Focus on gold: Financial investors support gold price, says Saxo Bank

Financial investors have supported gold prices in recent weeks, reassured by announcements form Europe and increased physical gold sales in India and China, says Saxo Bank.

Investment flows into gold continued this month, with holdings in exchange traded funds rising by 95 metric tons during the last month to a new record of 2,565 tons, according to Bloomberg.

Hedge funds and other leverage investors have seen their net long exposure to gold through futures rise to 730 tons, up 210 tons over the past four weeks.

This demand, coupled with various external factors, has been putting upwards pressure on gold prices. These have been rising steadily over the past quarter, according to Saxo Bank’s analysis.

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European Central Bank’s bond buying announcement last month weakened the US dollar, which boosted the gold price. This remains the main factor providing upward pressure for precious metal prices, Saxo Bank says.

Additional demand for gold may also come from India and China, sources say.

With the gold prices declining by 5% in rupee terms over the past month and the upcoming Diwali festival in India in November (Festival of Lights), physical sales of gold in the country are up.

India and China are the two largest consumers of gold worldwide, respectively, so increased demand from these regions would give gold prices a significant boost.

However, prices per ounce have been teetering on the $1,800 threshold, and further developments depend on external pressures.

As unemployment data from the US last week revealed a more positive picture than expected, with the lowest figures since the start of 2009, prices have seen a consolidation around the $1,800 mark.

Analysts’ opinion on further developments this year differ, but many are convinced prices will continue their upwards journey.

An analyst from Commerzbank, for example, wrote in a report yesterday that the “chance of unlimited, cheap central bank liquidity and strong ETF inflows suggest that the price might soon rise [further] towards $1,800.”

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