China returns to the market...
Recorded 3 February 2012
Transcript from 3 February 2012, written by Ben Traynor
China returned to the market this week, following the break for Lunar New Year. Despite stories of strong retail demand for gold during the holiday week, professional traders in Shanghai on Monday appeared happy to take profits. Gold fell in Monday's early trading, and was probably not helped by weakness in the Euro.
Gold soon resumed its 2012 uptrend, hitting an eleven-week high on Friday morning. Later that day however, the release of better-than-expected US nonfarm payroll data saw gold fall sharply, with the Dollar surging on the currency markets.
Greece began the week reacting furiously to Germany's suggestion that a foreign budget commissioner should be appointed to oversee Greece's finances. Indeed, one Greek tabloid carried a rather forceful rejection of the idea on its front page. Not too surprisingly, the proposal now looks to have been shelved by European leaders.
By Friday afternoon, there was still no resolution to the Greek debt issue. The deadlock, though, seems to have been good news for investors who price gold in Euros. The Euro Gold Price has hit its highest level since last September. Indeed, gold priced in Euros was at one point this week just 2.5% off its all-time high.
There was some progress on the European front this week. Leaders signed a treaty confirming the creation of a permanent Eurozone bailout fund, the European Stability Mechanism. Of course, it still needs to be ratified by national parliaments before it can come into force in July, so we can expect plenty of fun and games in the coming weeks.
Vietnam's central bank looks to be stepping up its control of the domestic gold market. The governor of the State Bank of Vietnam spoke this week about the need to mobilize the estimated 300-500 tonnes of gold held by Vietnamese citizens. The newly mobilized gold, he said, could then be used "to serve socio-economic development".
Next week sees the latest interest rate decisions from the European Central Bank and the Bank of England. Bank of England policymaker Adam Posen this week said he would be in favor of more quantitative easing if the bank's forecasters continue to predict that inflation will fall.