Gold & Silver Rise as China’s Long-Term Demand Forecast to Keep Growing

Wholesale prices to buy gold rose to 7-session highs in London on Thursday morning, touching $1726 per ounce even as new data showed US employment rising at its fastest pace since February.
The private-sector ADP payrolls report said the US added 158,000 jobs in October. Earlier data from the manufacturing sector in China, the world’s #2 gold consumer, showed its slowdown to be easing.

However, “Over 17% of survey respondents reported a fall in the volume of new export orders,” said the new Purchasing Managing Index report from HSBC/Markit Economics, “and just under 10% noted an increase.”

Two-thirds of Chinese businesses reporting quarterly results to the stock market have seen a sharp rise in unpaid bills according to the Financial Times. The People’s Bank of China has this week pumped a record $60 billion-worth of liquidity into its domestic money market. “Gold has been finding support on approach of $1700,” says today’s note from Standard Bank’s commodities team. “Our Standard Bank Gold Physical Flow index has risen substantially in the past few days,” says Standard, with demand to buy gold in Asia and India “pick[ing] up.”

Looking further ahead, and “supported by the continual income growth of [China’s] emerging middle-income class, investment as well as gold products will benefit,” says Albert Cheng, managing director for the Far East at market-development organization the World Gold Council. “The longer-term growth of China’s economy remains healthy.”  The state-owned research group Antaike meantime forecasts that China’s demand to buy silver will grow by 10% in 2013 to hit new record levels.

Alongside a large forecast for silver investment demand, the solar-panel industry is flagged as a key driver.

Back in Thursday’s action, major-economy government bond prices slipped, nudging interest rates higher as Italian and Spanish bond prices rose, reducing their interest rate. Silver extended what one analyst called Wednesday’s “impressive advance” by reaching 2-week highs above $32.65 per ounce.  “We look for [gold price] support in the $1660 area,” says a note from Barclays Capital, “to underpin a move higher toward the $1800 highs.”

“Historically gold performs strongly in November,” says a note from Commerzbank, “with monthly returns over the past 30/40 years around 1.40% – the second strongest month of the year.”

Slipping 3.2% from the end of September, prices to buy gold just put in their first monthly drop since May and their worst October since 2008’s plunge of 17.4%.

Commodities overall also delivered their worst monthly returns since May, losing 4.1% in October on the S&P index of 24 natural resources and unwinding the last of 2012’s gain to date. Global stock markets lost 0.6%, says Bloomberg. Bonds of all kinds gave a positive return.

Silver prices lost 7.1% against the US Dollar. But while last month’s sales of silver Eagles by the US Mint slipped 3.1% from September, they hit a new October record at 3.15 million ounces.

Adrian Ash

BullionVault: buy gold, buy silver

 

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