The US dollar index hit a 12 year high this week and, unsurprisingly, the precious metals are feeling the pain. Gold is making four month lows while platinum has fallen to a five and a half year low. Investors and traders appear to be wary ahead of tomorrow’s Federal Open Market Committee press conference. The general concern heading into tomorrow’s FOMC is that there will be language suggesting a rise in interest rates as early as June. Besides a brief short covering rally in today’s trading session where gold shot up $15 in three minutes on 11,000 lots (1,100,000 ounces), USD strength and pre-FOMC anxiety have gold pressed into negative territory.
Physical demand out of Asia is picking up in gold as it trends lower. Shanghai Gold Exchange gold has become more expensive versus spot/London pool gold recently. Refineries in North America and Europe are picking up their production of kilo gold bars in order to feed the existing and anticipated demand in India and China at these lower prices. Gold lease rates have picked up a tad as refineries borrow gold from banks which is contributing to the spot price trading at a premium to futures (known as backwardation).