Gold News

Gold Bullion 'Set to Test 2015 Downtrend' as Indian Imports Defy Poor Monsoon

GOLD BULLION prices slipped to 2-day lows of $1132 per ounce late in London trade Wednesday, retreating 1.3% from yesterday's 1-week high as Western stock markets crept higher but commodity prices fell yet again.
 
"Support for the yellow metal was evident around $1135" in Asian trade overnight, said a note from Swiss refining and finance group MKS.
 
With the Shanghai gold market now closed until next week for China's WWII Victory Day commemorations, "Gold looks range bound leading into Friday's [US jobs] report," MKS says.
 
Holding above its 20-day moving average however – now at $1124 per ounce – gold "remains well placed to test the 2015 downtrend at $1163," says the latest Bullion Weekly Technicals from Karen Jones at Germany's Commerzbank.
 
"It is hard to get too bullish," countered a daily technical analysis from bullion market maker Scotia Mocatta, "considering [that] falls are more significant than the bounces.
 
"We believe this is a consolidation situation with only a breach of $1168 bringing in fresh buying."
 
"Physical markets remain somewhat subdued," agreed a London trading desk Wednesday.
 
Bullion analyst Matt Turner at Australia's Macquarie bank meantime highlighted "the potential for near-term gold weakness," pointing first to how gold has only rallied during US Fed rate-hiking cycles "after the tightening begins and is gradual," and also how physical demand in major consumers India and China "face potential challenges".
 
Monsoon rains in India – the world's No.2 gold buying nation – will finish well below average in 2015, the Meteorological Department said Wednesday, potentially denting farming incomes.
 
"Given that rural households account for the lion share of Indian gold demand," said a recent report from analysts Metals Focus, "it is not surprising that jewellers [had] been cautious about increasing stocks."
 
Gold imports to India, however, jumped this summer as wholesalers stocked up at 5-year low prices ahead of the traditional post-harvest festival season culminating with Diwali in November.
 
India imported 69 tonnes of gold bullion from Switzerland in July, according to Swiss trade data, and the major Indian airfreight hub of Ahmedabad alone saw August inflows double from a year earlier to almost 16 tonnes.
 
Solid trading in the Shanghai Gold Exchange's major domestic contract meantime saw wholesale bullion delivered in China close at a strong $6 per ounce premium to London quotes, incentivising new imports to the world's No.1 consumer nation.
 
Ahead of the Victory Day shutdown in Chinese markets, the SGE's main international contract – dealt for Yuan held in offshore accounts – in contrast recorded zero volume for the third time since early July.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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