The Daily Nugget: China And Gold Look Up

This morning gold is at a three-week high and may be on track to post its first weekly gain in four weeks. Technical analysts expect to see gold rise to $1,749 during the trading day.

ETFs
Gold-backed exchange traded funds have once again been hitting records, on Tuesday holdings rose to a record high of 75.133 million ounces.

A Bloomberg survey found 25 out of 33 analysts were bullish on an increase in the gold price next week. This is likely thanks to further speculations that Obama and the Fed will continue with stimulus measures and do little to rein in the deficit.

Yesterday the Bank of England decided to hold back on another round of quantitative easing, stopping asset purchases for just the third time since the crisis began.

As the Telegraph said, never has such a non-event, had such a big build up. Many believed we would see more printing, but it seems the Bank may have had a change of heart when it comes to QE. Chitter chatter in recent weeks has suggested current members and influencers outside the MPC are losing faith in QE in its current form.

That is, of course, not to say that they will suddenly embark on reining in all this extra money. They will find other ways to ‘stimulate’ the economy, but the point is that they are thinking about the implications of how they are implementing policies. Unfortunately disappointing data in the future will soon prompt further easing measures.

The ECB also disappointed the markets Thursday when it decided to refrain from further stimulus measures. Little more can be done for Greece -- enough has already been done in our opinion -- and Spain was disappointed to not hear any reassurances of lower borrowing costs. According to Draghi the Euro zone’s troubled countries are poised for recovery…but no-one lese seemed to agree. Most notably, the European Commission had, just days before, cut growth forecasts for the area.

Euro zone economic sentiment also contradicted Draghi. It worsened going into the fourth quarter as ‘public budget deficits’ were cited as the biggest worry by those expert respondents to the Ifo Institute survey.

China's Strong Data
China is having its monthly data dump as retail sales, investment and industrial production all shoew improvement in October prompting beliefs that the world’s second largest economy is coming to the end of its two year slowdown.

In a report this morning from Hu Jintao’s congress, much focus is placed on the economy and the successes achieved. Future plans include doubling incomes, which is expected to benefit 600 million people. Let’s hope this is done by growing the country’s productive ability. It’s all very well giving people more money, but it means nothing if there is nothing of any value being produced.

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