Indian households, together the world’s largest hoarders of gold, hold a record 23,000-24,000 tonnes of the prea record 23,000-24,000 tonnes of the precious metal, worth at least $800 billion, despite a sharp fall in international prices from their peaks in 2011, according to a comprehensive study of the Indian market by the London-headquartered World Gold Council (WGC). The value of the holdings is based on (conservative) international prices, which doesn’t factor in a 10% customs duty. The value would be substantially higher in the rupee term.
Coupled with 557.7 tonnes of the central bank’s holdings, gold stocks at most of the known sources in the world’s second-largest consumer would represent around a half of its gross domestic product. This means the gold monetisation scheme can be a success if the government makes it lucrative. The country’s gold demand has been shaken a tad after demonetisation, as some customers feared a crackdown on gold holding as well, but long-term prospects remain bright with demand expected to average at 850-950 per annum by 2020, the WGC said. The country’s gold demand is expected to have fallen to a seven-year low of 650-750 tonnes in 2016, although a recovery is expected as early as 2017.
The premium that mainland Chinese investors are willing to pay for physical gold has surged to over $40 as the Chinese government seeks to curb illegal capital outflows. Following slowing in Tier 1 home price growth, and a collapse in the China bond market, it appears gold panic-buying is accelerating…
This premium is higher than during the Lehman crisis and as bad as the peak of the Chinese banking system liquidity crisis in 2013 as onshore investors appear to prefer the precious metal to hedge against ongoing Yuan devaluation…
But it’s not just precious metals that are bid as alternatives to their paper money, Bitcoin is bid to its highest since Jan 2014…
China has curbed gold imports in the wake of government attempts to clamp down on capital leaving the country, according to traders and bankers.
Some banks with licences have recently had difficulty obtaining approval to import gold, they said — a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.
The hit to gold imports comes as China tightens restrictions on overseas deals by state-owned companies in an effort to limit capital outflows that has seen the renminbi fall to its lowest against the dollar in eight years.
The renminbi has slipped 5.8 per cent against the greenback this year, on track for its worst year on record.
Quotas for importing gold have been cut during quarterly assessments this year. Banks also have dollar quotas, some of which must be used when buying gold.
India’s gold imports declined by 58.96 per cent to 270 tonnes from January to September from 658 tonnes that were shipped-in during the corresponding period of last year, a research report said on Tuesday.
According to the report by the industry body Assocham, gold imports declined due to a prolonged strike by jewellers and continuation of 10 per cent custom duty on imports.
The report stated that smuggling of gold has been on the rise due to high custom duty, even as the industry demands a lower levy structure to encourage official imports.
India has been among the two biggest gold consumers in the world with average imports of more than 1,000 tonnes per annum reported in the recent past.
Further, the industry body pointed-out that it expects gold prices to stay firm in the range of Rs 30,500-Rs 33,500 per 10 grams.
The report said that gold prices are expected to remain firm in the backdrop of continuous global political and financial risks coupled with revival in demand in the domestic market. The prices have appreciated by about 25 per cent since January this year.
“The moot question among the buyers and analysts is whether scope for any further run is left when gold has seen so much of a rally, the best among all the assets classes – including quantitative easing led stock markets,” the research paper by Assocham said.
“Revival in Indian consumption, financial risks in the Chinese economy, tapering tantrums of the US Federal Reserve as also close American Presidential elections are all seen as the push factors for the gold to remain as a safe haven.”
