Category Archives: Gold Prices

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.

For details of Goldwatcher publications and Q&A sessions please email

thegoldwatcher@icloud.com

 

 

ETP GOLD HOLDINGS SINK TO RECORD LOW

Gold Price Weakness

Update 18th June 2015

Bitcoin surges as Grexit fears mount :

Gold up 1.45% AT $1201

Ole Hansen, Head of Commodity Strategy Saxo Bank: writes

“Investors have cut total holdings in Exchange-Traded Products backed by physical gold to a new six-year low following five consecutive weeks of selling.”

Charts Courtesy Ole Hansen Saxo Bank

ETP holdings, weekly change

ETP holdings, graphs

Gold Mining Costs  & The Price Buyers Are Willing To Pay

Mining costs are not uniform.  But, in relation to substantial volume producers,  indicated all in  costs are between  $950 and $1150 per oz. This price range corresponds with the prices buyers are currently willing to pay. If gold buyers are not prepared to pay a price that rewards production supply will fall, demand will exceed supply and the price will stabilise at a level that rewards producers.
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.

Moderation, Motivation, Strategy  & Timing

 The Goldwatcher  pitch has been that gold is well described as The Stateless Money Franchise. Moderation has been our Golden Rule and still is.  Sensible motivation, strategy and timing are of course  golden rules for all investing.
Gold is out of favour now with the investors who can access a range of alternative financial hedges and diversification opportunities. However gold  remains on the agenda for anyone interested in owning  an asset with a different risk reward profile to other financial assets. In this context  the case outlined in The Goldwatcher for owning gold as insurance against the unexpected and unthinkable remains compelling .

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GOLD SUPPLY DEMAND TRENDS & ETF ANALYSIS

Sustained Central Bank demand for gold supports the conclusion in The Goldwatcher that the gold mining industry needs central banks and central banks need gold.

In his 1997 Lecture   “The International Monetary System in the 21st Century Could Gold Make a Comeback the Nobel Laureate Economist Robert Mundell predicted :

“More likely, gold will be used at some point, maybe in 10 or 15 years when it has been banalized among central bankers, and they are not so timid to speak about its use as an asset that can circulate between central banks. Not necessarily at a fixed price, but a market price.”

Infographic 1

Source World Gold Council  Supply and Demand Trends Analysis 

GOLD DEMAND ANALYSIS

2013 2014 2015 Q1’15 vs Q1’14
Tonnes 2013 2014 Q2 Q3 Q4 Q1 Q2 Q2 Q4 Q1 % chg
Jewellery 2,670.7 2,457.2 822.9 628.4 614.7 620.2 590.2 591.6 655.1 600.8 -3
Technology 354.1 346.5 93.9 87.0 83.6 81.9 86.4 87.9 90.4 80.4 -2
Electronics 248.4 277.6 65.3 61.4 59.1 65.0 68.9 70.7 73.0 63.7 -2
Other Industrial 82.7 49.0 22.5 20.0 19.3 11.5 12.6 12.3 12.6 12.0 4
Dentistry 23.0 19.9 6.1 5.6 5.2 5.3 4.9 4.9 4.8 4.7 -11
Investment 785.9 820.6 162.3 202.2 161.3 268.0 199.2 182.9 170.6 278.8 4
Total bar and coin demand 1,702.0 1,004.4 593.8 320.9 346.5 281.5 237.1 223.4 262.5 253.1 -10
Physical Bar demand 1,335.8 726.0 472.0 262.4 261.4 201.3 170.0 166.9 187.9 193.5 -4
Official Coin 266.3 204.6 85.8 42.2 67.0 64.4 49.2 36.1 54.9 45.0 -30
Medals/Imitation Coin 99.9 73.8 36.1 16.4 18.0 15.8 17.9 20.4 19.7 14.6 -8
ETFs & similar products* -916.0 -183.8 -431.5 -118.7 -185.2 -13.5 -37.9 -40.5 -91.9 25.7 -
Central bank & other inst. 625.5 588.0 166.5 138.9 150.0 119.8 157.2 176.7 134.2 119.4 0
Gold demand 4,436.3 4,212.4 1,245.6 1,056.4 1,009.6 1,089.9 1,033.0 1,039.2 1,050.4 1,079.3 -1
LBMA Gold Price, US$/oz 1,411.2 1,266.4 1,414.8 1,326.3 1,276.2 1,293.1 1,288.4 1,281.9 1,201.4 1,218.5 -6

GOLD ETFs GLOBAL HOLDINGS

 1041 TONNES  VALUE US $40,305m

Product name Total Tonnes Total Ounces Total Value
New York Stock Exchange Arca (NYSE Arca) AND Singapore Exchange (SGX) AND Tokyo Stock Exchange (TSE) AND Hong Kong Stock Exchange (HKEx) AND Mexico Stock Exchange (BMV) SPDR® Gold Shares 715.260 22,996,326 US$27,681m
London Stock Exchange (LSE) AND NYSE Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse – Xetra) Gold Bullion Securities 138.13 4,441,056 US$5,274m
London Stock Exchange (LSE) AND NYSE Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse – Xetra) AND NYSE Euronext Amsterdam ETFS Physical Gold 152.66 4,908,200 US$5,825m
Australian Stock Exchange (ASX) Gold Bullion Securities 11.16 358,789 US$426m
Johannesburg Securities Exchange (JSE) New Gold Debentures 28.38 912,310 US$1,099m

 

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GOLD FOR SLEEPWALKERS – GREECE & HER CREDITORS

 

31st MAY : ANALYSIS ON GREECE UPDATED & CONTINUED  IN                                                         THE GLOBEWATCHER

 

IMF PRESIDENT LA GARDE REFUSES DEBT RELIEF EXTENSION

#NOTE ADDED 21st MAY 2015

DEPOSITORS FLEEING GREEK BANKS:

Depositors are responding to the risk of waking up one morning to discover their  Euro deposits have been convered to drachmas.

lst May :Rating agencies say no default if Greece misses ECB/IMF payments

# 23rd April: The ECB has agreed to expand ELA (emergency lending program) to Greek banks by €1.5bn to €75.5bn. as long as they stay solvent. The Greek bank share index roseover 13% on Wednesday. Link to Reuters comment

BACK TO APRIL 21st POSTING

German,  Greek, European and other interested  finance ministers are in  Washington for the annual joint meetings of the IMF and the World Bank together with the great and the good among the world’s major policy makers and economists. They have  an opportunity to help bridge the differences between Greece, the IMF and Europe. The Brookings Institution were quick off the mark.

