247Bull.com Editor: Those that believe the ‘everything is fixed’ message being peddled by G20 policymakers will see no reason to continue holding gold. The only people left holding physical metal at this stage are those that see past the political spin and layers of abstraction. Those still holding gold can see that the unprecedented money printing (and other stimulus), which is likely to gather pace over the next few quarters, only buys us time. Not only are these policies failing to address the structural problems and imbalances we face, in many cases they are making them worse. Ultimately all these futile efforts to maintain our broken monetary system will manifest in a currency crisis. It is then that gold will prove to be the ultimate safe haven.
Spot gold prices slipped back below $1470 per ounce Thursday morning in London, drifting as world stock markets failed to follow Wall Street higher, where equities yesterday hit new all-time highs.
Silver held above $24.00 per ounce, just shy of last week’s finish, as commodities slipped overall.
A rise in Sterling after the Bank of England held its monetary policy unchanged drove gold prices down to £942 per ounce for UK investors.
Government bond prices meantime rose everywhere except Australia and New Zealand, where strong new jobs data saw both currencies jump together with interest rates.
Spain today raised €4.5 billion ($6.5bn) in new debt at sharply lower interest rates from its last bond auction in April.
Neighboring Portugal has “already been able to totally finance our needs for this year” the finance minister said earlier this week, adding that Lisbon is now aiming to start pre-financing its 2014 needs and plan an exit from the €78bn bail-out it received from the European Union and IMF in 2011.
“The downtrend in [gold's Relative Strength Index] is bearish,” says the latest technical comment from bullion bank Scotia Mocatta, “as it indicates that gold is becoming overbought at progressively lower levels, and becoming oversold at progressively lower levels.”
Even so, “Gold still has some room to move higher before making its next leg down,” Scotia’s note adds.
In terms of private-investor demand, “The pace of buying has cooled,” says another broker, pointing to “the frenzied pace” following the 30-year record price crash of mid-April.
“We suspect that those sitting on the fence and waiting for cheaper prices may yet have another shot at getting back in.”
Amongst the exchange-traded trust funds favored by money managers buying gold, the giant SPDR Gold Trust shed another 6 tonnes on Wednesday, taking the quantity of bullion held to back its shares to the lowest level since March 2009 at 1051 tonnes.
“Indian physical demand is strong,” says James Steel at London market-maker HSBC, “and the combined response by consumers and retail investors to the plunge in prices since mid-April is absorbing a portion of the liquidation in the gold-exchange traded funds.”
“No end in sight for precious metals appetite across the globe,” agrees Swiss refining and finance group MKS, “especially out of China and India” – the world’s No. 2 and No.1 consumer markets respectively.
“The question is who will win the battle between the unprecedented physical demand, and the unrelenting ETF supply.”
Importers are rushing to beat new gold restrictions proposed by India’s central bank, according to Rajesh Khosla, managing director at MMTC-PAMP India, in New Delhi.
“Supported by strong physical demand from India and China,” says Mumbai-based brokerage Emkay, “gold prices in India can be supported by physical demand ahead of Akshay Tritiya” – the spring festival celebrated this year on May 13 and traditionally an auspicious day on some Hindu calendars for buying gold.
Indian jewelers are buying gold at up to $12 an ounce over benchmark London prices, Livemint quotes Bachhraj Bamalwa, a director of the All India Gems & Jewellery Trade Federation.
That compares with $2 an ounce before mid-April’s slump in global gold prices.
With gold gifts now in demand for the Indian wedding season – which runs until July –”Should you buy gold [for your own portfolio] this Akshaya Tritiya?” asks Jayant Manglik, president of retail distribution at Indian brokerage Religare Capital, writing for MoneyControl.
“The unambiguous answer is yes. Having gold in the portfolio increases diversification & security while reducing risk & volatility. It is liquid in any country in the world and is virtually physically indestructible.
“The right mix would have between 10 to 15% of your investible surplus.”
On the supply side, meantime, the world’s largest gold miner corporation – Barrick Gold – has restructured a deal with the Dominican Republic to share more of the revenues from its giant Pueblo Viejo project with the government.
Barrick cut half-a-billion Dollars of new exploration spending from its 2013 plans following April’s price crash.
Gold mining output from South Africa – formerly the world’s #1 producer nation, but now in 6th place after production halved since 2000 – fell again in March, new data showed today, down a further 6.2% from a year earlier to the lowest levels in nine decades.
Adrian Ash | BullionVault