New Gold Markets in Asia
The U.S. Comex gold futures have jumped 3.34% last week and
have risen 0.36% this week to $1,321.30 on Tuesday. The gold prices
reached $1,326.60 intraday on Tuesday, approaching the recent high on 14
April although the prices are trading lower at around $1,313 during
Asia’s Wednesday morning. The S&P 500 Index declined 0.65% this
week, and the Euro Stoxx 50 Index fell 0.49% after rising last week.
The oil futures have dropped 1.15% in the past two days after rising
about 4.5% in the past two weeks. The Dollar Index is pretty much
unchanged from last Friday. The U.S. ten-year government bond yield
declined about 3bp this week to 2.578% on Tuesday.
Geopolitical Risks and the U.S. Economy
Almost all the recent economic data point towards a stronger rebound in
the U.S. economy. The May existing home sales jumped 4.9% in May
compared with 1.3% in April. The June consumer confidence index surged
to 85.2 versus an expected 83.5. New home sales in May surged 18.6%
versus 1.4% expected. However, the Case-Shiller housing price rose
10.82% year-on-year, the slowest yearly increase since March last year.
Despite the better economic data from the U.S., geopolitical tensions
in Iraq have kept gold prices higher this week. The U.S. Defense
Department believes that the Sunni militants in Iraq are gaining ground
and now pose a real threat to the Shiite-led Iraqi government.
Investor Positioning and New Gold Markets
The managed gold net combined positions have surged almost 30% during
the week of 17 June to 66,572 contracts, led by a close to 20% decline
in the shorts contracts. However, as Barclays pointed out, the
gold-backed ETP holdings have dropped in both April and May and have
continued to decline in June. Year-to-date, the holdings have declined
56.7 tonnes. While the redemption is much lower this year than last
year, a big rebound is not likely according to Barclays, keeping the lid
on gold prices. On the other hand, new gold contracts will begin to
trade in both Singapore and China as gold consumption continues to shift
to Asia. With Asia buying over 60% of the world’s gold jewellery,
bars, and coins in 2013, a transparent reference price and a more active
physical market in the East make sense.
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25 Jun 2014 | Categories: Gold
