Gold Price edges higher, but physical demand slow...
Recorded 24 February 2012
Transcript from 24 February 2012, written by Ben Traynor
Gold saw three distinct upward moves this week. Two were arguably policy-driven, while the third seemed to rest on technical factors.
On Monday, gold opened higher following an announcement by China's central bank that it is cutting the amount banks have to hold in reserve as a proportion of their total assets. This lowering of the reserve requirement ratio should enable China's banks to lend more, which would boost liquidity in one of the world's two biggest gold markets.
Greece's second bailout meantime was finally agreed on Tuesday. The Euro moved higher following the announcement, which was also followed by gains for gold.
Then on Wednesday, the spot gold price jumped during US trading ahead of the expiry of March gold options the following day. Thursday saw spot gold hit a three month high.
Dealers in both India and China, the world's two largest gold markets, reported slow physical demand this week. Nonetheless, gold had managed to hold onto its gains by Friday afternoon in London. Friday's PM London Fix price was $1777.50 an ounce, a gain of 3.2% from last Friday's.
Friday also saw silver break out of the sideways pattern it has shown for most of this month. Friday's London Fix price for silver was $35.57 an ounce, A 6.2% gain on last Friday's and the highest Dollar Silver Fix since last September.
On the spot market, gold in Euros came to within 2.5% of its all-time high this week. This week also saw Brent crude oil, the European benchmark oil price, set a new Euro price record.
Gold in Japanese Yen meantime hit its highest level in five-and-a-half months on Friday, coming within 3% of last year's peak.
G20 finance ministers and central bank governors meet in Mexico this weekend, where they are expected to discuss the Eurozone crisis. Germany is under pressure to agree an increase in the size of the European Stability Mechanism, the single currency's permanent bailout fund that becomes operational in July. Other G20 leaders say that unless Eurozone nations do more, they should not ask the International Monetary Fund for extra money.
Next week also sees the German parliament vote on this week's Greek bailout deal, as well as the European Central Bank's 3-Year longer term refinancing operation.