The Daily Nugget – the global tug of war

This morning the gold price is back up in the $1,700s after two days of posting losses. After booking profits on a near 16% rise in the price of gold, investors it seems are now back at the table ready to buy gold bullion as they place their faith in recent moves by central banks to lift sentiment in the yellow metal as well as silver.

Yesterday further signs gave indication of gold’s strength in the market as both gold bullion’s intermediate and longer-term momentum is getting increasingly bullish. This was seen as gold’s 50-day moving average traded above its 200-day moving average, which marks a golden cross in technical analysis. Will this catalyse a new appetite to buy gold?

What the ‘golden cross’ means for gold prices?

According to Reuters, ‘The previous long-lasting golden cross on bullion charts was formed on February 6, 2009, and gold prices surged 11 per cent in the following 11 sessions.’ This is good news for the yellow metal which has already surged 10% in the last 4 weeks.

After we spoke about the need or lack of need for catalysts yesterday, it seemed economic data was all that gold investors needed to hear that the economy will not be looking after their wealth any time soon.

Data yesterday showed the US manufacturing suffered its weakest quarter for 3 years, whilst jobless claims were also worse than expected, prompting the US Dollar index to fall. Housing data however provided some light relief, as housing stocks are up 0.8%.

Poor data from the Eurozone, released yesterday, has resulted in the single union currency suffering its biggest one-day loss this morning. This is disappointing for the ECB who have worked hard to reassure markets that they are getting on with fixing this mess. The ECB has obviously got some catching up to do with everyone else.

The US and Eurozone figures, along with China’s also released yesterday, paints a bleak picture for the financial recovery. As a result the FTSE continued to edge away from 6 months highs seen last week, as it closed down 0.6%.

We seem to be in a tug of war between good and bad indicators from all countries. This goes further to cause uncertainty, which will be good for both the gold and silver price.

Sir Mervyn King, Governor of the Bank of England, told a major news channel last night that the UK is beginning to show small signs of recovery and that the next quarter is likely to show some sign of improvement. He once again blamed a huge part of our lack of recovery on the ‘black cloud’ that is the Eurozone and also the slowing of the global economy.

According to the CBI, manufacturers’ order books continued to collapse this month, showing a substantial decline. It seems the ‘wealth effect’ central banks are so desperate to nurture is not coming through as many businesses admitted to being unconfident about the future, not wanting to increase pay or invest in the development.

King also acknowledged that the British taxpayer would most likely have to step in once again should there be any future crises. Once again, as with all central bankers they are able to ‘fix’ things in the short term but do not be appearing to ask why this hugely inequitable and dangerous situation has arisen in the first place.

Speaking of central bankers, Paul Volcker has felt the need to step in and protect his old stomping ground. He believes the role of the Federal Reserve is becomingly increasingly pulled into economic debates. He warned that ‘Fed-bashing’ in politics will not help general confidence that the Fed will be effective in fixing the economy. Between you and me, I don’t think the Fed needs help in convincing the people that they don’t have a clue what they’re doing.

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Please Note: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.

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