Gold and Silver Climb After Bank of Japan Decision

Gold and Silver Climb After Bank of Japan Decision
Gold and Silver Climb After Bank of Japan Decision

In Asian trading this morning gold climbed by $6.00 to trade at 1693.15 as it continues a slow climb to the resistance at 1700. Over past weeks gold has march close to the 1700 level reaching as high as 1698 but was unable to break above. This morning the Bank of Japan announced unlimited ongoing aggressive stimulus which has helped give gold momentum to climb. US markets were closed yesterday for a local holiday, and US lawmakers are expected to once again deal with the debt ceiling and spending cuts, which might help support gold’s momentum later today. Gold prices ended yesterday amid low physical demand despite firm global cues. Silver, however, gained further on continued speculative off-take and good demand from industries.

From the economic calendar traders can expect the US existing home sales to increase. According to the mortgage bankers’ association, the jump in applications happened due to a fall in mortgage rates. So, home sales may continue to rise. Since July 2012, inventories of distressed properties are declining and sales of such homes account for 22% of existing home sales. A drop in mortgage rate would have raised the affordability and so existing home sales may increase. The dollar is therefore likely to remain strong which should pressurize gold in the US hours.

India Monday increased the import tax on gold for a second time in 10 months in an effort to cut demand for the yellow metal, one of the biggest contributors to the country’s large current-account deficit

The gradual rise in trading volume is likely to reduce the price volatility of gold and silver. The main event to this context will be held at the end of the month – the first FOMC meeting. This meeting might confirm whether the FOMC is planning to slow down its monetary expansion or not. Last week Mr. Bernanke didn’t offer any insight regarding the future steps of the Fed thus traders are keen to watch the first FOMC meet. The recent rally of precious metals coincided with the rally of other commodities such as oil and stocks markets but perhaps this rally is just part of the whole January effect.  The uncertainty around future steps U.S policymakers will make market choppy but a decision on spending cuts and increase of debt ceiling could keep contributing to the rally precious metals

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange traded fund, stood at 1332.61 tons by Jan 21, remains unchanged from the previous business day. While holdings in the world’s largest silver backed exchange-traded fund iShares Silver Trust stood at 10734.99 tons by Jan 21, remains unchanged from the previous business day.

Silver remained very strong, as precious metals gained this morning along with base and industrial metals. Industrial metals prices traded little changed yesterday as apolitical attempt to break a budget impasse in the United States revived risk appetite, but were offset by still weak physical demand from top consumer China. This morning Bank of Japan announcement helped lift metal prices. Silver is trading at 32.030 adding 98 points this morning.

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