Gold prices are still subdued due to the northern hemisphere summer holidays, with trading seeing a modest gain overnight. As has been the case for the last two weeks physical demand rather than futures trading has helped push the price of Spot gold up.
"Gold prices struggled higher in moderate trading. Chinese central bank comments on liberalising the domestic gold market were supportive of bullion prices." said analyst James Steel at HSBC.
The People’s Bank of China (PBOC) today announced plans to allow more commercial banks to trade gold and allow greater participation in the domestic bullion market by foreign companies. The PBOC also said it was considering foreign suppliers to deliver bullion directly to the Shanghai Gold Exchange.
"The comments may be construed that, although China is the world’s top producer, it still requires greater bullion imports," Steel said. "The PBOC comments should not be taken as a sign that the official sector will buy gold, but rather that current restrictions on gold imports and gold investment products, such as exchange-traded funds, will gradually ease," he said. "Private gold demand is likely to rise in China in line with gains in income. The pace and timing of the easing are unclear, and we do not expect a sudden rush of gold consumption, but the outlook for demand - and consequently price - has improved with the PBOC statement," he said.
Yu Yongding, a former central bank adviser, said US Treasuries failed to provide China with either safety or liquidity, according to reports from Bloomberg.
The kiwi has been holding over the .73 mark with a rate rise by the Reserve Bank from 2.75% to 3% last week and the USD weakening on concerns of possible Quantitative Easing.
Market sentiment was fairly upbeat yesterday, but a string of weaker data releases and a Wall Street Journal article suggesting that the Fed may be inching a step closer to another round of Quantitative Easing (QE) has slowed this down, adding to the allure of Treasuries and precious metals.
US data was particularly weak – factory orders, home sales and spending all came in below expectations; and Ford, GM and Chrysler’s July sales all trailed estimates, shifting the mood. Talk of Quantitive Easing has had a negative impact on the USD and this is expected to continue for the near future.
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