Banks Pretend While Others Buy Gold

Gold futures rose earlier, Thursday, thanks to weakness in the dollar. However it faltered later as comments from the euro zone prompted hopes of a recovery.

Easing Still Expected
Minutes from last month’s MPC meeting showed Sir Mervyn King was keen to press ‘print’ on more QE. On Thursday, though, he hung back as no further asset purchases or rate changes were announced. Further easing is rumoured to be expected in the coming months, it’s not expected to take much to swing the majority of members.

Following the MPC meeting, the pound strengthened and was up 0.4% on the day.

Friday's Data
Unexpectedly, U.S. jobless claims fell to a six-week low, by 7,000, to 340,000, prompting the Down Jones index to climb to yet another record high. This took some further shine off gold. Friday brings the most important U.S. economic report for March is out tomorrow -- the key non-farm payroll data, which is expected to have climbed up 157,000, while unemployment remains around 7.8%. Still at a level to encourage the FOMC.

Following the ECB meeting today and Draghi’s press conference, the Euro rose to an eight-week high. No new major policy changes were announced. It seems Draghi’s cool, calm and collected approach fooled the markets and boosted the optimism of the euro-bulls.

Draghi Downplays Italy
During the press conference, which followed the meeting, Draghi said that a rate-cut had been discussed but that overall it was felt that rates should remain unchanged. The ECB president played down the impact of Italy’s election on the stability of the euro zone and said many financial markets were beginning to show signs of returning confidence.

At its final meeting under Governor Shirakawa’s leadership, the Bank of Japan opted to hold monetary policy as is.

Gold Hoarders
Those interested in gold know that central banks -- the main drivers of last year's bull-market -- have continued to buy gold in the first quarter of this year. That behaviour echoes central-bank behavior last year when, during the hazy days of summer, they quietly accumulated 71 tons between them. South Korea added 20 tons to their gold reserves in February, its fifth purchase in less than two years. Russia added 12.2 tons, while Kazakhstan bought 1.5 tons.

At the risk of sounding like a broken record, these central banks are behaving as we all should -- buying on the dips and deciding to invest in gold.

This post was published by The Real Asset Company.