Gold's Week Ahead

It seems that the price of gold continues to suffer a hangover from Friday’s dismal performance when the metal staged its biggest daily loss in over two months. The price of silver has also felt gold’s pain, falling over 1.5%.

This morning, prices have fallen to two-and-a-half-week lows following inflation data from China, which showed that CPI had fallen slightly from 2% in August to 1.9% the following month. This -- combined with export data showing a higher-than-expected growth in imports -- has driven gold and silver prices down as hopes of further stimulus from China are dampened.

Friday’s fall was thanks to U.S. consumer confidence data that came in better than expected, once again driving down hopes that QE3 would go on to infinity. Consumer confidence is purportedly at a five-year high as global demand to buy gold bullion eased slightly.

ETF Investors Buy Gold
Despite the disappointing end to the week, holdings in gold backed Exchange traded products reached a record 2,582.98 Metric tonnes on Friday.

Eyes will now be on Thursday’s data dump from China, which is expected to show a third quarter of weak growth this year, having slowed to its most sluggish pace yet in this financial crisis.

London Easing?
Here in the UK, minutes from the last MPC meeting to be released on Wednesday are expected to show an appetite for QE from some members, suggesting November will see another round announced. Inflation numbers are released on Tuesday, whilst retail sales data on Thursday will hopefully show a bounce back from a slow August.

In the U.S. this week it’s mainly about housing data, a key indication for some on the economic revival. In the manufacturing sector, a further slowdown is expected to be reported on Thursday in the Philly Fed’s survey.

The EU Summit
The pressure might be off everyone on Thursday and Friday however as all eyes will turn towards the EU leaders’ summit. After warnings from the IMF last week (and a Nobel Peace prize?!). It will be interesting to what steps, if any, are taken towards further financial integration. Data wise, however, this week doesn’t see much from the EU apart from the ZEW German investor sentiment reading, Euro-zone inflation and current account data.

The EU summit will be an interesting one to watch in regard to gold investment, as any decisions regarding further plans for the Eurozone, particularly Spain, may provide a much needed boost to the Euro, helping the gold price.

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