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Gold Coin Demand In H1 2012 Shows Fundamentals Driving Current Demand

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From GoldCore

Gold Coin Demand in H1 2012 Shows Fundamentals Driving Current Demand

Today's AM fix was USD 1608.50, EUR 1278.31 and GBP 1025.70 per ounce.
Yesterday’s AM fix was USD 1,596.25, EUR 1,263.26, and GBP 1,018.34 per ounce.

In New York yesterday, gold rose to $1602.14 in late morning New York trade, but it then came under selling pressure towards the close and ended with a loss of 0.02%.

Cross Currency Table – (Bloomberg)

Gold gradually ticked higher in Asia and rose to over $1,610/oz by the open in Europe and appears to be consolidating on those gains. Gold is also higher in sterling, euros and Swiss francs at 1,026.30 GBP/oz , 1,278.30 EUR/oz and 1,535.80 CHF/oz.

US markets will close early today (1300 EST) and remain closed on Wednesday in observance of Independence Day.

Gold is being supported by continuing robust demand – primarily from ETFs and central bank diversification. Far from falling this demand may increase further in the coming months and the economic crisis degenerates further.

Small coin and bar demand fell in H1 2012 from the very high levels seen in Q4 2011. However the US Mint data and other mints data shows that demand remains robust and may be consolidating at these levels.

Dr. Constantin Gurdgiev, a non Executive member of the GoldCore Investment Committee, has analysed the data of US Mint coin sales in H1 2012 and has looked at them in their important historical context:

Based on data from the US Mint we can now update H1 2012 figures for sales of the US-minted gold coins. As the background - new coins issued by the US Mint, in my opinion, represent a much more fundamentals-linked asset as the demand for these coins differs, if only subtly, from the demand for gold as an asset:

* Coins are purchased by long-hold collectors;

* Coins are easier to purchase and store than gold bars, attracting more demand from savers, rather than speculative investors; and

* Coins are used frequently to store inter-generational wealth and start family savings schemes.

All of this means that correlations between demand for coins and gold price should be less pronounced and that is exactly what we observe throughout the historical and current data:

So with that in mind, what should we expect from the gold coins sales. Price of gold has been trending side-ways with some correlation over the 20-day averages since April 2011 ranging between USD1505.5 low in June 2011 to the high of USD1813.5 in August 2011 and into USD1570 in June 2012. With this, we should expect some moderation in demand for gold coins coming from the reduced speculative demand. Since this speculative demand forms a smaller component of overall coins demand, we should expect moderation in demand for coins to bring us down toward historical averages for the crisis period.

At the same time, outside the euro area, global crisis has entered a stage of stabilization (not growth, yet), which means that demand for gold as safe haven (rather than a hedge) should be moderating as well. This can be expected to have a more modest impact on coins sales than on gold sales and especially ETFs-instrumented gold sales.

In other words, fundamentals (inflation expectations, longer-term savings and investment objectives) should be driving current demand for gold coins.

And, this is exactly what we are seeing. In June 2012, the US Mint sold 54,500oz of coinage gold, up on 53,000 in May 2012. Total for H1 2012, US Mint sales of gold coins in terms of total weight sold are down 41.3% on H1 2011 and it is down 49.8% on H1 2010 and 50.3% on H1 2009. Dramatic? Sure, when one disregards consideration of drivers for 2009-2011 demand for coins being coincident with extreme risks in other markets.

Total H1 2012 demand was at 338,000oz still well ahead of H1 average demand for 2000-2007 period when it was 165,679oz, but down on 531,750oz average for H1 2008-2011 crisis period.

Exactly the same picture - return to fundamentals - is seen in the number of coins sold.

Consistent with still robust demand drivers, H1 2012 average coin sold contained 0.60 oz, while H1 2000-2007 period average was 0.51oz and H1 2008-2011 period average was 0.76oz.

Here's a summary of H1 changes and a chart highlighting dynamics:

All three parameters (coins sold, oz total sold and oz/coin) are showing that H1 2012 was continuing moderation in demand away from short-term safe haven considerations toward fundamentals-driven consideration and basics of long-term hold demand. All three also show that current demand dynamics for gold coins remain ahead of historical averages. There is neither a panic buying, nor a panic selling and should demand stabilize at around 10% upside to the historical average ex-1999 spike, and recall that this is NEW demand, we will be in the comfortable longer term range that can take us well into global economic growth cycle once it resumes.

