Daily Nugget – Will Gold Fail To End Month On High?

An imminent attack on Syria is looking less likely today and gold has reacted accordingly, falling below $1,400 this morning. It no longer appears as though it is heading for its second-monthly gain. Meanwhile silver is still aiming for its best month since January 2012.

Whilst talks of Syria appear to have calmed, I suspect the price of gold will find some support from discussions surrounding Syria, given Obama’s stance that they will act without UN support.

This latest drop hasn’t stopped traders from remaining bullish. In the weekly Bloomberg survey the results showed the highest proportion of bulls since March, with the majority expecting prices to rise next week.

Holdings in gold-backed ETFs continued to rise for the third consecutive week.

As we featured in yesterday’s Social Gold Mine, data from the LBMA shows that gold transferred between accounts fell by an average of 23.2 million ounces a day, a drop in 20%.

Does US data still matter?

Interestingly mainstream financial reports are focussing on Syria and South Africa’s mining strikes as gold’s key drivers this morning. There is little mention of the positive economic data that came out of the US yesterday.

In the April to June period U.S. gross domestic product grew at a 2.5% annual rate (up from an estimate of 1.7%), this will be seen as a strong sign of recovery as the reading was more than double the pace achieved in the prior three months. This good news followed the jobless benefits claims data that showed the number of Americans filing new claims for jobless benefits fell last week.

Asia may not be so good for gold

Reuters reports this morning that premiums have dropped across Asia. Hong Kong premiums have fallen by 50% to $2.50, whilst in Singapore and Japan premiums are down to $1.50.

Speaking of Asia, we also reported yesterday that India’s latest wheeze in the gold war has been to suggest that the RBI buys gold from its citizens.

Also in India the Forward Market’s Commission has raised the initial margin on gold futures from 4% to 5%.

Concerns surrounding the impact of the East’s rout on gold are growing louder. As investors flee the weakening currencies, analysts are worried that this will impact gold demand from the world’s largest buyers of gold.

HSBC have lowered their bullion allocation to 4%, from 7% in July, According to reports the bank has left gold’s weighting unchanged (at 5%) in its six-month-view tactical portfolio. Reasons for the change come on views that emerging markets are slowing and weakness in developed economies continues.

A bit of science now. An interesting article on Bloomberg explains how gold may have come into existence “The origin of heavy metals like gold has long been a scientific mystery, said Don Lamb, an astronomer at the University of Chicago. Now, astronomers at Harvard University have analyzed a gamma ray burst thought to be from a rare neutron star collision and found it helped seed the universe with heavy metals, including enough gold to create a pile that would have about 10 times more mass than the earth’s moon.”