World Gold Council Q3 Update

Key highlights from the World Gold Council Q3 report:

Price trends

The gold price continued its upward trend during Q3 2010, ending the quarter at US$1,307.00/oz, on the London PM fi x, 5.1% higher quarter-on-quarter. Gold’s average volatility of 13.2% in Q3 was not only lower than previous quarters but remained below that of equity and commodity indices. Concerns over the health of economic growth in the developed world, quantitative easing, continued purchases from central banks in emerging markets, healthy jewellery consumption in regions like China and usage in technological applications have all ensured that gold remains a sought after asset

Investment trends

Investors bought 28 tonnes of gold in the ETFs we monitor in Q3 2010, bringing their total holdings to a new high of 2,070 tonnes, worth $87 billion. In the futures market, COMEX gold net long positions remained strong throughout the quarter as many investors continued to see value in the long gold trade. Similarly, investment demand in bars and coins in North America, Europe, China, India and the Middle East during Q3 2010, while lower than the second quarter estimates, remains historically high.

Market and economic influences

Economic performance in the third quarter of 2010 was mixed. Many equity markets rebounded from the low levels seen during Q2, but economic growth and labour markets in many developed countries remain constrained. Conversely, emerging markets have seen upward revisions to their economic growth and inflation estimates. In all, this continues to be supportive of gold investment. In recent research reports, the WGC has found that gold does not appear overvalued and that even modest allocations to gold in a portfolio can help investors mitigate losses and hedge against tail risks without sacrificing long-term returns.

Gold market trends

Preliminary reports in India suggest the fi rst half of Q3 2010 witnessed robust jewellery sales, supported by a normal monsoon season. The WGC expects demand to pick-up further in Q4 on the back of the main festive season. In China and Hong Kong, the gold market appears to have maintained its strong momentum, suggesting continued positive growth during Q3 2010 relative to year-earlier levels. Sales by European central banks remained negligible while their counterparts in emerging markets continued to increase their gold reserves.

Key data

Our key data table provides you with a concise summary of gold returns, supply and demand statistics, price volatility and a correlation matrix covering gold, silver, commodities, equities and bonds.

Full report (pdf)

Comments

[theXman]

Gold will keep going up until Bernanke and his cohorts are ousted or when the Fed is abolished.

[nuinut]

I would reword your statement thus:

All paper debt instruments will continue to diminish relative to physical gold until such time as the market has completely ceased to regard and use said instruments as a wealth storage vehicle.

... but that's just me.

The Fed, as we know, are simply following a course which was predetermined long ago.

If you want to see who is to blame, take a look in the mirror. Our individual and collective desire to consume tomorrow today is the cause. The banking system has merely acted as facilitator.

Prepare for the invisible hand to strike a corrective blow.

[spacemonkey_hu]

"The Governor of the Saudi Arabian Monetary Agency (SAMA) has confirmed that the increase of 180 tonnes in the country’s gold reserves announced in June did not represent a recent purchase of gold, but rather a reclassification of gold it already owned into the category of official reserves."

[Silverhog]

World is going to have a fiat hangover for sometime after this Federal Reserve is kaput. I see Gold holding strong for many years to come.  

[chopper read]

i'll post this one more time for good measure; From The Gartman Letter yesterday:

China now holds just a bit more than 1000 tonnes of gold in reserve and the US holds just a bit more than 8100 tonnes, Meng said, "

Doubtless if the Yuan is to become an international currency like the dollar or the EUR, China has to get a huge gold reserve to support it and a reserve of 1054 tonnes is far from being enough."

The article went on to note that China needs only to use one tenth of its current dollar holdings in reserve to bring its gold holdings to parity with the US even with gold at $1300/ounce. We note also that Ms. Yi Gang, the head of SAFE (the rather aptly named State Administration for Foreign Currency), said earlier this month that China could add gold to its reserve position but would do so only “prudently,” rather than aggressively. Nonetheless, Mr. Meng’s article shall raise gold’s profile all things being otherwise equal.

[Snidley Whipsnae]

China made it's position very clear a couple of years ago. To wit, 'we will accumulate gold slowly in the open market in order not to influence the market price too much.' (paraphrased)

In simple terms, if China is accumulating gold slowly on price dips they have effectively put a floor under the gold price. In addition, recently I have noticed that rising gold prices have occured when Asian markets are open and US/European markets are closed. To confirm this for yourself watch what happens to gold prices beginning around 10pm each night (night in US, that is).

But, China is not the only foreign country accumulating gold in the open markets. Most of the SCO member countries and SCO observer countries are also accumulating gold.

In addition, the major oil exporters are accumulating gold. As a poster mentioned above, Saudia Arabia recently mentioned that their gold reserves are more than double what SA had announced earlier.

To understand how/why Saudia Arabia and some of the other major oil exporters have so much gold see FOFA's articles about the nature of gold for oil deals. Basically, "gold and oil never flow in the same direction".

In the last couple of years I have read screeching damnation of gold by Willem Buiter, Warren Buffet, and a host of others. These people hate gold because they cannot manipulate physical gold easily and the system of crony capitalism will collapse without debt based fiat currency. Our current system is FUBAR and the screechers need to realize it. What cannot continue will not continue.

In case you have not read it here is what Alan Greenspan had to say about gold in 1966, long before he wa coopted by the Fed.

"

Gold and Economic Freedom

by Alan Greenspan
[written in 1966]

This article originally appeared in a newsletter: The Objectivist published in 1966 and was reprinted in Ayn Rand's Capitalism: The Unknown Ideal"

http://www.321gold.com/fed/greenspan/1966.html

[chopper read]

all fantastic points, Snidley.  great thoughts.

[redpill]

No one?  Well fine.

Gold, bitchez!

[malusDiaz]

SILVER HOES!

[pmn]

even if no QE2 i think gold will just yawn drop a few points to shake off the speculators and carry on its march upwards and onwards

[Stuck on Zero]

I'm going to hang on to my 1/4 ounce Krugerrand for another year.  Retirement, you know.

[hamurobby]

Thanks for the hearty laugh!

Id say grab another half ounce for a grand time.

It is a shameful state of affairs, like a 200 car train wreck in slow motion.

[moofph]

"Concerns over the health of economic growth in the developed world, quantitative easing, continued purchases from central banks in emerging markets, healthy jewellery consumption in regions like China and usage in technological applications have all ensured that gold remains a sought after asset."

...i agree.

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