Gold News

Gold Trading "Subdued" Outside China, Prices "Driven by Speculation"

GOLD TRADING was muted Monday morning in London, with prices bouncing off their lowest level in almost 4 weeks at $1280 per ounce as European stock markets rose.
Major government bonds ticked higher after Friday's sharp sell-off on strong US jobs data.
Silver prices also fell to their lowest level since Oct. 17th, turning higher from $21.26.
The Sterling price of gold dipped below £800 per ounce – a level first reached in May 2010 – for the third time since April.
Wholesale gold trading in India and Dubai was also "subdued" overnight according to dealers, after world gold prices ended last week 2.5% down.
Gold trading on China's Shanghai Gold Exchange, in contrast, was the strongest in 3 weeks.
The Shanghai price, which slipped at the start of this month below the world's benchmark of London settlement for the first time in 2013, rose to a premium today of nearly $5 per ounce. 
Secure logistics firm Malca Amit meantime said Monday that it's opened a 2,000-tonne storage facility inside Shanghai's freeport zone.
"Such a facility is a massive vote of confidence for the Chinese gold market," says Philip Klapwijk, formerly of Thomson Reuters GFMS and now CEO of Precious Metals Insights in Hong Kong.
"The trend for demand has been very strongly positive," Bloomberg quotes Klapwijk, who said last week that alongside a surge in consumer gold purchases, China's central bank gold buying likely totaled 300 tonnes in the first 6 months of 2013 alone.
"It is very likely," agrees the weekly report from refining giant Heraeus, "that China will overtake India as the largest [private] gold consumer for the first time.
"[But] demand has eased off a bit and a sustainable trend is not expected at these levels."
Back in the traditional gold trading centres of India and the Middle East short term, "Physical markets might come better into play should gold prices soften any further," reckons Gerhard Schubert, head of commodities at Emirates NBD in Dubai.
"But it would be doubtful if the physical markets could stem the flow of derivative sales, should this pattern occur."
Latest data from US regulator the CFTC show speculative traders, as a group, raising their bearish bets and cutting their bullish positions in gold futures and options in the week-ending last Tuesday.
Overall, the so-called "net spec long" position – which measures the balance of bullish over bearish bets held by non-industry traders – shrank 12% to the equivalent of 372 tonnes.
That compares to a 5-year average of 675 tonnes.
"These numbers are a little stale," says ANZ Bank in a note, "given this snapshot was taken prior to [Thursday's] stronger-than-expected US GDP and [Friday's] non-farm payrolls figures.
"But they indicate that levels above $1340/oz were seen as good levels [by speculators trading gold derivatives] to lighten longs and initiate further shorts."
"Money managers," agrees the commodities team at Commerzbank, "made something of a retreat from the gold market again, having noticeably expanded their net long positions in the two preceding weeks.
"In other words, the fall in price [ahead of the US data] was largely speculatively-driven, just as the price increase was beforehand."
India's trade deficit – widely blamed on the country's historic and cultural gold demand – meantime rose last month from September, but was almost half the level of October 2012 as gold and silver imports fell by four-fifths year-on-year to the equivalent of $1.3 billion.
Despite the looming Hindu wedding season, "Supplies are limited" by the government's anti-import rules, says Daman Prakash Rathod at gold-trading wholesalers MNC Bullion in Chennai.
"Only a few jewellers are buying at the current price."
India's leading body for the gold trading industry, the Bombay Bullion Association, said at the weekend that it plans to enter the market as a participant, launching an exchange-traded product and minting small investment units.

Adrian Ash

Adrian Ash, BullionVault Gold News

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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