Credit Suisse Gold Supply And Demand Forecast; And Why Clients Should Sell Their Gold To CS

Tyler Durden's picture

Cutting straight to the chase:

Our analysis of the gold market leads us to take a bearish stance with regard to the gold price in 2010. In 2009 we reasoned that the main drivers of the gold price were significantly linked to the trade weighted dollar, increased investment demand, central bank purchases and market sentiment. The increase in investment demand for gold ETFs, in our view, had an “accelerating and reinforcing effect” on market sentiment and the safe haven status of gold which resulted in upward pressure on the gold price which rose 24.6% during 2009. We do not expect the 2009 rate of investment in ETFs to continue at the same pace in 2010.

We are of the view that the gold market will likely be dominated mainly by the demand side of the equation in 2010. We believe that the likely decline in investment demand for ETFs, year on year, will play a pre-eminent role as a swing factor in our supply-and-demand balance in 2010. Jewellery,  industrial and dental demand will likely strengthen marginally year on year. The secondary supply of scrap will depend on the gold price but will likely remain above 50% of mine supply. Central banks will likely become net purchasers while de-hedging will reduce significantly as the major players in this arena accelerate their 2009 de-hedging activities. Our calculations show a large oversupply of around 420 tonnes in our supply-and-demand equation for 2010.

In summary, we believe that the steam has run out of investment demand as the economic environment has and is changing to the positive. Muted investment demand coupled with a change in market sentiment and a projected large oversupply in the supply equation all point to a downward correction in the gold price from the highs reached at the end of 2009.

Such optimism, even as the global economy is poised on the edge of the double-dip. On the other hand, we wonder who Credit Suisse recommends its clients sell their gold to? Could it be... Credit Suisse?

Full report:

 

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Master Bates's picture

Gold will peak at 1300 / oz before beginning its downtrend (according to TA).  2000 / oz is merely wishful thinking, despite the wishes of the staff and posters at ZH.

There just isn't that strong of a demand for gold, aside from the marginal investor, which will quickly run for the exits when their bet gets killed by the downtrend.  Then it's "Look out below!"

It's not like Mr. T is going to buy 50 new necklaces and chains in THIS economy.  To better phrase his wishes "I'm looking for work, foo!"

Anonymous's picture

mr bates. how many times does it have to be said. gold is not a investment. it is a holder of wealth. it is protection from what is to come. that "event" evidentially has been put on hold for a bit, but nevertheless it is coming. this postulation sounds more to me like someone talking their hedge book in paper gold. maybe one of these days, we shall not be held captive by the shenanigans in the comex, etc. watch what happens when the chinese continue their buying spree in gold bullion for physical delivery. yep, watch out below my arse....

Master Bates's picture

The dollar has devalued about 75%, and gold is up 400%.  It's not like gold hasn't had its run with the weaker dollar.

Now, the dollar is strengthening and in a bonafide uptrend.  Gold has less demand, both in commodities markets and among investors.

It's in a bubble, not unlike the housing bubble that we've all come to love so much.

I remember people telling me I was a fool when I didn't buy a house in 2006 and 2007 either.  Now I'm really glad I didn't.  The same thing will happen to gold bulls as well.

For gold to get to the 2000 dollar mark, we'd nearly have to print twice as much money as exists now.  I just don't see that happening.

What I do see is deflation, as the demand from the consumer sector has been overextended for some time and tapped out.  Our situation is different than in 1982 where a decade of pent of demand existed.  People already have their second bathroom and granite countertops.  With deflation, the prices of all assets - including gold - will decrease.

Housing was a holder of wealth too, until it worked against everybody and diminished their wealth.  Just like the Nasdaq, just like every other bubble in history.
When the guy changing my tires and Glenn Beck are giving me advice on what to do with money, I know that the trend has run its course.

Shocker's picture

Just remember one quote " Gold and Silver is all you can rely on"

Master Bates's picture

I'll leave you with another quote.

"Housing is the best investment you can make because it's outperformed very asset class for the last decade!"

And now even Glenn Beck is telling me the same thing about gold.

Shocker's picture

Thanks, what your not understand is one key figure. Technically Gold could go to 8 dollars / oz and it will still have more value than any paper currency. Any natural resources that can't be printed or just made will have value. Forget trying to put it into dollar terms. Thats all I'm saying.

Master Bates's picture

Paper money buys me houses, cars, food, etc, etc, etc, etc.

Gold buys me paper money.

The only real worth gold has is for jewelry, semi-conductors, and pretty chalices for the pimp of the year.

Paper money, although only backed by faith, has the faith of most people.

