The Daily Nugget: Gold Starts November At 2-Week Low

Following sharp losses yesterday the gold price, thanks to profit-taking and strong US economic data, is trading at two-week lows this morning.

In October the pace of business activity in the U.S. Midwest jumped and exceeded expectations and U.S. jobless claims declined last week/ This data has prompted concerns that the next FOMC meeting, in December, could announce tapering. This is a change for the books given the bullish sentiment following Wednesday’s announcement.
Gold data

Import data shows China received more than 100 tonnes of gold from Hong Kong. It is this demand that is keeping the gold price above $1,300 despite ETF outflows and pressure from concerns over a cash crunch in China and tapering in the US.

In September the volume of gold transferred between accounts fell to its lowest since August 2012, by 16.3 percent to an average of 18.5 million ounces a day according to the LBMA yesterday. In contrast, the amount of silver transferred rose by 12.3% to 137.4 million ounces daily.

The third Commitment of Traders report (COT) released since the end of the government shutdown showed speculators trimmed their exposure to silver and platinum in both reports, too, but more so in gold. The fall in the net-long gold position is unsurprising given the fall in the gold price in the period covered.

Gold supply sucked dry

Those in India’s gold industry have warned that the industry is facing large job cuts following Diwali. According to Reuters refiners, jewellery manufacturers and retailers are concerned that the festival season has ‘sucked supply dry’ and therefore there will be no work. Banks are already considering redeploying staff, but have admitted many may be out of jobs in the coming months.

Despite Diwali, there are reports that coin and bar demand may just 25% of what it was last year, whilst jewellery demand is expected to be ‘moderate.’

Reuters also reports that ‘about 300,000 to 400,000 artisans from Zaveri Bazaar, India’s biggest bullion market, have already moved back to their villages due to a lack of work, according to Bombay Bullion Association director Kumar Jain.’

The Korea Gold Exchange reports that demand for gold bars has been consistent since the April drop with 64 to 87 kg sold every month. Silver has also experienced record demand; 850 kg of silver bars were sold last month bringing the total so far in 2013 to 8,915 kg, four times greater than 2012’s 2,029kg.

Gold price to recover to new highs

Jeffrey Christian’s CPM Group released its Gold Long-Term Outlook 2013 yesterday in which it forecast that gold will retreat before going to reach new highs in the next decade. “Investors are still interested in owning gold for many of the same reasons they were buying it for since 2002…The main difference now is they are in less of a rush to hoard up on the metal. They have grown increasingly price sensitive, which results in them holding off on making fresh purchases when prices rise. This is unlike the period between 2009 and 2011, when investors were buying large volumes of gold even as prices were rising.”

The group believes that the gold price has had ‘limited downside’ since its fall in June. Once investors are convinced that the bottom has been reached in gold then there will be stronger buying interest which will spur the gold price.