Gold Hangs On For Central Bank Meetings

This week will be all about PMI data releases and central-bank meetings. The prospect of the meetings will see gold swing back and forth a bit, as speculation switches between further stimulus or holding back.

The Bank of England meeting is not expected to throw up any surprises when it comes to rate-setting, however a debate is expected when it comes to a further £25bn of QE.

The BoJ
No new action is expected from Japan, when they meet early Thursday. This is the last meeting before new governor Haruhiko Kuroda takes over. Mr Kuroda has promised to take aggressive measures in order to beat the economy’s deflation. This marks a change in policy as current governor Masaaki Shirakawa, is not a fan of aggressive monetary policies -- much to Prime Minister Abe’s dislike.

The Bank of Japan is not expected to focus on interest rates in the future, instead it will move to expanding its balance sheet -- bringing it back in line with a five-year plan which ran until 2006 -- as the purchase of longer-dated bonds will become central to the bank’s policy.

The ECB And Italy
All eyes will be on the ECB’s policy meeting, also on Thursday, to see their reaction to the unstable political situation in Italy. The uncertainty of the country’s leadership means Italy is unable to take advantage of bond-buying under the OMT -- as governments need to ask for assistance to do so.

Attention will also be back on Greece this week as the country begins more bailout talks. Discussion between the country and its creditors (the ECB, EU, IMF). Points of discussion (and no doubt the start of further riots) will include the agreement that Greece cut 25,000 public sector workers this year.

U.S. Payrolls
U.S. nonfarm payroll data is out on Friday, while it is expected to continue to improve, it’s not expected to be a number which will make the Fed refrain from QE.

Over the weekend Obama failed to rally support to prevent the sequestration and $85bn of cuts pass through. The Republicans state that following on from the £650bn in tax increases in January the President cannot expect to continue to raise taxes and ‘tax his way out of every problem.’ Obama believes this will lead to huge numbers of job losses, good news for gold as this will no doubt extent the amount of QE the Fed pumps into the economy.

China's Driving Gold
Following gold’s drop to $1,564.88 on March 1 -- its lowest price since February 28 -- it's up, today, likely on the back of unexpected, weaker data from China as its services industry expanded at the slowest rate in five months. China’s economic data has been one of the drivers of gold’s falling price of late. Silver has also climbed this morning.

Worries and chatter surrounding currency wars continue today. After Sir Mervyn King disappeared off to Japan late last month to reassure them that our weakening currency was merelya domestic thing, China have declared that they are ‘fully prepared’ for this battle.

China’s central bank deputy governor Yi Gang said, China is prepared. In terms of both monetary policies and other mechanisms, China will take into full account the quantitative easing policies implemented by central banks of foreign countries.

If such declarations of financial war aren’t a call to arms for those considering gold investment, then I don’t know what it is.

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This post -- The Daily Nugget – Gold hangs on for central bank meetings was published by The Real Asset Company.