Category Archives: SUPPLY & DEMAND

A PESSIMIST’S GUIDE TO THE WORLD IN 2016

Picture credit Boomberg

# Note added 8th January 2016

December 15, 2015

Bloomberg News asked dozens of former and current diplomats, geopolitical strategists, security consultants, and economists to identify the possible worst-case scenarios, based on current global conflicts, that concern them most heading into 2016.

LINK TO BLOOMBERG’S PESSIMISTS GUIDE TO 2016

# Trump wins U.S Presidency

# Oil climbs to $100 per barrel

# The UK leaves the European Union

 

# Banks hit by cyber attack

# The EU crumbles under anti-immigration  fears

 

# China’s economy falls, military rises

 

# Israel attacks Iran’s nuclear facilities

 

# Putin sidelines America

 

# Climate change heats up

 

# Latin America’s lost decade

 

LINK TO related Story: Imagine a World Where Black Swans Really Do Come True in 2016

Goldwatcher Comments are being  published in the Goldwatcher Investor Literacy page    

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GOLD SUPPLY DEMAND DYNAMICS & PRICE INDICATIONS

GOLD : FUTURE SUPPLY, DEMAND DYNAMICS & PRICE INDICATIONS

CPM Group founder and Chief Executive Jeffrey Christian is one of the world’s best informed and  most respected commentators on gold. He understands global macro economics, finances gold investing and trading, knows the nuts and bolts of the gold mining industry and publishes reports on all aspects of gold and precious metals. His extensive  presentation on The State Of The Gold Market at the Denver Gold Forum meeting last week looks ahead a few years,  projects  demand recovering from next year with positive supply and demand dynamics ahead.  It’s essential reading for investors.

 

MOVING ON FROM THE GOLDWATCHER:

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This BLOG was launched to support The Goldwatcher- Demystifying Gold Investing when Wiley commissioned me to write the book   in March 2007.

 After repeated hacks that forced  us off line twice we relaunched in December last year when  friends, driven into frenzies of anxiety by apocalyptic warnings  and  get rich quick with with gold fantasies, wanted to know what I thought.  They will have found the information  I  posted since then  useful.

 However by the end of last year  content on The Goldwatcher was already more about global events than gold and gold mining.  To support a   book I am writing  on Information,  Simple Arithmetic and Common  Sense as  essential safeguards for investors I launched The Globewatcher and Investor Literacy blogs . Both already have a few headline commens on subjects being addressed in my new book.

I will continue to Tweet as JohnKatz Goldwatcher

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The Goldwatcher Page InvestorLiteracy.com

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Jeff Christian Denver September 2015

POSITIVE SUPPLY DEMAND INDICATIONS

 

CHART GOLD HOLDINGS IN EXCHANGE TRADED PRODUCTS COURTESY OLE HANSEN SAXO GROUP

Embedded image permalink

The above chart tweeted by Ole Hansen  reflects two important fundamental  developments – further clearance of the overhang of speculative gold in Exchange Traded Products and a significant revival  in Indian demand that needs to be reviewed in relation to the Indian Government’s initiatives to monetise gold hoarded in the country aimed at reducing future imports.

Speculative interest in gold may also have been  spiced up by the current political impasse over the US Budget that must be resolved by the end of September to avoid any shut down of Government activities.  This is potentially unsettling.  But  the issue will almost certainly be resolved without any shut down that acually interrupts significant Government activities.

Financial markets are already  unsettled by these and other  concerns including economic problems  in China  and recent revelations on Volkswagen’s deception on emission measurement – serious on its own and possibly involving other manufacturers.  These concerns may also have influenced increased  speculative interest in gold. But,  unlike the important  supply and demand factors illustrated in the chart above,   they don’t affect fundamental supply demand dynamics.

 

 

This website if not advisory.  Please read our Disclaimer On Investment Advice

 

 

 

 

CHINA : EXPECT THINGS TO GET WORSE BEFORE THEY GET BETTER

 UPDATE; 25th August 13.30 GMT:

BBC REPORT :

The People’s Bank of China cut its main interest rate by 0.25 percentage points to 4.6% after two days of stock market turmoil.

It is the fifth interest rate cut since November and will take effect on Wednesday.

The move has boosted European share prices further, with the FTSE 100 in London jumping 3.3% after the China move.

In Germany, the Dax was up by 4.4% and in Paris, the Cac was ahead by 4.6%.

