Daily Nugget: Gold’s ‘Flash’ Sale

Gold managed to keep up with its 2014 record yesterday and rose to its highest in three-weeks. There was a short period when it looked as though this wouldn’t be the case however, when the price fell by $30 in a minute to a low of $1,212.60. This price action prompted a 10-second ‘trading halt’.

The ‘flash-crash’ came just minutes after US economic data on US factory orders and the ISM services index was released.

The 2.5% drop in just a few seconds has prompted further declarations of ‘manipulation’ in the precious metals markets. Whilst many may argue that gold’s 28% drop in 2013 was just a matter of supply outstripping demand, it is difficult to tell what price movements such as those seen yesterday were for. Were they just a fat finger trade? Or a large bank/fund liquidating their gold position?

It isn’t all bad news. Data from the U.S. Commodity Futures Trading Commission shows hedge funds raised their bullish gold bets to a six-week high, an increase in the net-long position of 19%. Short holdings slid to their lowest since mid-November, by 4.6%. This was against the average where net-bullish holdings, ‘across 18 U.S.-traded commodities fell for the first time in six weeks as investors became the most bearish on sugar since September.’

Holdings in the SPDR Gold Trust, the largest gold ETF, remained at 794.62 tons yesterday, the lowest since January 2009.

Over the next few days the gold price is expected to trade sideways thanks to choppy trading, low investor demand in the West and strong physical sales in the East.

Speaking of ‘the East’, the world’s most valuable jewellery seller, Chow Tai Fook, said yesterday that sales of both gold and gem-encrusted pieces prompted sales in China to rise by 34% in the final quarter of 2013. Sales in Hong Kong and Macau rose by 18%.

Silver and platinum also each performed well yesterday, gaining 0.2%. Palladium fell by 0.1%.

One of the many headlines in the commodities sections today is the ‘news’ that the Swiss National Bank saw a 15 billion franc drop in the price of its gold reserves. The country’s gold accounts for less that 9% of its total foreign reserves, it still has its gold but according to the US dollar it is no longer worth as much.

An Indian budgetary proposal to raise the limit of duty-free gold ornaments non-residential Indians (NRIs) can bring into the country, has prompted a boost in sales of such items in the Gulf region. Some outlets reported sales to be up by as much as 25% last week.

As news that Indian authorities are looking to restrict gold trade restrictions continues to develop, the Thai government has begun talks with them in the hope of resuming their free trade agreement in gold jewellery. Prior to October 2013, the import duty on gold from Thailand was just 1%. However, this was raised to 15% to protect the domestic jewellery industry. A commerce ministry official said that no decision had been decided upon.