Unscarred's picture

Paper money, although only backed by faith, has the faith of most people.

Eloquently stated.  Both a Master Bater and a cunning-linguist.

VegasBD's picture

Paper money, although only backed by faith,

has the faith of most people, *today*.


Amended.

Gordon_Gekko's picture

Exactly. What happens when it no longer has the faith of "most" people? See this is where Gold comes is - IT DOES NOT REQUIRE FAITH, only a functioning brain (which, admittedly, is not present in at least 50% of US population).

Master Bates's picture

I wholeheartedly agree with what you say, and I even know that the dollar is on the outs because that is the historical norm of all fiat currencies.

I think that where we tend to disagree is the timeframe that it might occur.  I don't think that the dollar is going to collapse tomorrow, or even in a few years.  I think that gold has had a nice run, and I think that it could even go a little bit higher.  I just don't see that the dollar is going to poop out tomorrow, or even in ten years, and I think that people tend to get TOO negative when it comes to the future sometimes.

The birds will chirp, the sun will shine, and we won't be fighting in the streets over gold nuggets any time soon.  We all have our opinons, though, and I hope that I'm not wrong.

By the way, I've been lurking in the comments and reading them all for a very long time (since about April, actually), and I'm glad that I can finally begin talking to you all.

Nice to meet you all, and have a nice day!

Anonymous's picture

I think what you missing is a bad attitude about the financial world. We are in the start of a world wide collapse for the first time ever. The only upswing we will have will be in the next 3-6 months. A phony, engineered, dangerously optimistic upswing. Money people, investors, etc currently are in a state of mind similar to what manic depressants get just before a major mental breakdown. This global crisis isn’t going to end nice or soon. There is no room for optimism anymore, only sober survival and investing in things that hold value. I suggest buying cases of whisky and buying acorns (or any other food). You’d be surprised what people will pay for booze when all is hopeless.

Gordon_Gekko's picture

And a bankster minion too.

Unscarred's picture

"Smoke and a pancake, Goldmember?"

Share with us, oh great one, exactly what percentage of your holdings do you have in PMs?

Master Bates's picture

Will you take off your tin foil hat, or what?

I'm an accountant who used to work in the construction business, and lost my job in November.

I interviewed to be an accountant for a medical supply company today.

I work full time (usually), go to school full time, and live in Colorado, which is far from all banks.

I am far from a bankster minion.

Gordon_Gekko's picture

I'm an accountant who used to work in the construction business, and lost my job in November.

Good riddance.

WaterWings's picture

If I could pay my taxes with something else I would, but it's the law. So it's more about control and a lack of alternatives than faith, IMO.

Unscarred's picture

I agree with much of what you have said, but we must also be mindful that "value" is always subjective and relative to prevailing sentiments.  In acknowledging as much, sentiments change as time passes.

I believe that gold has gone "peak."  I believe that paper currency has little to no value.  But so long as society continues to place value in fiat money and diminish the perceived value of gold, I find it prudent to wait for a better entry point before storing wealth.

As Keynes said, "Markets can remain irrational far longer than you or I can remain solvent."

Anonymous's picture

As Keynes said, "Markets can remain irrational far longer than you or I can remain solvent."
Don't ever take a position that you haven't researched well
, don't fully believe in and/or don't have the ability to maintain.
Gold, over the past two years, is an excellent example
Its been a difficult horse to stay on, but is now well
worth the effort...

Anonymous's picture

"Technically Gold could go to 8 dollars / oz and it will still have more value than any paper currency."

Then (((technically))) it's value to the open market is 8 dollars / oz. It may have "more value than any paper currency" to you personally. And while you are a special and unique butterfly and your opinion matters greatly, unfortunately in the grand scheme of things that doesn't mean dippity shit.

Gold is not the public medium of exchange and it probably will not be allowed to be ever again. You can all jump around and scream that it is has more value than all the paper in the world. But in the end it is only worth whatever value it is currently given.

Shocker's picture

And yes, I see the dow easily going to 20,000. But does that mean anything... ponder on that :-)

jimmyjames's picture

Gold is not the public medium of exchange and it probably will not be allowed to be ever again. You can all jump around and scream that it is has more value than all the paper in the world. But in the end it is only worth whatever value it is currently give"

 

Totally off base--if  i thought gold would be again used as a medium of  exchange--I would view it as nothing more then a stable money--

one of these major currency's will eventually blow up--

When-not if--that happens--look to central banks going into the open markets and buying in a panic--buying at any price-while shorts run to cover at any price--that is why--you want to be in gold--

laugh at Iceland--VietNam--Argentina--Baltics etc--

They're sending a ripple through the currency markets--world wide--

They're "all" joined at the hip--all related--all have the same gene--

Coming to a currency--near you

Anonymous's picture

The public participated heavily in both the tech and real estate bubble which is why we are in such a mess. As far as gold to public is busy attending sell your old jewelry parties. CBs have been selling for years and just last year saw the error of their ways when the entire system collapsed. So who has bee buying? Dumb money, just ZH posters? If you are looking for the current bubble turn your attention to the government finance bubble.

