Metal markets: Hedge funds selling gold, downturn potential still exists

17.05.2013 14:24
Metal markets: Hedge funds selling gold, downturn potential still exists

YEREVAN, May 17./ARKA/. The World Gold Council released on Thursday, May 16, the global gold demand and supply statistics. According to the statistics, the global gold demand slipped in the first quarter by 13.05% to 963.0 tons, from a year earlier, and by 18.95%, compared to the previous quarter.

Decrease of the global gold demand is mainly due to the drop of the investment demand amid the stricter control over the American banks. The existing deflation risks are also reducing the mid-term demand for gold as an instrument for hedging against the inflation and paper money risks.

Thus, in the first quarter the investment demand for gold slashed year over year by 49.27% to 200.8 tons, and by 52.63% -quarter over quarter. The share of the investment demand downed in the reported quarter to 20.85% from the fourth quarter’s 35.68% due to sales of the gold processed by ETF, investment and hedge funds. Together they sold 176.9 tons of gold.

While the physical purchases of gold were rising by 10.28% to 377.7 tons (year over year), the jewelry demand within the reported period increased by 12.27% to 551.0 tons. Meanwhile, the purchases made by the official sector have somehow fell. The Central banks at the reported quarter bought 109.2 tons which was 5.21% lower from the analogical quarter a year before.

We forecast within the framework of the current risks of the U.S. stimulus program, the supporting benchmark for gold will be 1,280.0 USD per troy ounce.

According to the technical analyses, the growing trend of this asset slowed down in the first quarter. However, the situation is still uncertain, and we believe the gold prices are likely to drop this year.

As the regulators begin screwing their non-traditional measures of soft monetary policy, the gold will be becoming more unattractive for investment. On the other hand, more rapid economic growth rates in 2014 will cause inflation thus raising the attractiveness of this asset. We think, in 2014 the gold quotes can return to the range of 1,600.0 – 1,700.0 USD per troy ounce.

Mikael Verdyan, an analyst at FOREX CLUB, specially for ARKA news agency.
The opinion of the author does not necessarily reflect that of the agency. E.O.—0-

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