Daily Nugget: Gold Lies Flat For Housing Data

Despite having impressed everyone with its near 4% climb last week, gold had a fairly dull day yesterday finishing flat. Yesterday saw the beginning of data being released that had previously been delayed due to the shutdown. Gold failed to react to yesterday’s report that showed weaker US home resale and price growth last month.

In contrast, silver rose 1.5% yesterday, platinum and palladium also made small gains.

Trading volumes in Comex gold futures were at their lowest since April 1st yesterday Reuters report, explaining the lack of price movement. Spot gold underperformed the futures price, falling 0.1%. Holdings in the SPDR gold trust held steady yesterday, having experienced further outflows last week. Total October outflows currently stand at 34 tons, up from both September and August’s 25.7 tons and 17.9 tons respectively. Total global gold ETF holdings are estimated to be 63 million ounces, compared to December 2012’s total of 86.5 million.

Non-farm payroll time again

The disappointing day comes as speculators now wait in the wings following last week’s short covering rally and ahead of today’s two-week delayed nonfarm payrolls data. Overall unemployment is expected to remain unchanged at 7.3% whilst the key number is expected to show an improvement to 180,000 jobs.

Today’s data release will be widely used as a gauge to assess whether or not the FOMC will go ahead with tapering before Christmas. Chicago Fed President, Charles Evans told CNBC yesterday that the ‘fiscal strife’ means tapering will be delayed. Recent developments put even more weight on the belief that the Fed has no exit strategy to its QE program.

India’s gold trade is struggling ahead of Diwali season as jewellers struggle to get hold of supplies, those who can are paying record high premiums. Earlier this month gold shortages sent the price to $100/oz above London prices during the Dussehra festival. In contrast, smuggled gold reportedly carries ‘only’ a $50 premium.

Paulson’s PFR Gold Fund down 62%

John Paulson’s PFR Gold Fund fell 16% last month thanks to bullion and related stock falls. The fund has experienced a 62% loss in the first three-quarters of the year. The Gold Fund was started in 2010 based on the expectation that the Fed’s easy monetary policy would lead to inflation and therefore increased gold demand.

Paulson & Co. wrote in a report to investors (obtained by Bloomberg), ‘whilst actual inflation and inflation expectations remain subdued we continue to believe we are at risk of high inflation in the future. We also believe we are in a pause phase, which is likely to persist until we see the leading indicators of inflation pick up.