Gold Inches From One Month High

Those in gold investment had been hoping to see the gold price reach its one month high Wednesday but were disappointed as it inched further away yet again.

Wednesday the US House of Representatives passed a Republican plan which allows the federal government to keep borrowing money until May. The plan was endorsed by the top Senate Democrat and White House. The plan was passed after it became clear the US Treasury would exhaust its remaining borrowing capacity (of $16.4 trillion) by early March. Expect further volatility as the debt ceiling once again becomes an issue.

The gold price stumble was partly down to the US vote but also thanks to renewed hopes of a global recovery as China posted its best manufacturing data showing the best growth in over two years, whilst the IMF reportedly expect global growth to ‘accelerate’ in 2013. We also saw some profit taking after reaching monthly highs, which is to be expected.

The HSBC and Markit Economics flash manufacturing index for China saw a climb to 51.9 this month, prompting signs of a higher growth for the second-largest economy. Despite the improvement in the economy, gold buying in China remains fairly lackluster given the time of year.

Here in the UK, after the hubbub surrounding Cameron’s EU speech yesterday, jobs numbers are on the rise as employment levels reached 29.68m – a record high. The data has prompted many to suggest we’ve avoided the dreaded triple dip recession.

Despite indexes and statements suggesting things are on the mend, we still do not see a sign of tightening monetary policy in any of the major economies. Until we do, gold investment will remain a popular option.

Morgan Stanley agrees; their forecast released yesterday, expects to see gold rally into this year and next thanks to on-going asset purchases from the Federal Reserve. As we have said many times, the on-going bull-market is expected to continue thanks to increased gold investing and central bank buying.

Holdings of SPDR Gold Trust, whilst falling to 1,334.115 tonnes, remain 6% above levels this time last year.

Silver also proved a bit disappointing Wednesday, breaking its 8 day rally (its longest run since April 2011). Platinum remained uneventful, however palladium posted the biggest loss of the day of 0.8%, its biggest decline in a fortnight. These declines are slightly surprising given the renewed sense of optimism regarding the Chinese economy; one would expect to see a pick up in price thanks to forecast increased demand for industrial precious metals.

Disclosure: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.