Gold may come under selling pressure

Demand from retail investors could put a floor on the prices of gold, experts say

Image Credit: Gulf News archives
Pile of gold coins and bars at a gold shop in Bur Dubai.
03 Gulf News

Abu Dhabi: Gold may come under fresh selling pressure in the week ahead on continued off-loading by Exchange Traded Funds (ETFs) and institutional investors, but, demand from retail investors could put a floor on the prices, experts say.

“The ETF outflows, which are reportedly large and significant so far this year, may not be all what they seem to be. There has been a major change in the pricing structure for gold holdings in unallocated accounts in Switzerland. It has been reported that some Swiss banks have made it more expensive for their customers to hold metal in unallocated accounts than in allocated accounts. The reason for that might be that the banks will have a much higher capital requirement for gold held in unallocated accounts, as they are an on-balance sheet item for the bank,” said Gerhard Schubert, Head of Commodities Wealth Management at Emirates NBD in his latest research note.

He said despite some conflicting data, the trend seems to be of a growing and stronger recovery in the US.

“This will not be positive for the outlook for gold, unless there are inflationary tendencies visible, and we might be years away from that scenario. The current price levels are comfortable, but it seems that our customers are looking to liquidate, at least some of their holdings,” he added.

On Friday, gold prices ended the week trading at $1,464.20 a troy ounce.

Pradeep Unni, Senior Relationship Manager at Dubai-based Richcomm Global Services DMCC said “gold imports by India, the world’s largest consumer, are poised to fall after the central bank restricted overseas purchases by banks to reduce domestic demand and curb a record current-account deficit.”

Banks will be allowed to import bullion on a consignment basis to meet only genuine needs of exporters of gold jewellery, the Reserve Bank of India said in its annual monetary statement.

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  • Jeny Michaels

    May 5, 2013 2:48

    13th May is Akshaya Trithiya and Gold demand from India will surge....

  • Louie Tedesco

    May 5, 2013 11:22

    A parallel universe is when up is down and bad is good. When the stockmarket couldn't care less about the real economy as long as the FederalReserve is willing to push a trillion dollars into the system. Bankerstake a big part of that money and buy stocks with it – the stockmarket goes up and UP and UP. Why not buy stocks, they have nothing torisk, it’s not their money! When the banks buy stocks they onlykeep a portion of them and pledge the rest to the Fed for reserves. Ifgold reached new highs the public loses trust in fiat-paper money so theCentral Banks cannot allow gold to rise. Last Tuesday the ChicagoPurchasing Manager Index came in at 49 for the first time below themagic 50 number since the crash of 2008. With all of the other lousyeconomic data points last week the logical conclusion would be that thestock market would finally start a true correction - downwards. Thereason that it wasn't down 400 points is the Federal Reserve was insession of a two-day meeting on monetary policy. Already before that,there had been rumours that with low inflation and the constantly badeconomic news the Fed may decide to do even MORE stimulus. The bottomline is this is a skewed market. Earnings don't exist and no one cares.They're buying stocks. Stocks that they can make go higher. If thereever was a reason to buy gold and silver, the time is now. Use thestock market to make profits and take the profit to buy your gold andsilver Support your gold souk merchants!.

  • ST

    May 5, 2013 11:15

    What does that means for layman, price will go up or down?