The Daily Nugget: Gold Breaks Through $1,780

Welcome to the first Daily Nugget of October, illness struck at the beginning of the week – it must be going around as we hear the Iranian rial has also been struck down by something…

Yesterday the gold price rose slightly, for many this was down to anticipation regarding the first US presidential debate, but it was mainly down to looking forward to events today and tomorrow.

In regard to the US presidential debate it seems it was a hands down win for Romney who was on the offensive for the majority of the debate, afterwards in a snap poll by CNN/ORC 67% of viewers believed the Republican had won it. Looks like the GOP may have to hang on to that promise of a Gold Commission after all…

Today is an exciting day for central bank twitchers, with three banks set to meet and announce policy decisions in the next 24 hours.

As a result gold has advanced for the second time in three days, this morning proving more exciting than yesterday already, breaking through $1,780. Investors are looking to central bankers to move to boost economic growth and therefore have turned to gold bullion investment as a hedge against inflation.

Yesterday was a record day for bullion backed ETPs, according to Bloomberg, as they increased by 4.1 metric tonnes to an all-time high of 2,554.335 tonnes.

One of the central banks set to meet today is the ECB. They’re all off on a jolly to Ljubljana, in one of two annual meetings held away from the usual Frankfurt meeting point. Last month they announced an unlimited bond-purchase programme. This month they are expected to maintain the benchmark interest rate at 0.75%, a record low, in order to allow more time for Spain to ask for a bailout.

Yesterday both the eurozone and China saw disappointing data which helped to support gold’s impressive rise this morning. Services in the single currency area continued to decline, whilst output PMIs in France, Spain and Italy saw dramatic falls. September data shows CPI rose at an annual rate of 2.7% last month, above the target rate of 2.0%, leaving the ECB little room for manoeuvre. This morning, European stocks are up ahead of the ECB’s announcement.

Sir Mervyn King and the rest of the MPC will be meeting to decide the Bank of England’s interest rate and to make a decision regarding further rounds of QE. The general consensus amongst observers and economists is that the bond-purchase target of £375 billion and the 0.5% interest rate will remain as they are, but with possible moves set to be made at the November meeting.

PMI data for September was released yesterday, the UK came off relatively unscathed compared to its European cousins. Expansion could be seen in business activity and as a result GDP is expected to ‘increase robustly’ according to E&Y.

Last month, the Bank of Japan added to its asset purchase fund, throughout the month the government has led markets to believe that it would be willing to inject yet more cash into the stagnating economy. This month it seems to be the most promising in terms of pressing ‘PRINT’ . Already this morning the EUR has strengthened against the JPY as speculators sell the Yen in the belief further monetary stimulus will be announced in order to weaken the currency so as to maintain its strong exports.

Some positive data came in the US yesterday as the services sector was seen to defy pessimistic predictions and picked up in September, whilst private sector employment increased also. Tomorrow will also be an interesting day for gold as the US Department of Labor Statistics will release the latest employment figures. Predictions so far see the jobless rate rising from 8.1% in August to 8.2% in September. This morning however the USD has dropped as investors sell off for a profit ahead of tomorrow’s data release.

Please Note: 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.