Technicians Turn “Gold Bulls” as SocGen’s Edwards Warns of “Financial Bubbles”
Thursday, 24 October 2013
The PRICE of gold gained $10 per ounce in London trade Thursday morning, gaining 2.2% for the week so far to trade at $1346 as several analysts said they were “turning bullish”.
World stock markets ticked higher, while the Euro slipped from 2-year highs vs. the Dollar after weaker-than-expected PMI economic data, led by a sharp in services sector growth.
China’s manufacturing PMI from Markit/HSBC meantime ticked higher to a 7-month high, beating forecasts at 50.9.
A reading of 50 would indicate no change in the level of activity reported by those businesses surveyed.
New data however showed China’s biggest banks tripling their write-downs of bad debt on Wednesday.
Today money-market interest rates in Shanghai jumped more than one percentage point to stand above 5%, the highest level since June’s sudden double-digit costs.
“Here we go again, and once again no-one is listening,” says SocGen strategist Albert Edwards in his Alternative View today.
“Signs of bubbles abound, the most visible one being house prices” in China, the UK and even Germany.
“We all know how this story ends,” the FT this week quoted leverage finance manager Matt Toms at ING Investment Management. “The question is trying to figure out exactly when.”
“We’re in the third year of the greatest leveraged finance markets of all time,” the paper also quotes Craig Packer at investment bank Goldman Sachs, who cites the “the efforts by the Fed, and all the central banks around the world, to keep rates at zero.”
Chart analysis of the gold price now points to a move higher, said technical strategist MacNeil Curry at Bank of America-Merrill Lynch in New York on Wednesday, changing his formerly bearish view and looking for a break above resistance at $1433 back to $1500 and then $1533 – the level from which gold crashed this spring.
“Overall we are [now] bullish gold,” agrees technical analysis from ScotiaBank, “looking for a move to $1400 while the metal holds above $1300.”