For the first time in three days the gold price rose this morning, on the back of hope that the low price will spur gold buying in China.
Also, for the first time in the last week gold for immediate delivery in Shanghai traded at a premium to London. This suggests that the downside in gold is protected somewhat by expected demand in China.
Another reason for gold’s weakness this week is the impending March non-farm payroll data, due for release on Friday. Forecasts so far expect the U.S. Labor department to announce 200,000 new jobs were added last month.
Prior to the non-farm payroll data, the European Central Bank’s monetary policy committee will meet. There is no expectation that monetary policy will be loosened further. If this is the case then it is likely that the euro could gain in strength against the U.S. Dollar. In recent years a strong euro has benefitted the gold price.
ETF outflows continue, yesterday holdings in the SPDR Gold Trust fell to 810.98 tonnes, their lowest since the beginning of March.
India cuts tariff values
India has begun to make moves to relax import controls. Tariff values, the base price on which customs duty is calculated for imported gold or silver, have been cut this month. Gold’s import tariff value was cut by 5.39% and silver’s by 7.2%. The Central Board of Excise and Customs said tariff values were cut in line with the price of precious metals on the international market.
Pecora and Deutsche Bank make gold forecasts
According to asset manager Pecora Capital LLC, gold prices will bottom this year before reaching new highs within the next five years. This new strength will come from ongoing physical demand in Asia and weakening equities. The company believes that when the Fed’s balance sheet expansion stops, or there is a contraction, there will be ‘knee-jerk reaction’ causing gold-prices to drop ‘very temporarily’ before outperforming equities.
Deutsche Bank said yesterday that gold demand will continue to be supported by emerging-market central banks and China’s imports.
The bank expects the gold price to average $1,250 and $1,200 an ounce in the third and fourth-quarters respectively. The US economy will cause the gold price to remain below $1,300, as Treasury yields, equities and the dollar all gain in strength.
Unsurprisingly the bank expects both silver and the platinum group to outperform the yellow metal this year. For the latter metals this is due to ongoing supply deficits, industrial action in South Africa and concerns over palladium supply from Russia.
The platinum price continues to benefit from the ongoing industrial action at the Anglo American Platinum mines in South Africa. The strike has been ongoing for more than 10 weeks now.