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India's Response To The Gold Sell Off: A Massive Buying Frenzy
Panic, depression, rage, suicidal ideations: watching the US mainstream media, one would think that these are the prevailing sentiments among those who unlike the prevailing "developed world" speculative class, are invested most heavily in physical old - Indians, who collectively comprise the largest end-demand consumer segment for gold products. One would be very wrong.
Because while apparently it is incomprehensible to the "sophisticated" financial crowd in the US that someone may have conviction in their beliefs, and not just lunge from extreme to another, merely riding momentum and technicals like so many "professional" investors, Indians are doing precisely what a buyer should do when the price of the desired product plunges: doubling down, literally.
Bloomberg reports of the immediate aftermath to the past few days' gold plunge: "Gold buyers in India, the world’s biggest consumer, are flocking to stores to buy jewelry and coins, betting a selloff that plunged bullion to a two-year low may be overdone." Wait, so instead of jumping out off high buildings, Indians are being cool, calm and collected and... buying more? Unpossible. Do they not get CNBC in Mumbai? Apparently not: "My daughter is just six months old, but I think it is never too early to buy gold,” said Sharmila Shirodkar, a 28- year-old housewife, while displaying a new pair of earrings she bought from a store in Mumbai’s Zaveri Bazaar. “I had been asking my husband every day if prices will go down more. I couldn’t wait anymore.”
Indeed - the buying frenzy in India has been unleashed:
While the drop in gold prompted investors worldwide to pare holdings in exchange-traded products, surging physical demand in India may help stem the 17 percent slide in prices this year. The plunge after rallying for 12 straight years may make bullion more affordable to Indians, according to Mehul Choksi, chief executive officer of Gitanjali Gems Ltd. (GITG), the nation’s biggest retailer of jewelry and diamonds by sales.
“This is a perfect time to buy as prices will only go up from here,” said Vishal Mehta, a 33-year-old garment dealer, while ordering coins from Choksi V. Naginchand & Co. in Zaveri Bazaar. “I usually buy one gold coin a month, but this time I am buying two.”
Hence the true value of the word "double down". Here is another word US "investors" can learn from the Indians - value.
“It has been very hectic in the last two days,” said Deepak Tulsiani, owner of Dwarkadas Chandumal Jewellers in Mumbai as he surveyed his 11 employees, who were busy with customers. “There has been a rush to buy gold because now people are getting jewelry 15 percent cheaper than before. It’s value for their money.”
Zaveri Bazaar, the largest bullion market in the country, buzzed with customers, who were browsing through collections of bangles, bracelets, necklaces and rings displayed in trays ahead of the wedding and festival seasons. Most buyers were women in groups of two or more, accompanied by a male who paid the bills.
“Whatever be the price, Indians buy gold because it is an age-old tradition,” C.P. Krishnan, a director at Geojit Comtrade Ltd., said by phone from Kochi. “It has become an unavoidable expense during weddings and festivals. With the sudden crash in prices a lot of buying is happening across India as people are thinking of it as a golden opportunity.”
Yes: tradition! That's what the Chairman said too. And the chairman is never wrong. Even when he is selling the synthetic paper representation of that tradition and in the process allowing all those who trade on "value" and not "moment" to average down in terms of infinitely dilutible fiat paper.
Back to India:
“Some customers are still scared to buy now as they feel the price will go down more,” Chetan Ranka, owner of Choksi V. Naginchand, said after answering a call from a prospective customer on one of the four phones at his desk. “I have received more than 250 calls on Monday inquiring about the prices. Normally I get maybe 50 calls a day.”
The lower gold drops, the more people will buy.
“I had been keeping a tab on gold prices daily by reading the newspapers,” Sakshi Jain, a 39-year-old housewife, said as she held an intricately designed necklace against her neck in front of a mirror in Zaveri Bazaar. “I had some wedding purchases to make and as soon as prices dropped I came to buy.”
And the rub: once the correction is over, and prices resume their inexorable rising, the double down will become a buying frenzy, as everyone will realize one simple thing. Just because the BLS says inflation is has not arrived, it merely means the central banks, who are laboring under some $40-50 trillion in excess debt, will have no choice but to also double down. And one of these days not even the BLS' best efforts at fudging reality will fail.
Incidentally, they are already are. As the MIT's Billion Prices Project shows, there is just a slight disconnect between reality and what is being spoonfed.
Finally, for some actual numbers, we go to Bank of America which has calculated that the disconnect between the paper selloff and physical buying spree can only last so long before gold shoots right back up to $2000 as the surge in buying overwhelms the paper selling.
