Gold Price Hangs On For FOMC

After hitting a monthly low early yesterday morning, the gold price recovered yesterday to trade just above its key technical support of $1,721. Silver prices also gained 0.5% for the day. This morning, both have lost some ground, but not the levels seen yesterday. Gold for December delivery remains at $1,724.50 on the Comex in New York.

Analysts are, however, warning us to not get too excited about the small rebound seen yesterday. The minute recovery is partly thanks to increased Indian demand to buy gold bullion, other investors are waiting on the side lines for the outcome of the FOMC meeting, the Richmond manufacturing index and China’s PMI data.

FOMC meeting set to kick start gold prices?

set to kickThe FOMC meeting will commence today, but in terms of data releases there is little to take note of elsewhere. Consumer confidence for the EU area will be published which is expected to come in slightly better than last month. Business confidence for France has been released earlier this morning which has reported as lower than expected whilst non-EU trade data for Italy is released later in the day.

After a fairly dire day yesterday for the European markets, particularly Spain, Moody’s decided to cheer the country up by cutting the debt ratings of five of its regions overnight. This is following the decision to maintain the country’s current rating, one level above junk, last week.

Zerohedge have commented on an interesting Marketwatch article which believes that as Operation Twist comes to an end Bernanke will see QE3 expanded by a further $45billion in long term Treasurys each month; the equivalent to Operation Twist. As Zerohedge point out, Bernanke continues to box himself, and the Fed, into a corner, ‘there is no way on this earth that Bernanke will be able to unwind a $5 trillion balance sheet (which is what it will be in 2 years), without destroying every last trace of the equity (and likely) other capital markets, unless there is a concurrent bout of hyperinflation.’

Foreign & Commonwealth secretary William Hague has acknowledged the general poor feeling the UK has for the EU. Whilst he continues to support our membership of the region, he will today, in Berlin, indicate a desire for the country to regain some of sovereignty from the single market arrangement. As Allister Heath points out in this morning’s City AM, anyone who believes the UK’s future lies across the Channel is sorely mistaken and needs to wake-up and see that the our future is within the global market where the emerging economies are changing the face of global trade. We cannot be as short-sighted to think we a friendly arrangement with the rest of Europe will keep us at the forefront of the trading nations.

Relief for anyone who was worried, Cameron has announced the UK economy is ‘healing’. This is an interesting belief considering the national debt will triple by 2015/16, even if the deficit has been reduced to zero. This will, of course, need servicing thereby removing those much loved public services every government is elected on the back of by offering to improve/increase/grow/spend on etc. Unfortunately the truth is, the worst is yet to come as the markets focus on the Eurozone and our money printing has just about created a mirage of financial stability for the time being.

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