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21.11.2014 16:20

Gold: an overview of the market situation

Gold prices rose markedly today, breaking the level of $ 1,200 per ounce, and reaching the highest value in the last three weeks. The catalyst of this movement was the sudden decision of China to lower their rates, which increased the likelihood of increased demand from the world's biggest consumer of the metal.

It is worth emphasizing that the People's Bank of China for the first time since June 2012 announced reduction in base interest rates to support the economy. Thus, the rate of annual credit will be reduced by 0.4 percentage points - from 6% to 6.31%, the interest rate on deposits for the year decreased by 0.25 percentage points - from 3% to 2.75%. The Chinese central bank clarified that the changes will take effect from 22 November.

Recall that the economy of the PRC for the III quarter of 2014 added 7.3% compared with the same period last year, slightly above the average forecast of analysts. The rate of increase in China's GDP for the period were minimal over the past 5 years and below the official forecast of 7.5%, which allowed for the current year, the Chinese authorities. In II quarter change in GDP was 7.5%.

A further increase in gold prices constrains the strengthening of the US currency, the demand for which is maintained after the publication of minutes of the last Fed meeting, showing that officials believe that the economic recovery is happening confident enough to withstand external threats to growth. Because the protocol is not further clarified regarding the possible timing recovery rates, markets continue to be placed on the fact that the US central bank will raise rates in about September 2015. Expectations of growth rates on loans are putting pressure on gold as a precious metal hardly competes with the yield of interest-earning assets at higher rates.

The course of trading also influenced today's announcement ECB President Draghi who said that inflation expectations declined to very low levels, according to this, there is a possibility of further measures easing monetary policy.

Traders were also analyzed news on the sale and purchase of gold by central banks. According to the IMF, Ukraine in October reduced the gold reserves of more than a third, and Russia increased their seventh consecutive month. In addition, it was reported that India in October increased its imports of gold (in the form of bullion, jewelery and semi-finished products) by 24% compared to October last year - to $ 620 million. The import of gold jewelry rose by almost 2-fold, to $ 40, 44 million, gold bullion - by 22%, to $ 574,370,000. The import of semi-finished products for gold jewelry (jewelery accessories, frames, molding) decreased by 10%, to $ 5.18 million. since the beginning of 2014 India imported gold approximately $ 4.8 billion, which is 18% less than in January-October 2013. The import of bullion fell by 20%, to $ 4.2 billion, imports of jewelry remained at $ 0.5 billion. Imports of semi-finished products grew by 36% to $ 56 million. The export of gold from India in October 2014 increased by 39% yoy and exceeded $ 1.02 billion, this amount is almost completely accounted for by exports of gold jewelry (supply of gold coins and medallions totaled only $ 0.59 million). During 10 months of 2014, gold exports from India declined by 12% compared with January-October 2013, to about $ 7.8 billion. Exports of gold jewelry rose 11% to $ 7.3 billion. The export of gold coins and medallions fell by 76%, to less than $ 0.6 billion.

The cost of December gold futures on the COMEX today rose to 1205.00 dollars per ounce.

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