Gold: Physical market improving – HSBC

James Steel, Chief Precious Metals Analyst at HSBC, suggests that the gold market may look to Fed policy for near-term direction in light of Mr. Dudley’s comments, the ECB’s decision to leave rates unchanged, and Mr. Draghi’s confirmation that he will wait until December to decide whether to proceed with the EUR80bn asset purchase program formulated earlier this year.

Key Quotes

“If expectations of a Fed December rate hike rise further and the USD remains strong, gold may be forced back onto the defensive.

The physical market seems to be improving. India imported just 247t of gold in IH, down from 351t in 1H 2015, according to data collected for the World Gold Council and based on official customs data. But the drop in prices and annual gold-gift season have improved demand, with domestic Indian markets showing a slight premium to world prices. Meanwhile, Swiss gold exports to China in September hit their highest level since January, according to Swiss customs data. The United Kingdom remained the biggest destination of Swiss gold exports for a seventh consecutive month, importing 52.2t. Switzerland exported 35.5t of gold to China in September, up by two-thirds from a year ago. But shipments to Hong Kong dropped to 11.5t from 59.76t a year earlier. Exports to India rose to 27.6t from 23.0t for the same month. The general increase in demand may not be enough to buoy gold prices, but may be sufficient to help manage the downside.”