The gold price is set to post its biggest weekly gain since October, as it continues to sit comfortably above $1,300/oz. According to Reuters, COMEX gold futures climbed for the eighth straight session, the longest streak since July 2011.
Gold’s jump above $1,300 came on the back of soft US economic data and better-than-expected growth data from both France and Germany.
There is some debate within the gold and silver commentators as to what has led to the recent price rally.
For some this has little to do with recovering physical demand and climbs in ETF inflows, but instead it is thanks to soft data and technical momentum. The latter comes as the yellow metal has managed to stay close to (and above) the 100-day moving average, and has put in consistently higher lows since January. Many believe that if gold is unable to stand strong above $1,300 today then it is likely to return to $1,270 levels.
Of course the market has also had time to digest economic data in line with Yellen’s testimony on Tuesday. There seems to be some belief that tapering will be halted, as the Fed gives the market time to recover from previous cuts in QE. Should this happen then it will come as no surprise given the long-standing view that monetary policy may become more accommodative under Yellen and that the pace of tapering may be slowed down even more.
Gold wasn’t the only one who felt the love in the air, silver climbed to its highest level since mid-November, while platinum and palladium climbed by 0.4% and 0.5% respectively.
Holdings in the SPDR Gold Trust ETF jumped to their highest in over two months yesterday, and by the most seen in 16 months. In what is perhaps a sign of renewed confidence in gold, investors bought 7.5 tonnes yesterday pushing holdings back up above 800 tonnes. Last year gold ETF outflows were blamed for the poor sentiment in the market and the weak gold price, there were just 17 days of net inflows throughout 2013.
Last year we charted the amazing development in China’s gold market as the government and exchanges worked to open up the country’s precious metal industry. Last night the president of the Hong Kong based Chinese Singapore Gold and Silver Exchange said they were looking to launch a physical bullion trading exchange and 1,500 tonne depository in mainland China, within a freezone.
We strongly believe China will continue to be the driving force of the physical gold market in 2014. A report by China’s Trust Association yesterday said that funds held in trusts had grown by 46%. As we have reported previously, Chinese citizens are encouraged and incentivised to save in gold and we believe much of this jump in savings will be reflected in China’s gold imports.