Daily Market Update

Gold Focuses on FOMC Meeting as IMF Report Paints Sombre Picture for World Economy

Gold is trading at USD 1,811.05, EUR 1,324.35, GBP 1,156.92, JPY 138,179.50, AUD 1,765.83 and CHF 1,616.80 per ounce. 

Gold’s London AM fix this morning was USD 1,810.25, EUR 1,322.22, and GBP 1,155.23 per ounce. 

Yesterday’s AM fix was USD 1,792, EUR 1,309.37, and GBP 1,142.27 per ounce. 

Greece has reported "progress" in the talks with the ECB, EU and IMF designed to secure the next tranche of funding, but no deal just yet.  Meanwhile the IMF has dismissed talk that Greece is in imminent danger of defaulting as "not as scenario [they] are considering", yet the Portuguese finance minister has indicated that should such an event occur his country would require further assistance.

The Federal Open Market Committee meeting is scheduled to make a statement at 2:15pm EDT; some expect a hint of further quantitative easing policies for the future but nothing near term.  If there are we should see gold react positively.

The IMF World Economic Outlook Report just released makes for some sombre reading.  It opens up with a bleak run through of the global economic situation to date, when examined from the gold markets perspective though it would seem to indicate that gold prices have more reasons to rise then to fall for the foreseeable future.

"The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing."

Gold is considered to be an excellent hedge in uncertain times, if downside risks continue to grow gold should benefit.

"Against a backdrop of unresolved structural fragilities, a barrage of shocks hit the international economy this year. Japan was struck by the devastating Great East Japan earthquake and tsunami, and unrest swelled in some oil-producing countries."

As if the bursting of the global credit bubble was not enough the world also endured considerable political and environmental tail risk events. 

"At the same time, the handover from public to private demand in the U.S. economy stalled, the euro area encountered major financial turbulence, global markets suffered a major sell-off of risky assets, and there are growing signs of spillovers to the real economy. The structural problems facing the crisis-hit advanced economies have proven even more intractable than expected, and the process of devising and implementing reforms even more complicated. The outlook for these economies is thus for a continuing, but weak and bumpy, expansion."

This is one of the most instructive statements in the report and underscores more than any other the strong fundamentals for gold’s potential performance in the future – a very poor and ill-equipped political class that refuse to deal with the actual cause for the global crisis. 

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SILVER 
Silver is trading at $40.37/oz, €29.53/oz and £25.77/oz 

PLATINUM GROUP METALS 
Platinum is trading at $1,787.50/oz, palladium at $713/oz and rhodium at $1,725/oz. 

NEWS
(Wall Street Journal)
Gold Range-Bound In Asia Ahead Of Fed Meeting

(BBC News)
Economy enters ‘dangerous phase’

COMMENTARY
(Reuters)
Gold bug turned bear strikes lone pose

(Market Watch)
Is gold forming a bubble?

 

Mark O'Byrne
Executive Director

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