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London Gold Market Report
U.S. DOLLAR gold prices hovered above $1690 an ounce Tuesday
morning in London, close to one-month highs, while prices in Yen quoted on
Tokyo's gold futures market set a new record, following an announcement of
open-ended asset purchases and a new, higher inflation target by Japan's
central bank.
"[Gold] is struggling along the 55-day moving average at $1695.96
and just below the downtrend channel resistance line at $1704.89," says
Commerzbank senior technical analyst Axel Rudolph.
"We would like to see a daily close above the latter being made
before we become medium term bullish again."
"Gold really needs to break above $1700," agrees Scotia
Mocatta director Peter Tse, "and close above that level to attract
short-term buyers, but the momentum has not built up that much, even when we
are right before the [Chinese] Lunar New Year and physical demand is
steady."
Silver meantime hovered above $32 an ounce for much of this morning,
before dipping back to where it started the week, as other commodities were
also little changed.
European stock markets opened lower Tuesday morning, reversing
yesterday's gains, before regaining some ground by lunchtime.
Germany's DAX index was down more than 1% on the day at one point,
before recovering some losses after ZEW surveys showed better-than-expected
improvement in German and Eurozone-wide economic sentiment.
US markets reopen today after a holiday on Monday.
At its policy meeting Tuesday, the Bank of Japan announced it will
adopt a 2% inflation target, double the previous goal of 1%, a move that had
previously been suggested by the new government of prime minister Shinzo Abe,
who was elected last month.
The BoJ also announced an open-ended program of buying ¥13 trillion
($146 billion) of mainly short-term government debt a month starting in
January 2014, when its current quantitative easing program is due to end, as
part of efforts to raise inflation to the 2% target.
"This is a step toward bold monetary easing," Abe said in
response to the BoJ announcement.
Following the BoJ's announcement, gold prices in Yen for gold
contracts traded on the Tokyo Commodity Exchange (Tocom) hit an all-time high
Tuesday.
Last week, the Yen spot gold price touched its highest level since
1980 two years before the founding of the Tokyo Gold
Exchange, which became part of the Tocom when that was created in 1984.
The Yen meantime added to yesterday's gains against the Dollar this
morning, having started the week by touching a two-and-a-half-year low at the
start of Monday's session.
"The weakness of the [Yen]...may reflect the possibility that
efforts to revive inflation succeed too well, that the inflation genie will
be let loose and will not stop at 2%," says a note from HSBC.
"Inflation in Japan has not sustained a 2% handle since the early
1990s, so we are talking about a pretty aggressive target for the BoJ. Will
they really be able to micro-manage it higher without a blowout?"
Japan's government is "threatening an end to central bank
autonomy," according to Jens Wedimann, president of Germany's Bundesbank.
"A consequence, whether intentional or unintentional, could
moreover be an increased politicization of exchange rates," Weidmann
warned in a speech last night.
"So far the international currency system has come through the
crisis without a devaluation competition, and I hope very much that remains
the case."
Over in India, the world's biggest gold buying nation, the government
has raised
import duties on gold from 4% to 6%, economic
affairs secretary Arvind Mayaram told reporters late Monday.
"Consumption and imports will fall definitely," says
Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade
Federation, who last week warned that
such a duty hike could cause a drop in imports of up to 25%.
"This will also help the
government reduce the current account deficit."
Several Indian policymakers
have recently cited gold imports as a contributing factor India's trade
deficit, which they say undermines the Rupee exchange rate.
Ben Traynor
Editor of Gold News, the analysis and investment research site from
world-leading gold ownership service BullionVault, Ben Traynor was
formerly editor of the Fleet
Street Letter, the UK's longest-running investment letter. A
Cambridge economics graduate, he is a professional writer and editor with a
specialist interest in monetary economics. Ben writes and presents
BullionVault's weekly gold market summary on YouTube and can be found on
Google+
Please Note: This article is to inform your thinking, not lead
it. Only you can decide the best place for your money, and any decision you
make will put your money at risk. Information or data included here may have
already been overtaken by events and
must be verified elsewhere
should you choose to act on it.
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