"Price Drivers
The SPDR gold ETF again saw 2.705 tonnes of sales on Wednesday but none in the in the Gold Trust, leaving their holdings at 865.713 tonnes and 172.21 tonnes. After falling $10 the previous day on no sales from the SPDR gold ETF these sales occurred as the gold price hit a bottom at $1,273 ahead of Asian demand that lifted the gold price $13. The gold price has not broken support in the lower $1,270’ and the price is battling it out and finding another balance in supply and demand. This precedes a tipping of the balance one way or the other giving another short-term direction. Chinese demand remains firm, but over in India the government has stopped imports of gold, except where all imported gold is for re-export. Clearly, the obvious loopholes were being used to bring gold in. Now the only gold entering the country is from smuggling.
The remarkable situation that now persists in the gold market is that the gold price is being supported by Chinese demand and traditional seasonal demand. The World Gold Council reported that global jewellery demand of 487 tonnes is up 5% year-on-year, while Bars and Coin demand increased to 304 tonnes in Q3, up 6% year-on-year. But a modest 4% growth in mine production during the quarter was outweighed by an 11% contraction in recycling, as lower average prices failed to attract sellers. But what makes the situation remarkable is that 25% of demand for gold from India is now absent from the gold market, due to the Indian government. That demand hasn’t gone away, simply being pent up. With demand and supply now in balance without Indian demand the questions that jump up are, “When will growing Chinese demand force prices up? Will pent-up Indian demand reach the market and when?” With U.S. sales having no impact on the gold market and due to stop sometime, the structure of this market is not pointing to a lower gold price.
The economic reforms, that will come out of China from the Plenum, that has just finished, point to an emphasis on growing the Chinese middle classes."
AI
