Despite the recent fall back in the gold price all the structural imbalances in the global economic system remain in place and ever-growing Chinese and Indian demand could turn supply/demand forecasts on their head. Holdings in the SPDR Gold Trust remained unchanged. While holdings in the iShares Silver Trust, the world’s largest gold-backed exchange-traded fund, fell further to 10,526.70 tonnes, its lowest since November, spot gold gained 0.2 percent to $1,348.25 an ounce by 0341 GMT, but was on course for a third consecutive week of falls. U.S. gold edged up 0.1 percent to $1,347.8.
The recent downturn in gold and silver prices is a healthy correction that will not last long, traders and analysts said, a great time to buy.
“There’s some selling pressure still ongoing in the gold market,” said Yingxi Yu, an analyst at Barclays Capital. “But we still expect prices to venture into uncharted territory sometime this year. The macro environment still looks supportive for investment interest in gold.”
An improved economic outlook dampens gold’s safe-haven appeal, but inflation worries down the road will again drive investors to the precious metal, Yu said. Also weighing on sentiment, the CME Group, the parent of the Chicago Board of Trade, said it would hike requirement margins on gold futures by 11 percent, and silver futures by six percent.
The dollar index pared some gains from the previous session, as the euro held its ground with investors wary of getting too bearish on the common currency after a recent rally turned round sentiment.
The physical market in Asia remained buoyant, as jewelers, investors and bullion traders hunted for bargains after prices fell to nearly $100 below the record high of $1,430.95 hit on Dec 7. Chinese activity is expected to slow as the week-long Lunar New Year holiday in early February draws closer.
“Demand is still strong, with Thailand being the major buyer,” said a Singapore-based dealer. Considered a safe investment against economic and related crises, gold is and will be enjoying sustained growth in demand, even though its price remains at $1,346 per ounce it will go much higher, and may reach as high as $1,600 this year if not more. Resurgence in investment demand was propping up gold prices Monday. Gold for February delivery was adding $5.30 to $1,346.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,352.40 and as low as $1,340.70 while the spot gold price scooted $4.60 higher, according to Regal Assets gold index.
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