Standard Bank Says Physical Gold Purchases Unusually High

By Nicholas Larkin | Bloomberg 

Physical gold demand has been unusually strong for this time of year, with “good buying” from Southeast Asia, according to Standard Bank Plc.

The Standard Bank Gold Physical Flow Index signaled demand climbed to the highest since November, the bank wrote in an e- mailed report yesterday. Purchases typically pick up toward the end of the year amid religious festivals and the wedding season in India. Gold reached a four-week high of $1,696.28 an ounce in London on Jan. 17.

India, the biggest buyer in 2011, raised taxes on gold imports two days ago to reduce a record current-account deficit and to moderate demand. Standard Chartered Plc said earlier this month that its gold shipments to India soared on mounting concern the duty would be raised. While gold has gained for the past 12 years, the best run in at least nine decades, prices dropped as much as 9.5 percent from October through Jan. 4.

“It was strong in November and that’s normally a usual seasonal pattern that we see coming through from Indian post- monsoon, wedding season buying,” Marc Ground, a commodity strategist at Standard Bank in Johannesburg, said by phone yesterday. “The fact that January is as high as we see in November usually, that’s unusual. There was probably some Indian buying ahead of this tariff increase.”

Central Banks

Bullion for immediate delivery rose 1 percent this year to $1,692.78, after advancing 7.1 percent last year. It rebounded above the 200-day moving average, currently at about $1,663, earlier this month. Investors own 2,618.8 metric tons through exchange-traded products, a hoard valued at about $142.5 billion and bigger than the official reserves of all but two nations, data compiled by Bloomberg show.

Gold gained last year as central banks from the U.S. to China pledged more action to bolster economies. The Bank of Japan (8301) said yesterday it will buy about 13 trillion yen ($147 billion) in assets per month from January 2014 and set a 2 percent inflation target.

“Gold should find support from the BOJ stimulus as the liquidity created by the BOJ finds its way into the broader global economy,” Standard Bank analyst Walter de Wet wrote in the report. “We still expect $1,700 to provide resistance and $1,660 to provide support. If gold manages to break through $1,700, we would target $1,720.”

 Import Duties

India raised import duties on gold and platinum to 6 percent immediately from 4 percent. A levy on gold ore, concentrate and so-called dore bars for refining will be doubled to 4 percent, and an excise tax on refined gold will climb to 5 percent from 3 percent. About 80 percent of India’s current- account deficit, the broadest measure of trade, tracking goods, services and investment income, is due to gold imports, according to the Reserve Bank of India.

UBS AG said its gold flows to India on Jan. 21, when the tax revision was announced, were about twice the average. Indian purchases “paused” yesterday and may be “muted” in the next few days as buyers wait for clarity on details related to the change in import taxes, a typical response following such an announcement, the bank wrote today in a report.

Buying gold is considered auspicious in India during religious festivals and weddings. The festivals start in August and end in November, and are followed by the wedding season.