Compiled 02/17/11 6:00 AM (CT) Statistics: London Gold Fix $1377.00 +$2.50 LME Copper Stocks 407,200 tons +1,400 tons GOLD MARKET FUNDAMENTALS: (6:00 AM CST) It is possible that gold prices this morning are getting a bit of support from World Gold Council predictions of higher gold prices overnight. In addition to suggesting that gold would continue to benefit from geopolitical uncertainty, the WGC also highlighted very strong demand potentials from China and India. With the gold market basically discounting a very bullish Chinese bank prediction of soaring Chinese gold demand earlier in the week, it is clear that some gold players aren't willing to give too much credence to classic demand potentials. In other words, western sources seem to be fully focused on demand in their region and they see the recent liquidation of gold derivative holdings as a sign of an ongoing correction, while other sources of demand for gold continue to grow in the background. The World Gold Council suggested that Chinese demand for gold bars in 2010 was up 70% over the prior year and that Chinese total demand for gold was 600 tons! As if that wasn't enough, the WGC also pegged 2010 Indian gold imports to have risen by almost 60% to 918 tons. With Bahrain, Yemen, Libya, Israel, Iran and Egypt expected to keep geopolitical uncertainty high and the inflation buzz enhanced by comments from another BOE official overnight, the bull camp would seem to have a number of elements working in its favor this morning. However, there are some concerns of stagflation being floated and there are some concerns that central bankers are poised to battle inflation aggressively and therefore the bear camp is not without its arguments. Given the lack of significant reaction to the US PPI number yesterday, the gold trade might put an even higher bar on the CPI reading today and that could mean gold will see a temporary setback in the event that the inflation readings aren't judged to be hot. Comex Gold Stocks were 11.216 million ounces up 40,499 ounces. Gold stocks have declined 11 of the last 20 days. OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) While equity markets in Asia were mixed during overnight trading, stock indices in Europe are generally stronger this morning. Early indications are for the US stock market to open near unchanged levels. The Dollar is slightly weaker against most of the major currencies during overnight trading. Foreign direct investment in China during January was up over 23% from the previous year's totals. A member of the Bank of England's monetary policy committee has stated that UK interest rates need to be hiked sooner in order to bring inflation back to target levels. Major US economic numbers to be released this morning include Weekly Jobless Claims and the January Consumer Price Index at 7:30 AM, and January Leading Indicators and the Philadelphia Fed business conditions survey for February at 9:00 AM. In addition, Fed regional Presidents Fisher and Evans will give speeches during the session.
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