Overnight Rally Lost in Gold, Vietnam Announces Bargain-Hunting Plan

AN OVERNIGHT RALLY in gold evaporated in London trade Tuesday, pulling the metal back to last week's closing level of $1243 per ounce.

"Gold's rally over the past 24 hours," said a note from bullion and investment bank Standard Bank earlier, "we ascribe to small-scale short-covering" by bearish traders closing their positions.

"We still expect selling into rallies to be the main strategy."

Last week's 4-month lows, says German refining group Heraeus, "led to a strong increase in demand" for investment bars.

"Private investors appear to have considered gold below $1250 a good buy-opportunity and reacted consequently."

Overnight Tuesday, "Purchases of physical gold in Asia," says the commodities team at Germany's Commerzbank, "China in particular, may well also have helped prices recover.

"Demand for gold is likewise high in India, though only little gold is being imported due to the restrictions imposed by the country’s government and central bank."

"Evidences of renewed demand," agrees a separate note from a London trading desk, "is emerging from [emerging-market] countries, Turkey and India mostly.

"[But] it is clearly not enough to counter the cyclical bear momemtum in gold that is currently building around the Fed, the taper and debt-ceiling."

The State Bank of Vietnam, "foresee[ing] a downward trend in the price in the next six months or one year," is planning to buy gold for its foreign currency reserves, according to Vietnam.Net.

“It is still not clear about the timing, but we have got ready," says director of the Foreign Exchange Department, Nguyen Quang Huy, at the central bank – currently not holding any sizeable gold reserves according to IMF data, and unlikely to try buying gold directly from private citizens rather than dealers, according to local analysts.

China's top jewelry retailer, Chow Tai Fook, meantime reported better-than-forecast 6-month profits today, nearly doubling net income from March-Sept. 2012.

Shares in the world's largest jewelry stock by market cap have slipped 1.1% so far in 2013, the newswire notes, compared with a 4.5% gain in Hong Kong's broader Hang Seng index and a 26% drop in bullion prices.

Adrian Ash

(c) BullionVault 2013

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