Shanghai Gold Volume & Premiums Rise, But Western Sentiment Weighs Heavier On Thanksgiving

WHOLESALE gold rose in price in London trade Thursday, recovering last week's finish of $1243 per ounce to stand some 0.6% above an overnight low.

Asian and European stock markets also rose following Wall Street's new record-high finish before today's Thanksgiving holiday.

Commodities slipped further, however, while the British Pound rose to new 2013 highs after the Bank of England announced an early end to "funding for lending" for UK mortgage providers.

Gold in Sterling dipped to fresh 3-year lows beneath £758.50 per ounce.

"The yellow metal retraced [Wednesday's early gains] in the face of supportive factors," says a note from refining and finance group MKS, "including the weaker US Dollar.

"That really portrays general sentiment for investors [towards buying gold] at the moment."

Wednesday saw gold "[find] only short-term support" from China's latest gold import data, says Germany's Commerzbank in a note.

Now the world's No.1 gold consumer market, Chinese gold buyers may get 1500 or perhaps 1800 tonnes of supply in 2013, according to a new analysis today.

Shanghai premiums on gold rose Thursday to $9 per ounce over London prices from $7 at the start of this week.

"Physical demand for gold is still improving," says Standard Bank's commodity team meantime. But despite much heavier trading on the Shanghai Gold Exchange today, volumes still "don't seem big enough" to support prices, it adds.

Only if demand returns to June/July levels, Standard Bank concludes, "it may start forcing short-covering in the futures market," with bets against higher prices closed at a loss.

"A large short position," agrees Australia's ANZ Bank in a note, "remains among the speculative community.

"Overnight price action looks like long-side profit-taking from short-term players."

Gold futures trading was sharply higher ahead of the Thanksgiving shutdown on Wednesday, with Reuters reporting volume 40% above the last month's daily average.

"Turnover [was] lifted in part by the December-February rollover," says INTL FCStone's Edward Meir, pointing to traders wanting to maintain their positions from one quarterly contract to the next.

Nearer-term, "Precious metals markets are likely to be subdued due to the Thanksgiving holiday," Bloomberg quotes Joni Teves at Swiss investment and bullion bank UBS.

"The next key event risk to watch out for is the [US] nonfarm payrolls print next Friday...the last employment report before the final FOMC meeting for the year."

Looking at the odds of higher US interest rates ahead, "Why do you need something which yields nothing and is giving you a negative return?" the newswire also quotes John Stephenson at the $2.7 billion First Asset Investment Management Inc. in Toronto.

"When we do get tapering [of the US Fed's quantitative easing] the underlying message is the economy has improved well enough that we don't need all this stimulus."

Consumers in India meantime, the former world No.1, today saw gold quotes hold at $130 per ounce above the world's benchmark of London settlement, says Reuters.

"Demand has picked up a little bit," the newswire quotes Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation.

But thanks to the Indian governments ongoing import restrictions, aimed at reducing the pressure which gold demand puts on the country's trade deficit, "Supplies are tight so premiums have jumped," Bamalwa says.

Adrian Ash

(c) BullionVault 2013

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