Gold Prices Rise as US Prepares to Attack Syria

Gold prices rise as US prepares to attack Syria (Reuters).

Gold prices ended higher in August as the precious metal remained a safe investment hedge amid uncertainty surrounding a possible US-led military strike on war-torn Syria.

Spot gold hovered around $1,394 (£900, €1,055) an ounce at 3:20 pm EDT on 30 August. Gold prices ended 0.1% lower at the end of the week but for the month as a whole gained about 5.5%.

US gold futures for December delivery hovered at $1,396 an ounce, preliminary Reuters data showed.

Earlier in the week, gold prices rallied sharply as the US and its allies prepared to strike the strongholds of Syrian President Bashar al-Assad.

Prices dropped on Thursday and on Friday on news that the planned military action may be delayed as the US and its allies await the UN weapons inspectors' report on alleged use of chemical weapons in Syria.

Analysts warned that gold prices could drop in the near-time if US strikes in Syria do not affect crude oil supplies from the Middle East, which produces more than one-third of the world's oil.

In addition, the prospect of the US Federal Reserve tapering its $85bn bond-buying stimulus as early as September could adversely impact gold prices.

"By early next week, Syrian strike or no strike, we could see investor focus start to shift towards the upcoming Fed meeting where we suspect that the central bank will go through with a limited reduction in its bond buying program," Edward Meir, analyst at INTL FC Stone, wrote in a note.

"If our assessment is correct, this should generate a short-lived negative response in most commodity markets," said Meir. The Fed's FOMC is due to meet on 17 September.

India Crisis

Meanwhile, in India, the country's central bank proposes to ask commercial banks to buy gold from the public and divert it to the refining industry, reportedReuters.

The move could help trim gold imports into India, in turn reducing the country's huge current account deficit (CAD), the broadest measure of trade, and help arrest the decline in the value of the rupee.The currency has lost about 20% of its value since May.

India's current account deficit, at 4.9% of the GDP, is the third highest in the world, according to a Morgan Stanley report. At $98bn (£63bn €74bn) it trails only the UK ($106bn) and the US ($473bn).

India, the leading buyer of the precious metal, has imposed restrictions on gold imports and hiked the duty on gold three times this year to narrow its widening trade deficit.

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http://www.ibtimes.co.uk/articles/502738/20130831/gold-prices-jewellery-fed-qe-taper-syria.htm

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Gold Prices Could Skyrocket To $3,500, In Wild Unorthodox Estimate From Citi Analyst

By Nat Rudarakanchana

on August 29 2013 7:54 AM

Gold prices could climb to $3,500 per ounce in the next few years, well beyond double the current market price of $1,411, according to an unorthodox estimate by Citigroup Inc (NYSE:C) analyst Tom Fitzpatrick.

In an interview with the King World News blog, Fitzpatrick argues on technical and historical grounds that the long-term trend for gold is strongly bullish.

“We believe we are back into that track where gold is the hard currency of choice, and we expect for this trend to accelerate going forward,” Fitzpatrick told the blog. “We still believe that in the next couple of years we will be looking at a gold price of around $3,500.”

He also predicts that silver could reach above $100 per ounce, more than tripling its current price around $23.

Gold has hit a minor peak recently, reaching a three-month high and surging past the $1,400 threshold, chiefly thanks to investors wary of a risky Western military intervention in Syria.

Fitzpatrick's prediction is not the standard view among Citi analysts, however, nor is it the official in-house estimate. According to Bloomberg, Citi metals analyst David Wilson has forecasts for gold to reach $1,150 by the end of 2013, and $1,250 by 2015.

But remarkably optimistic projections by some gold analysts are not new or isolated.

Noted investor Dennis Gartman, a longtime bear on gold, has told CNBC several times in recent days that gold is a wise investment given the Syrian crisis, reiterating his view on Wednesday. 

Back in early June, in a volatile gold market, gold analyst John Hathaway with the Tocqueville Gold Fund told King World News that gold prices could suddenly increase by more than $1,000 per ounce by the end of 2013.

