Southeast Asian investors selling gold holdings
Southeast Asian investors selling gold holdings
SINGAPORE (Agencies): Many Southeast Asian investors are selling gold holdings to cash in on the sudden increase in prices of the yellow metal but traders yesterday saw some consolidation before prices scale a four-year peak.
"Investors are selling back gold bars in Southeast Asia -- Indonesia in particular. The sell-back is why our physical gold turnover dropped recently because of the high price," a trader with a British bank in Singapore was quoted by AFP as saying.
Gold demand in the region usually picks up in the run-up to the lunar new year, which falls on Feb. 19 this year, but there had been no "significant activity," so far even in Singapore, the trader said.
Singapore is a leading gold trading center in Asia.
Gold breached the key US$400 per ounce barrier in London on Monday, surging in early trade to $410.80, the highest point since $420.65 in the bull market of August 1993.
In New York Tuesday, the metal was quoted at $403.50 an ounce while prices hovered between $403.15 and $403.45 in early trading Wednesday in Hong Kong.
Since the beginning of 1996, gold prices had surged by about four percent amid speculative buying, especially by U.S. hedge funds and Middle East investment syndicates, analysts say.
"These speculators are buying gold to hedge against the U.S. dollar particularly and to me this cannot dictate gold price because it is unrelated to physical demand and supply," said the British bank trader here.
"Everyone is betting that the price could touch $410 but I am not so confident. I am expecting a pullback," he said.
A chief trader at a European bank in Singapore said he expected strong resistance at $405 before gold prices tested the new resistance at $410-412 possibly at the end of this month or in March.
He said that investments funds were banking on metals now because they felt the global equity and bond markets could have peaked.
"In Asia, those wanting to buy gold have revised their floor prices to about $400. Before it was mid-380's," the trader said.
In Hong Kong, Raymond Chan Fat Chu, vice president of the Chinese Gold and Silver Exchange Society, said: "I see $412 as a psychological level because that would mean a four-year high...After that I see $425, which would be a 10-year high."
"After that, the sky is the limit," he added.
Chan's enthusiasm only marginally outstripped that of traders and analysts polled by Reuters around the region and who see the rally continuing as long as Australian producers feel no need to sell.
A senior trader at Rothschild Australia Ltd, Mark Freemantle, said there had been little Australian producer selling on Tuesday, adding: "I think they are holding off for higher levels."
"Once we are between A$550 (US$401.50) and A$580 ($423), we will see some more producer selling," Freemantle said.
Traders in Tokyo concurred, saying they expected the selling by both producers and investment funds -- the two players in the current supply-demand game -- to begin at $410.
"The funds have made up their mind to push the market higher," Samuel Poon, chief gold dealer at Sun Hung Kai Securities in Hong Kong, said.
An analyst with an international bullion house in Hong Kong said investment fund money was quitting equities and forex markets in favor of gold because of a feeling other markets had either peaked or were starting to slow, and because of the metal's long-term under-performance.
Fundamental to that stagnation, Raymond Chan said, has been a willingness by central banks in the past five years to open their vaults to make up for an annual 500-ton shortfall.
"Western gold production is about 1,900 tons a year," he said. "Western world demand is around 2,450 tons, so that extra has been made up by central banks' selling over the past five years. And that has kept the price stable over that time."