With prices now below $1,500/oz, we expect a pick-up in jewellery demand in the medium term and see considerable pain for miners should prices dip below $1,200/oz. As such, we believe the downside to gold prices may be limited to an additional $150/oz. In fact, we estimate that jewellery demand may become so pronounced by 2016 that prices could trade above $1,500/oz even if investors remain net sellers. Looking at sensitivities from a different angle, investors would need to buy merely 600t of gold to sustain prices at $2,000/oz by 2016, compared to non-commercial purchases of 1,798t in 2012.
And some more thoughts from BofA:
Cyprus’ announcement to sell nearly 14t of gold reserves was a key trigger behind the recent collapse in gold prices, as it raised concerns that other peripheral nations may follow suit. Given our estimate that every $45/oz represents a net sale of 100t, the move over the last two days would suggest net sales of 480t, or about 20% of yearly mine supply. In short, the market seems to have discounted the combined future gold sales of Portugal and Greece. As we believe additional gold selling in the European periphery is highly unlikely, we find it hard to fully justify the sell-off.
So please go ahead and sell. All we can say is, well, thanks.
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Beating a Dead Horse Tyler.
I don't -Lie-Cheat- or Steal. I tell the Truth on Sunday. I 'publish' my charts and ask for nothing in return... Zero Hedge is (sweet justice)
What is this strange feeling that's coming over me? Am I feeling a twinge of inspiration because of Indian retail gold buyers? Retail gold buyers in India??? What the hell is wrong with me??
I gotta call my shrink and my broker. Except I don't have a shrink and I don't have a broker. Nuts.
I gotta call SOMEBODY, because these are definitely not normal feelings for me. Mom? Mom, I know you're in heaven, but I would really like to talk to you again one more time. Mom?
so theyre levering up to buy an asset that has no income stream in the hopes that it increases in value?
seems legit.
perhaps we should be shorting the indian consumer instead?
Just like the 30 year home loan.
I don't think Indians buy gold to flip it, so why would they want it to go up in value?
ask the argentinians if they care if it goes up in value
They buy & hold. It becomes part of the family's heirlooms, and part of future Dowry of children (daughter). Since their CB has little gold, it is not a worry to the Fed.
But it is also a great shopping Bonanza for the Chinese and their PBoC, to back the RMB with gold. Which should worry the Fed.
Just to clarify these are loans against your gold i.e. you deposit gold and get a loan.
This has been going on for centuries here. People in times of need either sold their jewelery or took a loan against it from moneylenders. Only difference now is that the moneylenders recruit suit wearing MBAs and have airconditioned offices and call centers.
http://www.manappuram.com/goldloan/
http://www.muthootfinance.com/servicesgoldloan.aspx
(check out the interest rates)
i wonder what the default rate is.
or how many seek refinancing. that would make them "shackles of gold" Ala payday-loans.
Jewelry, sophisticated, or otherwise... Collectively Per Capita, the Indian Population owns as much gold as the Federal Reserve Bank and the Bank of England.
so the Indians don't own any-wait- I'm confused.
All that gold & nukes...
~~~
Guess nobody will be paying them a "freedom" visit anytime soon...
oil and no nukes means you will be receiving a visit from our "freedom fighters"soon
any of you, homos, touch my gold & I'll kill you...
lighten up francis.
They own double of that. They own at least 18,000 tons. They got it much cheaper than current prices.
History has shown that the most sophisticated buyer (and seller) of gold is the Indian housewife. When gold was $800 in the 80's (remember that?) they were selling hand over fist. But for now it's a buying frenzy and with good reason.
We are all Indians now.
dot or feather?
Dot.
maha-bindu beeatcchhes!
Indians always buy 22 karat (the same purity as gold American Eagles) jewelry and higher unlike stupid Westeners who are habitually duped into buying watered down, less brilliant gold jewelry . . .
And Arabs like 21k and Japanese like 18k. I can't even walk past an American department store jewlry place without busting out laughing after having been to the Ginza and the Dubai gold souq.
Indian women buy lots of gold jewelry because Indian culture (loosening over the years) allows women to keep their jewelery as a personal asset aside from her husband's.
"Paper or plastic?" - Ben Bernanke
"Thanks, but no thanks. I'll take physical." - CD
Gold moves from West to East.
indian Honey Badger don't give a shit.
Honey Badger says "Fuck you Bernanke". Honey badger just takes what he wants.
i came up with a catch all reply to guard against retarded ideas.
