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As Retail Sells, Central Banks Wave Gold In With Both Hands

Tyler Durden's picture




 

As recent entrants in the gold market watched paralyzed in fear as gold tumbled by over $100 on the last FOMC day, on the idiotic notion that Ben Bernanke will no longer ease (oh we will, only after Iran is glassified, and not before Obama is confident he has the election down pat), resulting in pervasive sell stop orders getting hit, others were buying. Which others? The same ones whose only response to a downtick in the market is to proceed with more CTRL+P: the central banks. FT reports that the recent drop in gold has triggered large purchases of bullion by central banks in recent weeks. "The buying activity highlights the trend among central banks in emerging economies to buy gold, even as some western investors are losing patience with the metal. Gold prices have dropped 13.8 per cent from a nominal record high of $1,920 a troy ounce reached in September, and on Friday were trading at $1,655.60." Well, as we said a few days ago, "In conclusion we wish to say - thank you Chairman for the firesale in physical precious metals. We, and certainly China, thank you from the bottom of our hearts." Once again, we were more or less correct. And since past is prologue, we now expect any day to see a headline from the PBOC informing the world that the bank has quietly added a few hundred tons of the yellow metal since the last such public announcement in 2009: a catalyst which will quickly send it over recent record highs.

More on what was perfectly obvious to most except the propaganda pushers:

The Bank for International Settlements, which acts on behalf of central banks, has been buying significant quantities of gold on the international market amid falling prices, traders said.

 

According to several estimates, the BIS bought 4-6 tonnes of gold, worth roughly $250m-$300m at current prices, in the over-the-counter physical market last week, with purchases particularly strong at the end of the week. The total purchases over the past three or four weeks were likely to be as much as double that, the traders added.

 

In a note to clients this week, Credit Suisse referred to “aggressive central bank buying seen last Friday”.

Of course, central banks are well aware what they are doing. In fact, they have been buying up gold pretty much non-stop in the past few years.

As a group, they made their largest purchases of gold in more than four decades last year, led by emerging economies such as Mexico, Russia and South Korea intent on diversifying their dollar-heavy foreign exchange reserves. The World Gold Council has also pointed to the possibility of significant unreported purchases by China at the end of last year.

 

At the same time, European central banks have all but halted a run of large sales.

 

“Central banks have definitely been looking at gold as an asset class much more closely ever since European central banks stopped selling,” a senior gold banker said. “There has been a huge interest."

 

While some countries, such as Russia, China or the Philippines, have traditionally accumulated gold produced by their domestic mining industry, others use the BIS as an agent to carry out purchases and sales on their behalf, preserving anonymity.

 

The central bank buying comes as gold prices have slid in the past three weeks as strong economic data from the US has lowered investors’ expectations of quantitative easing by the Federal Reserve and made other investments, such as equities, appear more attractive.

The irony is that as has been pointed out repeatedly, gold will ultimately do well both in extreme deflation and inflation cases. And anyone who believes the Fed has the situation balanced properly, even as the global liquidity providing machine swings to ever greater exponential extremes, well, they likely also believed Bernanke when he told Maria Bartiromo that a home price decline is a "pretty unlikely possibility... we have never had a decline of house prices on a nationwide basis." And if it wasn't for Bernanke's endless bailouts, they would all be broke now.

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Sat, 03/17/2012 - 18:47 | 2265813 JimmyCDN
JimmyCDN's picture

Ironic, for a barbaric relic one can dig up for $5 / oz...

Sat, 03/17/2012 - 19:32 | 2265900 akak
akak's picture

 .

Ironic, for a barbaric relic one can dig up for $5 / oz...
No, you are thinking of silver there (according to Methman, anyway). Gold costs quite a bit more than $5 to mine --- but according to Jon Nadler, there are literally mountains of scrap gold just littering the landscape, so you should be able to pick some up relatively cheaply, especially outside of the Indian wedding season, which as we all know is the sole driving force of gold's price.
Sat, 03/17/2012 - 19:48 | 2265941 malikai
malikai's picture

There literally are mountains of scrap gold all around us. Have a look at your local landfill and you'll see quite a few old pcs, laptops, dead gadgets, etc. That's not to say you can extract from it economically, but given some time things will change.

If you want to make your children/grandchildren rich, buy a landfill.

Sat, 03/17/2012 - 19:51 | 2265953 akak
akak's picture

When they invent nanobots capable of digging around and extracting any given element out of those landfills one atom at a time, then you may be right, but probably not before such a development.