Commodities analyst Julien Garran of Swiss bank UBS AG (VTX:UBSN) also contrasts his view with the UBS house view, according to a research note earlier this month. Garran sees a highly bullish environment for gold if the Fed abandons tapering as unsuitable shortly after it begins, as he expects. Other UBS gold analysts say gold should slide down as strong U.S. economic data continue to come in for the rest of 2013 and early 2014.

Official bank estimates vary, with Barclays PLC (LON:BARC) projecting an average of $1,393 for 2013 in its latest note from Monday.

In mid-June, before some summer stabilization and the most recent upticks, HSBC Holdings plc (LON:HSBA) posted a forecast of $1,396 for gold averaged throughout 2013.

“Given investor uncertainty surrounding the Middle East, bullion has room for further gains in the near term should energy commodities including WTI [West Texas Intermediate] crude oil continue to rally, in our view,” wrote HSBC analysts in a research note on Monday.

http://www.ibtimes.com/gold-prices-could-skyrocket-3500-wild-unorthodox-estimate-citi-analyst-1401412

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War in Syria will send gold 'much, much higher': Jim Rogers

http://www.mining.com/war-in-syria-will-send-gold-much-much-higher-jim-rogers-84709/

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Gold and oil prices surge, while world shares fall as Western intervention in Syria looms

hares across the world fell yesterday as the prospect of military intervention in Syria sent jitters through the financial markets.

While stock exchanges in the Middle East predictably tumbled as the interventionist rhetoric in London and Washington intensified, Western markets also sank heavily as the uncertainty added to pre-existing worries about macro-economic issues such as the US Federal Reserve's plans for "tapering" its $85bn-a-month quantitative easing programme.

Dubai shares had their biggest fall since the country's economic crisis in 2009, tumbling 7 per cent by the close of trading as local brokers reported Western investors fleeing.

"It's down to geopolitics.... Foreigners are apparently selling and exiting the market," al-Ramz Securities' head of research Talal Touqan told Bloomberg in Dubai.

Saudi Arabia's index fell more than 4 per cent while Kuwait and Abu Dhabi both fell 3 per cent. Iran's foreign ministry has warned a US attack on Syria could drag the whole Middle East into the conflict.

Analysts said Dubai had the most to lose from a conflict because of its economy's reliance on tourism and trade in the region, as well as its stock market's strong gains this year.

European shares fell 3 per cent, while the main indices in London and New York both retreated around 1 per cent, with the Dow Jones Industrial Avereage shedding 170 points. The Nasdaq index was even lower, falling by over 2 per cent. The prospect of a widening conflagration in the region sent the oil price sharply higher. Brent crude leapt to six-month highs, settling at $3.63 a barrel to $114.36 – its highest price in six months.

Brenda Kelly, the head of strategy at IG, said: "Unrest in the Middle East and the potential for increased volatility tend to put the risk on the upside for oil, and any prolonged disruptions to pipeline supply could send the oil price back to this year's highs of $119."

Gold, also rose sharply, as did the Japanese yen and Swiss franc. Government bonds in the US, UK and Germany attracted large amounts of safe-haven investment.

Market strategists said the Syrian situation was exacerbating the flight of investors out of emerging markets, adding to the concerns taking hold about the impact on such countries of an end to the super-low interest rates and quantitative easing in the US.

The Indian rupee fell to yet another record low with investors now worrying that the Syria-induced oil-price rise would make India's current account deficit even worse. India is almost entirely at the whim of the foreign commodities markets, importing nearly 80 per cent of its oil.

The recent attack on emerging markets by investors has particularly been focused on countries such as India, with imports significantly outweighing exports. Now trading at 66.075 to the US dollar, the rupee has fallen 17 per cent this year.