"I'd rather give head to a honey badger."
o_O
Wealth is not measured by the holding of cash
it's measured by the weight or your stash.
There actually are people in this world who believe gold has a spiritual and/or auspicious meaning. Those people want nothing to do with pieces of paper and populate most of the Asian and Sub-Asian continent.
I suspect they are happy with the recent price movement since for them, the name of the game is physical ownwership and many were forced onto the sidelines at recent prices.
Funny, there are millions of people in North America who think that PAPER has a spiritual/auspicious meaning.
All the gold on Earth was created in supernovas which predate the formation of our sun.
The sun itself does not have enough mass to become a supernova because its mass is less than the Chandrasekhar mass (approximately 1.4 suns).
Blowing up the sun is not enough to create gold?
Give it up, Ben.
And 'their' green masters are Occultists and Satanists - deceivers...unmoral...liars...no love.
.
A Spiritual war indeed is going on...
Auspicious begins with Au...
you mean like a golden calf-we know who still worships that
Moses's brother and his Talmudic friends?
Those Babylonian world views die hard?
WB7 I was puking in my wastebasket non-stop over the last two days. Some self annointed experts on TV here were plugging ETF and e-Gold as there are no 'making charges' which a jeweller charges over spot!
What?LOL
half the people in line at the coin store last Saturday looked like Indians from India
They were buying as much gold as they could (forget silver)
Paper is paper.
Metal is metal.
Paper belongs in the bathroom where it is quite useful.
Gold is one of several ways to set yourself free.
It is not just India that is experiencing a buying frenzy: http://www.hurriyetdailynews.com/national-post-office-sued-for-unfair-competition-over-gold-sale.aspx?pageID=238&nID=45040&NewsCatID=344
This puts me in the mood for an Indian Kama Sutra coin. ;)
That's one way saying 'Fuck You' to a banker.
i dont see what all the indian brides will do with gold ETF's...?...../sarc
Funny, I saw an article saying India's current account deficit is not under pressure thanks to gold price falling.
Somebody posted this up earlier today: http://www.bullionbaron.com/2013/04/surge-of-buyers-rush-for-physical-gold.html
There's a link that talks about people in Shanghai, China buying up as well: http://english.peopledaily.com.cn/90778/8208040.html
http://www.bloomberg.com/news/2013-04-16/gold-plunge-buoys-india-fight-to-curb-deficit-crimping-rate-cuts.html
Premiums are now about twice late last year, and buy price is above spot...
I've got so much gold I just bought (lying around the house) I keep tripping over the stuff, because there is nowhere to walk.
What's the address?
I've got pen and paper handy.
Have it cast into a chair shape. Your own golden throne.
A nation of 1.5 billion, with a growing economy, a long cultural tradition of buying gold as a long-term store of value and an increasingly large number of them now able to buy more gold, gold that's unlikely to see the market again. AND, they have the normal reaction to a sale on stuff they want - buy it NOW, while it's on sale. Yes, I can see how this is going to end well for the paper shorts.
These fucking Indians are fucking Indians!~!
They don't have access to 'real' information and so of course the insophisticates behave like uneducated neanderthals.
All the good the barbarous relic will do them once the famine begins..
Idiots!
are you sure you haven't soiled yourself?
Hello .... this isn't the Huffington mess !
How is it possible for 'physical buying' to overcome 'paper selling"...it is not! There is infinite paper and just so much gold.
Here is a thought...the price of gold will falll....until there is no more physical to support the market...then?...then things get interesting.
The paper gold market was developed for a reason. Can you figure it out?
Oh Yeh, one more thing...can you guess the price the last available ounce will sell for? 1200? 950? 800? 1324???
Let me guess:
Does it have something to do with shearing sheep or whatever the Kiwis do to sheep?
Shear nonsense.
A paper gold market ALWAYS supresses the price. There is always 170,000 tons potentially for sale. There is always a price that can shake it loose. Paper can be created in infinite amounts by those with an infinite printer behind them. Unless some one supplies physical for the market the price will always fall.
Paper Gold, like all derivatives and fiat currencies will blow away like leaves in the fall. Fear not, your grandkids won't be paying for anything. It's the geezers that will pay, and soon.
Christ, another dumb ass who doesn't know the different notations for the Radix. It's 170.000 in American, or 170,000 for the rest of the world (or most of it).
For context... The US supply is/was around 8000 tons. DYH. Troll.
