Gold Demand Not Broad Based

BLOG WATCH

In the space of three hours in the US gold dropped from $1625 to $1595, recovering to $1605 in late trading but in the Asian market falling back down to $1595 as at 12pm Perth time.

In previous blog watches I have been reporting that the Perth Mint has seen weak demand from retail investors and India with some interest from Asia. This morning we suddenly had renewed interest from the bullion banks for large tonnage – destination China. No surprises there.

However, there were no calls for metal for India and our Depository dealing desk is not seeing any rush by investors to buy (or sell, for that matter) gold this morning. On the retail front, bullion coin and bar sales are also quiet. What to make of these mixed signals?

Coincidental then that last night listening to Financial Sense Newshour’s May 5^th podcast Chris Puplava gave me the answer by referring to legendary Wall Street veteran Bob Farrell’s “Ten Market Rules to Remember" (see this MarketWatch article for the list), specifically rule number seven:

“Markets are strongest when they are broad and weakest when they narrow”

The message – gold demand is not broad based from our viewpoint and hasn’t been for many weeks now. Reviewing the blogs over the past 24 hours confirms the story.

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