Central Banks Buying Gold To Offset Risk

Posted October 22, 2012 6:15 (GMT) | By FX Empire Analyst - Barry Norman | Print | Font Size
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Central Banks Buying Gold To Offset Risk

This morning in Asian trading, gold rose 0.37% as the euro gained against the U.S. dollar. Precious metal expected to increase further due to increasing demand from central banks in China, India, US and Europe as they shift reserves from major currencies that have greater risks to more secure assets including gold.

At the end of last week gold futures dropped more than $20 per ounce to tally a 2% w-o-w loss, as disappointment over recent corporate earnings, US economic data and the latest European summit drove gains for the US dollar. On Friday, US stocks slid the most since June and Treasuries rose as companies from General Electric (GE) Co. to McDonald’s Corp. and Microsoft Corp. posted results below estimates and Eurozone leaders failed to discuss aid for Spain at a summit. On Wall Street, corporate America’s premier corporations earning figures are of particular concern. The beat rate for revenue forecasts is just 41.4%, compared to the long-term average of 62%.

Gold imports by India, the world’s largest buyer, are set to climb for the first time in six quarters as a decline in domestic bullion prices stokes jewelry and investment demand ahead of major festivals.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,334.19 tons, as on Oct. 19. Silver holdings of iShares silver trust, the largest ETF backed by the metal, increased to 9,888.55 tons, as on Oct, 18.

South African workers officially ended a month long strike at major bullion producer Gold Fields on Friday, but there was still no end in sight for wildcat walkouts that have paralyzed other gold and platinum producers.

Gold prices breached the crucial support level ofUS$1,730/ounce and in the process registered a low of US$1,716/ounce. Similarly, Silver has breached the support levels of US$32.5/ounce and registered the low of US$31.9/ounce.

In US, market focus will be on the upcoming Federal Reserve’s policy meeting this week, and they will give an update the current economic scenario and likely throw light on future growth prospects.

Base metals moved lower, impacted by persistent demand concerns and poor flow of macroeconomic concerns in China. Selling pressure was evident in the non‐ferrous complex, with LME copper prices moving as low as US$7,983/ton.

This morning a report in Japan showed that exports fell a bigger‐than‐expected 10.3% in September from a year earlier, with exports to China slumping 14.1% in the year to September.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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