Gold's Place In The ‘Healthier’ Economy

Last week gold contracted for the eigth week in a row, a performance not seen since 2004.

The minutes from the latest FOMC meeting will be released this week. Last month, it announced plans to continue its $85bn monthly asset purchases while maintaining interest rates near zero for at least as long as unemployment sits above 6.5%.

Bloomberg reported that holdings in exchange traded products (ETP) fell 0.6% to 2,434.436 metric tons last week; levels not seen since August.

Nothing Much To Do
At the moment there isn’t much for gold to do. We’ve seen worse figures come out of economies in recent years and at the moment it’s a bit of a mixed bag.

IMF managing Director Christine Lagarde said Sunday that a ‘substantial proportion’ of the global economy is now looking healthier than it was a year ago.

Gold rallied 1.7% on Friday on the back of much weaker-than-expected U.S. jobs data. The economy added the fewest number of jobs in the last nine-months. Also last week, unprecedented plans for QE were announced by the Bank of Japan in the new Head’s first policy meeting. As a result, the Japanese currency fell to its weakest against the dollar since 2009. In the euro zone, Draghi said he'd be prepared to cut interest rates should the economy become even worse.

Driven Away From Gold
As we will outline further in our new research report out later this week, gold continues to be talked about and demanded by over 90 countries. Economic conditions in both the U.S. and EU are likely to deteriorate, but in order for gold to be driven higher the data has to be almost worse than that which has taken it up before. At present, a strong dollar and equities have driven investment demand away from gold.

This week we’ll be looking out for signs of Asia's economic health -- China's inflation and export data will be released on Tuesday and Wednesday. Speaking of China, we expect to see some physical buying return to the market following China’s bank holiday on Thursday and Friday last week.

The North Korean Factor
Some analysts are referring to North Korea as a ‘wildcard’ for gold and many will be looking out for further geopolitical developments this week in order to determine gold’s moves.

One asset that certainly isn’t faltering is Bitcoin, a virtual currency that has taken many by surprise. What do you think about Bitcoin? Tell us in our latest survey.

In the other precious metals, silver gained 0.4% but both platinum and palladium remained relatively unchanged.

This post 'Daily Nugget – economy looking ‘healthier’' was published by The Real Asset Company.