A week in gold: Surreal finish as investors wait for non-farm data

New York (Apr 4)  Gold ended the shortened week flat with trading subdued due to the key US non-farm payrolls numbers for March coming out on Good Friday, when most western financial markets are shut.

A bout of weakness by the dollar after some disappointing economic data had made it a decent week for the metal.

Federal Reserve chair Janet Yellen indicating last weekend that it may be later than June when interest rates start to rise also unsettled the US currency.

Gold and the US dollar traditionally move in opposite directions and the currency wobble briefly sent gold above US$1,200 again as it coincided with more uncertainty in Yemen.

While short-term sentiment will be dominated by the US interest rate debate and geopolitics, the views on how gold will fare on a longer time scale are more mixed.

A Goldman Sachs reports suggested gold supply may dry up almost completely in twenty years.

While that may be an extreme view, the mood beyond the very short term seems to be becoming more optimistic.

Commerzbamk has just surveyed its clients and the consensus view was that precious metal prices are set to climb.

More than half of the German broker’s corporate clients and financial institutions envisage higher gold prices in a year’s time compared to the next three months where the bulls and bears are in balance.

Key to the future will be physical demand especially in China and India, where the growing affluent middle classes are tipped to become major gold consumers as they become wealthier.

After disappointing numbers last year, Indian demand in particular is picking up again.

Some 70 tons of gold was imported in March, putting total imports in the fiscal year that has just ended at 638 tons.

Indian trade sources suggest gold imports in the new fiscal year will rise sharply  to 800-825 tons.

Recent figures from the World Gold Council suggest Indian demand for jewellery especially is booming.

Citigroup this week said that the growing disposable incomes of a huge middle-class demographic in India point to positive consumption trends in 2015, notably in higher margin products.

The one problem may be substitution, as platinum remains at a discount to gold following the recent slide in its price to a six year low.

Influential researcher Metals Focus this week also said it remains “quite bullish” in its pricing expectations.

While it expects gold to fall slightly between now and the end of the year, it will start heading upwards later on and into 2016.

“Interest rate rises will be quite modest and will not cause any more damage to the price of gold,” it added.

Spot gold was trading at US$1.196 a couple of hours into trading on Wall Street Friday, barely changed over the week.

Source: ProactiveInvestors.uk