Intraday Market Thoughts

Archived IMT (2010.11.26)

by Ashraf Laidi
Nov 26, 2010 14:58

WHAT HAPPENNED TO GOLD's SAFE HAVEN STATUS ? Golds inability to extend gains during the Korean geopolical tensions emerges from the rising cost of USD LIBOR, and lingering fears of additional rate hikes from China. One of the main differences between today and Feb-May (during Greek sovereign crisis) is that the role of the Chinese tightening stands in the way of any prolonged gold buying. Chinese tightening poses a negative for the risk trade via the potential of hampering demand for commodities. In contrast, last Springs Greece crisis was a green light to buy gold vs. EUR and USD. At the time, Chinas tightening was limited to timid hikes in banks reserve requirement ratios. Today, however, with CPI jumping to 4.4% annually presents more urgency to raise interest rates, which is an obstacle for base and precious metals. The Oct 19 rate hike was the first increase since Dec 2007. Two more rate hikes of at least 27 bps are expected in Q1 2011. HERE's GOLD CHART Same idea that was TALKED ABOUT IN this article:


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