The media, and in this respect lawrieongold.com is certainly not blameless, has the tendency to come up with sensationalist headlines, if only to persuade people to read the ensuing article. The headlines may not even accurately reflect the subsequent analysis - or may be reporting on analysis by third parties which are not necessarily the views of the writer.
So our apologies for two such headlines in the past week for which we have received a certain amount of adverse comment.
The first of these articles was titled Does China have 30,000 tonnes of gold stashed away? in which we reported on a comment in a client newsletter from a highly respected analyst who has some very specific knowledge on China. He has been very successful in predicting that nation’s commodity markets trends and price movements that have often been at odds with many other analysts but have since proved to be correct, at least in part. His judgements are in strong demand from clients. He, in turn, drew on an analysis last year by another well thought of gold analyst that China had accumulated some 25,000 tonnes of gold between the years 1982 and 2003 under the radar - admittedly a highly speculative assessment given that it seems unlikely such huge flows would not have been picked up at least in part by the other mainstream gold analysts. To this figure he added a far less controversial 5,000 tonnes of possible Chinese accumulations since 2003, which may even be seen as a conservative estimate by some many other followers of Chinese gold flows, and thus came up with the 30,000 tonne figure which was the genesis of the perhaps over-sensationalist headline.
In part this was a shame, as perhaps it detracted in some eyes from the rest of his comments which were looking at the restructuring of the Chinese economy over the next few years. These suggested that some decisions being taken now which, as we put it, would mean some swingeing internal financial reforms which will have a strong impact on global financial markets – and not a positive impact! Some of the recent announcements out of China on financial restructuring suggest that this process is already under way and is already beginning to take a toll on Western markets as the country’s growth is continuing to slow and as it tries to consolidate the huge internal progress it has made on urbanisation and wealth building in its society.
He also noted, more controversially, that China has the intention to tie its currency in some way to gold over the next three years. Less controversially he commented that it is trying to further internationalise direct trade in yuan rather than having to work via the world’s primary reserve currency, the US dollar, which it feels has been used by the US hugely to the latter’s own advantage over the years. He also noted that the Chinese do not want to make the yuan itself the new reserve currency - or even a reserve currency, but just simplify the direct trade aspects of yuan convertibility into other key currencies.
The second article which had perhaps an over-sensational headline was Could Apple Buy a Third of the World’s Gold? – Frank Holmes in which Frank looked at the potential impact on the gold market of major sales of a gold-cased version Apple’s proposed new ‘iWatch’. Frank drew on some other published data suggesting that the gold version of the watch might contain two ounces of gold (which we commented seemed to be an awful lot) and that it might sell millions, although that was perhaps a market assessment too far given the likely price of such a watch.
Two ounces of gold is indeed a lot. The Rolex gold President watch does contain over two ounces of gold - but the biggest proportion of that is in the strap rather than in the case and there hasn’t been any indication that Apple is considering marketing the gold version of its new watch with anything but a leather strap. The heaviest gold Rolex sells at about $60,000 and the take up is perhaps in hundreds rather than millions and there is again no indication that Apple is looking to quite such a high priced product so perhaps the assessments are somewhat away from reality. But, as with all such articles one needs to read it and makes one’s own judgement. We don’t think our readers are stupid and are quite capable of making their own deductions.
So what is the moral of this. It is perhaps to view article headlines as not necessarily directly indicative of the actual views of the writer - particularly if they are followed by a ?, but as a device to draw the reader in and decide for him- or her- self. The articles themselves may come up with counter arguments and may just be rapportage rather than the writer’s own comments. They need to be viewed as such