PS: This continues to confirm my long-term view on gold coins as more fundamentals-driven and fundamentals-reverting instrument.

Dr Gurdgiev remains one of the few economists in the world today to look at and analyse the data, facts and fundamentals of the gold market and his economics blog, True Economics, is a must read for all interested in markets, finance and economics today.

Dr Gurdgiev’s research note can be read here.

NEWSWIRE
(Bloomberg) -- Silver Futures May Rise 25% on Double Bottom: Technical Analysis
Silver prices, which slumped for four straight months, may rebound 25 percent after hitting a “double bottom,” according to technical analysis by Steel Vine Investments LLC.

Silver futures for September delivery may climb to $34.50 an ounce this quarter after falling to $26.33 on Sept. 26 and $26.105 on June 28, this year’s low, said Spencer Patton, the Chicago-based chief investment officer for Steel Vine. Prices jumped 5 percent on June 29, the most since Jan. 3.

A double bottom is a chart pattern showing a drop in price, followed by a rebound and then another decline to near the same level, usually indicating support.

“We have jumped back from the inflection point telling us that prices are now headed higher,” Patton said. The first “psychological” level the market will test is $30, he said. (Bloomberg) -- Silver prices, which slumped for four straight months, may rebound 25 percent after hitting a “double bottom,” according to technical analysis by Steel Vine Investments LLC.

Silver futures for September delivery may climb to $34.50 an ounce this quarter after falling to $26.33 on Sept. 26 and $26.105 on June 28, this year’s low, said Spencer Patton, the Chicago-based chief investment officer for Steel Vine. Prices jumped 5 percent on June 29, the most since Jan. 3.

A double bottom is a chart pattern showing a drop in price, followed by a rebound and then another decline to near the same level, usually indicating support.

“We have jumped back from the inflection point telling us that prices are now headed higher,” Patton said. The first “psychological” level the market will test is $30, he said.

(Bloomberg) -- South Africa Should Classify Gold, Platinum, Diamonds Strategic
South Africa should classify gold, platinum, and diamonds as strategic minerals, Abiel Mngomezulu, the chief executive officer of the Council for Mineral Technology, or Mintek, said.

The country should also classify coal, iron ore and vanadium strategic minerals, Mngomezulu, who is also a nonexecutive director of the state mining company, African Exploration Mining and Finance Co. said in a speech in Johannesburg today.

He defined strategic minerals as those that South Africa depends on and those in which it has a competitive advantage. The country should form companies like Sasol Ltd. to beneficiate minerals, he said.

(Bloomberg) -- Deutsche Bank Sees Gold Above $2,000 an Ounce Next Year
Gold will climb above $2,000 an ounce next year, Deutsche Bank AG said in a report e-mailed today.

“The potential for policy action could increase significantly; and as the market anticipates this, gold has the potential to move beyond $1,700” later this year, it said.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS

Gold Climbs Above $1,600 as Economic Data Lift Easing Prospects - Bloomberg

Gold gains on stimulus hopes after bleak data - Reuters

Gold edges up on European policy cut hopes - MarketWatch

Deputy governor of BOE - Tucker to be asked if he gave all-clear to falsify data - The Independent

COMMENTARY

CNBC Host States Silver Manipulation is a Fact, Not a Conspiracy - Silver Doctors

The Great LIBOR Bank Heist of 2008? - Azizonomics

As US Closes June With $15,856,367,214,324.44 In Federal Debt, US Debt/GDP Hits Post WWII High Of 101.5% - Zero Hedge

LIBORgate: Diamond v Tucker at Treasury Select Committee - Guido Fawkes' Blog

 

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Tue, 07/03/2012 - 08:26 | 2583204 USisCorrupt
USisCorrupt's picture

Could it be that Hopium is loosing some of its Luster?

Tue, 07/03/2012 - 08:36 | 2583231 whatsinaname
whatsinaname's picture

Anybody know if there is any demand supply data that futures markets use to determine pricing ? Similar to the weekly API data that is for crude markets is there something similar for gold that is published ?

Tue, 07/03/2012 - 08:27 | 2583206 Its_the_economy...
Its_the_economy_stupid's picture

Premiums for gold coins are up from 8 weeks ago. Not a sign of moderation in demand.

