5 Must-Reads for Tuesday: Gold, China, India, Cyberspying and More!

1. Factoid for the day ...
After the Second World War the U.S. earned 50% of the globe’s cash flow. As the developed world recovered, its share of global cash flow rose to 80% by the turn of the century. This is changing rapidly. China now has 40% of that cash flow and the entire ‘emerging’ world will command 65% of this cash flow sometime between 2016 and 2020 with the developed world earning 35% of the global cash flow.

2. India Outpacing China’s Oil Demand

India’s oil demand has shown steady growth through July at an average of 3%, or 101,000 barrels a day. China’s oil demand has declined at an average of 0.6%, or 62,000 barrel a day.

In absolute terms China is Asia’s largest oil consumer, having burned 10.76 million barrels a day of oil and accounting for 12.1% of global oil consumption in 2013, according to BP PLC. The second-largest oil consumer in Asia is Japan, though its oil consumption has been declining as its economy has matured. 

India ranks third at 3.7 million barrels a day and accounted for about 4.2% of global oil consumption in 2013. 

3. Gold Investment Positive last month, But Only Just

Argentina's default, the death toll in Gaza, LOL jihadis in Iraq...nothing shook gold from its summer slumber. In case you missed it – because you passed out with boredom – this is how tedious precious metals became in August 2014...

• Gold traded in the narrowest monthly price range for five years, a mere $40 per ounce;
• The monthly average price of $1296 was almost precisely the average gold price of the previous 12 months ($1297.50);
• Speculators and commercial traders both cut their holdings of Comex futures & options. In fact, open interest (ie, the number of contracts now open) fell to a series of 5-year lows;
• Investment funds also shrugged and took to the beach. The giant SPDR Gold Trust (GLD) shrank by 6 tonnes, reversing July's addition and erasing all 2014 growth so far at 795 tonnes – a 5-year low when first hit this January.

See also: 3 Important Gold Charts

4. Phony Cell Towers Could Be Intercepting Your Data 

Les Goldsmith, the CEO of ESD America, the company that makes the super-secure CryptoPhone 500, found 17 phony towers around the U.S. in July alone. No one knows for sure who's running them, Goldsmith tells Popular Science.

"What we find suspicious is that a lot of these interceptors are right on top of U.S. military bases. So we begin to wonder – are some of them U.S. government interceptors? Or are some of them Chinese interceptors?" he says.

5. Morgan Stanley: The Market Could Rally For Years, And The S&P Might Go To 3,000

"We believe a prolonged period of deleveraging in the U.S., coupled with an uneven global recovery, are just two of the reasons why this could prove to be the longest US expansion — ever," he writes.

Gold Dips Below $1,300 -- Chart and Analysis

Gold has dipped below $1,300 this morning. The reason is that news is out that China’s gold consumption had fallen more than 19% year-on-year to 569.45 metric tonnes.

Investors bought fewer bars and coins, offsetting higher demand for gold jewelry. Sales of gold bars and coins fell 62.1% and 44.3% respectively, while jewelry sales rose 11% to 426.17 tonnes. Industrial consumption rose 11.3%.

At the same time, China's total gold production in the first six months of 2014 reached 211.1 metric tonnes, up 9.47% from a year ago.

On the other hand, if you know gold’s seasonal trends, is this dip frightening or a buying opportunity?

Now, just because gold usually goes up in the next few months doesn’t mean that it has to. Sure, gold could go lower.

But consider that gold imports into India surged 65% year over year in June, despite the fact that India’s government hasn’t eased its tariffs on gold imports. China isn’t the only game in town.

Plus if, you think we’ve seen the last of geopolitical worries, I think you have another thing coming.

Buy gold and miners ... or don't. You always have to do what you're comfortable with. But it's a truism of the market that the best time to buy is when others are selling.

Good luck out there today, and good trades.

The Relationship Between Gold and The Dollar

I'm watching the U.S. dollar very closely here. Check out this chart from StockCharts.com for the PowerShares DB US Dollar Index Bullish Fund (UUP)



(Updated chart) 

You can see that the U.S. dollar drifts higher, then breaks lower, over and over again. Most recently, bullish action in the euro is weighing on the dollar.

Other thoughts ...

• Since gold is priced in dollars, more weakness in the dollar should be supportive for gold. It's worrisome that gold hasn't done better considering the slump in the dollar. But maybe the price in New York has yet to catch up with the fundamentals.
• And to be sure, all eyes are on the FOMC meeting this week.
• Speaking of gold, the most recent news out of China can be seen as a positive. The latest figures from Hong Kong suggest that gold demand in China is yet again heading for a new record in 2014.
• However, in India, farmers are concerned over a weak monsoon, which would drastically affect their crops. And that is probably dragging on gold.

