GoldCore's blog

Bonds, shares plus gold and silver fell sharply around the world this morning after the U.S. Federal Reserve again suggested an end to their easy money policies. Data also showed China's economy slowing down amid growing concerns that a credit crunch in China is worsening.

_{This was clearly seen in 1980 when silver rose from $6.08/oz on January 2nd 1979 to $50/oz on January 21st 1980 or more than eight fold in less than 13 months (see chart).}

Given silver’s volatility, dollar, pound or euro cost averaging into position remains prudent. Similarly, when prices have had a parabolic gain - dollar, pound or euro cost averaging out of a position will be prudent as it will be nigh impossible to time the top.

A record deficit in platinum supplies is set to push prices higher, as unrest sweeps the South African mining industry and demand is boosted by the auto sector and a new exchange traded fund (ETF), according to HSBC, as covered on CNBC

The Vietnamese Central Bank sold another 25,700 taels (37.5 grams, 1.2 troy ounces) at a gold bar auction on Friday in order to try and satiate the massive public demand for gold in Vietnam.

The Central Bank hopes that the sale of gold into the market will reduce the very high premiums paid by gold buyers in Vietnam, the largest buyer of gold in Southeast Asia after Thailand and one of the largest physical buyers of gold per capita in the world.

Vietnamese people hold gold as a store of wealth for protection against war, inflation and currency depreciation. In recent months, the bursting of bubbles in the stock market (see chart) and property market and the continuing devaluation of the dong has led to record demand in Vietnam and a surging premium over the spot price of gold.

Today, the premium was close to 5.5 million dong which is the equivalent of a very high premium of $217 per ounce over spot. 

James Steel, chief commodities analyst at HSBC in New York continues to be constructive on gold in the medium and long term and sees gold rising to $1,600/oz in the second half of 2013.

France Prohibits Sending Currency, “Coins And Precious Metals” By Mail

France has prohibited the sending of currency, “coins and precious metals” by mail.

In new legislation which was enacted May 23rd, the French government decreed that it is forbidden to send all forms of currency - coins and cash and all forms of precious metals – coins, bars and jewellery by mail.

India should monetise their huge gold stockpiles of over 20,000 metric tonnes according to the World Gold Council (WGC) as reported by Bloomberg this morning.

“In the long term gold could be monetized as a financial asset," Aram Shishmanian, the CEO of the WGC said in India overnight.

The World Gold Council has approached the Reserve Bank of India (RBI) to work with it so that bullion could be used as a financial asset, rather than just a physical asset. 

The store of wealth demand is not just from Chinese ‘aunties.’ There remains an under estimation of the demand coming from wealthy Chinese and high net worth and ultra high net worth individuals (HNWs and UHNWs). 

This has not been commented upon or analysed but we have direct experience of wealthy Chinese people looking to store gold in Hong Kong and Switzerland, as have other storage providers.

Gold edged higher today supported by strong physical demand internationally and especially in Asia.

Demand in the physical market continued to hold prices near $1,400/oz as the recent drops in the spot market encourage buyers internationally to accumulate bullion.

Today’s AM fix was USD 1,386.00, EUR 1,074.92 and GBP 919.16 per ounce.  
Yesterday’s AM fix was USD 1,385.25, EUR 1,071.43 and GBP 917.75 per ounce. 

The fundamentals of the platinum and palladium markets are beginning to receive market attention and not before time. The positive supply demand dynamics are leading to increased investment demand as seen in the ETF data and Chinese demand rising again due to both industrial and jewellery demand.

Silver’s recovery yesterday from being 10% lower at one stage to recouping these losses and then rising over 2% was very positive technically. The key reversal is leading some to postulate that we may have seen the bottom or are close to a bottom. 

It is likely that the very aggressive selling in illiquid Asian markets overnight was by a large hedge fund or bank or a combination of hedge funds and banks with deep pockets. Reuters quoted an analyst at a Japanese bank who said that silver’s price falls were due to one “unidentified investor”.

There are no surprises in the latest World Gold Council Gold Demand Trends report other than the fact that statistics show global demand for gold in Q1 2013 was on the increase before the COMEX raid on April 15th. This is a clear indication that the fundamentals supporting a strong price for gold in the long term remain and also helps to explain why there was such a shortage of gold bars and coins in the weeks after April 15th.

Driving the sentiment was the report that U.S. jobless benefits decreased to their lowest rate since 2007. Philadelphia Fed President Charles Plosser forecasted that day unemployment will drop to 7% by December 2013 and he favours reducing the Fed’s $85 billion monthly bond purchases next month. Plosser however has no vote on Fed policy this year.

While hedge funds are seeing outflows of $20.8 billion from gold funds this year, BlackRock Inc. the world’ biggest money manager is still bullish, reported Bloomberg.