Gold Prices Buffered by Retail Buyers Despite Traders’ Bearishness
The U.S. Comex gold futures fell 1.76 percent on Wednesday and rebounded
1.48 percent on Thursday to end at $1,467.60, a decline of 12.4 percent
year-to-date. The Dollar Index surged 0.91 percent on Thursday to
82.224 after falling 1.23 percent in the beginning of the week. The
Euro/Dollar dropped 0.87 percent on Thursday after the ECB cut rates.
The S&P 500 index ended up unchanged in the past two days while the
Euro Stoxx 50 index rose 0.25 percent.
Chinese Housewives Taking On Wall Street Short-Sellers?
According to a local Hong Kong newspaper, the largest fall in gold
prices in 30 years prompted the Mainland Chinese tourists to buy about
60 tonnes of gold in Hong Kong during the three-day Labour Day holiday.
After this surge of buying, physical demand will inevitably slow down
although it is clear that gold is highly regarded as precious gifts for
the younger generations and a store of value in Asia, providing support
to gold prices and prompting the short-sellers to cover. On the other
hand, the CFTC reported that speculators have reduced their net-long
gold positions by 25 percent in the latest reporting week while they
maintained the second-largest short positions in gold since the
beginning of the data in 2006.
Central Bank Actions - Different Gold Reactions
The U.S. Fed recently maintained the pace of bond purchases at $85
billion per month. However, the Fed would be ready to increase or
decrease the pace of bond purchases depending on the economic data,
changing the market expectation that the Fed can only reduce its pace of
bond purchases going forward. The slowdown in the March payroll data, a
weaker inflation, the tightening of fiscal policy as well as a lower
U.S. ISM manufacturing data have prompted the policy maker to remain
flexible in its monetary policy. The gold futures nevertheless fell
1.76 percent on Wednesday as the market still expects the U.S. to grow
faster in the next four quarters, leading investors to buy more equities
than gold. The gold-backed ETP holdings fell again by 0.9 percent this
week as of Wednesday and dropped 369.3 tons this year. On Thursday,
gold demand and prices increased after the ECB cut the refinancing rate
by 25bp and raised the possibilities of a negative deposit rate for the
banks and further stimulus down the road.
What to Watch
The market will zero in on this Friday’s April non-farm payroll data and
the unemployment rate in the U.S. Next week, we will watch for the
Chinese April trade numbers and Germany’s March industrial production
data on 7 May, the Bank of England’s monetary policy announcement and
the Chinese April inflation number on 9 May as well as the Fed’s speech
on 10 May.
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03 May 2013 | Categories: Gold
