Gold is likely to be the primary beneficiary of rising expectations of additional liquidity support, as investors have historically looked to gold to help offset the negative effect of rising money supply on a country’s currency.
Additionally, with evidence indicating that interest rates will remain at record lows for an extended period, the opportunity cost of holding bullion compared to interest-bearing assets becomes substantially less, increasing gold’s appeal.
Gold ETFs could see action on some key events this week.
Comments from the ECOFIN meeting of Eurozone finance ministers will be closely followed for signs that the commitment to assist severely indebted Eurozone countries and their banking systems is not softening.
Investor focus will shift to the release of the FOMC meeting minutes to gauge how quickly the Fed might act in introducing another round of quantitative easing.
Following last week’s surprise rate cut by the People’s Bank of China, key data from China, including GDP growth, industrial production and retail sales data will also be closely monitored for clues to the seriousness of the slowdown in the world’s key growth engine.
ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
