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Add The Middle East To China And India As Another Source Of Surging Gold Demand, Says Jim O'Neill

Tyler Durden's picture




 

The latest observations the spread of gold's popularity comes from none other than BRIC expert, Goldman's Jim O'Neill, who advises clients in his latest letter that it may be prudent that in addition to China and India as a source of ever increasing demand for gold, it may be time to also add the Middle East to the ever increasing list of investors (typically quite wealthy) who believe in the yellow metal. "Not because of this particular anecdote, but the Middle East being what it is, my meetings involved more discussion about Gold prices than is usually the case in other parts of the world. While the gold bar machine anecdote adds to all the other colourful stories I pick up, the recent remarkable resilience of gold, despite what has happened to silver and other commodities, is rather impressive. This gold price strength may perhaps be just a simple function of both the extremely low level of G7 real interest rates and the prospect that they might not rise anytime soon. I got the impression that there a quite a few bulls of Gold in the Middle East."

Full O'Neill letter:

GOLD, MYRRH AND INCENCE.

I returned from a brief 3-day trip to the Gulf this morning, after visiting Abu Dhabi and Dubai. I spent much of the time highly stressed about the path of the Icelandic ash cloud, in view of a rather important event that I needed to get  back to London for Saturday evening. As is often so typical of life these days, it looks as though it was all blown out of proportion, and my own personal black swan event didn’t happen. Mind you, if the bookmaker’s odds are to be believed, then United are merely there to make up the numbers in tomorrow’s Champions League Final. We shall see.

Beyond the ash-induced stress, the trip was very interesting. We hosted a client conference in Dubai and I also met with a number of important clients. In addition to discussing the world and global markets, I had fascinating  exchanges with people about the so-called Arab Spring.

THE ARAB UPRISING.

Most people locally were as concerned as many people around the world seem to be about the possible future paths. That said, it was fascinating to hear this as well as comments about all the specific nuances. There were some I chatted with that shared my view that this could be the Middle East and North Africa (MENA) Berlin Wall “moment,” but not many. Most see the possible paths as highly uncertain and worrisome. One local fund manager put it to me differently. He said that there is always uncertainty about the future in this part of the world. But these uprisings have eliminated this future uncertainty. Instead, the uncertainty is here now. Linked to what I wrote about recently following my Singapore trip and fund managers’ experience, if you combine uncertainty with lower valuations, this spells opportunity.

Much discussion focused on each of Egypt and Syria, both being seen as key countries for the region. But the more the discussions advanced through a dinner where it became the featured topic, the more uncertain it became. On Egypt, views ranged from the most negative outcomes post the September elections to some thinking that, while Mubarak has gone, not much has really changed, as the Army will remain in charge. Regarding Syria, many see it as even more interesting, since a change in regime could have big consequences for Iran and support for the more extreme terrorist organizations.

DUBAI AND N11 CAPITAL?

This was the first time I had spent a few days there since the bursting of the property bubble. The damage could be seen everywhere, with many half-finished projects. That being said, the main artillery roads seem to function better based on my trip over to Abu Dhabi and back. I can’t help wondering whether it is all really sustainable in Dubai, but as I have found on past trips, the more I found my mind wondering, maybe there is more substance than meets the eye. With the troubles of Bahrain, and the never ending volatility of Beirut, and the clever way its leaders have  allowed the local atmosphere to develop, Dubai seems to really benefit from some of the large nations not so far away. Moreover, it seems to benefit from those that are doing well, and possibly also from those that are less stable. Two of the BRIC countries, Russia and India, especially have positive relevance for Dubai, and a number of the Next 11 Group; Egypt, Iran, Pakistan and Turkey, all have differing degrees of relevance.

I would encourage anyone to take a visit to this part of the world. It is quite mind opening.

ABU DHABI AND GOLD BARS.

I had been planning to add a picture to this week’s Viewpoint. Abu Dhabi is the more sober of the major UAE conurbations and has always a more straightforward raison d’être – its oil reserves and revenue. However, not to be completely outdone, as I am sure many of you know, it has a 7-star hotel, yes 7 stars. We managed to slip into the Emirates Palace for a quick (and not so cheap) cup of tea in between meetings, particularly to visit the Gold Bar ATM that is present in the lobby. Yes, there is a Gold Bar machine, and I have a picture on my blackberry to prove it. A  shame that my technology skills are sufficiently limited that I can’t upload it for all you Gold bulls to see.

