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 http://www.goldbullionadvisors.com

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.
More information can be found online at http://www.goldbullionadvisors.com