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The Gold Party: World Gold Council Chimes In
Of course, if only one had seen that there is absolutely nothing different or new about the gold "story" at all since March 2009, there would have been no need to strengthen positions. Otherwise, more or less as has been said here all along. Furthermore, below are some pretty charts from the latest World Gold Council demand trends letter, presented below.
Summary from WGC:
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2011 was another impressive year for global gold demand; volume grew 0.4% to 4,067.1 tonnes, worth an estimated US$205.5bn. Investment was the main driver of growth, although jewellery and technology were resilient in the face of higher gold prices. Record mine production was offset by lower recycling activity and significant central bank purchases.

- 2011 marked another impressive year for global gold demand, with investment demand showing strong growth and both jewellery and technology sectors remaining resilient. Mine production increased slightly, to a record annual level, but this was counterbalanced by a small decline in recycling and considerable net purchases by central banks. Annual demand totalled 4,067.1 tonnes (+0.4% year-on-year) worth an estimated US$205.5bn. Demand for gold bars and coins accelerated, reflecting a blend of positive influences including concern over the financial health and future viability of the euro area; high inflation in some countries; positive price expectations; and the relatively poor performance of a range of alternative investments.
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The phrase “a year of two halves”, despite being often too liberally applied, serves as a befitting summary of the gold market in 2011. Gold, along with many other asset classes, faced a variety of challenges during 2011 from exogenous factors. It was a year characterised by dichotomous trends, manifest in price stability during the first half followed by higher than average volatility during the second. It was also a year of intense scrutiny but despite a strong headwind from commentators calling the top of the market, gold continued its 11-year bull run driven by a diverse set of factors.

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India and China: Perhaps the most pronounced example of dichotomous trends was the development of demand in India and China during the year. Both countries are often assumed to be congruent drivers of gold demand and price, regularly grouped together under some regional nomenclature. However, India and China are two different economies driven by different sets of factors. Last year’s macroeconomic backdrop painted two contrasting landscapes in these countries, which combined accounted for more than half of total global demand,6 and subsequently led to a strong divergence in overall demand trends. For both countries, inflation spurred on by rising food prices, presented particular difficulties in the first half of the year. However, the monetary tightening that followed had severe consequences for India as the domestic currency, following an initial rapid rise, fell precipitously in the second half of the year, on foreign capital outflows. The rapid rise and fall in the rupee, and resulting domestic gold price swings had a strong impact on gold buying with both jewellery and investment demand in H2 lower by around 33% (Chart 2). Full year jewellery and investment demand totalled 933.4 tonnes, a drop of 7% year-on-year. Meanwhile, in China, jewellery and investment demand reached 769.8 tonnes for the full year representing 82%7 of India’s level of demand. This figure has only recently risen above the 50% mark, reflecting the strength of China’s presence in the gold market.

- There are few who predicted that 2011 would see net official sector buying to the tune of 439.7 tonnes. This figure, the highest since 1964, is largely the result of emerging market central banks seeking to diversify their foreign exchange holdings, and a lack of selling by Central Bank Gold Agreement (CBGA) signatories. The net buying trend which started in Q2 2009 has proliferated, as emerging market central banks have continued to add gold on increasing concerns about the creditworthiness and low yields of their existing reserve assets. Both the euro area sovereign crisis and the sovereign debt downgrade in the US during the summer of 2011 have compounded these worries (Chart 4). In addition, diminishing CBGA selling has been insufficient to offset these resultant purchases. With the two dominant reserve currencies beset with issues,10 interest in gold as the one currency free from the impact of government policy and intervention, has been spurred. The trend in central bank buying is expected to continue given the lack of decisive action in dealing with the underlying issues both in Europe and the US, as well as low relative allocations to gold among emerging markets.
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The producer hedge book increased for the first time in a decade. The 18.0 tonnes11 of hedging added to an estimated outstanding global hedge book of 158.0 tonnes, was the first increase in a decade, but far from the levels associated with the previous two decades. In fact, half of the additional hedged tonnage was conducted by base metals miner Boliden, in an effort to manage revenue risk.12 While the net reduction in supply from de-hedging has come to an end following aggressive removals of forward hedges by major gold miners over a decade or more, hedging as a source of supply is expected to stay muted as the practice of wholesale industry-wide hedging activity has proved damaging to the industry in the long run.

