China & India's Gold vs Silver Imports Diverge As Analysts Warn On QE Taper

The PRICE of gold held just shy of last week's 2-month closing high in London trade on Friday, retreating $10 from an overnight high of $1380 per ounce as world stock markets also held flat.

Silver prices were similarly unchanged for the day and the week, trading around $23.15.

Both the Euro and British Pound reversed an early rally following stronger-than-expected GDP data.

"The bounce [in gold] may be coming to an end," said Natixis analyst Nic Brown to Reuters Insider TV today, pointing to the possibility of QE tapering by the US Federal Reserve next month.

"Higher US interest rates would raise the opportunity cost of owning" gold bullion.

"We still don't think," adds brokerage INTL FCStone," that investors have fully discounted September as being a potential start date [for QE tapering].

"Various commodity complexes, including gold, could run into more selling pressure next month as this realization sets in."

"Rising US Treasury yields," agrees a note from bullion market-maker HSBC, "are historically negative for gold and the potential for further weakness to US Treasuries may weigh, in our view.

"However, sideways trading is likely to persist for the gold market in the near term."

On the currency market, the Indian Rupee meantime ticked higher from yesterday's new all-time lows below 64 per Dollar.

The world's #1 gold consuming nation "should target structural impediments in the economy," says an op-ed at Bloomberg, "rather than frantically [trying and failing at] shoring up the currency."

After Deutsche Bank warned this week that the Rupee could fall to 70 per Dollar, analysts at Barclays today targeted a 12-month rally to 61 instead.

"Sideways trading in silver and gold," however, "point to near-term bullish exhaustion," the bank's technical analysts said separately.

"Watch for a pullback before an attempt at resistance," advises Barclays – now pegged at $1400 and then $1440 per ounce in gold bullion.

India's aggressive anti-gold measures, plus the traditional 'close season' of Chaturmas, have seen gold imports fall to zero so far this month.

In contrast, India's silver imports have soared in 2013 so far, rising 285% from the same period last year.

In world #2 gold consumer China, "Once the summer is over, we will see consistent [bullion] buying from September through the end of the year," reckons Peter Fung at Wing Fung dealers in Hong Kong.

Physical gold deliveries through China's Shanghai Gold Exchange already total more than 1,100 tonnes this year, overtaking full-year 2012. End-user demand rose 54% in Jan-July. China's silver imports, in contrast, have dropped by 40% and more.

"Indian imports are robust, where silver demand seems to be benefiting from government policies aimed at constraining gold demand," the Wall Street Journalquotes HSBC analyst James Steel.

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich or Singapore for just 0.5% commission.

(c) BullionVault 2013

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