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Guest Post: Propping Up The Gold Price?

Tyler Durden's picture





 

Submitted by John Aziz of Azizonomics

Propping Up The Gold Price?

Izabella Kaminska makes the point that central banks have turned net gold buyers:

Kaminska seems to believe that gold’s price is not just central-bank supported, but its trajectory is downward:

If not for the gold bar/coin frenzy and ETF demand (now substituted by official buying), one might speculate that the collapse in conventional demand (i.e. for industrial and jewelery purposes) may have led to a very different price path for gold post 2008.

Now that ETF demand is waning, however, marginal support for the gold price is actually being provided by the official sector more than ever.

 

Though, given the gold price reaction of late, clearly even this is not so effective so, either gold and coin buying has started to wane as well – and there is evidencethat this is the case – or it’s taking ever more buying (by official sources) to keep prices supported at the current level.

 

The recent plateauing of the gold price thus either suggest that today’s spot supply is increasingly catering to tomorrow’s demand expectations, or in the context of more gold being produced all the time, it is taking ever more buying by the official sector to keep prices from falling.

 

In other words, sans the intervention of central banks on a major level: case bearish.

The obvious thing, though — even if we take central bank buying out of the equation altogether — is that total demand for gold is still increasing. And the price of gold has increased faster than sales, illustrating that the market has struggled and continues to struggle to keep pace with underlying demand. 

And it’s not just demand for gold-denominated paper (i.e. ETFs or other such as-risky-as-anything-you’ll-get-from-MF Global assets) — it’s recently manifested as demand for hard physical gold:

It’s true that central banks are presently supporting the gold price — after years of selling off national wealth at pennies-on-the-dollar into a bear market and thus suppressing prices. Yet it’s not the Western central banks that are pushing demand for gold. It’s the BRICs. As PBOC official Zhang Jianhua noted:

No asset is safe now. The only choice to hedge risks is to hold hard currency — gold.

And as I noted yesterday, BRICs have founded and legitimate fears of buying even deeper into an increasingly ponzified, over-leveraged, rehypothecated and interconnective paper financial system. The PBOC (and other American creditors) already faces the risk of the US Treasury inflating much of their holdings away; the entire point is to get out of such assets into something much harder to duplicate, and impossible to inflate away.

According to China’s State Council’s Xia Bing:

China must make fuller use of the non-financial assets in its foreign reserves, as well as speed up the diversification of investing channels to resist a possible long-term weakening of the dollar.

No; I don’t think it’s particularly wise to announce to the world that you’re going to get elbow-deep into gold bullion either, but this isn’t just a bluff. China is importing hard-to-fathom quantities of gold:

Ultimately, the surge in demand for gold reflects one thing alone: distrust of the increasingly messy, interconnected, over-leveraged and fraudulent financial system. Whether it is China — fearful of dollar debasement — loading up on bullion, or retail investors in the United States or Europe — fearful of another MF Global (or PFG, or Lehman Brothers) — stacking Krugerrands in their basement, demand for gold reflects distrust in finance, distrust in the financial establishment, distrust in banks, distrust in regulators, distrust in government and distrust in the financial media. And it is that distrust — not (by any stretch of the imagination) central bank interventionism — that is the force moving demand for gold.

The distrust is not going anywhere because the system is still rotten. We all know — even Business Insider readers know deep down, I think — that there is something exceedingly rotten at the heart of the global financial system. We don’t know quite how rotten, how deep the rabbit hole goes, who will be implicated, or how fast. But with every LIBOR-rigging scandal (which the Fed, of course, was aware of), every raided segregated account, every devalued pension fund, every failed speculative “hedge”, every Facebook or Zynga pump-and-dump, we get closer to the truth.

There will be no bear market for physical gold until trust in the financial system and regulators is fixed, until markets trade fundamentals instead of the possibility of the NEW QE, until governments represent the interests of their people instead of the interests of tiny financial elites.

 


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Tue, 07/10/2012 - 19:17 | Link to Comment Ray1968
Ray1968's picture

China buying, ETF buying, Citizens buying. That sounds like real demand.

The downward trajectory is just in bankers fantasies as they dilute the market with paper gold.

Tue, 07/10/2012 - 19:18 | Link to Comment SHEEPFUKKER
SHEEPFUKKER's picture

Physical buying, paper selling. It's what's for dinner. 

Tue, 07/10/2012 - 20:05 | Link to Comment CClarity
CClarity's picture

Kyle Bass and the University of Texas looking smart on gold. Also looking increasingly like the Bass Japan bet will pay off too.

Tue, 07/10/2012 - 20:13 | Link to Comment cossack55
cossack55's picture

Kyle knows how to party on that ranch of his.  BTW, any corelation between the rise of gold from $300 to current prices and the advent of the internet?

Tue, 07/10/2012 - 20:22 | Link to Comment strannick
strannick's picture

Anyone whose analysis ignores deliberate precious metals price suppression and doesnt include successive COMEX (silver) margin hikes (April 2011)  and short sales equalling a years worth of production in an hour (Feb. 2012), is just kind of chattering...

Tue, 07/10/2012 - 22:36 | Link to Comment mcguire
mcguire's picture

if you pay attention to the analysis you are talking about, ie price supression, the smartest thing to do right now is sell paper gold and buy physical.  i swear this is not spam, i just found it an excellent technical analysis article on the price of gold.. http://www.gold-eagle.com/editorials_12/bloom070912.html

i think it is at least a valid concern to look at what past prices are telling you about possible future outcomes.. this article suggests that the price of gold and the dollar ar tellling us to lookf or eu inflation/us deflation and us price of gold to test $1100.  

