Backwardation in Gold indicates continued shortages: ETFS
The nearly 7% gain over the past two weeks is the largest gold price rise since November 2011. Gold ended the week just under US$1,300oz and appears to be building a firm base above US$1,200oz.
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Backwardation seen in US gold futures indicates shortage of the commodity in the market, according to a weekly analysis by ETF Securities Ltd (ETFS). Due to the quasi-currency status of gold, gold futures very rarely close in backwardation.�
However, on July 19, the August 2013 futures contract settled at US$1,292.9/oz. on the COMEX, US$0.40/oz. lower than the thinly traded July 2013 contract.�
Last week, gold posted second consecutive week of gains on hint from Ben Bernanke that monetary accommodation would continue, consequently a weak dollar helped the yellow metals to make gains.The prior week, the cost of borrowing gold rose to its highest level since 2008, as the recent gold sell-off has substantially tightened the leasing market.
The nearly 7% gain over the past two weeks is the largest gold price rise since November 2011. Gold ended the week just under US$1,300oz and appears to be building a firm base above US$1,200oz. Substantial physical demand, notably from China, increased central bank buying, unprecedented global monetary accommodation, a weaker than usual economic recovery and the recent price correction back to attractive value should be medium-term bullish for most precious metals prices.� Key events to watch this week� Manufacturing PMIs will dominate the news flow this week and provide investors a gauge for the strength of the global recovery. Given that Fed tapering is data-dependent, the flash Markit PMIs for US and China may attract as much attention as the official figures usually do. US housing market data will be closely analysed to assess whether last week’s weak housing starts data was an aberration or the start of a trend.