Wednesday, September 28, 2011

Advantage East

Indian ex-duty premiums: AM $11.41, PM $3.60, with world gold at $1,645 and $1,659.90. Lavish, and ample, for legal imports. The rupee firmed 0.6% to close at $1= R48.75 (R49.065) but the stock market closed down 0.47%.

There are quite a few stories testifying to a strong upswing in Indian off take, for instance

Gold rush in Ahmedabad, month of Shraadh notwithstanding

http://online.wsj.com/article/SB10001424052970204
226204576598031357845492.html

http://www.marketwatch.com/story/the-cruelest-month-for-gold-2011-09-28

This is attributed to the pattern of Indian appetite ahead of the key Diwali festival. In the current opinion climate in the West, this concept could be influential. JBGJ, however, sees October as usually being a reaction to the normally strong experience in September – as Hulbert notes

"…just as September is the worst month of the calendar for stocks, it is the best one for bullion."

This has not been the case this year!

Vietnam gold today stood at a premium of $83.45 to world gold of $1,642.60 (Tuesday $95.96/$1,633.15). The Vietnamese authorities are making noises about allowing more gold imports.

Shanghai gold closed at a premium of $11.87 to world gold of $1,658.05 on lighter volume equivalent to 13,927 NY lots (Tuesday $9.17/$1,652.30). The Yuan was moved up to a 6.8% post $US "depegging" appreciation (Tuesday 6.7%). China is closed all next week.

On day session volume equivalent to 17,105 NY lots TOCOM open interest slipped 2.569 tonnes (826 NY lots). The public cut their net long 2.289 tonnes (5.2%) entirely by reducing their longs. The active contract closed down 24 yen and world gold lost 50c during the session to go out $7.40 below the NY 4PM level.

This morning having weakened on the TOCOM open, gold abruptly rose over $20 just after the close – also approximately the European open, resulting in a Dec gold high up $19.50 around 3-15AM. Since then the general trend has been down. Estimated volume at 11AM was 142,569 lots; CME website volume at 8AM was just over 80,000 lots.

As noted last night Western observers are very despondent, especially if susceptible to charts. No doubt this will lead to selling on strength – and of course the shorts are well supplied with ammunition in the form of short term profits. A great deal of physical is likely to change hands in the immediate future as the Eastern buyers take advantage of the West.

Revisiting Monday’s lows will take an immense effort.

On the other hand, MarketWatch carries a story by Mark Hulbert pointing out that October has a pattern of being soft for gold:

"Over the last three decades, the London PM Fixing Price in U.S. dollars terms has lost an average of 0.9% during October. That compares to a 0.6% gain in all other months."

See

"The lower prices have attracted customers by the hoards resulting in sell-out of 10gm (99.5%) gold bars or coins in the city."

Dow Jones carries a story quoting the president of the Bombay Bullion Association:

"India's gold demand during the peak festival season is expected to rise by around 65% to around 150 metric tons, with a slide in prices as well as good monsoon rains driving up rural purchases, the president of the Bombay Bullion Association said Wednesday.

Demand during the festival season last year was around 90 tons.

"This week alone, the demand is expected to be around 100% more than last week," Prithviraj Kothari said."

JBGJ emphasis. See