This morning Gold has a three-week high, once again thanks to ongoing issues in Ukraine. This positive effect on gold will, however, be short-lived (as we have explained before) and investors will have to weigh geo-political tensions with an improving global economy (according to official figures).
Palladium is certainly benefitting from the Ukraine crisis, as speculators grow concerned about the supply of the metal (should sanctions be placed on Russia) and have driven it to prices not seen since August 2011.
Fall in Chinese gold bar demand
Data released from the China Gold Association, this morning, showed that demand for ‘gold bars’ fell by nearly 44% in the first quarter of the year, compared to the same period in 2013. This is despite overall gold consumption falling by 0.8%.
The fall in demand for gold bars will come as no surprise given the four-month low seen in gold imports from Hong Kong, the official main source of gold to China.
Gold to hit a four-year low…
This morning Metals Focus consultancy have said that the gold price is likely to reach a four-year low this year, touching $1,100 thanks to the global economic recovery. Whilst the yellow metal started the year strong, reaching a six-month high, ‘weakness is likely to set in’ but the consultancy does not expect to see a similar 28% price drop as we saw in 2013.
The consultancy is also not concerned about the supply of gold, despite China’s unstoppable demand and the clear outflow of gold from West to East, ‘”Given plenty of above-ground inventory, other than a temporary shortage of kilobars in Q2, the gold market remained well supplied last year,” Metals Focus said. “Moreover, it is of note that ‘Western’ investors tend to set the price, while physical markets react to it.”
The consultancy is also bearish about the silver price this year, currently at levels just below $20, this is where Metals Focus expects it to average for the year. Quite a difference from its $23.80 average price in 2013. The group also expects physical demand for the industrial precious metal to fall, by 11% in 2014.
…or maybe not?
The above is in contrast to Jeffrey Christian who believes the gold price will trade sideways until September – October and then the gold price will begin to rise as long-term investors begin to buy large amounts.
Christian is not so bullish about silver prices which, he believes, require historically high investment demand in order for the price to rise, rather than just relying on the high industrial demand.