Tue, 07/03/2012 - 08:34 | 2583222 GubbermintWorker
GubbermintWorker's picture

Get you some!

Tue, 07/03/2012 - 08:36 | 2583228 Snidley Whipsnae
Snidley Whipsnae's picture

I find this comment at odds with view of the current state of the world's economy...

"At the same time, outside the euro area, global crisis has entered a stage of stabilization (not growth, yet), which means that demand for gold as safe haven (rather than a hedge) should be moderating as well."

Tue, 07/03/2012 - 08:37 | 2583232 dereksatkinson
dereksatkinson's picture

BIS not happy

Tue, 07/03/2012 - 08:41 | 2583248 peekcrackers
peekcrackers's picture

I was at a coin dealer in Canada , and he had a big box of Euro gold coins , I asked whats up with the big box.. He said he had a huge demand from ppl in the E U zone doing money wires to there relatives in Canada and having them buy gold.

Tue, 07/03/2012 - 08:52 | 2583287 francis_sawyer
francis_sawyer's picture

Just don't use my boat to ship it over there...

Tue, 07/03/2012 - 11:08 | 2583269 SRSrocco
SRSrocco's picture

RETAIL GOLD INVESTMENT DEMAND IS A MERE PITTANCE COMPARED TO US GOLD NET EXPORTS

I have an article coming out soon on SILVERDOCTORS & TURDS BLOG on this exact subject.  First of all, the figures GOLDCORE put out are not quite correct.  In June the US MINT sold 60,000 oz of Gold Eagles and not the 54,500 stated by GoldCore.  Here are the exact figures:

GOLD EAGLE SALES

JAN-JUN 2011 = 576,000 oz

JAN-JUN 2012 = 343,500 oz (-40%)

Secondly, you will find out (as was a surprise to me), that retail investment demand in the precious metals is a fraction compared to the huge amount of GOLD heading to China & Europe.

Furthermore, NATIONALIZATION of the MINING INDUSTRY is picking up speed as the world continues to play MUSICAL GOLD CHAIRS:

Chubut mining law reform proposal could derail Navidad silver project

RENO (MINEWEB) - 

Pan American Silver warned Monday that if proposed legislation introduced by the governor of Chubut Province in Argentina is approved as is by the provincial legislature, it will render the company's Navidad Project "uneconomic at any reasonable estimate of long-term silver prices."

In the event "that the law is approved as proposed without any meaningful modifications, Pan American will have no other reasonable option but to suspend further investment in Navidad. Without clear potential for positive economic returns, further investment and project expenditures cannot be justified," the company stressed.

As Mineweb first reported on June 21, Chubut Gov. Martin Buzzi has submitted to the provincial legislature a bill providing for state ownership of mining operations and an increase of 3% to 8% in mining royalties.

-----------------------------

Pan American's Navidad Project was supposed to produce 20 million oz of silver per year.  The AMERICAN PUBLIC will realize that they should have been buying gold and silver all along.... unfortunately at some point in time in the near future, physical gold and silver may not be available for any amount of FIAT MONEY.

UPDATE:  MY ARTICLE IS NOW OUT:

U.S Gold Net Exports Increased Substantially During First Quarter 2012
Tue, 07/03/2012 - 08:56 | 2583302 chances
chances's picture

rubbish

Tue, 07/03/2012 - 09:08 | 2583337 tocointhephrase
tocointhephrase's picture

Jon Nadler talks rubbish. There we go, fixed it for ya!

Tue, 07/03/2012 - 10:10 | 2583502 akak
akak's picture

Jon Nadler is the Devil!

That fact that he is so arrogantly puerile in his incessant attacks on gold and "Radical Goldbug Extremists", and his evil is so venal and banal, only makes him all the more contemptible.

Tue, 07/03/2012 - 09:20 | 2583357 Forward History
Forward History's picture

Buy. The. Dip.

Dollar-cost averaging, folks. Of course, I like silver more than gold at this juncture.

Tue, 07/03/2012 - 09:55 | 2583459 eaglefalcon
eaglefalcon's picture

Today I saw a billboard ad at a major intersection in Shanghai, China.  The ad was placed by CFN (China's largest finance cable network) for an 8-part documentary series that'll be broadcast at prime time from July 9 to July 16.  The tite of the documentary: Age of Gold.  The billboard reads: the Age of Gold is not far behind us, but right ahead of us.