You got those backwards.
real gold it's difficult to move, trade bitcoins,
at what price the last bitcoin will be traded? Sure not now but every 4 years the btc price skyrockets!
http://getbitcoins.tk/
Fiat US dollars has the full faith of Bubble Bernanke and the Fed money printers behind them.
Gold as we can see has implied value. People want it, worldwide.
I guess that The Bernark algos and super computers, were not programed to take into account the reactions of simple minded Indians who worship a useless shiny metal.
Now the price of paper gold established recently by our planners is in peril.
God help us and the markets
Not just India. Yesterday, Provident Metals stopped taking phone orders, their site was slower than slow, and they are basically back ordered on any metal that they normally carry at the moment. They have hiked their premium up from around 60 cents over spot to 1.50 over spot today on their 1 kilo silver bars.
Gold Drop Splits Central Banks as Sri Lanka Sees Opportunity http://www.bloomberg.com/news/2013-04-16/gold-tumble-divides-central-banks-as-sri-lanka-sees-opportunity.html
Gold Miners Approaching $1,300 Pain Threshold http://www.bloomberg.com/news/2013-04-16/gold-miners-approaching-1-300-pain-threshold.html
Gold Dive ‘Extremely Concerning,’ S. Africa’s Marcus Says http://www.bloomberg.com/news/2013-04-16/gold-plunge-extremely-concerning-marcus-says.html
Nice links
Buy all the gold you want right now from Tulving. Tubes of maples, spot +$36.95. He's offering just about everything.
http://tulving.com/goldbull.html
The Cyprus gold story is complete bullshit. China hauled in 400 tons in March alone...on top of 1000+ tons last year. The 13.5 tons Cyprus has would be gone before you can say 'tradition'. The gold price fell for reasons that will become obvious soon. Paper is cheap...physical gold...well that is getting harder to pry from the hands of those who own it...particularly in the quantity it will take to keep this paper market alive.
+1 it is indeed bullshit, but for propaganda purposes it allows to concatenate Draghi + gold + european periphery + sale and then have discussions of all europe selling gold as Dr. Krugman advises
Indian women use gold as insurance. When they get married if there are any shenanigans afterwards, they already got theirs. Alimony upfront. The plus is that it is outside the rotten system. Smart bunch of broads.
I believe they still have a dowery system in India where the bride is required to offer up a financial incentive to get married.
Unlike in America where tits and ass are all it takes to convince the male to take the plunge.
Still, lots of evil involved with the dowery system in India.
http://brokendreams.wordpress.com/2006/12/17/dowry-crimes-and-bride-pric...
Yes! My friend has just been through a divorce. Ex-wife walks away with all the gold gifted to her by her in-laws.
You state: "...the "sophisticated" financial crowd in the US..."
This "sophisticated financial crowd" mode of thinking is representive of (in classic science - philosophy) of quantitative complexity, which is a con-fusion (a most ancient and biblical term which we are told, must be escaped from...) of extrapolted opinions, manipulations and the preference of theft over science.
The dynamics of life evolution demand a process that evolves from simplicity ---> quantitatiive complexity ---> to evolving simplicity. The study of Life dynamics shows that, that is all that is happening and has always and continually happened over recorded history. The World is not going to be destroyed, but the Snake is shedding its Skin (also a well worn ancient biblical analogy in the identical context) and only the "status quo" will be destroyed allowing for the new tomorrow's dawn.
This is the scientific reality of life.
The Economists of the Central Bankers who carry out the bidding of their Masters have only 3 tools, albeit power tools, which are Lies, Theft and manipulation - That is to say, only 3 tools. One could perceive these tools as redistribution of wealth, saving the (their) way of Life, and the protection of the Nation; which can be reduced to opinion, ignorance and preference. It's all the same, just rhetorical bullshit.
The term "sophisticated" is like "excellence", a praise; a judgment and an opinion, all which are often conveniently used to avoid reality.
Gold and Silver hard cannot and should not be viewed as an investment, but as the last ditch personal and legitimate preparation for "survival". And 75% of the World's population embrace bullion in theis manner. Why? Due to the fact that "culture" is derived from the millenea of the vast historical experience of those same lesser men who always attempt to stop the dynamics of Life in their preference through statism of the "status quo" and always tank their Empires and the associated fiat currencies.
Only "truth" can defeat Universal Principles - that neither ignorance or the fists of force, can achieve.
Ho hum
Some fucking idiot 'investment advisor' I spoke to reckons this is wrong
http://www.paulcraigroberts.org/2013/04/13/assault-on-gold-update-paul-craig-roberts/
So I said, why would Goldman be telling the public to get out of gold right before it crashed? He has no idea (maybe he thinks they are suddenly altruists).
