Our Thoughts on Declining COMEX Gold Inventories
This weeks feature article covers a topic we alluded to in our main article last week on gold backwardation and negative Gold Forward Offered Rates, where we said there has been plenty of talk around the interwebs of “high demand for physical gold and that this is backed up by falling COMEX inventories”.
Just like GOFO and backwardation this is not the simplest topic to cover, but if you’ve read a bit about COMEX stockpiles but not got your head around the difference between the likes of Eligible and Registered gold stocks then hopefully this might help you out. We also cover what we think you can make of the declining inventories, where they’re going, (Hint – it begins with Ch and rhymes “finer”) and what this might mean for the future.
Other articles on the website include a look back at the late 70’s to get an idea of what a poor economy means for the gold price.
Lastly this great little 3 minute video that Bix Weir forwarded on yesterday, which covers some of the reasons you should own actual physical gold and silver and to be careful how and where it is stored. It draws a simple parallel to continuing partying on board the titanic after the iceberg was hit and parallels gold to lifeboats. Very clever!
More Gold Storage Facilities Opening in Asia
Speaking of beginning with “Ch” and rhyming with “finer”, all this gold flowing eastwards is backed up by the observation that more and more vaulting facilities opening in the Asia region. Aussie Bank ANZ has just opened a gold vault in the Singapore Freeport facility capable of storing 50 tonnes to add to its existing Hong Kong storage. The Sydney Morning Herald piece said:
“Demand for physical metal is robust, irrespective of prices, said Mr Listorti, [ANZs co-head of fixed income, currencies and commodities] whose team distributes about 15 percent of the world’s primary gold production. Clients include central banks, sovereign wealth funds and asset managers, he said. The company has a supply agreement with the Perth Mint and is one of the top three providers of gold into China, according to a statement.”
So they should have their finger on the pulse as to just how much metal is moving into China. Bloomberg reported this morning imports fell 4.8% from June, but they still exceeded 100 tonnes. Also see our above mentioned article on COMEX stocks for the latest chart on gold imports into China via Hong Kong.
Could China confiscate its citizens’ gold? (And would they need to?)
Sticking to the topic of China and gold we also just read this morning an interesting piece by Laurie Williams on Mineweb entitled “Could China confiscate its citizens’ gold en route to global domination?”
In a nutshell Laurie ponders whether China could pull “a Roosevelt” and force its populace to sell their private gold holdings to the government to overtake the USA’s stockpile in one fell swoop and give it advantage in a new monetary world order.
An interesting angle we reckon, but perhaps they may not need to?
If there was sufficient gold within Chinese borders and then if gold was re-monetised within China and circulated they would likely have more “money” than any other nation anyway. Back in 2009 we posted an article based upon a speech we heard in Canberra by Professor Fekete where he outlined a 7 point plan that China could follow. This didn’t involve them needing to confiscate gold but rather just to Open the Chinese Mint to Gold and Silver. As we wrote back then…
“Open the Chinese Mint to Gold and Silver. Create an unconditional right for the people of China to convert bullion into coins free of seigniorage (as the US Constitution says) i.e. There would be no charge to mint bullion into coins. This would result in tremendous demand as gold in coin form is worth more than in bullion form as it is more readily exchangeable. So people would actually take their gold to China to effectively get something for nothing. The cost to China would be made up for by the massive amounts of gold coming into their financial system.”
See the full article for the rest of the Professors plan:
We reckon the Chinese rulers would be more likely to follow the Professors plan as this wouldn’t involve upsetting the populace with a forced sale but have the same end result.
Why India Won’t be Deterred from Buying Precious Metals
It’s a real Eastern hemisphere theme here today! Here’s evidence that government intervention rarely works, with silver imports up massively in India in response to the Indian Government’s multiple restrictions on gold imports.
“Silver imports recorded a staggering 258.65% growth at 857 metric tonnes (MT) in the first four months (April-July) of 2013-14 as compared to 239 MT by July 2012.”
The Indian Governments argument is that the massive gold imports negatively affect the countries balance of trade. However we wonder what pressure has been put on India’s leaders by western governments to stem the flow of bullion from West to East? It was “interesting” how these moves were timed when there was massive demand for gold not just in India but globally, and may have worked to stem the tide somewhat.
Anyway, on top of these increases in silver imports are the reports of significant increases in the smuggling of gold into India mostly from Dubai. Now the latest is that buyers have shifted into Pakistan…
“Following the Indian government’s decision to discourage gold import by imposing 8% duties, buyers have reportedly shifted to Pakistan where the precious metal is allowed to be imported duty free since 2001.”
In response Pakistan has placed a 1 month ban on gold imports. The lengths the central planners will go to combat the yellow metal!
With more smuggling news coming in each week, the odds are that plenty of black market gold is still making it’s way into India and is probably why Alistair MacLeod thinks the Indian consumer is unlikley to fall for the paper gold switcheroo the government is trying to pull with getting them into ETFs and the like.
Our Thoughts on Gold and Silver in NZD
Today NZD gold is at $1617.82, down $42 per ounce from a week ago. While silver is down 24c per ounce to $24.66.
The theme of the last couple of weeks has been that gold and silver have struggled to break above their respective 50 day moving averages (blue lines in the charts). So we have seen both metals trending down over this period.
Given the difficulty in breaching the technically important 50 day MA, it would not be surprising to see further weakness in the prices of both metals in the short term. There remains a chance we could yet see a retest of the June lows. But these current levels still make a good place to take a position and as we like to remind you leave some powder dry in case a further dip comes – of which of course there is no guarantee.
Local silver is back down to 7% above spot + $13.80 ingot charge per bar. So 5 x 1kg (160.75oz) today delivered and insured to your door, the cost is around $4329.95 or $26.94 per ounce and ready around a week away.
And premiums have just dropped back on Canadian Silver Maples too. A box of 500 is today at $14820 delivered and fully insured.
Get in touch if you want to get a quote or have any questions.
1. Email: firstname.lastname@example.org
2. Phone: 0800 888 GOLD ( 0800 888 465 ) (or +64 9 2813898)
3. or Online order form with indicative pricing
Have a golden week!
Glenn (and David)
Ph: 0800 888 465
From outside NZ: +64 9 281 3898
This Weeks Articles:
|Our Take on Gold Backwardation and Negative GOFO|
|2013-08-02 05:02:41-04Gold Survival Gold Article Updates August 02, 2013 This Week: Gold Backwardation and Negative GOFO – What does it all mean? Ned Naylor-Leyland on Gold Backwardation And More Sorry we missed last weeks update. We were hoping to finish our latest article on gold backwardation and negative Gold Forward Offered Rates (GOFO), so held off emailing […]read more…|
|Poor Economy = Low Gold Price?|
|2013-08-06 02:14:25-04As the saying goes history doesn’t repeat but it does rhyme and the period that may have most relevance to today might be the late 1970′s. This saw a stagnating global economy, but with rising oil prices, interest rates and accelerating inflation (which we don’t see currently – well not yet at least). The following […]read more…|
|Declining COMEX Gold Inventories – what to make of it?|
|2013-08-07 00:40:08-04As we referenced in last weeks article on gold backwardation and negative Gold Forward Offered Rates, there has been plenty of talk around the interwebs of “high demand for physical gold and that this is backed up by falling COMEX inventories”. There have been arguments made that these falling inventories are signalling a soon to […]read more…|
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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.
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