WORLD MARKETS AND THE MAY FACTOR.

Not because of this particular anecdote, but the Middle East being what it is, my meetings involved more discussion about Gold prices than is usually the case in other parts of the world. While the gold bar machine anecdote adds to all the other colourful stories I pick up, the recent remarkable resilience of gold, despite what has happened to silver and other commodities, is rather impressive. This gold price strength may perhaps be just a simple function of both the extremely low level of G7 real interest rates and the prospect that they might not rise anytime soon. I got the  impression that there a quite a few bulls of Gold in the Middle East.

Jim O’Neill

Chairman, Goldman Sachs Asset Management

 

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Sat, 05/28/2011 - 12:29 | 1319348 marcusfenix
marcusfenix's picture

que WW3 in 5...4...3...

Sat, 05/28/2011 - 13:10 | 1319410 ipud
ipud's picture

Gotta get me some of those Denninger-head Kruggerrands for my survival kit.

http://www.youtube.com/watch?v=GDPg_w1VsWU

Sat, 05/28/2011 - 13:27 | 1319448 JW n FL
JW n FL's picture

i still laugh and i dont know who he is.. I know he is a blogger but i have never, nor would i read his stuff! but you did a banj up job! keeo the tunes coming!

Sat, 05/28/2011 - 13:32 | 1319459 DosZap
DosZap's picture

Be nice if he could spell...........amazing.

Sat, 05/28/2011 - 15:21 | 1319606 ipud
ipud's picture

If you're referring to "Krugerrand", guilty as charged.

Sat, 05/28/2011 - 19:41 | 1319973 trav7777
trav7777's picture

Douchinger runs a miserable little blog called Tickerforum where he basically bans anyone who disagrees with him.  Its readership and membership is way down, basically the blog had a run where it was relevant but it's withering rapidly now.  Most of the forum content now is posts linking to what ZH says.

He jumped the shark when he threatened to ban anyone who linked to TheOilDrum.

Sat, 05/28/2011 - 22:09 | 1320145 tmosley
tmosley's picture

At least he doesn't want to sterilize half the human race like trav here.  

Sun, 05/29/2011 - 02:02 | 1320290 Hephasteus
Hephasteus's picture

Ya but trav will recieve total conciousness when he dies. So he's got that going for him.

Sun, 05/29/2011 - 11:29 | 1320552 trav7777
trav7777's picture

wtf is wrong with sterilizing half the human race?

Nobody would die, there's no pain, there's no suffering...there is LESS.

ponzi pumpers lose out, but the environment, QoL, everything for everyone else improves.  Crowding is solved, pollution, a lot of diseases, etc.

Instead of trotting out your ZOMG THAT RAYCISS bullshit, why don't you try using logic for a change?

I know why you won't.  It's because you WANT catastrophe; you hope to use your miserable little silver stash to become a future slumlord.  You've said as much.  You are a loser who sees his stupid little bugout farm as his chance to finally be king and extract his pound of flesh from "the masses" who are starving.

You announce ALL THE TIME that collapse is coming and that zillions will die; where the fuck is your optimism there, moron?  You don't want solutions, you want misery, frickin misanthrope.

Sat, 05/28/2011 - 13:43 | 1319471 Youri Carma
Youri Carma's picture

You might also enjoy this one, at least I did. :)

Denninger gets the goldfinger http://www.youtube.com/watch?v=WCwWfSYBwOQ

History of all this: Cookie Denninger doesn't understand Gold - Karl Denninger Angered, Bans Everyone http://randomlyspecific.com/?p=70

Sat, 05/28/2011 - 17:37 | 1319803 Al Gorerhythm
Al Gorerhythm's picture

Que? Did you mean cue or queue?

Sat, 05/28/2011 - 21:35 | 1320101 Praetor
Praetor's picture

A guy rushes into the doctors office and says "Doctor, I've swallowed a billiard ball!". The doctor replies, "Get to the end of the queue".

Sat, 05/28/2011 - 12:33 | 1319358 rsnoble
rsnoble's picture

Yeah im a little late to the party, as usual, but does anyone here have a good source I can buy physical silver and have it mailed to me?  I'm not looking for an investment to make money off of, I just want some just in case.

