Asian Investors "Buy Gold on the Dip", Western Physical Demand Also Jumps

Wholesale prices for buying gold climbed briefly above $1400 per ounce Thursday morning, having bounced from a $50-an-ounce drop overnight, with dealers reporting strong demand for physical bullion in Asia.

In Hong Kong and Macau, the number of customers visiting stores run by the world's biggest jewelry chain, Chow Tai Fook, jumped by a quarter in the period between Saturday and Tuesday, Bloomberg reports.

"I think if prices fail to break through $1300, people will buy back," says one gold dealer in Hong Kong.

"Asia is a good buyer of gold this year. Stocks at refiners have suddenly disappeared after prices dropped more than $200 [an ounce], and it takes time to manufacture gold bars. Supply is a bit tight. Premiums will move higher next week."

"The culture in Asia is such that they will absorb the physical metal when the price drops," adds Dick Poon, Hong Kong-based general manager at refiner Heraeus.

"Jewelry demand is improving and industrial customers are also buying on the dip."

India, traditionally the world's biggest gold buying nation, has this week seen its strongest demand so far this year, according to the All India Gems & Jewellery Federation. Thailand and Japan have also seen a strong rise in gold sales, according to local press reports.

Western investors have also shown signs of renewed appetite for bullion since gold's price drop. Users of BullionVault, the world's largest gold and silver provider to private investors online, were net buyers of gold for the first time in a week on Wednesday, with inflows of cash outpacing withdrawals by a wide margin.

The US Mint meantime sold 77,000 ounces of American Eagle gold coins during Tuesday and Wednesday, compared to just 62,000 ounces for the whole of March.

"Gold was set up for having a proper correction," says well-known investor Jim Rogers.

"This may be the proper correction and, if so, then it will make a bottom and we can all buy gold again because it is going to be much higher over the decade."

The world's biggest gold exchange traded fund meantime continued to see outflows Wednesday. The total volume of gold backing shares in the SPDR Gold Trust (ticker: GLD), fell to 1134.8 tonnes, down from 1221.3 tonnes at the start of this month. Holdings of all gold ETFs tracked by Bloomberg are down 3.5% to 2364.9 tonnes this month.

Like gold, silver bounced off an overnight low to end Thursday morning in London back above $23.50 an ounce, while stocks and commodities regained some ground after this week's losses and US Treasuries dipped.

Japan's exports to the US in the year to end March were up 10% from a year earlier, while exports to China dropped 9%, making the US the number one destination for Japanese exports for the first time since 2009, figures published by the country's finance ministry Thursday show.

"This weakness [of exports to China] is more structural than cyclical," Kyohei Morita, chief economist at Barclays in Tokyo.

China's annualized economic growth rate slowed to 7.7% in the first quarter, according to figures released by Beijing earlier this week, down from 7.9% in the previous quarter. Ratings agency Moody's lowered its outlook on China from 'positive' to 'stable' this week, noting concerns over local government debt levels.

In Washington, leaders meeting for the G20 meeting that begins today are expected to commit their countries not to weaken their currencies with a view to gaining a trade advantage, Bloomberg reports. A similar pledge was made in a G7 statement earlier this year.

A month before that statement, Bank of England governor Mervyn King told an audience in Belfast that "between late 2007 and the beginning of 2009...an adjustment of Sterling...was certainly necessary for a full rebalancing of our economy".

Italy's parliament began voting on a new president Thursday, with the bloc led by Pier Luigi Bersani's Democratic Party – which won the most votes of any alliance in February's general election but not enough to form a government – nominating former Senate speaker Franco Marini.

Once a president is elected their first task will be to preside over the forming of a government, which will involve either a coalition of rival parties, fresh elections, or the appointment of another technocrat prime minister.