While The West Ponders Fed QE Plans -The Chinese Accumulate Gold

Today’s AM fix was USD 1,287.75, EUR 964.25 and GBP 830.11 per ounce. 
Yesterday’s AM fix was USD 1,275.50, EUR 960.61 and GBP 838.04 per ounce.

Gold rose $1.50 or 0.12% yesterday and closed at $1,285.10/oz. Silver fell $0.01 or 0.05% and closed at $19.51. 

Gold is up from a three week low hit early yesterday.  The recent movements in the gold price have been driven by investors looking to short cover as they are selling long their U.S. dollars and buying other currencies and gold. The weakness in the U.S. dollar, which is at a seven week low, has been driven by the comments from the Fed which has given strong hints that it will begin tapering QE in September or soon thereafter. 

While western investors focus on Federal Reserve’s quantitative easing tapering timelines, the bigger gold story is taking place in China. The negative sentiment currently attributable to the gold price masks the accumulation of gold by the Chinese who are set to overtake India this year as the world’s top gold consumer. This is a startling turnaround given the Chinese embargo on gold ownership was only lifted as recently as 2003.


Support & Resistance Chart, 5 Year – (GoldCore)

The Chinese yuan is at a 19-year high against the U.S. dollar which is providing support to local Chinese buyers through cheaper local bullion prices. What is unknown is the real volume of gold bullion purchases by the Chinese central bank as it looks to reduce its exposure to the U.S dollar, such is the volume of dollar reserves on account.

With some $3.2 trillion in official reserves, the Chinese have gone about their central bank gold bullion accumulation programme quietly and with little fanfare. When the dust settles on 2013 the big story will be ‘China, Less Dollars, More Gold.’ Whether or not the big game is played out and the Chinese back the yuan with gold, the long term prospect for the gold price is very positive.

GoldCore’s Stephen Flood was interviewed on CNBC Squawk Box yesterday and discussed the demand for gold from China, gold as a diversification element in portfolios and about the risks of a stock market fall. With central banks grappling with a stimulus dependent capital market and a fragile economic recovery, the risks of a downside move in the stock markets are significant. GoldCore 2013 market outlook and long term price expectation is for gold to reach its inflation-adjusted high of $2,400. 

Louise Yamada, the respected technical analyst, views gold as still technically weak.  In an a interview with Bloomberg she said gold “will need a lot of repair to come out of this bear market, .. the recovery that we have seen is fragile, and monthly momentum is in steep decline.”

GoldCore’s trading  desk is seeing considerable physical interest at these levels, with many clients viewing the current price as an attractive entry point. Buyer to seller interest is seen at 2:1.

NEWS
Gold gains for second dayas dollar weakens – Reuters

Gold Climbs Before Jobless Report as Investors Weigh Stimulus – Bloomberg

BoJ keeps monetary policy on hold – The Financial Times

COMMENTARY
"Hello HSBC, This Is JPMorgan – We Urgently Need Some Of Your Gold" – Zero Hedge

COMEX Deliverable (Registered) Gold Declines By Almost 60,000 Ounces – Jesse’s Café Américain

Marc Faber: The Fed Will Increase QE – The Daily Reckoning

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Mark OByrne

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