Most Crucial Triggers for Gold Prices to Rise
|November 14, 2012 |||Comments Off ||
Gold Prices hovered around flat to negative during European trading hours. Gold Prices slipped in thin trade after the Euro dropped to a two-month low against the U.S. dollar and as uncertainty about another tranche of financial aid for Greece kept investors cautious. The US Dollar index is seen slightly higher today morning near a two-month high. A stronger dollar makes commodities priced in the U.S. currency, weaker. Overall industrial production in the EU countries fell 2.5% in September. There will be key economic data coming out of the EU on Thursday, as GDP – gross domestic product data gets released by the major EU countries. Reuters reported that, participants in an annual gathering of the LBMA – London Bullion Metal Association on Tuesday expected Gold Prices to reach $1,843 an ounce by the time of the next conference in September 2013, and forecast silver to reach $38.40. The 700-strong crowd cut its Gold Prices forecast from $1,914 an ounce on Monday, after listening to the comments of a parade of speakers, including miners, refineries, jewelers and bankers over the two-day conference on the precious metals market. Almost half of the participants expect the US Federal Reserve to launch another round of quantitative easing, and 56% of them see China’s economy growing between 7 and 8% in 2013. 36% of conference participants expect Shanghai to become Asia’s precious metals trading hub in the next year, topping Hong Kong and Singapore, which are vying for the position. Singapore recently scrapped a sales tax of 7% on investment-grade gold, and has attracted a number of Gold industry players to set up shop in the city-state. Switzerland-based Metalor Technologies SA plans to build a refinery in Singapore with an annual capacity of 100 tonnes, and South Africa-based Rand Refinery is building an assaying and sampling facility there. Gold Prices will probably rally to a record above $2,000 an ounce next year as central banks ramp up stimulus to sustain the recovery, according to Raymond Key, London-based global head of metals trading at Deutsche Bank AG, reported Bloomberg.
Indian Gold Demand Back in 2013:
India’s Gold Demand is expected to recover next year after a difficult 2012 during which sales dropped due to higher import taxes and a weak rupee. The US Dollar is expected to weaken against most currencies during 2013. This will help the Indian Rupee strengthen against the U.S. dollar next year, which would make Gold Prices more attractive in the Indian Markets. The weakening Dollar will boost Gold Prices in the Dollar terms but weaken in Rupee terms, thus stalling a further spike in Gold Prices in Indian markets. An increase in the number of astrologically auspicious days for weddings in 2013 – a key factor driving gold jewelry purchases in the world’s top gold consumer – will help boost demand by 25% on the year. Last week, the head of the Bombay Bullion Association, a leading trade body, said he did not expect the government to further increase import duties for gold in the next budget, likely in February, reported Reuters. India’s government earlier this year raised duties on Gold imports to curb imports to $38 billion in the current fiscal year from $58 billion in 2011/12 as it seeks to rein in its current account deficit and encourage money tied up in gold back into the economy.
Around 70,440 traders participated in Gold Trading executed on the NSEL on Dhanteras, a day before Diwali which is considered the most auspicious day for buying Gold Bullion or jewelry. Gold trading volumes this auspicious day jumped 110% YoY.
China could provide the necessary boost to Gold Prices:
According to International Financial Statistics said China’s Gold Reserves have climbed to 1,054 tons after importing 582 tons of Gold in the first nine months of this year. China needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks, Gao Wei, an official from the Department of International Economic Affairs of Ministry of Foreign Affairs, writes in a commentary in the China Securities Journal today which was reported on by Bloomberg. China’s gold reserve is “too small”, Gao said and while Gold Prices are currently near record highs, China can build its reserves by buying low and selling high amid the short-term volatility, Gao wrote. The People’s Bank of China is accumulating significant volumes of gold under the radar of many less informed market participants which is bullish. The Chinese government is secretive about its gold diversification and buying and does not disclose gold purchases to the IMF. Therefore, there has been no official update to their holdings since the barely reported upon announcement four years ago that Chinese gold reserves had risen from just over 500 tonnes to over 1,000 tonnes. In 2009, State Council adviser Ji said that a team of experts from Shanghai and Beijing had set up a task force to consider expanding China’s gold reserves. Ji was quoted as saying “we suggested that China’s gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years”. China is likely to have been quietly accumulating another 1,000 or 2,000 tonnes in recent years and astute market participants realize that the announcement by China of a dramatic increase in gold reserves could lead to sharp price gains. The very low level of the People’s Bank of China’s Gold Reserves vis-à-vis their massive foreign exchange exposure and compared to western counterparts gold reserves will continue to be a source of significant gold demand in the coming months which will support gold and may contribute to higher prices in 2013. As Xi Jingping set to become China’s new leader, most analysts said China will definitely boost it’s gold reserves under the new leadership and might slowdown processes to globalize yuan. They said Xi Jingping clearly knows the situation that the Chinese currency cannot replace the US dollar as global currency even as the dollar remained on the receiving end for most of the last decade. Xi Jingping will definitely boost gold and bargain with it for China.
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