Why should Asian gold buyers chase gold prices up when they can absorb all that is mined at bargain basement prices asks Julian Phillips.
This morning the dollar index remained almost unchanged at 97.55 despite the slightly weaker euro. Gold is moving as an independent currency still.
Yesterday we mentioned that it will take a monetary event to move the gold price. Greece is looking more and more like this will be the first one of these to happen. It would be an easier political solution for Greece just to sit back and wait for a default. We expect the E.U. to then do all it can to keep Greece in the euro so as to keep the euro weak going forward. Once this event takes place volatility will return to the foreign exchanges and to the gold and silver markets.
It is felt by many that the gold markets are manipulated. The direction of this manipulation is downwards or just to hold the gold price at current levels. Certainly it appears that the banking system in the developed world is getting a big advantage in this. On the other side we have a most extraordinary picture. Chinese and Indian demand alone has in the last two years exceeded newly mined gold supplies. That’s around 3,300 tonnes. And Asia is getting it all, at prices down 37.5% from its peak level. Doesn’t this strike you as odd?
Demand such there has never been seen before emanating out of Asia, is not driving up prices? Instead they are getting all this gold at a deep discount? Who’s really getting the big advantage? Why should Asia want to see higher prices? When you can get the entire available stock that comes to the market at these prices, why chase prices?
As it is, more and more mines in South Africa and elsewhere in the world are being taken over by the Chinese. The production of these mines goes straight to China and not through the London and New York markets. It means the physical volumes of gold going through London and New York are shrinking but still enough to allow these markets to keep prices low.
There were purchases of 3.282 of a tonnes of gold into the SPDR gold E.T.F. purchases of 0.50 of a tonne into the Gold Trust on Tuesday. The holdings of the SPDR gold ETF are at 742.347 tonnes and at 165.58 tonnes in the Gold Trust.