The drop in prices has wiped $66.8 billion from the value of exchange-traded products this year. Hedge-fund manager John Paulson’s PFR Gold Fund fell 16% in September, according to a report to investors obtained by Bloomberg News on Oct. 21. Paulson, who in the second quarter sold 53% of his stake in the SPDR Gold Trust, the largest gold ETP, is still the biggest holder. His company asserted in a report that the risk of high inflation remains in the future, triggered by the Fed’s asset purchases.
Expectations of long-term inflation, coupled with risks of growth slipping during the fourth quarter because of the 16-day government shutdown last month, may push prices higher, according to Jeff Sica of Sica Wealth Management in Morristown, New Jersey.
“The economy has not completely recovered, so we may see some safe-haven buying,” said Sica, who helps oversee more than $1 billion. “Also, the long-term buyers will be picking up gold as the easy money policy adopted globally will push inflation higher.”
The environment for commodities has “deteriorated again” after improvement in the third quarter, as supply disruptions dissipate, Chinese economic data softens and near-month premiums ease in markets including oil, Barclay’s analysts led by Suki Cooper said in a report. The “subdued tone” will probably persist into year-end, they said.
Credit Suisse, in a note on Nov. 4 said, the rebound in global industrial production since the fourth quarter of 2011 is peaking.
The European Central Bank unexpectedly reduced its main refinance rate to a record on Nov. 7.
Sixteen analysts surveyed by Bloomberg expected gold prices to advance this week, with 11 bearish and five neutral.
Gold purchases in India, the biggest consumer, probably will fall in this year’s festival season, and sales of coins and bars may decline to as little as 25% of the year-earlier total, the Gems & Jewellery Trade Federation said on Oct. 30. Consumption in India, which imports almost all the bullion it uses, accounted for 20% of global demand in 2012, the World Gold Council estimates.
The U.S. Mint sold 764,500 ounces of American Eagle coins as of Nov. 8, compared with 753,000 ounces in all of 2012, according to data on the mint’s website. The mint sold 48,500 ounces in October, 77% less than in April, when they surged to a 40-month high.
Shipments to China from Hong Kong fell for a second month through September after the premium to take immediate delivery declined, indicating waning physical demand in the nation poised to become the largest consumer.
Net imports, after deducting flows from China into Hong Kong, were 109.4 metric tons in September, from 110.2 tons a month earlier, according to Bloomberg calculations based on data e-mailed from the Hong Kong Census and Statistics Department. While the amount has more than doubled to 826 tons in the first nine months of the year, Credit Suisse said in a note on Nov. 7 that demand from China has peaked for the year.