April 30, 2013
Gold is slightly lower today after yesterday’s consolidation on last week’s gains.
Premiums continue to rise on physical product across the world to reflect a significant increase in demand and very tight supplies. Premiums on gold and silver coins and bars are increasing across the world – from London to Frankfurt to Zurich to Turkey to Dubai to Mumbai to Singapore to Hong Kong to Tokyo and across the U.S.
Physical gold stocks held at CME Group’s Comex warehouses in New York have dropped to a near-five year low in a further sign that gold’s recent weakness has unleashed a nascent mini gold rush of demand as people all over the world scramble to own bars and coins.
Premiums to secure supplies in India jumped to five times the level before the slump.
Physical bullion coins and bars for immediate delivery are not available in much of the world including in the Middle East and Singapore.
Consumers in Singapore and Hong Kong have seen premiums on bars rise sharply and Standard Merchant Bank (Asia) Ltd. said that “physical metal is still not available.”
Australia’s Perth Mint, the largest refinery in Australia and one of the largest in the world, said that demand has jumped to the highest level since the Lehman crisis in 2008.
Demand has been robust due to currency devaluation concerns and then the 15% price fall led to a massive surge in demand as store of wealth buyers leapt at the chance to acquire physical bullion at much cheaper prices.
This led to the Perth Mint which refines nearly all of the nation’s bullion, having to stay open over the weekend to meet orders.
There’s been strong interest, including from the U.S., with buyers confident that the metal will rebound from the decline, Ron Currie, sales and marketing director, told Bloomberg in a phone interview from Perth.
“We haven’t seen levels like this since the 2008 global financial crisis,” Currie said yesterday. “Compared to March sales, April sales have doubled or tripled,” he said.
“We worked all weekend to keep the factory running to make more stock and that was only to fill orders,” Currie said from the facility founded in 1899. “We’re being inundated with people buying products.”
As the Perth Mint’s Approved Dealer in the EU, GoldCore are seeing a similar increase in demand – particularly for Perth Mint gold bars and allocated bullion accounts.
Bullion buyers who had been planning to buy coins and bars in the coming months have brought forward their purchases due to the much cheaper prices and concerns about rising premiums and difficulty in securing supply.
“We’re seeing people are coming into the market because the price has come down, they think they can afford it now and expect that it will go up again,” Currie said. “The U.S. has got the money to purchase metal and is doing so as a hedge,” he said, referring to individual investors. “It’s extremely busy for us in the U.S.”
Coin sales by the U.S. Mint are set for the highest month since December 2009, while premiums to secure supplies in India rose to five times the level before the slump.
While prices have gained 11 percent from a two-year low on April 16, they are still heading for the biggest monthly loss since December 2011.
Increased physical purchases may help to offset declining holdings in ETPs, which are on course for a record contraction in tonnage terms this month, according to data compiled by Bloomberg. Holdings have contracted 168 tons in April as weak more speculative hands were shook out of the market on the price decline.
Billionaire John Paulson, the biggest investor in the largest exchange-traded product backed by bullion, reiterated his bullish view on prices.
The U.S. Mint said on April 23 it suspended sales of coins weighing a 10th of an ounce after demand more than doubled from a year earlier. The mint has sold 209,500 ounces of gold coins so far in April from 62,000 in March, according to data compiled by Bloomberg. The U.K. Mint said purchases tripled in April.
Gold is now testing resistance at the 50% retracement level and further price weakness is possible. However, the fundamentals remain as sound as ever and securing ownership of gold and silver bullion coins and bars at these prices and at these still relatively low premiums remains very prudent.
This article was posted: Tuesday, April 30, 2013 at 11:33 am