Demand to Buy Gold "Improving" But Investment Sentiment "Weak" Despite "Supportive Factors"
Thursday, 11/28/2013 14:59
BUY GOLD orders in London trade lifted the metal back to last week's finish of $1243 per ounce Thursday morning, some 0.6% above an overnight low.
Asian and European stock markets also rose following Wall Street's new record-high finish before today's Thanksgiving holiday.
Commodities slipped further, however, while the British Pound rose to new 2013 highs after the Bank of England announced
an early end to "funding for lending" for UK mortgage providers.
Prices to buy gold in Sterling dipped to fresh 3-year lows beneath £758.50 per ounce.
"The yellow metal retraced [Wednesday's early gains] in the face of supportive factors," says a note from refining and finance group MKS, "including the weaker US Dollar.
"That really portrays general sentiment for investors [towards buying gold] at the moment."
Wednesday saw prices to buy gold "[find] only short-term support" from
China's latest gold import data, says Germany's Commerzbank in a note.
Now the world's No.1 gold consumer market, Chinese gold buyers may get 1500 or perhaps 1800 tonnes of supply in 2013, according to a new analysis today.
Shanghai premiums to buy gold rose Thursday to $9 per ounce over London prices from $7 at the start of this week.
"Physical demand for gold is still improving," says Standard Bank's commodity team meantime. But despite much heavier trading on the Shanghai Gold Exchange today, volumes still "don't seem big enough" to support prices, it adds.
If demand to buy gold returns to June/July levels, Standard Bank concludes, "it may start forcing short-covering in the futures market," with bets against higher prices closed at a loss.
"A large short position," agrees Australia's ANZ Bank in a note, "remains among the speculative community.
"Overnight price action looks like long-side profit-taking from short-term players."
Gold futures trading was sharply higher Wednesday, with Reuters reporting volume 40% above the last month's daily average.
"Turnover [was] lifted in part by the December-February rollover," says INTL FCStone's Edward Meir, pointing to traders wanting to maintain their positions from one quarterly contract to the next having to buy gold futures before the current one expires.
Nearer-term, "Precious metals markets are likely to be subdued due to the Thanksgiving holiday," Bloomberg quotes Joni Teves at Swiss investment and bullion bank UBS.
"The next key event risk to watch out for is the [US] nonfarm payrolls print next Friday...the last employment report before the final FOMC meeting for the year."
Looking at the odds of higher US interest rates ahead, "Why do you need to buy gold?" the newswire also quotes John Stephenson at the $2.7 billion First Asset Investment Management Inc. in Toronto.
"[It] yields nothing and is giving you a negative return. When we do get tapering [of the US Fed's quantitative easing] the underlying message is the economy has improved well enough that we don't need all this stimulus."
Consumers in India meantime, the former world No.1, today saw prices to buy gold hold at $130 above the world's benchmark of London settlement, says Reuters.
"Demand has picked up a little bit," the newswire quotes Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation.
But thanks to the Indian governments ongoing import restrictions, aimed at reducing the pressure which demand to buy gold puts on the country's trade deficit, "Supplies are tight so premiums have jumped," Bamalwa says.
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