Gold moved back above the psychological $1 200 level this morning. Can it retain this upwards move and perhaps extend it?
LONDON (MINEWEB) – Gold bounced back above $1 200 this morning in London, but before one can be sure that this is the start of the long-expected recovery there could yet be teeth in the bear. The big money playing the futures markets with paper gold can still exert ultimate control over where the price is headed short term and if it suits them there could yet be another sharp price drop to try and drive out any remaining weak gold holders.
But medium term it may be that options are becoming more and more limited for keeping the market depressed. Gold continues to flow from West to East with the big recovery in Indian demand coupled with continuing high levels of withdrawals from the Shanghai Gold Exchange as the key elements in this.
Although whether Indian demand has recovered to overtake China’s over the past two quarters as World Gold Council figures might suggest, and which has been reported as fact by much of the media, given SGE withdrawal figures have been running at such high levels of late we think is not a true picture of the real situation, but in combination India and China are taking in gold at back to peak levels.
Demand is also seen as high in a number of other countries in Europe, the Middle East and elsewhere in Asia, while Russia and some of the old FSU countries are adding to their gold reserves thus taking even more metal off the markets. It is hard to see where all this volume of gold is coming from as it certainly substantially exceeds new global gold output.
Gold in backwardation too also suggests that supplies of physical metal in the West are becoming more and more limited and the logic of shorting gold may be about to disappear. There has been the suggestion that the recent fall in the gold price down to $1 140 has been a bear trap to catch the short traders out.
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