Gold News

Gold Investment Surge 'Marks Major Price Low' But India & China Demand 'Dead' So Far in 2016

GOLD INVESTMENT prices slipped to 3-session lows beneath $1270 per ounce in London trade Tuesday, retreating 1.4% from yesterday's 1-week high as Western equities failed to follow China's stock market higher.
 
Silver also erased Monday's pop higher, trading unchanged in Dollar terms from the end of last week at $17.13 per ounce.
 
"Major lows achieved across the complex," says a new chart book from the technical analysis team at French investment and London bullion bank Societe Generale – calling December 2015's gold price low a "major bottom" at $1045 per ounce.
 
"Short term though, a shaky configuration [is] expected."
 
"We are confident," agrees the new Commodities Quarterly from Chinese-owned ICBC Standard Bank's strategists in London, "in stating that the lows for this cycle are behind us for all precious metals. The bears have returned to hibernation.
 
"[But] while Western investment demand for gold has been robust so far this year, physical demand from Middle Eastern, Indian and Asian markets has not."
 
"US wealth-management allocations to gold have risen in 2016," said one precious metals strategist at Monday night's Bulls vs Bears Debate for the Association of Mining Analysts in London, sponsored by MoneyWeek magazine and gold retailer Sharps Pixley.
 
"That matters," the debate heard, because it exposes gold prices to some of the $250 trillion in total global wealth, rather than just the $150-200bn consistently spent each year by jewelry consumers, coin and bar investors, and other regular buyers.
 
Despite gold prices rising at the fastest pace in 30 years during Q1, hedge-fund giant Paulson & Co. cut its holding of shares in the giant SPDR Gold Trust (NYSEArca:GLD) by 17% as some of the group's investment products lost 15% of their value, regulatory filings show.
 
Paulson & Co. has used GLD shares to offer clients "gold-denominated" shares in its funds since 2009.
 
Hedge fund legend George Soros' group, in contrast, bought almost as many GLD shares between January and March as Paulson & Co. sold, rebuilding an exposure to gold price movements slashed just ahead of the Spring 2013 gold crash.
 
"Demand from Asia [meantime] is as weak as I've ever know it," said one precious metals strategist on Monday.
 
"China and India are deathly quiet," confirmed a secure logistics executive separately to BullionVault, with gold and silver shipments into those major demand centers "as good as zero" so far in 2016 compared with recent years.
 
China's new benchmark Shanghai Gold Price today showed a discount to London wholesale prices for the third time since its launch a month ago, with demand and supply concentrated at a Dollar equivalent price some 80 cents cheaper per ounce.
 
India's trade deficit fell to a 5-year monthly low in April, new data said last week, reduced by a collapse in bullion inflows extending what analysts already called a "pitiful" first quarter for Indian gold demand, when consumer purchases fell 39% from the same period last year, according to data compiled for mining-backed market development organization the World Gold Council.

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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