Investors in the UK have become increasingly concerned about whether to believe the pledge from the new Bank of England Governor, Mark Carney, to keep interest rates on hold until mid-2016, when he believes unemployment will have fallen from 7.8 per cent to 7 per cent.

Given the improving flow of data on the economy, markets are rapidly beginning to expect this point will come far sooner, possibly more than a year in advance of Mr Carney's forecast. The Governor gives a key speech today, at which he is expected to defend his position by focusing on the continued strains facing the UK economy, in particular its jobs market.

http://www.independent.co.uk/news/business/news/gold-and-oil-prices-surge-while-world-shares-fall-as-western-intervention-in-syria-looms-8786917.html

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Gold rises amid Syria fears, September jitters

Dario Pignatelli | Bloomberg | Getty Images

Published: Monday, 26 Aug 2013 | 4:30 PM ET

By: Patti Domm | CNBC Executive News Editor

Gold broke the key $1400 level and could continue to push higher amid concerns about military action in Syria and ahead of a number of September events that could make markets volatile.

Shimmering for two months now, gold has been helped by investors realigning their portfolios in advance of such things as the Fed's mid-September meeting; budget debates in Congress, and the German election Sept. 22.

(Read More: Enjoy your vacation! Why you're going to hate September!)

Gold made a late day move higher Monday after U.S. Secretary of State John Kerry said the U.S. believes Syria used chemical weapons on its citizens and that President Obama believes anyone using chemical weapons should be held accountable. Kerry said the U.S. was reviewing what he called a "moral obscenity" with its partners.

"What I call a small fear premium suddenly appeared," said George Gero, analyst at RBC, of the move higher on the Syria news.

Play Video

Gold briefly tops $1,400

CNBC's Courtney Reagan follows the gold trade.

The December gold futures contract rose above $1400 in late trading, after closing at $1393.60 per ounce Monday. The metal broke $1400 for the first time in 11 weeks earlier in the trading day and reached an intra-day high of $1406.90.

There are a number of factors affecting the price, and gold is moving as a safe-haven asset and on other fundamental reasons, like the perception China's economy may be improving. 

(Read more: Here's why you need to own gold this week)

Weaker economic reports, like Friday's new-home sales and Monday's durable goods, gave gold a boost on speculation the Fed may now refrain from deciding at its Sept. 18 meeting to cut back on its bond buying. That would keep yields lower and stall out the dollar's rise, a positive for gold.Besides concerns about military intervention in Syria, uncertainty about Egypt is providing support. Gold also is being helped by strong physical demand from China, as buyers in India, the world's biggest gold buyer, are sidelined by a weak rupee and higher taxes on gold imports.

"We are kind of on cruise control this week, and then when we come back next week from the U.S. Labor Day holiday, you have Congress coming back in the middle of the month. You have the jobs report. There's some heavy issues here upcoming that's going to impact the marketplace," said Jim Wyckoff, senior analyst at Kitco. 

The market is also watching a series of events in September that could give investors pause. For one, Congress will be addressing the budget and will have to vote on a resolution to keep the government funded. While analysts expect a showdown over the debt ceiling later in the year, the discussions could be contentious.

"The investor looks around and says: 'Gee, everything looks a bit dodgy and gold is holding up,'" said Gero. He said gold's selloff Monday was prompted by maneuvering around the expiration of options Tuesday.

Wyckoff is "tepidly bullish" on gold. "We'll probably drift sideways to higher until the jobs report next Friday, and that's the pivot point. It's all going to depend on the strength of the jobs report," he said. "If we see a marked weakening in jobs growth, that's going to throw a scare into those who are expecting the Fed to taper."

Gero said gold has momentum on its side. Gold historically outperforms in September. Since 1990, September has been the best month of the year for gold, rising an average 2.7 percent. The psychological $1,400 area could also be a magnet for investors.

(Read more: Ron Paul portfolio: 'Craziest' we've ever seen?)

