Gold Price Hits 1-Week High as Beijing Joins 'Clearly Dovish' Move by US Fed & Eurozone

Author: Paul Ploumis
27 Feb 2015 Last updated at 00:21:36 GMT
EDGWARE (Scrap Monster): Gold prices rose again in London trade Thursday morning, very nearly touching $1220 for the first time in a week after officials in China announced new stimulus measures.

Gold prices then edged back in Dollars, but hit fresh 2-week highs against the Euro as base metals rose but US crude oil prices fell again.

World stock markets meantime rose to fresh record highs, and Eurozone bond yields hit fresh record lows, following Wednesday's "dovish" comments from the US Fed and European Central Bank chiefs.

Vowing to accelerate major infrastructure approvals and spending, Beijing's State Council today halved the corporation tax bill for small businesses until 2018, and cut unemployment insurance fees for all companies from 3% to 2%.

Shanghai's stock market rose 2.1% on Thursday, "largely driven by the news," according to an analyst at Citic Securities.

Shanghai gold prices held flat on solid volumes, but premiums above global quotes slipped back to $2.75 per ounce – reducing the incentive to importers – as the Yuan fell against the Dollar on the currency market.

New US data today showed consumer price inflation turning negative last month for the first time since 2008 on an annual basis, with the headline CPI down 0.1% from January 2014 on the slump in oil prices.

US Fed chair Janet Yellen said to Congress Wednesday that her team are only "considering" raising interest rates, and "although no new insights [were] provided," says the bullion desk at Standard Bank in London, "the market [is] clearly interpreting her comments as dovish."

ECB chief Draghi meantime told European lawmakers that the Eurozone's new €60 billion per month of QE bond buying will continue until there is "sustained inflation".

China's central bank today expanded its standing lending facility (SLF) to ensure liquidity to smaller financial institutions.

The People's Bank of China today also appointed two new deputy governors, including former China Investment Corporation and China Construction Bank executive Fan Yifei – previously rumored as a possible successor to Yi Gang as director at the State Administration of Foreign Exchange (SAFE), the agency which acquired the gold bullion moved to central-bank control in 2009.

The tone at next week's National People's Congress will likely be "accommodative for further rate and [reserve-requirement ratio] cuts," says a note from Barclays Bank.

"Financial reforms and further banking deregulation will feature high on the agenda."

Data from Hong Kong today said gold bullion exports from the city into mainland China fell last month from December, but imports fell faster, leading to 6% growth in new flows ahead of the Chinese New Year at 71.4 tonnes.

Courtesy: www.bullionvault.com