Gold nears $2700 with eyes on China

Gold is up $22 to $2695 today and threatening to touch $2700 for the first time.

I’m watching China as a catalyst. Chinese stocks are lower again today as they continue to retrace the big October rally. Earlier today, Chinese officials touted a big announcement to support real estate but then actual announcement was less-than-impressive and property stocks were routed.

To my way of thinking, Chinese investors prefer to buy 1) real estate 2) stocks/securities 3) gold. If they can find a reason to buy #1 or #2 they will but the move in stocks was so fast that retail likely didn’t have a chance to catch it and now they’re underwater on stocks once again.

That and the continued climb in gold makes for an improving love affair between China and gold that I think is the main driver of the rally. Underscoring that is the impressive resilience in gold to higher Treasury yields.

If China were to deliver some kind of fiscal bazooka, that calculus could change but the market is now in a ‘show me’ mode rather than believing all the promises.

This article was written by Adam Button at www.forexlive.com.