Singapore Bullion Market Association

Website Sponsor

Article List

Article List

Is the Gold Run Over?

By Brian Lan, Managing Director, GoldSilver Central Services

Published on September 10, 2021

On 9 August 2021, gold fell by 4.2% to a five-month low (Figure 1). Many wondered if this was a flash crash or if there was manipulation at play. Well, this is in fact what healthy markets do and it all depends on buyers or sellers in the market, and its not unique to gold. There might be a few reasons behind this dip.

1. Algorithmic traders derived similar sell levels and multiple stop loss or stop out levels were triggered

Many algorithmic traders might have derived similar sell levels based on their technical models and there might have been hundreds or thousands of sell orders once prices hit their sell limit levels. This dip happened during the early hours of Singapore time, also during the wee hours in Europe and late night in the US. Those who had long positions might have had their positions automatically liquidated due to insufficient margins and as prices go lower, this would be further exacerbated into a downward spiral.

2. Lack of liquidity during market open in Asia

Coincidentally, this price dip happened on public holidays in Singapore and Japan. Singapore was celebrating its National Day and Japan was having a holiday in lieu of its Mountain Holiday. There was more trading activity on Friday the week before as US released better-than-expected non-farm payroll figures. This led many to believe that economic recovery was on the way. This probably led to more traders in Asia to leave sell orders before the market opened on Monday.

There are a number of gold desks in banks located in Singapore and Japan. Due to the holiday, there were probably fewer traders physically on desk or less experienced ones left on desk to handle the trades. Also, expectedly more trades were on the sell side when market opened, coupled with a lack of liquidity in the early hours with fewer market makers during Asia hours, which resulted in a 4.2% dip in the gold price before finding a support level. Gold prices then recovered very quickly within two hours and prices recovered from the low at US$1,680 to US$1,720. (Figure 1).

Figure 1: Gold Price Daily Chart

Figure 2 and table 1 show increased activities (volume and open interest) on these two particular days as compared to other trading days, but they are nothing out of the ordinary. It is also very unlikely there was “manipulation” as many unhappy investors claimed. There were many market participants that contributed to this dip, as opposed to a single big trade by a market player.

Figure 2: Gold futures – Volume and open interest

Source: CME Group

3. “Summer doldrums” and other asset classes have generated higher returns

The annual seasonal weakness for gold happens during the summer months, which many call the summer doldrums. During this period many family offices, fund managers and traders are on vacation, which means fewer trades executed and hence lesser volatility or price action during this period. Refineries use this period to retool and collect gold dust in their facility as physical demand tends to be lower. As we know, when markets are trading in narrow ranges, not much activity happens and more often than not, investors who are looking for prices to appreciate to make a profit will then lose interest and look at other asset classes to generate their alpha.

Capital will always flow to asset classes that can generate higher returns. This year equity and cryptocurrencies have done well. The S&P has posted 50 new highs this year and a return of about 20% so far. Cryptocurrencies such as bitcoin and ethereum have also done well, with more than 100% returns at their highs. Short-term gold investors were disenchanted as they were expecting gold to hit new highs from what they have seen last year, but prices went persistently lower than the market open on 2 January this year. This probably played a big part in the sell orders we’ve seen, especially when prices fell.

Table 1: Gold futures – Volume and open interest

Source: CME Group

Is the gold run over then?

It seems like gold will do well during the last quarter, hence I remain bullish on the precious metal. There are three main reasons why I believe gold prices will be supported. First, weak hands have been cleared out by this dip and prices can climb from here. Second, central banks that were not usual buyers have been buying gold in big quantities. For example, Brazil bought 62.3 tonnes, Hungary bought 63 tonnes, Japan bought 80.8 tonnes and Thailand bought 90.2 tonnes this year. Prices they bought into were in the range of US$1,780 to US$1,840, hence we might expect to see more central banks buying into gold at current levels, which would be a good support for gold. Finally, jewellery buying from China and India has picked up sharply compared to last year and as we move into the wedding seasons for both countries, we expect demand to pick up during the last quarter. Coupled with the October Comex Gold roll that will be rolled over to December, we could see an exciting end for gold in 2021.

Updates on silver premiums

In Crucible 17, I shared that the premiums for 100 oz. silver bars shot up by 687% in February, exacerbated by the silver squeeze. Currently, supply has more or less caught up with demand and we have seen the easing of premiums, though it is still elevated at 250%. However, ready inventory supply is still not at pre-Covid levels, hence we expect premiums to rise if there is a sharp increase in physical demand.

BRIAN LAN is the Managing Director of GoldSilver Central and a member of the company’s Board of Directors. He is part of the team in charge of overall management of the company and is responsible for sales, operational infrastructure and predominantly, global business development. His passion is using technology to transform business processes and advance client outcomes. He also sits on the board of GoldPlus Assets and Fund Express. This year GoldSilver Central is proud to celebrate its 10th anniversary in business.

PREV ARTICLE
NEXT ARTICLE
BACK TO INDEX

Singapore Bullion Market Association Secretariat-Lee-Jia-Yi

Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

SECRETARIAT SBMA-Emily-Oh

Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

SECRETARIAT SBMA Clara-Chang

Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

SBMA Committee-Photo-john-levin

Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

SBMA Secretariat-Fabian-Lew

Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

SBMA-margare-secretariat

Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

SBMA-Albert-secretariat

Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

SBMA-Shaokai-Fan

Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

SBMA-Committee-Alan-Liew

Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

SBMA-Committee-Nikos

Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

SBMA-Committee-khun nuttapong

Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

SBMA Committee-Photo-Raman-Walia

Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

SBMA Committee-Photo-Andrew-Clarke

Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

SBMA Committee-Photo-Kazuya-Naoki

Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

SBMA Committee-Photo-Vinh-Nguyen

Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

SBMA Committee-KL-Yap

Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.