-- Posted Wednesday, 4 April 2007 | Digg This Article
We've gotten our update on ECB bank sales the past week, and just as we figured, we've seen another week of massive increases in bank reserve gold selling into the market. This past week's additions are roughly 17.5 tonnes of gold into the market. That means that in the last three weeks, 45.5 tonnes of gold have flooded out of ECB banks into the gold market. For a point of reference, the previous three weeks, sales had totaled roughly 7 tonnes total. Considering the past price action in periods when selling has increased this dramatically, the gold price has held up considerably well and even made advances in the face of this massive selling pressure. The last two examples of similar selling pressure into the market had collapsed prices; Sept. '06 when +50 tonnes were sold into the market, prices fell nearly $30; May '06 75 tonnes were sold into the market and prices fell over $100 per ounce.
That gold has absorbed this increased selling and continued higher should highlight two things. First, the physical demand in the marketplace at present is quite robust to be able to digest these levels of supply and trend higher. Second, this can now be confirmed as the reason the gold market has not been reflecting the current market conditions that should be pushing prices higher. The wet blanket that has been thrown on this market should be lifted in the coming weeks. We wouldn't be surprised to see major price spikes during the London open simply because the bank gold supply dries up and continued demand forces prices higher. Assuming France is the lone major seller left in the market at present, the Bank of France is coming very close to concluding their own bank's allotment of sales under the Central Bank Gold Agreement II. Germany has said they will sell no gold in '07. Spain and Portugal, after having sold massive amounts in '06, have sold no gold reserves in the past 5 months.
This is a significantly bullish event for the market. We're heading into the peak demand season and the supply/demand fundamentals will take control of this market.
Today is also US oil inventory report day, 10:30 AM EST. Significant draws or additions to inventory figures will always move energy and conversely precious metals markets.
On a side note, Iran has announced that they will be releasing the 15 British sailors. We'll be keeping tabs on this news and it's impact on the market today. Interestingly, the release of this news hasn't hurt the gold price this AM.
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-- Posted Wednesday, 4 April 2007 | Digg This Article