It's pretty fucking obvious - they WANTED to start a panic. And I guarantee you not only Indians are buying on the big dip hahaha
So what is his theory as to why it crashed/
It's because that in spite of trillions printed we are not seeing hyperinflation so money is getting out of the hedge.
In my way of thinking the fact that we do not have hyperinflation in spite of trillions of printing and zirp makes me WANT TO HOLD GOLD EVEN CLOSER
Because the globaly economy is even WORSE than in my wildest dreams. Basically it must be a dead horse - and we all know that even if you try to jolt a dead horse with a million volts of electricity.... he may convulse a little...
But he remains a dead horse.
Yes, deflationary storm coming and someone needed liquidity. There will be more of that, too. Hard to imagine any assets not being pushed down.
and this : JPM and Goldman See $1,800/oz Gold By Year End (Jan. 22, 2013)
Marketwatch said gold's fair value is 800.00
how can they be wrong even if it costs more than that to extract and the USA andothers have debased their currencies by printing trillions.
to be fair I think they meant 8000, that would be closer.
If the US Mint had enough ASE's they would break all records for sales this month. It's kind of coincidental that the mint stopped sales right before the plunge... or is it???
When I went to my Local Bullion store yesterday to take advantage of the current prices, aprox. 2/3rd's of the people in the line-up (that stretched to the door) were East Indians....... so yes, even in my home town (which isn't in India) the East Indians are backing up the truck.
Right. Let them eat gold. Everything is coming up roses.
FOOLS!!! NEXT UP: INDIA DEBT CRISIS. INDIANS REGRET BUYING ALL THIS DAMN GOLD.
They almost always pay in cash ... they use very little debt.
'
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People far smarter than me have already game played this one out: This is a sucker's opporotunity.
TPTB want the gold out of the Muppet's hands, and to NOT be an alternative.
They know people will pile in, the smarty-pants who think they know, at these prices.
To make the gambit complete, the TPTB, will create another price sprial and burn everyone again.
Because it's what I'd do.
Then, there will be nobody left to buy, and the price will drop dramatically, and the CBs will finish the job, along with China, buying everything.
I'm going to buy in at that point.
Then it will be decided, who will be first with the gold backed currency?
•J•
V-V
I am not a muppet. No ones got their hand up my ass.
They are beginning to run out of physical gold in India: http://www.samachar.com/Gold-rush-Some-Pune-shops-exhaust-stocks-nergNxi...
There was already a shortage of assayed gold (which we call Swiss Gold here) in the jewelery stores. Most popular form of gold besides jewelly is coins and bars from NIBR.
check out the crowd at the firesale :)
http://www.dnaindia.com/pune/1823077/slideshow-puneites-make-a-beeline-for-jewellery-stores-as-gold-prices-nosedive
Wow.
Dunno if people have heard "predictions" that you will know gold is seriously hot when you see people lining up around the corner to buy? That post makes me think of that.
Here we have online sales, so maybe we aren't seeing it... like a silent bank run.
Holy cow!!! That would only happen in U.S. for shortage of McNuggets.
I love my little dark Aryan cousins .... even more .... since I found out .... Gandhi was a racist pedophile .... Indians love PMs .... they rape, murder and steal just like everybody .... they hate Muslim terrorists .... and they are no longer on that liberal pedestal .... as an alternative to us rude Capitalists ! I'm a Guru .... I only have one lemming follower .... Yen Cross ?
dravidian mutherfucker.
BRICS BITCHEZ.. Can anybody else say checkmate?
Thanks Vlad for the thumbs up.
Whatever India peoples!
Seriously, take it easy on the calm/cool buying & save a little for us sophisticated north americans huh?
But...but... some financial expert on BBC business was saying that one of the reasons gold went down is because of India and China were NOT buying. I want to be one of these 'experts' - seems like you don't have to know a thing and can simply make up facrts as you go.....and the interviewer didn't know enough to question this guy on his assertions.
China has been buying by the ton - at a central bank level and individually - imports of gold into CHina have been exploding and there were rumblings of tonnage being bought in Londoin during the price droip. The Indian government has been doing all they can to get people to STOP buying gold - without success.
No mention at all of massive physical buying recently in London, huge outstanding positions on COMEX and increased Central Bank buying. No mention of DECLINING mine production (and major 'interruptions' occurring at specific sites) - instead some BS about 'improved technology increasing yields.' BS - miners are scrambling to deal with lower quality ores and world wide production has been declining.
