Gold News

Gold Price Adds 1% for Week as Japan 'Moves to Helicopter Money', ECB Denies It

GOLD PRICES headed for a 1.0% weekly gain in London dealing Friday, recovering half a $10 mid-morning drop as Western stock markets rose for a second day to recover last Friday's closing levels.
 
The best weekly gain in five, that put US Dollar gold prices at $1235 per ounce as government bond prices eased back and commodities rose.
 
Chart of US Dollar gold price, weekly percentage change
 
Silver cut its weekly gain to 0.9% to trade just below $15.20 per ounce.
 
Gold priced in Sterling held close to £880 per ounce – up 2.1% from last weekend – as the Pound traded near 6-week lows versus the Dollar at $1.40 and 22-month lows beneath €1.23 versus the Euro.
 
The UK's balance of trade in goods yawned 20% wider in February, new data said Friday, reaching a record deficit of £12.0 billion.
 
The deficit was boosted by a £0.5bn net import of gold – the first net inflow to London's bullion vaults, center of the world's wholesale trade, since October and the largest since February 2015.
 
"Weak stock markets, significantly lower bond yields and ETF inflows [have] lent buoyancy to the gold price," says a commodities note from German financial services giant Commerzbank.
 
"What is more, the ECB is keeping all options open for its future monetary policy."
 
With its deposit rate now 0.4% below zero, and creating €80 billion per month under its asset-purchase QE program, the European Central Bank will own one-third of all Eurozone government debt by March 2017, says a note from UK bond-fund managers M&G.
 
Printing money to give to private households – aka 'helicopter money' – is " not on the table, it’s not even discussed" said the European Central Bank's chief economist Peter Praet in Germany on Thursday.
 
"Helicopter money is not on the table, and I haven't seen any thorough analysis on it," agreed Belgian ECB member Jan Smets on Thursday.
 
But "we have a series of instruments that can be used, which include both interest and unconventional policies."
 
"Helicopter money is closer than you think," says the UK's Guardian newspaper, pointing to the Japanese government "currently toying with the idea of distributing shopping vouchers to all households, which they could use for child care or other spending."
 
"Everyone accepts that you can't cut your way to economic prosperity via an ever-depreciating exchange rate," says Chinese-owned investment and bullion bank ICBC Standard Bank's FX strategist Steven Barrow, "especially if others are trying to do the same thing."
 
With the Japanese Yen surging this week to 18-month highs against the US Dollar, "Perhaps the Bank of Japan has found the natural limit," Barrow says.
 
"There is [also] accommodation in the monetary policy that we have," said US Fed chief Janet Yellen Thursday, speaking on a panel with previous chairmen Paul Volcker, Alan Greenspan and Ben Bernanke.
 
"But we think the gradual path of rate increases will be appropriate...I don't think [raising from 0% in] December was a mistake."
 
Looking ahead to April's quarterly reporting season for US companies listed on the stockmarket, the hurdle of "beating the Street" could prove "unusually easy to clear," says Thomson Reuters, because analysts have slashed their forecasts and expect a 7.4% average drop from Q1 2015.
 
But "newly released US whole economy profits data," counters Edwards at French investment bank Societe Generale, "show a gut wrenching slump."
 
Predicting that recession will follow, and "with the US corporate sector up to its eyes in debt," says Edwards, "the economy will surely be swept away by a tidal wave of corporate default."
 
The jewellers' strike in world No.1 consumer market India meantime continued Friday after finance minister Arun Jaitley repeated that the new 1% sales tax on gold – imposed by his Budget of end-February – will not be removed.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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