Anonymous's picture

The public participated heavily in both the tech and real estate bubble which is why we are in such a mess. As far as gold to public is busy attending sell your old jewelry parties. CBs have been selling for years and just last year saw the error of their ways when the entire system collapsed. So who has been buying? Dumb money, just ZH posters? If you are looking for the current bubble turn your attention to the government finance bubble.

Anonymous's picture

Its comments like Mr Bates makes that just dont make sense. He says gold is in a bubble. If it hasnt kept pace with inflation since 1980 then how is it in a bubble? Its either ahead of inflation and due for a correction or its under and has room to run. And that before you even consider the proposition that gold is possibly returning to being used as money - which further increases demand (and therefore price).

Crime of the Century's picture

It is impossible for gold to be in a bubble, yet mining shares not outperforming by a wide margin.

Anonymous's picture

Wayne? Is that you?

Anonymous's picture

I bet 1 in 100 people do not own gold. People that own gold are still viewed as kooks.

Anonymous's picture

Yes, if we're talking bullion, not jewellry.

I'd say 1% owning bullion is a very safe bet in Canada, where I live. Probably less than 1%. Mind you, Goldbugs are viewed as less kooky by the day as the price continues to rise.

Bubble?? You must be joking.

10044's picture

let's see who gets to say "I told you so" first.

$1500 by June 2010 (maybe earlier)

Master Bates's picture

I'd bet you a lunch, 10044.  1300 is the peak before the fail...  If it even gets that high.

10044's picture

keep the ham sandwich to yourself.

1) China wants to import thousands of tons of gold within the next few years.

2) There will be wars in the middle east.

3) Middle east WILL abandon the dollar

4) Dollar WILL be devalued (http://www.business24-7.ae/Articles/2009/12/Pages/26122009/12272009_b60d...) fyi, when Martin Wolf talks people listen, because he is part of the illumanati.

 

5) you must an absoloute moron not to think gold will go to stratosphere based on the above and MANY MANY more reasons, incl. the suppression of gold by the fed in the last 20 years. (http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_v...)

6) PPT will be disolved because of HR-1207. Hence gold WILL rise to around $5-$6k to reflect the 1980 inflation model.

 

Master Bates's picture

1.  China has already been the largest importer of gold the last five to ten years.

2.  There have been wars in the middle east for the last five to ten years

3.  No they won't. 

4.  Ooohhh... the illuminati.  Maybe you can throw in some Nostradamous predictions  next!

5.  You must be an absolute moron to believe that the countries with large dollar FX reserves would let the dollar plummet another 80% in the near term, which is what it would take to get gold to 5-6k.

6.  Look how much HR-1207 is having an effect, despite being in existence for a year now... yep, still nothing happening.

10044's picture

just out of interest, do you work around 33 Liberty St??

just wait till you're hungry and can't get food

http://www.marketskeptics.com/2009/12/2010-food-crisis-for-dummies.html

and Nostradamous has nothing to do with illuminati, the council on foreign relations, the trilateral commission and the Builderberg group do.

You're too dumb for me to even waste time on, go get your UST and Citi stock recommended by Jim Cramer and do  me (actually all of us) a huge favor and GET THE FCK OUT OF ZERO HEDGE, THIS IS NOT HUFFINGTON POST.

 

Master Bates's picture

Actually, I've made quite a few bucks going against Zerohedge's predictions.  It sure was nice buying BAC at 5 bucks and still owning it.  I bought F at 1.50 too!  Good thing I didn't listen to all the Gloom and Doom before..

I wish I worked at 33 Liberty.

While you have little substance to your arguments, you have plenty of personal attacks in each post.  Sure sign of somebody with little substance to their arguments...

Have a nice day!

Anonymous's picture

Interesting point-counterpoint.
I fall on the Au side of the arg, having
significant holdings of PM.
Good position statements Master Bates.
The one fact not mentioned though is that
fiat currencies always fail, historically.
That fact,coupled with the level of fraud and
corruption in our financial/political system, along
with being a welfare state, doesn't bode well.
But you are correct, the gloom and doom
gets a bit overdone, which clouds our
investment decisions.....
For an excellent history on fiat currencies see
Ralph Foster's book "fiat paper money, the history
and evolution of our currency"
Its a very sobering account of paper monies and their
catastrophic failures

Master Bates's picture

Hey, I'm willing to admit that I could be wrong, and there are defnitely strong arguments for gold being a great store of value when compared to fiat currencies in the future.

