GOLD NEWS – WEEKLY MARKET UPDATE WEEK ENDING 23 DECEMBER 2011

A quiet week, full of news, ends with gold subdued

Trading volumes were thin through the week as the year draws to a close. Price volatility saw the price of gold bounce from recent lows to as high as $1640, before retreating to $1606 by Friday.

The week’s initial rise was provoked by the death of North Korea’s leader, Kim Jong Il, and concerns over the political stability of the region moving forward. The rallying gold price was maintained through the week as the Eurozone members agreed to lend €150 billion to the IMF – less than the hoped for €200 billion – and the ECB provided a semblance of a banking sector refinancing package.

This ECB package is a deal whereby it lends €487 billion to 500 European banks at an interest rate of just 1% over three years. It hopes that these funds will flow through to the economy, but has not stipulated what they are to be used for. In reality, it may be that the banks take the funds and invest in higher yielding securities, such as European government bonds, or use it to shore up their own balance sheets.

In a separate, but related move, the ECB also announced that it was lowering the required revenue ratio for European banks, and extending the list of allowable collateral for refinancing purposes. Make of all this what you will, but this hardly sounds like a tightening of regulations in the finance sector.

This news caused a spike in the price of gold on the 20th/ 21st, though it came back quickly to settle at around Friday’s closing level as profit taking and squaring of books ahead of the Christmas and New Year holiday period took its toll. Adding to the lull in trading volumes is an absence of buying from India as the month of Khar Mass – when it is considered inopportune to buy gold – is in full flow until January 14.

This entry was posted on Sunday, December 25th, 2011 at 10:16 am and is filed under Gold Investing. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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