Sat, 03/17/2012 - 20:12 | 2266006 DoChenRollingBearing
DoChenRollingBearing's picture

The Central Bank of DoChenRollingBearing will be buying physical gold soon.

As soon as he gets back from Peru!

Sat, 03/17/2012 - 20:29 | 2266037 akak
akak's picture

Have some chirimoyas and aji de gallina for me while you are still down there!

Sat, 03/17/2012 - 20:34 | 2266056 DoChenRollingBearing
DoChenRollingBearing's picture

Two nights ago: Olloquito!

Last night: Caigua!

You almost NEVER find either at Peruvian restaurants in the USA.  Can´t find the raw materials...

+ 1 akak!  Viva el Peru!

Sat, 03/17/2012 - 20:47 | 2266075 akak
akak's picture

I positively LOVE Andean food!  It is too bad that so many of the raw ingredients are unavailable in the US --- olluco, chuno, tunto, choclo, naranjillas, oca, that dark green herb that is like cilantro on steroids, and so many others I have now forgotten.

Sat, 03/17/2012 - 21:28 | 2266169 Pinto Currency
Pinto Currency's picture

 

 

Ben Bernanke to Maria from above:

...he told Maria Bartiromo that a home price decline is a "pretty unlikely possibility... we have never had a decline of house prices on a nationwide basis."

Never had a decline in house prices on a nationwide basis Ben??

"The U.S. house collapse is now worse than during the Great Depression and is likely to get worse, according to a new report. 

Since the collapse began in 2006, prices have fallen by 33 per cent, more than the 31 per cent drop recorded between the 1920s and 1930s."

http://www.dailymail.co.uk/news/article-2004282/U-S-house-prices-collapse-worse-Great-Depression.html

 

Nice central planner.


Sun, 03/18/2012 - 04:54 | 2266767 jeff montanye
jeff montanye's picture

what ben apparently meant was never a nationwide housing decline since ww2.  didn't want to scare the children or the horses.

housing declined from 1929 to 1942 and during the 1840's and 1880's, at least.  the great inflation of 1942 to 1980/2007 is an anomaly matched only by relatively rare events such as the discovery and theft of precious metals in the new world by spain, et. al.

Sun, 03/18/2012 - 11:23 | 2267016 Pinto Currency
Pinto Currency's picture

 

That is probably what he meant.  We've never had a decline in house prices nationwide since it happened the last time. 

Sun, 03/18/2012 - 14:49 | 2267472 Cadavre
Cadavre's picture

Love Pinto's cite of the Benny "Hill" Berskanki's brain dead rodeo clown response to the question that drooled out Double Chin's 50 psi lips:

"pretty unlikely possibility"

I ain't the smartest or best read witness to all the funny money shenanigans, but could someone explain between the words from Benny:

Exactly what does, "a pretty unlikely possibility" f*cking mean?

Is it laike a ... a ... err .. a "possible"  "impossibility" or do it mean more along de lines of an "impossible" "possibility"? (dis is gonna be way too easy!)

Another Benny jewel a tad too confusing tool:

"we have never had a decline of house prices on a nationwide basis"

As the FED's main man kapo, I'm sure the Benny feels like he be a god given royal stain too busy to read the contraindications on the packing slip that came with his  meds.

Exactly what "nation" was the the "nation" Ben was referring to when he said "nationwide basis".

Up your Ginkgo intake Benny Boy - them bath house poppers done dulled the last two brain cells you got.

 

 

Sun, 03/18/2012 - 15:08 | 2267519 Jendrzejczyk
Jendrzejczyk's picture

http://budget.net/~herbseed/Quilquina.htm

This is what you're looking for Akak. I used to grow it but lost the last seeds about 15 years ago. Nothing better in fresh salsa.

There's even some seeds on

http://www.ebay.com/itm/15-SEEDS-Quirquina-quilquina-Porophyllum-ruderal...

Sun, 03/18/2012 - 16:03 | 2267636 akak
akak's picture

Wow!

Never thought I would ever find out just what that herb was.

Dzienkuje bardzo, Jendrzejczyk!

Sun, 03/18/2012 - 13:55 | 2267350 KrugerrandFan
KrugerrandFan's picture

Last time I was there I ate cuy, better known as guinea pig! Won't be in a rush to eat it again though. Great country and lovely people though.