 

Wed, 07/11/2012 - 03:05 | Link to Comment Western
Western's picture

Article assumes the relationship of gold-usd is going to have the same dynamic as in years past.

 

This time is different? It's a possibility is it not... the EUR is also a competing reserve currency and the RMB is more attractive to BRICS it seems like, and GOLD is transforming into the safety trade for fucks sakes. The PTB are trying to AVOID a panic to induce the safety trade.

 

I guess that's the real question; How crazy does the manipulation have to get where the paper price becomes $1100 yet you cant buy it in physical form (and that in itself is not enough to bring the price to a reasonable level)?

Wed, 07/11/2012 - 06:36 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Propping Up The Gold Price?

 

Is anyone else trading their food stamps for gold......or is it just me?

 

Wed, 07/11/2012 - 11:34 | Link to Comment AustriAnnie
AustriAnnie's picture

"where the paper price becomes $1100 yet you cant buy it in physical form"

Exactly.  Gold might drop, but its only a bargain if you can actually complete the transaction.

And slowly the holders of gold who WILL part with gold in the dips, are being replaced by gold holders who absolutely WILL NOT part with the gold until they do have trust in the system (or need to sell gold to eat).  The price manipulation only increases the pace of buying by stronger holders and scares off the remaining group of buyers who scare easily.  

And by depending on the USD as safety trade, they increase the pace of the USD-for-gold trade, do they not?  By strengthening the dollar, while simultaneously holding down price of gold, they only encourage the gold buying spree by giving a discount to dollar holders.

Tue, 07/10/2012 - 20:14 | Link to Comment strannick
strannick's picture

Ahh. So first a quadrillion of derivatives has to unwind before gold will level off. Leaves a bit more upside then I guess.

Tue, 07/10/2012 - 20:25 | Link to Comment dexter bland
dexter bland's picture

The interesting thing about China buying physical gold from Hong Kong, is that Hong Kong is also buying huge amounts of gold from China. Circular trading to inflate the statistics perhaps? Who is the world's biggest gold producer again?

http://finance.yahoo.com/news/1-hong-kong-may-gold-102339385.html

"Market participants have been puzzled by the high volume of gold imports from China from February, since China restricts gold exports.

Some suspect the continuous "round tripping" of the precious metal between the mainland and Hong Kong has greatly inflated gold import figures from Hong Kong, the main conduit of gold into China, the world's top gold producer and upcoming No.1 consumer of the metal.

On the other hand there is very little doubt that the physical demand from India has fallen off a cliff.

And sorry gold bugs, but gold is already in a bear market and the 2012 numbers, not shown on the chart, reveal the reasons why. Even central bank purchases are falling. The whole thing is propped up by the "paper" futures traders betting on QE,

 

Tue, 07/10/2012 - 21:27 | Link to Comment LongBalls
LongBalls's picture

Research the Bank of International Settlements (BIS). The world is running out of sufficient collateral. You know it, I know it. The BIS is not looking into moving gold from a Tier 3 to Tier 1 asset class because they have nothing better to do.

 

 

Tue, 07/10/2012 - 21:46 | Link to Comment Aziz
Aziz's picture

Bingo.

Krugman said that the BoIS had gone "full-blown liquidationist".

That says it all — the BoIS is likely going to move gold to a Tier 1 asset class as part of Basel 3.

That would open a whole new golden vista.

Wed, 07/11/2012 - 06:45 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

The BIS doesn't even have a country. They don't have to do sh!t.

 

Krugman is a windup puppet doll.

 

Tue, 07/10/2012 - 21:35 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Wake me when it gets back to my dollar cost average of $300 an ounce. Buying physical is not an investment moron, it is safely storing wealth just in case the paper pushers get greedy, and they always do.

Tue, 07/10/2012 - 21:49 | Link to Comment Al Huxley
Al Huxley's picture

Well said/

Wed, 07/11/2012 - 07:47 | Link to Comment eclectic syncretist
eclectic syncretist's picture

Place your bets, live with the consequences.

Wed, 07/11/2012 - 06:32 | Link to Comment OmNamah
OmNamah's picture

For last about half-year I have been using Zerohedge as contrary trading signal in terms of timing (else I rely on my statistical edge to trade) to trade PM's.

For once my system is confirming a major bottom is in place, in both Gold and Silver.

So Ahoy!!! Good days will be back...I would prefer gold and silver miner....but everyone on its own in this bad-bad world of trading:)

On Indian markets please refer: www.bubbleshort.blogspot.in

Tue, 07/10/2012 - 19:19 | Link to Comment Manthong
Manthong's picture

You've got to know when to hold'em.

http://www.youtube.com/watch?v=azZr1cSu9-4&feature=related.

Tue, 07/10/2012 - 19:17 | Link to Comment Rainman
Rainman's picture

Not one damn thing I ever bought the past 30 years has had a better return rate than my gold....but that's just me.

Rate of return on Mrs. Rainman a different matter.

Tue, 07/10/2012 - 19:29 | Link to Comment PiratePawpaw
PiratePawpaw's picture

Ditto, except maybe my ammo...

"There will be no bear market for physical gold until trust in the financial system and regulators is fixed, until markets trade fundamentals instead of the possibility of the NEW QE, until governments represent the interests of their people instead of the interests of tiny financial elites" 

 

Translation: Not in our lifetimes

Tue, 07/10/2012 - 19:51 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

PiratePawpaw said:

Translation: Not in our lifetimes

Correct, at least for many people older than around 40. At a minimum, there will be no bear market in gold until sometime after the current corrupt system is put out of our misery, many a noose is strained under the repetitive load of the culling of the guilty, and a new system has demonstrated sufficient trustworthiness over the course of a generation or two.