It seems like this drop in price was orchestrated in the face of HUGE demand (and possibly dwindliong stocks) in a manipulated effort to drive prices lower so
1) bullion banks could pick up inventory to refill vaults
2) bullion banks could cover their shorts at a more affordable price (making a fortune in the process - sell lnaked shorts and drive the price down, buy back to cover those shorts at the lower level AND cover the per-existing short positions they were holding)
3) Feed the MOPE meme that 'all is well', 'recovery is underway' and gold is a poor place to put your money
I never ceased to be amazed at the level of manipulation existing in all markets these days - and the ability of those runing the financial sector to keep this ponzi scheme going. The can has been kicked farther down the road than I thought possible. I just wonder if the eventual blow up wioll be far worse as a result of the delay in final accountability.
Don't be such a skeptic... (-:
When a woman gets married in India, her dowery becomes the property of her husband ...
... except her gold, which remains hers. Indian women have A LOT of gold.
When a security get sold off massively for no whatsoever proper explaination, you should fade the move.
Just two quick comments on the topic of PMs/gold. First, India's culture is integrated with owning gold (for centuries). Unlike westerners that are consumed with being TSGs (traders, speculators, and gamblers), Indians view of gold is extremely long-term from an investment perspective (multi generations). Hence, they are not as easily shaken or stirred by this James Bond like action/volatility. And they certainly know a good sale when they see one. The problem with the western capital markets is that everything is about the "trade" now and not makring proper and prudent long-term investment. The instant gratification environment, amplified by advances in technology, is that returns must now be earned in days, weeks, months, and quarters instead of, god forbid, executing a five year business plan.
Second, while gold is still available from a number of ecommerce sites I'm having a hell of a time buying desired/marketable silver (blank 1 ounce rounds), in quanity. I know there are people on this site that will say look here or there but when you really read the fine print and speak to the sites, there is basically no silver available for immediate delivery. Plenty of sites will take my money for a delivery promissed in early May but no guarantees. So be careful out their and make sure you understand what you're buying and when you can expect delivery. Some of these sites may end up like the movie Money Pit when Tom Hanks and Shelly Long keep asking the contractor when the house will be ready. Just two more weeks, again and again, over and over.
Premiums at Apmex now at $2.49 for a 1 ounce JM silver bar. Earlier today it was I believe $2.19 and yesterday $1.99. Gold premiums now $74.99 for a 1 ounce coin. Earlier was in the $34.99 to $44.99 range. Capitalism at its finest with premiums rising by over 15% on silver in less than one day. I wonder if the Fed and Washington are factoring these price increases into their inflation rate calculations? Demand must be off the charts for physical if Apmex can get these premiums.
The gold price crash is further evidence of market riggingThe facts in the public domain do not justify the sharp fall in the gold price over the past two trading days. At the time of writing, the price per 100oz is $1363, down over $200 since Friday's open. The scale of the sell-off was the worst in 30 years, with the volatility index standing at the highest level in its history. John Kemp at Reuters has calculated that based on a normal distribution, you would expect to see movements like Monday's only once in every 500 million trading days, or two million years. The news which would justify such a price swing is curiously absent – in fact, my view is that the market ought to be bullish for gold.
Something doesn't add up.
In any market, price is determined by the confluence of demand and supply. In many respects supply of gold is relatively fixed. We know the extent of discovered gold reserves and the rate of production. While Cyprus is being forced to dump "excess" gold in order to meet the ever escalating bank bail-out bill, its whole holdings are worth only $750m, hardly enough to move one of the worlds deepest and most liquid markets to this degree.
In fact, most of the selling pressure has come from ETFs dumping holdings. A record $9.2bn of net outflows from gold ETFs in the first three months of 2013 are indicative of a loss of faith on the part of investors, as well as of a structural change in a market which has been opened up to electronic trading by the invention of these instruments.
But why would investors wish to sell their gold holdings? As an alternative store of value, it is easiest to think of demand for gold in terms of demand and supply of fiat money. When demand for fiat money falls or supply rises, people decide to hold less and move their cash into alternative stores (gold, silver and now Bitcoins being the most common). Likewise, when people are optimistic about the state of the economy, they demand more cash because they believe they will be able to invest it in dynamic assets like stocks which will generate better returns.
A surge in demand for money over gold (and hence a fall in the demand for/price of gold) can, therefore, be very broadly justified by either a contraction in the supply of money or a more general optimism about the economy. Are there grounds to believe either of these has happened?
