A new outlook and revision released yesterday to its Gold Survey 2012, Thomson Reuters GFMS said it expects gold to extend its more than a decade long bull run in 2013, with prices potentially testing $1,900 per ounce in the first half of the year, as solid demand for the metal from central banks and from opportunistic buyers in India and China outweighs a “sizeable bearish contingent” in the market. This report helped give markets a boost as gold broke above the 1680 price level. Gold futures declined, pulling back after gains over the past two trading sessions, but prices finished well off their lows of the day amid upbeat prospects for investment demand. This morning gold is trading at 1678.05 relaxing a bit. Gold prices are consolidating in a tight range since two days failing to breach strong resistance at $1685 levels.
Despite the Beige book indicating economic growth was held down by the fiscal policy, gold could not recover. It means fundamental weakness is still working on gold while the market division is also playing a pivotal role in gold’s move on intraday basis.
Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,334.42 tons, as on Jan 16. Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 10,734.99 tons, as on Jan 16.
Reports today are likely to show an improvement in the US housing sector. Building permits are expected to improve while the starts may increase at a slower pace after the US housing delinquencies reduced in recent times. However, the Philadelphia Fed manufacturing may not improve much after the Beige book indicated except three regions among the twelve in US could not improve much in manufacturing. Overall, traders can expect the housing sector release will the major support for the dollar to get strengthen and hence gold may remain under pressure. There are no euro area releases today. Gold is expected to remain range bound in today’s session moving between the 1670-1685 price levels.
Base metal were trading lower mirroring similar trend in contracts on the London Metal Exchange, where prices declined on firm US dollar against the euro trading now at 1.3302 and caution in the market ahead of China’s growth data. Investors avoided taking major positions due to caution ahead of China’s gross domestic product data due to release on Friday. Silver fell by 0.65% ($31.33) this morning. Silver however may rebound as the investment demand is remaining at its peak. ETP holdings rose by 50tons yesterday while the I-share holdings have also increased.