The next target for gold, once it rises above $1,400, is $1,426, its June high. "If we get above $1,426, you're going to have pretty much smooth sailing to the $1,490 area," Wyckoff said. The May high was $1,490, and if it moves above that, the next target would be $1,517, the 200-day moving average. 

(Read more: Here's what economists say is their biggest worry)

Silver, meanwhile, was up 1.2 percent Monday to just above $24.00 an ounce, and platinum was up $2.50 to $1,544 an ounce.

"Silver is outperforming gold. Silver has more going for it," said Gero. He said silver benefits from its role as both a precious metal and industrial material. "Silver is up, platinum is up because people are looking for better automobile sales coming out of China and traders are reaching for news, and that's all that's going on."

Silver ETF holdings reached a new all-time high last week, according to ETF Securities research.

http://www.cnbc.com/id/100988809

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Gold price takes baby steps higher

By Ian Lyall

August 24 2013, 7:30am

The gold price continued its baby-steps and moved higher in the week just gone with the price of an ounce of the precious metal adding US$14 an ounce, or just over 1% in the last five trading sessions.

The technical analysts see a support level of around US$1,350 (it is currently US$1,375), with a “grouping of multiple, long-term trend lines” pointing to a target of US$1,500 an ounce, according to Michael van Dulken, head of research at Accendo Markets.

He’s ascribing the latest phase of the gold rally (the price is up almost 15% since hitting its nadir in June) to the uncertainty surrounding the ‘tapering’ of America’s fiscal stimulus programme.

Meanwhile, recent figures from the China Gold Association revealed consumption grew by 54% in the first half of the year, which may help support the revival.

However, Citigroup poured the metaphorical bucket of cold water over that particular idea in research issued on Friday.

“We remain unconvinced that this is a sustainable rally,” it said.

“Positive Chinese and Indian first-half demand remains insufficient to counter the significant outflow from physical gold exchange traded funds, while central bank gold buying stuttered in the second-quarter, in part due the dramatic April pull back.

“Whilst Asian consumers seem to prefer gold at lower prices, institutional investors, and to a lesser extent, central banks, still do not.

“With mine supply continuing to increase, the jewellery markets in Asia will have to absorb still more gold in the second half, while the issue of Fed Tapering remains crucial.”

Chinese cash isn’t just going into jewellery. According to Bloomberg it is being ploughed into the companies that produce the metal.

Takeovers and asset purchases by producers based in China and Hong Kong rose to a record US$2.24bn this year, beating last year’s record US$1.96bn, according to Bloomberg.

The data provider cited the falling the price of gold over the last two years (and the consequent crumble in value of Western companies) for this shopping spree.

Whether this will result in a number of takeovers among the juniors across here on AIM remains to be seen.

That said, there has been a revival of sorts among the gold diggers and explorers built around news flow.

SolGold (LON:SOLG) was undoubtedly the star of the week as it saw its share price more than double.

This followed environmental approval for the Cascabel project in Ecuador, which paves the way for drilling to start next month.

Finally, who said it is all over for gold miners in Argentina?

Minera IRL (LON:MIRL, TSE:IRL) has shown that it is possible to get financing for the right project – and not just that, it has found local backing for the Don Nicolas property down there in Patagonia.

Its US$80mln financing deal belies the difficult political backdrop that has put the kibosh on interest in what was one of the most exciting emerging postcodes for the precious metal.

That Minera is now little over a year from first gold (Don Nicolas is slated to produce 50,000 ounces of the yellow metal a year), appears to have injected a little life into the share price.

http://www.proactiveinvestors.co.uk/companies/market_reports/60348/gold-price-takes-baby-steps-higher--60348.html

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Gold’s rebound seems believable this time

Junko Kimura | Bloomberg | Getty Images

As investors shun risk assets such asemerging market equities and currencies, gold is quietly gaining traction, clawing its way back up to the $1,400 level.

The strength of bullion amid growing expectations for the U.S. central bank toscale back its bond buying program in September is a sign that a solid base may have formed in the yellow metal, say strategists.

