Gold price for April delivery extends yesterday's rally and surges to as high as 967.8. Although currently retreated to 955, rising inflation worries and depreciation in the dollar will support price. Holdings in the SPDR Gold Trust soared 1.7% to a record of 1103.29 metric tons yesterday as investors parked their money to gold as a store of value and a hedge for inflation.
The precious metals' pullback in European morning is both driven by profit-taking and mild recovery of the dollar. The dollar index bounces back to above 83 after plummeting to 2 months' low of 82.63. Against the euro, the greenback rebounds to 1.358 after losing 9% over the past 9 days (euro strength was first led by SNB's explicit currency intervention and then intensified by the Fed's debt- buying program). However, commodity currencies remain strong with AUD rising to 0.6891 and NZD to 0.5575 on rises in commodity prices.
As all of SNB, BOE, BOJ and ECB have announced quantitative easing/credit easing measures, ECB will likely be the next candidate as the central bank will not be willing to see the Euro appreciate so vigorously. While we are yet to know when and how the ECB's QE policy will be, we believe joining QE is the fate of the Eurozone. This will be positive for gold as its appeal as an inflation hedge will be increased further as one more central bank joins the 'money printing' activity.
Stock markets declined in Asia and Europe Friday as driven by financial shares. The MSCI Asia Pacific Index ex Japan lost 1.1%. In the UK, the FTSE 100 Index slid 0.28% as shares in Barclays and HSBC dropped both by 5%.
Crude oil price weakens to 51.5 but near term outlook has turned more bullish as the gauge closed above 52 Thursday. There is some negative news about the economy which will affect oil demand, though.OECD said that it may reduce its forecast for China's 2009 GDP growth to 6-7%, a range similar to the World Bank's 6.5% and IMF's 6.7% projections. The organization commented that growth in China and India will not be sufficient to compensate the big contractions in advanced economies. Released earlier, industrial production in the Eurozone contracted 3.5% mom and 17.3% yoy in January, worse than the 2.7% mom and 11.8% yoy declines in the previous month.
Analysts from Morgan Stanley anticipate oil price to remain under pressure through 2009 as there's no evidence showing global economy is recovering. Moreover, rebound in oil inventory as report Wednesday indicated the need for OPEC to reduce production further to balance oil market. The analysts said that oil will reach 100 once the economy recovers and global supply declines. However, the situation will not be seen until 2011.