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Post by jeffolie on Aug 18, 2011 17:37:23 GMT -6
Where are people buying metals with a mania, fevered pitch? ... not in America ... answer: in China, India and Vietnam [see below piece: Demand for gold is shifting away from ETFs] "... Demand for gold bars and coins, however, climbed 9%, with India and China dominating this segment of the market. Bars took up the biggest share of the category....' American people often sell their small amounts and jewelry as businesses thrive on buying these small amounts in mall Kiosks, rented hotel rooms designed for meetings and shows, pawn shops, gold buyers specializing in mail in your gold, etc. In manic, fevered pitch metals buying in countries where their currencies are crashing, this does not happen. The opposite happens where confidence in a country's currency is low and average people brag about their small hoard of gold and often silver. Silver often peaks with a blow off, buying mania as average people chose the lower priced metal because they can not afford the higher priced metals of gold and platinum. Silver is not blowing off in a manic, buying frenzy now in America although it has a small blow off among rich investor types that was squashed speculators with margin increases. Average people do not care about margin increases because they often are not margin investors while average people buy silver with cash and take physical possession of silver. ================================ Demand for gold is shifting away from ETFs August 18, 2011, 1:53 PM . When it comes to gold — arguably the safe-haven king — it looks like investors are getting more and more wary of the paper assets and going for the physical commodity. Global gold demand measured at an impressive 919.8 metric tons, worth a near-record $44.5 billion, in the second quarter of this year, according to a report from the World Gold Council released Thursday. But overall, global gold demand was down 17% from the same quarter a year ago, with global investment demand down 37% year on year. The decline in investment demand was almost entirely driven by exchange-traded funds and similar products, the report said. Demand for gold bars and coins, however, climbed 9%, with India and China dominating this segment of the market. Bars took up the biggest share of the category. The strong rise in demand for bars and coins is “indicative that Indian investors continue to harbor bullish price expectations,” the report said. So although gold traders are changing the ways they invest in gold, they’ll be buying just the same. Gold futures GC1Z are trading at fresh record highs above $1,800 an ounce. They’re up more than 25% year to date. blogs.marketwatch.com/thetell/2011/08/18/demand-for-gold-is-shifting-away-from-etfs/
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Post by jeffolie on Aug 19, 2011 10:04:06 GMT -6
Central Banks' Demand For Gold Quadrupled In 2nd Quarter "Central banks are topping up their gold reserves, quadrupling their total purchases from the market in the last quarter as they seek to reduce their dependence on traditional reserve currencies such as the U.S. dollar. Even with gold prices at record highs, emerging markets' central banks have revived the official sector's gold-buying interest. They are diversifying their foreign exchange reserves, which have grown along with their export industries. More recently, they've also bought gold in reaction to the persistent sovereign-debt crises affecting traditional reserve currencies, like the dollar and the euro. Analysts say this trend is likely to continue. "We expect to see additional demand support from official-sector purchases as numerous influential countries are becoming bearish on the status of the U.S. dollar as a reserve currency," said analysts at Swiss bank Credit Suisse. Central banks bought 69.4 metric tons of gold in the second quarter, more than four times the 14.1 tons reported a year earlier, the World Gold Council said Thursday. During the first half of the year, central bank gold purchases totaled 192.3 tons, more than 2 1/2 times the 72.9 tons bought in the first six months of 2010, the council said. online.wsj.com/article/BT-CO-20110818-712171.html
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Post by unlawflcombatnt on Aug 19, 2011 11:35:11 GMT -6
I saw an article on Makretwatch a couple of weeks ago stressing the Gold purchases by Central Banks. (I meant to post it but never found it again.) Now some are drawing a relationship between the VIX and Gold prices. From Marketwatch: Gold & the Vixby Myra Saefong Fri, Aug 19, 2011 " Gold and the VIX have an interesting relationship.Gold’s impressive moves haven’t gone unnoticed, but the Chicago Board Options Exchange’s volatility index VIX has been making even fancier moves and, according to a strategist at ConvergEx Group, their relationship could offer an important “buy” signal for equities....
