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Physical Gold Demand Picking Up After Price Drop
(Kitco News) - There’s an old adage that says nothing helps commodity prices more than low commodity prices.
At least to an extent, that’s starting to happen in the gold market, as traders and analysts report that the price drop in the precious metal during recent months is beginning to trigger increased demand out of crucial Asian buying nations.
Comex December gold last week bottomed at $1,167.10 an ounce, its weakest level since the beginning of 2017, although the contract had improved to $1,192.20 an ounce as of 8:31 a.m. EDT.
“Gold demand in Asia is picking up again thanks to the low prices,” Commerzbank said. “This is reported for one thing by local traders, and for another is evident from the premiums. In India, the world’s second-largest gold consumer after China, higher premiums have to be paid on the world market price as bullion dealers replenish their stocks. They are taking advantage of the low prices – gold in Indian rupees dropped for a time to an eight-month low last week.”
Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA in Switzerland, also reported seeing improved physical demand.
“Even the premiums have picked up a bit – not as much as I’d like but better than nothing,” he said in an interview with Kitco News.
The demand might have eased back a bit at the start of this week, he commented. He attributed this to participants simply “trying to figure out where this market is going.”
“We could see fresh demand coming tomorrow,” Nabavi added.
Commerzbank pointed out that data from India earlier this month showed that buying in the physical market was already picking up in July. A preliminary report from the Ministry of Finance indicated that gold imports climbed to 65.6 tonnes in July, up 20% from the same month a year ago.
