Sorry we’re a bit late getting this out this week. Our intention now is to deliver our weekly email each Thursday around lunchtime (used to be late afternoon Wednesday).
Today NZD gold is down $15.32 per oz or 0.97% from last Thursday and is today at $1557.53. NZD silver is down 88 cents per oz or 3.37% to $25.18.
The blue arrows in the gold chart below show where the price had dropped to last week, so gold has continued on the downwards trajectory it was on last week. However in the past couple of days this has reversed and we may now be back on the uptick. Gold didn’t quite reach the October lows.
(A reminder the turquoise plotted line is the USD gold price just for comparison as to how it has tracked recently to the NZD gold price).
However as we mentioned might occur last week, NZD silver did indeed retest the $25 lows of last month. It may well be bouncing back up from those levels now.
Reports from all bullion dealers we know are of very little buying going on currently both here and in Australia. So as we’ve mentioned before this can be an indicator of a bottom. Sentiment is certainly low but hey it can always go lower too. Regardless, note that the price to buy either metal is close to 3 year lows currently.
Thoughts on Australia’s Prospects, Housing and Gold
This weeks feature article is a summary of another presentation given at the Gold Symposium last month. This one by the Chief Economist for ABC Bullion Jordan Eliseo. Entitled Australia “The Lucky Country?”, he looked at what the prospects are for Australia and dug into some of the numbers commonly presented, covering inflation, unemployment demographics and debt just to name a few.
He also had some alternative thoughts on the Australian “housing shortage”, using official government statistics to show why this may not actually exist to the extent commonly promulgated. It has prompted us to have a dig around for some similar data here in NZ, so stay tuned for that shortly. We also intend to update our NZ housing priced in gold charts, something Jordan also covered for Australia. So keep an eye out for a housing report from us shortly.
Exit Strategy… What Exit Strategy?
We’ve read that the gold price has been weaker over the past week or so due to further speculation that the Fed will taper their bond purchases in the near term as a result of recently announced improved employment numbers and higher US GDP figures. We have our doubts about this as we’ve mentioned more than once.
In this short video interview, Chris Martenson explains succinctly just why the Fed will find it so hard to back out of QE. He also makes the point that if you look at the various crises that have occurred in the past couple of decades, the frequency is getting smaller (i.e. they occur more often) but the amplitude is actually getting larger, so he reckons the next crisis will be larger than the 2008 one.
However we also wonder if all this discussion as to what the Fed will or won’t do may end up being rather inconsequential. How so?
Well, recall that gold rose in price versus the US dollar and all other fiat currencies from 2000 to 2008 and this occurred without any currency printing from the Fed or the Bank of England or the Bank of Japan. This expansion of the monetary base since 2008 has no doubt had an impact on the price of gold versus the dollar, but it may have merely raised the level to which gold will have to rise (or be revalued to) eventually. Fiat money is dying and what the Fed does or doesn’t do might have a short term impact on the price but in the long run may not matter so much.
Rather it may be what the billions of Chinese and Indian citizens continue to do. If they continue to buy gold (and silver) as they have done, this may prove to be the much more significant factor in golds long run value versus paper currencies.
Of course using this argument, we could also bring up some negatives for gold in the shorter term, as undoubtedly the Indian central banks and governments efforts to dull demand for gold have not been without impact.
It is unknowable just how much gold is being smuggled into India to counteract the government measures. But we’ve read how many gold fabrication businesses in India have been put out of business due to these measures, so any smuggling has obviously not made up for the reduced gold demand that these measures have resulted in.
We read an interesting piece this week on this very topic by Stewart Thomson who writes Graceland Updates and so we’ve posted that on the website too. He has some very interesting thoughts on China and India. In particular how Indian gold demand could make a comeback next year.
Gold Demand Down?
The latest World Gold Council Gold Demand Trends report came out yesterday. It reports gold demand rising only 1.4% in quarter 3, and year on year shows global demand falling by 20%.
Compared to the 2nd quarter demand was down in China, Jewellery, small bar and coin. Only central Bank purchases and ETF demand was up in quarter 3.
So how did the price rise 11% in quarter 3 compared to quarter 2 if demand was flat?
Bullionvault reports that:
“…gold prices really aren’t about supply and demand. Not short term.
Sentiment drives gold prices. Most particularly wealthy Western sentiment. And in tick by tick, most especially the hot-money sentiment of traders at big-money hedge funds.”
