The Daily Nugget: Spot Gold Price Rebounds

After six consecutive sessions of falling the spot gold price traded near its highest in four days and saw its biggest rise in two weeks yesterday.

The weak dollar continued to add to gold’s attractiveness yesterday. The Bloomberg Dollar Index has fallen 1.1% this week. Weekly jobless claims numbers increased by 5,000, lower than expected. Stronger than expected China trade data for last month also helped gold futures prices.

In Singapore gold bullion for immediate delivery climbed by 0.3% and COMEX December gold also climbed 0.3%. Earlier in the day spot gold hit a session high of $1,313.95.

The silver price also benefited from China’s strong data, silver for immediate delivery climbed to its highest since July 24 by 0.5%.

Few investors want to buy gold ETFs

Outflows from GLD have reached 8.1 tonnes for the week. We are starting to see a pick up in outflows from gold backed ETFs.

China remains the key player in the physical gold market, its positive data combined with a weak US Dollar works favourably for gold. The perceived strength of the Chinese economy ‘means deflationary forces are brushed aside and inflationary forces are more popular now,” Axel Merk wrote yesterday. This is likely to see more turn to gold bullion bars as an inflation hedge.

Demand for physical gold bullion shows little sound of abating, yet the price remains low thanks to the paper market. This low price has raised concerns over supply and the cost of gold production. Many analysts have suggested that this will now work to help the spot gold price further as the tightness between demand and supply tenses up.

Demand for gold in Viet Nam continues to be insatiable. The 51st gold auction held by the State Bank of Viet Nam saw nearly 1 tonne of gold buying yesterday. This adds to to the 53 tonnes that have been sold by the SBV since March.

Platinum continues to outperform the rest of the precious metals groups. It saw its biggest gain in 13 months yesterday on the back of improved German and Chinese export data whilst labour disputes place pressure on supply. Platinum for October delivery jumped by 3.7%, covering up the 3.3% drop this year.

It wasn’t positive economic data for everyone, the ECB’s latest forecast shows growth in the single currency union is expected to contract by 0.6% in 2014 before ‘recovering’ in 2014and growing 0.9%.