Wed, 07/11/2012 - 09:45 | Link to Comment Hayabusa
Hayabusa's picture

"Not in our lifetimes" is absolutely correct!!  In addition, "governments represent the interests of their people instead of the interests of tiny financial elites"... tiny financial elites, they are hardly "tiny"... we're talking economics here and that means $$, not numbers of people.  Our government is and has been bought and paid for by the "tiny" financial elites they haven't represented the interests of the 99% in decades... the elites and special interests get what they want through corruption, bribes and manipulation.  I find it funny how some of you preach about right and wrong what our government officials are doing, or not doing... my take - notions of right and wrong are promoted for the 99% by the 1% who do the opposite.  The 1% get away with stealing the rest of us blind and make their kleptocracy "legal"... this will only end when people get realistic, quit whining and start playing by the 1%ers' "real world" rules - which equate to anything goes as long as you can get away with it.

Tue, 07/10/2012 - 19:16 | Link to Comment devo
devo's picture

I think it reflects a looming world war and gold backed yuan

Tue, 07/10/2012 - 19:49 | Link to Comment kito
kito's picture

yuan is definitely something you should diversify into......ive mentioned before that the bank of china in nyc allows you to open a renminbi denominated bank account--fdic insured (ha-as if that makes you feel better)-yuan is certainly going to be an influential part of the post-reset world monetary system...........

Tue, 07/10/2012 - 19:58 | Link to Comment fonzannoon
fonzannoon's picture

Completely agree about the Yuan although I don't know who will confiscate the US customers bank of China accounts first, the US or China?

Tue, 07/10/2012 - 22:05 | Link to Comment LawsofPhysics
LawsofPhysics's picture

China is printing faster than the fucking Fed. ALL fiat is going to zero and China and the U.S. elite have been on same page for years. The problem is that Americans are not as conditioned to a strong state authority, yet.

How many firearms in citizen's hands again in China?

Wed, 07/11/2012 - 00:15 | Link to Comment prole
prole's picture

Zero?    Zero? ..... Wait ......... Zero?

Mon, 07/16/2012 - 07:17 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

no, China is printing no faster than the Fed, keeping the soft peg and still appreciating mildly vs USD. That means the Fed is printing faster.

Tue, 07/10/2012 - 20:22 | Link to Comment devo
devo's picture

I called my bank and told them I was taking a trip to China and needed Yuan. They said they could get them for me.

Problem is you get pretty hard with taxes on any appreciation...

Tue, 07/10/2012 - 21:05 | Link to Comment JohnG
JohnG's picture

Check out EverBank.

Tue, 07/10/2012 - 19:18 | Link to Comment Gringo Viejo
Gringo Viejo's picture

I REPEAT: The United States DOES NOT have 8,000 tonnes of gold.

The COMEX DOES NOT have 100,000,000  ounces of silver.

Tue, 07/10/2012 - 19:23 | Link to Comment Aziz
Aziz's picture

3,000 tonnes of tungsten?

6,000 tonnes of tungsten?

Tue, 07/10/2012 - 19:30 | Link to Comment devo
devo's picture

100,000,000 ounces of hooker jizz.

Tue, 07/10/2012 - 19:53 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

A pile of lead bricks and a few cans of yellow paint.

Tue, 07/10/2012 - 22:19 | Link to Comment sumo
sumo's picture

And chemical warfare antidote samples.

Tue, 07/10/2012 - 23:28 | Link to Comment jonjon831983
jonjon831983's picture

Actually... Yes, I will take it.  Tungsten is valuable and one of the toughest metals and is used in Armour Piercing shells. ... I just need to buy a tank first, but once that happens then I am set.

Wed, 07/11/2012 - 01:54 | Link to Comment zerozulu
zerozulu's picture

Tungsten is not a bad investment either. one day FED will sell it at the price of gold.

Tue, 07/10/2012 - 19:28 | Link to Comment devo
devo's picture

Lloyd Christmas said it best:

http://www.youtube.com/watch?v=m_hz5HFmA6A

Tue, 07/10/2012 - 19:30 | Link to Comment Joebloinvestor
Joebloinvestor's picture

Yup, read the fine print.

The US claims gold "in reserve", that is unmined gold on federal land.

fucking liars.

Tue, 07/10/2012 - 19:37 | Link to Comment devo
devo's picture

This is why gold stocks are a terrible long-term buy. Good trade, though. They'll pop big time with QE3.

Wed, 07/11/2012 - 02:01 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

 

 

It doesn't matter if they have a GAZILLION tons of gold, FEDERAL RESERVE NOTES ARE NOT REDEEMABLE FOR A-N-Y OF IT.

And who fucking cares if the Fed is "undercapitalized"  because most of the shit on their balance sheet is fucking worthless?

IT DOESN'T MATTER. 

What part of NON-REDEEMABLE do you people not understand?

The currency is non-redeemable, SO IT DOESN'T FUCKING MATTER what the Fed has on their balance sheet, in their vault, or any damn place.

 

Mon, 07/16/2012 - 07:13 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Fed is holding notes saying redeemable for gold at 42/oz.

They have the notes from the Treasury.

IT IS REDEEMABLE.

Sat, 07/14/2012 - 16:29 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

REPEAT: the USA holds gold from many nations on its soil which can not be taken by force and whose ownership will be decided by nuclear missiles NOT DEEDS OR TITLES or contracts.

