Archive for the ‘Gold’ Category

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Posted May 20, 2011

Gold Bullion Bars

The World Gold Council has just published the latest issue of “Gold Demand Trends” (Q1 2011). This is a rather bullish report, concluding: “The outlook for global gold demand remains robust throughout 2011against a background of another strong quarter, the geographic and sectoral diversity of demand and strong fundamentals.”

The report summarized the demand trends as follows:

  • Global gold demand in the first quarter of 2011 totaled 981.3 tonnes, up 11% year-on-year from 881.0 tonnes in the first quarter of 2010. In value terms, this translated to U.S. $43.7bn, compared with $31.4bn in the first quarter of 2010, an increase of almost 40%. This was largely attributable to a widespread rise in demand for bars and coins, supported by an improvement in jewelery demand in key markets.
  • The quarterly average gold price hit a new record of U.S. $1,386.27/oz (London PM Fix), its eighth consecutive year-on-year increase. Despite a period of price consolidation in the early part of the quarter, it climbed to record highs throughout March and has continued to achieve new highs in April and May.
  • During the first quarter of the year, investment demand grew by 26% to 310.5 tonnes from 245.6 tonnes in the first quarter of 2010. In value terms, investment demand was $13.8bn. The main growth came from bar and coin demand which increased by 52% year-on-year, to 366.4 tonnes. In value terms, this represented a near-doubling of demand to $16.3bn from $8.6bn in Q1 2010.
  • ETFs and similar products witnessed net outflows of 56 tonnes ($2.5bn). Redemptions were concentrated in January. Despite the outflows, the collective volume of gold held by global ETFs by the end of the quarter was in excess of 2,100 tonnes equating to more than $95bn.
  • Jewelery demand in the first quarter of 2011 registered a gain of 7% from year earlier levels of 521.3 tonnes to reach 556.9 tonnes. This equated to a record quarterly value of $24.8bn. India and China, the two largest markets for gold jewelery, together accounted for 349.1 tonnes or 63% of the total, a value of $16bn. China’s jewelery demand reached a new quarterly record of 142.9 tonnes ($6.4bn) up 21% from 118.2 tonnes in the first quarter of 2010.
  • Technology demand remained steady in the first quarter at 113.8 tonnes ($5.1bn). A revision to the fourth quarter figures now means that 2010 was the highest year on record for gold demand in electronics at 326.8 tonnes or $12.9bn.
  • In Q1 2011, gold supply declined by 4% year-on-year to 872.2 tonnes from 912.1 tonnes in the first quarter of 2010. This decline was due to a sharp increase in net purchasing by the official sector and a fall in the supply of recycled gold, which was down 6% on year-earlier levels to 347.5 tonnes from 369.3 tonnes in the first quarter of 2010. Mine production increased by 44 tonnes year-on-year, a growth rate of 7% from year earlier levels, with negligible net producer de-hedging.
  • Central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total of net purchases during the first three quarters of 2010.

The World Gold Council expects gold to be driven by the following factors during the rest of 2011.

  • Prevailing global socio-economic conditions will continue to drive investment demand for gold. These include: Continued uncertainty over the U.S. economy and the dollar, ongoing European sovereign debt concerns, global inflationary pressures and continued tensions in the Middle East and North Africa.
  • Sustained momentum in Chinese and Indian jewelery demand will underpin growth in the jewelery sector throughout 2011. Strong demand in India during the recent Akshaya Tritiya festival and the beginning of the wedding season, alongside extensive purchasing on dips in the gold price, underlines the strength of the Indian market.
  • Net purchasing by the official sector is expected to continue in 2011 as central banks turn to gold as a means of diversifying their reserves into an asset with no credit or counter-party risk.

Original Source

This material is for informational purposes only. Although it is obtained from sources believed to be reliable, Leland National Gold does not guarantee its accuracy, or being all-inclusive. Past performance is no guarantee of future results. There are risks in buying and selling physical metals. The potential for loss as well as gain increases by leveraging physical precious metals transactions. Never trade with more money than you can afford to lose, and always be sure to read the Risk Disclosure provided in your account documents.

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Gold - The Calm Before the Storm

The excitement that surrounded the gold and silver markets for most of last year has somewhat subsided this year. Although events in the first quarter of the year have been very interesting, gold hasn’t been making the headlines as much as one would think. These are the type of lull periods in the gold market that get me the most excited.  We are clearly in a period of consolidation, which in my opinion, is very bullish for gold.

My number one wish is for sentiment to turn decidedly bearish. I want people to believe that our debt problems can be papered over forever without repercussions. I want people to trade in their gold for stocks and be done with it. I want deflationists to explain for the 10th year in a row why gold is going to $200. I want people to say gold is a bubble even though gold, having consolidated for 4 straight months, resembles no bubble I’ve ever studied. These are the kind of things I will look for in an intermediate term bottom.

Balanced Outlook

While gold is positioned to go much higher from here, I believe those with the most balanced outlook in gold will be the most profitable. When gold is rocketing higher day after day, it is common to hear that the dollar is going to collapse and gold is going to $10,000. On the flip side, when gold is correcting. you hear about how the dollar is the ultimate safe haven currency and how gold is going back to $200. Neither of these views is truly balanced.

In the same way that the British pound didn’t disappear but merely made way for the U.S. dollar, I believe the U.S. dollar will make way for a new global currency. If this is in the form of SDR’s, the dollar will still be in demand. The real debate doesn’t necessarily revolve around the dollar disappearing, it concerns the dominance of the dollar. As long as the U.S. is the dominant military power, they will have the dominant currency. However, no matter how much airplay the rise of Asia receives, I still think people are underestimating the magnitude of the shift we are seeing. These shifts in power occur a lot more frequently than you think. In ancient times, the Assyrians made way for the Babylonians, who made way for the Persians, who made way for the Greeks, who made way for the Romans. I strongly believe Asia, led by China, will dominate the 2nd half of the 21st century.

Gold and silver will play a critical role in the ascent of Asia. China has been accumulating gold at a torrid pace and they are positioning themselves very wisely for what is to come. Trading in depreciating Treasuries for gold is just about the smartest thing China can do- and they are doing it. Heck, China can use their dollar reserves to buy the U.S.’s gold, thereby contracting our current account deficit with China. This will not only strengthen China’s financial position, but it will allay some of the political pressure coming from Washington D.C. These are the trends I see coming.

This is a lull period that gold bugs will just have to fight through. If gold does suffer a major correction, block out all the talking heads on TV. States have yet to figure out how to legitimately balances their budgets. Debt growth on the federal level is still oupacing GDP growth. Pensions are still underfunded. Last time I checked, Boomers are still getting a year older every year. We are facing major funding problems in our near future. Believe me, gold is getting prepared to launch to outer space as a result.

This material is for informational purposes only. Although it is obtained from sources believed to be reliable, Leland National Gold does not guarantee its accuracy, or being all-inclusive. Past performance is no guarantee of future results. There are risks in buying and selling physical metals. The potential for loss as well as gain increases by leveraging physical precious metals transactions. Never trade with more money than you can afford to lose, and always be sure to read the Risk Disclosure provided in your account documents.