China Buying Gold?
MarketWatch
Gold’s rebound puzzles the bugs — but they’ll take it anyway.
It helps to have luck — or something! Michael Gayed’s brave column yesterday, “Was that the bottom in gold?, published just after gold closed with an impressive $16.80 rise in the CME June gold contract, was not followed by an immediate reversal. June gold closed today down only 40 cents, so the gains were held.
In contrast, my own recent cheerful chat about gold was followed by a horrible $57.90 drop in gold the next day.
Of course, I was just reporting what the investment letters say — but I felt bad anyway.
In fact, the important gold-positive news I noted — that the strike by the jewelers in India, the world’s biggest gold importer, appeared to be ending — turned out to be wrong. The strike went on for another week. But it did finally end this past Saturday, after an extraordinary 21 days.
Observers in a position to know, like bullion dealer UBS, say that, while working through the disruptions caused by this unprecedented stoppage will take some time, they have seen demand from India returning.
Since India is in effect the default buyer on a gold downswing, this means critical underpinning is back in place.
But gold bugs were extremely puzzled by Tuesday’s gain. I cannot recollect a move which drew so many frank statements of ignorance from the sources I regularly check.
Of course, that does not influence the chartists. They don’t care why prices move: movement itself impresses them. Bullion dealer ScotiaMocatta’s Technical Commentary on Wednesday noted:
“Gold closed slightly lower today… at 1658. The ability for gold to hold the 1656 level (the 50% retracement of the December to February up-move) and to close above the short-term bearish trend channel, is encouraging for bulls. Gold also clearly rejected the move down below the 61.8% Fibonacci retracement of the same uptrend…”
One hypothesis widely discussed, particularly on the hard-core gold conspiracy site LeMetropoleCafe, is that there is heavy buying by the Chinese, particularly China’s Central bank.
