Gold & Precious Metals

Precious Metals Enter “Summer Lull”, Will Miss “Commodity Supercycle” Says SocGen

 

The GOLD PRICE ticked higher in London trade Monday morning, rising from its lowest weekly close in three years as Asian stock markets fell but Eurozone shares jumped over 2% higher.

Major government bonds ticked higher, easing interest rates down, while the US Dollar held steady after last week’s strong gains on the currency market.

A Wall Street Journal survey says the majority of economists think that Friday’s jobs data mean the US Federal Reserve will start reducing its quantitative easing program as early as September.

Silver bullion today ticked back above $19.22 per ounce, regaining half of last week’s 3.6% drop.

“Unlike the April rout [in gold prices],” says the latest monthly report from brokers INTL FCStone, “which drew out a slew of buyers, we are not seeing the same type of reaction this time around.

“[This suggests] the complex remains vulnerable from the physical side as well.”

The gold price is now “near the lows of the year,” says David Govett at fellow brokers Marex Spectron, but “For the moment at least, I do think we have done enough.

“I now think we are moving into the good old summer lull. Overall direction will be sideways.”

New curbs on gold bullion imports to India – where the Hindu calendar’s Chaturmas will now keep gold demand low until September – cut legal inflows by 81% in June from May’s record high of 162 tonnes, a government official told journalists today.

Sales are however “expected to go up again” because of the gold price, the official added.

“India’s gold imports will be somewhat the same or slightly more for July,” agrees Commtrendz Research’s Gnanasekar Thiagarajan, quoted by Reuters, “as some bargain hunting interest was seen.”

The Indian Rupee fell Monday to fresh all-time lows against the Dollar, reducing the gold price discount for buyers in the world’s No.1 consumer market.

“The [Reserve Bank of India] is definitely concerned about Rupee weakness,” says Nick Verdi at Barclays in Singapore.

Rather than intervening to support the Rupee with cash trades, however, “It will look to combat this mostly through verbal intervention,” he reckons.

Meantime in Egypt, the 12th largest private gold consumer in 2012, the main stock market sank almost 3% as fighting continued after more than 40 supporters of ousted president Morsi were killed at the weekend.

“Tensions in Egypt put pressure on local [gold] demand,” says German refining group Umicore in a quarterly trading update, “as some retailers started to think of closing their shops for fears of looting.”

With the gold price now 36% below its Dollar record of September 2011, Russia’s state treasury Gokhran – the official trader of gems and precious metals – is preparing to buy gold on the domestic market after a two-year gap, Reuters reports.

Invited to sell gold onto the open market when prices neared their 2011 peak, “We were forbidden to buy gold directly [from Russian miners],” a source tells the newswire. 

“If we receive permission, we will be happy to start buying gold again,” the source added.

Russia’s central has continued to acquire gold bullion for its own reserves, adding more than 78 tonnes in the last 12 months and rising to 7th place amongst the largest nation-state holders.

Western Europe’s central banks, in contrast, have so far sold only 4.3 tonnes of the 400-tonne limit set by their Central Bank Gold Agreement this year.

Running from September, the agreement was first signed in 1999 to cap erratic sales by European governments as the gold price sank to three decade lows. 

“Gold prices are going to generally drop down throughout the year,” reckons Société Générale’s head of commodities research, Michael Haigh, speaking today at a media briefing in Singapore.

Pointing to possible “price hedging” by gold-mining producers, “They’ll start selling into the market,” Haigh warned, “which puts more downward pressure on gold prices.”

SocGen’s outlook for gold is in stark contrast to its broader view of the commodities “super cycle”, which Haigh believes will continue for another 15-20 years thanks to “population and urbanization” in emerging Asian economies.

“But it’s not going to be an upward price for all.”

Forecast by many analysts to overtake India as the world’s No.1 gold consumer in 2013, China imported its second greatest monthly volume of gold bullion through Hong Kong in May, data showed last week.

Through the first 6 months of the year, separate data showed Friday, gold bullion deliveries made to traders using the Shanghai Gold Exchange totalled 1058 tonnes.

That was precisely 50% of the 2012 full-year total.

The plunging gold price however saw shares in Zijin Mining – the largest gold miner in world No.1 mining nation China – today drop 11% after it forecast “very poor results, below expectations.”

“The fact that the gold price has fallen is actually going to be very healthy,” said gold-mining fund manager Evy Hambro of Blackrock to Bloomberg last week.

“We need to see costs taken out of the industry; we need to see the companies stop producing the ounces that don’t make money and focusing on the ones that do.”

 

Adrian Ash

BullionVault

 

Gold price chart, no delay | Buy gold online

 

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

 

(c) BullionVault 2013

 

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

We are leading off with a discussion of gold mining stocks because the recent price action has created a situation that can now aptly be described as unprecedented. A consequence is that there has NEVER been a better time to buy gold mining stocks.

Changes in Silver: So Who Is Buying?

Posted by Miguel Perez-Santalla - BullionVault

on Friday, 5 July 2013 17:25

With photography gone, and PV not plugging the gap, where is silver seeing the strongest demand…? 

FOR ALL ITS monetary and investment history, silver is by far an industrial metal today.

The industrial sector consumed close to 466 million ounces of silver in 2012 according to the Silver Institute. Add what’s left of photographic demand, and you get to 524 moz, some 62% of total fabrication.

