Comex Gold Futures for Dec delivery hit their weakest level in 7 weeks to $1698.7 before closing at $1701.6 for the first time since Sept. 7, with trading volume at 20% below its 30-day average. The US Federal Reserve stuck to its plan to keep stimulating growth until the job market improves offering no surprising moves in its policy statement. Comex Gold Prices hit a 2012 high on October 5 at $1,795.69 on market optimism after the Fed in September unveiled a third round of mortgage backed securities (MBS) buying to stimulate economic growth but the initial optimism on the Fed’s QE3 stimulus seems fading off. Gold Prices are once again trading under the levels where they were prior to the Federal Reserve’s third quantitative easing (QE3) announcement. Despite the absence of surprises, the outcome should give Gold Investors confidence of the Inflationary consequences of the unlimited QE3.
The Fed also repeated its vow to keep rates near zero until mid-2015 and its pledge to keep supporting growth while the recovery strengthens. It also made no change to its plan announced in September to buy $40 billion in Treasury & Mortgage-backed debt per month meant to push down long-term interest rates. The FOMC remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions, reported Reuters. The Fed noted some areas of improvement, such as consumer spending, but said jobs growth remains slow and that the unemployment remains “elevated.” Even though the Fed’s latest round of mortgage-bond buyback should underpin Gold Prices in the long term, the US Federal Reserve cannot eliminate the risks for a global deflation. Gold Prices also appeared to have lost momentum after repeatedly failing to break the psychologically important $1,800 an ounce level thrice this year.
Gold Trade Technically Speaking:
The $1,700 level, though mild, is still quite a key support level for Gold Prices. India Gold Demand should come back to the market because of the Diwali festive buying. Gold has a strong support around its 200-day moving average of $1657 to $1666. Silver Futures prices can decline to a strong support range of $30.25 to $29.98, which should ideally be used for longer term buying.
Gold Poised for a rise in November:
The festive season in India will peak in November with Dhanteras & Diwali considered as auspicious for Gold Bullion & jewelry buying or gifting. Weddings also take place during this period, and Gold jewelry is an essential part of the gifting and this may act as a backstop against steeper Gold Price dips. Gold Demand is expected to rise in Q4 2012 due to weaker prices based on the stronger INR against the US Dollar and stronger jewelry and investment purchases, according to the All India Gems & Jewelry Trade Federation. Post the US Presidential Elections in November & based on the open ended dynamics of the latest quantitative easing program- the QE3, we see the possibility for Gold Prices reaching & also surpassing the 2011 high of $1925, once the psychological range of $1800 to $1855 is breached. Spain also may soon make a formal request for a Bailout which may add to the Global stimulus, triggering Gold Prices to spike upside.
Silver Holds more Promise on Chinese Buying:
A Chinese survey of purchasing managers pointed to a modest recovery in October. Refined Copper imports increased by 17% for the month and 7% year-on-year as a combination of improved sentiment and a pickup in financing activity drove increased buying. There was a shocking increase in refined Zinc imports, to the highest level seen since May 2009 at 73,000 tons. Silver demand in China, the world’s second-largest user, may jump as much as 10% next year to a record as investors look to preserve wealth & consumption may climb to as much as 7,700 metric tons. About 33% of the country’s demand comes from jewelry and coins, with the rest from industrial use in photography, solar and electrical appliances. A recovery in the solar industry may add to Silver Demand. The government is targeting 21 Giga-watts of solar-power installations by 2015 after installing 2.6 Giga-watts in 2011, according to Bloomberg New Energy Finance. Chinese investors are buying more silver as the second- largest economy slowed for a seventh quarter. Chinese investors want hard assets such as silver, especially when it’s cheaper than gold and requires less funding. Many producers and investors have hoarded the precious metal in the form of ingots or un-wrought Silver. Silver rose 53% in the Federal Reserve’s first round of quantitative easing, or QE, from December 2008 through March 2010, twice as much as gold, and 24% during the second phase ending in June 2011, three times as much.
China Buying Up Australian Gold:
Gold has jumped past coal as Australia’s 2nd most beneficial physical export to China, with revenue up a whopping 900% for your first eight months of the year, bringing in $4.1 billion. Chinese purchasers are hoarding Gold Bullion amid a slowing economic climate, property-buying restrictions and uncertain monetary markets as its central financial institution raises its holdings. The unparalleled jump in gold revenue, together with ongoing acceleration of export revenues for other commodities led by coal, up 80% to $4 billion, caused total exports to China to increase by 10.7% for the 12 months to August, based on Australian Bureau of Statistics figures.