Gold fair value estimated

















The gold price has climbed higher in Q3:09 and early Q4:09 supported mainly by a weaker US dollar and through increased ETF investment holdings. On the investment side, holdings by
the SPDR Gold Trust ETF have increased 0.4% w/w to 1,098 metric tonnes.

Despite being positive for gold, the rate of increase in gold investment holdings is relatively slow. This perhaps suggests that weak global fabrication demand and low Asian physical demand
are starting to impact on sentiment after all. Although increased Indian physical gold demand has seen the domestic Indian gold price trade at a USD0.30/oz to USD0.40/oz premium to London, ahead of the Diwali festival, physical gold is still trading at a discount in most other locations in the Asia- Pacific region.

Of note, the 1-week rolling correlation between spot gold and oil has contracted from 91% on Friday to 25% last week. Gold’s rolling correlation with the NewEdge CTA index, which most of the report use to proxy investment flows, has also fallen from 73% on Friday to 12% last week. The rolling correlation between the trade weighted US dollar and spot gold price has increased from –66%, on Friday, to –91%. Most of the investor believe increased importance of the US dollar and reduced influence of oil and investment flows could increase short-term gold price volatility.

Base on Standard Bank report, fair value estimate for the gold price, which is a short-term 1-month outlook, has increased 4.7% m/m to $993/oz in October. On that basis, plus given the fact that physical demand is weak, they see the potential for a short-term correction in the spot gold price from last week levels of over $1,020/oz. They caution however, that with the dollar remaining the dominant force driving prices, gold’s relationship to its fundamentals remains very much at arm’s length.

















Malaysia Gold price also bounds up high and hits RM116 per gram before turn down. Base on the chart Malaysia gold price may hits news high in this month so this is the time to get profit.

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