I'm sure that can meet the 8000+ tons.

Tue, 07/10/2012 - 19:20 | Link to Comment yabyum
yabyum's picture

If I had tons of US fiat I would buy some gold. Hell, if I had a little fiat I would buy a little.

Tue, 07/10/2012 - 19:32 | Link to Comment Spitzer
Spitzer's picture

If I could legally print money, I would buy gold in case/when the printer gets taken away or breaks. THAT IS WHY CENTRAL BANKS BUY GOLD.

http://freegoldobserver.blogspot.ca/

Tue, 07/10/2012 - 19:21 | Link to Comment francis_sawyer
francis_sawyer's picture

'Propping up' gold prices WITH WHAT? (ought to be on everyone's mind at the moment)...

Tue, 07/10/2012 - 19:25 | Link to Comment RobotTrader
RobotTrader's picture

If these central banks are buying gold, then they are also buying 10x more U.S. paper.

 

Virtually all U.S. based bond ETF's are screaming to new highs, including CXA, the California Muni-Bond ETF.

Today, there is an unquenchable amount of thirst for U.S. Dollar-good "Paper Promises", not the "hard tangbile assets" everyone has been harping on.

Tue, 07/10/2012 - 19:38 | Link to Comment Spitzer
Spitzer's picture

Today, there is an unquenchable amount of thirst for U.S. Dollar-good "Paper Promises",

Yeah just like Freddy/fanny stock a few years ago.

not the "hard tangbile assets" everyone has been harping on.

Everyone ? Who Peter Schiff and Zero hedge readers ???

 

 

 

Tue, 07/10/2012 - 21:53 | Link to Comment Al Huxley
Al Huxley's picture

Or what did that stupid fucker Charlie Prince at Citi say, in July 2007, just before everything went to shit in August?  Something along the lines of 'everybody's dancing so we just have to keep on dancing'.  It works until it doesn't - timing's a bitch, but just because bond prices are rising doesn't mean I want to own them and play the 'greater fool' game.

Tue, 07/10/2012 - 22:40 | Link to Comment mcguire
mcguire's picture

how about some zero interest bonds.. they are now on the menu for 'greater fools'.

Tue, 07/10/2012 - 19:45 | Link to Comment kito
kito's picture

robo, nobody ever knows what point you are trying to make....really....are you saying that "unquenchable" and "screaming to all time highs"  are phrases to describe assets we should jump into?.......last time i checked, those phrases were indicative of MASSIVE BUBBLES...so wtf is your point? go out and follow the herd into walmart and u.s. paper?????.....are you trying to show us all how incredibly short sighted you are?...because you are doing a great job...............

Tue, 07/10/2012 - 20:54 | Link to Comment knowless
knowless's picture

dam, mind blowing in the wind.

Tue, 07/10/2012 - 22:14 | Link to Comment Winston Churchill
Winston Churchill's picture

Thought it was MDB under another avatar.

You mean he's for real ?

Tue, 07/10/2012 - 23:23 | Link to Comment James_Cole
James_Cole's picture

Robo is correct (no matter how much they print folks can't get enough) doesn't really diminish the idea of holding gold though. 

Tue, 07/10/2012 - 20:33 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Virtually all U.S. based bond ETF's are screaming to new highs, including CXA, the California Muni-Bond ETF.

Herd mentality, herd behavior. Fascinating, isn't it? One wonders how many ramps and chutes they'll be marched down before the final one to the abattoir.

Today, there is an unquenchable amount of thirst for U.S. Dollar-good "Paper Promises", not the "hard tangbile assets" everyone has been harping on.

Robo's next screaming buy:

http://www.amazon.com/dp/B002OTN3X6/

Tue, 07/10/2012 - 20:55 | Link to Comment Everybodys All ...
Everybodys All American's picture

Liebor screams look out below ... you can only manipulate interest rates for so long. Reading comprehension apparently is now an art form.

Tue, 07/10/2012 - 21:03 | Link to Comment gookempucky
gookempucky's picture

Lets see ---hmmmm ---21 primary dealers--hhmmm---that are required-yes REQUIRED to bid/ purchase treasuries.

Central banks are not buying US paper--21 PDs RRRRRRRRRR---indirect participation has and still is running round 30%.

direct bidders still running round 10%

PDs take down the rest

Its all a giant IMAGINARY PAPER TIGER

Tue, 07/10/2012 - 21:07 | Link to Comment NidStyles
NidStyles's picture

Why would they buy paper? They can just Ctrl-P it.

Tue, 07/10/2012 - 21:56 | Link to Comment Al Huxley
Al Huxley's picture

They throw in a few extra steps, because it makes the whole ponzi less obvious, and provides more opportunities for graft and corruption.

Wed, 07/11/2012 - 07:17 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Exactly. A skim for every step.

Tue, 07/10/2012 - 21:24 | Link to Comment JohnG
JohnG's picture

 

 

"Today, there is an unquenchable amount of thirst for U.S. Dollar-good "Paper Promises", not the "hard tangible assets" everyone has been harping on."

That seems at best dubious when you write "paper promises" given the ongoing debasement of "paper."

 

Don't get me wrong,  Sure some of the retailers and reits have made good gains.  I'm right there with you following the tape.  You MUST realize that people's financial conditions are not getting better (note the unemployed falling off the dole).  Credit cards, 401K liquidations, etc. are being used to finance lifestyles at this point.  This has an endpoint.

And that endpoint is soon approaching.

Tue, 07/10/2012 - 22:37 | Link to Comment essence
essence's picture

Robo

I went and checked the 5 year on CXA.
9% = screaming? Perhaps in robo world.

