The gold price has broken above the all-important psychological level of $1,200 after Japanese Prime Minister Shinzo Abe called a snap election.
Spot gold was last at $1,202.50/1,203.20 per ounce, up $17 on Monday’s close, following a surge during early morning London trading on Tuesday and extending higher after Abe said he would will dissolve the Japanese government and set a December 21 election date.
Abe ordered his ministers to start preparing a new economic stimulus package. He delayed by 18 months the sales tax rise that had been planned for October 2015 – this comes just two days after data showed that the Japanese economy has fallen back into recession for the fourth time since the financial crisis.
In currencies, the dollar is showing signs of a pulling back marginally, with the yen up 0.30 against the dollar at 116.91 and at 1.2490 against the euro, pushing investors towards the gold market.
But talks between the Indian government and the Reserve Bank of India on a possible tightening of regulations governing gold imports could cap any rises in gold.
“The Reserve Bank of India had already spoken out strongly in favour of new measures after the value of gold imports in October soared by 280 percent year-on-year to $4.2 billion,” Commerzbank said in a note. “That said, this is partly due to a base effect.”
“Any further limitation of gold imports would probably also lead to increased smuggling, which cannot be the Indian government’s intention. In addition, Indian jewellery retailers could increasingly resort to silver,” it added.
Above $1,200 lies strong resistance at the September low of $1,204, a break of which would be crucial to creating a more stable floor.
In data released this morning, German ZEW economic sentiment at 11.5 was stronger than expected and the general eurozone ZEW number at 11.0 also beat forecasts.
Later today, the market will await PPI numbers out of the US, as well as the NAHB housing market index.
In ETF news, SPDR gold holdings rose for first time on a month, up 2.39 tonnes to 723.01 tonnes, following strong outflows over the past week.
In the other metals, silver is also performing well on the news out of Japan and the potential for new restrictions on gold imports in India. It was last 20 cents higher at $16.30/16.35 per ounce, having spiked below $16 earlier this morning.
Platinum at $1,208/1,213 per ounce was $12 higher while palladium was up $6 at $770/776.
(Editing by Mark Shaw)
The post Gold price retakes $1,200 after Japan PM calls for election appeared first on The Bullion Desk.
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