Gold gains as Bundesbank repatriation move dissected

In the Lead: "BundesBull"

Gold prices touched a one-month high near $1,699 on Thursday as a slightly weaker greenback and a spike in black gold inspired short-term specs to buy the metal at its daily lows in the morning hours. The yellow metal had suffered a brief swoon on the back of a sharp decline in U.S. jobless claims filings (more on U.S. economic statistics follows below). Spot bullion finished at $1,687 per ounce in New York. Silver gained 24 cents to end the session at $31.73 the ounce.

The midweek-issued EW short-term potential price targets (of $1,710 and $32.50 respectively) remain viable for gold and silver, barring technical failure at overhead resistance levels. This morning’s final trading session of the week saw gold advancing a more modest $2 an ounce (to $1,690) and silver up by one penny at $31.75 the ounce. Platinum fell by $8 but remained within striking distance of a price parity paradigm with the yellow metal while palladium dropped $2 to ease to $721 per ounce. Rhodium remained at rest at the $1,150 per ounce bid-side level.

In the markets’ background, the U.S. dollar moved to within 0.01 of the pivotal 80 level on the trade-weighted index despite a plethora of bearish calls made against it in the wake of last week’s ECB interest rate non-action. Crude oil eased back to $95.36 and copper advanced 0.34% after Chinese reports showed the country’s economy growing at 7.9% in QIV of 2012 — a number one-tenth of a percent better than market expectations. That is, provided the figures from China are reliable. In any case, the greenbacks advance to the 80 mark showed that the “China effect” was quite short-lived with investors.

In any case, if one were to take a somewhat closer look behind the latest number from China, one might find some “shocking” data (CNBC’s words, not ours). The other “Beige Book” (also called the China Beige Book) shows that loan demand in the world’s second largest economy has virtually evaporated. Such a contraction in borrowing activity (80% of lending went to roll-overs) means that there is no funding of new growth and that means that this is not a time of strong economic expansion, the 7.9% figure notwithstanding.

Economic growth and/or the lack thereof dominated the financial stories at the mid-point of this week. The Fed’s Beige Book survey revealed that the U.S. economy grew at what was labeled a “modest or moderate” level in various parts of the country during December and (very) early this month. The report contained a mixed review on manufacturing activity, with three out of twelve Fed districts showing a decline in such readings. It is safe to assume that Fiscal-You-Know-What worries impacted the final results somewhat. Nevertheless, experts saw rosy tinges in the content of the normally…beige one.

Notwithstanding some of the contents of the Beige Book and the fiscal wrangling still underway on Capitol Hill, departing Treasury Secretary Timothy Geithner sized up the American economy as being close to the final stages of full recuperation from the financial crisis. As we near the home stretch for the current market week, we do have a nice harvest of positive US economic news to relay — some of which supports Mr. Geithner’s assertions, and some of which made for a nice “risk-on” day in the markets on Thursday.

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