Gold
and silver have recovered somewhat from slight falls in Asia overnight and are
now higher against the British pound and Swiss franc which are weaker this
morning. With geopolitical instability looking set to escalate and the real
possibility of a military confrontation in the Mediterranean, any sell off in
the precious metals will likely be tentative.
Cross Currency and Precious Metal Table
$1,500/oz for gold and $40/oz for silver remain viable short term targets and
any price dip should be seen as a buying opportunity. Bullion dealers,
including GoldCore, are experiencing only tentative buying and indeed some
selling; buying of bullion is nowhere near the levels seen during the Bear
Stearns, Lehman Brothers or more recent Eurozone sovereign debt crises.
Total Known Gold ETF Holdings
The lack of animal spirits in the gold and silver bullion markets is also
seen in the decline of the gold ETF holdings (see chart above) and the
Commitment of Traders open interest (see below). Neither show any signs of
speculative fever whatsoever.
This
would suggest that the recent record prices are due to short covering on the
COMEX (possibly by Wall Street banks with concentrated short positions as
alleged by the Gold Anti-Trust Action Committee or GATA and being
investigated by the CFTC) and buying of bullion in the Middle East and Asia,
particularly in China.
While
all the focus is on the geopolitical risk in the Mediterranean, the not
insignificant risks posed by the European sovereign crisis, the possibility
of a US municipal and sovereign debt crisis and continuing currency debasement
internationally are the prime drivers of gold today.
Quantitative
easing, debt monetisation and competitive currency devaluations have not gone
away and are leading to deepening inflation which will likely result in much
higher prices in 2011 and 2012.
Enter
the Chinese Gold Dragon
Overnight, UBS
confirmed in a Bloomberg article that China alone imported a massive 200
metric tonnes of gold in just the first two months of 2011. This gold is
being bought by China’s 1.3 billion people in order to protect against
surging inflation (see news).
The FT
last week quoted a senior executive of the world’s largest bank by
market capitalisation Industrial and Commercial Bank of China Ltd. (ICBC)
about the “voracious” appetite for gold in China. ICBC bank has
in some two months opened gold savings accounts for more than 1 million
savers with more than 12 tons of gold stored on their behalf.
Shopping
malls in China are experiencing massive buying of gold jewellery and ingots
as shoppers buy gold as a store of wealth in order to protect against surging
food and energy inflation. Statistics from Beijing Caibai, Beijing’s
largest jewellry store, show sales of gold bars and jewellry have totaled an
incredible 4 billion yuan or about $600 million US dollars so far this year,
a 70-percent increase year-on-year (see news).
This
demand is only the demand from Chinese investors and savers. It does not
include purchases by the less than transparent People’s Bank of China
who are almost certainly continuing to diversify their massive nearing $3
trillion currency reserves into gold bullion in order to protect themselves
from their massive dollar ($1.6 trillion dollars of US debt alone, according
to the Treasury Department) and other currency exposure.
Chinese
Yuan Gold Standard
China is
clearly trying to position the yuan or renminbi as the alternative global
reserve currency. The Chinese likely realise that they will need to surpass
the Federal Reserve’s official, but unaudited, gold holding of 8,133.5
tonnes. China is the sixth largest holder of gold reserves in the world today
and officially has reserves of 1054.1 tonnes which is less than half those of
even Euro debtor nations France and Italy who are believed to have 2,435.4
and 2,451.8 tonnes respectively.
China’s
ambitions to rival and even supplant the dollar were seen overnight with news
that China is to allow all exporters and importers to settle their
cross-border trades in the yuan this year. The People’s Bank of China
said that it was “part of plans to grow the currency's international
role” and “would respond to overseas demand for the yuan to be
used as a reserve currency.”
Russia
is also attempting to position the Russian ruble as a global reserve currency
(see news).
World
Bank President Robert Zoellick recently mooted the possibility of a return to
some form of gold standard. It seems extremely likely that senior and
influential Chinese policy makers, bankers and government officials may be
having similar thoughts.
Gold
Bubble?
The lack of
knowledge of the vast majority of people about gold and the very
important developments in the gold markets with significant macroeconomic,
monetary and geopolitical ramifications is hardly indicative of a bubble.
Nor is
the instinctual aversion and bias against gold by some today. Indeed, the
negativity displayed against gold by a minority (normally vested interests
offering other investment or saving products) in recent years and continuing
today may be partly due to some feeling unwise due to their failure to
predict gold’s rise and return as a global currency.
