Daily Nugget: Will Gold Climb With Tapering?

In yesterday’s Social Gold Mine we featured a couple of tweets regarding India’s ongoing currency wars; the rupee versus gold. Despite the rupee sitting at an all-time low against the dollar, for the time being it is officially winning the war. Thanks to the weak currency the price of gold bullion is at a record high and August’s gold imports fell by 90% from the previous year.

Now that tensions over Syria appear to have calmed, gold appears almost entirely focussed on the FOMC meeting next week and the subsequent decision. Consensus remains that the 17-18 September meeting will result in an announcement that the Fed will reduce the $85billion monthly purchases by around $10-$15 billion.

Goldman Sachs, not really known for their record gold price predictions, said this morning that gold’s drop will extend into 2014 when the Fed taper asset purchases. The bank’s economists expect tapering to be the catalyst to push gold lower, ‘gold prices will decline into 2014 on the back of an acceleration in US activity and a less accommodative monetary-policy stance.’

Goldman Sachs joins a host other major institutions including SocGen, Citigroup and ABN Amro all of whom have predicted lower gold prices for 2014.

BofA Merrill Lynch Global Research said yesterday that gold is likely to rise even if the Fed does embark on tapering, but only if it is less than expected.
Platinum price

The same group also mentioned platinum yesterday which they expect to perform well in light of ‘tighter monetary policy’ and improvement in developing markets. Despite this, they have reduced their 2013 platinum price target, by 6%, to $1,575 an ounce. Predictions for 2014 and 2015 are $1,850 and $1,900 respectively.

Whilst India looks likely to lose it shine in the gold market, China is no doubt set to buy even more given their industrial output data releases yesterday. August’s industrial output for the country rose by 10.4%, 0.5% higher than expected. Retail sales were up 13.4%.
COMEX default

Is COMEX facing a default risk? Inventories have fallen by 36% so far this year, from 11.059 million ounces to 7.034 million. Whilst a default can never be ruled out, we draw your attention to our earlier research that shows the delivery ratios were exceptionally low at present. Having said this, as many are pointing out this does not mean that the COMEX is not open to being cornered by a sovereign nation or even a group of wealthy individuals.

Gold’s Superman

Here in the West we are all aware of Warren Buffet’s views on gold. But when it comes to Asia’ own Warren Buffet, Li Ka-shing, it’s a different story. Also known as ‘Superman’ (much cooler than the ‘Sage of Omaha’), he is the wealthiest Chinese person of descent in the world. And he is buying gold. Having just invested in CEF Holdings, a joint venture which will acquire gold mining companies and other gold-related assets.