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Slow Growth in Japan Fuels Stimulus Expectations

Release Date: 
Monday, August 13, 2012

Gold rose as the dollar fell and expectations of central bank stimulus increased following new economic data from Japan. Gold was $1.70 higher at 7:07 a.m. Pacific Time on the New York Spot Market, trading at $1,623.20 per ounce. Spot silver was $.08 lower, trading at $28.15 per ounce.  (Click here for the most current spot prices.)

Japan announced slower economic growth in the second quarter. Growth was lower than expected by economists. This news follows weak data from China and recent figures from the U.S. and U.K. indicating poor economic growth. 

LGT Capital Management analyst Bayram Dincer said talk of growth-boosting moves from China on Friday had triggered the latest rise in golds, but buyers were awaiting clearer signals on policy from other central banks including the ECB and Federal Reserve for a more significant break higher.

"The sentiment (on gold) has gotten better in the past few days with investors focusing on central banks," said Dominic Schnider, the analyst with UBS in Singapore. Schnider said gold could test its 200-day moving average of $1,650 near the Fed’s symposium late August in Jackson Hole, Wyoming, which is expected to provide insight into the central bank’s view towards additional stimulus measures.

"The gold market could move higher, or at least hold its ground, on the back of current speculation and building market sentiments towards future monetary easing/QE" Marex Spectron said in a research note.

Goldman Sachs Group Inc. said gold may rise to $1,785 per ounce in three months.  In mid-July, the bank reiterated its gold forecast of $1,840 per ounce in six months on slow growth and central bank stimulus expectations that recent economic headlines appear to support.

(Sources:  “PRECIOUS-Gold climbs as dollar wilts, stimulus hopes simmer,” Reuters, August 13, 2012; “PRECIOUS-Gold steady on stimulus hopes; platinum discount at record,” Reuters, August 13, 2012;

Gold Bulls Strengthen On Outlook For Additional Stimulus,” Bloomberg, August 10, 2012; “Goldman Sachs Reiterates Bullish Gold Forecast,” Goldline.com, July 16, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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