But despite this reduction in physical gold movement into the country, the gold price has been strong (relatively in relation to recent months) driven mostly be at least signs of a minor change in sentiment towards the yellow metal in the West. This is making short speculators nervous and retail demand in the West has been seeing signs of a change - in part triggered over the past few days by the very disappointing non-farm US payroll figures coming in well below expectations and suggesting to the markets that any Fed interest raising programme may have been yet further delayed.
In truth, the recognition is coming about that the supposed U.S. economic recovery is not all it is purported to be. Some indicators show positive signs, but others not so and there is a worry out there that the next set of corporate earnings figures will emphasise the negative and put a heavy dent in stock market valuations. Some safe haven buying is thus returning to gold.
But while it seems to be North America which sets the gold price, much of the rest of the world is still showing some severe signs of economic weakness which is impacting on apparent dollar strength. As one columnist pointed out recently using an old quote, supposedly attributed to Erasmus in the 15th Century- 'In the kingdom of the blind the one eyed man is king' and the dollar is very much the one-eyed man in this context. In other words it's not so much that the dollar is strong, but that most of the world's other fiat currencies are weak - some hugely so. Hence the gold price in these currencies has been rising even faster than in the dollar in which most of the world only seems to view it.
Not long ago, we published a table showing how the gold price has been performing this year in terms of global currencies. Here's an update showing what's happened in the US dollar, the Euro, the pound sterling, the Japanese yen, the Chinese yuan, the Swiss franc, the Indian rupee and some major producer currencies:
What the table shows is that even in those countries where the gold price has fallen year to date, the falls have been small in percentage terms - in general less than the domestic equity markets have dropped, while in some nations - notably Canada, Australia and South Africa, the price rise has been very significant, so in general gold has been performing its safe haven role pretty well. This is very much contrary to the general impression from gold coverage in the major media which has tended to concentrate on the times gold has fallen, but neglected to cover much in the way of the gold pickups. And again the media is wholly focused on the US dollar price mostly neglecting the movement in other currencies.
So is sentiment changing? In that only just over a month ago when gold slipped below the $1100 mark, analysts from the major banks were falling over each other to predict dire things ahead for the yellow metal - forecasts of it falling below $1000 were commonplace - while the media emphasised that the major gold miners were putting in place contingency plans in case this should occur. What the media seemed to fail to grasp was that this was not because the miners believed gold would fall to those kinds of levels, but that the managers would not have been doing their jobs if they were not making plans 'just in case'.
However, almost immediately the bank analysts came out with their dire forecasts, something arrested the gold price fall (perhaps China putting a floor on it) and it stabilised and began rising again. While it has remained fairly volatile within a $50 price band there is beginning to be the feeling that the next major move may well be upwards, shorts are being covered 'just in case' and the gold bulls are looking a little less unhappy all of a sudden. The latest price jump has come in the wake of a perceived dismal US payrolls increase figure, but also in the absence of any Chinese buying due to the holiday there, is giving the precious metals markets something of a psychological uplift. Indian buying, which had been seen to be weak leading to gold price discounts, is anecdotally said to be turning around as the wedding and festival season comes into play. And on Thursday the Chinese start coming back into the market again which could give it another lift.
But gold is a fickle investment. There are too many vested interests with big money behind them seeking to control the paper market which has been setting the price virtually irrespective of physical supply and demand. For the most part these appear to have been suppressing the gold price - perhaps at the behest of some central banks which perceive gold as a threat. But bankers and traders are fickle beasts too. Money and profit is everything. If they see the tide turning they could well move in the opposite direction to recent activity.
The gold price appears also to have been moving on the perception of if and when the US Fed will start to raise interest rates. This may well be something of an irrelevance in the overall scheme of things. The Fed may well have talked itself into implementing an interest rates rise by the end of the year, but the way the US economy is going any such interest rate increase will be marginal - probably a max of 25 basis points - and will be symbolic only leaving us still with negative real interest rates with little likelihood of follow-up increases unless the US economy starts to show very significant improvement.
As I write, the US$ gold price has moved up to $1150 an ounce. If this level, or higher can be sustained that will give a huge boost to gold price sentiment.
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