Gold Forecasts Split at $10,000 and $1000 as ETFs Sell, Central Banks Buy, Indian Dealers Cleaned Out

WHOLESALE GOLD rose to an 8-session high just shy of $1450 per ounce in London trade Thursday morning, recovering 45% of this month’s near-record slump.

Asian stock markets also ticked higher, but European shares were flat while commodities extended their rally.

Silver prices were unchanged for the week so far at $23.30 per ounce.

Gold priced in Sterling fell £10 per ounce from an 8-session high of £946 as the Pound jump on news that the UK avoided recession – growing just 0.3% – in the first quarter of 2013.

“Gold is continuing [its] recovery,” says the daily comment from the commodities team at Germany’s Commerzbank.

“Rate-cut speculation ahead of next week’s [Eurozone central bank] meeting – and the prospect of continued ultra-loose US monetary policy following more weak economic figures – are lending buoyancy to the gold price.”

Investors who buy gold, writes Société Générale’s global strategist Albert Edwards in a new report, are making “a bet against central banks’ competency.”

Given central banks’ track record, he adds – repeating his team’s forecast of $10,000 gold – “that’s certainly a bet I’d be happy to still take.”

Money-creation leading to a surge in inflation is also the forecast from billionaire hedge-fund manager John Paulson, who reportedly told clients on a webinar Wednesday that he and his chief precious metals strategist – the highly respected former UBS analyst John Reade – are also “holding course” despite last week’s price crash.

Dutch bank ABN Amro however – which this month said “the demise of gold [was] still at an early stage” – today revised its $1000 gold forecast from end-2015 to the end of 2014.

“ETF [trust funds] still see sellers, but physical demand remains very strong,” says Moudi Raad at Swiss refining and finance group MKS.

New York’s giant SPDR Gold Trust yesterday shed another 4 tonnes of gold, taking the bullion held to back its shares down to the lowest level since the start of September 2009 at 1093 tonnes.

Over in India however – the world’s heaviest gold-buying nation – “We are unable to get supply,” Reuters quotes a state-bank dealer.

“Refiners have sold out till second or third week of May. Gold for immediate delivery is quoted at $10 on London prices.”

Latest data from the International Monetary Fund meantime show that emerging-market central banks again chose to buy gold for their reserves in March.

Russia led central-bank gold buying, adding 4.7 tonnes to reach 981 tonnes, while Turkey continued to pull in metal from its commercial banks, adding a further 33 tonnes to reach 409.

“I think physical and central banks…those buyers are supporting the market,” Reuters quotes Yuichi Ikemizu at Standard Bank in Tokyo.

“With this sharp decline in the price,” he adds, “I think South Korea is buying gold too. [It] always buys gold when the price comes off.”

Adrian Ash

BullionVault

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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

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