Sat, 03/17/2012 - 22:13 | 2266286 Hobbleknee
Hobbleknee's picture

Actually, people are already salvaging gold before it makes it to the landfill.  Check it out:

http://www.ebay.ca/sch/sis.html?_nkw=Gold+scrap+gold+recovery+E+scrap+Go...

 

Sun, 03/18/2012 - 13:07 | 2267238 americanspirit
americanspirit's picture

Let's not forget all that gold in seawater. And in asteroids too!

Sun, 03/18/2012 - 05:14 | 2266773 TWSceptic
TWSceptic's picture

barbaric relic = paper money

Sat, 03/17/2012 - 18:48 | 2265816 Sudden Debt
Sudden Debt's picture

Just look at what the commercials are buying in the pits whenever the price goes down for gold and silver and the manipulation is just so big that inventory is as good as gone for both metals.

Sat, 03/17/2012 - 18:53 | 2265829 I think I need ...
I think I need to buy a gun's picture

i think the central banks haven't sold any to retail the last 3 years they are just converting the "CASH FOR GOLD" from the 99% to the 1%.

Sat, 03/17/2012 - 18:57 | 2265836 Sudden Debt
Sudden Debt's picture

Retail is you and me, the commercials are the traders in the pits, JPM etc... Who can bring the price down and buy the real stuff cheap and run it back up to sell to the retails.
But retails just own about 8 to 9% of the stuff. Even less for gold.

Sat, 03/17/2012 - 21:29 | 2266165 Pinto Currency
Pinto Currency's picture

post deleted

 

Sun, 03/18/2012 - 13:40 | 2267323 blindman
blindman's picture

Ted Butler: How the Silver Manipulation Scheme Works
Ted Butler responds to CFTC Commissioner Bart Chilton
http://www.financialsense.com/financial-sense-newshour/big-picture/2012/...

Sat, 03/17/2012 - 18:52 | 2265827 Spitzer
Spitzer's picture

Kinross gold was below its 2008 low in the same year gold made its all time high. There must be some truth to this miner manipulation. This is fuct up.

Sat, 03/17/2012 - 20:15 | 2266012 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1 for the thought / idea

But, you know better than almost anyone here that physical gold is a better way to save than the miners...

No miners for me.  I´ll just take the real thing.

Sat, 03/17/2012 - 20:31 | 2266051 akak
akak's picture

Miners tend to bitch when stuffed into safe deposit boxes, as well, and constantly need to be fed --- all quite a hassle.

Sat, 03/17/2012 - 20:36 | 2266060 xela2200
xela2200's picture

I read an article somewhere where they mentioned that traditionally Miners was a good way to play the gold trade. However, since we now have ETF (whatever you might think of them), people use them instead of miners. Additionally, miners have other dangers like expropriation, forced sales to government, strikes, or just not finding as much gold as the had estimated. Also, they are in the FED's shit list, so especial taxation can affect them.

I know every expert out there say they are undervalue including Peter Schiff, but I just don't find them attractive when I can just hold the real thing if one is going for wealth preservation

Sat, 03/17/2012 - 20:46 | 2266086 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

I know very little about gold miners and gold mining.  But, I have read about those same risks you wrote about.

No gold ETFs for the Bearing!

Sat, 03/17/2012 - 23:07 | 2266426 nick elsworth
nick elsworth's picture

Just wrote an article about it and couldn't agree more:

http://assetinflation.com/blog/2012/03/16/another-look-at-gold-and-gold-stocks-seeking-alpha/

Outlook: Physical Gold Shines Brightest

We are revisiting our outlook and focus based on information that has continued to evolve (and summarized above). It is clear to us that physical gold continues to be in great demand relative to derivative alternatives, especially considering the apparent need for central banks to support the world economy. As physical gold continues to be accumulated by individuals and governments worldwide, we believe that a premium will continue to be justified.

Sun, 03/18/2012 - 12:17 | 2267154 Spitzer
Spitzer's picture

Yeah you can come up with  all the reasons you want but it doesnt make any sense.

Agnico Eagle had a problem at one of its mines and the stock fell 30% in one day. When that Carnival cruise ship in Italy capsized and a bunch of people died, Carnivals stock fell by around 8%. 

Every gold producers market cap combined is less then half the market cap of Apple.

Sun, 03/18/2012 - 12:13 | 2267145 Spitzer
Spitzer's picture

Mining stocks are the Worst on earth. Airline stocks are better FFS.

The gold mining industry is being destroyed so that means a reduction in supply of gold. All the better for physical in hand..

