Wed, 02nd December 2015

Anirudh Sethi Report


Archives of “GOLD” Tag

Gold Demand in China Heading For Record and Reserves Increase 14 Tonnes In October

While gold prices continue to languish in the doldrums and are on course for their worst month since 2013, global demand and especially Chinese retail, investor and official demand continues to remain very robust. Indeed, China looks likely to see a new record demand for gold annually again in 2015.

Shanghai Gold Exchange (SGE) deliveries as reported last Friday were again very robust with another 54.063 tonnes of bullion deliveries for the week ending November 20th. Shanghai Gold Exchange (SGE) deliveries remain the best indicator or proxy for actual Chinese demand and appear to show Chinese gold demand is heading for a new record in 2015 (see charts below).

China added another 14 tonnes or 450,000 troy ounces of gold bullion to its foreign exchange reserves in October.

Gold reserves rose to 1,722.5 metric tonnes or 55.38 million troy ounces at the end of October. This was up from 54.93 million at the end of September, data from the People’s Bank of China (PBOC) showed today.

China’s increasingly powerful central bank has been adding between 14 tonnes and 19 tonnes of gold every month. The strong demand and positive view of gold comes as the country looks to diversify its massive foreign exchange reserves of over $3.5 trillion.

Indian Citizens Very Smart-Only 30 Kilograms Take Part In “Gold Monetization Scheme”

Two months ago we gave our most recent review of what we dubbed the soft launch of India’s gold confiscation program, when the government’s “voluntary”gold-to-paper backed bonds conversion went, well, gold: back then, Modi’s government approved the gold monetization plan and sale of sovereign bonds proposed several months ago by the Reserve Bank of India.

The plans were first announced by Finance Minister Arun Jaitley in February as measures to woo Indians away from physical gold. As Jaitley explained the deposited gold would be auctioned, used to replenish the Reserve Bank of India’s reserves or be lent to jewelers. Subsequently, gold “depositors” can redeem in gold or cash depending on the tenure. Said otherwise, an attempt to “fractionally-reserve” gold, which would then be used a source of gold rehypothecation in the country that despite all the government’s efforts, remains starved for physical gold.

Now, one week after the gold scheme’s official launch, we take a look at how has it has done so far. In one word, so far the “gold monetization” plan has been a disaster with a laughable 30 kilograms in gold tendered by the people from physical into “government-backed” form.

The Times of India has the details, and reports that in the first-week “collection by the government’s sovereign gold bond scheme has been rather tepid with less than Rs 10 crore being reported to the Reserve Bank of India (RBI). The scheme, which closes on November 20, allows investors to purchase between 2 and 500 grams of gold-equivalent.

World Gold Council Continues To Hide Insatiable Chinese Gold Demand

The amount of gold withdrawn from the vaults of the Shanghai Gold Exchange (SGE), which equals Chinese wholesale gold demand, accounted for 45 tonnes in the trading week that ended on 6 November. Year to date SGE withdrawals have reached an astonishing 2,210 tonnes, which is more than the full year record set in 2013 at 2,197 tonnes. With nearly two months of trading left in the Chinese gold market, SGE withdrawals are estimated to reach more than 2,600 tonnes.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 43

Please read The Mechanics Of The Chinese Domestic Gold Market for a comprehensive explanation of the relationship between SGE withdrawals and Chinese wholesale gold demand.

If Chinese gold import will be higher than in 2013 remains to be seen. Two years ago China imported 1,507 tonnes in standard gold bars. According to my estimates China is on track to import 1,400 tonnes in 2015. This year’s SGE withdrawals can have been supplied by more recycled gold than in 2013 that in part replaces gold import.

SGE withdrawals = mine + import + recycled gold supply.

Platinum prices stumble to 7-year low

Precious metal prices are bouncing around like bucking broncos today. Ride them at your own peril.

Platinum prices have fallen to a 7-year low amid a similarly wild, volatile session to that being endured by gold

The shiny silvery metal is down 1.5 per cent today at $872.5 per ounce, a level not seen since December 2008.

But it’s not been a steady march south. The price jumped 1.8 per cent in less than half an hour during afternoon trading in London to $883.5, before quickly giving up almost of all its sudden gains and falling back to $872.5.

