Gold Prices Rise On Positive Chinese Economic Outlook

Today’s AM fix was USD 1,305.50, EUR 975.49 and GBP 839.44 per ounce.  
Yesterday’s AM fix was USD 1,287.75, EUR 964.25 and GBP 830.11 per ounce.

Gold climbed $27.40 or 2.13% yesterday and closed at $1,312.50/oz. Silver surged $0.79 or 4.05% and closed at $20.30. 

Gold climbed for its third session breaking the psychological $1,300/oz barrier helped by the weak U.S. dollar. South African miners noted that platinum group metals fell 18.9% and gold production fell 14.1% in June due to labour turbulence. China’s strong export figures suggest their economy is beginning to recover which bodes well for gold bullion demand from the world’s 2nd largest consumer. 

 
National Bureau of Statistics of China dropped unexpected good news onto the global markets yesterday with an announcement that economic data was far better than expected. The bureau reported that total imports rose to +10.9% year-on-year in July from -0.7% year-on-year in June and total exports increased to +5.1% year-on-year in July from -3.1% year-on-year in June. This caused a rise in prices of all metals as Chinese demand looks set to continue and not weaken as some expected. Whilst gold advanced, silver showed most gains with a significant rise of 4%.

Meanwhile, the U.S. authorities focussed on labour statistics which reported that jobless claims increased slightly to 333,000 for the week ending 3 August from 328,000 reported for the previous week. On a four week rolling basis, first time filings for jobless claims fell to 335,500 for 3 August, the lowest level since November 2007, from 341,800 in 26 July. These figures are important as the U.S. Fed has said that its target of  maximum employment – the rate the economy can support without excessive inflation – is 6%, and it currently stands as 7.4%. It is this rate that the Fed is leveraging to begin the talk of QE tapering.

Two more U.S. Fed Presidents have issued statements in support of QE tapering and as we reported in Market Update, this coordinated effort among the 12 Fed presidents is likely to continue and the markets can’t say they weren’t warned.

Sandra Pianalto, the president of the Cleveland Federal Reserve Bank said she would be ready to scale back the central bank’s $85 billion-per-month bond-buying program if the labor market continues to improve as it has over the past year.  Pianalto says that the jobless rate, which was 7.4% in July, is more than a half a percentage point lower than she projected last September. Pianalto also went on to say that The Fed’s goal is to have inflation at 2%; it’s currently running at 1.3%.


Support & Resistance Chart, 5 Year – (GoldCore)

Charles Plosser, the President of the Federal Reserve Bank of Philadelphia who has been a vocal critic of quantitative easing said the central bank should begin tapering its $85 billion in monthly bond buying in September and end the unorthodox stimulus by year-end.

Monetary policy formation by means of kite flying by Fed officials may be indicative of the deep concerns within the Fed complex over the issue of Easing Quantitative Easing (EQE). Coupled with an imminent changing of the guard at the top and economic statistics, that are wishy-washy to say the least, means we could be in for some first class economic theatrics over the coming months. 

And in other (not so unrelated) news….Bloomberg reports that the Japanese Government debt level has officially broken the quadrillion mark, thats 1,000,000,000,000,000 Yen. We are not making this up! If it was not so serious it would be funny. 

NEWS
Gold Swings as Investors Weigh Fed Stimulus Outlook, Weak Dollar – Business Week

Fed’s Pianalto: Ready to Scale Back QE – Wall Street Journal

Gold up for third session on weaker dollar – Reuters

Gold, Platinum Rise on China Data – Wall Street Journal

COMMENTARY
Proof Bullion Banks Are Buying All The Physical Gold They Can – King World News

The Bernanke Conundrum– 24HGold

"Hello Scotia Mocatta, This Is JPMorgan – We Urgently Need Some Of Your Gold" – Zero Hedge

Mark OByrne

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