Monday, October 20, 2014

Gold demand in China grossly underestimated, expert says

The market is now “driven by Asia,” notes BlackRock fund manager

Koos Jansen of the In Gold We Trust blog and Bullion Star has long contested the so-called “official” statistics on China’s gold consumption, and now he’s pointing to a bombshell speech from the head of the China Gold Association that confirms his argument.
Jansen says that import/export figures tracking gold shipments between mainland China and Hong Kong are inadequate because they don’t reveal the true demand picture. Likewise, he disagrees with the World Gold Council’s data on Chinese purchases, saying its estimates of about 1,000 tons are grossly lowballed. Jansen cites the Shanghai Gold Exchange as the best gauge of Chinese demand.
Demand pegged at 2,000 tons: In a new blog post, Jansen says a speech from a top Chinese gold industry player, now available in an English translation, confirm his estimates of much-higher gold demand.
“This is the final blow for the ones who still couldn’t comprehend, after all evidence presented, the amount of Chinese non-government gold demand in 2013,” Jansen wrote. “At the LBMA forum in Singapore June 25, 2014, one of the keynote speakers was chairman of the Shanghai Gold Exchange (SGE) Xu Luode. In his speech he made a few very candid statements about Chinese consumer gold demand that according to Xu reached 2,000 tonnes in 2013. In contrast to the Word Gold Council (WGC) that states Chinese gold demand was 1,066 tonnes in 2013. Xu's speech has now finally been translated and published in the LBMA magazine The Alchemist #75.”
“Data on China’s gold imports has not previously been made available to the public,” Xu said. “However, gold has historically been imported through Hong Kong, and Hong Kong is highly transparent, disclosing details such as the number of tonnes of gold imported on a monthly basis.Last year, China imported 1,540 tonnes of gold. Such imports, together with the 430 tonnes of gold we produced ourselves, means that we have, in effect, supplied approximately 2,000 tonnes of gold last year.”
Media are dropping the ball: Jansen concludes: “There still hasn't been a single mainstream news outlet that has covered the immense discrepancy between the Chinese demand numbers from the WGC and the SGE. I would like to express my deepest concern about how the mainstream media is covering the (Chinese) gold market. Xu stated, at the most prominent precious metals forum in the world, Chinese gold demand reached 2,000 tonnes. How could the press have missed this?” 
But look out: Asia’s ability to import gold – as well as its role in setting prices -- will only grow stronger now that China, Hong Kong, and Singapore are launching new influential gold contracts. Even The Wall Street Journal had to acknowledge the issue.
“Asians buy most of the world’s gold, but nearly all of it trades in London,” it reported. "Now, with Western investors souring on the metal, the region is making a bid for some of the action. Three big financial hubs in Asia are separately launching trading in a gold contract, each backed with physical gold. If they draw enough investors, the contracts could influence the price of gold, which is set by a daily fix in London.”
“You now have a market that’s driven by Asia,” BlackRock fund manager Catherine Raw told the paper.
“Enormous” gold demand: Combine this news with a recent statement from bestselling author and investment strategist Jim Rickards, and you have a frightening picture of Chinese gold demand.
China is “bringing gold in through Central Asia using People’s Liberation Army assets – armored columns, basically – off the books, mining outputs, Hong Kong imports,” he said. “China has acquired 3,000 to 4,000 tons in the last five years. That’s almost 10% of all the official gold in the world. These are enormous acquisitions.”
There’s a giant sucking sound coming from Asia, and it’s the sound of China – along with India, Singapore, and other nations – lapping up Western gold. The potential implications for the gold price – not to mention the U.S. dollar – are huge. Therefore, the time to acquire your own store of physical gold is now.
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Sunday, October 5, 2014

Greenspan sings gold’s praises as China aims for 8,500 tons

Former Fed chief weighs in on bullion’s “universal acceptability”

