Daily Nugget: Inflation To Keep Gold Demand Up

This morning the gold price has climbed, snapping a 5-day losing streak, as speculators worry over US economic growth and non-farm data on Friday. Should both figures disappoint then it may result in a further delay in the much anticipated decision to taper.

The Institute for Supply Management’s U.S. non-manufacturing index is due today and is expected to have fallen to a four-month low, whilst jobs data is likely to post just a small gain.

Rumours regarding tapering have also been affected by comments from various Fed officials all of whom vote on policy this year. Governor Jerome Powell, Boston Fed President Eric Rosengren and James Bullard of the St. Louis Fed yesterday signalled that stimulus may continue for some time, a couple urging that the Fed should not rush to withdraw stimulus.

Ahead of the ECB meeting on Thursday, the Euro has dropped as a sharp slowdown in inflation has prompted concerns that Draghi et al will take a dovish stance. Gold, previously positively correlated with the Euro, may drop further should the drop in the Euro resume.

The current gold price allows investors to buy insurance at a time when the US government are only able to offer short-term solutions to the debt ceiling and money printing.

Inflation to keep gold demand up

Whilst headlines yesterday told us that gold investment in both India and China would reach no more than 1,000 tonnes per country, HSBC believes that gold demand will remain strong in the coming years due to inflation. HSBC forecasts consumer prices in China to rise by 2.7% in 2014 and by 3.1% in 2015. They expect inflation in India to remain at a similar level to where it is currently; 7.7% in 2014 and 7.9% in 2015.

Refiner accused of war crimes

In other news Swiss refiner Argor-Heraeus is under investigation for ‘suspected money laundering and complicity in war crimes.’ The refinery, part owned by Commerzbank and the Austrian mint, finds the case brought against them by TRIAL. According to Forbes, TRIAL accuses the ‘firm of refining 3 tons of gold ore pillaged from the Democratic Republic of the Congo between 2004 and 2005. TRIAL suspects Argor-Heraeus “of being guilty of the crime of laundering the proceeds of a major crime … and handling goods pillaged during an armed conflict,” it said in a statement.’

This isn’t the first time the refiner has been accused, having already been investigated (and cleared) by the United Nations, Switzerland’s State Secretariat for Economic Affairs and the Swiss Financial Market Supervisory Authority. Needless to say Argor-Heraeus has denied all allegations.