FOCUS – Physical gold shortage has eased – SocGen

London 24/09/2013 – The shortage of physical gold available for immediate delivery in Asian markets has eased, Société Générale said.

This shortage, brought about by an explosion in demand following the heavy price falls the metal sustained earlier this year, has now dissipated, the bank said in a research piece published on Tuesday.

“The bottleneck at the refineries that developed in the second quarter of 2013 meant that lead times extended out to a number of weeks, as opposed to days in the more normal scheme of things, with premia in India eventually exceeding $40 and premia on the Shanghai Gold Exchange reaching four percent in early July compared with an average of 0.8 percent in the first quarter of this year,” it said.

And while it may appear that outflows from exchange-traded funds (ETFs) have exceeded the increase in “retail grass roots demand” for gold jewellery and investment bards, the initial delays meant that the outflow was not sufficient to meet the increased offtake, SocGen added.

“This contributed, in large part, to the fact that gold prices moved into backwardation,” it said.

In the ETFs followed by FastMarkets, holdings have fallen nearly 700 tonnes to 1,948.79 tonnes on Monday from last year’s record peak of 2,647.28 tonnes.

SocGen described the 23-percent gain in jewellery fabrication so far this year compared with 2013 as “a strong improvement… given the economic environment”.

Spot gold prices were last quoted at $1,309.60/1,310.70, down $11 on yesterday’s close.

(Editing by Mark Shaw)

Eddie van der Walt

About Eddie van der Walt

London-based, South African-born metals markets reporter, currently focusing on precious metals and the London Metal Exchange. All that glitters must be sold. Twitter: @EvdW