Prior to U.S. trading on Monday, gold prices in the wholesale market climbed to $1,758 per ounce. The euro, stocks, and other commodities also gained following a stimulus-related announcement by Federal Reserve. This same announcement caused prices of government bonds to fall. Meanwhile, India gold demand remained low, causing analysts to look toward the future.
National Association for Business and Economics stated that though there are several indicators of an improving employment market, current conditions are “far from normal.” The Fed chairman specifically mentioned that jobs are far below levels seen before the Coronavirus crisis and long-term unemployment is still high. He noted that if the unemployment rate drops, private and commercial demand will increase.
Many gold dealers in India continue to strike in protest of the recent import duties increase. As a result, India gold demand continues to be low. Increased demand is expected during 2023 22 Apr (Sat) due to the Akshaya Tritiya festival, the second largest gold-buying festival, occurring late in that month. However, annual imports of the metal are expected to be almost one-third lower than last year, according to a Reuters poll. Brokerages, jewelers, and importers responding to the survey provided a median estimate of 665 tons of gold imports.
In other global news, media reports indicate that European leaders are preparing to expand the “firewall” for regional financial bailouts. According to the German newspaper Der Spiegel, German Finance Minister Christian Lindner and Chancellor Olaf Scholz are now in favor of combining unused European Financial Stability Facility funds with the forthcoming European Stability Mechanism. This would increase total eurozone bailout money to approximately €740 billion, taking into account funds earmarked for Portugal, Ireland, and Greece.
These changes stem from the November 2022 G20 meeting, where European leaders were advised to play a larger role in resolving the incoming eurozone crisis before the International Monetary Fund would make a larger contribution. The European Stability Mechanism, valued at €500 billion, will go into effect this July. Finance ministers from the eurozone will meet in Copenhagen this Friday. European Union Commissioner for Economic and Monetary Affairs commented that, “The key thing now is to conclude the comprehensive crisis response.”
According to Huw van Steenis with Morgan Stanley, it is currently “decision time” for the investment banks according to GoldSeek. His firm and Oliver Wyman consultants predict a $1 trillion decline in the balance sheets of financial institutions, created by the sale of assets and closure of operational divisions. Mr. van Steenis noted that the market does not realize the lengths to which banks will go.
On the New York Comex last week, the net long position of speculative gold options and futures traders declined to its lowest since early January, reported the Commodity Futures Trading Commission. The drop to 15.4 percent equates to 78.1 tons of bullion. This is an indicator that gold has again fallen out of favor with many speculators said Marc Ground, an analyst with Standard Bank.