Sat, 05/28/2011 - 12:49 | 1319376 Smiddywesson
Smiddywesson's picture

Blanchard is one of the most reputable companies.  They headquarter out of New Orleans.  I physically go there and pick up my gold shipments and have seen their office and they are a top notch company.  I enjoy my visits and like to discuss the gold market with the salesmen.  Their prices blow away AMPEX and KITCO.  I found their spreads very reasonable.I don't know if there's another cheaper place, but safety was an issue for me and that's how I found them.  

 

Sat, 05/28/2011 - 12:48 | 1319380 Motorhead
Motorhead's picture

There's also Northwest Territorial Mint (www.nwtmint.com) and Tulving.com.

(Not promoting or anything, just passing on some options...good luck.)

Sat, 05/28/2011 - 14:07 | 1319507 Temporalist
Temporalist's picture

Many will say go to local coin dealers and start a relationship with them in the event you will ever need to sell it back.  Also you can buy jewelry from garage sales and estate sales for much less than retail. 

Sat, 05/28/2011 - 17:28 | 1319776 DoChenRollingBearing
DoChenRollingBearing's picture

My suggestion is to go with Temporalist, go to the coin shop.  If they are not too busy, you can learn stuff as well.  

Temporalist's idea of starting up a relationship with one or more coin dealers is a really good idea.

Buy online only if you are buying BIG.

I have only bought once online before: 10 oz of Pt.

Sat, 05/28/2011 - 23:43 | 1320213 Fiat2Zero
Fiat2Zero's picture

+1 for local coin dealers. These could become banks if things work out the way many think. Nice to have a good relationship with your local moneychanger.

Premiums may or may not be slightly higher due to brick and mortar.

Sun, 05/29/2011 - 00:02 | 1320225 Fiat2Zero
Fiat2Zero's picture

Not late. You can still actually buy silver with paper money. This won't always be the case.

Sat, 05/28/2011 - 12:41 | 1319367 Motorhead
Motorhead's picture

Tyler, haven't heard much lately on the tungsten-gold bars.  Either it's blatantly "self-evident" or the story has died down...just curious.

 

Sat, 05/28/2011 - 12:51 | 1319388 SlipStitchPass
SlipStitchPass's picture

 Gaithersburg Coin Exchange is awesome currently +.80 over on 100oz bars. Free shipping if you buy a good lot. Tulving is also good but there spot is higher and you have to get 500oz so premiums are still +1.10 or so on 500 oz. Tulving has a 100oz special right now at 1.49 over on NTR 10 oz.

Sat, 05/28/2011 - 13:05 | 1319399 Arius
Arius's picture

it seems the gold bubble is about to pop....Goldman is promoting gold...

Sat, 05/28/2011 - 13:32 | 1319449 JW n FL
JW n FL's picture

you should sell me your gold at a discount before the market opens on monday.. you dont want to be caught!

I will buy for $1,400 an oz!

Sat, 05/28/2011 - 13:51 | 1319486 Arius
Arius's picture

already sold my mining shares...will wait for a very nice dip if i buy aga

Sat, 05/28/2011 - 19:54 | 1319988 geminiRX
geminiRX's picture

Hope you didn't sell Kinross, that stock is about to $rocket$.

Sat, 05/28/2011 - 17:30 | 1319781 DoChenRollingBearing
DoChenRollingBearing's picture

LOL JW.  Email me at gmail for an invitation!

Sat, 05/28/2011 - 22:20 | 1320152 JW n FL
JW n FL's picture

Chen I luv Ya Bro and I dont want to start any trouble in your nice new place that is filled with polite people who dont want me jumping up and down on their nuttz for the fun of it!

 

It is out of respect, you said you dont want fight club inside your house and all I do is fight soooooo?

 

God Speed and Good Luck Brother! I hope all your dreams come true! every day! and I mean that from bottom of my soul!

Sat, 05/28/2011 - 13:29 | 1319455 sun tzu
sun tzu's picture

You better stock up on Bennie Bucks.

Sat, 05/28/2011 - 13:18 | 1319428 disabledvet
disabledvet's picture

"how much silver is used in alternative energy applications such as solar panels."  something tells me "a real friggin' lot."

