Physical Gold Demand Better But Not 'Excellent' After Price Drop
(Kitco News)- Physical demand for gold has improved on the recent price decline, although traders say it’s still onthe soft side and any pickup may not be quantifiable until key nations startreleasing their import/export data for May.
“It’s better than before,but it’s still not excellent,” said Afshin Nabavi, head of trading at trade houseMKS (Switzerland) SA, in an interview with Kitco News.
Meanwhile, holdings inglobal exchange-traded funds have increased over the last two months even asthe price fell, observers said.
Spot gold spent most of2018 range-bound between roughly $1,300 and $1,365 an ounce before fallingthrough the lower end of that band one week ago. Prices bottomed just above
$1,282 an ounce on Monday and have edged higher since. As of 8:33 a.m. EDT,spot gold was up $2, trading at $1,295 an ounce.
“The market was prettypoor on the physical front last week,” Nabavi said. “When we held nicely on thedownside, we saw better demand coming in.”
Basically, as prices weresliding, many potential buyers still held off waiting to see if they would beable to obtain gold at even cheaper prices, Nabavi continued. Further, he said,buyers do not want to pay a premium when there is a fair amount of supplyavailable.
Bart Melek, head ofcommodities strategy with TD Securities, said it’s too early to say just whatthe impact on demand may be until hard data is released, such as India’s importdata and Hong Kong’s exports to China. Further, much gold moves throughSwitzerland, so this country’s exports are closely monitored as a sign of golddemand as well.
“For the most part, this[price fall] will probably stimulate physical demand down the road,” Meleksaid. “The problem is still the [strong] U.S. dollar.”
Commerzbank analysts, in adaily research report on commodities, still described the overall physicalmarket as soft.
“Contrary to our expectations, the lower goldprice has hardly attracted any buyers so far,” the bank said.
For example, in India, gold is trading at itshighest discount compared to the world market in two months, with local tradersreporting this is up to $4 per troy ounce, Commerzbank said. Further, analystsadded, depreciation of the Indian rupee has actually driven up gold prices in thelocal currency in India.
“The collapse of the Turkish lira could alsoprompt buyer reticence in Turkey,”
Commerzbank said. “In any case, gold in Turkish lira is trading at a recordhigh.”
ETF Holdings Up Since March
While hard data on recent physical demand isnot readily available, statistics for ETF holdings can be tracked. Thus, thisis one aspect of the market “we can talk about almost in real time,” Meleksaid.
He pointed out that global ETF holdings of goldwere 73.291 million ounces on March 30, when gold was still well above $1,300.Now that gold is down around $1,295, those holdings have actually edged up to75.18 million ounces, he pointed out.
The ETFs trade like a stock but track the priceof the commodity, with metal put into storage to back the shares.
By Allen SykoraFor Kitco News
Follow @AllenSykora
asykora@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.