Well, the world's stock of fiat money is not contracting. Quite the opposite, in fact. Japan has just launched stimulus on steroids which will see the developed world's most indebted economy create a proposed $1.4 trillion in Yen in a bid to break free from depression. Nor is money creation in the West likely to subside. Earlier this month the Fed hinted it would continue buying bonds for the foreseeable future, while there is an expectation in London that Mark Carney's arrival at the Bank of England will see more activist monetary policy here, too.
Likewise, the recent decision of the eurozone to confiscate money directly from Cypriot bank accounts clearly creates a template for other crisis-struck nations in Europe and beyond. There is now a major political risk factor in holding large cash deposits. In the meantime, US growth is slowing, Britain's is still anaemic and China's rate of expansion came in below market consensus for Q1. It isn't a booming real economy which is persuading people to cash in their chips.
So what is driving the gold dump if not changes in the macro-economy? I have written in the past that, in my view, the gold markets have been rigged. In this context, the sale of 500 tonnes of paper gold on Friday takes on a different hue. As John Mauldin, one of the most impressive macro analysts out there, wrote in his newsletter this morning:
Five hundred tons of paper gold contracts were sold dumped into the market on Friday. That is a lot of gold. In short, some people sold gold like they had a gun to their heads, in such a quantity and with such ferocity that the likelihood of their being a for-profit seller is right up there with my chances of winning this week's Masters
I agree. I have written in the past of the links between the British gold sale at the turn of the millennium and the need to prevent the insolvency of a trading house whose short position had left them unable to meet their commitments at expiry. With this in mind, Andrew Maguire's comments that a similar situation led to a concerted effort to drive down the gold price this time around are interesting, although unverifiable.
The gold market remains one of the most complex and opaque in the world. None of the publicly available data justifies the incredible price movements we have seen recently. It looks as though the market has been rigged again.
http://blogs.telegraph.co.uk/finance/thomaspascoe/100024081/the-gold-pri...
Lack of quality collateral is also an interesting possibility as a catalyst, as someone pointed out in an article from earlier.
"500 tons of paper gold... is a lot of gold"
Actually, it isn't any gold. ETF's and fractional reserve trading houses have always been a vessel to contain demand with no increase in actual supply. It is a diabolic joke that this same contained (stored up) demand can then be dumped like it was supply. A gold derivitive is not gold and the big lie being perpetrated by the disingenuous bankers and their financial media whores is that derivitives actually are the same.
This goes for everything else under the sun, which has been hypothecated, leveraged, collateralized and multiplied into an amount of derivitives that mimic and replace everything, providing a huge false supply which soaks up all the massive amounts of money being printed and giving the false impression of abundance. This is where a great deflation will and must take place as all the false supply, that has been bought and paid for (one way or another) must become what it truely is, which is nothing. Unfortunately, the baby gets thrown out with the bath water.
The thing to remember is after the water soaks away, the baby is still there.
the tie between paper gold and physical gold is loose but theoretically speaking those speculators in paper gold could demand physical delivery...
Do not know though how many of them would do it and among those who do how many would actually get it delivered (most likely would get renegotiated settlement in fiat)
Prices don't go on random walks, you moron.
http://www.imf.org/external/np/seminars/eng/2012/commodity/pdf/filimonov.pdf
why am i dancing on the roof tops with a fiddle?...
same thing happens over here in Hong Kong
as the proud owner
of a D-8 Cat
bury my silver
where ever i want ..
as the proud owner
of a Minelab GPX-5000 metal detector
find your stack
when ever i want..
As the proud owner of a boat with a bit of a leak...
Buy the F'n dip you Bitchez!
...Lessing you're chicken? Bok Bok Bok
Bernanke Bucks or gold, tough call.
delete
Indians love affair with gold on 60 Minutes. Very enlightening.
http://www.cbsnews.com/video/watch/?id=7398482n
I have Indian friends who have gold jewellery kept in the family for centuries. They never ever sell no matter what the price. Selling the family jewellery is usually a sign that one is financially disgraced.
Gold has had to exist under a continuous reign of supression for many years, yet still managed to reach $1,900 until TPTB took extreme measures to crash it over and over but all the while not with Real gold, only unbacked paper gold and access to a printing press.
Even with these strong persistent powers against gold it was able to continue bouncing back.
That it has never stayed down despite all this, despite all knowing the enemy fighting gold, gold was and still gets bought as ever before.
It took 500 tons of gold dumped in a day to take gold down a few hundred dollars, in the end only a few hunred dollars. $20bn thrown at taking down gold and every things else put against it.
