Gold claws back ground as Asian buyers step in

Physical demand in India and China rises but holdings in exchange-traded products down

PUBLISHED : Saturday, 20 April, 2013, 12:00am
UPDATED : Saturday, 20 April, 2013, 5:35am

Gold climbed, paring a fourth weekly decline, as rising physical demand from Australia to China countered outflows from exchange-traded products. Silver headed for the worst week in almost 19 months.

Spot gold rose up to 2.6 per cent to US$1,426.05 an ounce but fell back to US$1,404 at about 3pm in London. Prices slumped to US$1,321.95 on Tuesday, the lowest since January 2011.

Gold had plunged 14 per cent in two sessions, including Monday, on growing optimism that an economic recovery in the United States will curb appetite for the precious metal as a haven.

Prices also dropped on concern Cyprus may lead other European states in selling the metal from reserves, according to Goldman Sachs.

Retail sales and jewellery demand soared in India and China, while the US Mint has sold 153,000 ounces of American Eagle gold coins this month, the highest in almost three years.

"We are already seeing a strong response to the fall in prices, with a sharp pickup in physical gold sales by investors and retail consumers in the two key consumer markets - India and China," Mark Pervan, global head of commodity strategy at Australia and New Zealand Banking Group, said in a note yesterday. A stabilisation and fresh buying of gold-based exchange-traded products might "restore some of the lost confidence" for long-term investors, he said.

Holdings in ETPs backed by bullion decreased for a 13th day to 2,348 tonnes, the lowest since January last year. Assets in the SPDR Gold Trust, the biggest ETP, fell to the lowest in three years.

Not everyone is pessimistic.

Gold will rebound from its two-year low and rally as much as 29 per cent by December as scepticism over the recovery in the global economy increases demand, according to billionaire Indian jeweller T.S. Kalyanaraman. Bullion will gain to US$1,800 an ounce, Kalyanaraman, chairman of Kalyan Jewellers, said.

A rush in India to buy gold jewellery and coins would boost imports this quarter as traders and banks ran out of stockpiles, Mohit Kamboj, president of the Bombay Bullion Association, said on Thursday.

Daily customer traffic in Hong Kong and Macau rose as much as 25 per cent from Saturday to Tuesday, said Chow Tai Fook Jewellery.

"We've seen enormous numbers of people, and they're all buying," said Nigel Moffatt, treasurer of Australia's Perth Mint.