 

 

Sat, 03/17/2012 - 18:53 | 2265828 Yen Cross
Yen Cross's picture

 You hate me. Just like " Merve the Swerve"

Sat, 03/17/2012 - 18:54 | 2265832 css1971
css1971's picture

mmm. Central banks don't have good reputations for timing. Or rather, their point of view is quite different from the rest of the world.

Sat, 03/17/2012 - 18:57 | 2265837 CryingBear
CryingBear's picture

China is screwed if the product they endorsed and advertised to the public goes down in value but I doubt they can keep this up much longer.

 

Sat, 03/17/2012 - 20:42 | 2266076 xela2200
xela2200's picture

The mistake that you are making is that You are thinking like westerner. We are more short term, Chinese think in life times.

Indians also seem to have an interesting take on it too. I was watching a wedding documentary on tv, and these people were wearing gold through out. Then as it turns out that part of the gold is just been passed down, so every generation is getting the benefit of the previous one. In a way they are beating inheritance taxes and transferring wealth to heirs.

Sat, 03/17/2012 - 18:58 | 2265840 Floordawg
Floordawg's picture

Walked by a dozen people today wearing, "WE BUY GOLD" signs in NYC.

I think I need one of those signs.

Sat, 03/17/2012 - 19:07 | 2265854 Dr. Engali
Dr. Engali's picture

I was thinking the same thing. Buy up as much scrap gold on the cheap that I can.

Sat, 03/17/2012 - 19:17 | 2265870 yabyum
yabyum's picture

The guy in the pink gorilla will probably give you 50% of spot....and maybe some ky to go with it. Best to aquire than to sell at this point.

Sat, 03/17/2012 - 19:23 | 2265881 Dr. Engali
Dr. Engali's picture

Shit I won't sell for anything. I was talking about getting myself a sign to buy. I might trade some gold for a 50 cal sniper rifle though.

Sat, 03/17/2012 - 19:29 | 2265896 Floordawg
Floordawg's picture

.50 cal, a gift to ones self that keeps on giving... for the man who has everything.

Sat, 03/17/2012 - 19:54 | 2265961 SgtSchultz
SgtSchultz's picture

How about a 20 mm rifle??

http://www.anzioironworks.com/20MM-TAKE-DOWN-RIFLE.htm

 

Features:

  • 3000 yard range
  • 1600 grain bullet
  • 3300 ft per second
  • Only weighs 39 pounds
  • Takes 20mm Vulcan ammo (percussion primed)
Sat, 03/17/2012 - 20:22 | 2266024 DoChenRollingBearing
DoChenRollingBearing's picture

+ 20 mm

I was going to say something nice about the .338 Lapua shooting flatter than the .50, but you had already raised the stakes!  Nice gun!  What is it supposed to take down?  Bradleys?  Body armor at 2 kms?

Sat, 03/17/2012 - 20:54 | 2266107 Errol
Errol's picture

I'm thinking...at only 39 pounds, it might kick a little...

Sat, 03/17/2012 - 22:12 | 2266284 SgtSchultz
SgtSchultz's picture

I would imagine a sore shoulder would be a given.

Three shots with the Anzio 20mm

Shot goes off at the 51 second mark:

http://www.youtube.com/watch?v=7ft2j6J4NcY

 

Sun, 03/18/2012 - 00:07 | 2266508 Dr. Engali
Dr. Engali's picture

Good Lord that's certainly not a gun you can take to the range and play around with all day. The way it moved him I'd say 10 shots would be pushing it.

Sun, 03/18/2012 - 00:28 | 2266541 Conax
Conax's picture

Wait til you try to buy some ammo for a 20 mm. The 50 caliber is about 6 bucks a round. The next time I'm charged by a bull elephant or mebbe a Bradley fighting vehicle, I'll consider a new 20mm.

Get yourself a .308 (or 5.56) rifle, 12 gauge pump, a .45 auto and a hideout popgun and you are as ready as anybody. Spend the excess money on practice ammo and range time. There ya go.

Sun, 03/18/2012 - 11:30 | 2267062 malikai
malikai's picture

Don't try to act like you didn't get a tingle in the pants when you saw that 20mm fire.

Sun, 03/18/2012 - 13:30 | 2267304 Conax
Conax's picture

I did. Ya got me.

But it isn't something you can sneak under your overcoat.

I like good guns with ammo that can be had as surplus. An important feature is that the dead may have some in their pockets.

Sun, 03/18/2012 - 07:33 | 2266827 RoadKill
RoadKill's picture

I now believe in gun control.

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