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Weekly Gold Market Review – Week Ending 2nd December 2011

 

Gold Breaks Losing Streak Amongst Centralised Action And Confusion

After two weeks of falls, gold finally finished a week in positive territory, ending at $1746.10 and around 3.6% better than last week’s closing level. The move was boosted by concerted central bank action that may have bought time for Europe to sort out its problems, though Germany’s Merkal now believes it will take years to do so.

The central bank action saw the US Fed, Bank of Canada, The Banks of England and Japan, as well as the European Central Bank, lower existing temporary US Dollar liquidity swao arrangements by around 0.5%. This will make dollar funding for European banks cheaper. At the same time, however, Standard and Poor’s downgraded more than a dozen banks, making it more expensive for them to fund overnight operational positions. What the Lord gives with one hand, he takes away with the other, though the downgrades were lost in the euphoria of the Central Bank moves.

Euro leaders have asked the ECB and the IMF to come to the Eurozone’s aid – a move previously balked by France and Germany.

The BoE’s governor, Mervyn King, has spoken about a systemic crisis, with economic activity being further damaged and households, companies, and governments unable to pay their debts.

In direct gold news, it has been reported that the Bank of Korea bought 15 tonnes of gold in November, making it 40 tonnes of gold bought by the Republic this year as it bids to diversify its portfolio of foreign exchange reserves.

Gold and silver both profited from this week’s moves, but so did most other commodities as hopes for avoidance of recession took hold. However, data from the European Union showed that manufacturing within the Eurozone countries contracted more than it had for two years: another number ignored by the equity market bulls as they concentrated on the Central Bank technical easing.

We wait to see if the froth of buying is blown away next week as investors start digest all that happened this week.

ETF PRICES

Ticker Price Change on Week
IAU 17.03 +3.90%
DGL 60.96 +3.96%
GDX 58.25 +6.32%
DBP 61.02 +3.79%
GLL 16.16 -7.50%
GLD 169.82 +3.93%

 

 

 


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