The Daily Nugget: Gold ETFs Drive Value Of Entire Global ETF Market

Despite two major central bank meetings, the price of gold remained relatively flat throughout the day yesterday due to the US Independence Holiday and the wait prior to the non-farm payrolls data.

Following renewed dollar strength yesterday, thanks to ECB and BOE dovish stances, many are expecting gold to take a bit more of a tumble today, despite gaining around 2% this week.

The ECB took a new step and released a statement in which the opening remarks explicitly implied that rates are likely to be cut. Mark Carney, in his first MPC meeting, also said that we should not expect any rise in interest rates in the near future due to fears of hampering the country’s recovery efforts.

The gold price fell this morning for the first time this week on the back of concerns over the US jobs data. May believe the data will show signs that the US economy is recovery, thus prompting more calls for QE to be tapered. If the report backs a stronger dollar then gold will suffer.

Despite nervousness surrounding gold and its reaction to the non-farm payrolls data, traders remain bullish over the yellow metal given the political instability in Portugal and Egypt. The ‘return’ of the European debt crisis is likely to sustain a rally for gold.

ETF Securities said yesterday that a record quarterly decline in assets under management for global commodity exchange traded products was down the fall in gold-backed ETFs. Assets under management for gold-backed ETFs fell from $131 billion to $82.3b billion between the first and second quarter this year. Gold accounted for 97% total of ETP selling.

On the other side of the world where they don’t worry about things such as debt crisis, Middle East tensions and some jobs data affecting gold, imports are streaming in. I’m talking about China, Standard Bank stated in a report earlier this week that rising premiums in a China were signal that demand for gold is on the rise again. I hadn’t realised it had ever disappeared, but it’s good to see mainstream analysts notice.

Reports on Twitter state that gold imports in China, from Hong Kong, have risen by 68% from a year earlier. The term ‘Chinese housewives’ has become common when referring to the huge gold demand seen in China. During the three-day May Day holiday shops in Hong Kong sold 60 tonnes of physical gold, 50 per cent more than last year. This huge demand has been coming from the Chinese mothers who have had the foresight to spot what a great price it is and believe owning gold can bring good fortune. Many believe it is these women who have beaten the Wall St guys who are trying to bring down the gold price, at their own game.

In some lighter news the Royal Mint has announced that all babies born on the same day as the Duke and Duchess of Cambridge’s baby will receive a ‘lucky silver penny’ to commemorate the day.