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Last week was a nice week to
own gold, it finished 3.3% up as safe-havens received a boost, whilst stocks
struggled. The gain is the biggest seen since the end of August, thanks to
growing concerns over America’s fiscal cliff and, of course, the Eurozone.
This morning Reuters have
reported gold price rises in India as the gold price hit its highest level in
intra-day trade since 20th September. The country is getting
to the peak of festival and wedding season, with Diwali to be celebrated
tomorrow.
India gold investment
Whilst India continues to invest in gold, China is still on track to
overtake them as the world’s largest consumer of gold. Gold investment by individuals has grown by
an average of 24% a year since 2007, whilst with gold reserves of only an
estimated 2% of currency reserves many analysts assume they can only grow
further. This certainly seems to be the case, as latest figures show
China’s gold imports from Hong Kong in September at 69.7 tonnes,
returning to levels seen earlier in the year.
This Wednesday we will hear
re-elected President Obama speak on the matter of the
Fiscal Cliff. Whilst this may dissipate some fears in the short-term, which
may take some steam out of gold’s current run; negative real interest
rates as well as the inflationary monetary policies will keep the long-term
outlook for gold firmly on the bullish side.
We are likely to begin to
see similar patterns in the gold market as we saw last summer over the
debt-ceiling fiasco. The gold price soared as a result of it
being raised.
The week ahead
Decisions regarding Greece
will be made this week, some analysts wonder if tough decisions were put on
hold until after the US election. With this and the US election some volatile
currency movements can be expected, although how this will affect the gold price
is unclear.
This week we will be able to
gauge some feeling as to the health of the global economy as Q3 GDP estimates
are released for Germany, France, Italy Spain and Japan. It is believed both
France and Germany will show the strongest figures and will suggest they have
avoided the worst of the downturn, thanks to strong summer figures. This does
not however mean they are out of the woods for Q4, as recent figures show.
Industrial production for
the EU will also be released, on Wednesday. This is expected to show a
significant decline given Germany’s disappointing industrial production
figures last week. Meanwhile ZEW economic sentiment indicators are released
for both areas tomorrow, both are expected to see some improvement.
Following George
Osborne’s decision to just take the ‘spare QE cash’ to
reduce the public deficit, (proving the Bank isn’t independent and
Osborne is getting panicky about targets) inflation figures will be released
for the UK tomorrow, little change is expected.
Sir Mervyn King on Wednesday
will talk following the release of the BOE’s inflation report release.
This will be an interesting one to watch given the decision to not implement
further easing last week.
Several economic updates for
the US will be released this week, most are expected to remain as if there
will still an election on – i.e. rosy. Industrial production and retail
sales are expected to show modest changes. All data will be watched closely
given the looming Cliff.
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