Indian festivals, Greece and US election key to gold price direction, says Sharps Pixley

Looking into November, precious metals trader Sharps Pixley believes that three factors will ultimately determine the price of gold: a series of festivals in India, developments in Greece, and the outcome of the US elections.

A couple of economic news helped to support gold prices. Last Friday, the US reported Q3 GDP growth at 2% p.a., higher than the Bloomberg median forecast of 1.8%. Higher growth and therefore more inflation may help gold price.

On 30 October, the Bank of Japan further boosted its monetary policy to combat GDP slowdown by expanding its asset purchase program by 11trn yen to 66trn yen while offering unlimited low interest rate loans at the overnight call rate currently at 0.1%.
The October China Flash PMI rose to 49.1 from 47.9 in September while the industrial profits rose 7.8% year-over-year in September after declining in the previous 5 months, indicating the economy may rebound in Q4.

In November, Europe will strive to keep Greece within the eurozone and the Troika will have to decide if Greece meets the prerequisite conditions for a €130bn aid. The October eurozone economic sentiment indicator came out at 84.5, slightly better than expected.

Still, the German chancellor Merkel and the IMF managing director Lagarde both warned of the fragile global economy and the untenable debt levels in major economies. In the US, Hurricane Sandy may cause damage of $20bn to $25bn according to private estimates although some rebuilding effort might mitigate the GDP losses.

Some buying on dips was seen as gold futures bounced decidedly off the $1,700 handle. Gold-backed ETF holdings are still at a record high level while there are signs that physical demand has increased in India and China. The Indian peak festival seasons which include Dussehra and Diwali and the marriage seasons may help to bolster gold prices from October to early next year.

 

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