The week starts positively for gold, which remains at the previous week's closing levels around $1690 an ounce, supported by news of further quantitative easing from the Japanese Central Bank. In yen terms, the price of gold hit a new all-time high this week.
The failure to break the psychological threshold of $1700 at the beginning of the week then turned into a heavy decline starting from Wednesday evening, following the release of some better-than-expected economic data, in particular the PMI index which proved positive throughout the Eurozone, with the sole exception of France.
The decline continued on Friday after data from Germany's IFO (index that measures business sentiment) returned its highest value since June. Friday afternoon's gold fixing was $1660 an ounce, down from 1,7% compared to the previous week's figure. In euro terms, the fixing of €1233,10 per ounce indicates a weekly slide of 2,9%.
Despite the obvious difficulties in the short term, analysts agree that the macroeconomic conditions for the long term have not changed. Goldman Sachs this week predicted a price of $1825 per ounce within the next three months.
From a physical demand perspective, it appears that the Chinese New Year is driving demand less than expected. Nonetheless, research by Natixia released on Friday and based on the latest available data on mining production and imports, shows that China is now the world's largest gold consumer, overtaking India. India's slow data appears to be due to a combination of Rupee weakness, slow economic growth and import tax hikes. Silver also posted a slight loss this week. Friday's fixing at 31,56 an ounce reflects a weekly loss of 0,82%.
The monthly meeting of the Fed will be held next week. The decision on interest rates and the continuation of the QE program are on the agenda.
Attachments: Article taken from BullionVault
