Daily Nugget: Gold Remains Near 3-Week Low

This morning the gold price remains near its three-week low after a quiet day’s trading yesterday during Armistice and Veteran’s Day.

Yesterday was a federal holiday in the US and no economic data was released which meant the ongoing speculation over tapering had a bit of a break. However, three Fed Presidents are set to speak later on today which will no doubt see many deciphering what is being said.

The Fed’s leading dove, Minneapolis President Narayana Kocherlakota will be the most interesting to watch. Due to be a voting member of the FOMC next year he has previously been vocal of his colleagues’ decisions to not do enough to help the economy. With official inflation so low, he is unlikely to believe that tapering should go ahead in the foreseeable future.

Last week’s non-farm payroll data prompted concerns that tapering would go ahead, a move that would prove negative for raw commodities and gold in the short-term. According to Reuters some market commentators believe speculators have overreacted to the latest US data that showed jobs figures to have improved in recent months.

Also look out for a small economic data release; October’s NFIB survey of small business sentiment.

Inflation report jitters

Today the UK and currency markets are awaiting the release of the Bank of England’s inflation report, released tomorrow. In anticipation the pound fell for a second day against the euro and the dollar yesterday. We are now in the 47th month of CPI being above the 2% target but many believe today’s report will show the inflation has fallen from 2.7% to 2.5%, it is likely that this positive news has already been priced in.

In the period since the last Inflation Report, released in August business surveys have showed a marked improvement in performance and sentiment. This also corresponds with a potentially improving job market and a rise in wages last month. Retail sales are expected to have been flat in October, in the calm before the Christmas storm.

The Bank of England will update their view on how fast unemployment is falling and whether or not this will call for a review on interest rates prior to 2016, the previously anticipated date when by the central bank expects unemployment to fall 7% from the current 7.7%. Since the central bank decided to link the unemployment rate to forward guidance the figure has become even more important for markets.

Interest rates are not set to rise until unemployment has fallen to this key level, according to forward guidance, so long as various ‘knockout’ scenarios involving inflation, expected inflation and financial stability are not breached.

Gold coin demand

Some Asia news websites are reporting that gold demand remained strong during the festival season, something that was evident in on-line sales. According to The Asian Age, Dhanteras Day saw one gold coin purchased every four minutes. Whilst store-based sales of silver and diamonds climbed on last year’s figures, outstripping those for gold, the yellow metal remained king on-line.

Who’s who in China?
And finally, if you’ve been enjoying the ongoing collaboration between Koos Jansen and myself then you will love the next instalment. We bring you a fantastic infographic looking at the top ten individuals leading China’s path to gold market domination.