Euro, China And Japan Drive Gold Prices

Last week, gold took a bit of a knock thanks to Chinese inflation data which came out higher than expected, prompting fears that the Chinese government would hang back on their monetary policy program. Previous to the release, many had expected the yellow metal to break out from its trading range seen earlier in the week. However, by the end of Friday, all gains seen on Thursday had been pretty much wiped out. Analysts expect trading to continue as it did last week, in a narrow range – $1,660 – $1680/oz.

Gold prices are also being supported by euro strength and strong gold investment demand from China ahead of the Lunar New Year, as well as Japan’s monetary policy. The yuan reached record highs against the dollar last Friday which has helped gold buying.

US inflation readings will be released on Wednesday and are expected to show it unchanged at 1.8%.

Last week we commented on platinum’s impressive price rise over the last three weeks. Yesterday, the platinum discount to gold was at its narrowest in nine months.

Whilst the majority of Britain is freezing over, it seems the economy imitates nature – business survey data released yesterday shows the UK is falling into its third recession in four years. Data releases from the UK this week include housing data and inflation which is expected to remain unchanged at 2.7%.

China is expected to have seen a small improvement in its Q4 GDP compared to Q3, from 7.4% to 7.8% – a modest gain considering weak exports to Europe. China will be further disappointed that things are unlikely to improve in this area when Europe’s trade and industrial production data for November is released -analysts expect this to show a fourth consecutive quarterly decline.

GDP data from Germany on Tuesday is expected to confirm the steep fall in the country’s economy, 0.8% GDP for Q4 is predicted.

The ridiculous $1 trillion platinum coin debate was finally put to bed this weekend when a Treasury spokesman confirmed, “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,”