Gold Support at 144 Day Moving Average at $1,603; Chinese Gold Demand “Extremely Strong”

Physical demand for gold in Shanghai has been “extremely strong” this week following the week-long Chinese holiday, Mitusi note in their morning report. UBS are more circumspect but note that physical demand in China appeared to be “quite decent” in the first trading day after the Golden Week holiday. They note that combined volumes for the SGE Au9999 and Au9995 contracts surged to the highest since February 14th. Year-to-date volumes are now 11% higher than 2010 levels. UBS “expect demand to remain strong until the Chinese New Year holidays in late January 2012.” A further sign of the significant scale of demand from Asia and from China in particular is seen in the news today that China has installed its first gold vending machine. More importantly, China and Chinese banks are planning to roll out another 2,000 gold ATMs nationwide. Each ATM can hold up to 200 kilograms of gold bullion in varying denominations at once.

From Goldcore:

Gold is trading at USD 1,655.70, EUR 1,232.18, GBP 1,065.81, JPY 126,856.60, AUD 1,703.34 and CHF 1,523.38 per ounce.
Gold’s London AM fix this morning was USD 1,662.00, EUR 1,222.96, and GBP 1,064.09 per ounce.
Yesterday’s AM fix was USD 1,664.00, EUR 1,226.59, and GBP 1,063.74.

Cross Currency Rates
Gold closed marginally higher last week which will embolden some technical traders. After the sharp fall seen in September, gold looks well supported at the 144 day moving average which has edged up to $1,602.95/oz (see chart below). The 144 day moving average has provided strong support for gold in recent years and may again prove a valuable technical aid.
Fundamentally there is also strong demand above $1,650 and especially near $1,600/oz. A large Tokyo based bullion house told Reuters that "we see the bottom for gold prices at $1,600  . . . When gold prices approach that level, physical demand from emerging economies rises."
Given the scale of the selloff in September, the market may require more time to compose itself. Further consolidation between the 100 ($1,660.90/oz) and the 144 ($1,602.95/oz) day moving average is possible and has been the pattern after selloffs in recent years.

Gold in USD – 2 Years (Daily) with 100 (White) and 144 DMA (Green)
Fundamental support continues to come from physical demand particularly in Asia.
Premiums for gold bars in Vietnam were at $22.21 to world gold of $1,648.70 on Monday.
Premiums for gold bars in Hong Kong are at $3.00 an ounce over spot prices, their highest level since at least February. Shanghai gold closed at a very healthy premium of $21.81 to world gold of $1,656.60.
Physical demand for gold in Shanghai has been “extremely strong” this week following the week-long Chinese holiday, Mitusi note in their morning report.
UBS are more circumspect but note that physical demand in China appeared to be “quite decent” in the first trading day after the Golden Week holiday. They note that combined volumes for the SGE Au9999 and Au9995 contracts surged to the highest since February 14th. Year-to-date volumes are now 11% higher than 2010 levels.
UBS “expect demand to remain strong until the Chinese New Year holidays in late January 2012.”
A further sign of the significant scale of demand from Asia and from China in particular is seen in the news today that China has installed its first gold vending machine. More importantly, China and Chinese banks are planning to roll out another 2,000 gold ATMs nationwide. Each ATM can hold up to 200 kilograms of gold bullion in varying denominations at once.
 The handful of ATM machines internationally selling gold bars have received much media attention and some have suggested that these few gold ATMs signal a top in the market.
The rolling out of 2,000 gold ATMs in China in the coming months is a further sign of China’s nearly insatiable appetite for gold bullion and a sign that demand is likely to remain robust for the foreseeable future.
The per capita consumption of gold of nearly 1.3 billion Chinese people continues to increase from a very low base.
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NEWS
(Mineweb) -- China installs gold vending machine, plans 2,000 more
http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=137215&sn=Detail&pid=102055
(Bloomberg) -- Gold Drops From Two-Week High Before Slovakia Bailout Fund Vote
http://www.businessweek.com/news/2011-10-11/gold-drops-from-two-week-hig...
(Reuters) -- Gold extends gains on EU debt hopes
http://www.reuters.com/article/2011/10/11/us-markets-precious-idUSTRE78M...
(Bloomberg) -- Gold Extends Biggest Advance in a Month as Debt Optimism Helps Buoy Euro
http://www.bloomberg.com/news/2011-10-11/gold-may-advance-a-second-day-a...
(CNBC) -- Dennis Gartman: Gold Market Giving Europe Thumbs Down
http://www.cnbc.com/id/44849999
COMMENTARY
(Zero Hedge) -- Peak Silver Revisited: Impacts Of A Global Depression, Declining Ore Grades & A Falling EROI
http://www.zerohedge.com/news/peak-silver-revisited-impacts-global-depre...
(History Channel via YouTube) -- Decoded: Ft. Knox Gold
http://www.youtube.com/watch?v=IXXMSduH6YE&feature=share
(Dollar Collapse) -- Doug Noland: “The Situation Is Utterly Hopeless”
http://dollarcollapse.com/the-economy/doug-noland-%E2%80%9Cthe-situation...
(New York times) -- Panic of the Plutocrats
http://www.nytimes.com/2011/10/10/opinion/panic-of-the-plutocrats.html?_...