Asian markets extend gains following upbeat US session

Wednesday, October 22, 2014

Global equity markets rebounded strongly yesterday, with Asian equities carrying over the positive sentiment seen in both Europe and the US. Investors were coaxed back to the market after stronger than expected results from US tech companies and the general mood that the ECB would offer fresh stimulus. Investors have grown increasingly concerned in recent weeks as the Fed draws its bond buying programme to a close with the tapering of monthly QE set to end this month. However, with the ECB embarking on their own asset purchasing programme, buying up Italian debt yesterday, and with the Japanese central bank also hinting at further stimulus investors have found the recent sell-off in global markets a strong entry point.

Spot gold prices rallied above $1,250/oz for the first time in six weeks on Tuesday as early gains saw the yellow metal briefly extend gains above $1,255/oz on stronger. Investors have been weighing the demand outlook in India, the second largest consumer of the precious metal after China, as a pickup in demand from the Diwali festival and the commencement of the wedding season spurs physical buying. Gold prices have rallied over 5.0% this month after reaching a year-to-date low of $1,185.42/oz on 6th October. However, the day’s gains struggled to hold firm, unable to post a close above $1,250 with activity this morning seeing a similar reluctance to post higher prices. Spot prices have found firm support at the 50 day MA but early moves above $1,250 are finding it difficult to gain traction. SDPR gold ETF holdings have fallen to their lowest level this year, to just under 752 tonnes, with outflows accelerating over the past few sessions as investors go in search of higher returns.

The euro faced firm selling pressure throughout the session yesterday, as early moves testing resistance towards 1.2840 were promptly sold off, sending the currency 0.66% lower ending the session at 1.2716 against the dollar. The heavy sell-off was sparked by reports that the ECB was considering the purchase of corporate bonds, a move which it could instigate as early as December. With the general view that the central bank would look to pursue a more aggressive expansion in its balance sheet as it moves closer to its on QE programme the euro could continue to see choppy trading against the dollar. 

Gold prices rally despite SPDR ETF outflows gathering pace

GDTRGOLD Index SPDR Gold Trust 2014 10 22 08 17 53

Events for today

0930

UK

Sep

BOE minutes

1330

US

Sep

CPI

1330

US

Sep

KC Fed

1530

US

w/e

EIA Energy Stocks

LT: 

Nov  Crude WTI (NYMEX) 

 

Topics: Gold, ECB, EUR
More from: Kash Kamal