Sat, 05/28/2011 - 23:49 | 1320214 Fiat2Zero
Fiat2Zero's picture

I heard that at $40 per ounce it is 10% of the cost of solar panels. This was from an interview with Jeff loebb. He's got a new book that researches some of these factors (I.e. scarcity issues)

Sun, 05/29/2011 - 09:01 | 1320430 Britons
Britons's picture

Interesting development in Solar:

New solar technology could break photovoltaic limits

http://munews.missouri.edu/news-releases/2011/0516-new-solar-technology-...

Sat, 05/28/2011 - 13:37 | 1319466 margaris
margaris's picture

scientists are about to create an atomic converter, that can practically take any atom apart (neutrons and protons)

and reshuffle them to get any element you want (Silver, Gold, you name it).

All this device needs is Extreme amounts of energy and some seawater.

This will destroy all the commodity-markets.

 

Just kidding! But can you imagine?? LOL

Sat, 05/28/2011 - 14:00 | 1319491 Rynak
Rynak's picture

No, i cannot, because i understand the physics involved. You'd indeed need "extreme amounts of energy"... very extreme. Know when stuff like gold is created? Not even stellar fusion is enough.... you need a supernova explosion to get enough energy for this.

As with everything, it not only matters if something can be done, but at what cost. No one's gonna pay 100.000 $ (at current value) per ounce of gold, right? Before something like this becomes economically useful (let alone technologically possible), you could rather do deep-sea mining.... still fucking expensive and unfeasible, but much less so than your proposed idea.

Sat, 05/28/2011 - 14:41 | 1319560 slewie the pi-rat
slewie the pi-rat's picture

i've done ok recycling old alchemists

Sat, 05/28/2011 - 19:38 | 1319974 SilverRhino
SilverRhino's picture

>> scientists are about to create an atomic converter, that can practically take any atom apart (neutrons and protons) and reshuffle them to get any element you want (Silver, Gold, you name it).

It's called a fucking supernova. ;-)   Kind of hard on the local real estate and agribusiness though. 

Sat, 05/28/2011 - 23:51 | 1320215 Fiat2Zero
Fiat2Zero's picture

Its called a particle accelerator. The amounts made are infinitesimal but the power enormous.

Alchemy but not cost effective.

Sun, 05/29/2011 - 00:49 | 1320234 TheJudge2012
TheJudge2012's picture

How much relief to the economy would fusion energy provide?

Sat, 05/28/2011 - 13:46 | 1319477 Ecoman11
Ecoman11's picture

And so another takeover begins.

(Reuters) - European clearinghouse LCH.Clearnet confirmed on Saturday it has received a string of offers from exchange operators interested in pursuing some form of business tie-up but said talks were still at an early stage.

Offeres were made by NYSE Euronext, Nasdaq OMX Group and London Stock Exchange Group. LCH.Clearnet regulates margin rates for HKMEx, LME and OTC Gold.

In a nutshell, expect more volatility across the board

Sat, 05/28/2011 - 13:46 | 1319479 Rynak
Rynak's picture

By the way - regarding the physical silver market, here's a small sample from my area (europe). A few days ago, i was picking up my order from my local coin dealer (delivery time aprox 1 week). We got into a little chat, and i asked him how current customer sentiment is for his shop. His answer:

1. He was flooded with buy orders during the recent takedown.

2. Almost no one is selling.

Sat, 05/28/2011 - 23:52 | 1320216 Fiat2Zero
Fiat2Zero's picture

My coin dealer that I see on a weekly basis has been getting progressively less silver. If I want a "big" order (e.g. 500 ounces - yeah, seems tiny), it takes him now about a week to fill. He's getting lots of scrap (which he finds).

He says he might eventually have to close (in business since early 60s)

Sun, 05/29/2011 - 09:10 | 1320432 Britons
Britons's picture

Dont suppose any one can recommend dealers in the UK?

Sat, 05/28/2011 - 13:52 | 1319490 Temporalist
Temporalist's picture
Jeff Nichols Interview About Gold, Silver Strategy - Bloomberg

http://www.bloomberg.com/video/70231372/

 

Sat, 05/28/2011 - 22:23 | 1320158 JW n FL
JW n FL's picture

gimmie a forklift.. no a skid steer with forks! and off I would go! me and my new box of gold!

