US GOLD OPEN – Comex slips toward $1,300/oz as physical demand wanes

Aug 15, 2014 - 2:06 PM GMT

Gold futures could see increased selling pressure going into the weekend as the apparent absence of physical demand has finally become too pronounced for the market to overcome.

Gold for December delivery on the Comex division of the New York Mercantile Exchange was last down $11.30 at $1,304.40 an ounce. Trade has ranged from $1,307.60 to $1,316.50.

“Going forward, it is hard to get a read on gold prices at this juncture; the precious metal has been holding up fairly well, likely on account of the weaker global macro numbers both from Europe and China,” INTL FCStone’s Ed Meir said.

“However, with a host of commodities all pushing lower, we are hard-pressed to see how much longer gold prices can hold up, especially if it is missing the twin buying engines that jewellery and investor demand could generate,” Meir added.

The World Gold Council reported on Thursday that China’s gold demand was just 192.5 tonnes in the second quarter, down 52 percent, while Indian gold demand dipped by 39 percent to 204.1 tonnes. Lower jewellery demand and falling investment demand in bar and coins were attributed for the drop in overall demand trends.

“Since demand for jewellery, bars and coins has proved very weak of late, overall demand for gold is again more dependent on investors,” Commerzbank said. “However, investment demand is probably not sufficient to make up completely for weak physical demand in Asia at present, especially since coin sales in the West are likewise modest.”

Meanwhile, in yesterday’s data, US weekly unemployment claims increased 21,000 to a seasonally adjusted 311,000, above the 307,000 forecast and the previous week’s revised total of 290,000.

Elsewhere, French preliminary GDP reading of 0.0 percent missed the forecast 0.1 percent increase – the second quarter of stagnant growth. German second-quarter GDP fell 0.2 percent – this was the first contraction in the German economy since the second quarter of 2012.

And the final flash GDP reading for the EU was 0.0 percent, below the expected 0.1-percent increase. US weekly claims of 311,000 were just above forecast, while July import prices fell the anticipated 0.2 percent.

Earlier this week, Chinese industrial production, retail sales growth and fixed asset investment all undershot forecasts, while new bank lending tumbled to 385.2 billion yuan ($62.5 billion) from 1.1 trillion yuan in June.

In today’s data, US PPI rose 0.1 percent in July, meeting expectations but down from June’s 0.4 percent climb. Over the past year, prices increased 1.7. Core PPI advanced 0.2 percent, which was also in-line with forecast.

The Empire State Manufacturing index retreated 11 points to 14.7, after reaching a four-year high in July. The new orders index slipped almost five points to 14.1, while the shipments index edged up a point to 24.6, a multiyear high.

In geopolitical news, Iraq Prime Minister Nuri Kamal al-Maliki has agreed to step down amid fears that a military coup was imminent. This news comes as US deploys plants to target Sunni Islamist militants, the New York Times reported.

“We should now see a more concerted response to the rebel insurrection that is seizing large parts of the country since for the first time in weeks, a functioning Iraqi government could be in place,” INTL FCStone’s Meir said.

In the wider-markets, the euro was 0.17 percent stronger at 1.3390 against the dollar, while Germany’s DAX and France’s CAC-40 were both 0.9 percent higher. In Asia, the Nikkei and Hang Seng finished up 0.02 percent and 0.62 percent respectively.

Light sweet crude (WTI) oil futures for September delivery were up 8 cents at $95.66 per barrel, while the September Comex copper contract rose 0.1 cent to $3.0920.

As for the other precious metals, Comex silver for September delivery were down 32.6 cents at $19.580 an ounce. Trade has ranged from $19.515 to $19.955.

Platinum futures for October delivery on the Nymex were down $19.60 at $1,453.00 an ounce, while the most-actively traded palladium contract was at $878.10 an ounce, down $8.50.