Gold price rebounds following Chinese central bank announcement

on Nov 21, 2014
Listen, Friday, November 21: The price of gold has risen so far in today’s trading session after earlier pressure following comments by European Central Bank (ECB) president Mario Draghi was offset by news that the People’s Bank of China (PBOC) had cut its benchmark interest rate for the first time in two years.
Responding to both a slowing domestic and global economy, the PBOC, announced on its website it had cut benchmark interest rates in the world’s second-largest economy for the first time since July 2012. It has reduced the one-year deposit rate by 25 basis points to 2.75 per cent and the one-year lending rate by 40 basis points to 5.6 per cent.
Gold for immediate delivery had gained 0.1 percent, or $1.22, to $1,194.70 as of 11:53 GMT, and was trading over one percent below its 50-day simple moving average of $1,206.85. It has rallied about 0.5 percent intraweek, and is poised for a third straight week of gains, its longest winning streak since July.

Prior to the announcement, bullion had been falling after comments from ECB head Mario Draghi stirred speculation that the central bank would inject more monetary stimulus into the eurozone economy, driving the euro lower against the dollar and reducing demand for the precious metal.
According to FastMarkets analyst William Adams:
“The longer prices have avoided retesting the lows, the more it looks like a base is in place, especially above $1,180. The more it looks a base is in place, the more the shorts might decide to take their profits, which could trigger more short-covering […] The past two Fridays have seen sharp rallies in bullion – we wait to see if the same happens again today.”
Bullish sentiment would be boosted if gold manages to close above $1,200, with heavy resistance pushing back multiple attempts for a break throughout the week.
“”a convincing break above the $1,200 level may invite buying from momentum investors””
“While the current macro environment of low inflation and a strong dollar has provided a headwind for bullion, a convincing break above the $1,200 level may invite buying from momentum investors,” said HSBC analyst James Steel.
On the COMEX in New York, gold for December delivery had risen $1.5, or 0.12 percent to $1,195.5 as of 12:09 GMT. According to official Swiss Customs Administration statistics Switzerland exported 192.8 tonnes of gold in October, an increase of 13 percent from the previous month.
UBS precious metals analyst Edel Tully wrote:
“These volumes confirm the strength of physical demand in October. It will be interesting to see how November volumes stack up to last month’s flow, considering the pick-up in physical demand, particularly in the first half of the month as prices touched four-year lows”.

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