"If tapering does occur in September, it will be more 'buy the rumor, sell the fact.' Certainly the entire market is expecting it already. We'll see gold prices continue to rise quite strongly over the next couple of months," said Andrew Su, CEO of Compass Global Markets.

(Read more: With Paulson's exit, is the worst over for gold?)

"The reaction to (Fed) minutes was lackluster, under most circumstances you would have gold prices to fall a lot more, and they haven't. That reflects the strong buying and heavy interest in gold particularly out of Asia," Su, who expects gold to cross $1,400 over the next week, added. Gold has risen 11.5 percent since July, erasing some of the hefty losses seen in the first six months of the year.

According to the Federal Reserve's July minutes, officials thought it would soon be time to slow the pace of the bond buying "somewhat," but some counseled patience.

Play Video

Gold is glittering again

The precious metal is up six percent since hitting a 4-year low. John Bridges, JPMorgan, joins to discuss why gold is a wealth protection device and a good thing to own if you are uncertain about the direction of the markets.

Kelly Teoh, market strategist at IG Markets who believes the upside in gold has legs, said investors are moving into the precious metal because Asian currencies are under tremendous pressure.

"If you look at all the various asset classes, the U.S. equities are at all-time highs, Asian ex-Japan equities are lagging, commodities is the only asset class that's underperformed so I see value in that," she added.

Barclays' chief technical strategist Dhiren Sarin says gold has either already formed, or is in the process, of establishing a "very strong base."

(Read more: Is sentiment toward gold shifting again?)

"We are bullish in the medium to long term. Short term, we potentially see a pullback as the U.S. dollar is catching a strong bid, which could undermine gold in the near term," he said.

Published: Thursday, 22 Aug 2013 | 11:02 PM ET

By: Ansuya Harjani | Writer, CNBC Asia

Sarin recommends buying gold on pullbacks, noting that September is seasonally the most bullish period for gold. Looking at the yellow metal's performance since the 1960s, median returns for gold are approximately 2 percent during the month, far outpacing any other month of the year, he said.

"In the coming years though, we believe gold has stronger upside potential towards the average levels of 2012, near $1,700, though this will likely evolve next year," he said.

(Read more: Demand for physical gold jumps 53% in second quarter)

David McAlvany, CEO, McAlvany Financial Group agrees the longer-term prospects for gold are bullish, pointing to possible supply constraints over the coming months.

"We're already dealing with projects that are being scuttled in Africa – because you're dealing with a cost of production which is $200-300 above the current price," he said.

"You would have to move to 2014 for that to have a real positive supply-demand benefit in terms of the price, but you may see that by the mid-year (2014)," he added.

—By CNBC's Ansuya Harjani; Follow her on Twitter 

@Ansuya_H

http://www.cnbc.com/id/100982767
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Gold Rout Seen Bottoming by Analysts as China Buys: Commodities

By Glenys Sim & Nicholas Larkin - Aug 22, 2013 8:16 AM GMT+0400

The rout in gold that wiped out $56 billion of value this year is spurring consumer demand in China and India, the biggest buyers, and leading JPMorgan Chase & Co. and Bank of America Corp. to say prices are bottoming.

Sales of jewelry, coins and bars will reach as much as 1,000 metric tons in India and China in 2013, valued at a combined $87.6 billion, the World Gold Council estimates. Prices will average $1,300 an ounce in the fourth quarter, or 4.6 percent less than now, the median of 17 analyst estimates compiled by Bloomberg shows. Bank of America is the most bullish, predicting a fourth-quarter average of $1,495, and JPMorgan anticipates rising averages in every quarter through the end of next year.