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Bars and coins, ETFs and OTC investment: Divergent growth rates were also visible within investment. Bar and coin demand, often but not always reflecting the ‘individual’ end of the market, continued growing at an impressive rate. OTC investment,13 encompassing the more ‘institutional’ spectrum, fell for the first time since 2008. ETF demand, representing a cross section of investors, saw growth slow year-on-year, but picked up towards the latter quarters. Over the past few years, these three access channels have diverged in relative terms: While bar and coin demand has grown on a year-on-year basis, ETF demand has slowed and OTC investment has fallen. Chart 5 suggests that ETF and OTC investors have not been accumulating gold at rates that some commentators maintain. Moreover, activity in the derivatives market which is typically considered the more speculative type of investment demand, as evidenced by the net positioning data provided on the gold futures market, has fallen quite sharply in the last few quarters.

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Future Gold Demand
Technology
Technology demand is likely to face challenges as some developed markets flirt with double-dip recessions and export and policy-led slowdowns affect emerging markets. Yet demand for electronics has been formidably resilient over the last few years despite uncertainty over industrial output. Gold is a key component in the manufacture of semiconductors due to its beneficial material properties. Semiconductor sales, as reported by the Semiconductor Industry Association (SIA), reached a new record in 2011,14 supporting electronics demand during an uncertain year for industrial activity.
Jewellery
At some point normal economic growth will resume in the worst affected economies, and as it does, the decline in jewellery demand on a global basis may also wane. While the jewellery market is likely to face continued difficulties should prices rise in the foreseeable future, there are tentative signs of at least a bottoming out of the decline seen over the past decade. Data on global jewellery demand is often masked by India’s prominence, with the country accounting for an average of almost one third of global demand over the last five years. Excluding India, which has seen a temporary slowdown in demand over the past year, global demand has grown for the last five consecutive quarters on a rolling 4-quarter basis. These gains follow a period of strong declines. In addition the 10-year decline in the US market, currently the fourth largest by tonnage, also looks to be moderating with 2011 showing a year-on-year decline of 9%,the lowest since 2005 despite steadily rising prices (Chart 6).
Investment
A number of commentators had cited anecdotal evidence of slowing of investment demand in the latter half of 2011, amid continuing concerns about the macroeconomic environment, as a sign of medium- to long-term demand exhaustion. We believe that investment demand has yet to reach its full potential and that this argument is inaccurate. During 2011, net investment demand was the result of a mixture of liquidity-driven selling and store-of-wealth based buying and speculation on either side of the equation. The primary macroeconomic drivers for investment demand have been the threat of inflation from food prices and low real deposit rates in emerging markets, with deflation threats in Western markets stemming from lingering effects of the credit crunch and the current sovereign debt crisis. In other words, the inflation threat globally has been, at best, mixed. India and China, as the two biggest gold markets, are facing pressures from a slowing global economy. While authorities in these two economies dealt a blow to domestic inflation in 2011, they have the means and the incentive to tolerate higher inflation through accommodative policy to avoid succumbing to the global malaise, going forward.
Full report here
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"Supreme Ayatollah Osama Bin Bernanke" is gold's best friend
"Suspicion towards a currency, once awakened, develops insomnia" - James Dines.
That gold crap is at least 5000 years old.......I don't think it's going to stick around.
Reminds me of a favorite quote-
"Nobody goes there anymore...it's too crowded."
- Yogi Berra
Gold doesn't generate any cash, people!!! NO INTEREST, ok? That's why it's a suck investment.
Treasuries on the other hand, generate a negative rate of return and are therefore a much better place to park money.
Bought it at $273 and now it's over $1700.......should have stuck it into a CD.......or maybe somthing with no counter party risk......like MF Global.
“Sir Mervyn said the UK's economy was moving in the right direction because it had a plan in place to tackle the country's debt and it had devalued its currency without leading to a rise in wages.”
Ref - http://www.independent.co.uk/news/business/news/economy-faces-choppy-waters-says-mervyn-king-6939038.html
Thanks Merv.
And of course "De Americans" responded to said dilemma with chattel slavery...among other things. Still..."there's a lot of arable land out there." throw in the system of roads and bridges and a pick up truck and I'm not ready to throw in the towel just yet.
Plad: great quote, I use it with friends often.
As for Lone Pine: where the hell have you been these past five-ten years?
"Re-establish a position" means "we made a mistake when we sold it," right?
