AFP: Gold Support at 200 DMA at $1618/oz, Massive Chinese Demand and Gartman Flip Flops
Gold in USD – 1 Yr (100, 144, 200 DMA – yellow line at $1,618/oz)
Gold fell 2.6% in US dollar terms yesterday on low volumes as technical selling led to price falls which were exacerbated by a number of stop levels getting hit. The falls may be due to banks raising capital due to liquidity and solvency issues.
Gold’s weakness yesterday was primarily a function of dollar strength. This meant that gold’s falls in euros, pounds and other currencies was much smaller (between 1% and 2% in most currencies) and gold fell less in euros than did the DAX and CAC equity indices.
The technical situation has deteriorated. The 144 day moving average which has provided good support for 2 years was breached yesterday and the 200 day moving average at $1,618/oz now becomes support.
Absolutely nothing has changed with regard to the fundamentals driving the gold market. Investment demand for physical bullion remains robust internationally.
Real macroeconomic, systemic and monetary risk remains and will support gold.
There are signs that demand in India and China is picking up again after the latest correction. Bullion dealers in India report bargain hunters again buying on the dip.
Chinese citizens continue to buy gold in record volumes with October the fourth successive record month for imports via Hong Kong (see table above).
The October total was 85.7 tonnes –up very significantly on the September figure which was itself a new record. The October demand was a massive 40 times higher than imports via this route a year ago.
It is the fourth successive month of record imports into China and overall imports through Hong Kong for the first 10 months of the year are around three times higher than a year ago.
Of importance is the fact that the amount of gold imported through Hong Kong amounted to over a quarter of estimated global demand for the yellow metal – as noted by Mineweb.
Premiums in Hong Kong and Singapore (see chart above) are likely to stabilise near the $1.00 per ounce level as Chinese buyers are likely to again buy on weakness – especially as dealers and jewelers will soon be buying stock prior to Chinese New Year at the end of January.
