Daily Nugget: Gold, Silver Volumes Remain Low As Taper Decision Ahead

And so it has arrived, the week of Dectaper. All month, in fact longer, analysts, traders and market commentators have been looking ahead to this very week when the FOMC will meet for Bernanke’s final meeting.

But, of course tomorrow and Wednesday are not about Bernanke never leading another FOMC meeting, but instead this is the month when tapering is apparently definitely going to go ahead if you believed Bernanke’s statement earlier this year.

We doubt that tapering will be the outcome of the meeting. The likelihood of the Fed scaling back stimulus is unlikely overall anyway, but the chances of Bernanke deciding to do it in his last meeting is also unlikely. What is likely is that the statement following the decision will be used as an opportunity to telegraph the committee’s outlook for the future.

Gold and silver volumes remain low this morning, in anticipation of the outcome from the most watched monetary policy committee meeting. Physical buying also remains low as buyers await a price drop following the FOMC’s meeting. Many banks’ analysts expect the gold price to go beyond 2013 lows before year-end.

China launches third gold ETF

Earlier this year China saw the launch of two gold ETFs, HuaAn Gold ETF and Guotai Gold ETF. They disappointed, with a weak uptake in demand it was clear that China’s citizens want to own physical rather than any paper alternatives.

Reuters reports that four funds have been given the all-clear to launch, since June this year. The third, E Fund Gold ETF, launched over this morning on the Shenzen Stock Exchange and, like its predecessors, has also failed to make waves in the gold market. It fell by 0.6% this morning.

The lacklustre interest in the three funds may well be not only down to a preference for physical gold, but also because of gold’s recent performance. SPDR Gold Trust, the world’s largest gold ETF, was launched during gold’s bull-run, a contrasting environment to the one we see today for gold.

Holdings in the top 14 gold ETFs have fallen by 31%, according to a recent Bloomberg report. Now at 1,813.7 metric tons, holdings in the ETFs are expected to fall by a further 311 tons, according to a Bloomberg survey.

Speaking of China, silver slipped this morning on the back of PMI data that showed the country’s factory output had declined to a three month low.

Gold price forecasts

More gold price forecasts have been released, the most recent from Bank of America Merrill Lynch. They believe that next year gold will underperform both silver and platinum, threatened by further liquidation of positions and future decisions by the Fed. The bank believes that ‘none of the concerns that brought investors to the market post-recession materialized.’ They believe gold could be pushed to $1,100/oz in 2014.

Zimbabwe gold sales

Top gold news over the weekend was from Zimbabwe that President Mugabe plans to ban the private sale of gold. Producers will be required to sell any mined gold through a state-owned company. This latest measure will not come as a shock to anyone who has followed the troubled nation’s economic progress.

The week ahead

This week isn’t all about tapering, believe it or not. There is also a slurry of industrial production data which will give analysts more of an idea over certain countries’ economic recoveries. Look out for industrial production data for the eurozone, the UK, Japan and China. Revised GDP data from Japan at the end of the week will also be interesting as will the recruitment industry data from the UK which will give support to the UK’s recovery.