The
significant and continuing price appreciation of something they don't own,
they don't understand and did not advise people to diversify into has some looking
somewhat imprudent.
Gold
Gold
is trading at $1,428.10/oz, €1,030.45/oz and £877.86/oz.
Silver
Silver
is trading at $34.49/oz, €24.89/oz and £21.20/oz.
Platinum
Group Metals
Platinum
is trading at $1,841.25/oz, palladium at $815.00/oz and rhodium at $2,350/oz.
News
(Bloomberg)
-- Gold Is Heading for $2,000 in 12 Months, Deutsche Bank Says
Gold is
heading for $2,000 an ounce in the next 12 months, Deutsche Bank AG said in a
report. Silver may average $50 an ounce next year, Deutsche Bank analyst
Daniel Brebner said in the report e-mailed today.
(Bloomberg)
-- Russia Depository Bought 3.4 Tons of Gold in 2011, Interfax Says
Russia’s
Gokhran state depository bought 3.4 metric tons of gold from producers last
year, more than the 2.5 tons previously reported, Interfax reported, citing
unidentified sources in the organization.
The
state precious-metals and gems depository purchased 5 tons of gold in 2009,
according to Interfax. Russian banks last year bought 148.8 tons of gold from
producers, led by OAO Sberbank, Nomos Bank and OAO Sberbank, the news service
reported.
(Russia-Media.RU)
–Russia’s currency- and gold reserves up 4.8 billion USD during
last week
The External
and Public Relations Department of the Bank of Russia informed on Thursday
that the country’s international currency and gold reserves are up 4.8
billion USD or 1.0 percent during last week to a volume of 492.2 billion USD
per 25 February 2011.
Since
1 January 2011 the reserves are up 12.8 billion USD.
The
reserves have been on 478.7 billion at 1 January 2008, 427,1 billion 1
January 2009, 440,6 billion USD January 2010 and 479.4 billion USD at 1
Januar 2011. They reached their highest volume with 598,1 billion USD before
the conflict with Georgia about South-Ossetia in the beginning of August
2008.
(Bloomberg)
-- World Food Prices Rose to a Record in February, UN Says
World food
prices rose to a record in February, the United Nations said. Its FAO Food
Price Index averaged 236 points, the group said in a notice on its website
today.
(Bloomberg)
-- Commodity Index Extends Rally to 29-Month High on Cotton, Sugar
The Thomson
Reuters/CRB Index of 19 commodities rose to a 29-month high, led by gains in
cotton, sugar, silver and crude oil. The index advanced 0.6 percent to 357.32
at 9:33 a.m. in New York, after touching 357.67, the highest since Sept. 29,
2008.
(DPA)
-- Swiss central bank reports loss of 20.7 billion dollars in 2010
The Swiss
National Bank (SNB) reported Thursday a consolidated loss of 19.17 billion Swiss
francs (20.7 billion dollars) last year, largely due to the appreciating
value of the Swiss currency.
The
results compare with a profit of 9.96 billion francs in 2009. A profit of 2.6
billion francs was recorded by its so-called stability fund, which holds
toxic assets from UBS AG, the Swiss bank that required a bailout in 2008.
But
currency interventions were costly for the central bank, which has tried to
prevent too quick a rise in the franc versus the dollar and the euro. Despite
these market interventions, the franc has hit new highs against the major
currencies.
Philipp
Hildebrand, head of the SNB, has warned of deflationary risks from a strong
franc to justify the interventions, which at times have been controversial in
Switzerland.
The
sharp rise in the price of gold resulted in valuation gains of 5.82 billion
francs for the SNB, on unchanged gold holdings of 1,040 tonnes.
(Wall
Street Journal) -- Bernanke Unfazed By Gold Standard, Currency History
Queries
WASHINGTON --
Federal Reserve Chairman Ben Bernanke defended the central bank's effect on
the dollar Tuesday, pushing back at the idea that policy makers should
consider alternative proposals like the gold standard.
Bernanke,
appearing before the Senate Banking Committee, was pressed by Sen. Jim
DeMint, R-S.C., on the viability of a return to a gold-backed economy or the
idea of the Treasury Department issuing bonds payable in gold.
Bernanke,
who has studied the issue, said a return to the gold standard wouldn't work.
