Gold News

Physical Demand to Buy Gold "Weak" Ahead of Indian Festival, Easy-Money Worldwide "Keeps Metal Warehouses Full"

PRICES to Buy Gold dropped near two-week lows for US investors Thursday lunchtime in London, as gold again "fell victim to a strengthening Dollar" in the words of one analyst.

The European single currency fell back from $1.3150 for the 3rd day running, dropping despite Spain's successful auction of €5 billion in new government debt, albeit at marginally higher rates of interest than at the last time of asking.

France's CAC40 stock index turned a 0.5% rise into a 0.5% loss inside an hour, and commodity prices also fell back amid trading-room rumors that France's credit rating was about to be downgraded by a major agency.

German Bund prices rose to push yields down to new record lows.

Falling $10 per ounce to $1634, the price to Buy Gold was little changed for Euro investors, holding flat for the day at €41,180 per kilo.

"The upside is very heavy because the Euro remains under pressure [vs. the Dollar]," Reuters today quoted Peter Fung at Wing Fung Precious Metals in Hong Kong.

"Weak physical demand isn't helping," he added, saying that a price-drop to $1600 would likely encourage traders to Buy Gold.

"Physical buying out of Asia is strengthening as we approach the Indian Akshaya Tritiya festival beginning 24 April," says Marc Ground at Standard Bank today. But "the pace of demand is not to the extent that we expected."

"No imports of gold have taken place in the last week," said Bachhraj Bamalwa, chairman of the All India Gem & Jewellery Trade Federation, to the Economic Times earlier.

"Demand is lacklustre and there will be hardly any growth in the Akshaya Tritiya period this year."

Considered an auspicious day on the Hindu calendar to Buy Gold and begin new ventures, Akshaya Tritiya this year sees the Indian Post Office working with the World Gold Council and Reliance Money to offer 6% discounts on Gold Coins sold through India Post branches.

"The Rupee is weaker than Dollar, which is pushing up prices to Buy Gold," says a private broker.

"There is an increasing demand for diamonds as it is better preferred by the youngsters," says one jeweler in Hyderabad, speaking to IBN Live.

Over in China, now the world's #2 gold consumer market behind India  – and where economic growth slowed for the 5th quarter running between Jan. and March  – "The central bank will continue to implement a prudent monetary policy," said a Chinese official to the Xinhua news agency today, "to facilitate a stable and relatively rapid development of the national economy."

Japan is "fully committed [to] powerful monetary easing" said Tokyo's chief central banker Masaaki Shirakawa late Wednesday.

Mark Carney, governor of the Bank of Canada, followed Tuesday's no-change decision on monetary policy by telling a press conference yesterday that 1% interest rates are "consistent" with hitting the Bank's 2% annual inflation target, with economic growth forecast at 2.4% in both 2012 and 2013.

"The most sensible thing to do is to take the cheap (free) money and convert it into solid things, like, for example, industrial metals," says an editorial on global monetary policy in Metal Bulletin today.

"That's why the warehouses are full, and why the prices remain firm."

Latest data from the Comex US futures exchange showed a small decrease Wednesday in warehouse stockpiles of Silver Bullion, but this week's 20-year record "certainly points to plentiful supply on the global silver market," notes Swiss refining and finance group MKS.

"[It's] very likely to block any major price increases in the short-term."

Comex data also show that the total number of open contracts in US Gold Futures – previously unchanged from the start of the year – has shrunk by 8% in the last month. As a proportion of all contracts now open, daily trading volume has also slipped, down from an average around 40% down below 30%.

Trading volume has also fallen in the exchange-traded gold trusts, with turnover in New York's $70bn GLD fund falling this week to the lowest levels since Christmas.

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