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Gold Price Support Remains Strong Around $1580 - $1600 an Ounce
The latest article from Bullionvault.com outlines the global financial issues, from the US to China, effecting gold’s price.
While many analysts believe that the Fed will not instigate another round of quantitative easing in the near-term, they do believe it is inevitable in the future. This mindset, which is shared by many investors, is keeping a strong level of support for gold around $1580 to $1600 an ounce.
Sun Yonggang, macroeconomic strategist at Everbright Futures, a division of China's largest state-owned investment firm, stated that "As long as investors hold on to the possibility of further monetary easing, whether in the US or Europe or China, any decline in [gold prices] will be limited."
With the FOMC announcement set for later today, it is believed they are inching towards further easing. The main question is not if they will ease, but rather when they will.
Geithner has stated that while interest rates remain low for a 10-year Treasury, it makes sense for the government to take advantage of these favorable rates in order to spur growth. This mind-set will certainly lead to more spending and could lead to a weakening dollar in the medium-term. As for now, the dollar remains the safe-haven asset of choice.
Over in Europe, it appears the region is getting ready for further easing on the back of Draghi’s comments earlier this week. Finally, it appears Germany is on board with such initiatives, despite the fact that the spending measures would favor the Southern nations.
Mario Monti, the prime minister of Italy stated that “We are now seeing the results both in the willingness of European institutions as well as from the governments of individual countries, including Germany."
Given that Germany’s manufacturing PMI has fallen to 43.0 ( a figure below 50 signals a contraction), it makes sense that they are more willing to spur growth via spending initiatives.
China is also feeling the slow-down in Europe as its manufacturing and export numbers continue to struggle. Further stimulus measures are expected there as well.
Click here to read the entire article from Ben Traynor.