Enlarge image

Sales of jewelry, coins and bars will reach as much as 1,000 metric tons in India and China in 2013, valued at a combined $87.6 billion, the World Gold Council estimates. Photographer: Victor J. Blue/Bloomberg

While investors from John Paulson to George Soros sold after the bear market began in April as some investors lost their faith in gold as a store of value, the slump boosted sales in Asia. Australia & New Zealand Banking Group Ltd., Deutsche Bank AG and UBS AG opened vaults in the region this year and U.K. bullion exports rose eightfold, a sign to Macquarie Group Ltd. of the flow of metal from west to east. Asian buyers are being attracted by prices that are now 29 percent below the record $1,921.15 reached in September 2011.

“Whenever we have a bit of idle cash, we think of buying a few pieces,” said Wang Xiang, a 70-year-old from the eastern Chinese province of Anhui, as he bought a gold pendant for his grandson in Beijing’s Caibai Jewelry store, the nation’s largest by sales. “We don’t know how to invest otherwise and that’s the traditional way of preserving wealth.”

Worst Performer

Gold tumbled 19 percent to $1,360.08 in London this year, poised to end a 12-year winning streak during which prices rose as much as sevenfold. It is the third-worst performer, after corn and silver, in the Standard & Poor’s GSCI gauge of 24 commodities, which fell 0.8 percent. The MSCI All-Country World Index of equities climbed 7.8 percent and the Bloomberg U.S. Treasury Bond Index lost 3.9 percent.

The metal rallied 15 percent since reaching a 34-month low of $1,180.50 in June as sales from exchange-traded products slowed and jewelry demand strengthened. Indian and Chinese consumer demand may be 900 to 1,000 tons each this year, the gold council said. That would beat China’s 2011 record of 778.6 tons and be near India’s all-time high of 1,006.5 tons in 2010.

Premiums paid by jewelers for physical supply rose to a record in India and jumped fourfold in China as the flow of metal to the region failed to keep pace. Purchases advanced 45 percent to 571.2 tons in the first half in China and 48 percent to 567.5 tons in India, the London-based gold council estimates. Global demand expanded 32 percent to 2,040.2 tons.

ETP Holdings

Investors sold 23.2 tons from gold-backed ETPs since the start of August, set for the smallest outflow since January, according to data compiled by Bloomberg. That took this year’s drop to 683.6 tons, close to the 700 tons that Barclays Plc expects to be sold in 2013. The bank predicts no change in ETP holdings in 2014.

Hedge funds and other large speculators reduced bearish bets by 17 percent last week, U.S. Commodity Futures Trading Commission data show. The 14 most widely held options confer the right to buy gold at prices higher than today.

Gold will average $1,350 in the fourth quarter next year, according to the median in the Bloomberg survey. Commerzbank AG and UniCredit SpA see prices at $1,600, while Bank of America anticipates $1,652.

Demand for jewelry, coins and ingots contrasts with record sales from ETPs, which at the peak in December held 2,632.5 tons, more than the official reserves held by all but three central banks. The funds now own 1,949.2 tons valued at $85.4 billion, $56.3 billion less than at the end of December, data compiled by Bloomberg show.

Most Accurate

Danske Bank A/S, the most accurate gold forecaster tracked by Bloomberg over the past two years, raised its estimate for next year’s average to $1,138 from $938 on Aug. 20. Its fourth-quarter 2014 prediction of $1,100 is still 19 percent lower than prices today. Credit Suisse Group AG, Citigroup Inc., ABN Amro Group NV and Macquarie also anticipate declines.

Societe Generale SA and Goldman Sachs Group Inc., both of whom correctly predicted the rout that began in the second quarter, are also bearish. The French bank expects a 2014 average of $1,150 and New York-based Goldman says prices will retreat to $1,175 in 12 months.

Gold slumped this year in part because of investors’ expectations the Federal Reserve will taper stimulus as the U.S. economy strengthens. The metal rose 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system by purchasing debt, increasing investors’ concern about currency debasement and accelerating inflation.

Biggest Investor

A Bloomberg survey this month showed that 65 percent of economists expect policy makers to reduce the $85 billion of monthly asset purchases starting in September.

