In what has become a recent routinized pattern in the price of gold (and silver), the market rallies during peak Indian gold market hours and then sells off when London opens. After the customary price take-down when the Comex floor trading opens, gold and (and silver) typically recoup the overnight sell-off. In short, there seems to be epic price discovery battle going on between paper derivative gold and the physical gold market and that won’t take much to ignite a massive move higher.
The recent sell-off in gold has triggered massive gold demand from India. Recall that India had been dormant since June, when the Government increased the import duty by 25% on imported kilo bars. But the lower price of world gold, combined with India’s peak seasonal gold buying period has unleashed India’s gold importation beast.
Based on premiums being paid for gold after taking into account the import duty, Indian importation is running full-tilt.
Despite repeated attempts to take the price of gold lower, Indian physical demand has put a floor under the market, at least for now, and poses a potential threat to the record level of net short interest in Comex futures by the banks and hedgers…The rest of my commentary came be found at Gold-Eagle.com.