Gold and silver both are attempting to build a floor today - gold around $1,380, and silver between $23.00 and $23.50. ETFs continue to hemorrhage, while physical demand is hitting almost unprecedented levels. Asian buying especially is off the charts, with the premium on gold bars in Singapore hitting an 18-month high. Distributors world wide are scrambling for any stock at all after two days amazing demand has scooped up nearly everything available. There are truly two worlds in precious metals this week - panic selling in "paper gold" and a "gold rush" of buying in the physical market.
It was an unhappy day in equities today, as European stocks fell again on bad economic news, hitting a four-month low. The continued unease that larger troubled European nations could be coerced to sell central bank gold in order to qualify for a bailout is also weighing on sentiment. European automobile sales dropped for the 18th straight month, by 10.3%. This hit the platinum group metals, as platinum and palladium see major use in catalytic converters. The euro is down after hitting a seven-week high against the dollar.
The IMF has downgraded its global economic forecast for 2013 and 2014, which is another factor is depressing equities world wide.
Wall St. opened lower for the second day on disappointing corporate earnings. The dollar is solidly higher off yesterday's close, while oil is down on the IMF forecast and increased inventory in the U.S. These two factors will pressure precious metals.
In Asia, Chinese are slightly lower, as an unconfirmed report that Western banks were shorting Chinese bank stocks drove their financial sector down. Hong Kong stocks fell for a 4th day, but the Nikkei gained, breaking a three-day losing streak on the back of a falling yen.
Physical demand for gold won't be letting up soon, as many Indians may think that the Friday/Monday crash in gold prices was the answer to their prayers at the start of the spring wedding season. In addition to the wedding season, one of the biggest Hindu holidays of the year is coming up soon. Akshaya Tritiyai occurs on May 13th. Known as " The Gold Festival," it is the largest gold-buying occasion of the year in India. Gold imports are equal to 3% of India's GDP.
Demand in the U.S. is also phenomenal. Buyers Monday found the web sites of several online distributors to be slow or to have crashed completely. (The robust infrastructure of the Gainesville Coins website was able to service the unparalleled demand without a hitch.) Government and private mints are struggling to keep up with the sudden surge in orders. We are hearing reports that the West Point Mint, which produces the silver eagles, is working three shifts, 24/7 in an attempt to meet demand. U.S. and Canadian bullion isn't just for the West anymore, either. Asian demand for silver and gold Eagles from the U.S. Mint is off the charts.
(We apologize for the recent delay in market updates and decreased number of blog posts. All efforts are going into caring for clients during this extremely busy time.)