Gold Investors Weekly Review – May 2nd

In his weekly market review, Frank Holmes of the nicely summarizes for gold investors this week’s strengths, weaknesses, opportunities and threats in the gold market. Gold closed the week at $1,300.62, down $2.58  per ounce (0.20%). The NYSE Arca Gold Miners Index fell 0.28% on the week. This was the gold investors review of past week.

Gold Market Strengths

Global demand for silver jewelry exports from India soared 59 percent over the past year as industry officials expect further growth in exports this year. Trade organization officials expect exports to rise in the 2014-15 season as jewelers try to meet rapidly rising demand from China, Russia, and the U.S. The CPM group, a commodities consultant, has reported silver demand for jewelry rose to 266.5 million ounces in 2013, the highest level in at least 10 years, increasing its share of the declining global supply of silver, which only reached 971 million ounces in 2013.

Gold jewelers in India, the world’s second-largest consumer, are expecting a surge in demand at the country’s bullion buying festival this week. The anticipation for the Akshaya Tritiya festival, which is considered by the nation’s more than 900 million Hindus as an auspicious day to buy precious metals, has driven jewelers to buy gold from importing banks at premiums as high as $110 per ounce over the London fix price.

Gold Market Weaknesses

A U.S. Senate Special Committee on Aging staff report “conservatively estimates that more than 10,000 Americans have been victimized through [precious metals] schemes, with losses around $300 million.” Seniors, looking for a safe haven for their life savings, have been led into buying leveraged gold, silver, platinum, or palladium bets under the impression that they are participating in safe investments. The sellers scam seniors with multiple fees and interest costs that benefit scammers, while leaving the seniors’ principal to bear all the risk of the leveraged bets.

Gold fell $2.58 per ounce for the week, as positive data in the U.S. lowered demand for the precious metal. The Fed meeting appeared to be a non-event as the cut of an additional $10 billion in asset buying matched economists’ predictions. Hong Kong gold exports to China offered a relief, as net imports reached 80.6 tonnes in March, down from 111.4 tons in February. Silver, which fell 0.99 percent for the week, is being undermined by its association with gold despite nine-year-high buying by makers of jewelry and solar panels.

Gold Market Opportunities

The latest Platinum and Palladium Survey by GFMS, the leading independent precious metals consultancy, shows the impact on platinum by South African strikes has been muted; however, palladium has begun to move strongly. The highly successful launch of two South African palladium ETFs, together with supply constraints arising from the events between Russia and Ukraine are further emphasizing the market deficit for the precious metal. As such, GFMS believes palladium has bottomed out already and expects the robust fundamentals to propel the price towards a test of $930 per ounce before year-end.


palladium outlook in 2014

Gold Market Threats

Morgan Stanley bank analysts almost “outbear” Goldman Sachs analysts on gold price, according to Mineweb’s Lawrence Williams. Morgan Stanley’s analysts suggest gold will trade down to $1,168 in the second half of the year, and will continue trending down to $1,138 in 2015. The main driver, according to the analysts, is the fall-off in Chinese demand caused by a weakening economy and depreciating currency. However, Chinese gold import demand has continued to show resiliency, even as the currency depreciation makes gold more expensive in local terms. February and March import data from Hong Kong show imports of over 190 tonnes, roughly in line with the pace of imports in the fourth quarter of 2013.

ABN-AMRO, the largest Dutch bank by assets, revised its gold forecast price down to $1,235 per ounce as it expects the U.S. economy to accelerate, and U.S. yields and the U.S. dollar to move higher. The bank released its outlook to coincide with the Fed’s announcement of a further $10 billion monthly taper. Important macroeconomic indicators to follow next week are U.S. Non-Manufacturing ISM, Chinese CPI and PPI data, and the Japanese Leading Index, which is expected to show further deceleration.

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