BS:Gold may touch this year's high of $1,330 an oz this quarter
Gold may rise over five percent from the current prevailing level to touch the year’s high of $1330 an oz this quarter on strong physical buying led by robust fabrication demand, a Thomson Reuters GFMS study said.
The yellow metal is currently trading at $1260 an oz in spot London market translating thereby, in India at over Rs 30,000 per 10gms. Given that the 10% import duty and $120 an oz premiums prevail, gold price in Indian market will be costlier at least by Rs 1,300 per 10gms.
While private investors demonstrated near-voracious appetite for gold in the wake of a sharp weakening in prices, professional investors remained totally absent from active buying. This is expected to persist into 2014. But, a short-covering rally in the first quarter of 2014 cannot be ruled out which could build on the recent stabilisation above $1,185 an oz.
“It is therefore possible for gold to taste $1,330 an oz before the current quarter is out. The gold market has not regained the sparkle of 2008 – late 2011, and is not expected to do so this year as well,” the study further said.
Tapering by the United States did not have major implication on gold market as the price tumbled in the second quarter. The net result was that while exchange traded fund (ETF) investors sold 880 tonnes over the course of 2013, bar hoarding in East Asia, the Indian sub-continent and the West Asia amounted to 1,066 tonnes, with a global total of 1,338 tonnes.
In 2012, combined gold investment demand from ETF holdings and bar hoarding accounted for a net 458 tonnes of physical gold investment in 2013 as against 1,285 tonnes in 2012.
Tapering is expected to continue in the United States through at least to the end of 2014, by which stage some interest rate guidance is expected to emerge. Improving economic fundamentals are expected to continue to inform investor appetite for risk and are also likely to militate against hefty gold investment suggesting that – while it may stage an early rally – gold will fail to pierce the overall downtrend that has been in place since late 2011.
“With investment activity muted, therefore, gold is likely to show a more traditionally seasonal pattern than has been the case in recent years. This points towards the possibility of brief test of $1000 should there be any further investor retreat in the second and quite possibly the third quarters of the year, but physical demand is expected easily to be robust enough to defend any test of this level and any such dips would be short lived,” said Rhona O’Connell, Head of Metals Research and Forecasting at Thomson Reuters.
Gold to take a back seat to other asset classes this year, but strong physical demand will sustain elevated average price this year. China was the world’s largest jewellery fabricating nation in 2013 with 33% of the world total, while Indian government restrictions choke off local growth; China and India form 51% of world jewellery fabrication. Net of scrap, global jewellery fabrication gained 48% year-on-year in 2013.
