Comex gold futures have risen five consecutive days, closing at $1,640.70 at the end of Tuesday trading. The gold futures have surged 1.22% this week to a three-and-a-half month high. The S&P500 Index have traded down 0.35% this week, although the level is approaching April's high of 1,419. The Stoxx 50 Index rallied 0.97% for the week, the Euro/Dollar Index rose 1.12% and the CRB Commodities Index surged 1.37%. The Dollar Index retreated about 2.49% from the recent high reached on July 24 to 81.907 as of Tuesday.
The risky external markets, commodities and gold are all having a tear. Sentiment on commodities has turned positive owing to traders' expectations of further monetary easing in China and better US growth prospects. China's Premier Wen said there would be room for more monetary operation, while the US consumer confidence in August and July's leading indicators both turned out better than expected.
Prices of the European stocks were further boosted by falling borrowing costs in Spain: the yield of the 12-month bill declined 85bp to 3.07%, while the yield of the 18-month bill fell 90bp to 3.34% compared to the level at the last sale. The market will also focus on Jean-Claude Juncker's visit to Greece on the country's request to extend the fiscal adjustment program by two years, as well as the Hollande-Merkel meeting on Aug. 23. The tone of these meetings will inform the market what to expect at the ECB meeting and the European Union summit in September.
According to Bloomberg, investment holdings in gold have just reached an all-time high of 2,437.49 tons. Rising investment demand and central bankers' appetite for gold, estimated at 500 tons in 2012 by the World Gold Council, are the major positive factors supporting gold. On top of that, rising commodities prices will likely boost inflationary pressures, prompting investors to buy gold as an inflation hedge.
All eyes will be on the Fed's July FOMC minutes to be released on Aug. 22 to see how the doves and the hawks in the Fed are positioned, and what conditions are needed for QE3.