The Gold-ETP Investors and the Asian Consumers View Gold Differently
The U.S. Comex gold futures have dropped 1.25 percent to $1,316 on
Tuesday after rising 1.85 percent last week. After a jump of 4.73
percent last Thursday, the gold futures retreated almost 2.70 percent on
Friday. After closing at an all-time high last Wednesday at 1,725.52,
the S&P 500 Index has dropped 1.63 percent by Tuesday this week.
The Euro Stoxx 50 Index rose 2.10 percent last week and dropped 0.15
percent this week. Since the FOMC meeting last Wednesday, the Dollar
Index has risen for four consecutive days by a total of 0.41 percent.
The clear beneficiary of the Fed’s delayed tapering has been the U.S.
10-year Treasury bond yield, which has declined 20bp to 2.6552 percent
since the start of the FOMC meeting.
Improving External Environments
The September China “flash” PMI jumped to a six-month high at 51.2
compared to an expectation of 50.9. The growth rebound has been helped
by better exports. The improving external environment is confirmed by
the E17 September PMI, which rose faster than expected to 52.1. The
index has been above 50 (expansion) three months in a row. The EU is
China’s largest trading partner. With Germany’s Chancellor Merkel
winning a third term, a strengthening Euro, and Greece clawing back from
defaults, the E17 growth outlook is getting better. However, the U.S.
September flash PMI was at 52.8, lower than the 54 expected. The U.S.
September Consumer Confidence Index has also declined for four
consecutive months. The gold price pendulum swings as a couple of the
Fed governors said that a tapering by October or the end of the year
could not be ruled out while the U.S. budget headline risks have been
increasing and the Dollar Index has stalled.
Investors’ Demand
According to the CFTC, the combined short contracts of the gold
speculators jumped almost 17 percent while the combined long contracts
declined five percent right before the FOMC meeting. The gold-backed
ETP holdings rose about three metric tons on Tuesday, the first increase
after 11 days of decline. Year-to-date, the ETP holdings have dropped
about 26 percent to 1,935 metric tons. However, research has shown that
in the first seven months of this year, the Chinese consumers have
taken up more than twice the amount of the outflow from the SPDR gold
ETF. According to the World Gold Council, the Q2 jewellery demand has
climbed to 576 tonnes, with both China and India demand jumping by over
50 percent year-on-year. The Q2 bars and coins demand jumped 78 percent
from a year ago, with the Chinese demand surging 157% and that of India
jumping 116 percent. Thailand, the third largest Asian consumers after
China and India, has seen gold demand jumping 58 percent in Q2 as well.
The “battle” between the gold ETP sellers and the Asian consumers
continues to be an important one to watch.
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25 Sep 2013 | Categories: Gold
