The African Standard bank released its daily commodities analysis and report for September 26th. The report focused on analyzing gold physical demand.
Gold physical demand provided price support on approach of $1,300 per ounce. The absence of significant additions to new speculative longs might cause the gold price rallies to fade. Gold price key resistance is currently at $1,348, which is higher level than physical buying can support.
The U.S. government 10-year bond yield is lower now at 2.62%, from 2.84% a week ago. This weakness in U.S. bond yield moved gold higher as an alternative hedge fund.
After the FOMC meeting, the physical demand on gold started to improve at a better than expected rate. Physical gold demand from Asia improved marginally despite the price was heading towards $1,300 per ounce. There has been a clear improvement in demand on the Gold Physical Flow Index. However, the demand is still below the levels seen in June and July.
The YTD demand in 2013 remains remarkably strong compared to 2012 and 2011. The physical demand from Asia seems able to absorb gold-backed ETF liquidation. ETFs liquidation slowed since August quite well. However, the bank have doubts concerning the ability of physical gold demand to push gold price to sustainable higher levels, such as $1,400 level seen in August.
Gold physical demand has become sensitive to price change. For instance, demand faded quickly on August when the price of gold approached $1,400. It’s expected to see the same movement if the price hit that level again. Therefore, gold physical demand provides good support around $1,300 level, but as the price move further away, the support is likely to fade.
Seasonal demand might drive the price higher and attract more speculative longs. It’s been noticed that demand on gold improve starting September. However, buying demand from India, the largest gold consumer in the world, has been lacking strength this season. It’s probably because of the weak Indian rupee and high import duties.
COMEX gold future for December delivery settlement was at $1,332.60, DGCX gold future for October delivery was at $1,331.04, CBOT gold for December delivery at $1,336.20 and TOCOM gold for June delivery was at ¥4,240 per gram.
Gold price technical support is at $1,309 and $1,300 while technical resistance $1,343 and $1,348.