“Gold currently trades like it is a serious and viable alternative to the CBOE VIX Index,” said Nicholas Colas, chief market strategist at ConvergEx Group, in a note Friday.
Month to date as of Thursday, gold prices GC1Z have gained 12%, while the VIX has climbed 69%.
The volatility index’s correlation to gold price movements over the 21 years of the modern VIX is a “scant” 5%, with a standard deviation of 27 percentage points, said Colas, noting that certain periods in financial history can push the correlation as high as 79%, as it did in October 2002, or as low as negative 76%, as seen in April 2007.
So far in the third quarter, the correlation is 44% “and all the ingredients are in place to move that number closer to the 2002 experience than that of 2007,” he said.
The lows for financial assets such as stocks aren’t likely to come until the gold/VIX relationship begins to break down, he said, pointing out that when the correlation reached 79% in 2002, the move coincided with the lows for the S&P 500 SPX not only for the year, but for every year until 2009."
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Post by unlawflcombatnt on Aug 19, 2011 11:40:37 GMT -6
Here's the other article from Aug 5, 2011 from Marketwatch Central banks hint: It’s not too late to buy goldBy Myra P. Saefong " Central banks in emerging markets have decided that it’s not too late to join gold’s party.
South Korea and Mexico are among the nations whose central banks have been ramping up gold holdings lately — and they’re willing to pay the highest-ever prices for an ounce of gold to do it, even though gold’s latest rally began more than a decade ago.
Admittedly, it’s not new trend for all central banks, but one that’s speeding up as the world loses faith in the U.S. dollar and global markets. South Korea buys gold for the first time in 13 years, the latest central bank seeking to reduce dependence on the U.S. dollar. “The trend of greater purchases by emerging-market central banks and slowing sales by European central banks had been under way for three years, although it has accelerated of late,” said Natalie Dempster, director of government affairs for the World Gold Council.
Central banks became net buyers of gold last year for the first time in two decades, adding 76 metric tons to their reserves, she said — and in the first half of this year, they bought almost three times that amount.
In February and March, Mexico added around 93 metric tons to its reserves, Russia purchased 48 metric tons during the first half of this year, and Thailand bought 17 metric tons in June, according to data from the World Gold Council.
This week, the Bank of Korea confirmed that it made its first purchase of gold since the Asian financial crisis of 1997-1998, buying 25 metric tons of gold in June and July of this year.
The purchase by South Korea, a country which relies heavily on support by the U.S. government, is “significant, as it represents the first purchase of gold by the East Asian country in over a decade,” said Nick Barisheff, chief executive officer of Bullion Management Group Inc. “It would seem South Korea has joined the ranks of those countries that have lost faith in the U.S. dollar.”
And “it is no coincidence that many of these central banks are from emerging-market economies,” he said. “Many of these countries have experienced the grim reality of enduring a currency crisis first-hand.”
Barisheff pointed out that in the last 20 years, there have been many currencies crises: in Mexico in 1994, the Asian financial crisis of 1997, the Russian financial crisis of 1998, the Argentine economic crisis of 1999-2002 and the Zimbabwean financial crisis, which is ongoing after consuming much of the last decade.
“The emerging markets can now see what lies ahead for the United States,” he said. “Gold is the ultimate safe haven, and many central banks are diversifying out of U.S. dollars and into gold to protect their country’s wealth.”
Feeding the frenzy The value of the U.S. dollar has certainly been a key concern for investors around the world, and that has made gold, as usual, much more attractive. Read about how to invest in gold.
“The bull market in gold is and has always been about the collapse of the dollar as a reserve currency and international facilitator of trade,” said Edmond Bugos, director of mining finance at Strategic Metals Research & Capital.
Since early June 2010, the U.S. dollar index (NYE:DXY) has lost about 15%, while gold prices (CNS:GC1Z) are up over 30%.
”Exuberant spending and excessive debt has led the United States to a financial situation that has passed the point of no return,” Barisheff said. “A currency crisis will eventually happen, and there will be dire consequences for the U.S. dollar, which has already lost over 80% of its purchasing power over the last decade compared to gold.”
