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Gold Meanders
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(November 14, 2011) Gold price patterns the second part of this year have retraced familiar seasonal trends. Buying in India has been huge, while US and European demand for gold bullion products have lagged going into autumn.
US demand for bullion can be approximately tracked through sale of gold Eagles. October sales of 46,000 ounces of the bellweather 1-ounce gold Eagles amounted to the lowest output since August 2010. Further, November sales as we approach the month’s halfway point so far number only 8500 pieces.

Sales of US gold eagles so far this year number only 814,500, so final figures for 2011 will probably come in at well under one million coins. As a comparison, last years the US Mint sold 1,143,000 one-ouncers, and in 2009, 1,325,500.

Krugerrands, which had traded at much higher premiums this summer as European buyers bid up gold in the midst of Europe’s worst economic crisis in decades, now show a distinct slackening of demand (panic fatigue sets in at some point, no matter the crisis). Thus, Krugerrand premiums have fallen to more normal and deflated premiums as Europe has ceased to suck up current available supplies.

Pamp Suisse gold products are in short supply, reflecting increased diversion of their bullion production eastward, most particularly to feed India’s booming market. The Swiss refiner sells to 24 of India’s 27 banks which retail gold in that market, and Pamp has been busy turning out the gram-denominated bullion products so popular there. This year, the Indian tradition of gold buying during the fall festival season has been one of the strongest on record.

Gold’s price seasonality was writ large this year, as prices rose from its July 1st low of $1483, trading twice in early September at $1895.00, only to suffer a fall of almost $300 before that month was over.

From that low (the PM London fix was $1598.00 on September 26th), gold prices have recovered substantially, yet domestic US and European retail bullion demand have not been particularly strong since September’s fireworks.

The good news for gold buyers at this point is that the popular gold bullion coins are widely available, and premiums asked are at quite reasonable levels.

 

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