GoldCore Update: Uncertain Political and Regulatory Conditons Leading to Uncertainty in Markets

Gold
Gold rose slightly in US trading yesterday and rose in early trade in Asia prior to range trading between $1,092/oz and $1,098/oz overnight and this morning. Gold is currently trading at $1,096.40/oz (support at $1,075/oz) and in euro and GBP terms, gold is trading at €779.08/oz and £676.08/oz respectively.

Equity markets internationally are again under pressure with continued focus on tighter Chinese monetary policy and the ramifications of this for both the Chinese economy and the global economy. The spiraling US budget deficit which is expected to reach $1.35 trillion (£837bn) in 2010 alone may challenge the dollar’s recent period of strength and should support gold.

Despite gold’s recent period of weakness and correlation with equity markets, it is again performing as it should – as a safe haven asset. As per the Performance Table, gold is flat (down 0.15%) year to date despite sharp volatility and a fall of over 2% in the S&P and 3.3% in the FTSE year to date (not to mention the 6% fall in oil prices). With the euro under continuing pressure and threatening to break through $1.40, euro gold has performed strongly and is up 1.77% year to date despite falls in equity and commodity markets.

Sterling fell yesterday on the still very weak UK GDP figures. The meager growth ended Britain’s longest recession since the second World War but the risk of a double dip recession in the UK and a double dip recession internationally remains real and may contribute to continuing safe haven demand for gold.

The level of uncertainty with regard to political and regulatory developments (such as Obama’s proposed banking reforms) is extremely high and this uncertainty is leading to continued risk aversion. Both Federal Reserve Chairman, Bernanke and Treasury Secretary Geithner’s positions are by no means guaranteed and Wall Street and world markets may be reacting to this uncertainty. The State of the Union address and the Federal Reserve rate decision are awaited by traders looking for reassurance on the outlook.

Silver
Silver began the night at $16.88/oz and moved steadily lower overnight. Silver is currently trading at $16.66/oz, €11.84/oz and £10.27/oz.

Platinum Group Metals
Platinum is trading at $1,521/oz and palladium is currently trading at $428/oz. Rhodium is at $2,500/oz.

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Mark OByrne

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