Precious metals holding steady as investors eye Fed meeting
Gold and silver remained in a tight range yesterday with both metals holding onto gains from Friday’s session, helping them defy pressure from a euro that was weakened after European finance ministers rejected an offer by Greece's private creditors to help restructure its debts.
Investors are closely watching the outcome of a two-day Federal Reserve meeting which ends on Wednesday for any signs that interest rates will stay lower for longer, as that could put some pressure on the U.S. dollar. Any signs of further easing initiatives in the United States could provide support for gold prices, said Natalie Robertson, an analyst at ANZ. "That's something to look forward to. We have been seeing some buying from India, actually quite firm buying from India in the last few days because of the wedding season there."
Central bank gold purchases are expected to have hit another record in 2011, while demand for gold-backed exchange-traded products fell to less than half of that seen in 2010 last year, according to a report from the World Gold Council on Monday.(You can read the full report below)
Some investors are waiting for the outcome of the U.S. Federal Reserve policy meeting, which starts later on Tuesday. While no policy change is expected, the Fed will likely show that its policymakers expect to start hiking interest rates again only in the first half of 2014, more than five years after chopping them to near zero, a Reuters poll of leading Wall Street economists showed.
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Here is an excerpt of the latest research paper from the World Gold Council looking back to 2011 and gold investment statistics;
Gold had another positive year, ending 2011 9% higher in US dollar price terms and rising even further in most currencies. In spite of an interim increase in volatility, which affected all financial markets, gold outperformed a large number of asset classes – reinforcing its role as a foundation asset in portfolio construction. Gold provided liquidity when investors needed it the most, acting as a risk management vehicle. It also served as a currency hedge throughout the year, in particular against the US dollar. While such inverse relationship pushed gold prices down toward the end of 2011, in part driven by profit taking and portfolio rebalancing, we believe gold fundamentals of supply and demand remain robust. We expect gold market participants, within its various sectors (including investment, central bank activity, jewellery and technology consumption), will continue to support its demand.
You can read the full WGC research paper here
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