"It
did deliver price stability over very long periods of time, but over shorter
periods of time it caused wide swings in prices related to changes in demand
or supply of gold. So I don't think it's a panacea," Bernanke told
DeMint.
Additionally,
Bernanke said there were a number of practical issues that would prevent the
return of gold as the world standard. Namely, there's not enough gold in the
world to effectively support the U.S. money supply.
"I
don't think that a full-fledged gold standard would be practical at this point,"
Bernanke said, declining to opine on the gold-backed bond issue because he
was not familiar with the idea.
Sen.
Mark Kirk, R-Ill., also engaged Bernanke on the currency issue, questioning
whether the Fed's $600 billion bond-purchase program is in effect monetizing
the U.S. debt. Bernanke noted that the U.S couldn't have currency outstanding
if there were no Treasury securities to back it up, and that even the most
steady economic times the Fed engages in the buying and selling of
U.S.-backed securities.
Kirk,
however, noted that the United States did have currency not backed by federal
debt at one time in its history: under the administration of President Andrew
Jackson, the nation's seventh president.
Bernanke,
appearing amused, was quick to respond.
"So
this was before the Civil War. This was during the period where individual
banks issued currency. We didn't have a national currency," Bernanke
said.
Not to
be outdone, Kirk asked whether it was possible for a country to have a
currency without a trillion-dollar debt. Bernanke said that was the case.
(Bloomberg)
-- Turkey Gold Imports 5.48 Tons in February, Exchange Data Show
Turkey’s
gold imports reached 5.48 metric tons in February, the Istanbul Gold Exchange
said in a report on its website.
The
country imported no silver in February, the data show.
(Bloomberg)
-- Gold Buying in China Jumps as Inflation Flares, Boosting Demand, UBS Says
Gold purchases
in China, the world’s largest producer, climbed to 200 metric tons in
the first two months of 2011 as faster inflation boosted consumer demand,
according to UBS AG, which said the price may gain to $1,500.
“China
is the big buyer,” Peter Hickson, global commodities strategist at
Switzerland’s largest bank, said by phone yesterday, without giving a
comparable figure for 2010. The estimate for the two-month period compares
with full-year consumer demand from China of 579.5 tons for last year,
according to the World Gold Council, a producer-funded group.
Bullion,
which rallied 30 percent last year, surged to a record yesterday as uprisings
in the Middle East, quickening inflation and currency debasement boosted
global demand. China’s consumer prices rose 4.9 percent in January from
a year earlier, exceeding policy makers’ 4 percent ceiling for a fourth
month.
“Chinese
interest is huge,” said Peter Tse, Hong Kong- based head of precious
metals at Bank of Nova Scotia. “Demand for physical gold and imports
has increased substantially” due to the Lunar New Year holiday, Tse
said today, referring to the week-long break that began Feb. 2.
Immediate-delivery
gold was at $1,429.05 an ounce at 5:08 p.m. in Singapore compared with
yesterday’s peak of $1,434.93. Yuan-denominated bullion rose 0.5
percent to 303.58 yuan ($46.19) a gram in Shanghai, approaching the record
314 yuan, set Nov. 9.
‘Gold
Is Attractive’
“Gold is attractive,” Hickson said. “The more the market
becomes concerned about inflation or concerns about unrest in Africa, more
and more people will look to gold.” The price may rise to $1,500 an
ounce in the next six months, said Hong Kong- based Hickson, who’s
worked for UBS since 1996.
Blackstone
Group LP’s Byron Wien said in January that gold may rise to more than
$1,600 this year “as investors across the world place more of their
assets in something they consider ‘real’.” The price may
reach $1,600 this year, Wayne Atwell, a managing director at Casimir Capital
LP said the same month.
Protests
partly linked to record food prices have erupted across North Africa and the
Middle East this year, toppling leaders in Tunisia and Egypt and boosting oil
prices. Libyan rebels braced for renewed clashes today with forces loyal to
leader Muammar Qaddafi. Iranian protesters have clashed with security forces
in Tehran, Al Arabiya reported.
Gold
investment in China, the largest buyer of the precious metal after India, may
gain 40 percent to 50 percent this year amid a lack of alternatives, Wang
Lixin, China representative for the World Gold Council, said last month. He
called that forecast a “conservative estimate.”
