After a near 5% climb last week, gold futures prices finished lower yesterday, something that was expected given its stellar performance in the last week.
The papers and financial media outlets are once again stating that markets are getting nervous about the rumored tapering. Why they are suddenly nervous again is not apparent – there was little data or announcements yesterday that pointed to an economic recovery in the U.S. Ultimately the slow action in both gold and silver are due to the summer lulls.
The minutes of the Fed’s July meeting are due on Wednesday, it is hoped that there will be a clear idea on the sentiment of the FOMC in regard to tapering in the coming months.
Silver’s rally continues. Last week’s 14% climb was the biggest weekly rise for a most-active contract since September 2008. It has support at $20, whilst demand from both India and industry is expected to maintain the price rise. Between April and July 2013, Indian silver imports were 857 3.5 times more than during the same period in 2012.
Australian bank Macquarie said in a note yesterday that the U.K. exported 240 tonnes of gold to Switzerland in May, compared to 92 tons for all of 2012. This huge volume, they believe, comes from outflows from U.K. ETFs, the gold is then shipped to Switzerland where it is melted down into smaller bars to meet demand in Asia.
Total outflows from gold-backed ETFs between April and June were 402.2 tonnes.
Some news sites are declaring that the surge to own physical, following the fall in the gold price in April, has slowed to a halt after the sales of American Eagles have disappointed so far for August. Last year’s sales for the month were 39,000 ounces, so far sales have only reached 3,000 ounces, significantly smaller than the 100,000 ounces average per month since the beginning of the year. Such a slowdown suggests one of two things, the first is that bargain hunters (which were most likely coin dealers) have stocked up with all they can during the price slump and secondly that the summer month is unlikely to attract new demand for the coins.
Whilst no-one really knows what the intentions are around tapering, this decision along with other key events will be crucial for gold. Whilst gold is not likely to be dramatically affected should tapering go ahead, it is likely to respond positively if nothing happens in September. Added to this the looming debt ceiling and budget issues are likely to place pressure on the U.S. dollar and benefit safe-havens such as gold.