Physical gold buying seen by Standard Bank as unusually high

Physical gold demand has been unusually strong for this time of year, with “good buying” from Southeast Asia, according to Standard Bank Plc.

The Standard Bank Gold Physical Flow Index signaled demand climbed to the highest since November, the bank wrote in an e- mailed report yesterday. Purchases typically pick up toward the end of the year amid religious festivals and the wedding season in India. Gold reached a four-week high of $1,696.28 an ounce in London on Jan. 17.

India, the biggest buyer in 2011, raised taxes on gold imports two days ago to reduce a record current-account deficit and to moderate demand. Standard Chartered Plc said earlier this month that its gold shipments to India soared on mounting concern the duty would be raised. While gold has gained for the past 12 years, the best run in at least nine decades, prices dropped as much as 9.5% from October through Jan. 4.

“It was strong in November and that’s normally a usual seasonal pattern that we see coming through from Indian post- monsoon, wedding season buying,” Marc Ground, a commodity strategist at Standard Bank in Johannesburg, said by phone yesterday. “The fact that January is as high as we see in November usually, that’s unusual. There was probably some Indian buying ahead of this tariff increase.”

Central Banks

Bullion for immediate delivery rose 1% this year to $1,692.74, after advancing 7.1% last year. It rebounded above the 200-day moving average, currently at about $1,663, earlier this month. Investors own 2,618.8 metric tons through exchange-traded products, a hoard valued at about $142.5 billion and bigger than the official reserves of all but two nations, data compiled by Bloomberg show.

Gold gained last year as central banks from the U.S. to China pledged more action to bolster economies. The Bank of Japan said yesterday it will buy about 13 trillion yen ($147 billion) in assets per month from January 2014 and set a 2 percent inflation target.

“Gold should find support from the BOJ stimulus as the liquidity created by the BOJ finds its way into the broader global economy,” Standard Bank analyst Walter de Wet wrote in the report. “We still expect $1,700 to provide resistance and $1,660 to provide support. If gold manages to break through $1,700, we would target $1,720.”

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