Gold Bar Premiums At 17-Year High In Hong Kong

Tyler Durden's picture

Submitted by GoldCorp.

Gold Bar Premiums at 17-Year High in Hong Kong – Safe Haven Bid on Inflation and Egypt Concerns

The geopolitical ramifications of the revolution in Egypt and the likelihood that it will spread throughout the Middle East, North Africa and possibly further afield is leading to volatility in markets. Equity indices in the Middle East and Far East were mostly down (except for China) overnight. European bourses were under pressure this morning but have recovered somewhat.

Gold and silver are marginally lower after their strong showing Friday which resulted in silver closing the week 1.7% higher and gold being tentatively lower (-0.14%). Remarks by a People’s Bank of China advisor that the Chinese should diversify into gold and silver are very important (see below).

click for full size

(Click to enlarge) Gold in USD and CFTC Gold Open Interest - 2 Years (Daily)

NYMEX crude is up some 0.4% to just over $90.00 (see long term chart below) and Brent crude remains close to $100 a barrel this morning. Oil’s nearly 5% surge on Friday to end the week higher was ominous and the possibility of unrest spreading to other oil rich dictatorships such as Saudi Arabia is making investors nervous. The Middle East and North Africa produce more than a third of the world's oil and OPEC has warned of a possible oil “shortage”.

click for full size

Oil in USD – 5 Years (Daily)

Any speculative froth seen when gold recently rose above $1,400/oz has been removed from the gold market as can be seen in the gold futures open interest numbers. Open interest has fallen by more than a third since early September. Those short the market have once again managed to flush out the weak paper longs who have been shaken out of positions.

Open interest levels are now well below those seen after the last period of correction and consolidation in the first quarter of 2010 (see first chart above) and we may now have seen capitulation.

Short positions remain high and concentrated with a few market players, especially JP Morgan, and they are vulnerable to a short squeeze, should prices begin to move up again. This seems likely given the tight physical demand situation in the market internationally.

Further evidence of this was seen in the fact that premiums for gold bars in Hong Kong are at their highest levels in 17 years (since 1994) as Chinese, Indian and wider Asian buying continues. Deepening inflation has led to strong demand and the geopolitical instability in Egypt and the possibility that it could spread throughout the Middle East and North Africa will lead to safe haven buying.
China Should Buy More Gold, Silver for Reserves – Chinese Central Bank Advisor

People's Bank of China adviser Xia Bin told the Economic Information Daily today that China should steadily increase its holdings of gold, silver and other precious metals. In an interview with the paper Xia said that “holdings of gold and silver can help establish the yuan as an international currency by increasing China's "final payment capacity." He advised buying precious metals on the dips and while gold and silver are marginally lower today, the remarks are another long term positive for the gold market.

Only last month, Xia made similar comments saying that the People’s Bank of China should diversify their massive $2.7 trillion foreign exchange reserves away from US dollars and increase their gold reserves as a long term strategy in order to help internationalise the yuan. The Chinese wish to make the yuan an accepted international reserve currency and establish it as a currency that will be used for payment and settlement in international trade.

China’s gold holdings, at 1,054 tonnes, remain miniscule compared to the over 8,000 tonnes held by the US Federal Reserve (gold only accounts for 1.6 percent of China’s massive currency reserves). With the supply and demand equation already tight due to international investment demand and central banks having become net buyers rather than net sellers, even a small amount of diversification out of their US dollar holdings and into gold should lead to much higher gold prices.

The reference to silver was important as it marks the first time in modern times that a central bank advisor or official has spoken about diversifying currency reserves into silver. It shows how the Chinese view silver as money rather than as simply a commodity to be consumed. Indeed, the Chinese like most of the world, used silver as currency for most of their history.

The comments may signal the start of a growing shift from seeing silver purely as an industrial commodity to seeing silver more like gold – as both an industrial commodity but more importantly as a store of value and as money. As Milton Friedman pointed out, the major monetary metal throughout history was silver, rather than gold.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mr Lennon Hendrix's picture

Does anyone in the world buy gold before the daily Blythe gold dump?  Just wondering...

66Sexy's picture

CNBC is parading the gold bleed quote like the moneychangers paraded JC's crucifixion... 

quite the display... 

wow, look, there it is again...

try getting this level of reliability when gold happens to be green...


i always know when gold is up when watching muted CNBC... the damn quote never comes up.

HamyWanger's picture

I've sold all my gold one week ago, and I don't regret it.

Sudden Debt's picture

he couldn't find it. His wife hid it somewhere...

Warmer warmer, HOT HOT HOT, colder colder....

HamyWanger's picture

Libertarians and permabears are so rude.

Alcoholic Native American's picture

They are just bitter from being so wrong all the time.

Look out behind you! Bondzilla is coming!


