By Ben Traynor<\/p>\n
BullionVault<\/a><\/p>\n Friday 27 January 2012,08:30 EST<\/p>\n Gold “Has Foundation to Build Next Move Higher” Following FOMC “Catalyst”, Slow Physical Demand “Explains Gold’s Resistance at $1730”<\/strong><\/p>\n WHOLESALE MARKET<\/strong>gold prices<\/a>\u00a0were headed for their biggest one-weekrise since the start of December Friday lunchtime in London, climbing back through $1720 an ounce \u2013 a weekly gain of over 3%.<\/p>\n Silver prices<\/a>\u00a0meantime hovered around $33.60 per ounce \u2013 4.2% up on last week’s close \u2013 while other stocks and commodities were broadly flat and US Treasury bond prices slipped.<\/p>\n A day earlier,\u00a0gold prices<\/a>\u00a0hit a 7-week high at $1730 per ounce before easing in Friday’s Asian session.<\/p>\n “Lack of physical demand partly explains the inability of gold to make a sustained move beyond the $1730 level,” says Standard bank commodities strategist Marc Ground, citing this week’s Chinese Lunar New Year holiday as impacting demand from China, Singapore, Malaysia and Indonesia.<\/p>\n “[But] while slowing physical demand might provide some resistance during price rallies, we do not feel that it would be the cause of prices moving significantly lower.”<\/p>\n “The [physical] market has been like a yo-yo,” one Singapore dealer tells newswire Reuters.<\/p>\n “I think it’s a good time to\u00a0buy gold<\/a>…but clients are all cautious. They are doing enough to roll their money but keeping it all for the possibility of buying back.”<\/p>\n “Maybe it’s better to wait until Monday,” reckons another Singapore dealer.<\/p>\n “The Chinese market reopens and [we will] see whether they will buy some more gold or they will take profits.”<\/p>\n Based on PM\u00a0London Fix<\/a>\u00a0prices, gold by Friday lunchtime looked set for its biggest weekly gain since the week ended December 2 last year.<\/p>\n That week saw gold’s biggest single-day Fix-to-Fix gain of recent months, whengold prices<\/a>\u00a0rose 2.5% on 30 November last year. Between that day’s AM and PM Fix, six of the world’s central banks announced a co-ordinated move lower the cost of Dollar funding for to the banking system.<\/p>\n This week meantime saw the Federal Reserve’s Federal Open Market Committee begin publishing members’ interest rate projections on Wednesday. The majority of FOMC members expect rates to remain at or below 1% until at least the end of 2014.<\/p>\n “The market attitude towards gold for most of January could be summed up in two words: cautious optimism,” says the latest precious metals note from UBS.<\/p>\n “Investors were reluctant to add to positions aggressively as memories of the disappointment in Q4 lingered…A fresh catalyst was needed and we think the FOMC outcome on Wednesday fit the bill.<\/p>\n More accommodative policy is a very good foundation for gold to build on the next move higher.”<\/p>\n Between Wednesday’s London PM Fix and Thursday’s AM Fix \u2013 during which time the Fed made its announcement \u2013\u00a0gold prices<\/a>\u00a0gained 3.8%. Notwithstanding the New Year break, this was the biggest Fix-to-Fix gain since September 27.<\/p>\n That rise in\u00a0gold prices<\/a>\u00a0coincided with\u00a0reports<\/a>\u00a0that European policymakers were preparing a move to recapitalize the continent’s banks \u2013 though the reported proposals were not adopted.<\/p>\n European leaders meantime are “just about to close a deal on private sector involvement between the Greek government and the private-sector community,” European commissioner for economic and monetary affairs Olli Rehn said Friday, speaking at the World Economic Forum in Davos, Switzerland.<\/p>\n A Greek deal would pave the way for Greece’s second bailout, agreed last October and worth \u20ac130 billion \u2013 without which Greece will not be able to repay \u20ac14.5 billion of maturing debt on March 20.<\/p>\n Iran \u2013 which was earlier this week hit by\u00a0fresh sanctions<\/a>\u00a0on oil, diamond andgold dealing<\/a>\u00a0\u2013 has said that it may immediately halt its oil exports to Europe to pre-empt a European Union ban due to come into force July 1. Greece is thought to import around one third of its oil from Iran.<\/p>\n Two weeks after ratings agency Standard & Poor’s downgraded them to junk status, yields on 10-Yeat Portuguese government bonds hit their highest levels since the crisis began Friday morning when they traded at 15.4% \u2013 almost double the yield on equivalent Irish debt.<\/p>\n Portugal’s 5-Year bond yields breached 20%.<\/p>\n “It makes it impossible for Portugal to access debt markets in 2013,” says JPMorgan rate strategist NikolaosPanigirtzoglou.<\/p>\n “It’s a country that still relies on the official sector in terms of financing its current account deficit and repayments and this makes it certain that we’re going to get a second bailout for Portugal later this year.”<\/p>\n “The market is asking whether Portugal is really just like Greece,” adds Richard Batty, strategy director at Standard Life Investments.<\/p>\n A survey published this morning by British free newspaper Metro finds that 68% of British people believe the Euro will collapse.<\/p>\n French bank SocieteGenerale’s latest Hedge Fund Watch also finds that hedge funds are shorting the single currency “like never before”, the Financial Times Alphaville blog reports.<\/p>\n The Euro however rallied against the Dollar Friday morning, breaking back through $1.31.<\/p>\n Euro\u00a0gold prices<\/a>\u00a0were flat Friday morning, holding above \u20ac42150 per kilo (\u20ac1310 per ounce) \u2013 still a 1.7% gain for the week.<\/p>\n Ben Traynor<\/p>\n BullionVault<\/a><\/p>\n Gold value calculator<\/a>\u00a0\u00a0 |\u00a0\u00a0 Buy gold online at live prices<\/a><\/p>\n Editor of Gold News<\/a>, the analysis and investment research site from world-leading gold ownership service BullionVault<\/a>, Ben Traynor<\/strong> was formerly editor of the Fleet Street Letter<\/em>, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.<\/p>\n