The gold price failed to top its three-day running streak this yesterday and is in retreat for its second session this morning, having fallen back from a one-month high. The recent rally appears to have stalled but it may disappear should the U.S. dollar begin to rally.
Wholesale quotes for gold bounced from one-week lows beneath $1,270 per ounce Tuesday morning in London, turning higher as Asian and European stock markets failed to extend Monday's rise to new all-time highs in U.S. equities.
Citi is looking for gold to average $1,255/oz in 2014. The bank believes Chinese physical demand will ‘represent a key source of price support for the gold market…and we believe renewed positive buying momentum in China will prevent a wholesale rout of gold prices.’
Gold and silver prices declined during the first half of the week with gold falling $70 to a low of $1,274 on Wednesday morning. The $1,300 level was seen as support that failed spectacularly, and it was this that has influenced commentators and investment strategists.
This week bullion prices began to rise in quiet conditions, with gold rising more than 6% and silver by slightly more. Trading patterns have changed, with much of the rise coming during U.S. trading hours, confirming that the short positions on Comex are being squeezed.
Chinese housewives or “aunties” have purchased 300 tons of the yellow metal in the past three weeks amounting in nearly $16 billion. The impact of the run on physical gold in China may have a significant effect on import statistics.
Attention is now firmly focused on Chinese and Indian demand for gold, which between them is absorbing all non-Asian mine supply. Chinese net purchases of gold totaled 320.54 tonnes in the first quarter 2013.
The non-U.S. banks increased their short silver positions by 457 contracts, representing more than 42 million ounces between them to give a total short position of 277,810,000 ounces, the second highest on record.