 

According to a description on the CFN website which is in Chinese http://www.yicai.com/news/2012/06/1857118.html, the documentary consists of 8 episode, 1. Power of Gold, 2. The Changing Role of Gold, 3.  From Emperor Zhu to Roosevelt, 4. Between a Rock and a Hard Place, 5. Precious Yellow, 6. Debates on Gold, 7. Asian Gold and 8. Light of Reason

 

People interviewed in the series: Steve Forbes, Eric Maskin, Edmund Phelps, etc.  Transcripts of Steve Forbes interview has been published in Chinese here;

http://www.yicai.com/news/2012/07/1865884.html

You may try to translate the interview with Google, the guy keeps talking about the advantage of gold and gold standard: stable storage of wealth, creating an enviroment of trust, restriction on government, etc.  Among them:

 

CFN: Some believe that gold standard causes deflation.  For instance, deflation occured right after the United Kingdom restored the gold standard after WWI

Steve Forbes:  That's not correct.  UK failed to value gold correctly.  That was the reason for their deflation.  If they had valued money correctly (by gold), they would have had neither inflation nor deflation, but price stability.

 

Contrary (to what people say), printing paper money does not promote prosperity.  For example, the United States didn't walk out of the shadow of depression until the end of WWII, that financial crisis was not caused by gold, but by new government taxes and regulations.  Before the UK abandoned gold standard, it enjoyed a trade surplus.  All trade advantages evaporated when they followed the lead of (other nations) and abolished the gold standard.

Tue, 07/03/2012 - 10:01 | 2583495 eaglefalcon
eaglefalcon's picture

What a difference between Steve Forbes and Warren Buffet

Tue, 07/03/2012 - 10:09 | 2583529 akak
akak's picture

And Warren doesn't even have that inimical Forbes "Special Olympics" smile.

Tue, 07/03/2012 - 10:46 | 2583755 Tekrunner
Tekrunner's picture

CFN: Some believe that gold standard causes deflation.  For instance, deflation occured right after the United Kingdom restored the gold standard after WWI

Steve Forbes:  That's not correct.  UK failed to value gold correctly.  That was the reason for their deflation.  If they had valued money correctly (by gold), they would have had neither inflation nor deflation, but price stability.

That's a pretty damn weak argument. Of course the gold standard is deflationary in a growing economy. More assets but a stable monetary base = deflationary pressures. Denying that is like saying that printing money cannot cause inflation.

Tue, 07/03/2012 - 11:33 | 2584007 eaglefalcon
eaglefalcon's picture

the amount of gold increases by 2% annually because of mining, so monetary base can increase at the same rate with no problem. Countries growing fast can and will import gold from countries not growing or growing slow. That's what trade surplus is for.

Tue, 07/03/2012 - 10:00 | 2583487 Pasadena Phil
Pasadena Phil's picture

Gold coin purchases may be declining by weight but as the price keeps climbing, people are still chasing it up with more and more dollars. People don't go out intending to buy "x" ounces of gold. They go out to invest "x" dollars.

Tue, 07/03/2012 - 11:29 | 2583982 Random_Robert
Random_Robert's picture

Ding ding ding ding....!

 

We have a winner!  

 

 

Tue, 07/03/2012 - 17:40 | 2585326 Shigure
Shigure's picture

Well that summed me up, I buy as much as I can afford with what I have left at the end of the month, don't trust retirement funds.

Tue, 07/03/2012 - 10:09 | 2583533 youngman
youngman's picture

I bet the high end Frenchies are buying it right now.....its better than paying a 75% tax on your assets....and easier to transport out of the country..

Tue, 07/03/2012 - 10:39 | 2583712 Tekrunner
Tekrunner's picture

Except that the 75% tax will be on revenues, not assets, so I'm not sure how that's relevant.

Tue, 07/03/2012 - 12:00 | 2584145 Grand Supercycle
Grand Supercycle's picture

Rally Warning Confirmed.
.
As mentioned earlier, further equity strength and USDX weakness expected this year according to my analysis.

http://www.zerohedge.com/news/2012-12-24/market-analysis

Do NOT follow this link or you will be banned from the site!