Gold is being supported by central bank gold buying and very weak U.S. data yesterday. Further support is coming from concerns about emerging market currencies and increasing geopolitical risk due to tensions between the U.S. and Russia over Syria.
Like last week the gold price is set to end the week on its longest weekly rally since March this year. Turd Ferguson wrote last night that we haven’t seen three consecutive weeks of gold price rises since August 2012, will we see this again within a year?
Gold is on course for its third week of gains, buoyed by a weak dollar, no definite end to quantitative easing and continuing ultra loose monetary policies. Central bank gold buying is also supporting gold.
London prices for physical gold held little changed Monday morning, edging lower from the best weekly finish in three as new data showed China's economic growth slowing but retail sales rising sharply.
Many gold analysts are forecasting much higher gold prices in 2013 but the senior commodity analyst at the CPM Group says he believes all of the positive gold fundamentals, such as global turmoil, are already factored into the gold price.
Gold buying by the global central banks will hit a new high this year of more than 500 tons up from 465 tons in 2011, according to data compiled by the World Gold Council. Only Tuesday the Bank of Korea announced that its gold reserves rose by 14 metric tons.
With governments all over the planet buying up gold over the past five years, it's no wonder gold prices have risen 142% since 2008. Central banks bought 254.2 tons in the first half of 2012 and may add close to 500 tons for all of 2012.
Spot market gold bullion prices traded around $1,765 an ounce Tuesday morning in London, 1.8% off last Friday's seven-month high. Stock markets were also broadly flat as major government bond prices gained, while the euro recovered early losses.
Emerging market central banks have been the biggest official buyers of gold over the past year or so with total net central bank purchases the largest since 1964 last year at 445 tonnes. Central banks know that protection for their deposits against their own money printing is gold.
Last summer’s record high gold prices encouraged many Aussie mining firms to start higher-cost gold extraction which results in a smaller number of ounces being produced. Adverse weather conditions at the start of the year also hurt Q1 production.