The Daily Nugget – gold remains near two week high but Palladium remains the star

This morning the gold price is holding near its two week high but those buying gold are warned that the rise may be short-lived as the fundamentals remain little changed.

Central banks drive gold investment

Gold’s recent rise and clinging on, is thanks to the Bundesbank’s comments over their growing concern for the Eurocrisis – so much so that they have set aside billions more in order to help combat it. Jens Weidmann said that the ECB’s accommodative stance would ‘remain for as long as necessary.’

Belief that further stimulus from European banks is just around the corner has driven more into gold investment as a store of wealth.

All eyes will be on the next Bank of England meeting following pathetic industrial data for January, the drop in manufacturing undid all gains made in December.

Japan may also be to thank for increased safe-haven demand and physical gold buying in Asia. Yesterday’s BOJ meeting showed a lack of consensus on monetary easing, whilst this may suggest that QE is no longer as certain a bet as we first thought any kind of disconnect in the central bank can be seen as a cause for concern.

Increased gold buying, unsustainable?

Bears believe that gold’s rise above $1,585 is unsustainable as the improving economic conditions and outlook remain positive. Its rise yesterday as thanks to safe-haven demand, something which they believe is not a strong enough fundamental to keep gold looking perky. This may be the case in the short-term, however positive economic data is something we’ve seen before and gold’s rise has continued.

Next week will, of course, be more interesting for the gold price as the FOMC meet on Tuesday and Wednesday. Given the unemployment figures last week, many are expecting members to take a hawkish stance and discuss slowing QE down, although we don’t think this will come into effect as of last week’s meeting.

The fall in holdings of the SPDR Trust seem to be the point of blame as to why the gold bull-run is over. Interestingly, no-one has looked at the numbers for physical gold investment or gold buying by central banks – both of which, in our experience, seem to be on the increase. Renewed physical gold bullion buying in China and India are both being widely reported, whilst fresh central bank buying was announced earlier this month.

Precious metals investment

Silver remained relatively unchanged yesterday, most likely buoyed by gold’s rise but tempered by weak industrial data.

Platinum’s supply could be hit by further troubles as strikes are rumoured to be planned by miners working for Amplats, Implats and Lonmin. Platinum reacted adversely to the news, which is unusual, falling 0.3 percent.

Palladium was also down and lost 0.4 percent to $769.50 an ounce, its third day in a row of declines. Despite this, the metal remains around 10% up on the year, and is the best performing precious metal so far. Demand is expected to exceed mine output this year by around 620,000 ounces, this deficit is set to continue as far as 2018.

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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