goldcore.com / By Mark O’Byrne / 20 December 2013
Gold fell below support at $1,200/oz yesterday and is vulnerable to a further test of the June 28th low of $1,180.50/oz. A close below $1,180.50/oz could lead to prices falling to $1,100/oz and the next level of support is $1,000/oz.
Gold rallied from its worst closing price in almost three years after the Fed’s decision to marginally reduce its debt monetisation programme. Gold is on track to suffer its first decline since 2000 or first decline in 13 years.
The taper is not as bearish as some suggest as debt monetisation will continue at the whopping $900 billion per annum – down from over $1 trillion per annum and the Fed will maintain near zero percent interest rates for the foreseeable future.
Chinese demand may once again stem the decline in gold prices. Chinese buyers eagerly scooped up gold at bargain prices overnight after the 4% price fall this week and 29% fall this year.
Gold volumes for the benchmark cash contract on the Shanghai Gold Exchange (SGE), China’s biggest spot bullion market, climbed to a 10 week high as lower prices led to increased buying.
The volume for bullion of 99.99% purity climbed to 19,775 kilograms yesterday, the biggest since October 8, from 13,673 kilograms the previous day, according to exchange data compiled by Bloomberg. Prices fell on the SGE overnight for a third day, losing 2.1% to 235.85 yuan a gram ($1,208 an ounce), the lowest since February 2010.
Gold in Renminbi – Shanghai Gold Exchange – 5 Years
The surge underscores robust demand in the nation set to overtake India as the largest buyer of gold. When gold entered a bear market in April, demand for jewelry and gold bars surged in Asia, even as more speculative investors cut holdings in ETF products at a record pace.
China’s shipments from Hong Kong rose to the second highest on record in October, with the amount in the first 10 months in 2013 alone more than doubling to 955.9 tons. This does not include shipments directly into China that do not go through Hong Kong.
Chinese demand for gold has surged again this year and the World Gold Council’s estimate of demand reaching 1,000 metric tons, is increasingly being seen as very conservative. Chinese demand may be much, much higher with some analysts saying that demand may be close to the 2,000 tonne mark.