We already discussed what happened to photographic demand in Part 1 and we looked at photovoltaic silver consumption in Part 2 of this series. There we saw how PV demand remains a long way from filling the gap left by the collapse of photography.

So who does buy silver in bulk? Well, silver is also used in electronics and catalysts. And a fast-growing industry that consumes silver is the production of ethylene oxide.

Ethylene oxide (EO) is used in the production of antifreeze, polyester, heat transfer liquids, gas dehydration, and solvents. It is also used in cosmetics, pharmaceuticals, lubricants, paint solvents, soaps, detergents, gas purification, emulsifiers and dispersants. Because of the wonderful properties of this reactive chemical, its growth has benefited the silver market as well. Because the precious metal is used as a catalyst in EO production.

Some 90% of silver’s total catalyst demand comes from EO production. The EO market has enjoyed a 30-year continued growth cycle, according to consultancy Metals Focus Ltd. In 2002 it consumed 100 million ounces of silver, and it is projected by 2017 to reach 225 million ounces per annum. This rivals the historical high of the photographic industry. However, the EO market will not continue to grow at this pace. Because consumers are able to recover the silver from the catalyst. This means that at some point its demand will stabilize and perhaps decrease.

By geographical area, the United States is the largest consumer of silver. It is also the largest consumer of silver jewelry. Over the last couple of years demand to buy silver as jewelry has remained strong, as gold remained at high prices, leading consumers to substitute. But now, with the recent decline in the gold price, there’s good reason to think silver will have a bigger struggle to keep its share of the market.

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What of that other major consumer of silver – investment? This is not a primary user. We are talking about the investor, who can substitute at will. As of this writing, the SLV (which is the call sign for the largest exchange-traded silver trust fund or ETF) is holding 320 million ounces of silver. This number represents 31% of annual world silver supply using 2012’s statistics.

That’s a significant overhang if it comes back to the market. But overall silver investment has grown significantly in both the ETF market and coins and medals. Since 2002 sales of coins and medals grew close to 250% worldwide.  Yes, that only represents only half of the type of consumption we see for jewelry. But adding the ETF and other physical investment products together, it becomes larger than the jewelry by 28%.

What are the concerns then for an investor? What happens if the silver comes back into the market that is in the hands of investors? What happens if the price goes down? Finally what happens if the price goes up?

The funny thing with silver is that when the price goes down demand from the industrial sector and jewelry sector will rise and it will be consumed. It may take some time but it will happen. At the same time if the price is low then there will be less mining because of profitability. Eventually the fundamentals will drive the price higher.

If the price makes new highs we usually see large liquidations of metal either from scrap recovery or investors. This will force market prices to correct to a level that will sustain the available material. Of course if silver were to be demanded as forms of currency, then all bets are off. The price of silver would then reach unknown heights.

Fundamentally silver remains an indispensable metal. It is one that mankind cannot do without. There will always be uses and demand for silver. Its beauty and its relevance as a store of value – added along with its physical and chemical properties – make it an important part of anyone’s portfolio. Just like gold, it remains a good thing to own.

Miguel Perez-Santalla

BullionVault

 

Miguel Perez-Santalla is vice president of business development for BullionVault, the physical gold and silver exchange founded a decade ago and now the world’s #1 provider of physical bullion ownership online. A fierce advocate for retail investors, and a regular speaker at industry and media events, Miguel has over 30 years’ experience in the precious metals business, previously working at the United States’ top coin dealerships, as well as international refining group Heraeus.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

 
 

The period ending in 2010 was one of the most explosive episodes of growth for the gold mining industry, but the aftermath has been bleak. Gold is down $500 in 2013 alone. The GDX, which tracks the performance of an index of gold mining companies, has declined by over 48% in that same period. What’s it going to take – and how long – before the gold mining stocks turn around?

Steve Todoruk, a Senior Investment Executive at Sprott Global Resource Investments Ltd., says the major mining companies are starting to clean up their acts and run more efficient operations, but the turnaround could take time…..full comment HERE

“Water, water everywhere, nor any drop to drink… There is a similar situation with regard to fiat paper everywhere, but not a gold delivery to be made. The delirium cast by central bankers issuing unlimited fiat has kept so many people in a fiat-induced fog, unable to see clearly. The fog has lifted. It is all a game. See the fraudulent scheme for what it is and then fear no more. It is just a matter of time before everything unravels, as it surely is.”

“The price of gold and silver are closer to a bottom than a top. The QE-Infinity is closer to a top and will collapse under its own ‘goldless’ weight. The PM holders are on the correct side of history. Understand that it has been one of the bigger world scams played by the central bankers, the illuminati who believed themselves untouchable, beyond the scope of comprehension by the non-banking world.”

“Stop buying into the scheme of the moneychangers. Their time has come, and it is but a matter of time. They are playing with everyone’s mind, doing everything possible to destroy the gold/silver markets, committing self-destruction in the process. They are making every attempt to discredit the barbaric metal that cannot be eaten, that pays no dividends, but somehow survives as the most reliable measure of accepted value.”

“This is all taking much longer than many expected. One need not be religious to keep the faith, for the reality of owning the physical will not disappoint. The ultimate facts are on the side of PM holders.”

…..read more HERE