UBS: Physical-Market Participants Likely Stepping Back On Recent Gold Rise
Friday October 25, 2013 8:15 AM
Gold has benefited lately from a weaker U.S. dollar and reassessment of monetary policy expectations due to softer data and continued political and fiscal uncertainty; however, physical demand appears to have waned at higher prices, says UBS. “Gold is currently above the 100-day moving average at $1,323.83 and hovering close to the 50-day moving average sitting at $1,342.47; the last time prices stayed above both technical levels for a prolonged period was in late August to early September,” UBS says. “For the physical gold market, the 8% rally from the lows printed this month has meant that participants here are likely stepping back a bit. This is noticeable in China, where average volumes on the Shanghai Gold Exchange this week are about 30% lower versus the previous week at 11 (metric) tons, and premiums are coming off.” In India, meanwhile, lower-than-usual buying ahead of the Diwali festival has been blamed largely on supply issues as the government seeks to limit imports due to the current-account deficit. “While our index of physical sales to India continues to be uninspiring, the sense is that premiums are elevated and are expected to rise further,” the bank says.