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Strong Gold Demand in Asia "Should Offset" ETF Selling

Commodities / Gold and Silver 2013 Apr 09, 2013 - 05:10 PM GMT

By: Adrian_Ash

Commodities

The PRICE of GOLD and silver was little changed Tuesday morning near last week's finish, while European stock markets rose but Japan's Nikkei stalled its 5-day surge as the Yen bounced higher from 4-year lows on the currency market.

Silver prices ticked higher to $27.40 per ounce, while gold regained $1574.


Energy and industrial commodity prices also edged higher. Major government bonds eased back, nudging up the interest rate offered to buyers.

The US Treasury will this week auction $66 billion in new debt, according to Bloomberg data.

"The [quantitative easing] actions of the Bank of Japan are having a profound effect on bond yields," notes the commodities team at Standard Bank today, "across especially emerging markets."

Because the BoJ's promise of $1.4 trillion in new money creation by 2015 is weakening the Yen, sats Standard Bank, "some gold-consuming countries, such as Thailand, [are] seeing their currencies stronger against the Dollar."

So "there's been fairly strong gold buying interest from South East Asia...which should partly offset the ongoing ETF liquidation."

China's net imports of gold through Hong Kong doubled in February from January's 3-month, new data showed today, rising to more than 60 tonnes.

New York's $61-billion SPDR Gold Trust meantime ended Monday with the quantity of bullion backing its shares unchanged from Friday's new 21-month low of 1205 tonnes.

"Physical demand [has been] offset by professional investor liquidation," says the latest quarterly review from German refining group Umicore.

Swiss bank and major bullion dealer UBS today cut its average 2013 gold price forecast from $1900 to $1740 per ounce.

"We continue to expect the price of gold to moderate over the year ahead," says a note from Australian retail bank NAB, forecasting a 2014 average of $1410 and citing economic recovery and lower risks in the developed world.

"Partly offsetting this is our expectation for central bank purchases by the emerging economies [plus] continued strong consumer demand from India and China."

Germany's Deutsche Bank today cut its 2013 price forecast by one eighth to $1637, saying that the forces pushing gold prices higher over the last 10 years "have all moved into reverse".

Danske Bank analysts are more aggressive, cutting their 2013 gold price forecast below $1500 and targeting $1294 per ounce for next year.

"Gold is in our view still in bubble territory," they write, "despite the extended price drop seen since the autumn [and] the signs of global currency war earlier in 2013."

Commenting on the price action in gold, "I can say the chart doesn't look good," Reuters quotes a Hong Kong trader at Lee Cheong Gold Dealers.

"I think $1585 is the crucial point. If it can break above this level, another bull run or short covering will push up the market to $1600."

Reviewing the relative moves in gold and silver meantime, "The gold/silver ratio's rally picked up the pace last week," says technical analyst Axel Rudolph at Germany's Commerzbank.

The number of silver ounces you can buy with one ounce of gold "has so far reached 57.85, a nine-month high," Rudolph goes on. If the peak of 58.72 from June 2012 is broken, he says, "the psychological 60.00 region will be targeted as well."

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

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