 

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Blog Posting 10.30 a.m. 25th August 2014:

 In a comment Pressure Mounts on China to Act Scott Minerd, Glocal CIO Guggenheum Partners writes:

“…the PBoC will soon be forced to reduce bank reserve requirements while allowing for a more rapid devaluation of the RMB. Time is not on the side of Chinese policymakers. Given the severity of the current domestic slowdown, pressure is mounting for more radical policy action.

“Expect to see further downward pressure on commodity prices, global equities, and U.S. Treasury yields. The first sign that we are approaching a bottom for all three will be when China caves and allows the RMB to adjust to a more appropriate level, which could mean another 25–30 percent decline in the value of the RMB against the U.S. dollar.

“Things will get worse before they get better, and investors around the world are demonstrating appropriate concern. Unfortunately, relief is nowhere in sight.”

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Goldwatcher comment:

Gold is likely to be back on the agenda of investors “demonstrating appropriate concern” over adverse developments and uncertainties.

This website if not advisory.  Please read our Disclaimer On Investment Advice

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GOLD DEMAND SINKS BY 12% IN JUNE QUARTER & CHINA BUYS 19 TONNES IN JULY

 

Gold Demand Trends Q2 2015

The World Gouncil published the following schedule  on Q2 2015 demand yesterday reflecting a 12% decline in total demand from the previous quarter with demand declines in every category.

 

2013 2014 2015 Q2’15 vs Q2’14
Tonnes 2013 2014 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 % chg
Jewellery 2,673.2 2,462.9 628.4 616.0 618.1 594.5 593.7 656.6 603.4 513.5 -14
Technology 354.3 346.5 87.4 84.4 82.2 86.3 87.7 90.4 81.6 85.5 -1
Electronics 248.6 277.6 61.7 59.7 65.3 68.8 70.5 73.0 64.9 68.2 -1
Other Industrial 82.7 49.0 20.1 19.5 11.5 12.6 12.3 12.6 11.9 12.6 0
Dentistry 23.0 19.9 5.6 5.2 5.3 4.9 4.9 4.8 4.7 4.7 -4
Investment 785.6 820.2 202.2 161.0 267.9 199.9 182.5 169.9 275.5 178.5 -11
Total bar and coin demand 1,702.0 1,004.4 320.9 346.5 281.5 237.8 223.0 262.0 252.1 201.4 -15
Physical Bar demand 1,335.8 725.7 262.4 261.4 201.3 170.6 166.5 187.4 191.5 152.3 -11
Official Coin 266.3 204.6 42.2 67.0 64.4 49.2 36.1 54.9 45.9 36.2 -26
Medals/Imitation Coin 99.9 74.0 16.4 18.0 15.8 18.1 20.4 19.7 14.6 12.9 -29
ETFs & similar products* -916.3 -184.2 -118.7 -185.5 -13.6 -37.9 -40.5 -92.1 23.4 -22.9 -
Central bank & other inst. 625.5 590.5 138.9 150.0 119.8 157.2 179.5 133.9 123.6 137.4 -13
Gold demand 4,438.6 4,220.1 1,056.8 1,011.5 1,087.9 1,038.0 1,043.5 1,050.8 1,084.0 914.9 -12
LBMA Gold price, US$/oz 1,411.2 1,266.4 1,326.3 1,276.2 1,293.1 1,288.4 1,281.9 1,201.4 1,218.5 1,192.4 -7

 

Following this extremely negative news the FT reported this morning :  “China released data on its gold holdings for the second time in a month on Friday, saying it had bought 19 tonnes of gold last month as prices traded at their lowest levels in five years. The People’s Bank of China said it increased gold holdings to 1,677 tonnes (53.93m fine troy ounces) at the end of July, an increase of 1 per cent.”

Goldwatcher analysis stresses the importance of central bank activity.  Sustained interest by China is of special importance as she is on track to being the world’s largest economy by 2016 with the Remninbi expected to be included as a component of the IMF’s SDR basket within the next few months. 

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GOLD PRICES : SHORT SELLERS BUT AS YET NO BLACK SWANS

 

Black Swan at Martin Mere.JPG

BEHIND RECENT ACTIVITY IN GOLD

A sustained rally in gold prices could follow a financial catastrophe  or  other so called  black swan event.  Some commentators  continue making the case a financial catasrophe is imminent  – a case they have been making for years. But  the recent Chinese currency devaluation isn’t a black swan event. It’s a legitimate decision made by a sovereign nation .

