Commodity Trade Mantra

Banks expect a Gold Rally – Is Trust driving Germany to repatriate Gold?

Banks expect a Gold Rally

Banks expect a Gold Rally- Is Trust driving Germany to repatriate Gold?

Gold Market players feel that it’s too early to dismiss a potential Gold Price Rally in the coming months. With Indian marriage season Gold Jewelry buying coming up and a possible resurgence out of China as that economy rebounds, Gold Demand may resurface. Speculative positioning in gold futures is yet light & that leaves much room for additional long positions to be established should Gold Prices jump on the back of any negative Economic news or developments. The U.S. Mint data showed 113,000 ounces of Gold Coins were sold in the U.S. to date this year, nearly as much as were sold in the whole of January 2012. Interest in Silver coinage is similar as 5.1 million ounces have already been sold, the highest figure for 12 months. “Coin sales are thus just 16% below last year’s January figure. If this dynamism continues for the rest of the month, January could achieve record sales in Silver Coins in the U.S., which should lend support to the Silver Prices,” Commerzbank says. Commerzbank is also looking for an up tick in the U.S., European and Japanese economies, driven by government/central bank stimuli, and coupled with the continuing Chinese growth sees the commodities  ‘super cycle’ as still well and truly alive with a consequent positive effect on industrial metals and minerals.

The ever growing Asian Gold Demand:

Chinese demand for physical Gold seems to be ever rising, and given the anticipated economic growth returning to higher levels this seems likely to increase further.  China is already running neck and neck with India as being the world’s largest consumer of physical metal in this sector – between them the two Asian countries now account for the purchase of well over half of global new mined gold production, but while India’s Gold consumption may stall as the government tries to make imports less attractive, China should move into first place either this year or next.  Together with central bank purchases, the two Asian giants, along with particularly strong Gold Demand elsewhere in Asia and the Middle East, may well account for taking up some 80% of the 2,800 tons of newly mined Gold, and getting on for perhaps 60% of annual total supply of around 4,000 tons including scrap and recycling. At the beginning of the Gold Bull Market, Chinese consumption was tiny, but it has accelerated throughout it and really took off around four to five years ago when the government actively promoted Gold and Silver purchases by the general public.  This trend shows little sign of diminishing, even through last year’s Chinese economic downturn and the Asian giant’s consumption will continue to be as big an influence in the Precious Metals sector as it is for industrial metals and minerals, perhaps even bigger.

Bundesbank bringing Gold back home by 2020- May be lack of trust on rising Gold Prices!

Bundesbank will repatriate 674 metric tons of Gold from vaults in Paris and New York by 2020 to restore public confidence in the safety of Germany’s reserves. The phased relocation of the Gold, currently worth about 27 billion euros ($36 billion), will begin this year and result in half of Germany’s reserves being stored in Frankfurt by the end of the decade, the Bundesbank said in a statement today. It will bring home all 374 tons of its Gold held at the Banque de France and a further 300 tons from the New York Federal Reserve, it said. Holdings at the Bank of England will remain unchanged. German Gold is stored for free in New York and Paris, the Bank of England charges between 500,000 Euros and 550,000 Euros a year. Makes Sense? There seems more to it than meets the eye. With this new storage plan, the Bundesbank is focusing on the two primary functions of the Gold Reserves: to build trust and confidence domestically, and the ability to exchange Gold for foreign currencies at Gold Trading centers abroad within a short space of time. “In Germany, a lot of emotion is attached to the topic of Gold Reserves,” Bundesbank board member Carl-Ludwig Thiele said at a press conference in Frankfurt. “The Bundesbank has managed the Gold Reserves with great caution and will continue to do so.” During the Cold War, Germany kept most of its gold abroad for fear it could fall into the hands of the Soviet Union if the country were invaded. Another reason was to have the precious metal close to the foreign currency markets in London, Paris and New York, where gold is traded. Since France, like Germany, switched to the euro more than a decade ago, storing gold for foreign currency swaps in Paris is no longer necessary, the Bundesbank said. Once the shipment is complete, Frankfurt will hold half of Germany’s 3,400 tons of reserve Gold currently worth about $183 billion with New York retaining 37% and London 13%. The Bundesbank is negotiating auditing rights with its partner central banks. Thiele said he visited all storage locations last year and the returning Gold will be examined. He declined to comment on the cost of the transfers, saying only it is “economically tolerable for the Bundesbank.” Is the expectation of a fresh Bull Run in Gold Prices driving Germany to repatriate its Gold to the safety of its own reserves? OR is it that Germany expects other problems to rise since the world expects the US to enter a deep & long term recession? 

GFMS Sees Investment Demand Continuing To Support Gold In 2013:

Publication of Thomson Reuters GFMS Gold Survey 2012 – Update 2

  •        Gold investment swelled to record levels in dollar terms last year at an approximate $87 Bn
  •        Official sector purchases at 50-year highs
  •        Jewelry demand resilient, falling ‘only’ 4%
  •        Mine production growth constrained last year, but at record levels

Thomson Reuters GFMS launched its Gold Survey 2012 – Update 2 publication today, their latest report on the Gold Market at an event inToronto.  The briefing was given at the launch by Philip Klapwijk, Global Head of Metals Analytics at Thomson Reuters GFMS.  The report delivers GFMS’ initial estimates of the market’s fundamentals for calendar 2012, ahead of Gold Survey 2013 in April. GFMS expects central bank purchases of gold will continue again this year, noting that in 2012, official sector net purchases rose 17%. Gold Jewelry demand fell 4% in 2012. Indian and Chinese demand fell, with Chinese jewelry fabrication down for the first time in nine years.


Interesting: Russia Says World Is Nearing Currency War as Europe Joins – Bloomberg

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