Gold price closed above 900 for the first time in more than 2 weeks Thursday and will likely record the first weekly gain in five, as reports showed that demand for the precious metal remained strong during the first quarter while weak US housing data reignited worries on economic recovery. Today, the June contract extends the gain and soars to as high as 914.
The World Gold Council revealed in a report that investment demand in gold ETFs futures and coins& bars remained robust in 1Q09. Investment in gold through ETFs rose 469 metric tons to a record to 1658 metric tons ($48.6B). Net long commercial and non reportable positions on COMEX also surged to 565 metric tons during the quarter, compared with 444 metric tons at end-2008. The council believed the strong demands were drive by 'a renewed search for effective portfolio diversifiers and growing concerns over the over for price stability'.
Although recent rallies in gold price were driven by increase in investment demand, jewelry demand indeed contributes over 60% of total demand for gold. The rebound in gold price yesterday was also partly led by modest recovery in Indian import of gold in April. In 1Q09, gold imports to India were less than 3 metric tons because economic crisis and high gold price in rupee terms damped demand. However, for the first half of April, gold imports to 10 metric tons, marking a good start of the second quarter.
In the US, existing home sales dropped -2.97% mom in March to 4.57M units, worse than consesnsu of 4.65M units. At the same time, initial jobless claims rose to 640K last week, compared with market expectation of 630K.
Although platinum price rose for the second day to 1188 Thursday, news from the auto sector halts the white metal from gaining further and the benchmark contract plunged to 1182 Friday. Toyota said its world sales in 1Q09 plummeted 27% to 1.77M. Moreover, General Motors said it would reduce production over the next three months to cut its inventories of vehicles so as to avoid 'uncontrolled shutdown' as a result of the financial crisis. As over 50% of applications in platinum is in autocatalyst, reduction in auto production definitely affects demand for the metal.
Oil price edged 1.6% higher to close at 49.62 yesterday as the dollar weakened and stock markets moved steadily. On the other hand, natural gas price plunged severely to below 3.4 after the US Energy Department reported that stockpiles for the week ended April 17 rose 46 bcf to 1741 bcf. Although the gain was more or less inline with consensus of 47 bcf, total supply has now been 23% higher than 5-year average