by Alasdair Macleod, Gold Money:
Yesterday, the World Gold Council released its estimate of gold demand for the first quarter of 2016, which compared with supply estimated at 1,081 tonnes.
While the WGC collects its figures assiduously, the demand figures are only those that are known from trade associations, central banks, and ETFs. Drilling down into the figures, according to the WGC, Chinese demand for the quarter totalled 241.3 tonnes, whereas according to the Shanghai Gold Exchange, it delivered 516 tonnes to the public from its vaults. The substantial difference cannot be satisfactorily identified as far as the WGC is concerned, but this illustrates the difficulties in tracking down accurate figures.
One category that is easy to identify is ETF demand for physical metal, and this increased to 364 tonnes, the highest net inflow since 2009. There can be little doubt this is down to two factors: the improved technical position with the establishment of a new bull phase, and negative interest rates in both the euro and the yen. But while this has spurred demand for securitised gold, there is no such increase recorded in demand for bars and coin. That cannot be right. Physical demand must be considerably higher than the WGC figures reflect.
On futures markets the gold price fell on Monday from last Friday’s close of $1287, hitting a low point of $1257 on Tuesday. A rally took the price back up to $1280 at one stage yesterday, before slipping back to $1263 last night. However, in early trade this morning gold and silver opened higher at $1274 and $17.09 respectively in early European trade.
Gold had become very overbought, with the Managed Money category noticeably long, as the next chart shows.
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