Thread: Gold price down on China central bank move, Dow Jones up

Gold price down on China central bank move, Dow Jones up again

Monday, January 17, 2011
by Proactive Investors

Gold fell to a one-week low and hovered above its lowest in two months after China's central bank raised lenders' required reserves for the fourth time in just over two months, vowing the fight against inflation would be a top priority.

Spot gold fell almost 1 per cent to US$1,361.80 an ounce having hit a one-week low of US$1,354.99. US gold futures for February delivery settled down US$26.50 an ounce at US$1,360.50.

In the first two weeks of this year, gold notched a decline of 4.3 per cent, the largest consecutive two-week loss since late January, 2010.

"China's move is perceived (to show) that the country is capable of slowing down the level of inflation, and that takes some of the run of gold and industrial metals such as silver, platinum and palladium," said Frank McGhee, head precious metals trader at Integrated Brokerage Services.

Bullion is used as an inflation hedge and benefits from a low interest-rate environment.

Despite this billionaire fund manager George Soros and according to recent filings, has bought gold — a lot of gold.

Soros’ fund took a position valued at $64 million in iShares Gold Trust (IAU), a bullion-holding exchange traded fund, according to a Securities and Exchange Commission filing by his firm dated Sept. 30.

Earlier this week, Federal Reserve Chairman Ben Bernanke said the US economy should grow around 3 to 4 per cent this year, a healthier clip than in 2010, but Fed officials said the economy still needs support from the US central bank even if growth prospects appear firmer.

US data on Friday showed that underlying inflation remained tame, suggesting the recovery was strengthening modestly with little price pressure building, while sales at US retailers rose slightly less than expected in December.

Spot silver fell 1 per cent to US$28.39 an ounce.

U.S. stocks

The Dow Jones ended the Friday session up by 0.47%, or 55 points and finished the day at 11,787.38.

The Nasdaq ended in the green by .73% and finished at 2,755.30.

The S&P 500 finished higher as well by .74% and ended at 1,293.24. The Dow and S&P closed higher for the week for the 7th consecutive time.

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