And considering Stockton CA just went tits up, are munis (especially CA munis) really a good place to be?
Hell, they just collectiively approved a bullet train boondoggle financed by bonds. Yet more misguided CA thinking. Or maybe not ... if the Robos of the world are foolish enough to line up and buy them.

Wed, 07/11/2012 - 02:25 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

 

 

Hey moron, let's talk again after the rest of the world drops USD as world reserve currency ...which is coming a lot sooner than you dollar bulls wana believe.

ALL your damn dollar-based paper bullshit will be WORTHLESS, and gold will be ...well ...let's just say out of your price range.

Sat, 07/14/2012 - 16:19 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

The central banks are selling more short-dated US paper than long-dated paper to buy. They are buying even more gold still.

No one wants US dollars or treasuries - they are all buying gold, land and countries with paper they unload.

Tue, 07/10/2012 - 19:27 | Link to Comment Chartist
Chartist's picture

I have gold going to $1100 the oz .....I'm sitting on my hands with a small short SPX position.

Tue, 07/10/2012 - 19:43 | Link to Comment Long-John-Silver
Long-John-Silver's picture

You're missing a zero.

Wed, 07/11/2012 - 01:36 | Link to Comment walküre
walküre's picture

Promise yourself and your family to not keep sitting on your hands if gold should hit that level. However unlikely.

Pull the trigger, man. Don't even tell the family you're doing it. The less they know the better and fewer chances your little secret might slip somewhere. When you possess precious metals, you don't want others to know. Just rest assured that you will always have the means to feed your loved ones.

Tue, 07/10/2012 - 19:30 | Link to Comment Spitzer
Spitzer's picture

Now that ETF demand is waning, however, marginal support for the gold price is actually being provided by the official sector more than ever.

Umm, maybe because they need something real you fucking idiot. What the fuck are they going to do ? Sell gold and put the proceeds of the sale on the same cash pile that came freely out of the printing press the day before ?

 

http://freegoldobserver.blogspot.ca/

Tue, 07/10/2012 - 19:33 | Link to Comment Kokulakai
Kokulakai's picture

Even Central Banks know:

If you don't hold, you don't own it.

Tue, 07/10/2012 - 19:34 | Link to Comment AGmoney
AGmoney's picture

So Why is gold industrial and jewelery demand highest at low gold price years?  In essence increaseing high demand for gold industrial and jewlery demand is bearish, not bullish. As investment in gold is money and insurance, industrial demand and bling bought at 50-200% premiums to spot price is usually not bullish.  If one wants to buy gold do you buy around spot when the price is higher compared to recent years or do you buy jewlery at 50-200% premiums to the current price?  You buy gold coins/bars around spot when price is moving up or relativley higher and jewlery when price is moving down or low.  Highest demand for gold jewerly in recent years was near the bottom of the gold price in early 2000.  I as for propping prices through central bank buying, i guess you could read it like that and spin it negative, but in essence this is just another big buyer in bull market, and not bullish untll they stop buying or net sellers.

Tue, 07/10/2012 - 22:37 | Link to Comment sumo
sumo's picture

Gold buyers in India tend to buy the dips. They are in it for the long haul and want to accumulate.

My nightmare is that the Fed and allied central banks will back their currencies in gold, but only after:

(a) they announce plans to dump gold, to scare the market down, then

(b) impose export/inport bans on physical, so no stock leaves the country, then

(c) nationalize/confiscate gold at a rock-bottom price, then

(d) officially revalue gold at $15k per oz, once it's in govt and Wall St hands.

Tue, 07/10/2012 - 19:36 | Link to Comment AGmoney
AGmoney's picture

gold is money not jewlery

Tue, 07/10/2012 - 20:41 | Link to Comment ThaBigPerm
ThaBigPerm's picture

...which is why it was made into jewelry in antiquity.  You always had some money with you that was, depending on the type of jewelry, divisible (links can be removed from a gold chain necklace).  In the intervening centuries our collective memories have "forgotten" why we did it in the first place.  Now it's done because ... well ... why did we do it again?  It's pretty? 

Like wearing ties (to display heraldry).

Tue, 07/10/2012 - 21:24 | Link to Comment earleflorida
earleflorida's picture

i wear a gold/ gem encrusted amulet around my neck with a facsimile of a 1933 double-eagle tucked inside for good luck and fortune

 pure gold, from the beginning of time has been cherished for its malleability by mankind - it can be crafted into jewelry with but a stone to shape ones artistic value... be it prehistoric or modern man. coinage of gold millenniums later required by a sprinkle of simple base metal to firm its lifelong hold

so, yes... money is value and gold is valuable

Wed, 07/11/2012 - 13:04 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

facsimile?

Cheapskate :O)

Tue, 07/10/2012 - 19:48 | Link to Comment devo
devo's picture

Blog posts about gold probably generate tonnes of gold via hits. Hits for gold--it's a nice setup ZH has here.

Tue, 07/10/2012 - 20:32 | Link to Comment Aziz
Aziz's picture

Here at Zero Hedge, we love gold.

Tue, 07/10/2012 - 21:52 | Link to Comment BKbroiler
BKbroiler's picture

Great blog, man.  Started reading you a few months back and I always enjoy.  Good shit, keep at it.

Tue, 07/10/2012 - 20:36 | Link to Comment fuu
fuu's picture

Top 100 article tags used by ZH through June.

http://oi49.tinypic.com/1fteeu.jpg

Tue, 07/10/2012 - 22:03 | Link to Comment smiler03
smiler03's picture

Interesting. Have you noticed that this article about gold isn't tagged with gold? Tylers tags are bizarre in the extreme, often. (and not just guest ones)

Tue, 07/10/2012 - 22:15 | Link to Comment fuu
fuu's picture

Glad I wasn't the only one that noticed.

