Gold’s London AM fix this morning was USD 1,698.00, EUR 1,286.17, and GBP 1,073.60 per ounce.
Friday’s AM fix was USD 1,714.50, EUR 1,292.99, and GBP 1,076.14 per ounce.
Gold fell $3.10 in New York Friday and closed at $1,711.60/oz. Gold fell in Asia prior to modest price falls in Europe which has gold now trading at $1,696.43/oz.
Gold fell by nearly 3.5% last week – the largest one week fall since the week of Dec 18. Gold’s intraday and monthly low from the “Leap Year Gold Massacre” is $1,688/oz. Technical damage continues and a breach of this level could see gold quickly fall to support at $1,650/oz.
Gold is being supported by Asian physical demand, which has picked up again and was robust in Asia overnight. Asian jewellery makers are reported to have been using this dip to stock up on gold.
Besides Asian jewellers, many Asian money managers and hedge funds continue to see the value in the yellow metal and buy on price weakness.
Gold is also supported by good retail and institutional demand internationally as seen in the new record ETF gold holdings last week. CFTC data shows that hedge funds, bullion banks and other institutions also remain positive on gold and increased their net long positions last week – rising by 12,259 contracts or 7% from a week earlier.
The EU’s second 3 year funding and a surprise policy easing by the Bank of Japan a few weeks ago has pressured the euro and the yen making gold increasingly attractive to holders of these currencies. Economists believe that the ECB will keep interest rates low at 1% until deep into 2013 on economic concerns and despite high oil prices and the impact of the money that they’ve flooded into the market.
Continuing negative real interest rates and global currency debasement are strong fundamentals leading most analysts to forecast much higher prices.
Citigroup have said that they believe that gold will rise to $2,400/oz in 2012 and by $3,400/oz in “the coming years”.
However, Citi’s Tom Fitzpatrick warned of price weakness in the short term and said there is a “real danger” that there may be a correction to $1,600/oz which would provide an even better buying opportunity.
Citi are also cautious near term on oil and silver.
Production of gold in Australia slid again last year, despite gold fetching higher nominal prices than ever before.
According to gold experts, Surbiton Associates, 264 tonnes of gold were produced last year, two tonnes less than in 2010.
The 264 tonnes equated to about 8.5 million ounces and ensures that Australia remains a major player in gold, with only China producing more last year. The United States was the world’s third-biggest producer with 240 tonnes.
Australia’s gold production was well below the nation’s production peak in the late 1990s.
This further suggests the possibility of peak gold production. Of the world’s four biggest gold producers (China, Australia, the U.S. and South Africa), only China has managed to increase gold production in recent years and this Chinese gold is used in China to meet the rapidly growing demand for gold jewellery and coins and bars as stores of value in China.
Thus Chinese gold is not exported into the international market which means that the supply/demand balance in gold is remains tight and the last Wednesday’s manipulated sell off provides yet another buying opportunity.