SCHAUBLE AND VAROUFAKIS AT BROOKINGS:

Brookings introduced their support with this comment:

‘As finance ministers from around the world gather in Washington, DC this weekend for the annual meetings of the IMF and World Bank, Brookings hosted two of them, separately, in back-to-back events yesterday: Germany’s Wolfgang Schäuble, and Greece’s Yanis Varoufakis. The convergence of the two ministers is of particular interest because the government in Athens is out of money, is unable to borrow on global bond markets, and is dependent on loans from the rest of Europe and the IMF. But Greece’s creditors, including Germany, are reluctant to lend Greece more money unless Athens institutes firm commitments to make Greece economically more competitive.’

‘Against this backdrop, the two foreign ministers gave remarks and answered questions in the two events at Brookings. Senior Fellow David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy, participated in both events, and spoke on NPR this morning about what he heard.

“Both sides say they are looking for common ground,” Wessel told NPR’s David Greene,”but right now it’s hard to see what policies will fly politically in Greece and satisfy the conditions set by the IMF and Europe. It’s a game of chicken: each one expects the other side to blink first. And Greece is taking a hard line, expecting the creditors will flinch because they are afraid that if there is an implosion in Greece that will produce a lot of problems in other vulnerable countries.” You can listen to the interview below this video, which highlights various remarks of the two finance ministers.’

The Greek economy and its global partners: A conversation with Greek Finance Minister Yanis Varoufakis

Eurozone at a crossroads (again) : A conversation with Wolfgang Schauble.

I found listening to both talks brought insight on the contentions between them  and personal respect for both Schauble and Varoufakis.  Without in any way distracting from their knowledge or sincerity both could  come from central casting.

MUNCHAU ON THE PROSPECTS FOR A GREXIT

Wolfgang Munchau writes  In a Financial Times article ‘Greek default is necessary but Grexit is not.’  For Greece, defaulting on debt to the IMF and ECB  ‘ is the only route to short term relief …..but no one has ever done it.’ After reviewing  options open to Greece Munchau  finds ‘the economic case for a debt default  overwhelming.’

However he brands  Eurozone’s crisis management as  ‘catastrophic’ and doubts the Greek government has the experience or resources to manage the complexities of  a default without a Grexit  causing  incalculable economic risk to Greece and harm to  the EU’s geopolitical ambitions and global reputation.’

SOME INDICATIONS ON GREXIT COSTS:

Varoufakis warns unambiguously on the social and financial disaster for Greece  that would follow a Grexit.  Financial markets agree. Investors have dumped Greek Bonds, The 2 year yield has jumped above 28%. and credit default swops are soaring. Capital is flowing out of Greece and expectations for Greek economic growth are heading into freefall.

Europe and Germany in particular are also exposed to serious direct  financial losses likely to flow from a Grexit. Tzipras is already raiding  funds to keep afloat . He may be forced to call a referendum to seek a new political mandate and,  following a Grexit,  Germany  will be exposed to substantial losses through the Eurozone’s Tier 2 payments arrangements.

SLEEPWALKING & OTHER POSSIBLE OUTCOMES:

A safe bet bet with Europe is contentious  issues will be despatched to the long grass. My guess is that’s less likely with this issue. A key theme  of Varoufakis’s Brookings talk was enough of the extend and pretend – it hasn’t worked in the past and won’t in future. But, faced with the alternatives of a financial disaster that could be resolved with debt maturity extensions at near zero cost ,the Syzira government will be wise to reach a survival accommodation even if an element of pretend and extend remains.

But accidents  happen and Munchau writes at the end of his analysis quoted above:

‘I think I know the answer to that, and wonder whether one or more people on both sides of these discussions may simply be miscalculating. We may be on the verge of one of those sleepwalking moments in European history.’

GOLD FOR SLEEPWALKERS?

Pundits are again screaming from the rooftops its time to buy gold. The Goldwatcher Golden Rule is moderation. Gold, bought in moderation at a reasonable price can be useful insurance against the unexpected and the unthinkable. Gold as a speculation calls for different motivation.

For information on The Goldwatcher 2015 update and price forecast review please email

Thegoldwatcher@icloud.com

 

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COMMENT AND ANALYSIS IS NOT PROVIDED AS INVESTMENT ADVICE AND MUST NOT BE USED AS INVESTMENT ADVICE

GOLD REMAINS A STORE OF VALUE IN SEVERAL MAJOR CURRENCIES

 

Figure 3: Gold: USD, Brazilian real (BRL), Indian rupee (INR) & Russian ruble (RUB) perspectives

Source: Bloomberg Professional, GOLDS, BRL, INR and RUBLE

Chart above & Quote below from CME Group comment on oil and gold

“.. gold has fallen in recent years from a USD perspective, but has held steady or risen from the perspective of investors in many developing economies of the world, maintaining its role as a store of value (Figure 3). Indeed, declines in many emerging market currencies versus the US dollar may have also led to demand for gold from this sector.”