Indian Premiums Surge $30 To Record On Physical Demand, Supply Crunch

Today’s AM fix was USD 1,276.00, EUR 941.49 and GBP 766.50 per ounce.
Friday’s AM fix was USD 1,285.75, EUR 947.15 and GBP 804.30 per ounce.

Gold fell $17.20 or 1.34% Friday, closing at $$1,270.20/oz. Silver slipped $0.30 or 1.39% closing at $21.29. Platinum dropped $13.51 or 1% to $1,366.49/oz, while palladium rose $3.22 or 0.5% to $709.22/oz. Gold and silver had negative returns for the week at 3.08% and 1.80% respectively.

Gold remains near three month lows today after another peculiar large sell trade Friday pushed prices lower, despite the failure of weekend talks in Washington to reach an agreement to avert a U.S. debt default and despite very robust demand from China and India.           

Gold fell over 1% Friday after unusually large sell orders in New York futures prompted a $30 an ounce drop in prices in about three minutes and a brief trading halt. The aggressive selling reaffirmed suspicions of gold price manipulation and suppression. 

Gold in US Dollars 5 Years with Support and Resistance - (Bloomberg)

Senate negotiations to bring a boiling fiscal crisis to an end showed little signs of material progress over the weekend and there were no guarantees that the U.S. federal government shutdown was about to end or that a historic default would be avoided.

We believe that a default will be avoided again this time through politicians cobbling together another makeshift agreement at the last minute. However, long term the U.S. is almost certainly set to default either through debt default or a quasi default through devaluing and debasing the dollar and significant inflation.

Gold had its second week of losses and is looking vulnerable to further weakness technically. Gold’s weekly close below $1,300/oz on Friday makes it vulnerable. There remains the potential of a sell off to test the next level of support at $1,200/oz and the June 28th low of $1,180/oz.

A daily or weekly close below $1,180/oz would be bearish and could result in gold falling to test support at $1,000/oz which was a previous resistance in 2009 (see chart below).

Gold premiums in India, the world's biggest buyer of gold along with China, jumped sharply last week as the festive season began, driving up demand, and supply remained tight on a lack of imports according to Reuters.

Indian Gold v U.S. Gold Premium - (GoldChartsrus.com)

Premiums to London prices jumped to $30 to $40 an ounce from last week's $5 to $7, the All-India Gems and Jewellery Trade Federation (GJF) said.

"There is no official gold available. People are not willing to sell their old jewellery either, at these prices," said Sudheesh Nambiath, an analyst with metals consultancy Thomson Reuters GFMS.

"Current availability is largely unofficial metal, which is being sold into market at a lower rate than the prevailing premium."

Gold imports have virtually dried up in India. Battling a high trade deficit, the country has set the import duty on the precious metal at a record 10%.

Indian Gold v U.S. Gold Premium - (GoldChartsrus.com)

India's gold imports dropped more than 95%, to 7.24 tonnes in September, from a record 162 tonnes in May but India looks set to see gold imports of close to 1,000 tonnes again in 2013 despite government attempts to curb demand.

Meanwhile, Chinese gold demand remains very high and China is now certain to become the world’s largest importer of gold in 2013 and to greatly exceed the 1,000 tonne demand level in 2013.

Zero Hedge reported Friday how “August was the second highest gold importing month in history, lower only compared to March when it imported an unprecedented 223.5 tons” and gave the all important context of China’s huge gold demand, including their official central bank stealth demand, which is being ignored by the market for now.

China Gross Gold Imports From Hong Kong: 2012 v 2103 (Tonnes) - (Zerohedge)

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