Give it up losers.

scratch_and_sniff's picture

I cant believe you just uttered those words...didn't you mean "right 27% yoy of the time"?? I can sympathise with the gold bugs, i really can.


Sudden Debt's picture

Calm down, it's just a redneck.

ColonelCooper's picture

Actually I would say, "not a redneck".  The redneck is WAAaay more likely to be a goldbug than a bondholder

william the bastard's picture

Over the longer term, too, the case for gold seems less compelling, say some analysts. While the metal has traditionally been seen as a buffer against runaway inflation and a collapsing dollar, at these prices gold may have less value as an insurance policy than investors might think.

Take inflation. From 1968—when investors started to price in the possibility of the U.S. dropping the gold standard—to 2001, the price of gold rose 5.6% a year, while the Consumer Price Index gained 5.1% annually. That hasn't been the case recently: Since 2001 gold has surged 18.8% annually, while the CPI has risen just 2.3%.

ColonelCooper's picture

I also like how those "analysts" conveniently forget to factor inflation into the value of their stock portfolio.

william the bastard's picture

Even assuming the price of gold now includes a premium for protection against a falling dollar, a collapse in the stock market and inflation, gold still looks expensive, says Vadim Zlotnikov, chief market strategist at Alliance Bernstein Research. He calculates that the current price reflects fears of a 20% decline in stocks, a 20% drop in the dollar and an inflation rate above 4%, based on historical performance. (The inflation rate is currently 1.5%.)

ColonelCooper's picture

Yes, and the econ. pundrity has been spot on to date. Uhm not.  Only time is going to tell.  Market analysts make money pumping a market.  I don't lend them any more credence than a Goldline ad tearing it down.   

I don't shill for metal; do whatever you want, and best of luck. Rather, I never cease to be amazed at the vehemence towards people who are taking the other side of the trade. 

99% of the gold vs. fiat arguments here are started by trolls. 


Bay of Pigs's picture

"gold still looks expensive, says Vadim Zlotnikov, chief market strategist at Alliance Bernstein Research"

And who the fuck is this guy? Nice try Bill. All those numbers are crap and if you took the time to investigate, you'd already know that and wouldn't post this propaganda.


Snidley Whipsnae's picture

"over the longer term"???

Over the longer term gold WAS money for 5,000 years!

We now have a lot of worthless paper currencies 'floating' against each other...and, they are falling apart.

If there is no center...and, gold is the center...the the center cannot hold.

william the bastard's picture

Gold is money amd it is worth less and less dollars as the days go by.

ColonelCooper's picture

Which really doesn't explain how as money supply goes up, so do premiums for physical.  Denying the effect of ETF's on price is a Flat Earth approach to the debate.

william the bastard's picture

You'll find a new theory as people sell more and more of the ETFs out of portfolio. Don't be a ham brain.

tmosley's picture

Damn, you really are the crappiest troll yet.

ColonelCooper's picture

That is 100% reliant on an individual's need for short term liquidity.  If you really believe that LONG TERM, a store of wealth with thousands of years of stability will be beaten to death by global fiat... As I've said before, "All the best."  I personally don't care what your play was.  I won't be knocking at your door looking for supper, regardless of the outcome.

If you are so heavily tied to physical that you may need to sell in the next six months to live, than I may side with you in the Ham Brain argument.  That isn't my scenario.  I personally like the fact that I'm cushioned regardless of the outcome.  I TRULY hope my children inherit my worthless Barbarous Relics.  I just kind of doubt it will be the case.

mogul rider's picture

Are yu any relation to Fat bastard?

You sound the same

Quintus's picture

Not in any currency I look at. Gold hasn't had a down year since 2001.  I'd say, on that basis, my gold is worth more and more as the days go by.  Unless your math is different from mine.

mogul rider's picture


At least we know Hammy the Wanker and Billy the f'headbondholder aren't gold bugs.

That assures us of at least another 3 year run. However, be on guard once these two fucknuts start pounding the table on the precious then you know the top is in.

Yup the BillyBastard and the Wanker Oscillator is now active bookmark accordingly.

scratch_and_sniff's picture

Libertarians are too quaint, im more of a libertine.

Alcoholic Native American's picture

Nice, bet you made a hefty profit too. Gold bugs are loons No way we will go back to pinching gold dust. We will go all digital before we go back to the barbaric bartering with gold.

Libertarian loons are living in a dream world or are actively hoping for total collapse. Sickening.

ColonelCooper's picture

Best of luck to you.  I love how you equate cynicism with hoping for a total collapse.  Add that to the performance of metal in the last few years and your argument is pretty thin.

william the bastard's picture

Since 2001 gold has surged 18.8% annually, while the CPI has risen just 2.3%.

ColonelCooper's picture

Which means it is outpacing inflation by a satisfying margin.  I would actually say that it HAS NOT performed as well, because CPI is a joke.  If you are calling it a bubble, that's the million dollar question isn't it? 

