Asian Metals Market Update for 11th February

February 11, 2025

Why gold price will rise or may not fall significantly in the near term?

London bullion market players are racing to borrow gold from central banks, which store bullion in London, following a surge in gold deliveries to the United States.
Gold in the Bank of England vault is trading at a discount to the wider market. This has seen week-long queues to withdraw the metal.
Global bullion banks are flying gold into the United States from trading hubs catering to Asian consumers, including Dubai and Hong Kong, to capitalize on the unusually high premium.
The London Bullion Market Association also reported on Friday that the amount of gold stored in London vaults fell 1.7% month-on-month to 8,535 metric tons, worth $771.6 billion in January, due to a rush in shipments to the United States.
Central banks bought more than 1,000 tons of the metal for the third year in a row in 2024, the World Gold Council (WGC) said in a quarterly report.
In the final quarter of 2024, when Trump won the U.S. election, buying by central banks accelerated by 54% year on year to 333 tons, the WGC calculated, based on reported purchases and an estimate of unreported buying.
China's central bank added gold to its reserves in January for a third straight month, official data showed.
Asian currencies have weakened significantly against the US dollar in the last five months. A weaker local currency further increased gold prices in almost every Asian country and worldwide. The sentiment is only towards more weakness in Asian currencies. Central bank intervention is there sporadically.
China's decision to allow insurance funds to invest in gold, as well as other moves, appears to bolster bullion’s bullish momentum. China will also allow some of its insurance funds to buy gold for medium- and long-term asset allocations as part of a pilot project, the country's financial regulator said.
(partly copied from Reuters News)

The surprise above is China allowing its insurance funds to invest in gold. There are no estimates on the value/amount that Chinese insurance companies will invest in gold. Chinese demand for gold and gold investment will see a big rise (as compared to 2024 demand) this year.

Gold is flowing from London to the USA. Copper is moving from London to the USA. The big question is whether the flow of physical gold and physical copper from London to the USA is just (i) temporary or (ii) there is something very large conspiracy behind the same.

Copper is used and will be used in everything in the future. There are projections of a shortage of physical copper over the coming years. Is the USA indirectly increasing its gold reserves through its hedge funds?
Gold is essential to trade between nations.
Copper, aluminum, and other metals increased reserves by nations imply that are building reserves and also to control future prices and ensure continued long-term supply.
The gap, or spread, between LME and COMEX futures prices has widened to $740 a tonne, its highest in around 35 years, as traders play the arbitrage - selling London futures in favor of buying U.S. ones. When Trump took office, this spread was below $240 a tonne.

I feel something fishy in this transfer of physical metals from London to the USA. I cannot justify the same. Time will tell us the motive behind the current situation in the USA. The “Trade Wars” could be a mask for something very large upcoming geopolitical shift. Gold price will rise. There may be sharp corrections here and there. The pace of the rise will be unpredictable.

CME SILVER MAY 2025 – Current price $3236.30

Silver March (2025) has to trade over $3178.00 to rise to $3315.00 and more.
A mild sell-off will be there if silver March trades below $3211.00 with $3160.00 as key support till Thursday's close.
Views are intraday.

Disclaimer

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Disclosure: I trade in India's MCX commodity exchange. I have open positions in India's MCX commodity future. I do not trade in CME future or OTC spot gold and spot silver.

NOTES TO THE ABOVE REPORT