Market Nuggets
Standard: Central Banks Remain Gold Buyers; Indian Demand Picks Up
Central banks remain noted gold buyers and there are signs of demand picking up in India, says Standard Chartered Bank. Gold prices have fallen lately, which the bank blames on U.S. dollar strength. “Physical demand will be key to tracking how solid the floor for prices is, but in the seasonally slow period for demand, it will likely be fragile,” Standard says. “The exception here is potential demand growth in Turkey amid political and economic uncertainty. In an environment lacking strong investment demand, physical demand sets the price. But not everyone is selling gold – central banks added to reserves in May, demand in India has shown signs of life, and risk reversals suggest there is some hesitant appetite to establish long positions.” Gold prices started to edge lower in May and India’s gold imports rose by 36% that month compared to April, Standard says. Imports were down 31% year-on-year. However, Standard says, “If demand does pick up significantly counter-seasonally, inventory will likely be depleted quickly, pushing local premia higher.” Meanwhile, International Monetary Fund data show that central banks continued to add to their gold reserves last month, Standard says. Russia was the largest buyer, adding 18.4 tonnes, taking year-to-date purchases to 89.5 tonnes.
By Allen Sykora of Kitco News; asykora@kitco.com
SP Angel: Future Gold Supply Declining, ‘Not Really A Substitute’
Thursday July 12, 2018 09:47
Commodities brokerage SP Angel says comments from gold producers suggest that the future supply of freshly mined metal may be limited. “When 'peak oil' started becoming a problem 10 years ago, the industry developed new fracking and horizontal drilling technologies,” the firm says. “And other industries, like solar and wind, began developing better substitutes for oil. But there's not really a substitute for gold. And the biggest players in the space are saying we're running out.” SP Angel lists comments to this effect from several mining executives. The firm quotes Rudy Fronk, chairman and chief executive officer of Seabridge Gold, as saying last month: "Peak gold is the new reality in the gold business with reserves now being mined much faster than they are being replaced." SP Angel quotes Nick Holland, CEO of South Africa's Gold Fields, as saying: "We were all talking about how production was going to increase every year. I think those days are probably gone." SP Angel also quotes Kevin Dushnisky, president of Barrick Gold Corp., as saying: "Falling grades and production levels, a lack of new discoveries, and extended project development timelines are bullish for the medium- and long-term gold price outlook."
By Allen Sykora of Kitco News; asykora@kitco.com
RBC’s Gero: Open-Interest Data Suggest More Bears
Thursday July 12, 2018 09:47
Comex gold is attempting to stabilize after recent data show the number of open futures positions has risen, suggesting more bearish traders (also known as shorts), says George Gero, managing director with RBC Wealth Management. For now, he says, gold is attempting to rally, facing headwinds from a stock-market recovery but helped by a crude-oil rebound. As of 9:33 a.m. EDT, Comex August gold was $1.40 higher to $1,245.80 an ounce. Gero says the precious metal is “still looking for leadership as funds have been sellers lately. Many bears lately [have] shown [up] in open interest and options numbers.” He notes open interest has been rising as prices moved lower recently, meaning “there are plenty of shorts now.”
