Gold Bullion Drop Blamed on
"Short-Term Speculators" as Asian Buying Picks Up on "Bargain
THE PRICE of gold bullion traded near 7-week lows
for US and UK investors on Wednesday morning, maintaining the drop of 1% so
far this week.
Despite press reports that Greece will get a further two years to meet its
"austerity" budget targets, the Euro currency held onto its drop
below $1.30 after new German data showed consumer confidence falling to a
All told, the 17-nation Eurozone "sank further into decline at the start
of the fourth quarter," added the Markit PMI
survey, pegging the drop in manufacturing and service output at its fastest
pace in more than three years.
Tuesday's fall in gold bullion prices came amid "a market-wide
retreat" said one analyst, with "across-the-board selling by
speculators" according to another.
Looking at the gold futures market, "The reduction in short-term spec[ulative] positions suggests
that the recent move lower in gold has been as a related to short-term
investors," writes Nomura analysts in a note.
"I think what you're seeing is a reduction of investor concerns,"
counters the CPM consultancy's managing director Jeffrey Christian, speaking
to MineWeb, "reflected in investors taking
some of the profits out of their gold positions.
"[Investors] are looking more to repositioning themselves for slower
Ahead of Wednesday's policy update from the US Federal Reserve, and
"while recent data flow has been encouraging," writes Marc Ground
at Standard Bank, "it is still apparent that the US economy still faces
"Ironically, this may encourage risk appetite in financial
markets...Consensus is that the Fed will continue its current programme of easing
until at least Q4:13. We would concur, but also see the potential for further
Shorter-term, Standard Bank's commodity team "still feel that $1700 is a
significant level of support and don’t expect it to be sustainably
breached amid steadily improving physical demand for the metal out of
Given the recent price decline, "Emerging-market demand for gold bullion
has picked up," agrees London market-maker HSBC in a note, "and
this may act as a backstop against steeper price drops."
Today in India – the world's largest consumer market, where next
month's Diwali festival will mark the peak of annual demand – dealers
saw "bargain hunting" by jewelers and
other stockists, according to local press.
More broadly in Asia, "Investors [were] buying a little bit," said
Ronald Leung, head of Lee Cheong Gold Dealers in Hong Kong. But "they
are not that aggressive."
Dealer premiums on gold bullion bars in Singapore and Hong Kong held around
90¢ per ounce above the world's benchmark London quote, little changed
this week so far.
Silver prices also stalled after a brief rally early Wednesday, failing to
hold above $32.00 per ounce.
The broader commodity markets ticked higher, as did European stock markets
after an initial fall.
"Market players will be paying close attention to this afternoon’s
press conference in Berlin," says Eugene Weinberg at Commerzbank in
Frankfurt, when "Draghi will be explaining the
ECB’s current monetary policy to German politicians."
Looking ahead to the US Fed announcement due early afternoon Washington time,
"the bank’s commitment to an expansionary course will probably be
reiterated, meaning that opportunity costs for holding gold will remain
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Adrian Ash is head
of research at BullionVault – the secure, low-cost gold and silver market for
private investors online, where you can buy physical gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
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