We’re nearing the end of this year, and that’s when the major banks come out with their Christmas shopping lists. And of course as you could have expected, not a single decent bank is even considering to add gold to the list, and the bearish voices are now stronger than ever before.
Goldman Sachs expects the price of the yellow metal to fall to $1000/oz whilst the Bank of America, BNP Paribas and ABN Amro all expect the gold price to fall below the $1000-level in 2016. That reminds us of the exact opposite stance just a few years ago when gold was skyrocketing. Back then everybody was saying the yellow metal was a very useful addition to a portfolio and even the common man in the street was considering buying gold.
And of course, that has proven to be a good counter-indicator. The more gold is liked/hated by the common man, the higher the chance is its price will undergo a correction/put a bottom in place. And that might be exactly what we are seeing here at the $1080-1060-level. The gold price has tested this theoretical and technical bottom a few times but has repeatedly failed to fall towards a triple-digit number and always bounced slightly. Of course, that’s not a good enough reason to run out and increase your exposure to gold as we’re obviously not out of the woods just yet, but there’s a bigger picture we’d like to present here.
We all know the non-conventional countries are still keen on getting their hands on even more gold, and when the gold price falls, these countries are actually stepping up their buying pace. Russia, for instance, has purchased 5.27 million ounces in the first ten months of this year and will very likely end 2015 with a 6M oz higher gold position compared to the end of 2014. That by itself already is a very interesting and important fact as it shows that even when the Russian economy is falling apart it still considers gold to be a very important part of its strategic reserves. The next chart shows you how gold as a percentage of Russia’s official foreign assets has evolved.
And Russia obviously isn’t alone. Its friends in Kazakhstan have increased their gold holdings by 13% YTD and gold now accounts for 28% of the total amount of official reserve assets.
China also continues to buy more gold and is believed to have purchased no less than 35 tonnes of physical gold in just October and November alone, increasing the official stash by 1.1 million ounces in just two months. In fact, when the gold price was correcting in November, China stepped up its buying rate by a stunning 40%, and we wouldn’t be surprised to see the country having imported an additional 20-25 tonnes of gold in December.
And no, it’s not just Russia & friends and China that are buying gold, but India has also confirmed it expects to import 1,000 tonnes of gold this year, roughly 100 tonnes more than originally anticipated as the jewelers are stepping up the plate to take advantage of the current low price.
All of this leads us to one question. Please, Goldman Sachs, BNP Paribas, JP Morgan and other Bank of Americas, please tell us why these countries are so keen to destroy their own wealth? There’s no fundamental reason why the gold price should go further south and the country with probably the best long-term vision (China, which is also stockpiling as much oil as its strategic reserve tanks can hold) is filling the basement of its Central Bank with newly-smelted shiny bars.
Secular Investor offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies are transformed into the Gold & Silver Report and the Commodity Report.
Follow us on Facebook @SecularInvestor [NEW] and Twitter @SecularInvest