Weekly Commentary on Bullion

Investment Demand Stampedes
The recent rise in risk aversion has triggered strong inflows into the gold ETFs and a simultaneous increase in demand for gold coins and small investment bars. On December 17th 2008 the combined gold holdings of the World Gold Council gold Exchange Traded Funds and Barclays Gold Trust stood at 985.59 tonnes. By the 16th January 2009 this had risen to 1009.92. By 30th January early in London time they had grown to 1079.83 a growth of almost 70 tonnes in two weeks. To give one perspective, the Central Bank Gold Agreement signatories [European central banks only] sold only 3.5 tonnes in the last two weeks. There are many other gold bullion-holding funds in the developed world from Canada to Switzerland that are not included in this total. If they were the total would be approaching 1200+ tonnes. Clearly we are seeing a stampede of institutional fund management into gold at present.

Central Banks in the Gold Market
The Central Banks of the world are the largest holders of gold in themselves, despite that unquantifiable fact that around 20,000 tonnes of gold are held privately across the Indian sub-continent. So as to give us a sense of proportion on the top cats in the neighborhood, here are the current gold holdings of the top 9 central banks in the world. If we are to take the entire privately held gold Exchange Traded Fund shares they would represent more gold than held by the Swiss National Bank, Switzerland’s central bank. Japan was overtaken a long time ago. Take the world Council gold Exchange Traded Funds and the Gold Trust totals and at the present level of demand the next fortnight will see them overtake Switzerland alone.

Bullion is not in any correlation with Crude Oil and Dollar from last one month. Euro Dollar fell 1.25% during the week and Crude Oil also fell 10% but Gold gained 3% during the week. Silver also followed Gold by rising 5%. This uptrend is likely to continue due to fund buying.

COMEX Gold has support at $900 and resistance at $950 and $990.
Buy MCX Gold (Apr) on dips ~14100 SL 13900 Tgt 14500

COMEX Silver has support at $12 and resistance at $13
Buy MCX Silver (Mar) on dips ~19500 SL 18900 Tgt 20400