The Daily Nugget: Gold Price Bulls Returning?

Analysts surveyed by Bloomberg are at their most bullish on the price of gold in five weeks due to Bernanke’s acknowledgement that QE was still needed by the US economy.

Gold prices almost touched $1,300 yesterday, reaching $1,298.73/ounce. At the moment gold bullion is headed for its strongest weekly performance since October 2001, according to Bloomberg. This is despite the gold price slipping this morning.

In silver news it wasn’t so positive as the metal declined overnight, for the first time this week.

The small drop in the gold price (spot gold fell 0.1%) came after China’s finance minister said he expects the country’s economic growth for 2013 will come in 0.5% lower than expected, at 7% instead.

Gold coin demand vs mine supply
According the US Mint’s website, American Eagle sales for July are already on course to beat June sales of 57,000. 21,000 gold coins have been sold already this month, this may suggest that buyers believe we will not return to gold price lows experienced recently.

However, in contrast the Perth Mint, continues to experience a decline in gold bar and coin sales, having seen a 47% fall in June.

March’s US gold mine output has been revised by the US Geological Survey, up to 18,500 kgs of gold bullion bars from an original 17,100 kgs however this is still a 2% decline on last year. Q1 production fell by 12% from Q4 2012.

Gold continues to be supported by physical gold investment. The four year high of one-month lease rates show strong industry demand and suggests that the jewellery industry are getting ready for Christmas demand.

Gold buying in China
Last week the Shanghai Futures Exchange launched their after-hours trading. It has proved to be a huge success, as trading volumes jumped to record highs. Average daily trading volumes for gold, in June, were 595,642 lots, yesterday 595,642 lots were recorded.

Our work on the Shanghai Futures Exchange, released yesterday, shows China are taking a significant amount of supply out of the market place. We found that delivery volumes exceed, or are close to, HK export data and mining supply of gold.

There is also some anecdotal suggestions that the Chinese and Russian central banks have been buying gold bars again. This, added to high import figures suggests that strong physical demand may well lead to scarcity and therefore a significant advance in the gold price.

According to RBS Capital Market Global Futures, there has been a small increase in the number of open positions in COMEX gold. This suggests that speculators are returning to the market, worried that they are missing out on an opportunity.

Has gold reached its bottom? We can’t be too sure, says Jim Rogers in a recent interview. He believes that we should expect more volatility over the next couple of years and that this week’s improved performance was not a sign that gold had reached its bottom.