SocGen: “Sharp” Gold Rally As US GDP Surprises “Dramatically” to Downside

Gold’s London AM fix this morning was USD 1,648.50, EUR 1,248.86, and GBP 1,039.01 per ounce.

Yesterday’s AM fix was USD 1,654.00, EUR 1,256.93 and GBP 1,044.26 per ounce.


Cross Currency Table – (Bloomberg)

Gold rose $2.60 in New York yesterday to close at $1,662.70/oz. Gold dropped in Asia this morning and losses continued in Europe where gold is now trading at $1,649.90/oz.

The superficially rosy US economic outlook has dimmed gold’s safe haven appeal for speculators and some investors. Some investors opted to allocate cash to equities which have outperformed and been more buoyant of late. 

The flight to safe haven gold has slowed in recent weeks due to the perception that the worst of the Eurozone debt crisis is over and that the US economy is recovering.


Gold 1 Year Chart – (Bloomberg)

Weak speculative hands have been washed out of the gold market and many smaller retail investors have also sold bullion recently due to the widespread concern that gold is overvalued and a bubble.

Jewelers in India are protesting the tax hike on gold imports and plan to keep their shops closed for two more days. This is India’s first nationwide strike in seven years and shows how important the gold industry is in India. The excise duty hike is expected to lead to less demand however Indian demand may again prove to be robust despite tax increases.

SPDR Gold Trust, the world’s largest gold-backed ETF, said its gold holdings remained unchanged at 1,293.268 metric tonnes for the 5th straight session on Monday, despite the drop in prices last week.

Gold will have a “sharp” rally as the U.S. boosts monetary stimulus because of a faltering economy in the coming months, Societe Generale said in a report that was picked up by Bloomberg.

Data on U.S. gross domestic product in the first and second quarters will “surprise dramatically to the downside,” the bank said today in a report.

Meanwhile, ANZ has said that central bank gold buying may lead to a nominal gold record price in 2012 and prices to average $1,744/oz from $1,571/oz in 2011.

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

OTHER NEWS

(Bloomberg) – Gold May Near Record On Central Bank Buying, ANZ Says
Gold may near a record this year, averaging $1,744 an ounce compared with last year’s average of $1,571, on retail and central bank buying, according to Australia & New Zealand Banking Group Ltd.

“Retail investors will continue to seek protection from the longer-term bearish outlook for the dollar and insulate themselves from the risks posed by negative real interest rates and the crisis in Europe,” the bank’s analysts wrote in a report today.

(Bloomberg) — Silver to Outperform Gold For Most of 2nd Half, BNP Paribas Says
An improving economic outlook means silver may outperform gold for most of the second half of this year and in 2013, BNP Paribas SA said today in an e-mailed report.

The bank maintained its gold forecasts for this year and next, and reduced its 2013 estimate for silver to $51 an ounce. It raised its 2012 platinum forecast to $1,840 an ounce and cut its palladium estimate for this year to $825 an ounce.

(Bloomberg) — Economist Dennis Gartman Says He’s Cutting His Gold Position
Economist Dennis Gartman is cutting his gold position priced in yen by half, he said today in his daily Gartman Letter.

(Bloomberg) — CPM Sees Gold at ‘Cyclical Peak in Secular Bull Market’
Gold prices “are at a cyclical peak in a secular bull market,” and the metal is “unlikely” to top the intraday record reached in 2011, CPM Group said today in a statement before the release of its “Gold Yearbook 2012” on March 27.

SILVER 
Silver is trading at $32.32/oz, €24.48/oz and £20.39/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,658.63/oz, palladium at $691./oz and rhodium at $1,425/oz. 

NEWS

(Wall Street Journal)
Gold edges down, positive US outlook dents demand‎

(MarketWatch)
Gold edges down in Asian electronic trade‎

(Bloomberg)
Jewelers in India Extend Strike Seeking Withdrawal of Taxes

(The Financial Times)
Deutsche to open gold vault in London‎

COMMENTARY

(Zero Hedge)
Spot The Difference Between These Two Gold Holdings Charts

(Mineweb)
Gold to average $1800 this year despite big supply surplus – GFMS

(King World News)
London Trader – Sovereign Gold Buyers to Raise Their Bids

(You Tube)
Jim Sinclair U.S. has launched economic nuclear war

(Reuters)
Saft on Wealth, Buffett, Cash and Gold

 

Mark O'Byrne

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