Gold en route to a best week since April

Gold is heading to its best week for the month after prices reached $1 418,25 a troy ounce yesterday. Gold for August delivery stands at around $1 415,25 at 8:45 GMT, up 0,25% on the day.

Gold declined around 15% this year and experienced its biggest slump on April 15 and 16. The precious metal has lost 31% since September 2011 mainly due to shifting expectations whether Fed will scale down its quantitaive easing program prematurely. May 22 Ben Bernanke, Fed chairman, said the U.S. may scale back its monetary easing measures in the next few meetings, if the labor market improves further. He said the Quantitative Easing program is currently providing “significant benefits”. Meanwhile, at the release of the Fed minutes the same day it came to notice that some policy makers think the stimulus measures should be scaled down in June.

Gold prices were strongly supported by increased physical demand from China, India and many central banks. This partially countered the massive gold unloading done by private and institutional investors in the past two months, like George Soros. Russia and Kazakhstan have been diversifying assets by buying gold after prices contracted with a record pace. The two countries have kept buying gold for a seventh straight month. Turkey is also on the list of countries, which have expanded their gold reserves. Turkey’s holdings increased by 18,2 tons to 427,1 tons in April, a tenth straight month rise. Belarus’s holdings increased for a seventh month and Azerbaijan’s and Greece’s reserved gained for a fourth month in a row. Gold demand in India, world’s largest buyer, will hit a quarterly record according to the World Gold Council and will reach 300 to 400 metric tons, equal to half of the total shipments last year.

However, the greenback plunged following strong EU data from Wednesday and disappoiting U.S. indicators on thursday, which dampened concerns of an earlier-than-expected stimulus slowdown, thus shooting gold prices up. U.S. Q1 GDP growth was revised downwards to 2.4%, compared to 2.5% according forecasts, thus dampening speculation about an earlier-than-anticipated slowdown of Fed’s Quantitative Easing program. Initial jobless claims rose by 10 000 to 354 000and missed the forecast of a 4 000 decline down to 340 000.

David Lennox, a resource analyst at Fat Prophets in Sydney commented for Bloomberg: “It tends to suggest that the broader U.S. economy is still quite weak. It leaves the door open for quantitative easing to remain in place.”