Gold Silver Worlds: In his weekly market review, Frank Holmes of the USFunds.com nicely summarizes for gold investors this week’s strengths, weaknesses, opportunities and threats in the gold market. The price of the yellow metal recovered from past week’s losses. Gold closed the week at $1,350.80 which is $34.55 per ounce higher (2.6%). The NYSE Arca Gold Miners Index went 7.94% higher.
Gold Market Strengths
India’s third-largest gold fund has reopened to investors after disallowing buy-ins three months ago. Reliance Gold Savings Fund, which manages about $300 million, originally closed to support government efforts to curb bullion demand and control a rising trade deficit. “The economic conditions are getting better and the dollar has come down…,” said Sundeep Sikka, CEO of Reliance Capital Asset Management, justifying the re-launch. The rupee has appreciated 11 percent from its August lows, which could revive investment interest for physical gold and put pressure on supplies.
According to the most recent data from the Indian market, current premiums for physical delivery are running at around 18 percent over the spot price of gold. The chart below shows that the premium has been steadily rising over the last two years, but it has accelerated since April of this year. According to Hebba Investments, a Seeking Alpha contributor, high premiums usually signify bottlenecks in the supply chain or a general shortage in the physical market; a shortage being extremely bullish for the gold market. In addition, Asian press is starting to pick up on this story and dealers are complaining that physical gold is in short supply. This is evident by people not willing to sell their old jewelry at these prices, according to a wholesaler in Kolkata.
Gold Market Weaknesses
Mineweb contributor Lawrence Williams reported on this month’s unusual gold trades on the futures markets, which are now occurring almost daily. The chart below, by Reuters’ Frank Tang, shows the number of contracts traded daily and the corresponding movement in the gold price. What are visible are massive trading volumes every day of over 5,000 contracts, all around the same time. On the first of October, as well as on October 10, there were massive trades of over 20,000 contracts.(...)Click here to continue reading the original ETFDailyNews.com article: SPDR Gold Trust ETF Investors Weekly ReviewYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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