In its latest update to its 2014 Gold Survey, Thomson Reuters GFMS sees gold as entering a period of recuperation, but holds out little hope for any short term price appreciation, with physical demand falling sharply in the first half of the year compared with a year ago. It sees last year’s substantial price falls as highly anomalous and talks of the market regaining its composure. However the report will have been written ahead of the recent gold price collapse, down to a nine-month low yesterday following some heavy sales on COMEX after the release of the latest statement from the FOMC. (Although, given that it kept its ‘not for a considerable time’ wording for the likelihood of interest rate increases, and no other surprises on tapering, this might actually have been seen as gold positive.) Indeed we foreshadowed this reaction on Mineweb as a follow-on from a pattern seen in previous FOMC statement gold price reactions whether they were generally seen as gold positive or no.
GFMS reckons the Asian markets over-bought gold during the 2013 price falls and this has affected purchases which otherwise might have been made this year. And there is also a suggestion that overbought gold may have meant inventories had been built up to a level more than sufficient to meet demand atb the time and that these have been gradually run down following the Chinese New Year. Thus we have seen quite a sharp demand downturn from China in particular, although this may well not have been quite as steep as some commentators have suggested. Indeed both Indian and Chinese demand appear to have been picking up again towards the end of the third quarter