Big gold sale out of GLD but not sufficient for price breakdown

Monday saw a substantial sale of gold from the SPDR gold ETF of 3.577 tonnes but none from the Gold Trust. This again leaves the holdings of the SPDR gold ETF at 674.606 tonnes and 159.30 tonnes in the Gold Trust. This was sufficient to push the gold price down slightly, but not sufficient to cause a breakdown in the gold price. It continues to consolidate within the pennant formation. The dollar is strengthening still, which was the main driver of the gold price slightly lower.

In India, the gold season is starting to pick up ahead of the festival season in October. But yet again the massive demand in Asia is not feeding through to the gold price. COMEX continues to dictate prices, but the U.S. physical demand including COMEX demand is very small relative to Asia. It is a 10th of the level of the gold demand east of Greece, but due to the structure of the markets globally this demand is not reaching gold prices. Asia is happy to see this as prices continue at bargain levels. Will it change any time soon? We believe it will, once the current barriers to a demand/supply related global price are overcome.

While many believe it is the developed world engineering this state of affairs to protect the dollar’s international role, it would be equally to the advantage of China to sell small amounts in the U.S. or London to ensure prices stay low. There just is not enough information on this in the public domain to say who is keeping prices low. But until demand globally reaches into COMEX for physical demand, sufficient to take up any additional liquidity supplied by the major banks, this situation will persist.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.silverforecaster.com and www.goldforecaster.com

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