Commodities | Nov 21 2013
India is known as the world's largest consumer of the metal. Last year the economy demanded 864 tonnes and this year it was tipped to demand close to 1000 tonnes. However, with Government duties it is anticipated that that it will fall short of the target by about 100 tonnes. Interestingly enough, when the Government introduced its 10% duty to help curb the rupee weakness and high trade deficit, imports between May and October dropped by 142 tonnes. It is anticipated that the local premiums will continue to rise and in early November they traded to a record high of US$130. In fact, as demand is falling so too is India's ranking as the top consumer. It is now predicted by the WGC that China will take the number one position from India, consuming close to 1000 tonnes. Demand from China continues to remain strong and in the last quarter, traditionally a slow period, demand picked up by 18%. The flow of Gold from west to east continues at a rapid rate.
So when we look at the metal with “rose” coloured lenses we like to be bullish, however the fundamental news needs to be questioned a little more. When we look for bullish reasons to buy the metal they are becoming few and as a result of the failing rally we bought into, we have to be skeptical about the next bull market. It will eventually come, however at the moment we feel that we are in for more consolidation. A break of US1265-70 will confirm this.
We continue to toy with support. The metal does look heavy although momentum indicators look positive. We feel the next few days will make it or break it for the commodity. We are long, however nervous about the position and may even go short.
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