Not necessarily. It could mean; 'when we saw it hit $1950 we took profits and are getting back in for the next leg up'.
Yeah, I get that. But only traders think that way about gold. It was sort of a survey post to see how many look at gold as a trade as opposed to a store of purchasing power. Returns are transient, purchasing power is not.
You think his clients understand that?
Rhetorical. Certainly he does. And so the real questions are how abject speculation on a "non-cash-producing asset" aligns with his philosophy, and whether his philosophy is aligned with his clients.
I'm kinda with you. I think it's definitely getting inflated and burst.
But I made a simple reasoning that most banks are based on gold deposits and uncertainty in the world is doing nothing but increasing so.... pick a little up and store it.
The way this is dragging out we may not see the bottom of the currencies for years.....
I keep wondering how long they can keep this ponzi scheme going. Is it all going to crumble this week? Or will this charade keep going until 2015 or beyond? The dollar will ultimately get hit with both barrels: monetary policy and fiscal policy, but I guess the timing of the dollar's demise depends somewhat on which barrel shoots first. Will they destroy the dollar in the near future with monetary policy? Or will they kill it later with fiscal policy?
Why do you think monetary and fiscal policy are so distinct? Printing and spending are joined at the hip. The notion that Benny is, for all practical purposes, anything but a Keynesian is a joke.
The USD still has viable future. There are lots of countries out there that are not using our currency...we will re-educate and convert them.
A central purpose of Fed monetary policy has been to devalue the USD (see Rickards book Currency Wars for detailed analysis). Since 1913, the dollar has lost 97% or so of its purchasing power, and Fed monetary policy threatens to kill its remaining purchasing power in the near future. U.S. federal government debt and obligations total (by various estimates) $70-200 trillion, which is far beyond the amount of money that the government can ever collect in taxes. That debt is not servicable. The U.S. government's only options are outright default or to shrink the dollar by devaluing it. Either way, fiscal policy with destroy the USD.
So, can you please explain the "viable future" you mentioned for the USD?
I think he was being sarcastic. Please put down the gun.
(good rant, though)
Oh, right. Sorry. I tend to shoot first, and apologize later. :-(
'We re-established a position in gold during the quarter. Although we certainly have misgivings about an asset that does not produce cash,..."
That's because it's money -no? $Cash doesn't produce cash either...unless you lend it out.
So lend out your gold if you want an income stream.
Glad I paid my entry fee early. Soon the Gold Party will become so crowded that they will restrict entry. That's when my lifetime pass will be......well.....Golden baby. :)
BTFD on gold and hold it. We do not know when, but one day you will be able to look out your window and clearly see that Hell has frozen over and you will know that the Fed has finally stopped printing money.
If you're doing it in euro's I couldn't agree more. I'm thinking about going "full on gangster look" btw. How 'bout all of you? "this is America! When doubt...WEAR YOUR GOLD!"
disabledvet
After getting nailed for 28% on taxes on CG's, I may just do that.
All PM's are considered COLLECTIBLES and are subject to that rate.
Short term.No taxes on Jewelry.
Mr.T may look like a pauper if we start wearing, 24K, but THEN they will tax it.
ima get a rack of gold teefs
Who is the World Gold Council? http://www.gold.org/about_us/members/
Think about it.
Wow, wish I'd invested in African Barrick last year, earnings up from 14 to 53 !!
They also were partnered with SSGA....and the architects of the Gold ETF's that the Comex needed to help provide the liquidity to settle contracts on the CME's casinos
Steve Mandel is about to get some FBI lovin.
Mandel says it's an investment that does not produce cash? Neither does a dollar bill until you put it at risk by handing it over to someone else. Gold does produce a return if (a) it is loaned out as an interest bearing commodity, which central banks do all the time, and (2) if you've ever heard of Total Return, then it's done better than S&P for 11 years.
The bigger question, tho, is who are the folks who put their money with this guy Mandel, who doesn't understand there is no return on any investment until it's put at risk? Does this guy manage a lot of people's money, or just the money of brain dead morons? I wonder how the brain dead morons who placed money with this guy feel about a guy who doesn't understand mechanics of risk?
The bulk of jewlery buying in asian countrys is wearable savings. It´s tradition "stole that one from you Ben". And the money printing in the world isn´t all about lowering the value to dilute the debt and to be competitive. It´s the exponential function of the ponzi kicking in. If they don´t print it will all be over. The system HAVE to expand faster and faster.
It will work, until it doesn´t. It´s very easy actually to understand what is in a bubble and what is not. I´ve bought my ticket and patiently wait for what is a natural law.
"Gold, go get you some" Aristotle
Chart 5 is my favorite. ETF demand slackening while the physical demand strides forward on stilts, onwards and upwards.