Gold Investors Taking Advantage of 1-Year Lows As Buying Picks Up
(Kitco News)- Gold prices may have further room to fall but it appearsthat physical sellers are currently exhausted, according to sales data fromKitco Metals.
Peter Hug, global trading director at Kitco Metals, saidthat selling in the physical marketplace stopped about two weeks ago and he isnow starting to see buyers jump back into the market as gold prices hover neartheir lowest level in a year.
“Two weeks ago Kitco saw about three buyers for every sevensellers. Now as investors take advantage of lower prices, we are seeing ninebuyers to one seller. The activity has completely reversed,” he said.
August gold futures last traded at $1,227 an ounce, relativelyunchanged on the day.
However, while gold bears are looking a little exhausted,Hug warned that there is still scope for prices to move lower in the near-term.
He added that while $1,220 an ounce has held as initialsupport, the level hasn’t been thoroughly tested.
“Fundamentals haven’t change. The Fed is still looking tohike interest rates two more times this year; geopolitical tensions are easingand the rate differential between the U.S. and Europe continues to widen. Theseare all factors that continue to support the U.S. dollar,” he said.
Ultimately, gold prices will need to hold support at $1,220and break through initial resistance at $1,237 an ounce to attract morelong-term buying momentum, Hug said.
While current market conditions support further U.S. dollarstrength, Hug also noted that the environment can change relatively quickly.
“There is a lot of stuff out there like the threat of agrowing trade war that could turn the Fed fairly dovish,” he said.
Hug’s optimistic outlook on physical gold demand alsomatches the latest sales data from the U.S. Mint, which is updated on a dailybasis. Halfway through the month, the U.S. Mint has sold 17,000 ounces of goldin various denominations of American Eagle gold coins. If the current salespace continues, July could be the Mint’s best month since January. In June the Mintsold 24,500 ounces of gold.
In silver, the U.S. Mint is already seeing its best sales inthree months. The Mint has sold 515,000 one-ounce American Eagle silver coinsin July.
Hug also isn’t the only analyst to see value in gold atcurrent levels. Analysts at Commerzbank have not seen much reason for gold’scurrent oversold levels.
“For weeks now the gold market has seen one wave of sellingafter another,” they said. “We no longer understand why gold should be sold tosuch an extent.”
In an interview with Kitco News, George Milling-Stanley,head of gold investments at State Street Global Advisors, said that some goldinvestors are paying more attention to costs, which has helped grow themarket’s newest low-cost gold-backed ETF.
SPDR Shares Gold MiniShares, which launched less than onemonth ago and has the lowest management fees at 18 basis points, has alreadyseen inflows of $44 million, said Milling-Stanley.
“As we can see there is interest in gold andinvestors are just being more cost-conscious,” he said.
By Kitco NewsFor Kitco News
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