As if the geopolitical situation across the globe weren’t volatile enough, the massive demonstrations in Hong Kong have only added fuel to the fire.
“Make no mistake, if China starts to slide into chaos, the gold price will go wild,” chief Clem Chambers wrote at Forbes.
There’s “a safe-haven play starting to develop, and obviously that stretches not just sort of what’s happening in the Middle East, in Russia, but also obviously what’s happening in Asia at the moment, particularly in Hong Kong,” agreed Ayers Alliance Securities exec Jonathan Barratt in a Sept. 29 Bloomberg interview.
In the short term, the Hong Kong unrest could dampen buying during this week’s gold-focused National Day holiday, but “the physical demand for the metal is still there,” Barratt argued.
Greenspan sings gold’s praises: And demand is apparently there at the sovereign level, so much so that Ayn Rand acolyte and former Federal Reserve chief Alan Greenspan weighed in on the issue in an article in Foreign Affairs, the main journal of the Council on Foreign Relations.
“If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system,” he wrote. Greenspan sounded skeptical about how far China will go in implementing some form of a gold standard, but at least in the short term, “for the rest of the world, gold prices would certainly rise.”
Fiat cash pales versus gold: Despite Greenspan’s assumption that a new gold standard isn’t forthcoming, he acknowledged gold’s role as the ultimate currency. “Gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close. Today, the acceptance of fiat money -- currency not backed by an asset of intrinsic value -- rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.
No barbarous relic: “If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute. … If, in the words of the British economist John Maynard Keynes, gold were a ‘barbarous relic,’ central banks around the world would not have so much.”
Greenspan downplayed the likelihood of China surpassing the U.S. as a dominant power, sayings its authoritarian nature would hamper the innovation needed to achieve technological superiority. But perhaps Greenspan hasn’t seen the numerous reports predicting that China is on course to top America, maybe even as early as 2024.
“More than the U.S.” is goal: And maybe Greenspan missed recent articles written by China Gold Association President Song Xin and published on Sina Finance. Koos Jansen, a writer for In Gold We Trust and Bullion Star, brought Song’s work to light.
“In this view, our gold reserves are very low, both in terms of a nominal level as well as a percentage of official reserves,” Song wrote. “That is why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the U.S.”
As strategic a resource as oil: And Song’s predecessor at the gold association, Sun Zhaoxue, wrote these words in 2012: “The state will need to elevate gold to an equal strategic resource as oil.
“Currently, there are more and more people recognizing that the ‘gold is useless’ story contains too many lies. Gold now suffers from a ‘smokescreen’ designed by the U.S., which stores 74% of global official gold reserves, to put down other currencies and maintain the U.S. dollar hegemony. … Individual investment demand is an important component of China’s gold reserve system, we should encourage individual investment demand for gold. Practice shows that gold possession by citizens is an effective supplement to national reserves and is very important to national financial security.”
Gold investors would be wise to keep watching the crisis in China unfold and what China is doing with its currency and gold reserves. Alan Greenspan certainly is, at least to some degree.
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Wednesday, September 24, 2014

Russia loads up on 9 more tons of gold in August

Prime minister, finance minister detail plans for shunning the U.S. dollar

Last week China’s launch of its new yuan-denominated gold contract in Shanghai’s free-trade zone was the talk of the industry. Now China’s top ally in the race to dethrone the U.S. dollar – Russia – has made some headlines of its own.
Russia’s central bank has announced the purchase of 9.3 tonnes of gold bullion to its reserves in August. “Russian gold reserves now stand at 1,113.5 tonnes, the world’s fifth largest national holding, thus climbing even further above China’s 'official' 1,054 tonnes,” Mineweb’s Lawrence Williams reported. The bank has added about 1.4 million ounces of gold in the past four months.
“Russia, like China, perhaps somewhat belatedly, has come to see its gold holdings as a significant positive in any new world financial order that may develop over the next decade.”
Williams went on to note that China and Russia also are moving ahead with new trade and currency deals, particularly in energy, with the ultimate goal of replacing the dollar as the go-to currency in such transactions.
Is there any reason to doubt that targeting the U.S. dollar is their plan? Not with top Russian ministers articulating that goal almost daily. Zero Hedge reports that Russian Prime Minister Dmitry Medvedev told Rossiya TV that Moscow and its allies “can easily make mutual settlements directly” in their own currencies and that China “is our strategic partner, and we are interested in expanding the volume of cooperation.”
Moreover, The Wall Street Journal reported that Russia's finance minister, Anton Siluanov, admitted that their goal is diversifying away from the dollar.  "[We would like to] walk away from investing in papers of the countries that impose sanctions against us," he said, referring to the U.S. and its primary debt instrument, the Treasury bond.
Siluanov announced plans to instead purchase the bonds of fellow BRICS nations, which besides Russia comprises Brazil, India, China, and South Africa, as well as channeling money into the new BRICS bank, which was established this past summer, as well as creating a new “mini-IMF” to serve the BRICS.
The dollar is at highs unseen in years, but its long-term trajectory has not been healthy. With these major economies making concrete forays into gold and nondollar trade and currency deals, the time to prepare for a weaker greenback is now, through gold.

