The price whipsaw has started this morning as US economic reports began hitting the wires. Gold and other precious metals have recovered convincingly off their bottoms in the London market, rebounding nearly $5 per ounce before the economic reports began hitting the tape. This should be an indication that unless we see some wildly unexpected PPI and CPI figures out at the end of the week, the tech trading community sees a bottom in at the $647-650 range.
We've got energy data from the US hitting the tape at 10:30 AM EST and after that the release of the Fed Beige Book this afternoon.
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We're heading into the precious metals markets notoriously quiet period during the summer months after having failed to break the $700 per ounce psychological level on numerous occasions over the past three months. While it has become readily apparent that the short-term, sharp increase in central bank sales helped to bottle up prices, what's most important is looking at what can potentially change over the summer months.
With major hedge book close outs looming, South African labor disputes, slowed down central bank sales and a number of potential geopolitical flare ups sitting out there, the summer is indeed looking anything but typical for the precious metals markets.
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Credit Suisse just released a research note calling for $700 gold this year. They also believe that silver has the potential to outperform gold in the next year. This follows on Citigroup, JP Morgan, UBS, Scotia Moccatta, and other bullion bankers notes out into the market calling for much higher prices into the second half of the year. Since we're in fairly good company expecting higher prices, the question becomes when to enter the market, when prices are low or when they've started moving back up? If the last five years of this markets have shown anything, it's that buying on pullbacks or adding to positions during periods of market weakness is always rewarded in the long term.
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According to the World Gold Council, Indian imports of gold increased n the first quarter and this trend has continued into April and May. Remember, the WGC put out a note with GFMS a few weeks ago saying that total demand had increased 4% in the first quarter of 2007. While they have not released any figures, it is encouraging to see more information about increasing total demand.
"India imported 211 tonnes of gold in January-March, a 50 percent jump over the same period last year, data from WGC showed. In 2006, gold imports were at 715.5 tonnes, down less than a percent over the previous year.
'Till May we have had very bullish purchases of gold and we don't see a scale-down from that,' Ajay Mitra, managing director - India, at the World Gold Council (WGC), told Reuters. Mitra joined in March as WGC's new India head.
Imports in April and May suggest the momentum is continuing, Mitra said. He did not give the figures." - Reuters article, June 13th
