Sorry but this week’s musing will be a bit light, care of a sick child and a mess to clean up! That’s too much information already on that topic so we’ll press on quickly…
Given the not exactly surprisingly re-eruption of troubles in Europe and particularly Spain in the past couple of days, precious metals have held up quite well – especially gold. Global sharemarkets have fallen but gold and silver seem to have had plenty of buying support when they’ve dipped. This has been occurring just about every day lately. A sharp fall soon after New York open but buyers arrive and send the price back up to similar levels from where it started.
See chart below of these sharp falls and corresponding sharp rises. Green line was last night. Red night was Monday night.
There has been conjecture that these are big money Asian buyers or even Central Banks from the east. Who knows exactly, but China keeps importing a lot of gold via Hong Kong as we’ve reported in past weeks. Bloomberg reported gold imports into China via Hong Kong for May were 76 metric tonnes, which was a six-fold increase on last year. Also Russia has almost doubled its gold reserves since the financial crisis hit in 2008 from about 15 million oz to 29mil oz.
Gold bears will say this indicates a top in gold but as last week’s article showed historically the Central Banks are still a long way from reaching past highs in terms of their gold reserves:
…world central-bank holdings are far below what they were in 1980. Clearly, a few years of net buying does not a bubble make.
The difference is greater than you might realize. Consider that since 1980…
• The global population has grown 55%
• Worldwide gold supply has grown 120%
• Foreign-exchange holdings have increased 650% since 1995, and now total $10.4 trillion.
It seems rather obvious that a lot more “catch-up” buying is needed before we start talking about a top for gold on this basis.
Here in NZ the price of gold has bounced higher these past couple of days mainly care of the weakening NZ dollar.
The higher kiwi dollar has helped keep the silver price steady as it has actually fallen in US trading over the past couple of days.
There were 2 significant but not widely reported gold news stories out of China this past week.
Firstly, “over 5,000 investors were bilked out of 380 billion yuan, or $59.62 billion in a scheme involving Loco London gold since 2008, according to a report in the China Daily.” Source.
This is further evidence of the importance of having physical bullion. As we mentioned in a previous article, “Confusing investing with wealth protection: The risks of paper gold”, there has been no shortage of gold based scams in recent years with one paper gold failure close to home in the past year as well.
Anyway, $60 billion is not an insignificant amount that could have instead been held in physical bullion. This could push more people in China into the physical market and away from paper based trading. So potentially more support for the price.
Also out this week was the report that China is to launch an interbank gold market at the end of August. Source.
Hard to say exactly what impact this will have, but probably good to have a bit more competition in how the price is set. Physical gold is moving from West to East, and now perhaps some pricing power and control is heading that way too.
We’ve had quite a few questions from first time buyers lately so this week we pulled together a few of the more commonly asked questions and jotted down our answers and stitched them together into an article called Buying Precious Metals: Common Questions from First Time Buyers
So if you’re somewhat new to precious metals that might be helpful.
We’ve also published a somewhat philosophical article which is a little away from what you would usually find on Gold Survival Guide, but it was thought provoking and controversial enough that it deserved some coverage: Compassion – Killer of Society?
Well as we said a bit shorter today so that’s all folks. As always we’re happy to help out first time buyers, so if your question wasn’t answered in this weeks main article then drop us a line or give us a call and we’ll do our best to point you in the right direction.
1. Email: email@example.com
2. Phone: 0800 888 GOLD ( 0800 888 465 )
3. or new and improved Online order form with indicative pricing
Have a golden week!
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Compassion – Killer of Society?
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Buying Precious Metals: Common Questions from First Time Buyers
Buying precious metals can be a confusing project to embark on. In fact that was one of the reasons we set up Gold Survival Guide in the first place. Before we even started to offer any bullion for sale most questions we received were along the lines of what, where, how and from whom to […] read more…
The Legal stuff – Disclaimer:
We are not financial advisors, accountants or lawyers. Any information we provide is not intended as investment or financial advice. It is merely information based upon our own experiences. The information we discuss is of a general nature and should merely be used as a place to start your own research and you definitely should conduct your own due diligence. You should seek professional investment or financial advice before making any decisions.