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Friday, August 29, 2014

Gold bounces back: Bullion’s resiliency hailed as “tremendous”

Metal hits $1,290 and reclaims 200-day moving average Tuesday

Just when the bears think gold has capitulated, it comes fighting back. That’s what the yellow metal did Tuesday, rebounding from a two-month low of $1,273 to hit a session high of $1,290. Suddenly, $1,300 is back in the cards.
Festival buying in India helped bullion prices, as did simmering tensions in Ukraine as Russian President Vladimir Putin met with President Petro Poroshenko for trade talks in Minsk.
“Gold is getting a bid today because of the escalation in violence in Ukraine,” Frank Lesh of FuturePath told Bloomberg. “Some people are worried that this crisis will not end soon.”
Bullion also managed to retake its 200-day moving average near $1,280 in Tuesday’s surge. "Overall, it seems that gold is getting back into that range of $1,287 and $1,312 as it is clawing back some of the losses made last week and gaining on the back of technical strength," Mitsubishi analyst Jonathan Butler said.
What’s amazing is that gold has fought its way back higher even as the U.S. stock market has roared ahead, led by the S&P 500’s charge above 2,000 for the first time in its history. (However, trading veterans such as Art Cashin of UBS were quick to point out that the S&P record was achieved Monday on the lowest trading volumes of the year – not a healthy sign.)
Stocks have been advancing, but U.S. data continue to show a mixed recovery that could force the Federal Reserve to keep rates near record lows for longer than most onlookers are expecting – and that’s good news for gold.
Although durable-goods orders hit a record, the gains were largely fueled by Boeing orders. As Zero Hedge pointed out, minus the transportation sector, orders “collapsed from a 3% gain to a 0.8% drop -- the biggest drop in 2014, missing expectations by the most in 8 months.”
And on the housing front, the Case-Shiller home-price index showed that "for the first time since February 2008, all cities showed lower annual rates than the previous month." That report was preceded by Monday’s new-home sales number, which dropped to its lowest level since March.
Also on Monday, U.S. service-sector PMI also fell short of expectations, with Markit noting that its “latest survey suggests the recovery has lost some momentum since hitting a post-crisis peak in June.”
So despite all the razzle dazzle in the stock market, gold is hanging in there -- and then some, noted CNBC contributor Jeff Kilburg of KKM Financial, who told the network Tuesday: “The resiliency in gold has been tremendous. Look at every reason that the bears have had to sell it and they have not been victorious. We’re looking here at $1,285. We have not seen inflation, according to the government. We have not seen any type of movement from a kneejerk reaction on the stock market as it hits historic highs. Geopolitical tensions have subsided. So every reason they have had to sell it under $1,100, even under $1,000 like we’ve seen a lot of forecasts – it has not happened. So I like owning gold due to the fact that it’s kind of like the Rocky Balboa right now – it’s been going around the ring, it’s been knocked a bunch of times, but it will not go down. … Every reason that all these bears have had to sell the living life out of it – it hasn’t happened.”
And Axel Merk of Merk Funds made a similar observation in a recent interview with Greg Hunter of USA Watchdog. “I am spooked about the equity markets. The folks that buy stocks buy them because they have to keep up with the markets. The folks that buy gold buy it because they like gold. Just recently, you have a downturn, and you don’t have this rush to sell gold right now because the folks holding it are strong hands. Whereas in the stock market, if you have a wave of sellers, who says everybody is not going to rush for that same exit at the same time.”
It’s time to take some chips off the equities table, Merk argued. “I fear a crash. The reason I fear a crash is that when you have a market that goes up relentlessly, and volatility goes down and complacency is high, that means folks are buying equities that are not aware of the risks of the stock market. The moment the fear comes back to the market, for whatever reason, those guys are gone in a heartbeat.”
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Friday, June 20, 2014

Gold demand in China to remain strong long-term, says its biggest miner - Wealth Management

Meanwhile, top jeweler reports 32% increase in profits

Official gold-demand statistics in China for the second quarter could show a bit of a lull, but new reports from its mining and retail-jewelry sectors suggest that the long-term trend remains bullish.
The Wall Street Journal reported that “China’s largest gold-mining company, China National Gold Group Corp., is on the hunt for global acquisitions and partnerships.”
Why? Last year “the country’s gold consumption grew to more than 1,176.4 metric tons, but its production was 428 metric tons, a dynamic which encourages overseas acquisitions.”
Company President Xin Song said “he believed that demand for gold in China will remain strong even if the second quarter of this year sees a slight decline over the preceding quarter. … Long-term demand should stay strong.”
And in the retail gold sector, the world’s largest jewelry chain, Chow Tai Fook, “reported a 32% increase in profit as it sold more gold products,” Bloomberg noted.
“We are also confident that our business will continue to benefit from the colossal market potential in mainland China, especially in the lower-tier inland cities where economic growth and resilience to macro-economic changes are both strong,” the company said.
More information can be found online at