But there are other factors feeding gold’s price rally.
Central banks have been adding to their gold reserves as “a combination of rapid foreign-exchange accumulation and stagnant gold holdings has meant that gold’s share in total reserves has dropped sharply in many countries,” said Dempster.
The U.S., the world’s top holder of gold, has 74.7% of its reserves in gold, according to data from the World Gold Council, as of July.
Russia, No. 8 on the list of gold holders, has just 7.8% of its reserves in gold, even though it’s added gold to them nearly every month since the start of 2007, data show.
Global financial assets are valued at an estimated $200 trillion, but the world’s total above-ground gold has been valued at “a modest” $3 trillion, said Barisheff, adding that “about half of that is owned by central banks.”
And lately, most of the buying, though not all, is coming from emerging markets whose economic fortunes are very much tied to the West, said Peter Grant, senior metals analyst at USAGold-Centennial Precious Metals Inc.
“Many have accumulated large amounts of dollar-denominated assets in reserve and are rightfully worried about the mounting currency risk,” he said, so they can either choose to shift into assets denominated in some other fiat currency with a more reasonable risk profile, or choose to allocate into a hard asset without counter-party risk, such as gold.
“The prudent ones are increasingly opting for the latter,” Grant said. Read about gold’s investment risks.
Asian elephants But with emerging markets, it has always been tough to figure out the “who, what, where, when and how” on gold purchases.
“Central banks are often reluctant to declare the exact state of their gold holdings and gold policies,” said Mark O’Byrne, executive director at international bullion dealer GoldCore.
“The elephant in the room is the central banks of China and India and their gold buying,” he said, though “informed analysts are confident that they are quietly continuing to accumulate gold.”
Even though China has 1,054 metric tons of gold in its reserves, ranked as the world’s sixth-largest gold holding, that’s only 1.6% of its total reserves, according to data from the World Gold Council.
“Watch China above all else,” said Dennis Gartman, editor of the Gartman Letter in Suffolk, Va. “The Chinese have a reputation for being savvy traders, but in reality they are slow to the game, and they have been.”
He points out that China could take the world’s production of gold for several years and still not get the diversification job done adequately.
“To become a major player in international finance, traditionally a central bank needs to have a large reserve in gold,” said Jeffrey Wright, senior analyst of metals and mining equity research at Global Hunter Securities.
China has actually “left the ranks of an emerging market across multiple metrics, and the amount of gold held by their central bank is one of these metrics,” Wright said.
“China, as well as Russia, do not want more exposure to unstable and depreciating assets, such as the U.S. dollar and euro. They see better long-term stability and growth prospects in gold,” he said.
Yet despite rising investment demand and purchases from central banks over the last decade, Barisheff said, gold production has actually remained flat over the last two decades, increasing only marginally by an average of 0.7% per year.
“Gold is at record highs, but for solid fundamental reasons,” said Steve Gillette, president of Cirrus Commodities Exchange. “Gold is not at a frenzied high and is not in a bubble.”"
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Post by unlawflcombatnt on Aug 20, 2011 10:36:49 GMT -6
Central banks hint: It’s not too late to buy goldBy Myra P. Saefong.... Global financial assets are valued at an estimated $200 trillion, but the world’s total above-ground gold has been valued at “a modest” $3 trillion, said Barisheff, adding that “about half of that is owned by central banks.” Actually, Barisheff is way off with this "$3 trillion" amount, based on World Gold Council Statistics Assuming that on the day this article was written that Gold was $1,670 oz, then this would give a total world gold supply of 1.79 billion ounces. At 32,000 ounces per tonne, that comes out to only about 56,000 tonnes. In contrast, the World Gold Council put the world supply of gold at 165,000 tonnes. Based on the World Gold Council's estimate, the total value of the World's gold supply would have been about $9 trillion (3 times what was stated in this article.) Now at 1,850/oz, that 165K tonnes should be worth ~ $9.8 trillion.
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