Gold Q2, 2012 - Investment Statistics And Commentary

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Gold Q2, 2012 - Investment Statistics And Commentary

Today's AM fix was USD 1,583.00, EUR 1,291.30, and GBP 1,007.83 per ounce.
Yesterday’s AM fix was USD 1,580.00, EUR 1,287.06 and GBP 1,009.33 per ounce.

Silver is trading at $27.07/oz, €22.22/oz and £17.32/oz. Platinum is trading at $1,418.25/oz, palladium at $577.80/oz and rhodium at $1,190/oz.

Gold rose $3.70 or 0.23% in New York yesterday and closed at $1,581.00/oz. It rose as high as $1,590/oz prior to determined selling which saw gold fall. Gold ticked higher in Asia prior to falling soon after the European open.

Gold has been trading in a range between $1,530/oz and $1,630/oz for nearly 2 months despite the Eurozone debt crisis entering its 3rd year and looking set to escalate and despite signs that the US economy is on the verge of a sharp recession.

These two factors alone mean that gold will likely resume its upward march due to continuing safe haven demand. The likelihood of further QE from the Fed will be icing on the cake for gold and silver.

US data yesterday showed factory activity shrunk in July for a 3rd consecutive month and the jobless claims rose last week.

Those who continue to put “lipstick on the pig” that is the US economy are lulling themselves and other unfortunates into another false sense of security.

“Blue skies thinking” regarding individual economies and the global economy got us into this mess and it will not get us out.

The World Gold Council have just published their commentary on gold’s price performance in various currencies, its volatility statistics and correlation to other assets in the quarter -

Gold Q2, 2012 - Investment Statistics and Commentary.

It provides macroeconomic context to the investment statistics published at the end of each quarter and highlights emerging themes relevant to gold’s future development.

One of their key findings is that gold will act as hedge against possible coming dollar weakness and gold will act as a "currency hedge in the international monetary system."

Key findings of the World Gold Council’s report:

Review: Key Macroeconomic Themes During Q2 2012

Gold prices declined in most currencies during the second quarter with the exception of the euro, Swiss franc and Indian rupee, in part due to a strong US dollar. Despite a 3.8% decline in Q2 to US$1,598.50/oz on the London PM fix, gold was up 4.4% during the first half of the year. Volatility remained elevated amidst a busy event-risk period. However, gold generally outperformed risk assets.

Global inflation eases but underlying trends supportive for gold: A substantial drop in energy and some agricultural commodities during the period has eased inflation pressures in many parts of the world and put downward pressure on gold prices.

Reassessing “risk-free” assets: Even assets traditionally considered safe are under pressure. German Bunds interest rates climbed in June. The Swiss franc, yen and US Treasuries are also facing issues – challenging their role as assets of last resort. Despite pressures on the price of gold, its lack of credit risk, its liquidity and hedging characteristics has made gold an attractive vehicle for long-term wealth preservation.

Correlation between gold and risk assets approaches long-term averages: Gold’s correlation to equities and other risk assets fell towards long-run average levels in Q2 helping portfolio diversification. Gold’s increased correlation to equities in Q1 was an indirect effect related to a weaker global economy coupled with a stronger US dollar.

Outlook: Emerging Macroeconomic Themes In H2 2012

Deflationary concerns in some countries provide room for further fiscal and monetary stimulus. This may lead to a further debasement of currencies through unconventional monetary policy and an increased risk of future inflation. These factors should provide support for future gold investment.

The underlying structural issues that affect the euro zone remain unresolved, despite advances in the formation of more comprehensive burden-sharing mechanisms. In such an environment of uncertainty and higher market volatility, gold will continue to be an asset that investors use to diversify risk and preserve capital.

The flight to the US dollar as a safe-haven in the first half of 2012 could be reversed. The US debt ceiling debate in Q3 and federal elections in November, followed by the necessity to confront a US$1.3tn budget deficit will prove challenging to the US dollar. With most currencies under pressure in one form or another, gold is likely to provide a hedging mechanism for investors


Cross Currency Table – (Bloomberg)

Dr. Constantin Gurdgiev, a non Executive member of the GoldCore Investment Committee, has analysed the Q2, 2012 World Gold Council data and has written a blog post that can be read here or see commentary.

He finds that the report is worth a read as it shows how gold generally outperformed risk assets and helped portfolio diversification.

He warns that safe haven government debt markets have all the hallmarks of “return-free risks” rather than “risk-free returns.”

The World Gold Council’s ‘Quarterly statistics commentary Q2 2012’ can be read here.

Dr Constantin Gurdgiev’s blog on the report including charts can be read here.

NEWSWIRE

(Bloomberg) -- China Plans to Start Interbank Gold Trading on Local Market
China is preparing to introduce an interbank gold-trading system, a move that may enable domestic banks to treat the precious metal as a more liquid asset and increase holdings.

The Shanghai Gold Exchange, the country’s biggest spot market, has been working with the China Foreign Exchange Trade System since the start of the year, Gu Wenshuo, an exchange spokesman, said today. The original plan was for the new system to be running at the end of August, Gu said by phone, adding that details are unavailable as banks are giving feedback.

China has been the largest producer since 2007, and was the biggest user after India last year. An interbank gold-trading system is part of broader reforms that Beijing aims to introduce to make the financial sector more market-driven, according to Jiang Shu, a senior analyst at Industrial Bank Co. Ltd.

“China is already very important in terms of gold production and consumption,” said Jeffrey Rhodes, global head of precious metals in Dubai at INTL FCStone Inc., a New York- based trading and brokerage firm. “If a new interbank market really does flourish, it could put the Chinese market in the mainstream and become world-class.”

Spot gold was 0.2 percent higher at $1,584.65 an ounce at 3:38 p.m. in Shanghai. The metal, which reached a record $1,921.15 in September, has rallied for 11 years on emerging- market and investment demand, as well as central-bank purchases.

Gold imports by mainland China from Hong Kong reached 314,810 kilograms in the first five months, compared with 39,607.4 kilograms a year ago, according to Bloomberg calculations based on data from the Hong Kong government.

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NEWS
Gold steady on weak U.S. data; dollar weighs – Reuters

Gold advances for second day - MarketWatch

Asia Stocks Drop With Oil on Global Growth Concern as Euro Falls - Bloomberg

UK housing slump will deepen, warns IMF – The Telegraph

COMMENTARY
Dr Gurdgiev: Q2 Report From The World Gold Council – True Economics

China’s Coming Assault on the Western Financial System – The Daily Reckoning

It's a fine line between gold manipulation and intervention - Mineweb

GoldSeek Radio - Ron Paul: U.S. probably manipulates gold through ESF - GoldSeek

World economy now effectively a multitrillion-dollar game of chicken – Resource Clips

Ray Dalio's Bridgewater On The "Self Re-Inforcing Global Decline" – Zero Hedge