6 Hot Stories & Charts on Gold & Silver

As we slide into a Good Friday weekend, I have some charts of gold and silver for you.

Let's start with two factoids from Frank Holmes at US Global ...

#1: China Continues to Accumulate Gold

China is now thought to hold 2,716 tonnes of gold, while the U.S. holds 8,812 tonnes. China would still need ten years for its gold holdings to catch up to the U.S., suggesting strong gold demand from China. With Russia on the offensive again, it too has the capacity to push oil prices higher, boost its revenue and purchase additional gold beyond domestic production.

XX Update -- thanks to sharp-eyed reader "Anonymous," I have corrected this figure.  US Global listed it as "million tonnes," and I didn't catch it. The World Gold Council lists more likely numbers. The chart is still wrong.


#2. India's Gold Trade Caught in Cash Bind.

India’s general election has negatively impacted gold trade in the country. Gold traders in India are used to cash transactions when buying and selling gold. With the election code of conduct in force, traders face severe restrictions on carrying physical cash in large denominations. According to Hasmukh Bafna, President of the Gold Chains & Jewellery Welfare Association, business has dropped by 70 to 80 percent since the first week in March.This low gold demand is expected to continue until the middle of May

#3. Russia Rising.

Russia has now overtaken the U.S. to become the world’s second-largest gold producer behind China. In fact, the Wall Street Journal reports that Russia's production of gold-containing concentrates increased in January-March by 12.3% compared with January-March 2013, and the country's gold output increased by 32.6% on the year.

#4. Silver Production at Primary Producers on a Slippery Slope

Steve at SRSRoccoReports.com says that for 2013, the top primary silver miners suffered the lowest average silver yield ever.

Read the rest of his analysis HERE.

#5. Gold Miner All-In Cost Blues

Deutsche Bank has released a chart showing all-in costs of some smaller gold producers.

Chart found HERE.

#6. Chart of Gold
Finally, here's an updated version of my gold chart.

(Updated chart)

 Clearly, this was a bearish week for the metal. Gold closed below $1,300 AND its 200-day moving average. A test of support seems likely.

I'm sorry if that's not bullish enough for you. If you want bullish, look at natural gas. I'll have more analysis on that next week.

Have a happy Good Friday and a Wonderful Easter.  By the way, do you wonder why it's called "Good" Friday. Wonder no more.

Peace be upon you.

6 Hot Links and Charts for Monday

Here are some of the things I find interesting this morning.

1. India's gold imports rise in March
The gold import in India surged nearly 50 tones in March, amid the RBI’s import restrictions. Meantime, the RBI Governor, Mr. Raghuram Rajan hinted on the further relaxation of the gold import curbs today despite the increased gold import flow seen recently.

2. Former Treasury Official: The Fed Has No Integrity on Gold
Almost every week it is possible to illustrate the appearance of a large number of contracts shorting gold at times of day when trading is thin. The short-selling triggers stop-loss orders and margin calls and hammers down the gold price. The Fed has resorted to this practice in order to protect the value of the US dollar from Quantitative Easing.

In order for the Fed to effectively support the reserve status of the U.S. dollar by pushing it higher when it starts to drop, the Fed has also to prevent the price of gold from rising. Intervention in the gold market has been occurring for a long time. However, in the last several years the intervention has become blatant and desperate, as rising concerns about the dollar are causing countries such as China and Russia to accumulate fewer dollars and more gold.

Read the rest.

3. How much oil is produced in each tightoil play in the US?

4. Russia Makes New Move into Eastern Ukraine
Pro-Russia activists occupying a regional government building in Donetsk, in eastern Ukraine, on Monday proclaimed the creation of a separatist Donetsk republic, a Reuters witness said.

Sean's note: Read my column from last week explaining why the Russians would move into Eastern Ukraine. Hint: Oil, gas and coal.

5. The First 5 Things You Should Do When You Get a New Computer
Here are a few things you should do whenever you buy a new PC. Most people don't do 'em. Do you?

6. April 7 is National Beer Day!

Treat yourself. And have a great Monday.

4 Gold Stories & 4 Smokin' Hot Charts

Precious metals miners seem to be taking a pause to catch their breath; we'll see if it turns into something more. Personally, I'd like a buyable pullback, but I don't know if I've been that good. 

Miners seem to have been leading the metals, so maybe this is a taste of something bigger. But see my S&P 500 chart below if you are counting on a BIG pullback.  Might not be in the cards. 

Here are four gold stories I find interesting ...

