The Daily Nugget: Deutsche Bank Bullish On Gold

Last week did not end well for the gold price; it fell 2.7%, as US jobs data showed more jobs had been added than was forecast. The jobs number appears to have become the focal point, to an almost obsessive nature, as to how the markets should be feeling about the economy and if the FOMC will reduce asset-purchases. Alan Greenspan told CNBC last week that the FOMC should now begin to do so.

Gold’s fall following the jobs data suggests that markets no longer feel the need to hold gold if, as they suspect will happen, the Fed will pull back on Monetary easing measures. It seems that the only strength in gold, as they see it, is coming from China alone.

Now that the jobs data is out of the way, do to be surprised to see gold hit even lower levels as markets continue to feel bullish about the US recovery in the short-term.

The first of this week’s major economic releases came over the weekend from China, where international trade, inflation, money supply, industrial production, retail sales and investment data were all released. The data was disappointing however which has helped gold recover this morning. China’s May industrial output rose 9.2 %, lower than expected, from a year earlier and factory-gate prices fell for a 15th month. Export gains and imports also fell.

In the US industrial production and retail sales will be released, each is expected to tell a different story. Consumer confidence and retail sales have been impressive lately however industrial production has been slowing since the beginning of the year.

Data released from the Eurozone this week is also expected to be sombre where industrial production data for Italy and Spain will be released.

Shinzo Abe and the rest of Japan’s policy makers are likely to be patting themselves on the back this week as data is likely to show current policy has fed through to faster growth.

Deutsche Bank bullish on gold

Deutsche Bank, one of the world’s biggest gold trading banks, has opened a 200 tonne gold vault in Singapore, clearly they’re expecting that huge bear market everyone’s talking about. Like storage facilities offered by The Real Asset Company, the vault is subleased from Malca-Amit and is in the Singapore Freeport Facility.

Explaining the bank’s decision, head of wealth planning Mark Smallwood said, “What we’re seeing is customers looking at gold and being cognizant of the fact that when things go wrong, where you’re storing the gold is extremely important,” Mr. Smallwood said. “Risk factors for gold are increasing dramatically, and people want to store where they perceive it to be safe, which often will involve geographically diversifying that storage.” Gold stored in the vaults can be used as collateral for loans.

China’s new domestic ETPs

As financial media outlets continue to remind us, holding in gold-backed exchange traded products have fallen to a two-year low, however in China this is seen as no bad thing. The country has approved two domestic exchange-traded products. Bloomberg reports, “Gold ETFs should help boost gold demand as they will make Chinese investments in the bullion much easier,” Zhang Bingnan, secretary-general of the China Gold Association, said by phone from Beijing today. “The dumping recently of holdings in gold exchange-traded products by overseas investors may not prove to be a wise move.”