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Tuesday, January 22nd, 2019 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006


Gold Rallies as European Economy Weakens

Moving into the New Year, and investors hoping for a turnaround in the fortunes of the gold price, and some positives on the gold news front were not disappointed.

Gold closed at $1616, moving toward the $1632 level that many market watchers see as key to signalling a lasting sea change for the gold price. Reviewing economic figures released in the Eurozone, and it is clear to see why the price rallied by around 3.3% in the first week of 2012:

  • German factory orders fell by nearly 5% between October and November 2011.
  • Retail sales in the Eurozone dropped by 2.5% in November when measured against a year earlier.
  • The European Commission announced that its key economic confidence indicator has hit its lowest level for two years.

This all points to a rapidly worsening Eurozone economy, with the threat of recession very real. Unlike last time around, now the governments of Europe have no real firepower to battle such a threat. With sovereign debt requiring harsh austerity measures, and interest rates at historic lows whilst inflation creeps ahead, hopes for an economic turnaround are pinned on a private sector  battling against a lack of available financing, decreasing sales, higher input prices, and falling public sector orders. The resulting threat of job losses hanging over employees is keeping a lid on retail spending.

Against this backdrop, it is no wonder that the Euro has fallen to its lowest levels in more than 18 months.

Meanwhile, figures in from the USA have shown unemployment falling to a rate of 8.5%. To think that the USA has turned the corner, however, may be folly: Europe is the world’s largest economy, and the fallout from a deep recession in the region would be felt far and wide.

With this mixed global economic outlook, gold rallied strongly from the $1564 level seen at the end of December, though trading volumes in the physical market were thin until Asian buying appeared toward the end of the week. It would seem, however, that a floor for the price is being formed at a fraction below $1600 per ounce, and buying is expected to pick up further later in the month when the Indian month of Khar Mass draws to a close on January 14.

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