Average daily trading combined volumes on the three main gold contracts on the Shanghai Gold Exchange in the first two months of the year jumped 24% on the year, according to Reuter’s calculations.
“The strong physical demand in China is the main reason behind gold’s resilience,” a Beijing-based trader told Reuters. Physical demand prospects out of China remain positive in the weeks ahead, UBS AG said according to Bloomberg.
Sentiment is as bad as we have seen it in recent years which suggests to us that while gold may go lower in the short term – we are close to a bottom. The global debt crisis is far from over and when it erupts anew, gold’s appeal as an important diversification and safe haven will be appreciated once again.