Thursday, September 30, 2010

The CME Final for Wednesday indicates that on volume of 139,351 lots, 19.8% above estimate, open interest slipped 2,220 lots or 6.9 tonnes. Gold of course closed up $2 but was up $6.50 pre-open on what appeared to be relatively heavy volume. The obvious explanation is long liquidation, but the power of the early move raises the possibility that some carry-over short covering was going on.

India’s Banks were closed today which effectively means no reliable FX rates: Indian access to the global gold market was impeded. The stock market closed up 0.57% and so concluded Q3 up 14.9% for the year. This is the 7th consecutive positive quarter for Indian stock. Foreign portfolio inflows for 2010 jumped an astonishing 40.5% in September to pass the 2009 record: this momentum and the action of the dollar today suggest India’s bid for world gold will remain firm.

As noted last night, local Vietnam gold stood at a $5.75 premium to world gold early this morning (Wednesday $9.90/$1,308.70). Later in the day apparently the unofficial dong rate weakened, said to be because of activity by gold smugglers.

Shanghai gold closed at a $2.18 premium to world gold of $1,310.30 on volume equivalent to 5,942 NY lots (Wednesday (3c)/1,310.40). China is closed tomorrow and all next week.

TOCOM is nibbling. On day session volume equivalent to 7,496 NY lots open interest slipped 0.186 tonnes (59 NY) but the public added 1.153 tonnes (2.1%) to their long. The active contract closed down 12 yen and world gold barely moved during the session to go out $1.30 lower than the NY 4PM close.

Having attended the LBMA Conference in Berlin this week, UBS reports:

“Our conversations with refiners this week have convinced us that this source of supply will remain contained until the gold price reaches the $1350-$1400 area.”

This is important – the more so because the UBS analyst, Edel Tully, gained a great deal of experience surveying refiners at her previous employer, Mitsui.

Today gold started rising strongly around the European open, peaking up $7.20 at 8-50 AM NY. Pre-open volume however was barely half yesterday’s 41,000 lots. Heavy selling has subsequently erased this gain: a downswing of more than $14 at present. Estimated volume at 11 AM was 84,023 contracts.

Of course this is the end of Q3. Possibly a statement is being made. It is not one which will influence the Indians.