Gold Analysts Most Bullish Since March On Physical Demand

Today’s AM fix was USD 1,360.75, EUR 1,020.59 and GBP 870.10 per ounce.  
Yesterday’s AM fix was USD 1,339.50, EUR 1,008.05 and GBP 859.37 per ounce.

Gold climbed $27.90 or over 2% yesterday, closing at $1,362.90/oz. Silver surged another $1.09 or nearly 5%, closing at $22.93. Platinum rose 1% to $1,504.00/oz, while palladium rose 0.5% to $746/oz.

Gold and silver inched down today on profit taking after their respective 3.7% and 11.85%  gains seen this week. Gold surged through resistance at the $1,340/oz level yesterday. The next level of resistance is between $1,400/oz and $1,423/oz.


Gold in USD, 1 Month – (GoldCore)

Gold analysts are the most bullish in five months according to Bloomberg. Thirteen analysts surveyed by Bloomberg expect prices to rise next week, four were bearish and five neutral, the highest proportion of bulls since March 8. 

Store of wealth buying of physical gold surged 53% in the second quarter from a year earlier, making up for the record sales of gold ETFs.

Investor and store of wealth demand coin, bar and jewellery demand jumped by 376.5 metric tons to 1,083.2 tons in the second quarter as global bar and coin purchases reached a record and jewelry usage was the most since 2008.

Nations added 534.6 tons to reserves last year, the most since 1964, and may buy 350 tons this year, the World Gold Council said.

“People buying physical gold are more about having a store of wealth in the medium to long term whereas the ETP liquidations are more the speculative side,” Mark O’Byrne of GoldCore told Bloomberg.

"Physical demand remains very robust. People see gold prices as good value at these levels.”


Gold in USD, YTD 2013 – (GoldCore)

Store of wealth and financial insurance demand jumped by 376.5 metric tons to 1,083.2 tons in the second quarter as global bar and coin purchases reached a record and jewelry usage was the most since 2008. 

Demand was particularly strong in China and India which both look set to have demand of over 1,000 tonnes in 2013.

There may be a decline of demand in the next few months in India, last year’s biggest buyer, due to restrictions on imports. However,  2014 imports should be higher than this year in the nation and in China, the next biggest user, the World Gold Council said yesterday.

There are signs of rising demand elsewhere. Turkey’s bullion imports this year through July were a  massive 80% higher than in all of 2012, data on the Istanbul Gold Exchange’s website show.

Billionaire George Soros and Daniel Loeb sold their entire SPDR stakes in the past quarter, filings showed yesterday.

Billionaire investor John Paulson cut his gold ETF holding for the first time since 2011 and it is believed he did this due to the falling gold price and negative media coverage. Paulson, the biggest investor in the SPDR Gold Trust, the largest gold ETP, cut his stake by 53% in the second quarter, an August 14 government filing showed.

Paulson, Soros and Loeb may be following in the footsteps of Einhorn and Bass and deciding to liquidate the more risky gold ETF,  futures and paper gold and instead opting for the safety of allocated physical bullion.

Physical demand helped push August futures on the Comex in New York above the December contract for the first time on August 2, compared with trading at a discount before then. 

Backwardation, when nearby contracts are more expensive than longer-dated futures, very rarely happens and it often shows a lack of physical bullion supply. 

The three-month lease rate, reflecting the cost of borrowing gold, reached a four-year high on August 7 also signalling tight physical supplies globally.


Support & Resistance Chart – (GoldCore)

Gold has fallen 19% this year after some more speculative investors decided to sell, sparking losses for mining companies and hedge funds.  

Gold reached a low of $1,180.50 on June 28 and this low looks increasingly like it may be the low for 2013. 

The slump led to strong buying globally and a 16% price rally from a 34 month low on June 28.

As we pointed out yesterday, physical gold demand surged 53% and total supply was down 6% in Q2, 2013 and yet curiously prices fell 35% in the quarter – the worst quarterly fall on record.

Gold prices fell in eight of the past 10 months despite rising demand and falling supply.

NEWS
Gold Analysts Most Bullish Since March as Paulson Cuts – Bloomberg

Gold eases but on track for best week in a month – Reuters

Jewelry buyers cast golden glow on bullion in Q2 – China.org.cn

World Gold Council Deconstructs Gold’s Worst Plunge In 100 Years – Hard Assets Investor

Gold Rises for Fifth Time in Six Sessions as Dollar Drops – Bloomberg

COMMENTARY
Seasonally Strong Autumn Could See $1,600/oz Gold – You Tube

Gold blasts through 1,343.70/oz resistance. Target now 1,427/oz – FX Street

JPMORGAN: BUY GOLD – Business Insider

Gold Seasonality – Sweet Spot Now – Zero Hedge

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

 

Mark O'Byrne

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