Thinning Gold Volume and Slowing Emerging World Growth amidst Uncertainty of the Fed’s Tapering
The U.S. Comex gold futures fell for six consecutive days and ended at
$1,282.60 on Tuesday. During Asia Wednesday morning, the gold futures
fell a further 0.40 percent. The prices have already dropped over two
percent this week while they went up 7.25 percent in July, the best
month after January 2012. After rising 0.31 percent last week, the
Dollar Index dropped 0.37 percent in the past two days. Both the
S&P 500 Index and the Euro Stoxx 50 Index declined 0.72 percent this
week.
Developing World Growth Slows while Developed World Data Improve
The thinning liquidity during the summer months and the earnings
disappointment from HSBC, the largest European bank, have contributed to
weakness in the stock and gold markets this week. HSBC pointed to
slowing growth in the developing world especially in Asia and Latin
America while the Fed is preparing to taper its QE bond purchases. The
recent U.S. economic data have been mixed. The non-farm payrolls in
July added only 162,000 compared to 188,000 in June. The PCE inflation
index rose 1.3 percent in June, well below the Fed’s two percent
threshold. The July ISM services index jumped unexpectedly to 56
compared to 52.2 in June. Improving economic data has led the Chicago
Fed President Evans, one of the biggest supporters of monetary stimulus,
to suggest that tapering in September cannot be ruled out. Outside of
the U.S., the June German order expanded 3.8 percent, the highest
monthly change in eight months. The U.K. industrial production surged
1.90 percent in June compared to the expected 0.7 percent.
Investors Turn Negative while Physical Demand Eases
The gold-backed ETP holdings stabilized at the end of July, but the
decline has resumed since month-end. The holdings have dropped about
675 tons since the peak of 2,632 tons reached on 20 December last year.
According to the CFTC, the net combined position in gold by managed
money dropped for the first time in a month during the week ending 30
July as the number of shorts contracts rose and the number of the long
contracts declined. In India, gold imports have ground to a halt
recently due to the uncertainty over the government’s curb on gold
imports. According to Barclays, the jump in local bar premiums to
$45/oz was driven more by the gold shortage rather than a surge in
demand. The gold volume traded in Shanghai continues to ease while the
bar premiums in Hong Kong, Singapore, and Tokyo have all fallen. The
net gold imports from Hong Kong into China have dropped from 106 metric
tons in May to 101 metric tons in June as the price outlook and the Fed
policy remain uncertain.
This story is provided by Sharps Pixley, for more information and content please visit: www.SharpsPixley.com
07 Aug 2013 | Categories: Gold