Bars
and Coins
China’s investment demand in 2010 jumped 70 percent to 179.9 tons,
surpassing Germany and the U.S., as buyers sought out bars and coins, the
London-based industry group said. Consumption by the jewelry sector rose to a
record 399.7 tons, it said. China imported more than 300 tons last year,
People’s Bank of China Vice Governor Yi Gang said on Feb. 26 in
Beijing.
China
may be the “next big buyer” of gold, driven by institutional and
retail demand, Credit Suisse Group AG analyst Tom Kendall said in Cape Town
on Feb. 7. “If you’re sitting there in China with money in a
deposit account, you’re losing between 1-2 percent a year through
inflation,” Kendall said.
The
boom in gold demand in China is driven by concern about inflation pressure
and the poor performance of alternative investments, the producer-funded
council has said. Premier Wen Jiabao pledged on Feb. 27 to boost food
supplies to hold down costs, and to tackle surging property prices.
Spooked
by Inflation
Jewelers at shopping malls across Beijing are witnessing a gold rush as
residents spooked by inflation look to protect their money, the China Daily
reported on Feb. 28
Statistics
from Beijing Caibai, the city’s largest jewelry store, show sales of
gold and other jewelry have totaled about 4 billion yuan so far this year, a
70 percent increase from a year ago, the report said.
China
displaced South Africa as the world’s biggest gold producer in 2007.
Imports through last October rose almost fivefold to 209 tons from the total
shipped in the previous year, according to the Shanghai Gold Exchange. Mine
output reached a record 340 tons last year, the China Gold Association has
said.
The
Industrial and Commercial Bank of China Ltd., the world’s biggest
lender by market value, started physical-gold linked savings accounts in
December with the World Gold Council. Account openings have surpassed 1
million, with more than 12 tons of gold stored on behalf of investors, it has
said.
(China
Radio International - CRI) - Malls Witnessing Gold Rush as Shoppers Fear
Inflation
Jewellers at
shopping malls across Beijing are witnessing a gold rush amid inflation
fears.
Statistics
from Beijing Caibai, the city's largest jewellry store, show sales of gold
and other jewellry have totaled about 4 billion yuan or about $600 million US
dollars so far this year, a 70-percent increase year-on-year.
Wang
Chunli, general manager, said that hundreds of customers are lining up
outside every day to buy gold accessories, such as necklaces and rings.
After
seeing the enthusiasm for gold investment, insiders predict prices will
continue to rise this year.
The
price has already reached 338 yuan a gram at Caibai, according to data from
cngold.org, a popular gold investment website.
A
report released by the World Gold Council at the end of 2010 said China is
the strongest market for gold investment and gold accessory purchase.
(Zero
Hedge) -- As Silver Touches $34.90, US Mint Runs Out Of Bullion Blanks, Halts
American Eagle Silver Coin Production
The scramble
for non-dilutable currencies hits a frenzy as silver just touches on a fresh
31 year high of $34.90. To commemorate this historic event, the US Mint has
halted American Eagle silver coins production, in addition to its ongoing
halt of American Buffalo coins: "because of the continued demand for
American Eagle Silver Bullion Coins, 2010-dated American Eagle Silver
Uncirculated Coins will not be produced. The United States Mint will resume
production of American Eagle Silver Uncirculated Coins once sufficient
inventories of silver bullion blanks can be acquired to meet market demand
for all three American Eagle Silver Coin products."
From
the US Mint: Production of United States Mint American Eagle Silver Uncirculated
Coins continues to be temporarily suspended because of unprecedented demand
for American Eagle Silver Bullion Coins. Until recently, all available silver
bullion blanks were being allocated to the American Eagle Silver Bullion Coin
Program, as the United States Mint is required by Public Law 99-61 to produce
these coins “in quantities sufficient to meet public demand . . .
.”
Although
the demand for precious metal coins remains high, the increase in supply of
planchets—coupled with a lower demand for bullion orders in August and
September—allowed the United States Mint to meet public demand and
shift some capacity to produce numismatic versions of the American Eagle One
Ounce Silver Proof Coin.
However,
because of the continued demand for American Eagle Silver Bullion Coins,
2010-dated American Eagle Silver Uncirculated Coins will not be produced.
The
United States Mint will resume production of American Eagle Silver
Uncirculated Coins once sufficient inventories of silver bullion blanks can be
acquired to meet market demand for all three American Eagle Silver Coin
products.
Mark O’Byrne
Goldcore
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