The number one reason to buy physical gold and physical silver (not paper gold and paper silver, which is not the same thing) is very likely not what you think it is. I can deduce the number one reason why most people buy gold and silver simply from the disproprotionate amount of questions I receive about buying gold and silver whenever gold and silver prices are rising significantly versus when gold and silver prices are falling. In other words, most people believe that that top reason they should buy gold and silver is to profit from rising prices. However, this is far from the best reason to buy physical gold and physical silver. The number one reason to buy physical gold and silver, bar none, is the global currency rot that is happening today, that is relentless, and that Central Bankers are now helpless to stop (though they are responsible for creating it). Of course, some may say that benefiting from rising fiat currency prices of gold and silver is the same reason as protecting onself against currency rot, but in reality, these two reasons for buying gold and silver are as different as night and day, and here’s why. Of those that want to benefit from rising fiat currency prices of gold and silver, the vast majority are looking for a quick score, and they buy gold and silver for this reason without even taking the time to truly understand the value of gold and silver. Those seeking a quick profit from ownership of gold and silver typically fail to understand that:
(1) the true value of gold and silver is immutable and defined by its weight in grams or troy ounces;
(2) that gold and silver should never even be priced in terms of illegitimate fiat currencies; and
Just days after Goldman threw in the towel on its bearish gold call, the gold bulls are crawling out of the woodwork and none has been more vocal than Credit Suisse which moments ago hiked its gold price forecast to $1,500 which the world’s 3rd most systematically risky bank expects the yellow metal will hit in the first quarter of 2017.
According to CS, gold and silver are now its top picks in the metals space: “gold forecast to peak at $1,500/oz in Q1/17: We raise our gold price forecast by 8% in H2/16 to $1,413/oz and 10% in 2017 to $1,450/oz on prolonged macro and political uncertainty following the Brexit vote. We see an extended timeframe for a negative real rate environment in the US and abroad and continued gold buying by central banks and consumers to diversify wealth. Our silver price forecast increases by 12%, to $18.75/oz, in H2/16 and by 15%, to $19.03/oz, in 2017, following gold.”
hree days ago, when Wall Street was virtually certain that the Brexit vote would comfortably go in favor of the Remain camp, the best tell about the true sentiment on the ground had nothing to with polls, or manipulated bookies’ odds, and much more to do with our report that worried British savers are scrambling to buy gold bars and “stuffing them in safes at home, data suggests, as fears mount that a Brexit-induced financial meltdown could be just around the corner.”
To all those who did convert their soon to be far less valuable pounds sterling into physical gold, and in the process avoided a record devaluation in just one day, congratulations.
However, it turns out that many more did not. And as gold soared overnight, having its best day in years while cable was tanking, suddenly everyone else also had the epiphany that the only true money that preserves its value regardless of the stupidity of politicians or idiocy of central bankers, is gold.
As the Telegraph reports, by 11am London time, BullionVault users had traded £23.5m of vaulted gold and silver since midnight – more than two weeks’ worth of average trading in 2015. And, showing the scramble by the public to buy gold, new account openings by 11am were already twice this year’s daily average.
But it was about to get much worse, or perhaps, batter.
According to Google, the number of internet searches for the phrase “buy gold” spiked by 500% after the Brexit results trickled through around 5am. Investors flocked to the safe haven asset during Asian trading while the pound plummeted to a 31-year low.
Something very interesting took place in the COMEX Registered silver inventories last week. There were two very large transfers of silver from the Registered to the Eligible category. What makes these two large withdrawals so interesting is that the Registered silver inventories are now at a record low.
The first large transfer of silver was reported on June 1st, in which 2.5 million oz (Moz) were taken out of the CNT Depository and another 410,000 oz from HSBC. Nearly 3 Moz of silver were transferred out of the Registered inventories in one day:
Shares of gold miners have more than doubled this year, crushing the 20 per cent gain in the precious metal and prompting investors such as billionaire George Soros to increase their bets on the sector.
Soros Fund Management bought a 1.7 per cent stake in miner Barrick Gold in the first quarter, worth $263.7m, according to a filing on Monday. Shares in the Canadian-listed company have surged 139 per cent so far in 2016.
As gold does not pay a yield like bonds or offer a divided like some equities, the precious metal has benefited from the current low and negative interest rate environment. A weaker tone for the US dollar after peaking in late January has also spurred a solid rebound in commodity prices.
Gold miners have also spent the last four years writing down billions of dollars in assets and cutting costs to reduce their debts after gold prices tumbled from their 2011 peak. Barrick Gold has cut its debt by nearly a third over the past 15 months.
“They’ve gone through a bad few years (the gold mining companies) but they seem to come out the other side,” said David Govett, head of precious metals at broker Marex Spectron. “They’re easier to trade and you don’t get the ridiculous fluctuations we see in the commodity price sometimes.”