Don't get me wrong, I firmly believe that if gold hits $50,000, it will mainly be because of inflationary pressure rather than some reversion to a gold standard or magical gold fairy dust. 

When the fiat bubble bursts, and the dust settles Gold and Silver will still have value.  What it will be is anybodies guess, but I'm all in on the bet that it will be more than Bernanke Bucks or Ipad stocks.

Sands8oo's picture

Re: William the bastard - Always nice to see the dolts amongst us still have the moxy to show up on ZH and flap... And so, once again ladies and gentlemen, we seem to be dealing with a totally fucktarded individual.


Dear William,

Please feel free to rejoin the conversation when you've pulled your head from the FED's asshole and realize inflation has been a tad in excess of 2.3% annualized since 2001.  Until then, enjoy playing with your Tonka trucks in the shitbox while the grown-ups engage in serious conversation.

Yours Truly,

Nathan Wind

LoneCapitalist's picture

Digital what? Dollars? Maybe you havent heard, but we are currently experiencing problems with the dollar.

66Sexy's picture

can i quote yoda? "you will be... you WILL be....."

Pladizow's picture


Sudden Debt's picture

can't you make them wiggle?

StychoKiller's picture

Perhaps if you were to post a list of the software that you used to create domokun, we all could be twitchin'!

papaswamp's picture

If it doesn't rain would you cancel your flood insurance? Think of metals as insurance.

eaglefalcon's picture

Sold all your gold?  Smart move.


Hopefully you've reinvested all your money in municipal bonds.  Suckers are sorely needed to keep the system running for a few more months.  Is retirement in Egypt an option?

ak_khanna's picture

One thing I fail to understand is that why most analysts are recommending the purchase of Gold as a safe investment? The problem today is that the price of Gold is not derived by it's physical demand or supply but more by the speculative positions standing long or short on the commodity exchange like any other traded commodity, stock or currency.

The basic mechanism of price discovery (based on demand and supply for actual use) of anything traded on an exchange has been terminally infected by speculators having access to unlimited funds and super fast computers for trading leading to volatile price swings. This has been made worse by the launch of ETFs for anything and everything under the sun by the financial community.

The price of everything including Gold is likely to suffer when the speculators unwind their positions due to some event that they have not anticipated or foreseen.

Quintus's picture

Will you please stop posting this shit on every gold thread?  Please??

william the bastard's picture
  • JANUARY 29, 2011
  • Is Gold's Golden Era Over?

    Gold certainly is cheaper these days, having fallen 5.7% in 2011 alone. But investors who rush in now could be setting themselves up for disappointment.

    Classically a hedge against inflation, gold morphed into a hedge against economic collapse during the financial crisis and rallied strongly last year as fears mounted of a double-dip recession in the U.S. and a debt crisis in Europe. Those fears have largely eased, though gold did rally Friday on turmoil in the Middle East. By and large, investing in gold is once again a bet on global inflation.

    While there are signs of higher costs for raw materials in the U.S. and abroad, prices might not be rising fast enough to justify gold's current price of $1,340.70 an ounce, say some strategists. Emerging-market central banks, meanwhile, are raising interest rates to tackle rising prices.

    "For gold to rise there needs to be demand for a safe haven, a weak U.S. dollar and inflation fears," says Pierre Lapointe, a strategist at brokerage firm Brockhouse Cooper. "We don't see any of these in 2011."

    tmosley's picture

    having fallen 5.7% in 2011 alone

    lol.  Damn right alone.  No other declines anywhere for the past ten years.

    How can you idiots fail to understand the simple concept of a correction in a bull market?  There has been no parabolic blow off, which is the only thing that can confirm the end of a bull market, aside from, say, a year long decline.

    Hehehe, this guy doesn't see a demand for safe havens in the next year.  Must have his head up a unicorn's ass.

    ColonelCooper's picture

    "Damn, you really are the crappiest troll yet."

    God I miss Johnny Bravo.  At least he had actual thoughts in his head.  Lately all we get is cut and paste dumbasses that don't even understand what they're pasting. It gets more amazing by the day. 

    EscapeKey's picture

    I don't. JB used to threadshiat to the extent you'd see his name on every other post, all with inane comments, to the extent I just gave up reading threads he "contributed" to.

    ColonelCooper's picture

    I don't really either.  But at least he cracked a book, and talked about some broken rising inverted tea cup wedgehandles.  He is a kid, and trying.  I HATED his immaturity, but actually appreciated that he was making an effort to learn.  Better than most his age.

    Bay of Pigs's picture

    Pierre Lapointe? Another one of your experts? LMAO.

    You should be a stand up comedian Bill.

    TDoS's picture

    Seriously, next time I see this posted on here, I'm taking a scalp.