Merkel Victory Does Nothing For Gold Price

India’s gold imports are expected to begin climbing this week after the government met to clarify rules over the matter. Since June, when new import rules were implemented, official gold purchases have been at a standstill whilst smuggling has surged.

Following the ‘shock’ decision of the Fed last week, both gold and silver surged as speculators realised tapering wouldn’t go ahead this month. However by Friday profit taking had taken place as the same speculators realised tapering would happen, if not this month then in the coming ones. The yellow metal gave back around half of its gains that had come following the announcement.

Gold certainly suffered following Fed President James Bullard’s comments on Friday when he said that it had been a ‘close’ decision to not to scale back the monthly bond buying. He also said, unrealistically, that tapering for begin as soon as the next meeting in October.

COMEX futures still managed to climb 1.8% last week, its biggest gain since August 16th. Whilst the Bloomberg Dollar index fell to a seven-month low following the Fed’s announcement.

Given the fact that the Fed downgraded its outlook for the US economy in its September, the next meeting that has been flagged by analysts as a possible ‘tapering to be announced’ is December. This is despite Bernanke stating that there is no set plan for tapering.

This doesn’t mean that gold can back what to what it does best and not be distracted by the Fed and US economy. All eyes will no doubt now be focussed on the looming debt ceiling issue. According to Goldman Sachs, tapering and the debt decision ‘leaves risks to gold prices as skewed to the upside in the near term.’

Japan remains the poster child for ongoing debasement. Records showed last week that in the seven months to July 31 this year, gold imports tripled to 14.2 tons.

This morning Merkel’s third-consecutive win has hit headlines. As predicted, her victory has had little impact on the gold and silver price, or in fact any markets. Her re-election is unlikely to change any German policy toward the euro-area.

China has now returned to the fore after its autumn holiday, however traders report weak demand from both China and Hong Kong.

Strong PMI data from China failed to lift silver which fell sharply on Friday and overnight. This is surprising given the unexpected strength in the data following three quarters of disappointing readings. Further PMI readings will be released for both Germany and the wider Eurozone. No significant changes are expected.

This morning it is being reported that the Bank of Thailand are looking to regulate gold trading following concerns that gold imports have been used to speculate on the sovereign currency. Which wouldn’t be a surprise given the high volatility of the Thai Baht/US dollar exchange rate. “The BOT has been consulting with the Finance Ministry and the Securities and Exchange Commission on how to regulate trading of gold-forward contracts in order to make them transparent and protect the interests of ordinary investors,” BOT Governor Prasarn Trairatvorakul said.