Flat, cautious action in gold after surge as Asian premiums fall

December 11, 2013 09:19 AM

Asian and London dealing was quiet in gold Wednesday morning, with prices holding $10 per below yesterday's sudden rise to three-week highs above $1,267.

Silver also slipped but held onto more of Tuesday's 3.2% gain to $20.45 per ounce.

Asian stock markets fell more than 1% meantime, but European shares ticked higher with commodities as major government bonds held flat.

After "gold prices soared on Tuesday," said one brokers' note overnight, "we [saw] gold trading relatively flat."

"We suspect that given the better-looking chart patterns," says INTL FCStone, noting yesterday's 2% surge, "the current rally in gold will likely continue until $1290."

Tuesday's volumes in U.S. Comex futures were double the seven-week low hit Monday, one of the five lowest daily turnovers of 2013 according to Reuters' data.

But rising only to 154,000 lots, Comex futures trading still lagged the recent 30-day average of 182,000 gold contracts.

Junior gold mining stocks meantime had their best day since late October, with those making up the Market Vectors Junior Gold Miners ETF (GDXJ) rising more than 4%.

That only took the junior miner stocks to one-week highs however, some 61% down from the start of the year.

"Looking forward," says ANZ Bank in Australia, "prices may find it hard to maintain yesterday's momentum with Asian demand likely to taper off tomorrow."

"Trading is bound to be increasingly cautious," agrees a note from Swiss bank and London market-maker UBS, "with investors becoming more and more defensive" ahead of the Christmas shutdown.

"Given diminishing liquidity conditions heading into year-end, choppy price action should remain a feature for the remainder of 2013."

The volume of trading on China's officially-approved Shanghai Gold Exchange rose today from Tuesday, but lagged Monday's two-week high by value.

Although prices rose, Shanghai's premium to London quotes fell further, edging below $6 per ounce as the Yuan rose to fresh record highs against the U.S. Dollar.

Gold premiums in India meantime fell back to $120 per ounce according to local dealers, after there was "some delivery" from futures market the Multi Commodity Exchange.

"That has put pressure on premiums," Reuters quotes Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation.

India's imports of gold and silver bullion sank over 80% by value last month compared to November 2012, dropping to barely $1.0 billion as the government's anti-gold import rules continued to bite.

About the Author

Adrian Ash runs the research desk at BullionVault.