"Meadowbank" sounds like such a nice name, doesn't it? I remember the briefing on this project. It sounded insane then.  "Mining Gold at Minus 45 Degrees Celcius"

Drought Triggers New California Gold Rush: Prospectors in Southern California are heading to the hills, saying the severe drought has exposed gold that has never been touched by human hands

China’s gold imports from Hong Kong fell in January. Mainland Chinese buyers purchased a total of 102.6 tons in January, including scrap, compared with 126.6 tons a month earlier and 51.3 tons a year earlier, data from the Hong Kong government showed. It's not a big deal; seasonal and holiday issues are at work here.

Interesting: Sales of gold coins by the U.S. Mint, the world’s largest, are heading for the worst month since September after prices jumped to a 16-week high. This is a clear sign of price affecting demand.  US coin demand doesn't matter in the big picture; what matters is if price affects Chinese demand. Let's wait and see about that.

While we chew over that, here are some charts for your consideration ...

Chart #1: A New Way to Look at Consumer Confidence

I snagged this off of Twitter and promptly lost the link. Anyway, this longer-term look at Consumer Confidence, applying technical analysis, says that we may be at or nearing a top.

Chart #2: Gold Smuggling in India

Estimates are that India catches 1 in 3 smuggled ounces on a good day. The Wall Street Journal has the story. 

Chart #3: The S&P 500 Recovers From Its Pullback

Did you buy the dip in the S&P 500. I know, it was so three weeks ago. You'll get another chance, buddy.

Chart #4: US Defense Spending

Seriously, the amount we spend on armaments in this country is insane.  Now, the military is looking at the deepest cuts since the end of World War II.  Yet the Air Force still wants to hang on to that dog of an F-35 fighter, and will scrap the A-10 Warthog -- the best ground-support plane ever, a plane which the Air Force brass distinctly did not want -- to do it.

6 Gold Stories for Wednesday, & 1 Chart

1. Global Gold Coin And Bar Demand Surged 28% To Record 1,654 Tonnes In 2013

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 ...

(Updated chart)

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

Stocks Swoon, Gold Soars

Futures in multiple markets held hands and jumped off a ledge this morning, after China and US PMI both missed.

Flash U.S. PMI for January missed expectations, coming in at 53.7. Expectations were for a reading of 55 versus 54.4 prior. Anything over 50 shows growth. China was much worse –  the flash Markit/HSBC Purchasing Managers' Index fell to 49.6 in January from December's final

reading of 50.5. Again, that drop below the 50 line separates expansion of activity from contraction.

Two markets did well on this news.

One is the euro.  Interestingly enough, economic activity in the Eurozone reached its highest level since June 2011, coming in at 53.2. 

In fact, if you're looking for a beaten down market that seems to be makinga turn, Europe is worth a look.

The other market doing well is the gold market, though it may also be getting a boost on news that Sonia Gandhi, president of India's National Congress Party (and the Italian born widow of Rajiv Gandhi) is calling for India to ease its restrictions on gold imports.

As you probably know, India’s draconian restrictions slapped 10% import duty on gold and also dictate that 20% of all imports must leave the country as exports. The laws have actually hurt gold exports, and boosted gold smuggling. 

Other Gold News

You can download the latest Thomson/Reuters GFMS Gold Survey 2013 Update right here.  Free registration required.  Some of the highlights …

• China became the world’s top gold consumer in 2013.
• World investment, which accounted for 28% of overall demand, fell 11% to 1,342 metric tonnes in 2013, its lowest in five years.
• Last year's price crash triggered a jump in demand for jewelry, coins and bars, particularly in China. GFMS said Chinese jewelry fabrication surged 31% to 724 tonnes in 2013, its largest year-on-year tonnage gain since 1992. Overall jewelry demand hit a five-year high of 2,198 tonnes in 2013.
• Central bank demand fell by a third last year to 359 tonnes.
• GFMS sees $1,200 as a long-term floor for gold. Lower prices will ignite physical buying.
• GFMS says the professional market seems to be over-obsessed with issues around the Fed’s proposed tapering program but that “private individuals in the traditional gold investing countries had no such qualms and as the price tumbled in the second quarter, hordes of these buyers appeared in the market.”

Overall, I’d call the GFMS report moderately bearish.  I expect them to be surprised. Like Today!

Here is Jesse’s latest take on gold. It’s worth reading. One more gold piece: The best damned article you'll read on gold all day.

Other News

More oil spilled in US rail incidents in 2013 than in the previous 37 years combined.  There’s a company that can fix – if not prevent, at least minimize – a lot of those incidents. It’s a recommended position in Gold & Resource Trader, and it’s doing very well. Hang on to that one.

Yesterday, most of China’s internet traffic diverted to a single mysterious house in Wyoming 

I love maps. Especially strange maps, or maps that make you think. Here’s a map showing the population of other countries jig-sawed into “extraordinarily” populated India.

Have a good day.