Fiat currencies are unstable, and do usually fail as they deflate over time.  This coupled with our current policies could easily bode bullish for gold over the long term.

I think that where I differ with most people is on the scale of time that the deflation could take place.  It took more than 300 years for Rome to start failing after its empire and deflation statuses, and I think that people are a little bit too quick to think that the U.S. will go from the world's number one power with the most wealth, to the poorest country in the world, in a matter of ten years.

I will read Mr. Foster's book about currency, and thanks for responding to my thread. 

Have a nice day!

Anonymous's picture

The time factor on this crisis has been interesting.
We were hours away from a world wide meltdown
on or around sept 18th, 08. A "stop event"
It was amazing to watch the treasury and fed
pull out all the stops to prevent a complete meltdown.
There are more "stop events" lurking in the shadows,
otherwise this will be a long "death by a thousand cuts"
Personally, I prefer pulling the band-aid off in one
quick motion
Either way,the coming years are going to be painful
The stop events are one of the reason's I owm PM's
10 percent of NW in PM's, 50 percent in real estate
Too old to go 100 percent in anything, but I understand
the reasoning .....
consider a 4 percent position in PM's...own physical

Anonymous's picture

The US empire would be a continuation of the British empire, time is running out. The dollars days are numbered. As for glenn beck, well then you must be an al franken supporter since you bash gold, by the way I do not support glenn beck.

Any other empire in history never had to deal with a $600+ trillion derivatives bubble. The bubble not only keeps asset prices high, but also yields low and us debt servicing costs relatively low. It also allows for creditor nations of the US such as japan to continue to be creditor nations and buy up us debt.

whacked's picture

+1 Master Bates

Enjoy the site but ignore the posters, as they denigrate a good web site.

 

 

Unscarred's picture

You're too dumb for me to even waste time on, go get your UST and Citi stock recommended by Jim Cramer and do  me (actually all of us) a huge favor and GET THE FCK OUT OF ZERO HEDGE, THIS IS NOT HUFFINGTON POST.

There's a saying that says "We can disagree without being disagreeable."  These types of remarks are both unproductive AND unnecessary.  It's these types of comments that prevent the free exchange of thoughts and ideas- the very premise that ZH was founded upon.  So...  Why don't YOU get the FUCK out of ZH!?

Master Bates's picture

I know.  What a terrible thing to say, right?

I for one have never read the Huffington Post, and would never call somebody that I disagree with one of Cramer's fans.  That's like the lowest insult around! :)

I'm just a 20-something working as hard as I can to stay employed and go to school as much as I can!

VegasBD's picture

Disagree with you completely, but thanx for being a rational normal person. If they kicked everyone out of ZH that I didnt agree with I dont think I would learn as much.

But saying you wish you worked at 33 Liberty might be crossing the line...heheheh

Unscarred's picture

Keep doin' your thing bro, both here and away from ZH.  I enjoy dialogue with people who are open-minded, even-tempered, and stick to their views in the face of prevailing sentiments.  I'll look for your comments in the future.

Master Bates's picture

Hey, it's great to finally talk to you all.  Usually I just lurk around and read the comments from the many people who I consider to be much smarter than me!

But yeah, I hope to be a contributor here in the future.

And just because I disagree with some of the stories here doesn't mean that it isn't a wonderful learning experience and that I don't vastly appreciate the work of Tyler and Marla.

It's always good to get both sides, you know?

Anyway, have a wonderful day!

Unscarred's picture

I hope that you are able to keep such a great perspective in the years ahead.

chumbawamba's picture

Will be funny to see the expression on your face in some not too distant future.

I am Chumbawamba.

Master Bates's picture

If the scenario that you say happens, I'll cash out of equities at that time.  Then I will be smiling like a mofo counting my stacks of dollars.

So, in the interest of being friends, can I just say "Gold Bitches!!?"  That way, I can be the man around here and gain your respect.

chumbawamba's picture

And what will your "stacks of dollars" be worth at that point?  You will have done better to stay in the equities in the longterm.

Look, don't change your argument to try to impress me.  I'm nobody. Stick with your guns and let's see who comes out right in the end.

I am Chumbawamba.

Anonymous's picture

Chumba, you must be back on your meds. It's not like you to be so docile and complacent.

I am Chumbawynnonajudd