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Gold Bullion "Faces Aggressive Shorting" as Hong Kong Protests Grow Ahead of China's Golden Week Holidays, US Jobs Data Loom

Monday, September 29, 2014 15:45

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GOLD BULLION prices rose to $1223 per ounce in London on Monday, 0.4% higher from last week’s close, before slipping back as world stock markets cut their earlier losses.

Hong Kong’s main stock index lost 2.0% as pro-democracy protests spread across the city.

The US Dollar dropped from new 4-year highs on the currency market, helping food commodities bounce from multi-year lows.

Silver dropped in early Asian trade, before tracking gold bullion’s rally to stand unchanged from Friday’s finish above $17.60 per ounce.

“Quiet physical demand in China this week could leave gold lacking crucial support,” writes Jonanthan Butler at Japanese conglomerate Mitsubishi, pointing to the Golden Week holidays starting Tuesday.

“Though short covering may offer upside,” Butler adds, noting heavy bearish betting by speculative traders in US futures and options, “quarter-end squaring may leave investors with little appetite for gold in the coming days.”

Tuesday also marks the new Martyrs’ Day in China, aimed “to commemorate those who sacrificed for their country,” according to the New York Times.

Tens of thousands of protesters continued to block Hong Kong’s main business district Monday, extending the weekend’s march against Beijing’s refusal to allow a free choice of candidates in the city’s 2017 leadership elections.

Beijing’s censorship of social media site Weibo hit new record levels during this weekend’s protests, says the South China Morning Post.

“Usually a lot of Chinese tourists come to Hong Kong for the holiday,” Reuters quotes German bullion refining group Heraeus’ general manager in the city, Dick Poon.

“[Typically] they end up buying jewellery, but this time they might be turned off by the protests.”

This week’s absence of China’s wholesale dealers, says Swiss refiner MKS’s Asian desk, “could heap added pressure on gold,” especially if “combined with another strong US payrolls figure expected this Friday.

“This is a very similar scenario to last year where gold was aggressively sold by speculators during the absence of the Chinese.”

Consensus forecasts for Friday’s US employment data say 203,000 net jobs were added to non-farm payrolls this month, reversing July’s shock of just 142,000.

Thursday’s European Central Bank decision “could weaken the Euro and strengthen the Dollar,” adds Butler at Mitsubishi. “[But] the impact of this on bullion prices could be offset could be offset by safe-haven buying of physical gold.”

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