There is no "Gold" or "Silver" in the glossary.

Tue, 07/10/2012 - 19:53 | Link to Comment Peter Pan
Peter Pan's picture

Some points if I may.

First, if jewellery demand in dollar terms switched to coins and bars the POG would rocket because of the money spent on jewellery only half at best goes to gold while the rest is labour, sales taxes and overheads.

Secondly, people everywhere are being screwed and are forced to liquidate their gold and jewellery to cover living expenses. Hence the increase in these WE BUY GOLD places.

Thirdly, the refusal by the CTFC to hand down their findings on silver manipulation is not just a smoking gun, but an admission of guilt.

Finally, whilst their is no perfect form of wealth, in times of downturn, dishonesty, lack of punishment, deficts, political and geopolitical unrest, there is very little apart from precious metals that can offer some degree of protection and flexibility based on the reality of history rather than the fantasy of the printing press and lies.

Tue, 07/10/2012 - 19:55 | Link to Comment Never One Roach
Never One Roach's picture

All I know is watch the videos of the HK gold stores...packed with Indians and Chinese buying as much gold as they can carry out the store....hope to see it first hand some day.

 

These folks have experienced crashes, currency collapses, disasters and wars on their soil first hand so they must know something---at least how to protect themselves against any future cataclysms. Some learn from history.

 

Some don't.

Tue, 07/10/2012 - 19:57 | Link to Comment battlestargalactica
battlestargalactica's picture

PM ETFs = Imaginary friends- good for the kiddies; someone to blame for a broken lamp or tracking mud in the house; in the end abandoned.

Physical PM in stack / safe / lake bottom / coffee can buried under bush = real, old friends- bail out you of jail, buy you a pint when a woman breaks your heart, there when you need them; in the end, all that a man can measure real wealth in

If you think after all the bullsh$t that the brokers/bankers have done- vaporization, Corzining, Libor-circle jerking, suppression of price, TARPing, and countlless general goddamn unkosher mortgage thefts - that I'm going to trust them with a goddamn thing, not even their free sh$tty coffee in the lobby, you must be smoking the same crazy ditch weed as the two-time Obummer voters.

I trust my eyes, ears and gut. And that which I can stack in shiny, heavy piles that will, never, ever stab me in the f@cking back. Same with friends as investments.

Teddy 'Big Stick' Roosevelt said it best:

"Let the watchwords of all our people be the old familiar watchwords of honesty, decency, fair-dealing, and commonsense."... "We must treat each man on his worth and merits as a man. We must see that each is given a square deal, because he is entitled to no more and should receive no less.""The welfare of each of us is dependent fundamentally upon the welfare of all of us."

New York State Fair, Syracuse, September 7, 1903

Tue, 07/10/2012 - 20:00 | Link to Comment spinone
spinone's picture

As long as OPEC takes only dollars for oil, no worries.

Tue, 07/10/2012 - 20:22 | Link to Comment Solon the Destroyer
Solon the Destroyer's picture

It amazes me that years after this myth was utterly debunked and despite the fact it flies in the face of all common sense that this false meme still gets repeated as fact to this day.

Tue, 07/10/2012 - 20:11 | Link to Comment Bullionaire
Bullionaire's picture

"Izabella Kaminska makes the point..."

 

Stopped reading there.

 

Duh.

Tue, 07/10/2012 - 20:22 | Link to Comment SDRII
SDRII's picture

FT never misses a chance to sh$t on Au. Mainstream contrarian(ism) at its ripest. The only thing surprising is that they didn't link to one of Buiter's old editorials about the efficacy of digital currency with good until expiry dates as decreed. Citi customers can rest comfortably at night knowing that their very own "universal" bank now houses the seer.

Tue, 07/10/2012 - 20:14 | Link to Comment blindman
blindman's picture

bin go

Tue, 07/10/2012 - 20:29 | Link to Comment apberusdisvet
apberusdisvet's picture

The fact that everyone is overlooking is that close to 50% of annual global gold production (China, Russia, 3 of the 'stans) is being withheld from the free market and goes directly to the govt treasury.  Next up with be nationalization of G & S mines by sovereigns.

 

Get it while you can sheeple!!!!

Tue, 07/10/2012 - 20:32 | Link to Comment jmeyer
jmeyer's picture

On April 5, 1933, Roosevelt issued Executive Order 6012, which expropriated privately owned gold. He ordered Americans to surrender their gold to the government by May 1, 1933. Violators would be subject to a $10,000 fine or as many as 10 years in prison.

This may happen again as  gold price rises.

Tue, 07/10/2012 - 21:01 | Link to Comment eaglefalcon
eaglefalcon's picture

if it happens again, then take my gold, of course, from my cold dead hand

Tue, 07/10/2012 - 22:06 | Link to Comment smiler03
smiler03's picture

Better dead than having a stash. Seems a bit extreme.

Tue, 07/10/2012 - 21:15 | Link to Comment GOLDTEETHSILVER...
GOLDTEETHSILVERFILLINGS's picture

Follow the yellow brick road...

Tue, 07/10/2012 - 21:19 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

jmeyer said:

On April 5, 1933, Roosevelt issued Executive Order 6012, which expropriated privately owned gold. He ordered Americans to surrender their gold to the government by May 1, 1933.

It was ignored by most gold-owning Americans.

