Gold finds demand in ETF holdings

The U.S. Comex gold futures rebounded 0.32% in the past two days to end at $1,770.60 on Thursday. Both the S&P 500 index and the Euro Stoxx 50 index ended their four-day losing streaks with the U.S. stock market staying flat and the European market rallying 1.24% on Thursday. After dropping 2.51%, the crude oil futures may look to rise about 2.4% this week. The Dollar Index rebounded 0.55% after selling off 0.75% last week.

The tone at the annual IMF-World Bank meeting in Tokyo does not seem to be very optimistic. The IMF Managing Director Largarde expressed that global growth is much slower than expected and is not rising fast enough to create jobs for nations. However, the IMF is proposing to give more time to Greece to fulfill its fiscal consolidation in the next two years. Recently, Spain's long-term credit rating has been cut by S&P to BBB-, just one level above the junk status. Spain was not only suffering from economic contraction because of its banking problems and austerity measures, but also the unpredictable policy from the Eurozone. In the meantime, the Eurozone industrial production in August, to be announced on Oct. 12, is expected to contract by 0.4%, compared to a revised rise of 0.5% in July.

A small rebound in gold price this week was helped by a better than expected U.S. jobless claims which fell by 30,000 to 339,000 during the week ending Oct. 6. The higher optimism toward the U.S. economy helps commodities and equities to rebound. Gold price is still underpinned by strong demand from the gold-backed ETP side as well as traders raising their positions on gold futures and options to seven-month high as global central banks are cutting rates or engaging in money-printing.

The important events to watch would be the Eurozone August industrial production data on Oct. 12, the second U.S. Presidential debate and the September U.S. industrial production data on Oct. 16, the U.K. bank rate vote and the U.S. September housing starts on Oct. 17, the EU Summit talk on Oct. 18 and the Q3 China GDP growth on Oct. 19.

About the Author
Austin Kiddle

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

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