Monday, March 17, 2014

6 Important Stories on Gold

1. ETF Purchases of Gold Rise Again: There were purchases of gold into the SPDR gold ETF [GLD] of 3.297 tonnes but none into the iShares Gold Trust [IAU], on Friday, which left their respective holdings at 816.593 tonnes and 165.14 tonnes.

2. RBCCM sees gold rally ahead - similar to 2005-2008
Royal Bank of Canada Capital Markets analysts Dan Rollins in Toronto and Jonathan Guy in London have come up with a detailed analysis of the gold market over the next few years comparing it with the big ETF driven gold price rally of 2005-2008.Over that period, gold doubled in price from $450 to $900.

What they see as the huge, and sustainable, rise in gold purchases by China, which they reckon as replacing the surge in ETF purchases which drove prices after 2005 up until the 2012 crash.

Taking the net Hong Kong gold import figures alone, plus Chinese gold mine production, China appears to have absorbed just short of 1,600 tonnes of gold in 2013 alone – and the true figure is likely to be far higher given there are other routes for Chinese gold imports than just via Hong Kong.

Back in 2005, Chinese gold imports were negligible – so the difference here is enormous and is actually far bigger than the sales out of the ETFs. Read the rest

2. Speculators expect gold, wheat to get Ukraine price boost
Hedge fund managers are piling back in as the escalating crisis in Ukraine spurs a rebound in the prices of both commodities.

XX Sean's note -- this is actually a bearish force in the market, because the hedge funds will sell the minute the wind shifts.

3. Chinese Yuan Tumbles Again
The People's Bank of China widened the daily trading band around which the value of the Chinese yuan is allowed to deviate from the daily reference rate to 2% from 1%.
The announcement comes on the back of a PBoC-engineered weakening of the yuan (via lower reference rates) over the past several weeks — largely designed to shake out carry-trading speculators

XX Sean's note: A weakening of the yuan (or renminbi) means that gold prices are higher for people in China. This, along with other harbingers of inflation in China, makes them more likely to invest more money in gold. China also wants its people to own gold, long term. So unlike India, they won't discourage this investment in gold.

And let's in the fact that many of the wise sages of the market said that China's currency would appreciate as the government widened the band. Obviously that's not happening, so they're all caught on the wrong side of the market.

4. 2013 U.S. gold production down 128,602 oz - USGS
Also, 2013 worldwide gold production increased by 3% from 2,690 metric tons to 2,770 metric tons due to increases in production from Brazil, Canada, China, the Dominican Republic, and Russia, “which more than offset production decreases in Peru, Tanzania, South Africa, and the United States”. There are a lot of good stats in this story. Read the rest.

5. Bruised gold miners return tentatively to hedging
Increasing numbers of gold miners, battered by last year's drop in bullion prices, are selling planned output forward to help shore up their finances for stormy times.

XX Sean's comment: Obviously, many miners STILL don't believe the gold price rally is for real. You can't blame them after 3 years of a bear market, but it just shows that sentiment is awful, as I wrote about in a piece about my recent trip to the Prospectors & Developers Association of Canada (PDAC), the world's biggest mining conference.

6. Gold Weaker as Market Place Takes in Stride Crimea Vote to Succeed
XX Sean's note: On Friday, I told Gold & Resource Trader subscribers to expect this -- as well as a rally in the broad stock market. So what do you do now? And what comes next? GRT subscribers know what I think. We'll be acting on it soon. Stay tuned, my friends.

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