Gold slipped to one week lows today despite the U.S. Federal Reserve vowing to maintain its ultra loose monetary policies. Speculators may be taking profits from a recent run up in prices.
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Gold in GBP, 5 Year - (Bloomberg)
Gold has risen 8% since hitting a three month trough on October 15 as value buyers bought gold.
The Fed yesterday sounded a bit less optimistic about economic growth as it announced plans to keep buying $85 billion of U.S. bonds per month. The central bank noted that the recovery in the housing market had lost some steam and suggested some frustration at how poorly the labour market remains.
Many of the world’s largest banks have been accused of manipulating the $5.3 trillion a day global foreign exchange market. Citigroup Inc. (C:US) and JPMorgan Chase & Co. (JPM:US) are putting their top London currency dealers on leave as regulators and the U.S. Justice
Department are probing the manipulation of foreign exchange rates. The investigation began examining the traders’ use of an instant-message group. The roster of banks in the group changed as the men moved firms and also included Barclays Plc, Royal Bank of Scotland Group Plc and UBS AG.
The five firms account for about 47% of the massive foreign exchange market. Two other traders, who weren’t part of the conversations and who asked to not be identified because they do business with those involved, said that they and others in the market referred to the message group as “The Cartel.”
Despite a slight drop in physical demand from China in recent days, physical gold demand remains robust in India, the Middle East and amongst coin buyers in western markets.
Demand for gold in the Middle East remains robust and there has been an eightfold increase or 700% increase in demand in recent years. Geopolitical uncertainty in the region, from Libya to Egypt to Syria and Iraq and Iran is leading to demand for bullion.
Thus, the Dubai Gold & Commodities Exchange plans to list a spot gold contract in the second quarter of next year. The bourse, which offers gold and silver futures, is talking to local merchants and industry organizations and aims to get regulatory approval for the product by early 2014, Chief Executive Officer Gary Anderson told Bloomberg [18]. Demand for bullion in Dubai expanded eightfold in the last six to 10 years, he said.
Dubai accounts for about 25% of global physical gold trade and the United Arab Emirates will grow as a precious metals trading hub partly because of its location near the largest consuming nations, according to the Dubai Multi Commodities Centre, which owns a majority stake in the DGCX.
The size of the spot gold contract will probably be 1 kilogram (32 ounces). While there are “no concrete plans” yet for other precious metals products, a silver spot contract and platinum and palladium contracts may be possible in the future, Anderson said.
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Gold in EUR, 5 Year - (Bloomberg)
Sales of gold coins and bars [20] recovered in October, figures from two of the world’s leading mints show, suggesting physical buyers remain robust despite bullion's 20% fall this year.
While overall volumes remain well below this year's peak, they are on track for a very robust year that will be close to or surpass levels seen in 2011.
Gold has fallen out of favour with speculators and some investors on expectations that the Federal Reserve will soon start scaling back its money printing programme. However, data regarding physical demand from Asia and mints around the world, shows that store of wealth demand remains very robust and physical buyers are using price weakness to keep accumulating bullion.
Australia's Perth Mint gold sales – including the iconic Australian kangaroo coin series – up to October 25 reached 75,040 troy ounces, according to preliminary numbers obtained by CNBC [21].
They are on track for a near 10% month on month gain from 68,488 ounces in September.
Perth Mint gold sales surged to a record in April this year after the peculiar ‘flash crash’ that saw gold plummet in minutes due to a massive bout of concentrated selling on the COMEX. April sales surged to over 111,505 ounces which was more than double the sales in March.
Smart money accumulated on the dip, again.
Meanwhile, sales of American Eagle gold coins more than tripled on month in October to 46,500 ounces. While they remain well off the 209,500 ounce high recorded in April, according to daily updated numbers obtained from the U.S. Mint's website, they are also on track for another good year.
April represented a banner month for sales in both the Perth Mint and the U.S. Mint after buyers jumped at the opportunity to accumulate gold coins, following gold's biggest ever one day loss on April 15, when it tumbled $125. The concentrated selling on the COMEX precipitated the month's sharpest decline since December 2011 and led to further allegations of manipulation of gold prices by Wall Street banks.
Physical demand from store of wealth buyers in Asia and internationally who continue to ‘stack’ or gradually accumulate physical coins and bars is supporting gold and silver at these levels and should contribute to higher prices in the coming months.
Gold is down 20.2% year to date but has advanced 14% since reaching a 34 month low in June as lower prices led to increased demand for gold jewelry, bars and coins, particularly in Asia.
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Download GoldCore’s Essential Guide To Silver Eagles here [23]