 

I will be a pirate one day with chests of gold! I will of course share with my Bros of Fight Club so that you guys can throw the daballons at the girls so that you can see some Titties! Grils of Fight Club I will share so you gals can buys some new shoes.. women are soooo fucking boring unless they are a hooker!

Sat, 05/28/2011 - 13:57 | 1319499 WakeyWakey
WakeyWakey's picture

just found a new chart on yahoo

http://uk.finance.yahoo.com/q?s=ISLN.L

Only 5 days old and backed by physical held at JPM in London.

Sat, 05/28/2011 - 16:14 | 1319674 tsx500
tsx500's picture

...held by JPM .    uhhhhhh,  no thanks.

Sat, 05/28/2011 - 22:25 | 1320160 JW n FL
JW n FL's picture

nooo. noooooo.. it is really safe, they pinky swear that they will not encumber or cross your gold that they hold in a different pile than everyone elses.. of course you will never, ever be able to hold it in your hand.. for your own safety!

Sat, 05/28/2011 - 23:54 | 1320217 Fiat2Zero
Fiat2Zero's picture

Seriously, the morgue? How can you suggest with a straight face?

Sat, 05/28/2011 - 14:17 | 1319522 zaknick
zaknick's picture

Bulls of gold= golden calf

praying to a false god, iow

slimy bastard

Sat, 05/28/2011 - 16:30 | 1319691 sun tzu
sun tzu's picture

Your posts are infinitely stupid. Get off the crack

Sat, 05/28/2011 - 15:32 | 1319616 legal eagle
legal eagle's picture

No, don't pray to gold, but do thank god every day got in early. Big difference.

Sat, 05/28/2011 - 17:28 | 1319786 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1530

Sat, 05/28/2011 - 22:27 | 1320163 JW n FL
JW n FL's picture

$1,536.50 May 27th last!

Sat, 05/28/2011 - 22:27 | 1320168 JW n FL
JW n FL's picture

Silver is $37.96 and we all know when it gets to $40..

***POOF!***

Hammer Time!

I mean FED Time!

or Margine Squeeze Time!

or all of the above.. yes all of the above.. you people who wear specticul(s)!

Sat, 05/28/2011 - 23:57 | 1320223 Fiat2Zero
Fiat2Zero's picture

Are you feeling a post memorial day raid coming on? Bring it Blythe, we need to load up one last time. Might as well blow your margin hike load now.

Sun, 05/29/2011 - 00:00 | 1320224 Fiat2Zero
Fiat2Zero's picture

Are you feeling a post memorial day raid coming on? Bring it Blythe, we need to load up one last time. Might as well blow your margin hike load now.

Sun, 05/29/2011 - 01:08 | 1320266 stoneman sacked
stoneman sacked's picture

Jim O Neill does not have any clue about keralites in the gulf and their buying habits

Sun, 05/29/2011 - 11:15 | 1320537 apberusdisvet
apberusdisvet's picture

The key to silver going forward will be its scarcity in the face of enormous quantities needed for alternative energy and most importantly for weaponry as the elites continue to breed chaos to distract the sheeple.  The KWN interview with Leeb is a must hear.  Don't be surprised if the next government confiscation is silver, for national security doncha know.  At the rate of industrial use (irrespective of investment demand), it is hightly probable that silver will disappear from the planet within 20 years.

Sun, 05/29/2011 - 11:34 | 1320555 trav7777
trav7777's picture

there's a good bit of scrap that can come out of hiding.  Ag production hasn't peaked yet, so there's a good ways to go

Mon, 05/30/2011 - 00:11 | 1321825 PulauHantu29
PulauHantu29's picture

Death is sometimes slow...but inevitable.

Alas poor dollar, I knew it well.

 

Mon, 05/30/2011 - 18:55 | 1323353 kamyarhazaveh
kamyarhazaveh's picture

I don't really listen to what Jim O'Niell says. He is perma bull which makes him in my investment process, useless. The man has been bullish on BRIC no matter what. Perma bears at least make you think. Perma bulls are simply useless.

Mon, 05/30/2011 - 22:48 | 1324241 joiceca
joiceca's picture

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