The World Gold Council's "Demand Trends Full Year 2013" shows that China became the world’s largest store of wealth buyer of gold in 2013. They are not consumers as only a tiny fraction of gold is ever consumed. Chinese people bought a record 1,066 metric tons of gold last year, as sudden price falls led to a 32% jump in bars, coins and jewelry buying.
China’s increased purchases helped limit the decline in gold prices as western speculators and investors sold 869.1 tons through exchange-traded products backed by bullion.
2. 'Dama' women behind much of China's current gold demand
Massive gold purchases by Chinese `dama' investors - bargain-hunting, middle-aged women - may have propelled China past India as the largest gold consuming country in the world this year.
According to the Xinhua News Agency, the surge in gold demand seen in China was helped by frenzied purchases by these `damas', who were eager to chase cheap deals.
this group consisting mainly of married women between 40 and 60 years of age, grabbed the attention of the world for the first time in 2013. The Wall Street Journal specially created the term `dama' to showcase the urgency of the Chinese ladies in the gold market.
In the wake of the gold price slump in the international gold market, Chinese investors, mostly mothers, spent around 100 billion yuan to buy 300 tonnes of gold within 10 days.
3. The World Gold Council Clueless on Chinese Gold Demand?
The World Gold Council released the Gold Demand Trends for Q4 2013. According to this report total 2013 Chinese consumer demand was 1,065.8 tons. In my opinion this number is highly disputable.
The consequence/purpose of the structure of the Chinese gold market is that SGE withdrawals equal wholesale demand. In 2013 SGE withdrawals accounted for 2197 tons.
How come there is such a big difference between Chinese demand reported by the WGC, 1066 tons, and wholesale demand, 2197 tons? Why is the WGC missing 1132 tons? One reason is because the Chinese are hiding it. Since 2008 the Chinese have great interest to hoard in the dark in order to diversify their US dollar reserves, strengthen their economy and protect it from external shocks. The China Gold Association (CGA) changed the way they measure demand and all other Chinese gold institutions ceased publishing reports on demand since 2011. The only valuable information they continue to publish are SGE withdrawals.
4. The big gold ETF turnaround and its prospective impact
Chinese and Indian demand alongside high demand levels from a number of other countries, mostly in the East, Middle East and FSU, was perhaps more than countered, as far as the Western gold markets were concerned, by the enormous turnaround in the gold ETFs in 2013. The WGC figures put gold ETF outflows of 880.8 tonnes as against ETF intakes of 279.1 tonnes in 2012. Thus this comes out as a massive turnaround of 1,159.9 tonnes in effective market supply, which was almost certainly, although unspecified as such, the key driver forcing down gold prices in the West in 2013.
Now there are indications this year, although it is early days yet, that the outflows from the ETFs may have ended and may even be being replaced by small inflows.
5. Gold ETP Holdings In Biggest Jump Since December 2012
total gold holdings in exchange traded products rose by 3.2 tons, the biggest weekly increase since December 2012. Holdings in silver, which rallied more than 7 percent last week, jumped by 104.2 tons.
With two weeks gone, February could be on track to show the first monthly increase in ETP holdings since December 2012 as many investors who left the market last year may be tempted to get involved once again.
6. India's Smuggled gold doubles to 200 tonnes in 2013
According to estimates by the global precious metals consultancy GFMS, 150 to 200 tonnes were smuggled in 2013 from Dubai, Singapore and land routes of Bangladesh, Pakistan and Nepal. The agency estimated 112 tonnes had been smuggled in 2012.
7. US Dollar Tries to Bounce
Here is the chart of the PowerShares DB US Dollar Index Bullish Fund that I've been following ...
It looks like the US dollar wants to rally from support, but it's a pathetic bounce so far.
UPDATE: The Fed minutes released today (from January's meeting) seem to have put a bid in the U.S. dollar. This is weighing on gold. We'll see how far and long the dollar rally/gold correction goes.
Good luck, and good trades,
Sean
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