万花筒 2013-07-12&07-16 金价下跌何时休？

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Dahda, thanks for joining us. As I said, gold is finding some support here, but you think it's going to be short lived. 

Yes, basically I don't think we are gonna see again the rebound² we saw back in April when the gold price dropped on the back of the Cyprus story, fear that the Europe central bank, the rest of Europe, the Brussels central bank and rest of the Europe will be selling. Initially³ went down and the price rebounded⁴ because of the strong retail⁵ demand. We saw the premiums⁶ in countries like Singapore and China more than doubling, in Dubai and in Turkey. But soon after the prices went back down. I think what's happened is that when the retail demand the money already bought in April, I think, also they've burned their finger once already. I am not sure they are as keen to go back into the market . 

So maybe they are waiting for the prices to go back low before coming back in. Or to be stabilized⁷, go more sideways, just to see there is less volatilities maybe in the market. 

But there is always a retail demand, it is not as if evaporated, like, for example, the investment demand seems to be driving up. 

Yes the investment demand is dropping quite a bit. I mean in 2012 the investment demand was 3200 tons, this was equivalent of 29% of total demand for gold. So far this year, I think, we've seen a big freeze. Not only that , this investment demand is turning into source of supply. We seen that since mid⁸ February the supply from gold, the ECB xx product, physically⁹ backed ones, has dropped by 650 tons, this equivalent of adding 11%,  13%, excuse me, to the total supply of the gold. So there is a imbalance now in the supply demand equation.

That's bound to drive low of course. 

The is driving the price of gold lower. 

You think gold is going lower still a thousand dollar lower by the end of the year. 

That will not be very surprising, I mean. As I mentioned earlier this supply demand imbalance. As the gold price goes down, we have what we call it an automatic stabilizers. So the price of the gold goes down, yes we have higher demand for jewelry¹⁰. yes we have a lower scrap¹¹ supply. But nevertheless, I don't that is going to be enough because of the strong overflow¹² from the investment demand. What's gonna to happen is we will go down the supply curve, we'll go down all the way to balance this equation, is where the miners are gonna have to reduce the amount of gold they are mining, new mining output. We will not be surprised to see this around lowest case scenario¹³ 850 to 1,000. We need to reduce the mining supply by 20% to re-equilibrate the supply demand equation. 

So your base case is a 1000 dollar lower by the end of the year, but you think it could go as low as to 800. 

That's like our really worst case scenario. 

So what chance is, what's the likelihood of that?

If we continue to see this strong investment demand, this investment supply, more ECB demand outflow. If we get even better news from the US in terms of re-established strong stabilizing¹⁴ from the Feds, and maybe some improvement from the Europe, that would the drive of gold price lower. 

1000 dollar lower, that is quite the number. 

Yeah. It is, I suppose. But, I mean, we're still putting a close, watching, a close eye on the US and the quantitative¹⁵ easing. This sounds like this stabilizing is going to, leading to a high interest rates. High interest rates are strengthening the dollar, which is a very bad news for gold. It also gives, increased costs to hold the gold. So why would you want to hold the gold which gives you zero yield, which actually cost you money to store it, while actually you can put your money if interests go higher, in the bank to earn interest on it. 

Okay thanks, that's Bernard DaDah from Texas. 

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