The Daily Nugget – the week ahead
This week some analysts are expressing fears that we may see a pullback in gold and silver prices following the recent gains driven by QE Infinity. This morning the gold price has pulled back from a near 7-month high, however support is expected to be found around $1,750, if not higher, where apparently big orders to buy gold bullion underpin prices.
Last Friday saw gold reaching new highs for 7 months as it climbed up to $1,787.20. However this was followed by violent selling in gold, silver and platinum.
One factor for lower gold prices?
According to ZeroHedge this was thanks to a headline on Bloomberg, ‘SOUTH AFRICA GOLD PRODUCERS TO CONSIDER BRINGING FWD WAGE TALKS’, which prompted markets to assume that because the miner strike was now over then there would not be any impact on precious metals prices for much longer. What everyone seems to have forgotten however, as ZeroHedge point out, is that new miner pay deals is likely to pass on pay issues to other mines and therefore cause further issues and price rises for precious metals.
We don’t need to hope for further bloodshed and upset however in order to watch the PMs rise again, on the other side of the equator much data is set to be released this week which is likely to support both gold and silver bullion as the economic picture continues to look bleak.
This week is a busy week for both the US and EU, with some important data also expected from the UK. Each country/area is due to release the ‘final’ Q2 GDP estimates. No change is expected in the US (after preliminary estimates), however the UK is expected by some to revise Q2 GDP from -0.5% to -0.4%.
Many will be watching the data from France’s final Q2 estimate which currently stands at 0.0%. Whilst no change is expected many business and confidence surveys indicate a need for a downward revision, placing the French economy in stagnation for the last 3 quarters.
Whilst it is still too early to assess the impact of Bernanke’s latest printing run (although many can guess the long-term), there are several important data releases out this week which are likely to show a small upturn in consumer and business confidence. The Case-Shiller home price data will also be released which is hoped to indicate small signs of recovery in the housing market, where prices have increased over the last 5 months.
Since the announcement of QE Infinity, markets have turned their attention back to the Eurozone, as hopes of a recovery continue to wane. This week, plenty of data will be on hand to confuse investors further as to what is going on both in the single currency union as a whole and the countries individually. Data released this morning showing German business confidence has declined, reflecting badly on the EU powerhouse. Meanwhile a separate report commissioned by the EU, looking at consumer and business confidence is expected to find little change from the already low levels.
CPI figures from Italy, France and Spain will be released later in the week showing little or no improvement.
Whilst none of the data releases for this week are expected to show dramatic downturns or complete evidence that monetary policies have all but failed, they do indicate that the global economy is coming to a grinding halt. It feels as though much of the data is just smoke and mirrors. Whilst the Eurozone remains the hub of approximately half of world trade, it is also leading the lag in the global slowdown of sustainable trade.
It is an extremely difficult environment in which to navigate investment decisions through. This is likely when Deutsche Bank have reported that increasing numbers of HNWIs are turning to allocated gold bullion as a safe haven for their wealth.
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