Can Chinese Buyers Lift Gold?
October 31, 2016
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
Looking at gold, the Diwali festival has begun in India as officially Diwali began yesterday on the 30th and it shall continue on through the 3rd of November. Effectively, India is closed and that means that Indian buying shall be virtually non-existent.
At the same time, it does appear that the Chinese are there to take the place of Indian buyers, for as Bloomberg reported late last week in a story noting the weakness of the Yuan, The world’s biggest consumer of the precious metal raised bullion imports from Hong Kong in September for the first time in four months…Net purchases were 44.9 metric tons from 41.9 tons in August, according to data on Thursday from the Hong Kong Census and Statistics Department compiled by Bloomberg. Shipments of gold from Switzerland to China rose to 35.5 tons last month from 19.9 tons in August.
Gold soared higher on Friday following the “news” regarding Ms. Clinton and her e-mails, with spot gold trading at one point to $1282 and with spot gold in EUR terms trading to €1169/oz. Given that our only interest at this time is to own gold in EUR terms, we note that gold/EUR has settled back down to €1164/oz., but that the trend is still in a rather well defined upward sloping path from its low earlier this month when it traded down to €1105 amidst panic liquidation.
As long as the political problems attendant to Europe continue and as long as the monetary authorities there continue to err upon the side of monetary expansion as compared to the monetary contraction here in the US as the adjusted monetary base implodes we shall err upon the side of owning gold in EUR terms. Those not yet involved should become so as the fundamentals and the technicals of the market seem intent upon taking Gold/EUR on toward €1200/oz…. and beyond.