Gold targets $1,300 as Fed pours fire on inflationary forces - Wealth Management


Low rates support bullion but could spawn financial “catastrophe”

After hitting a peak near $1,285 on Monday and stumbling on Tuesday, goldwas rising back above $1,275 late Wednesday after Federal Reserve chief Janet Yellen stressed the need for “highly accommodative” monetary policies for a “considerable period” of time going forward. By Thursday morning, gold was knocking again at $1,300, also supported by the dangerous civil war unfolding in Iraq.
The Fed left interest rates near record lows but did continue tapering its bond-buying stimulus program. Nonetheless, it will still be buying $35 billion in Treasury bonds and mortgage-backed securities a month. The central bank also was forced to lower its U.S. growth forecast for the rest of the year after the first quarter’s unexpected economic projections, from 2.9% to about 2.1% to 2.3%.
“The growth forecast reduction suggested that the Fed may not be in a hurry to accelerate tapering,” said James of HSBC. Added Bank of Tokyo-Mitsubishieconomist Chris Rupkey: “All the evidence is that this is the weakest economic recovery on record, so she is going to tilt the committee in the direction of providing as much aid as possible for as long as it takes.”
Given Tuesday’s surprising CPI inflation report showing an uptick in prices, Yellen’s comment that the CPI was just “noise” was astonishing. “The Fed is maybe a little bit in denial about recent inflation trends,” said economist Laura Rosner at BNP Paribas.
The Fed is “pouring fire” on the “glowing embers of inflation” by continuing to buy bonds, albeit at a smaller official pace, warned Jim Grant, founder and editor of Grant’s Interest Rate Observer. That will certainly lead to “financial turmoil.”
Economist Marc Faber agreed. “It’s a catastrophe,” Faber told CNBC on Tuesday. “What the Fed has done is to lift asset prices, and the cost of living. In the meantime, as the cost of living increases, are higher than the wage increases, the typical American household income is going down in real terms. …
“So the Fed is boosting asset prices. It leads to less affordability, people can't buy their homes anymore in the lower income group. Except, of course, the well-to-do people, they can buy homes because their asset prices have gone up and they own the assets,” Faber said. “And so the more they print, the more inequality there is, the weaker the economy will become.”
Two other economists told CNBC that the Fed should be more worried about inflation. The Fed's 2% inflation target is just that, a target, BNY Mellon chief economist Richard Hoey said. The Fed might be thinking, “We've run below 2% for a while, what's so bad about running at 2.5% for while?”
“Be careful what you wish for,” UBS economist Draw Matus added. “They were worried about inflation being too low.”
With the Fed having missed so badly this year on the U.S. GDP target, can it be trusted to get its inflation forecasts right? Not necessarily. The time to prepare for the potential of out-of-control inflation is today. That means staying longgold and silver.
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Monday, May 19, 2014

“Gold remains an important element of global monetary reserves,” central banks affirm

European pact means no “significant” bullion sales planned

The European Central Bank and 20 other top regional central banks have announced a fourth Central Bank Gold Agreement — a pact that’s important for bullion investors because it pledges no imminent large-scale sales of the yellow metal.
In the May 19 press release, the signatories pledge that “gold remains an important element of global monetary reserves” and that “they do not have any plans to sell significant amounts of gold.”
“The agreement, the fourth of its kind, marks a continued commitment from some of the world’s largest gold reserve holders to preserve the clarity and transparency that this agreement provides for gold market participants,” the World Gold Council said. “It also firmly reasserts the importance of gold as an asset in global monetary reserves.”
In recent years, central banks around the globe started buying gold again, reversing a longstanding trend, and those purchases have been a key pillar of support in gold’s long bull run because they take major supply off the market.
The new gold agreement differs from previous pacts in that it lacks a cap on sales for the first time. However, with the ECB expected to introduce a negative interest rate at its June meeting and perhaps even a quantitative-easing program at a later date, now is not the time to get rid of a reserve asset like gold.
A couple of analysts dismissed the lack of a sales cap. “The lack of an explicit quota introduces some uncertainty, but given the trend in central bank activity in recent years, it only becomes more of an issue if this trend shifts. And at this point, I don’t see that happening any time soon,” said Joni Teves of UBS.
“European gold sales are over,” added Natalie Dempster of WGC. “If you look at the trend elsewhere, in the past few years we’ve seen significant purchases from Asia and Latin America. What it says is, central banks have been net buyers of gold for the past few years, and that trend is likely to remain in place for the next few years.”

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