1) Demand for gold is greatest going into the end of July till the middle of October. During this period, consumption is highest as gold fabricators and jewelers buy gold to prepare for gift-giving peaks beginning with Indian harvest and wedding festivals in autumn and carrying through US religious holidays and Chinese New Year.
2) Gold spot prices hit their lowest levels since mid march on June 15th 2007 of $649/ oz. Technicals show gold holding above the 180 day Exponential Moving Average which acted as support in mid January and since stochastics indicate a bottom or very little downside from here on (and have been a very reliable indicator in the past), I would wait a few days for the momentum in gold to reverse to the upside. Although I am waiting, I would be cautious about not sitting on the sidelines for too long because I don’t want to miss the seasonal gold trade
3) According to the World Gold Council, “Global demand for gold reached $17.4bn in Q1 2007, more than double the level of four years earlier and 22% higher, in dollar terms, than in the first quarter of 2006.” Chinese gold production this year is forecasted to fall 100 tonnes short of meeting demand. Additonally, on February 15, the first Indian gold ETF was launched, the Gold BeEs of Benchmark Mutual Fund. The second ETF launch, the UTI Gold Exchange Traded Fund, is already underway. Rajesh Bhojani, UTI Mutual Fund’s president of marketing says about 30% of the gold market in India is investors and according to Casey Research “the new gold ETFs (in India) are going to dramatically boost that percentage.” Moreover “Demand from countries like Egypt and Saudi Arabia for Dubai gold is increasing and the city is increasing its imports to meet this demand. Dubai’s first quarter gold imports rose to 132 tonnes, up 14.8% compared with the same period last year, while exports fell 23.3% to 66 tonnes, the DMCC said. “Demand for Dubai gold is becoming ... huge and more gold is getting into the city which has succeeded in truly becoming the world’s city of gold,” said Tawhid Abdullah, managing director of the Gold and Jewellery Group in the emirate. (Gulf Times) I don’t think I need to reiterate this point again but as middle classes in developing nations around the world increase their wealth, especially in Asia and the Middle East, they spend a considerable amount of their new found wealth on gold bullion and jewellery, thereby increasing global demand for gold.
4) The first partial private equity takeover of a mining company was sealed recently between Crescent Gold and Deutsche Bank's London branch to take a 55 per cent stake in the gold-miner in return for providing a $122 million cash injection. "The private equity chaps were very keen to get a hold of gold," Mr Haythorpe (Managing Director at Crescent Gold) said. "I think it's fair to say … they're very optimistic on the gold price." (Sydney Morning Herald) Uptil now, all the M&A activity that has been going on in Canada and the United States has not affected the price multiples of Gold producing companies. However, all the gold sector needs is one major takeover, maybe it’s this deal between Crescent Gold and Deutsche Bank, maybe not but as soon as that deal is announced we can expect the stocks of gold prodcing companies to follow a similar tear as witnessed in the sectors where M&A activity is rampant.
5) With the ECB recently announcing that they will not sell any more gold this year that in itself is a major bullish sign for the price of gold. The reasons being, either the ECB is running out of their gold reserves or that they think the gold prices are too low to sell, anyway you see it these are positive things for gold.
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