Commodities | Feb 23 2012
The potential for inflationary pressures coming to bear are perhaps a little more heightened today than they where a week ago. However, digging a little deeper, last week we mentioned the delicate balance between supply and demand forecasting the potential for a deficit. As investors get a little more comfortable with gold’s real return over equities, more players will enter the market. Bingo, supply demand comes into play.
Investors so far this month have ploughed more money into exchange trade gold products than for the whole of January. In total, inflows of purchases are set to rise more than 600,000 ounces in February adding weight to the numbers for January and thus added pressure to the supply side. To reiterate, from last week “third quarter 2011 demand for the precious metal was 6% higher to 1053 tonnes, yet supply was 1034 tonnes. Although both demand and supply increased it serves as a reminder that the market is delicately balanced and as such the dips have to remain attractive”. The demand for gold via the exchanges over the last two months has added a further 34 tons to the buy side.
Chart point:
The correction was short lived and the bounce looks pretty solid. At the moment we are testing resistance at US1760 and a break sets the tone for a good move higher. Although, we missed the dip keep an eye on this resistance level as if it goes we could expect a decent rally, which sees US1800 reached pretty quickly. On Silver if we get a break above US34.75 then we will look to trade the break.
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