Violators would be subject to a $10,000 fine or as many as 10 years in prison.

...although none of them were.

This may happen again as  gold price rises.

Not likely. The dollar is backed by nothing tangible, so the original reason for confiscation (dollar devaluation) no longer exists.

If confiscation is attempted again, it will be ignored again.

Tue, 07/10/2012 - 21:42 | Link to Comment earleflorida
earleflorida's picture

did you ever think that your very civil rights would ever be violated -

wait til they start disarming americans with the new rules & reg's being drafted in the UN -

it's ok to have nukes,... but guns kill people, nice!

great read Aziz :-))

Tue, 07/10/2012 - 22:16 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Will be ignored as boating accidents suddenly increase.

Wed, 07/11/2012 - 01:46 | Link to Comment walküre
walküre's picture

I wish I could travel back in time and talk to the folks back then. Just picking their brain and hear what they really felt about government and how complicit they'd be in following the rule.

Considering that wealth exploded out of nowhere like mushroom clouds after the Depression, I figure that the wealthiest and holders of large amounts of gold did not comply with Order 6012.

How many Americans were imprisoned? How much was surrendered to government? Those are interesting questions to ask. Just because government decides to order people to do something, doesn't mean they will comply.

However having said this, I fear that our dumbed down society will gladly surrender their gold for a 5 minute gig on Dancing With The Stars or they'd be snitching on their neighbors or even family to get the attention. Manipulation and oppression is so easy with a brain dead nation of attention whores.

Tue, 07/10/2012 - 20:56 | Link to Comment yogibear
yogibear's picture

Next surrender all 401Ks and IRAs to the government.

Tue, 07/10/2012 - 20:57 | Link to Comment HungrySeagull
HungrySeagull's picture

ASE is legal to keep as 401k inside your vault.

Think on that for a while over dinner.

Tue, 07/10/2012 - 20:57 | Link to Comment HungrySeagull
HungrySeagull's picture

Let's see.

Gold was worth 12 Silver at one time. Now it is worth about 52 silver today.

I have theory that it is not the gold that is going to fall, but the Silver that is going to regain it's ratio at some point in our future.

Tue, 07/10/2012 - 21:25 | Link to Comment Peter Pan
Peter Pan's picture

The battle is not between gold and silver or their relative ratios. It is between precious metals on the one hand which represent enduring value without reliance on government edict and fiat currencies which represent the worst aspects of societies which succumb to uncontrolled spending, borrowing, printing as well as damaging interference in the workings of markets and yet no penalties for those who damage the markets.

Wed, 07/11/2012 - 01:32 | Link to Comment zerozulu
zerozulu's picture

Gold is rich folks' hedge against inflation and silver is poor folks' hedge against inflation.

Tue, 07/10/2012 - 21:08 | Link to Comment midgetrannyporn
midgetrannyporn's picture

zh will blame manipulation if/when the price drops below $1000 so really there's no way for the gold bugs to be wrong.

Tue, 07/10/2012 - 22:07 | Link to Comment HungrySeagull
HungrySeagull's picture

To be honest with you, after last year's push down, anything is possible.

Gold 1000 would be most welcome.

There will however be those who seek to take the long walk on the board table towards the window.

Tue, 07/10/2012 - 22:15 | Link to Comment Aziz
Aziz's picture

Yeah, I'd love to see gold at 1,000. Great chance to stack some krugers.

Wed, 07/11/2012 - 13:12 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

Krugers? Dirty gold!

U want some .9999 Pandas, my friend ;o)

Wed, 07/11/2012 - 01:50 | Link to Comment walküre
walküre's picture

1000 in USD? Pffft the miners wouldn't lift a finger. The miners are richer than the governments. Why bother selling for diluted Dollars in a manipulated trade environment.

It's not going to happen because 1000 USD today does not have the same purchasing power it had in 2008. Far from it.

Unless we see massive liquidation of course from CBs or other institutional holders who need to pay entitlements.

HAHA.. good one. Institutional holders of gold liquidating to pay some poor slob's government pension? Forget it!

Tue, 07/10/2012 - 22:09 | Link to Comment smiler03
smiler03's picture

Ho ho, you made me laugh a lot. Gold bugs being wrong! Ha ha ha

Tue, 07/10/2012 - 21:52 | Link to Comment dolph9
dolph9's picture

It's been a tough year but the gold bull market definitely remains intact.

Moreover, it's unlikely from here on out to lose in any meaningful sense in gold.  If the metals fall, it's only because of a temporary wave of deflation in which case you haven't lost much.

Tue, 07/10/2012 - 22:02 | Link to Comment Aziz
Aziz's picture

I expect a few of those deflationary cycles.

One thing I monitor very closely is the state of mainstream academic economics.

And there is nothing hated more than deflation.

Any whiff of deflation and they will print.

Tue, 07/10/2012 - 22:34 | Link to Comment Hulk
Hulk's picture

Absolutely. The FED has stated this fact explicitly...

Tue, 07/10/2012 - 21:59 | Link to Comment Al Huxley
Al Huxley's picture

I love this one

If not for the gold bar/coin frenzy and ETF demand (now substituted by official buying), one might speculate that the collapse in conventional demand (i.e. for industrial and jewelery purposes) may have led to a very different price path for gold post 2008.

What a fucking idiotic tautology - 'if not for the demand for gold, the price would be lower'.  Wow, fucking brilliant Izabella.  And if not for the demands of 6 billion+ people to eat, the price of wheat would also be substantially lower.

Tue, 07/10/2012 - 22:08 | Link to Comment HungrySeagull
HungrySeagull's picture

Wheat and the Oil.

