The gold price rose to a one-month high yesterday, touching $1,257/oz, its highest since Dec. 12. Should it continue to rise today, it would make it a fourth day of gains, the longest rally seen since October 2013. This morning gold was trading near its monthly high thanks to a drop in the dollar and equities, giving gold investment some support from safe-haven buying.
Some analysts believe that we will see gold buying in China drop off somewhat if the price climbs any further. Bloomberg report that retail demand is ‘very price-sensitive,’ however we believe that in the run up to the Chinese New Year and the low prices compared to previous years, we will still see strong demand. Volumes overnight climbed from 15.730 tonnes, from 14.630 in the previous session, according to Reuters. Interestingly premiums have fallen from around $17 to $13.
Coin demand remains strong, the U.S. Mint yesterday reported coin sales of 63,000 ounces, 9,000 more than sold in December 2013. Similar demand has been seen here at the Royal Mint where ‘exceptional demand’ has run stocks of the 2014 Sovereign gold coins dry.
Assets in the SPDR Gold Trust, the world’s largest gold ETF, whose outflows last year were blamed for the fall in the gold price, remain unchanged yesterday for the third consecutive day.
ETF Securities said in a note yesterday that gold is potentially forming a double bottom, near the $1,200/oz level. It is finding support from ongoing, strong demand in Asia. They write that whilst they are aware of the bearish gold story, ‘Increasingly compelling, though, is the contrarian stance on the back of fundamentally attractive precious metals prices, which ended 2013 below most all-in-cost production estimates, about $1,200 for gold.’
Despite gold’s strong performance yesterday, silver dropped 0.3%, whilst platinum and palladium both climbed in price.
HSBC said in a note yesterday that they expect a ‘limited’ rally in gold. They believe the gold price could ‘push closer toward $1,300’ if equities continue to retreat and yields remain low.
Goldman Sachs was the latest of the bears to jump on the death of gold parade. Yesterday, Jeffrey Currie told CNBC that gold is set to take a beating in 2014, thanks to the U.S. recovery. He believes this early 2014 rally will not last as there are few inflationary pressures on the horizon. To read more about inflation and the factors affecting it, click here.
The National Commodity and Derivatives Exchange, the Indian commodities exchange, has announced the launch of its new precious metals contract. The futures contract has been launched in response to the government’s heavy measures to restrict the gold market. The import duties combined with restrictions in the banking and finance part of the industry have created a demand for investment/hedging gold products.