 

The following August 13th chart reflects speculation and short covering following China’s currency announcements.  While fundamentals for a sustained gold price rise  appear negative a squeeze on short sellers may supported the modest bounces.

 THE FEAR, LOVE & TRADE TRADES:

Pundits like to make the case  gold demand follows  fear trades and a love trades.  The fear trade moves markets  when global economic or political conditions are precarious and gold is being bought as catastrophe risk insurance. The love trade moves markets when buyers are active in China, India and other regions where gold remains  a traditional store of value.

However, while the fear and love trade are part of the demand story, markets also  respond to speculation . The trade trade.

Recent modest  gold price advances appear to have  been driven by  trade trades. Some buying in response to the China devaluations followed by a squeeze on short sellers and  a price bounce.

 

GOLD AT A REASONABLE PRICE:

Mining costs are a key factor in determining reasonable prices and, if gold is bought at a reasonable price,  owning it as insurance against black swan events  and major corrections in financial markets can make sense.  Should market prices for gold fall below levels it can be mined profitably supply will probably fall, demand will exceed supply and prices will adjust.

Metals Focus  report on mining costs for the industry . Their recent analysis reveal a significant portion of production is already at a loss and at current levels there is the potential for substantial production lshortfalls.  Metal Focus’s findings are detailed in this recent  Kitco comment

 

For further analysis on gold supply, demand and prices please contact:

TheGoldwatcher@icloud.com

 

 

 

 

 

 

PRICED IN REMNINBI GOLD GAINS & COMMODITIES FALL

Chart illustrating Gold priced in offshore  Remninbi Courtesy  Ole Hansen Saxo Bank

Gold in offshore Chinese Renminbi

Ole Hansen  Head of Commodity Strategy Saxo Bank “Is Gold Getting Back Its Moxie
“What a difference one announcement makes, especially when that announcement comes from China and it involves its currency which has been very steady for a long time against the dollar while many other currencies have weakened.”
Commodities recovered a bit on Monday only to be struck down in flames on Tuesday when the Peoples Bank of China announced its new fixing mechanism which essentially opens the door for a continued devaluation. The fact that the weakening of the currency has continued today has left the market with the unpleasant guessing game of how far they are prepared to let it go. Our FX Strategist John Hardy is looking at a potential 10% devaluation before the PBoC halts the slide.

 

Commodities most affected by China demand

Two day commodity performances

Chart Courtesy Saxo Bank

The previous Goldwatcher posting illustrated emerging market currencies in freefall.   4.5%  Remninbi adjustment in two days isn’t free fall Remninbi  but loss is significant. Short covering  rally is likely to support the gold price.

 John Hardy Head of FX Strategy at Saxo Bank writes: 

“I suspect the move will stop as quickly as it began at some unknowable point in the very near future (perhaps 6.80 area in USDCNY where the rate was fixed during the global financial crisis and representing approximately a 10% move?) and then the PBoC will try to make things as boring as possible.”

GOLD BULLS IN RETREAT AFTER PLUNGE

This CNBC article addresses the gold price plunge…

“Gold slid over 4 percent to as low as $1,086 an ounce in early trade on Monday, before paring back some losses over the course of the day. It was down 2.3 percent at $1,107 at around 12:00 SG/HK time…

“…Around 5 tonnes of gold was sold on the Shanghai Gold Exchange within the space of two minutes between 09:29 and 09:30. The daily volume last week was about 25 tonnes,

 

Bulls concede defeat

“The disappointing performance of the yellow metal, which is down 6.4 percent on a year-to-date basis, has sent gold bulls into retreat.

“Technical analyst Daryl Guppy also warned of “bearish features” on the gold chart: “There is a higher probability of a future fall below $1,150 and a continuation of the downtrend towards historical support near $980.”

“Wherever you look, there really is no support for the precious metal,” said Howie Lee, investment analyst at Phillip Futures, who has been targeting gold to hit $1,100 since the start of the year.

“Developments in China, whether in terms of central bank buying or jewelry demand, are simply not sufficient to keep gold prices at high levels,”

 

PREVIOUS  GOLDWATCHER ON CHINA DEMAND

The  gold price spiked to over $1900 between 2007 and 2011 when gold was being over hyped as a safe haven.  In spite of the severe correction that followed the  prophets of doom continue to hype gold relentlessly.  Claims that  China is on course to imposing a new gold standard  to strengthen its credentials with the IMF is the latest absurd pitch.”

 

Readers of Goldwatcher Fact Based Analysis would not have been taken by surprise by the recent price plunge or previous price movements.

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