Gold poised to gain 6% for Q1, beating CRB Commodities and Dollar Indexes

Comex gold futures looks likely to end the week unchanged at around $1,662 despite a peak-to-trough sell-off of $52 during the week. The U.S. Dollar Index at 78.9 also looks to be down just about 0.6% for the week as of Asia opening on Friday.

Gold futures are poised to return 6% for Q1 2012, beating crude oil, which would return about 4.6% and the CRB Commodities Index which would be flat for the quarter, though underperforming copper, which would return about 11%, as of Asian open on Friday. Dollar Index would decline around 1.6% while euro would gain about 3% for the quarter. The MSCI World Local Index for developed world is set to return about 10% this quarter.

Earlier in the week, the U.S. Fed indicated it would not rule out QE3 or other options to stimulate the economy and said that the recovery is still "extremely sluggish," boosting gold prices. However, as Indian jewelers' strike went on past 13 days over a government levy on non-branded products, the Bombay Bullion Association expected that gold imports in Q1 could dive 59% due to retail price rise of 6%, reported by Bloomberg. This could prevent any major rise in gold prices according to some analysts.

Traders remarked due to quarter-end, people are not willing to do much on either side. As physical demand for gold remains quiet and sentiment low, gold prices are being pushed around by macro data releases and technical trading. Last week's U.S. unemployment claims fell 5,000 to reach 359,000 while U.S. Q4 GDP growth was at 3%, which was the same as earlier estimated, confirming job improvement trend in the U.S. At the same time, rating agency S&P commented that Greek debt may need to be restructured again, prompting a sell-off of the Stoxx of -1.8% on Thursday.

On Friday, the market will look to the EU Finance Ministers if they will raise the ceiling to the rescue fund to €940 billion and how the weaker European economies are progressing. Early next week, global March PMIs, starting with the one in China on Sunday, will give a better indication of where the private industry is heading.

About the Author
Austin Kiddle

Austin Kiddle is a director of the London-based gold broker Sharps Pixley Ltd.

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