Paulson, the biggest investor in the largest ETP, cut his stake by 53 percent to 10.2 million shares now valued at $1.36 billion in the second quarter, according to a filing to the U.S. Securities and Exchange Commission. The 57-year-old hedge fund manager, who told investors as recently as last month that they should own gold, cut the holding “due to a reduced need for hedging,” New York-based Paulson & Co. said in an e-mail.

Billionaire Soros and Daniel Loeb sold their entire investments in the SPDR Gold Trust (GLD), the biggest ETP in the metal, last quarter, SEC filings showed. Soros Fund Management LLC’s shares were valued at $63.2 million as of June 28 and Loeb’s Third Point LLC holding were valued at $15.5 million at the end of the period, according to data compiled by Bloomberg.

Wealth Management

Growth in demand may be constrained in the second half by a lack of supply, with the cost ofborrowing gold for six months close to a four-year high. The London Bullion Market Association says that may indicate a scarcity of metal. The Indian government has sought to curb bullion imports to combat a record current-account deficit and weakening rupee.

“What frightens me is this is not going to be sustained,” said Dominic Schnider, the Singapore-based head of commodities research at the wealth-management unit of UBS, which anticipates a 2014 average of $1,325. “It’s one thing that demand expanded over a short period of time. Maintaining it is another thing. To what degree we have seen demand being brought forward and then weigh on the second half is unclear.”

First-half sales at Caibai Jewelry exceeded 10 billion yuan ($1.6 billion), from 12.5 billion yuan in all of 2012, marketing manager Shi Lei said in an interview at the four-level Beijing store. The Shanghai Gold Exchange delivered 1,098 tons to buyers in the first six months, from 1,139 tons for all of last year, bourse data show.

Mining Companies

While three increases in India’s bullion import taxes may reduce official volumes, actual sales may be boosted by a surge in smuggling. Customs agents at Mumbai airport confiscated gold valued at 93 million rupees ($1.4 million) from April to June, almost as much they seized for all of 2012, according to data from the customs department’s Air Intelligence Unit.

The slump forced mining companies to announce at least $26 billion of writedowns in the past two months, adding further constraints to supply. Toronto-based Barrick Gold Corp., the biggest producer, said Aug. 1 it may sell, close or curb output at 12 mines from Peru to Papua New Guinea. Production isn’t sustainable at prices below $1,250, Gold Fields Ltd. Chief Executive Officer Nick Holland said in an interview in June.

Mounting concern about availability is reflected in futures, with the August contract on Comex in New York flipping to a premium to December this month for the first time since they started trading. The backwardation in commodities indicates worries about near-term supply.

Gold Council

Central-bank demand also is helping to compensate for the sales from ETPs. Nations added 534.6 tons to reserves last year, the most since 1964, and may buy another 350 tons this year, the gold council estimates. Official reserves total 31,910 tons, 16 times more than metal held in ETPs.

“The arguments for holding gold are in the balance,” said Jeremy Baker, a senior commodities strategist who helps oversee about $700 million of assets at Harcourt Investment Consulting AG in Zurich. “The physical market is definitely helping and providing a boost and will go a long way to stabilizing prices, but for a longer-term rally we need to see ETF declines turning around and I don’t see that happening anytime soon.”

To contact Bloomberg News staff for this story: Glenys Sim in Singapore atgsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

http://www.bloomberg.com/news/2013-08-21/gold-rout-seen-bottoming-by-analysts-as-china-buys-commodities.html

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'Shocking' new warning sign for gold

Anthony Grisanti says the drop in physical gold buying is "shocking," and it could be a bad omen for gold, with CNBC's Jackie DeAngelis and the Futures Now Traders.

http://finance.yahoo.com/video/shocking-warning-sign-gold-181200957.html

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Gold Seen Rallying by End of Year as Physical Demand Gains

Gold may extend a rally through to the end of December, paring the first full-year loss since 2000, as rising physical demand across Asia helps to counter a selloff in exchange-traded products led by billionaire John Paulson.

