Gold Fundamental Analysis February 24, 2012, Forecast

By FX Empire Analyst - Barry Norman
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Economic Events: (GMT)

07:00   EUR    German GDP (QoQ)                            -0.2%               -0.2%

Gross Domestic Product (GDP) is the broadest measure of economic activity and is a key indicator of economic health. The quarterly percent changes in GDP show the growth rate of the economy as a whole.                

 09:30  GBP     Business Investment (QoQ)             -0.4%               0.3%

Business Investment measures the change in the total inflation-adjusted value of capital expenditure made by companies in the private sector.                    

 09:30  GBP     GDP (QoQ)                                          -0.2%               -0.2%

Gross Domestic Product (GDP) measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of economic activity and the primary indicator of the economy's health.                   

 14:55  USD     Michigan Consumer Sentiment    72.5                72.5

The University of Michigan Consumer Sentiment Index rates the relative level of current and future economic conditions. There are two versions of this data released two weeks apart, preliminary and revised. The preliminary data tends to have a greater impact. The reading is compiled from a survey of around 500 consumers.               

 15:00  USD    New Home Sales                            315K                307K

New Home Sales measures the annualized number of new single-family homes that were sold during the previous month. This report tends to have more impact when it's released ahead of Existing Home Sales because the reports are tightly correlated.                   

 15:00  CAD     BoC Gov Carney Speaks

Bank of Canada (BOC) Governor Mark Carney (February 2008 - February 2015) is to speak. As head of the BOC's Governing Council, which controls key short term interest rates, Carney has more influence over the Canadian dollar's value than any other person. Traders scrutinize his public engagements for clues regarding future monetary policy.                                              

Just a heads up since gold is volatile and will react to most economic indicators we will begin to post the daily calendar with events that could affect the price of gold. The gold price is sensitive to a number of scheduled U.S. and Euro area macroeconomic announcements—including retail sales, non-farm payrolls, and inflation. Gold’s high sensitivity to real interest rates and its unique role as a safe-haven and store of value typically leads to a counter-cyclical reaction to surprise news, in contrast to their commodities. It also shows a particularly high sensitivity to negative surprises that might lead financial investors to become more risk averse.  

These results have a number of implications. To reduce the uncertainty of the return on gold transactions, traders may wish to time their orders flow so as to avoid the release of information that has been shown to affect prices. For longer-term market participants, these results provide confirmation of the pro-cyclical bias of many commodities and gold’s role as a safe-haven during periods of economic uncertainty.

Analysis and Recommendations:

Gold has climbed to 1786.45 up 15.35 after surging on Wednesday in the last few minutes of trading, moving up over 30.00. Gold has climbed all day on weakness in the USD. Reaching a 3 month high. Investors are eyeing the 1800 magic number. There are many reasons individual reasons for gold to surge, from geopolitical tension with Iran, the oil embargo driving up the price of oil to tensions with Israel. Followed by the possibility of more monetary easing by central banks to worries about the Greece bailout, news leaked out today that a clause in the bailout agreement would allow Greek creditors to cease Greece’s gold reserves.

US unemployment data today showed the week ending February 18, the advance figure for seasonally adjusted initial claims was 351,000, unchanged from the previous week's revised figure of 351,000. The 4-week moving average was 359,000, a decrease of 7,000 from the previous week's revised average of 366,000. Existing home sales increased 4.3% to an annual rate of 4.57 million in January. But the gain came only because the National Association of Realtors sharply lowered December sales to 4.38 million. If December sales had stayed at their original 4.61 million, January sales would have been down slightly.

The European Commission sharply reduced its forecasts for growth in the EU and the Eurozone for 2012 while also raising its forecasts for inflation, suggesting that the European economy could struggle with stagflation in 2012 The Commission said the economy in the 27-member EU will not grow at all this year. Raises 2012 CPI forecast to +2.1% from +1.7% EUR/USD dipped 10 pips on the release but is holding firm around 1.3320

In the UK Jan Mortgage Approvals Highest Since Dec 2009 says British Bankers Assn. January mortgage approvals rose to their highest level since December 2009, with re-mortgaging continuing to decline, according to latest British Bankers’ Association data. The data add to a raft of evidence of a pick-up in housing market activity. Jan approvals for homes  38,092, vs 36,553 in Dec

Germany cuts 2012 machine output growth forecast to 0% (+4%) – real machine output 2011 +12% vs. forecast of +14% – Germany machine output for 2011 & 2010 combined +22% – Germany preliminary December machine output -1.9% y/,y. Also Germany’s Business morale up more than expected.

Italian consumer confidence rose to 94.2 from 91.8 in Jan when it had posted a 16-year low. The improvement was the result of better sentiment in the general economic climate and future outlook, partly offset by consumers’ worsening sentiment in other components of the index, including personal and current climate. –Consumers’ sentiment


February 23, 2012 Economic Data forecast v. actual





Hong Kong Trade Balance 












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German Current Assessment 












German Business Expectations 












Italian Consumer Confidence 











BBA Mortgage Approvals 











CBI Industrial Trends Orders 












Initial Jobless Claims 











Corporate Profits (QoQ) 










Continuing Jobless Claims 











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