Yesterday the Gold price fell to a six-week low and this morning it is holding just below $1,300/oz, having fallen below the key level early this morning. As we explained earlier in the month, the Crimea-related high were only always going to be temporary. The profit taking that we have seen this week gives the gold price good standing to now solidly build on its so far 9% gains seen this year.
A second day of outflows from ETF helped to keep the gold price low. Holdings in the SPDR Gold Trust fell 1.80 tonnes to 816.97 tonnes on Wednesday after losing 2.70 tonnes earlier in the week.
Much of the take-down in the gold price in the last couple of days will be thanks to Chinese financing deals following concerns about the stability of the country’s credit filled economy. Gold, as well as copper, is often used as collateral against carry-trade investment products. An unwinding of some gold-financed borrowing means that there will be weakness in the gold price. Once again, as with Crimea, this will be a temporary event and is not a reflection of physical gold demand.
Following the official release of Hong Kong’s gold exports to China, on Tuesday, Commerzbank yesterday said that should the pace of Chinese gold imports continue then they are likely to match last year’s record import figures. Remember that the figures read by Western institutions are often missing key data areas such as SGE numbers and imports from other sources. This is in contrast to the data that we have previously covered, which has been researched by Koos Jansen, and shows China’s gold imports to be much greater than frequently quoted figures suggest.
We have written recently of the push by Singaporean authorities for the country to become the hub of the world’s gold market. When we discussed the matter it was mainly in reference to the fantastic storage opportunities our partners offer in the Singapore Freezone. However, there is more; Bloomberg now reports that the SGX is considering the launch of physical gold trading.
India’s jewellery industry (and citizens) continue to hope that import restrictions will be relaxed slightly in the second-half of the year. T.S. Kalyanaraman, chairman of the Thrissur-India based Kalyan Jewellers Ltd, said in an interview yesterday that India’s government will be forced to lift restrictions as small jewellers’ demand for raw gold is pushing up levels of smuggling. The Chairman’s son, Ramesh Kalyanaraman, believes gold imports into the country will be slow until June and then levels will return to those seen last year, as restrictions are lifted somewhat.
The gold controls have certainly had the impact the government had hoped for. According to past statements, it is believed that bullion imports accounted for over 80% of the country’s record $87.8 billion deficit in the year ended March 31 2013. This year, the deficit is expected to be $40 billion, far less than the target $70 billion.