Daily Nugget: Gold Remains At 3-Week Lows

The gold price remains near three week lows this morning as speculation over the Fed and December’s meeting continues to mount. The US dollar was at a two-month high earlier as indications that the economy is on track for a recovery have inspired confidence in the currency.

The weak gold price and strength of the US dollar comes following the release of jobs data on Friday which showed employers added an additional 204,000 jobs to the payroll in October, a significant improvement on the predicted 125,000.

Today will be a key day for the gold price as we see how physical demand reacts to the price revisiting numbers below $1300.

This week look out for GDP data for the Eurozone and Japan as well as industrial output numbers for some Eurozone countries, the US and China. Here in the UK, look out for the Bank of England’s inflation report and unemployment numbers.

DGCX sees record volumes

The Dubai Gold and Commodities Exchange (DGCX) has seen record volumes in the last month. Year-to-date volumes were up 56% from the same period before. This robust figure helped the DGCX’s gold futures contract increase its market share in Asia by 2%.

Volumes on the gold futures contract increased by 60%, whereas silver contract volumes climbed by over 88%. The exchange is set to launch a gold spot contract in the near future, these recent numbers suggest there is some high demand to be tapped.

Speaking of the spot gold contract, CEO Gary Anderson, told Trade Arabia, “Such a contract will not only help merchants enhance price risk management and profitability, it will also enhance liquidity in the gold market by removing the need for offshore credit and collateral for gold trading.”

China and economic reform

All eyes will be on China today and tomorrow as meetings to discuss further economic reforms in the country (which began on Saturday, behind closed doors) continue.

The ‘Third Plenum’ will be closely watched by institutions around the world, namely because of what the previous two Third Plenums have brought about. Bill Fischer on Forbes explains, ‘the 1978 third plenum launched what was to become the economic reforms that transformed China from a moribund autarkic economy into a global powerhouse, and the 1993 third plenum established the market reform agenda that was later to be essential to the modernization of China’s economy under Premier Zhu Rongji, both major thresholds of policy change that were fundamental to catalyzing China’s development progress.’

Commodities traders specifically will be watching the outcome of the meeting, due to conclude tomorrow, given the impact previous decisions have made on the trading of commodities. Mining.com reports the country accounts for 70% of the seaborne trade of iron ore, 42% of copper demand, 47% of coal demand, 36% of nickel demand, 44% of lead demand and 41% of zinc demand.

New gold vault in Shanghai

Speaking of China, The Real Asset Company’s chosen vault provider Malca-Amit has announced the opening of a 2,000 metric ton gold storage facility in Shanghai. Given gold investment demand is expected to climb by nearly 30% this year, the move by the storage provider is a sign of confidence in China’s future gold demand.

Malca has chosen to locate the vault in the Waigaoqiao free-trade area where firms have fewer restrictions in regard to requirements over taxation and foreign-exchange. At present it is expected to be used by both international and Chinese institutions.

Official gold demand declines

India and China have dominated headlines in recent years as they are cited as evidence of the ongoing demand for physical gold. Whilst confidence clearly remains in China’s ability to keep up appearances, it is the opposite case for India. Last week the Gems & Jewellery Trade Federation said that they expect festival demand to have fallen 25% on last year’s figures. This will make a significant impact on global demand figures, given the country accounted for one-fifth of all gold demand last year.