With the Chinese and Euro talk and moves towards further stimulus to avoid deflation, gold seemed set to strengthen. The People’s Bank of China cut the one-year benchmark lending rate by 40 basis points to 5.6% and the one-year deposit rate by 25 basis points to 2.75%. This is expected to accelerate Chinese growth and thus shore up gold. The submission here is that it can only be technical buying and not sustained buying as
a) deflation is the global worry, not inflation;
b) China might yet take time to restore its high growth rate;
c) India has introduced Kisan Vikas Patra bonds which will see unaccounted money flow in to that route and not so much in to gold;
d) oil prices are weak and oil sellers would hesitate to invest in gold for some time yet;
e) Swiss referendum looks set to be not so benign for gold;
f) Russian buying at this point looks more geo-political rather than pure economics.
It may be a good idea for the day to sell and buy.
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