CHART GOLD HOLDINGS IN EXCHANGE TRADED PRODUCTS COURTESY OLE HANSEN SAXO GROUP
The above chart tweeted by Ole Hansen reflects two important fundamental developments – further clearance of the overhang of speculative gold in Exchange Traded Products and a significant revival in Indian demand that needs to be reviewed in relation to the Indian Government’s initiatives to monetise gold hoarded in the country aimed at reducing future imports.
Speculative interest in gold may also have been spiced up by the current political impasse over the US Budget that must be resolved by the end of September to avoid any shut down of Government activities. This is potentially unsettling. But the issue will almost certainly be resolved without any shut down that acually interrupts significant Government activities.
Financial markets are already unsettled by these and other concerns including economic problems in China and recent revelations on Volkswagen’s deception on emission measurement – serious on its own and possibly involving other manufacturers. These concerns may also have influenced increased speculative interest in gold. But, unlike the important supply and demand factors illustrated in the chart above, they don’t affect fundamental supply demand dynamics.