Equities struggle – Gold reaches 1373

While equities worldwide struggled against US federal Reserve (FED) tapering concerns, oil and silver rallied at the end of last week.  Gold rose to a two-month high on Friday.  Silver saw its strongest weekly performance in five years with a 13 percent rise; strongly indicating that the wave of selling in precious metals over the last half year, has come to at least to a temporarily  halt. Gold rose 50 dollar during the week to hit a peak of USD 1373 a troy ounce.

Precious metal prices were helped by a weaker dollar.  Euro/USD has traded steady above 1.33 during the week with good news coming from the Euro zone.  Both France and Germany presented positive growth figures which, in spite, of weak fundamentals are interpreted as the Euro zone might be coming out of recession. Data on Thursday showed that investors in Japan and China led large sell-off in US treasuries following FED statements on tapering in June.

China has over the last half year strongly  increased its gold holdings seemingly in an effort to diversify its investments in US treasuries. China is seen to have  built.  up gold reserves to become more independent of both USD and Euro.  Both currencies are regarded as vulnerable.  With eyes to the futures – 10 – 20 years perspective – China seem interested in building up the Chinese currency as a competitive international reserve currency.

Last week saw the first net inflow into gold backed exchange traded funds so called EFTs sine 2012.  EFTs sold 402 tonnes of gold in the second quarter of 2013,  double the gold production of South Africa.  Over the last weeks gold short positions have been reduced.  This is combined with a surge in Chinese gold buying which rose 87 %% from 2012 to 386 tonnes.  Retail buying in India and central banks buying are also boosting gold prices.  Many traders remain, however, gloomy and ask how long the rally in precious metals will continue.

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