Gold Market Update – April 2013

The gold price fell by 6.6% over April. Recent gold demand appears to have fallen sharply on news of soft US inflation, slowing Chinese growth as well as fears that highly indebted European countries like Cyprus may resort to selling gold reserves.

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  • The gold price fell by 6.6% over April. Recent gold demand appears to have fallen sharply on news of soft US inflation, slowing Chinese growth as well as fears that highly indebted European countries like Cyprus may resort to selling gold reserves.
  • Prices partially recovered over the second half of April as a result of renewed interest in physical gold buying as consumers and central banks took advantage of relatively low prices. Purchases of gold coins and bars at mints across the globe surged following a 14% price tumble in two days in mid-April.
  • Latest data from the World Gold Council show that the overall volume of gold demand over 2012 reached 4405.5 tonnes, which on a values basis was an all-time record of US$236.4 billion. However, the supply of gold eased to around 988.2 tonnes in December quarter 2012, reflecting a drop off in recycled gold and increased central bank purchases.
  • Central banks continue to purchase gold by way of strengthening and diversifying their asset holdings. Russia, Turkey, Mexico and Korea are just a handful of countries that have significantly increased their holdings of gold reserves over recent years.
  • It is likely that gold market participants have overreacted to recent news of a slowing Chinese economy, soft US inflation and expectations for US stimulus to wind up. However, we believe the upside risks to the gold price will dissipate (further) as the global economy improves and equities become more attractive. As such, it is our view that gold will end this year below US$1,500 per ounce.

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