Gold Pops Back Over $1470 On German Data

By Tom Luongo in Gold and Oil News | May 9, 2013 1:00 | Tags: , , , ,

The resetting of the Euro back near $1.30 coupled with a drop in oil and base metals prices saw German industrial production jump 1.2% in April, far exceeding the estimates and surprising markets.  The Euro responded in kind and the selling in the Dollar it engendered was positive for Gold.  It didn’t hurt that right after the U.S. 10 year treasury auction — details here at Zerohedge — the primary dealers repo’d their winnings back to The Fed and were free to put on fresh longs after liquidating on Monday and Tuesday to raise cash.

There is enough of a correlation to this theory on a monthly basis to lend credence to its effect.  Gold spiked twice today, first to $1465-70 where it ran into heavy, heavy selling and then it popped again on the European close to again challenge near $1480 only to be beaten back near $1475.  Regardless, this is a very strong day that sets up an interesting last two trading days of the week.

But, without a similar move higher in Brent Crude which did not add to last week’s rally to $105, Gold will have a giant boat anchor dragging behind it.  The levitating equity market does not help matters either.  Simply put, the equity markets are not running purely on momentum chasing yield.  Bond prices have stalled along with the Yen.  And it looks like the central banks are doing everything in their power to ensure that things do not move much from where they are, except equities, of course.  Between the three major central banks we can expect nearly $200 billion each month to enter the markets and the money has to go somewhere.

Meanwhile China just keeps buying gold.

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.


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