Prices may reach $1,450 an ounce by the end of the year, according to a median of estimates in a survey of 11 traders, jewelers and analysts who attended the India Gold Convention in Jaipur on Aug. 16-17. The metal, which was at $1,382.89 today, fell 17 percent this year.

Enlarge image

Bullion rebounded 17 percent since reaching a 34-month low in June as demand for jewelry, bars and coins soared from India to China and Turkey. Photographer: Lam Yik Fei/Bloomberg

Bullion rebounded since reaching a 34-month low in June as demand for jewelry, bars and coins soared from India to China and Turkey. The rally may help stem the outflow from exchange-traded products, or ETPs, after gold plunged 23 percent last quarter, the most since at least 1920. Consumer demand in India soared 71 percent in the second quarter, while in China it jumped 87 percent, according to the World Gold Council.

“The fact that the market has done so well and technically moved above $1,350 an ounce is very positive,” said Jeffrey Rhodes, managing director of the financial institutions division of the Kaloti Jewellery Group, a Dubai-based gold trader and refiner. “This suggests quite a strong end to the year,” supported by strong physical demand, particularly from India and China, he said.

‘Huge Outflows’

Bullion traded as high as $1,384.55 an ounce today, rebounding from $1,180.50 on June 28, the lowest in almost three years. The Standard & Poor’s GSCI gauge of 24 commodities rose 0.7 percent since the start of January and the MSCI All-Country World Index of equities gained 9.8 percent. Treasuries declined 3.6 percent, the Bloomberg U.S. Treasury Bond Index shows.

“There is some evidence in the gold market that demand is starting to stabilize following the huge outflows from ETFs and futures in the first half of the year,” JPMorgan Chase & Co. said in a report Aug. 16. “Spot gold is above forward prices, which is very unusual and likely reflects strong demand in the physical market bidding up spot prices,” the bank said.

Physical demand helped push August futures on the Comex in New York above the December contract for the first time on Aug. 2, compared with trading at a discount before then. Backwardation, when nearby contracts are more expensive than longer-dated futures, can signal concern that near-term supplies are tightening.

Fed Speculation

Prices will advance to $1,600 by yearend because investors “overreacted” to speculation that the Federal Reserve will trim monthly bond purchases and as governments maintain efforts to boost economic growth, Adrian Day, president of Adrian Day Asset Management in Annapolis,Maryland, said last week.

Investors sold 681.4 metric tons from ETPs this year, including 404.4 tons in the second quarter, as unprecedented money printing by central banks failed to accelerate inflation. Paulson & Co. cut its SPDR Gold Trust stake to 10.2 million shares in the three months ended June 30 from 21.8 million at the end of the first quarter, a Securities and Exchange Commission filing showed.

“Since April, when prices fell sharply and rose and fell right back, a lot of investors have pulled back from the market and are waiting to see how low price can go,” said Jeffrey Christian, managing partner at CPM Group. “Once you get to September and October a lot of investors, central banks and fabricators who have been waiting to see how low price can go, will step up and buy.”

Prices may rally to $1,420 an ounce by the end of the year and trade in a range of $1,300 to $1,500 for the next two years, Christian said in an interview on Aug. 16.

Money Printing

Prices fell in eight of the past 10 months on speculation the Fed will slow stimulus as the economy recovers. A Bloomberg survey this month showed 65 percent of economists expect Chairman Ben S. Bernanke to reduce the $85 billion of monthly asset purchases in September, probably starting with a cut of $10 billion. The metal will fall to $1,050 by the end of next year, Goldman Sachs Group Inc. estimates.

“The impact of so much money being printed globally in the long term is positive for gold,” said Chirag Mehta, a fund manager at Quantum Asset Management Co.“Some tapering will be there but still they are going to print money. The result of this monetary inflation will be price inflation going forward” and that should benefit gold, he said.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

http://www.bloomberg.com/news/2013-08-18/gold-seen-rallying-on-physical-demand-to-counter-paulson-selling.html

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