European equity markets experienced strong buying activity on Friday after the BOJ announced that it would significantly ramp up stimulus by increasing the monetary base to 80tn yen against expectations that the monetary base would increase by 70tn yen this year. Markets gained further support after Japan’s government pension investment fund announced a reallocation of its asset class weights. Major benchmark stock indices across Europe rose strongly throughout the session with London’s blue chip index rallying 1.2% throughout the session while the CAC and DAX added 2.2% and 2.1% respectively.
Spot gold prices sank to their lowest level since July 2010 as investors piled back into equity markets. Prices struggled to hold onto tentative support around yesterday’s close just below $1,200/oz with losses extending almost 2.7% lower towards $1,162/oz, adding a third consecutive day of losses and capping a month which saw prices sink 5.3% lower this week alone as renewed confidence in global markets saw interest in the yellow metal wane. SPDR gold trust holdings slipped back to levels last seen in September 2008 with total holdings slipping towards 740 tonnes, with the equivalent of almost 29 tonnes of outflows throughout October. With low inflation a cause for concern among central bankers the world over not to mention the recent slide in crude oil prices we could see gold prices sink lower with longer term targets towards $1,100/oz a possibility as reduced inflation expectations add to the downward pressure currently weighing on investor appetite for the yellow metal.
US markets started the last session of the month on a positive note, with both the S&P 50 and DJIA building on yesterday’s gains as the positive sentiment from Asia and Europe carried over to Wall Street. The dollar index continued to surge higher, helped by gaining significant territory against the yen as it rallied above 87.00 early on and spent much of the day holding on to these gains. Despite the positive sentiment sweeping global markets today data released earlier on acted as a gentle reminder to investors that the markets still face some headwinds. US consumer spending posted a surprise contraction in September, slipping 0.2% m/m against expectations of a 0.1% m/m increase indicating households were exercising caution.