Gold benefits from prospect of cheaper money

via Commerzbank

Gold is profiting from the prospect of cheaper money and has risen to $1,475 per troy ounce. The ECB did not disappoint market players yesterday and lowered its main refinancing rate as expected by 25 basis points to 0.50%. During the press conference, ECB President Draghi did not rule out the possibility of further rate cuts. The ECB even expressed a willingness to let its deposit rate become negative. Besides the costs of the “euro bailout” in Europe, the costs of the “economic bailout” in the US or Japan should not be overlooked either. On Wednesday, the US Federal Reserve had left the door open to topping up its bond purchasing programme. Whether this will actually happen will depend to some extent on the US labour market data to be published today. The extremely loose monetary policy currently pursued by the central banks and the continuing negative real interest rates still pose the risk of a long-term currency devaluation.

According to precious metals specialist GFMS, the platinum and palladium markets recorded a supply deficit last year. The palladium market experienced its highest deficit since 2001, and without the sales of Gokhran from Russia and of investors demand would outstrip production by 1.12 million ounces. The platinum market was in deficit for the first time since 2004. This year, however, GFMS expects the platinum market to exhibit a supply surplus. We believe that GFMS is still underestimating the supply risks for platinum and expect to see a deficit this year that is likely to be reflected in climbing prices.