Gold Volumes "Quiet" on Options Expiry as Hong Kong Prepares for Golden Week

September 25, 2013

WHOLESALE gold held unchanged in London on Wednesday, moving around last week's finish of $1325 per ounce as world stock markets and the US Dollar also reversed yesterday's small moves.

Silver traded in a 15-cent range either side of $21.70 per ounce.

Major government bonds were flat. Crude oil and industrial commodities ticked higher.

"It will likely be a very quiet few days," reckons brokerage INTL FCStone in a note, "at least until Friday, when we get some end-of-the-quarter book squaring."

October gold options contracts on the US Comex expire today.

"We remain range bound," agrees brokers Marex, "but the drop down towards 1300 yesterday and the subsequent good recovery will have deterred the bears for the time being."

However, "speculation that the Feds will begin tapering as early as next month," counters Commerzbank, "continues to pressure the yellow metal."

London's wholesale precious metals trading is likely to be subdued early next week, as trade group the London Bullion Market Association holds its annual conference from Sunday to Tuesday, this year in Rome.

China's long Golden Week holidays are also likely to dent import demand from stockists, dealers report.

Ahead of Golden Week, the government of Hong Kong – a major tourist destination for mainland residents during these annual holidays – has banned "forced shopping" trips, says the South China Morning Post.

Cut-price flights and hotel rooms were previously subsidized by kick-backs from stores to tour operators who brought in large groups, the paper explains.

Almost one million mainland tourists went to Hong Kong in Golden Week 2012, theWall Street Journal reported last October, "up nearly 25%" from the prior year. But sales of watches and gold jewelry "actually dropped" compared with 2011.

Gold prices for Chinese consumers have now fallen 25% since Golden Week 2012.

"We're not seeing too much physical demand around," Bloomberg today quotes senior vice-president Afshin Nabavi at Swiss refiner MKS in Geneva.

Elsewhere the newswire reports that for iPhone manufacturer Apple Inc., "bringing together China and gold is a recipe for success" after the US company reportedly asked its suppliers last week to increase production of "gold-colored" plastic casings for the new 5S handset.

Forbes says the same of gold-colored iPhone sales in India – now widely expected to take second place to China in physical gold demand this year.

"An assistant of the Punjab chief minister called me and asked for five gold-colored iPhones," the magazine quotes a distributor for Apple products in the affluent Indian region.

Across in Thailand, meantime, YLG Bullion International Co. – the largest gold importer into the world's 6th largest gold-buying nation last year – says its gold inflows will double in 2013 thanks to the surge in demand caused by gold's 25% price drop.

YLG is also one of seven Thai companies calling for the launch of a formal bullion-contract exchange, the Bangkok Post reports, aiming to "enhance Thailand as a regional gold trading hub."


Adrian Ash

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash is head of research at BullionVault, the physical gold and silver market for private investors online. City correspondent for Bill Bonner’s Daily Reckoning from 2003 to 2008, and previously head of editorial at London's top publisher of private-investment advice, Adrian is now a regular contributor to many leading analysis sites including Forbes and Gold-Eagle, and a regular guest on the BBC as well as international broadcasters. His views on the gold market are frequently quoted by the Financial Times, Daily Telegraph, MarketWatch and many other leading new outlets.


China is poised to become world's biggest gold consumer.

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