Gold Prices Pop on Physical Demand

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"Gold prices have been reversing losses this morning. . ."

Gold prices have been reversing losses this morning amid a spate of physical buying, and as bargain hunters jump in to purchase the yellow metal after it hit three-month lows amid weak consumer confidence numbers.

Gold for August delivery was up $1.40 to $1,159.40/oz. on the Comex. The gold price Wednesday has traded as high as $1,165 and as low as $1,157.40. The U.S. Dollar Index was down 1.7% at $113.51, while the euro was unchanged at $1.30 against the dollar. The spot gold price Wednesday was losing more than $1, according to Kitco's gold index.

According to a Reuters report, traders in India, the largest gold consumer in the world, are witnessing a pick up in gold as it became more affordable.

Adrian Ash of BullionVault writes in his morning note that while physical buying has provided gold with support, there is still downside risk for the yellow metal. Quoting Mitsui's London dealing desk, Ash writes: "Physical demand should support here, but with the third quarter largely absent of major gold buying holidays and festivals in physical centers [such as India], the risk remains to the downside."

James Moore of the Bullion Desk agrees that physical buying interest has provided gold with a boost, but "with gold having failed to hold the $1,166 level and with broader risk appetite continuing to rise, gold may now look to challenge the 200-day moving average of $1,149.60."

A WGC report indicates that the Council anticipates India gold demand will likely pick up towards the end of the summer and that there is evidence to suggest jewelry demand in China may have started to pick up in July.

Today, the Fed is set to release the Beige Book, which will show investors what Fed officials will be looking at in determining interest rate policy.

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