Demand in Asia and “Semi Official Buyer of Gold” On ‘Roubini Dip’

Gold’s London AM fix this morning was USD 1,585.50, EUR 1,221.87, and GBP 984.17 per ounce. Yesterday’s AM fix was USD 1,627.00, EUR 1,250.77 and GBP 1,008.99 per ounce.

Silver is trading at $28.77/oz, €22.27/oz and £17.92/oz. Platinum is trading at $1,506.75/oz, palladium at $613.20/oz and rhodium at $1,300/oz.

Gold dropped $31.90 or 1.95% in New York yesterday and closed at $1,606.80/oz. Gold gradually fell again in Asian and European trading and looks set to test support at $1,580/oz.


Cross Currency Table – (Bloomberg)

Gold hit a 4 month low today despite deepening worries that the political upheaval in Greece may sink the country into chaos and endanger the euro zone’s efforts to end the debt crisis – possibly leading to contagion and or a monetary crisis.

Some decent demand from South East Asia has been reported at the $1,600/oz level and there are also reports from Reuters of a “semi-official buyer of gold” emerging “on dip below $1,600/oz”. 

Gold’s weakness yesterday may have been again due to dollar strength and oil weakness – oil is now below $97 a barrel (NYMEX). It may also have been due to wholesale liquidation which created a new bout of "risk off" which has seen global equities and commodities all come under pressure.

However, gold’s weakness yesterday was also contributed to by more unusual trading activity. As trading in New York got underway, there was an unusually large bout of selling with some 6,000 gold futures contracts sold in minutes and this led to gold’s initial $10 fall to the $1,615/oz level.

Momentum driven algorithm trading may have then led to follow through selling and the initial sell off may have emboldened tech traders to sell more leading to the falls below $1,600/oz. 

Given strong store of wealth demand from the Middle East and China (as seen in figures yesterday), long term buyers will use this sell off to again accumulate bullion.

Greece’s problems coupled with France’s election of socialist candidate Francois Hollande as President creates a disruption of old Franco German alliances.  Hollande and the socialist victory in France will likely be positive for gold as he favours looser fiscal and monetary policies in the EU. 

Spot gold hasn’t seen these levels since early January and the next level of support for gold is $1,580/oz and then $1,545/oz – the low on December 29th 2011.


(Bloomberg)

As has been the case in the early stages of nearly all bouts of sharp risk aversion in recent years the initial beneficiaries have been the dollar, US debt and German Bunds, while gold was more correlated with the euro and riskier assets. 

However, gold’s correlations with risk assets have been short term in recent years. Gold has fallen less than other risk assets, based and then recovered and seen sharp recovery gains soon after the initial falls.

These recovery gains are often seen while equity and commodity markets have continued to fall. Similar patterns may be seen in markets again in the coming days and weeks and short term gold weakness should again be used to ease into an allocation to gold.

Nouriel Roubini has again taken to Twitter to engage in his semi annual bout of name calling and frequent suggestions that gold is a bubble and that gold will fall in price. He has been doing so since gold rose above $1,000/oz in 2008.

Overnight he tweeted how “Gold getting close to fall below 1600. In which caves are the gold bugs hiding…?”


Nouriel Roubini ‏ @Nouriel

Gold getting close to fall below 1600. In which caves are the gold bugs hiding…? 

This continues the recent meme regarding gold investors and store of wealth bullion buyers being ‘bugs’, people or animals who ‘hide’ in ‘caves’ or are “uncivilised” people.

Attacking the ball and not the man is a way to avoid engaging in real debate regarding the merits of gold as a diversification and as an academically and historically proven safe haven – one that has protected people both throughout history and again in recent years.

It is interesting that Roubini has not written a paper on gold nor has he conducted an interview about gold or written an article about gold in recent years. He confines his simplistic, ill informed anti gold comments to Twitter where he can be brief and not have his faulty thoughts and logic examined.

From a contrarian perspective, Roubini is a gift as his name calling and anti gold comments almost always coincide with an intermediate low in the gold price.

Prudent diversifiers are advised to buy this latest dip – what could be termed the ‘Roubini dip’ – as many have done overnight and this morning – including store of wealth buyers in Asia and central bank monetary diversification buyers.

For breaking news and commentary on financial markets and gold, follow us on Twitter.


XAU/EUR 1 Year Chart – (Bloomberg)

OTHER NEWS
(Bloomberg) — Gold to Rebound to $1,700 an Ounce This Year: Technical Analysis
Gold will rally to $1,700 an ounce later this year after trading below $1,600, according to technical analysis by Barclays Plc.

“The metal may slip to about $1,580 an ounce and then $1,525 an ounce, a level close to the weekly low seen in late December, before rebounding to $1,700 an ounce, the high seen in late March,” Dhiren Sarin, chief technical strategist for Asia Pacific at Barclays, said today by phone from Singapore.

Bullion has climbed 1.8 percent this year after a 10 percent increase in 2011, the 11th consecutive annual gain as investors sought to diversify from equities and some currencies amid concern over Europe’s debt crisis and expectations that central banks will add further stimulus, boosting haven demand.

“About the rebound to $1,700, it’s a bit of wait and watch but $1,580 is a potential place where buyers may come in and $1,525 to $1,530 area is another potential area,” he said, referring to levels singled out in Fibonacci analysis.

 
XAU/GBP Currency Chart – (Bloomberg)

Gold fell as much as 0.7 percent to the lowest level since Jan. 4 and traded at $1,594.05 an ounce at 12:13 p.m. Tokyo time, losing for a third day as Greece’s leaders struggled to form a government, increasing concern that the region’s debt crisis will escalate and boosting the dollar as a haven.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

NEWS
Gold, Silver Tumble as Deadlock in Greece Drives Dollar Higher – Business Week

Gold dips to 4-month low on Greece uncertainty – Reuters

Gold, Silver Tumble as Deadlock in Greece Drives Dollar Higher – Bloomberg

Global shares, commodities retreat on Greek uncertainty – MSN

Silver Forecasters Bullish as Funds Retreat From Slump – Bloomberg

COMMENTARY
Ron Paul Has a Gold Ally in the Buffett Family – The Street

Mauldin: End of the Debt Supercycle Draws Near – Casey Research

Did He Just Call You “Uncivilized”? –Agora Financial

Economic Alert: If You’re Not Worried Yet…You Should Be – Zero Hedge

"Uncivilized" China Quietly Building Gold Reserves As Gold Imports From HK Soar By 587% In First Quarter – Zero Hedge

Why Civilized People Buy Gold – GoldSeek

Stephen Flood

Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.

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