Wihtout the coruption of the Fed and Bullion banks fighting gold every ounce of the way its current price would be well into the high 2,000s
With central banks around the world and others buy and requesting the return of their gold, massive endless fiat printing.. we get wanker stories as in Market Watch saying the fair value of gold is $800... about the production cost of gold ... how utterly ignorant/dishonest/stupid.
The fair market value of gold given central bank desire to build their reserves (as in China) and the massive printing of fiat that will not end for sometime, and given that it already touched 1900 must be somewhere in the 2000s. AND given that bullion banks are in high risk of default....well gold's value may be well into the 3000s
You will never find an honest finance or economic story and anlysis in any of the MSM.
Low gold prices lure in retail investors
The U.S. Mint has also sold 83.5 thousand ounces of gold coins and more than 2.2 million ounces of silver coins so far in April. Thus sales of gold coins are now already more than four times as high as they were in the whole month of April last year.
http://homment.com/low-gold-price
OK people..
So if we take it as a given that there is a fractional market in paper gold and there is not enough physical in the vaults to cover the paper.
We now have a situation where the spot price has become a frankenstein with no real connection to the physical asset price (hence increased margins at the bullion dealers).
Can the paper and physical markets recouple?
Surely the people who orchestrated the smackdown would have known this would happen - fiat currencies rely on FAITH in their value, when faith is scarce surely this was always going to happen???
Not really. I think there is at least an outside possibility that crimex gets it's due when holders of contracts demand phyzz and crimex can't deliver. It's well-known at this point that demand for physical is far outstripping paper. As there is no honor among thieves, those who have large holdings in paper can reasonably be expected to say "phyzz please" when their futures contracts come up.
And on Chinese news just now....everyone down buying gold.
LoL
Sales up 49% to 31st March and noiw this :
http://www.theage.com.au/business/markets/golden-times-for-perth-mint-20130417-2hzv7.html
I work with a bunch of H1B Indians performing technical programing roles for a large auto company. They were telling me they were making an event of it, loading up the car and going down to buy lots of gold. I believe they were buying more than just jewellry.
I want to thank the American Banksters for causing H1Bs to come over here and use a deflated American Technical salary to buy US Bankster deflated Gold. Normally with the second rape, the criminal use vaseline....
Keep in mind that those H1B workers are happy to receive that compensition. On that pay they can not only cover their expenses, they also able to save enough to store the extra in Gold.
Also consider That they live in comunity houses like dormitories. But this is common and most likely much better than the tin shacks they grew up in.
Many Americans have yet to realize it is truly a one world economy. The new "jobs" will go to the best value for cost . Companys exist to make a profit, not to provide employment.
A idea which seems to have been forgotten.
Thank the idiots who move the markets in a fake manner to enable people to buy the physical at knock down prices.
:)))
Same thing here in Qatar...I went to the gold souk to buy at my favorite dealer (there are many) and he was sold out, and kind of irritated at being asked for the 100th time when he would be getting more bars...I've NEVER seen them sold out before and I have been buying here for two years...no one else had gold to sell either, and this is a souk with over 100 shops that turns over a lot of gold bullion. I stood around for a while to watch people coming in...there were a lot of disappointed South Asians and Arabs.
A question for y'all that I haven't figured out: what useful function does crimex fulfill for a producer of Au or Ag that couldn't be accomplished on an electronic auction site (e.g. e-bay), of which there are hundreds?
Said another way, why would a producer of any valuable commodity expose their assets to these sorts of shenanigans when you could sell directly to eager consumers and get your price determination that way?
when you want to be sure lets say 5 years in the future that your product will have demand at certain price level (so you can happily work with a profit) you go and sign futures contracts for the quantities you plan to produce. Unfortunately speculators (who produce nothing) can flood the market with many times larger amounts and so distort the whole price discovery mechanism
So is china.
golds sales in Shanghai jump 400%. People lined up in Guangzhuo for the bars. In China, people buy gold from dedicated gold stores. http://finance.sina.com.cn/money/nmetal/20130417/113715177952.shtml
Thank you goldman, thank you fed, thank you paper traders.
Gold, priced in US Dollars, is on the slide and will be for some time.
http://bullandbearmash.com/chart/spot-gold-daily-falls-87-support-level-...
And the BSE30 (aka the Sensex), one of the major Indian indexes, has been sliding since January and at the same level today as it was in 2010.
People / the economy are/is struggling - my guess is they may choose a loaf of bread over gold. Just a guess.
Anyone thinking these fags may be a little scuuured to lower this bitch anymore?