Fed Vice Chairman’s Speech Lifts Gold After FOMC Sell-Off: April 17, 2012

The Federal Reserve Vice-Chairman’s speech lifts precious metals after FOMC sell-off. Gold remains beholden to the communications of central banks, trading choppily in recent weeks as the market weighs the possibility of another round of quantitative easing.

Comments by Federal Reserve Vice-Chairman Janet Yellen’s comments last week gave a boost to precious metals prices, after she indicated that the US central bank is "willing and committed to take whatever actions are necessary" to maintain its dual mandate of promoting maximum employment and stable prices. The US dollar weakened following the speech, leading to gains for all precious metals as investors gained confidence about the potential for further monetary stimulus. With currency debasement a key investment theme for gold investors, the gold price bounced off its lowest level in three months, rallying by 2%.

South African PGM production slumps 50% in February. Official figures released figures last week by Statistics South Africa showed the that platinum group metal (PGM) production in February slumped by nearly 50%. The six-week strike at the Rustenberg mine, responsible for around 15% of global production, was largely to blame for the production loss. However, for the three months ending February, PGM production was down just 2%.

India’s jeweller’s back at work, but for how long? Indian jewellers suspended a three week strike after finance minister Mukherjee said that their demands for the gold excise tax hike to be withdrawn would be given consideration. However, jewellers have given the government until May 11th for the laws to be repealed or the strike would recommence. The Indian parliament convenes on May 7th, giving policymakers around four days to consider the new budget measures and possible alternatives.

G20 deliberations in focus amid escalating eurozone sovereign concerns. On the economic front, US retail sales will likely provide the initial directional cues for financial markets, with US industrial production and home sales data also scheduled for release later in the week. Eurozone investors will be closely monitoring the German ZEW business sentiment survey as well as the Spanish bond auctions for further evidence of deteriorating sentiment. However, the data may be overshadowed by a renewed flow of rhetoric in the lead-up to the G20 meeting on Friday, which is likely to focus on Eurozone issues alongside discussions over strategic petroleum reserve usage to offset oil price risks.