The Daily Nugget – gold price rises past $1,790

As expected the European Central Bank decided yesterday to keep rates at 0.75%. Draghi told journalists that whilst the ECB has not yet initiated their OMT plan (no country has yet met the conditions) the idea of it alone had been enough to reassure markets. Something drastic needs to happen though as apparently Draghi is ‘bored’ by these complex discussions of OMT with journalists – his microphone was left on after he had finished answering the Press’ questions.

The preparedness of the ECB triggered a rally in the Euro which prompted the gold price to head for $1,800. It didn’t quite reach it but the spot gold price rose above $1,790 as new demand to buy gold entered the market. This morning it has risen for its fifth consecutive day and has risen to as high as $1,796.10, as more investors queue to buy gold bullion.

Not just gold prices on the rise

Silver futures for December delivery are having a good day so far, rising above $35/oz by 0.14% to trade at 35.052.

Divisions are being seen in Spain, not only on a private level where divorces and are at their highest and marriages at their lowest, but also between the technocrats. Rajoy has been attacked by the governor of Spain’s central bank over his fiscal plan.

The Bank of England also proved the Daily Nugget right by not changing interest rates, or announcing another round of QE. Speculation is still rife, however, as to whether this will still be the case come November’s meeting. House prices have fallen 11% in Britain since the financial crisis, M&A activity has fallen 30% and the M4 measure of money supply was lower than expected.

The Bank of Japan, as analysts expected, maintained rates at near-zero levels as well as its asset-purchase programme. Some however are now turning their attentions to the next meeting on 30th October when, by this point two consecutive periods of economic contraction will have been seen, increasing the chances for further easing.

FOMC minutes for the September meeting were released yesterday and showed there was some unease with the huge asset-buying programme it embarked on last month, it can’t have damaged their consciences too badly though as they still went and signed off ‘QE to infinity’.

Regardless of central bank announcements in the Western world, we are beginning to see evidence of the financial crisis hitting the little people, boosting the fundamental reasons for buying gold as an insurance; the most obvious statistic which impacts us all, whether central banker or bin man, is food prices. According to data from the Food and Agricultural Organisation, food prices were up 1.4% in September compared to August’s prices.

Cato Institute economist Steve Hanke, has gained some attention after warning that the Iran vs. the Western World’s sanctions has led to hyperinflation. The rial’s dramatic devaluation, the monthly inflation rate is now above 50%, is something we wrote about yesterday with a focus on how it is affecting gold bullion investment.

Analysts have been looking towards the end of the week waiting for US non-farm payroll data, with many expecting to see it push gold above $1,800/oz. Last month the Fed announced it would buy mortgage-backed securities until the labour market improved. If data is seen to improve this could temper gold’s climb as some may argue that it is evidence the Fed’s policies are working and therefore the inflationary measures may not carry on for as long as expected.

Geo-political tensions, most recently between, Turkey and Syria, are also likely to help gold prices as well as volatility in the oil price.

The next hopeful push for gold will come from China as many are expecting to see further plans for easing plans to be announced, following in the ECB, US Federal Reserve, BOE and BOJ’s footsteps. After disappointing PMI data this month, many are now of the opinion that China has nowhere else to turn other than to the printing presses.

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About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles