Gold At Week's End

This week has been relatively quiet on both the speech and announcement fronts. Following last week’s feeding frenzy surrounding the Draghi and Bernanke sagas, this was probably just what the markets needed.

The week almost seemed to give investors time to reflect on all that the world’s most prominent bankers had told them since the financial crisis began, and they began to realise that somewhat of a mirage had been created, which perhaps the head honchos can’t talk their way out of.


This was confirmed on the release of the BoE’s inflation report on Wednesday and the press conference that followed. The finger pointing continued as explanations for why the central bank still couldn’t fix things showed they were at more of a loss than ever.

It's Your Birthday, Crisis
We did of course see the 5th anniversary of the financial crisis, something many decided to shout about -- we didn’t particularly as it’s merely five years since the mainstream financial world woke up to the financial crisis that began many years before.

To celebrate -- actually it was just a coincidence -- the ECB released its monthly report that admitted the single currency is in its worse shape ever. What followed was almost a begging letter asking governments to tackle the crisis and take steps to reform their economies ‘swiftly and decisively’.

This morning, the Euro fell against the U.S. dollar for the second day running but apparently losses are limited as the markets are still hanging on for further news of action by the ECB. So, they still have some trust then.

China Started It
Today China unleashed further bad news on the markets -- export growth has ‘collapsed’ indicating the weak world economy and lack of recovery. This news saw Asian shares ‘snap’ after a previous four-day rally.

Analysts are calling for the central bank to be more aggressive in its monetary policy for the rest of this year. Liu Li-Gang, Head of Greater China economics at Australia & New Zealand Banking Group Ltd, said there’s a risk of a “hard landing” and the government may lower banks’ reserve requirements “as soon as today”.

While gold inched down this morning on the back of weak Asian shares it remains on track for its second weekly rise in three weeks. Just rumours of further QE from the PBoC is enough to get the markets excited about gold investment, which was certainly the case yesterday when figures showed inflation at a 30-month low in China, prompting gold to climb.

UK Exports
Also yesterday, the UK’s June trade balance was reportedly at its lowest since modern records began 15 years ago. The value of UK exports of goods and services fell by 4.6% between May and June while imports declined by 0.7%. This news naturally saw the mainstream media clamouring for further spending on infrastructure and assistance with trade finance.

This week did, however, see gold confirm its place above $1600. Even Dennis Gartman has decided he’s bullish on gold for this week, so the metal must be doing something right to grab even his attention.