This could be the case, although it doesn’t seem Eric Sprott would agree.
He made quite a compelling in case in a recent “Open Letter to the World Gold Council” that it is in fact with the demand statistics the world gold council use that the trouble lies. He put together the following alternative table of demand and supply:
“The evidence presented here is clear, demand for physical gold is extremely strong and, in reality, without the massive outflows from ETFs (half of world mine supply), it is hard to imagine how this demand would have been met. Since ETFs have a finite size (about 1,900 tonnes left), these outflows cannot continue for much longer (see our article on the topic).7 All these observations point to a considerable imbalance between supply and demand (unless Western Central Banks decide to fill this void with what is left of their reserves). If recycling was reduced by one half (China, India and Russia) and the temporary sales from ETFs were excluded, demand could be as high as 5,185 tonnes versus supply of 2,140 tonnes. The supply-demand imbalance is obvious to all.”
As Chris Powell of GATA commented when here last month, “The World Gold Council (WGC) exists only to make sure there isn’t a World Gold Council. It is part of the other side. Somebody ought to form a WGC by a different name.”
So it seems unlikely that they will change their ways. But as Eric Sprott noted in his open letter… “In his now celebrated “The 1998 Gold Book Annual”, Frank Veneroso demonstrated the inconsistencies in GFMS gold demand data and proceeded to show how they grossly underestimated demand. The tremendous increase in the price of gold over the following years vindicated his conclusion.”
Therefore we likely don’t need more accurate data from the World Gold Council for gold to continue to march towards its true valuation – although it could help to get it there sooner.
Gold Revaluation Would Greatly Benefit India
Speaking of revaluation, last week we discussed the various ways in which the end game could play out. A common theme amongst the presenters we have heard over the past month in Auckland and Sydney was that there would be an overnight revaluation of gold.
John Butler believed this could be a multi-polar agreement or it could be by a “first-mover” forcing everyone else to follow.
This week we came across an article which outlines how it is estimated that Indians collectively hold 20% of all the gold that’s ever been mined! A staggering $1.4 trillion worth of the yellow metal!
“India’s official, or government, gold reserve amounts to just 613 tons – merely the world’s 11th largest stash.
But that’s nowhere near the whole picture.
You see, of the estimated 167,550 tons of gold mined throughout all of history, some 34,170 tons are in India.
That’s 20% of all the gold ever produced, in just one country.
And at today’s prices, it’s worth nearly $1.4 trillion.”
This “democratisation of gold” in India should mean that if there is a gold revaluation this would likely be very positive for the Indian citizens who are currently being well and truly persecuted by their central bank/government when it comes to buying gold – as discussed earlier.
Unfortunately here in NZ our reserve bank holds a grand total of zero tonnes of gold as we first reported almost 4 years ago: How much gold does the Reserve Bank of New Zealand have?
So it’s up to you to be your own Central Bank just as the citizens of India are. And thankfully it is much cheaper for us to buy here with no government duties or GST on gold or silver. If you want to add to or begin your “official reserves” get in touch or please let us know if you 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:
|How will it all end?|
Gold Survival Gold Article Updates Nov. 7, 2013 This Week: Chris Powell in Auckland: Gold price suppression – why, how, and how long? How will it all end? Opinions from Chris Powell, John Butler, Hugo Salinas Price and Dan Denning As we suspected they would last week, both metals turned down lower after reaching […]
|Exit Strategy… What Exit Strategy?|
Chris Martenson has a real ability to explain things simply and clearly as he does so well in his crash course. (If you have yet to watch the Crash Course, we posted a summary of this along with a condensed video of it 4 years ago. See this link: Chris Martenson’s Condensed Crash Course). In […]
|Gold Symposium 2013: Australia “The Lucky Country?”|
A summary of remarks by Jordan Eliseo – ABC Bullion Chief Economist While Jordan Eliseo’s (Chief Economist for ABC Bullion) presentation from the 2013 Gold Symposium in Sydney specifically looked at Australia and what might be in store for it, we thought it was well worth sharing with you. Given that Australia remains New Zealand’s largest […]
|On India: The Modi Man & Gold Tonnage|
Stewart Thomsons Graceland Updates are always amusing although sometimes rather cryptic. He has posted this one in the clear so we thought it worth sharing as it’s not so cryptic and has some interesting comments on the future of China and in particular India which are definitely worth taking note of as we’ve not seen them […]
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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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