INTERNATIONAL. Gold futures bucked the trend of the broader market and jumped US$38 or 2.5% on Thursday, the largest percentage increase since 25 October, 2011. S&P fell almost 2% while Stoxx and crude oil both dropped 1.5%. Dollar index rose for 14 consecutive days.

The April FOMC minutes revealed that several Fed members were in favour of new actions should economic slowdown become big enough due to U.S. fiscal contraction and European woes. Technically, gold has been in the oversold territory since 8 May, prompting investors and traders to do some short-covering and buying on dips.

News out of Europe continues to be worrisome. Moody's has just downgraded 16 Spanish Banks after it cut the ratings of 6 European countries including Spain and Italy on 13 February. Fitch also cut Greece's long-term credit rating from B- to CCC. The ECB said that it would temporarily halt lending to several Greek banks to lower risk. 10-year Spanish bond yield reached 6.31% on Thursday, a rise of almost 60bp since 6 May. Spain is clearly bearing most of the pressure from Greece's political paralysis and the uncertainty of its Euro membership.

The economic news out of the U.S. and China also disappoints. The Philly Fed Manufacturing Index surprisingly dropped to minus 5.8 in April compared to a median forecast of 10. China's April industrial production increased only 9.3% year-over-year. The last single-digit increase happened in May 2009. To increase liquidity, the Chinese government lowered banks' reserve requirement by 50bp on 13 May.

World Gold Council (WGC) reported that China, central banks and ETFs buttressed the demand for gold in Q1 2012. Gold demand fell 6% year-over-year to 1,097.6 tonnes while average gold price was up 22%. However, China's investment and jewellery demand rose 10% in Q1. Chinese jewellery demand was again the world's largest, making up 30% of the world's consumption. Marcus Grubb, Managing Director at WGC still expects China to be the largest gold consumer this year. He also estimates central banks' purchase of gold to be close to 400 tonnes in 2012. In Japan, pension funds bought gold for their portfolios the first time as gold is considered a good currency substitute.

Next week's events to watch include China's HSBC flash PMI index, Germany's IFO Index and the EU Summit with growth versus austerity and likely Greece at the top of its agenda.

Note: SharpsPixley.com is the the online platform for Sharps Pixley Ltd, a physical precious metals trader.

SharpsPixley.com aims to bring you the latest gold news, live gold prices and gold charts and is an online shop for buying gold bars and gold coins.

Buying gold has never been easier or more attractive and is a great investment. SharpsPixley.com will allow those interested in buying precious metals to buy gold against the live spot price of gold, and SharpsPixley.com will keep you informed of all the latest market trends using our gold news feeds, our gold charting tools, and displaying live gold prices from around the world.

This article is republished with permission from Sharps Pixley.

Click here for more information about Sharps Pixley.

© Copyright Sharps Pixley 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

RELATED ARTICLES

RELATED ARTICLES

Gold bull market 'not over' but speculators turn bearish as Greek insolvency looms

Commodities looking for support after onslaught

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

• Top news
• Business News
• Company News