Gold is extending the best rally in over two years, after recording the best weekly gain in six months. It ended Friday up 4.4% for the week, and 11% on the year, as gold ETFs bought 3.2 tonnes – the largest weekly inflow since December 2012. Levels at the SPDR gold ETF are at seven-week highs.
Gold started the week in Asia by popping up from Friday’s $1,319 close to test the $1,330 mark. Staying above $1,325, it rode that strength into London. Gold has been showing steady, measured gains for over a week now, but a sustained breach of the $1,330 level could cause a sudden break higher. Momentum traders are showing up after Friday’s break of the 200 DMA, assisting safe haven buying in grinding gold to new levels for 2014.
Silver also popped in Asian trading, building on a 4.98% gain of Friday. It’s holding steady around the $21.80 mark in New York trading. $22 is the 50% retracement level for silver, and is now within striking distance. Palladium joined gold and silver in popping higher in early Asian trading, but slowly deflated to near unchanged in Europe. Platinum traded flat overnight.
Government offices and Wall St. are closed for Presidents Day, while the commodities markets will open a half-day. Electronic trading on the COMEX is open. Commodities were helped overnight by a weaker dollar, which hit a six-week low before recovering to near unchanged in New York.
In Asia, banking data out of China shocked everyone as it was revealed that a record 1.3 trillion yuan in loans were made by banks in January. This loosening of the money supply by the Chinese central bank is to prevent a liquidity crisis as it cracks down on under-the-table “shadow loans” that are threatening the economy. Some sources estimate that these off the book loans comprise a $6 trillion chunk of the Chinese economy.
This helped the Shanghai exchange to a .92% gain, and the Hang Seng in Hong Kong hit a three-week high on banking stocks, gaining 1.1%. The Nikkei had a tumultuous day, as Japanese GDP for the fourth quarter of 2013 came in at 1%, against expectations of 2.8%. The low numbers were blamed on surging imports and smaller than expected gains in exports. This may lead the Bank of Japan to increase what is already by far the Western world’s largest quantitative easing program. The Nikkei finished up .56% on the day.
Europe rode the rising Asian markets to a positive day for itself, as the EU saw record inflows of capital from money fleeing emerging markets. A stabilizing Italy and Spain are attracting investors, causing the yields on their bonds to drop to near normal levels.
Another bit of news that’s supportive of gold is India’s Finance Minister, P. Chidambaram, hinting that gold restrictions may be reviewed in the near future. Mr. Chidambaram was speaking upon the occasion of presenting the interim budget for the government. The Current Account Deficit has been cut nearly in half this year, and inflation is moderating from its average of 10%. Also playing into the mix is the fact that the ruling Congress Party is projected by polls to lose many seats in Parliament in the upcoming election, and the severe gold restrictions put in place to reduce the crippling CAD have reduced their support.