Commodities | Oct 24 2013
Dashed hopes of tapering for the time being and even further stimulus efforts have spurred a more positive outlook for gold. The move to three-week highs certainly helps endorse our positive sentiment for the metal. The weak jobs data out of the US has prompted talk that the Fed's US$85 billion a month spend will continue for the foreseeable future, prompting traders to put back on “stimulus trades”, lower USD and higher gold. In addition to this, the metal has held up well in respect to continual liquidations in the ETF [exchange-traded fund] market. Last Monday saw the largest decline in tonnage from the largest of the EFTs, the SPDR, which saw a drop of 10.51 tones. This brings the total amount of gold controlled by the SPDR ETF market to 871.72 tones. A while ago we mentioned the concerns we had that the performance of gold was linked to the size of the Gold ETF markets and the fact that if these investors decided to lose faith in the metal, then we would continually see rallies sold into. This is much in the same vein as when miners once sold forward gold for funding, and similar to central bank sales. In those times the metal found it extremely hard to react to market nuances given a steady stream of sellers. In reality the market just lost interest and the metals just ebbed a long.
If we can manage to break about US1340 then we can suggest some more support for the market. We are just entering into the Diwali Festival in India which starts on the 3rd of November and ends on the 7th November and it is around this period is when demand for the precious metal is at its strongest. Hopefully the recent moves by the Indian Government to impose import duties on gold will not affect sales to much.
We are long gold at an average of US1302 and will probably look to add to positions on a break above US1345.
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