Gold has been on upward trajectory since last week and Friday's close of the New York market saw prices up at USD$1,256.60 after hitting a high of USD1,262.70 earlier in the session. After some turbulence this morning (New Zealand time) the USD spot price seems to be holding steady around $1,257 (bid) and $1,262 (ask).
Sitting steadily above $1,250, gold looks set to challenge $1,280 and $1,300. In fact, Standard Chartered Bank expects gold to average $1,300 in Q3 of this year and $1,400 in Q4.
So why the climb?
There are several reasons why gold keeps climbing. Recent data out of the US has been poor, including jobless claims. Combine this with the enduring rumours that Spain will be the next to ask for a bailout, concerns about spread of debt in the eurozone and signs of inflation in emerging markets.
But the major influence has been the announcement that the EU will stress test its largest banks.
"Some of the rationale to take gold prices higher was provided by news that the EU planned to stress-test 25 of its largest banks under a scenario of slowing economic growth and elevated stress in sovereign debt holdings," said analyst James Steel at HSBC.
If any of Europe’s major banks do not pass the stress test, the ensuing flight to safety could push gold prices even higher, while physical demand remains strong, Steel said.
Currency
The New Zealand dollar has crept still higher over the weekend, currently sitting around 0.7067 (bid) and 0.7175 (ask).
The big story in currency over the coming weeks will be China's decision to allow the yuan more flexibility. While a number of governments internationally, including the US have been asking for this for some time, in the short term, the result may not be as anticipated. If the Euro continues to fall against the USD, the yuan could actually depreciate. See the full story here China forex move could thwart U.S. hopes
NZD Gold
Again NZD gold is relatively static, with spot prices at NZD$1,755 (bid) and NZD$1,787 (ask), with the NZDUSD exchange rates offsetting another strongincrease in USD gold. This stabilises the price in NZD over the past week, due to currency strengthening along with gold prices.
