Join        Login             Stock Quote

March Should Bode Well For Gold

 March 02, 2012 03:16 PM

The beginning of March month could bode well for Gold as it is typically a strong month in two of gold's most important physical markets – China and India.

Cumulative data on the two Shanghai Gold Exchange (SGE) gold contracts since 2006 show that volumes usually pick-up towards the end of the first quarter. Indeed March is typically the second-strongest turnover month after January.

China and India have been largest consumers of gold, generating 55 percent of global jewellery demand and 49 percent of global demand, according to World Gold Council.

The demand in China likely reflects some post-Lunar New Year replenishing of stocks after the inventory draws over the holidays. A similar pattern holds for India where volumes normally edge up in March, before surging in April.

[Related -Automating Ourselves To Unemployment]

SGE gold volumes were the highest since late January, at 12,400kgs. Demand for kilobars and coins also emerged out of Europe as well, likely reflecting opportune buying and restocking. Demand was also evident across other Asian centers.Yet, it might take a few more days for physical demand to really come in with full force.

"Our index of physical sales to the country shows that volumes start picking up in March, before peaking April, when the market moves into the wedding season again, which runs through to May," UBS strategist Edel Tully wrote in a note to clients.

Meanwhile, one of the major festivals in India associated with hefty gold purchases, Akshaya Tritiya, falls on April 24 this year.

[Related -Fed: Waiting For June… Or Godot?]

"Seasonal elements, however, do not necessarily pan out. While history provides some guidance, there are no guarantees that things will play out as they have in the past," Tully said.

Tully said physical buyers can afford to be a little more patient at this stage as it is still very early in the month and there is plenty of time for the seasonal trend to kick-in.

That prices exhibited a sense of calm after the storm yesterday indicating a positive first step. Trading was range bound and the stability was somewhat restored, but should volatility ease in the coming week, then the necessary preconditions for post-price correction physical buying will be fully in place.

ETF buying was also evident a couple of days ago, with investors adding a hefty 338 thousand ounces (koz) on Wednesday, the largest daily increase to global holdings since late January. The GLD fund accounted for the bulk of ETF flows, having increased by just under 300koz this week.

Gold ETF holdings currently sit at an all-time high of 80.03 million ounces (moz) after about 900koz of additions last month, in line with January inflows. So far this year, investors have increased gold ETF investment by 1.86moz.

Gold starts a new month with the missing ingredients to its February run – physical demand and ETFs – now making their presence known.

Meanwhile, the report from Commodity Futures Trading Commission (CFTC) on trader positions is due later today and would offer some cues over how much longs increased from Feb 21 to Tuesday this week. Tully said given the increase in gold open positions over this period, the data will likely show a similarly strong expansion of gold net longs.

"That doesn't mean that gold is in a comfortable position again. It's not. But the desire to sell in size has gone, for now," Tully added.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.