News Header

 

Strong Physical Demand for Gold Seen By Analysts

Release Date: 
Wednesday, September 28, 2011

Physical demand for gold was a key factor supporting the metal, according to market experts. Physical purchases remain "very visible" across much of Asia, Edel Tully, the London-based analyst at UBS AG, wrote in a report. UBS noted this week that "Physical demand right now is not just decent, it is exceptionally strong." Marc Ground, an analyst at Standard Bank Plc, concurred, noting "physical demand out of the Far and Middle East remains strong." Saxo Bank's Ole Hansen also noted that increased physical demand should help support gold prices.

Commerzbank analysts wrote that lower prices are driving increased buying of physical gold.

"In India especially, where the festival season is about to begin, demand is reported to be high and some local traders are already speaking of supply bottlenecks," said Eugen Weinberg, Commerzbank's head of commodity research, in a note.

Premiums for gold bars elsewhere in Asia jumped to their highest level since at least February after a drop in prices spurred buying from jewelers and speculators, tightening supplies, according to dealers. Volumes on the Shanghai Gold Exchange hit levels not seen since the Lunar New Year in January, UBS wrote in a research note.

Commerzbank also highlighted that European central banks could soon join their emerging-market counterparts as net buyers of gold. "The price of gold should be well supported on this front in the medium to long term," Commerzbank said.

Standard Bank's Mark Ground also discussed Europe, saying "the continued fiscal/debt problems facing the region should point to further upside for gold." HSBC commented, "If the euro zone's efforts to remedy the sovereign debt crisis falter, gold could still rally even if riskier assets sell off," said HSBC. "Much would depend on if the financial markets become sufficiently rattled that investors turn back to bullion as a safe haven rather than trade it as a surrogate currency."

LGT Capital Management provided their price outlook and assessment of silver demand in a research note. "We remain of the opinion that, on a medium-term horizon, silver is undergoing a process of transformation from a basic raw material for manufacturing and jewelry to an asset for financial investment and a monetary means of payment," the firm said. "For this reason, we believe that global investment volumes will increase and a lasting demand trend will prevail." LGT expects to see silver in a $42-46 per ounce range for the rest of 2011.

(Source: "Calm returns to gold market after big swings," MarketWatch, September 28, 2011; "PRECIOUS-Gold steadies as stock markets turn higher," Reuters, September 28, 2011; "Gold May Decline in New York Trading as Investors Hold Off After Rout," Bloomberg, September 28, 2011; "PRECIOUS-Gold jumps 3 pct on physical buying, soft dollar," Reuters, September 27, 2011)

News Footer

 

†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

To receive free information package on gold and precious metals investing, call Goldline at 1-800-963-9798.