munKNEE.com Your Key to Making Money
The U.S. holiday season effectively…[begins] on the Independence Day weekend around July 4th…
[and ends] on Labor Day [weekend around Sept. 5th]. These two holidays can represent major turning points in investment sentiment…so gold investors will be nervous at what the post-holiday period will bring…and. [as such,] sentiment indicators…will thus be followed with particular interest for the next few days to see where the market is possibly headed.
The comments above and below are edited ([ ]) & abridged (…) excerpts from an article by Lawrie Williams(lawrieongold.com) to provide a faster and easier read.
Gold investors will have Labor Day 2011…written] on their hearts as that was effectively the day the gold bull market ended, and a four and a half year bear market in the precious metal began. This year saw the big SPDR Gold Shares (GLD) gold ETF reach its interim peak at 982.72 tonnes immediately following Independence Day…[and it is currently] at 937.89 tonnes – a fall of…[4.5%] in only two months…
The GLD figures tend to be a strong indicator of North American gold investment sentiment, particularly from the institutional viewpoint…[but ongoing supply and demand patterns will also be viewed] with huge interest by gold investors…
- Asian demand has been seen as weak with the two largest markets, China and India, taking in less gold that previous years.
- Swiss gold import and export statistics have reversed with respect to some key nations (notably the UK and the US) which usually export gold to Switzerland for re-refining. On the other hand, some key nations (notably the United Arab Emirates (UAE) and Hong Kong.) which had been significant importers of Swiss gold to meet their own trading needs have, in turn, become the largest exporters of gold back to Switzerland
…The remarkable change in gold flows has been for two main reasons.
- The first is that physical gold availability in the West has been becoming tight – particularly due to the big first half of the year needs of the major gold ETFs to maintain their gold balances in the light of big money flows into them by gold-focused investors.
- The second…is that the big gold fabricators and traders in nations/states like the UAE and Hong Kong have been suffering from a severe downturn in gold demand from their traditional purchasers, mostly in Asia, and have been liquidating excessive inventories built up in the expectation of continuing high Asian demand levels. With the substantial rise in the gold price so far this year this has been a profitable trade.
…Is all this about to change and will [the passing of] Labor Day be the trigger?
- The return of fund managers and traders to their desks may prompt a serious rethink in terms of gold investment policy and this could take the gold price in either direction depending on consensus.
- This makes the past two months’ gold price mostly range-bound movements perhaps the calm before the storm.
…What is changing which could affect the price scenario?
- By all accounts Indian and Chinese demand is beginning to pick up again while, on the other hand, gold ETF inflows have been replaced by outflows, but this could change rapidly with any improvement in sentiment towards gold investment.
- Net central bank gold buying appears to have fallen off…[but] perhaps not too much should be read into this yet given there are only three significant central bank gold buyers – Russia, China and, to a lesser extent, Kazakhstan, and month by month announced reserve increases by the first two of these can be somewhat variable.
On the gold production front, we may, or may not, have reached peak gold, although evidence suggests we are now there or thereabouts…so gold fundamentals are somewhat mixed in outlook, but close to balance and the markets could move it in either direction.
We remain gold positive as even when price weakness has appeared with some big technical sales on the COMEX futures market driving the price down, such raids have tended to prove short-lived in duration and effect suggesting there are plenty of buyers out there in the $1,300 – $1,340 range where gold is currently trading.
…It could be a whole new world for gold from today onwards when the traders and fund managers are fully back on track…
Disclosure: The above article has been edited ([ ]) and abridged (…) by the editorial team at 
munKNEE.com (Your Key to Making Money!) to provide a fast and easy read.
“Follow the munKNEE” on Facebook, on Twitter or via our FREE bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner)
