Gold fell marginally for a second day yesterday as it continues to consolidate after last week's 5% gain. Gold's trading was erratic yesterday with unusually large sell orders leading to sharp falls in the price in seconds prior to mild rebounds. Such sharp and speedy declines are very unusual and would suggest a large player wanted gold prices lower in the futures market. Gold has risen some 0.5% this morning.

Holdings in the SPDR Gold Trust (GLD:SPDR Gold Trust ETF), the biggest gold exchange-traded fund, stood at 1,104.45 tons on Monday, peculiarly unchanged for a third session, showing that investment demand has abated but risk aversion remains high and there has been little selling by investors.

Contrary to some commentary premiums for gold and particularly silver bullion products remain very firm and there has been little if any selling by the investment public of their bullion coins and bars. Non investing jewellery owners have been selling and this has increased the supply of scrap very significantly in recent months. GFMS estimate that scrap supply may have reached a very large 500 tonnes in the first quarter. Despite this huge additional supply which was swallowed by the market, gold remained firm and this bodes very well for prices in the coming months. Scrap supply simply cannot continue at this rate and only if we get markedly higher prices are we likely to see scrap supply remain near the levels seen in recent months.

The physical bullion market remains tight and there is anecdotal evidence that the shortages seen in the small coin and bar market may soon spread into the large bar market.