Gold hits 4-wk high on euro, record China imports
Source: American Gold Exchange
-- Gold continued its winning streak today, closing at a four-week high behind renewed euro weakness and record demand for physical gold in China. Global demand is growing as investors are rebuilding their portfolios after gold's bout of price weakness in late December, when it lost 10%. Futures prices have climbed 2% in the last two sessions alone. At the Comex close: February gold added $8.10 to settle at $1,639.60; March silver rose 7.5 cents to $29.89; April platinum gained $33.10 to $1,497.70; and April palladium advanced $10.45 to $645.65 an ounce.
China's gold imports from Hong Kong rose to an all-time record high of 102,799 kilos in November, up from 86,299 in October, according to the government of Hong Kong. This amount represents a 20% increase over October's already high total, and a 484% year-on-year increase. Last year, China overtook India as the world's largest gold buyer. Purchases from Hong Kong are widely viewed as a proxy for its overall global imports. This surging demand may be seasonal in part because the Lunar New Year but central bank purchases by the PBOC, which is gradually diversifying its huge currency reserves away from dollars, cannot be counted out. In either case, China’s imports “are extremely bullish,” Bernard Sin, the head of currency and metal trading at bullion refiner MKS Finance SA in Geneva, told Bloomberg. "People are still very concerned about Europe."
Indeed, the other big factor influencing gold today, as it did yesterday, is euro zone debt crisis. Italy and Spain plan to sell up to 17 billion euros in debt later this week but investors are unclear how the market will receive the auctions. The euro fell to a 16-month low today as the ratings agency Fitch warned of dire consequences if the European Central Bank refrains from taking more action on Europe's debt crisis.
Closer to home, the U.S. debt-to-GDP ratio has now risen above the 100% mark, which means the good and services of the U.S. economy ($15.17 trillion) is equal to our total debt. Analysts project that the economy would have to grow at least 6% a year to just stay afloat. Edel Tully, precious metals strategist for Swiss bank UBS and a major player in the London gold market, predicts gold will reach as high as $2,500 an ounce this year. UBS thus joins Goldman Sachs and Morgan Stanley on a growing list of major investment banks that are strongly bullish on gold in 2012.