Something to consider.

Tue, 07/10/2012 - 23:07 | Link to Comment JOYFUL
JOYFUL's picture

wait, yu missed the best part of all!

"in the context of more gold being produced all the time, it is taking ever more buying by the official sector to keep prices from falling."

more gold being produced all the time?

I rate that little gem of fatuous fallaciousness right up there with Al Gore's invention of the internet....

the majority of the gold that has come onto the market in the last decade via the biggest player in the miner's sector has been "produced" in the same manner that clean clothes gets "produced" at the dry cleaners...their production consisted of pulling stolen bars out of storage and slippin them into the refiners at a rate the market deems reasonable enough not to question. Buy judges, ex-Presidents, Prime Ministers & assorted accounting houses with proceeds, rinse n repeat.  The Clairtone formula never gets old for the gold[chipped]-Munk!

But we're not supposed to talk bout that...even on a gold bugs' blog!

Tue, 07/10/2012 - 22:44 | Link to Comment Burticus
Burticus's picture

"...demand for gold reflects distrust in finance, distrust in the financial establishment, distrust in banks, distrust in regulators, distrust in government and distrust in the financial media."

You took the words right out of my mouth!  I don't **cking trust anything anymore either except physical gold, silver, steel and lead, "the other precious metal."  These will be much more difficult to rob since the Wall Street fraud kings can' t just MF or PF me from behind in broad daylight while the toothless lapdawg alphabet agencies look the other way like a referee on TV wrestling.

Tue, 07/10/2012 - 22:54 | Link to Comment lemonobrien
lemonobrien's picture

i hope gold goes down; i want more for my dollar bill.

Tue, 07/10/2012 - 23:23 | Link to Comment jimmyjames
jimmyjames's picture

 

that the collapse in conventional demand (i.e. for industrial and jewelery purposes) may have led to a very different price path for gold post 2008.

The recent plateauing of the gold price thus either suggest that today’s spot supply is increasingly catering to tomorrow’s demand expectations, or in the context of more gold being produced all the time, it is taking ever more buying by the official sector to keep prices from falling.

 

In other words, sans the intervention of central banks on a major level: case bearish.

**********

Complete bullshit and i stopped reading there-

Industry and jewelry account for about 2000 tons/yr.

Mining supply is what its been for years--2000 tons/yr-

Would it be profitable if miners were to increase mine supply?

There's 165K tons out there "somewhere"

2000 tons give or take and all the ETF's don't mean shit-

Who has the gold?

ZH goldbugs?

Just too tiny-

 

Wed, 07/11/2012 - 04:00 | Link to Comment pcrs
pcrs's picture

PFG, that is not likely to happen soon. Governments just do what they always did:plunder, borrow and print untill the end. Spanish government started with plundering the indians of their gold and silver and ended up going bankrupt 13 times after that, with the 14th on the way. The way that immoral actions morf your society are long lasting.

Wed, 07/11/2012 - 05:06 | Link to Comment luckylongshot
luckylongshot's picture

So gold is on an infinite bull run...

Wed, 07/11/2012 - 08:07 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

luckylongshot said:

So gold is on an infinite bull run...

I would put it a little differently: the dollar has been in a lengthy, and terminal, downward spiral to worthlessness as the rotting system which supports its global reserve currency status circles the bowl.

Wed, 07/11/2012 - 05:41 | Link to Comment onebir
onebir's picture

"If not for the gold bar/coin frenzy and ETF demand (now substituted by official buying), one might speculate that the collapse in conventional demand (i.e. for industrial and jewelery purposes) may have led to a very different price path for gold post 2008."

So gold prices would be lower, due to lower demand caused by higher gold prices, if it weren't for higher official demand which raised gold prices. Priceless.

Was there no editor on duty when that got published?

Wed, 07/11/2012 - 06:35 | Link to Comment OmNamah
OmNamah's picture

For last about half-year I have been using Zerohedge as contrary trading signal in terms of timing (else I rely on my statistical edge to trade) to trade PM's.

For once my system is confirming a major bottom is in place, in both Gold and Silver.

So Ahoy!!! Good days will be back...I would prefer gold and silver miner....but everyone on its own in this bad-bad world of trading:)

On Indian markets please refer: www.bubbleshort.blogspot.in

Wed, 07/11/2012 - 06:49 | Link to Comment Ted Baker
Ted Baker's picture

CENTRAL BANKS ROUND THE WORLD HAVE SUCEEDING WITH DISTROYING THE WEALTH OF BILLIONS CITIZENS IN THE US, EUROPE, ASIA AND AFRICA.....END THE FED, BOE, SNB, ECB, BOJ, ETC ETC ETC.........LEFT GOLD SPEAKS FOR ITSELF

Wed, 07/11/2012 - 08:04 | Link to Comment TrumpXVI
TrumpXVI's picture

Why am I not surprised that the PBOC "gets it"?

"NO asset is safe."

"All one can do is HEDGE."

"And the best hedge is HARD currency."

It couldn't be put any simpler.  No need for all the vitriol and debate.

Thank you, Zhang Jianhua.

Wed, 07/11/2012 - 10:00 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

If the US authorities want to suppress the price of gold all they have to do is create USD (via the usual Treasury & FED mechanisms) and then short gold through an ETF. This will work so long as USD are accepted as money. The same goes for any other country/currency where a central bank exists to facilitate the currency creation.

So, until USD and other fiats are no longer accepted as money, gold cannot take off. Understand this and you understand why gold is as "cheap" as it is in spite of the continuing decline of USD and other fiats.

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