The majority of participants at the LBMA Precious Metals Conference in Edinburgh were bullish for gold’s outlook going forward. The chairman of the London Bullion Market Association, Kevin Crisp, said that the environment for gold prices is set to stay positive as concerns over the stability of other markets fuel investment into hard assets. The conference heard how the European Central Bank believe that gold will remain an important asset for European central banks as risk diversification becomes a more significant issue. Paul Mercier, deputy director general of market operations at the ECB, said that “gold makes sense as a contributor to risk diversification." He said the Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.
The news that India has bought 200 tonnes of a potential 403.3 tonnes of gold from the IMF is very bullish. The sales occurred over two weeks prior to October 30th when gold was trading between $1,030/oz and $1,070/oz showing that physical demand for gold is very robust at these levels (reports that an IMF official said that the sale was concluded at an average price of about $1,045 an ounce and that the transaction would be paid in dollars and not in IMF Special Drawing Rights). The Chinese are on record as wanting to increase their gold reserves significantly as their gold constitutes less than 2% of their foreign exchange reserves (compared to over 60% for most major European countries and nearly 79% of US foreign exchange reserves). Chinese and other large US creditor nations foreign exchange diversification is likely a primary reason for the robust performance of gold in recent weeks.
Smart money internationally, including central banks and the more astute hedge funds, are buying on the dips in anticipation of much higher prices. $1,200/oz remains a possibly target by year end and contrary to some simplistic analysis the recent rally in prices is sustainable.
Silver is currently trading at $16.46/oz, €11.14/oz and £10.09/oz.
Platinum Group Metals
Platinum is trading at $1,343/oz and rhodium is trading at $1,950/oz. Palladium is currently trading at $324/oz.
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