The price of platinum is down 6.9 per cent so far this week, putting it on track for its worst week of losses since September 2011.

The volatility comes on a Thursday packed with speeches from five Fed governors. Since the Fed’s surprisingly hawkish October meeting and last Friday’s bumper payrolls report, market expectations of a December rate hike have soared.

This has weighed on precious metal prices, which offer no yield, a shortcoming that is thrown into starker relief when the yields of other assets, such as US government bonds, are rising.

Platinum has suffered the added pain of the Volkswagen emissions fixing scandal, which has the potential to dent the sale of diesel cars and thereby diminish a key source of platinum demand – diesel catalytic convertors.

Russia is on Course to Global Platinum Domination

Platinum bar - finished produce of the Krastsvetmet non-ferrous metal plant, one of the world leaders of precious metal industry, based in Krasnoyarsk, SiberiaRussia could change the balance of power on the global platinum market thanks to its ambitious projects aimed at developing mines and building processing plants in Zimbabwe, the OilPrice news site reported.

Russian companies are currently building a platinum complex estimated to cost $3 billion.

The work is going according to schedule and the project, made public in September 2014, is expected to enter its second phase in the spring of 2016.

The speed and scope of cooperation are said to have major implications for global platinum market.

“Russia domestically controls 30 percent of global platinum and palladium output. And Zimbabwe’s mines represent the world’s fourth-leading source of these metals – meaning that Russian control in the African nation could create a stranglehold on this market,” the media outlet noted.

Russia also reportedly hopes to expand cooperation with Harare to include diamonds, gold and natural gas.

The Smoking Gun: Silver & Gold Manipulation Exposed

The amount of ink spilled on this topic could fill a supertanker.  Goldbugs the world over believe in the suppression story as an article of faith, and indeed, the evidence that “something is happening” appears incontrovertible.

Given how important the subject is to the bullion-owning community, and the volume of energy we expend talking (and talking, and talking, and talking) about it, how much information do we really have about what is actually going on?  Has anyone quantified suppression?  Do we know how, when, and how frequently it occurs?  Once a month?  Once a day?  What does it even look like?  For many of us it might be like that old Supreme Court Justice’s definition of obscenity: I can’t define it, but I know it when I see it.

So, I’ll take my best shot at defining suppression. Then armed with a definition, I should be able to discover how and when it takes place. To see how frequently it happens, and what the immediately observable effects are – as well as the apparent longer term effects of such events.  Does the fact that a suppression attack occurs means the price trend changes?  Is an attack prima facie evidence of successful control of prices over the long term?  And is anything else being suppressed, too?  Perhaps everything is being suppressed by our banking lords and masters!

The visible attacks that we have all seen involve “someone” dumping (or buying) large numbers of futures contracts in the market when activity is relatively lighter than usual, with the intent of deliberately moving price.  Most goldbugs like to say that gold and silver suppression attacks occur in the “wee hours of the morning.”  Loosely translated, I take this to mean during non-US and non-London trading hours.  So that’s the time range I will use: 4pm-3am Eastern; from just after US market close through to the London market open.

China data-September CPI: +1.6% y/y (expected +1.8%) and PPI -5.9% y/y (expected -5.9%)

China data-September CPI & PPI

CPI, in at +1.6% y/y

  • expected +1.8% and prior was 2.0%

PPI, -5.9% y/y

  • expected -5.9% and prior was -5.9% also

PPI negative for 43 consecutive months now … prices will be weighed upon while overcapacity is persistent and commodity prices remain on the soft side

Food price inflation eased back a little, giving us the lower CPI read

Meanwhile, producer prices deflated for a 43rd consecutive month, reflecting excess supply of housing materials and raw materials, and overcapacity in heavy industry. Producer prices remained 5.9 per cent below year-ago levels, its deepest since 2009.

“Imported commodity costs and overcapacity among domestic producers are leading to lower prices of energy, iron ore and other inputs,” Moody’s Analytics said. “Recent stock market volatility also appears to have caused a downtick in investment and production, which could lead to further deflation pressures. The recent yuan devaluation likely did not affect import costs to a great extent.”