Physical Demand for Gold Rising!
Demand for physical gold, which picked up considerably as prices fell more than 20 percent from last month's record highs above $1,920 an ounce, is continuing to support the precious metal, with Asian buyers particularly active in the market.
Premiums for gold bars in Hong Kong stood at around $3 an ounce, their highest level since at least February, while the premium in Tokyo held at 50 cents, dealers said. Seasonal buying, particularly in main consumer India ahead of the Diwali festival of lights on October 26, should underpin gold prices, Swiss bank UBS said in a note.
"Over the last couple of years, the two weeks leading to Diwali brought overall buying that was consistently above average - even twice the weekly average - despite rising prices," it said.
"Although day-to-day volumes will naturally show some degree of price sensitivity, as they have in previous years, this seasonal demand is an important underlying support for gold, as any dip in prices will likely encourage a buying spree."
Doubts remained over the metal's ability to recreate the stellar gains recorded earlier in the year, however. Prices remain up 17 percent since the end of December despite September's retracement, their sharpest monthly drop in nearly three years.
Societe Generale said it remains broadly bullish on the outlook for gold despite the recent retrenchment in its prices, but lowered its 2012 price forecast for the metal.