Hunger for gold continues

Asia continues to be key buyer for gold

The U.S. Comex gold futures surged 4.76 % to $1,462.0 on Thursday, about 6.6 % below the closing level of 11 April before the rout occurred. During Asian Friday morning, gold futures reached as high as $1,484.80. Gold prices have recovered roughly half of what they lost. The Dollar Index barely budged this week and ended at 82.744 on Thursday. The S&P 500 index, the Euro Stoxx 50 index and the CRB Commodity Index rebounded 1.92%, 5.02% and 1.39% respectively this week.

Lining up to Buy Gold After gold has fallen into a bear market on April 12, physical demand has soared. According to Bloomberg, the U.S. Mint sold 196,500 ounces of gold coins this month through April 24, more than three times the volume in March. Demand for gold is unabated at both the U.S. Mint and the U.K.'s Royal Mint.

The physical gold sold to India exceeded its highest record by 20%, reported by Standard Chartered. The gold premiums in Hong Kong and Singapore reached $3 an ounce, an 18-month high. The World Gold Council in the Far East remarked that the Asian's hunger for the cheaper gold has exceeded the expectation of global investors. In the past 10 days in the Shanghai Gold Exchange, the daily volume of the benchmark contract was more than four times of the 2012's daily average. Before the latest rout in gold, Russia's central bank boosted gold by 4.7 metric tons in March while Kazakhstan bought 1.2 tons. The emerging countries' central banks will likely take advantage of the gold price plunge to continue to add to gold, which is seen as an alternative currency and an inflation hedge.

Bloomberg reported that hedge fund managers turned into buyers and net added gold for two consecutive weeks. As the global economic data have turned softer recently, central banks such as the ECB are likely to continue to ease rather than terminate the ease prematurely. 

What to Monitor Next Week Lots of events to watch next week including the April Germany unemployment change on  April 29, the U.S. April consumer confidence index on  April 30, the U.S. FOMC meeting decision and the April U.S. ISM manufacturing index on May 1, the ECB interest rate decision on May 2 and the U.S. April non-farm payrolls on May 2.

About the Author
Austin Kiddle

Austin Kiddle is a director of the London-based gold broker Sharps Pixley Ltd.

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