Six recent posts by Lawrie on

I’ve been a little lax about linking here to my articles published on the Sharps Pixley website but here are links to six I have published so far this month.  They look at the gold and silver markets as well as pgms.  Click on the titles to read the full articles.  To keep up with my thoughts on precious metals, and a whole host of other precious metals news stories from around the world, take a regular look at

Indian gold imports: High but ignore the hype!

13 Jul 2017 – Indian gold imports this year have already surpassed the full year 2016 level, but its probably best to ignore some of the year on year growth media hype given how low the figures were for H1 2016.

Implications for silver of Tahoe’s Escobal shutdown

12 Jul 2017 – Any impact on the supposedly temporary enforced closure of Tahoe Resources’ Escobal mine, the world’s second largest primary silver mine by Guatemala’s supreme court may only have a very limited impact on global silver fundamentals and the metal price.

Palladium closing gap on platinum – but neither great long term

11 Jul 2017 – In the past year the palladium price has moved up and platinum down and there is a real prospect of the former overtaking the latter in the near future.

So what’s happening to gold – and silver?

10 Jul 2017 – Gold, which had been showing signs of strength saw some huge trading volumes late last week which prompted a price slump, while silver fared even worse with the GSR rising to almost 80.

Gold overall H1 performance matches dollar index decline

04 Jul 2017 – H1 commodity price changes very positive for palladium while gold rise pretty well matches fall in dollar index. Silver disappoints. Iron ore worst performer.


Chinese gold demand up a little y-o-y but still well down on 2015

04 Jul 2017 – After a blip in May, Chinese gold demand as represented by Shanghai Gold Exchange withdrawals is now a little higher than at the same time a year ago, but still well down on the record 2015 figure.



Gold part of the fabric of Indian society

 Gold Today –New York closed at $1,248.90 yesterday after closing at $1,258.70 Wednesday. London opened at $1,248.20 today. 

Overall the dollar was slightly stronger against global currencies, early today. Before London’s opening:

         The $: € was slightly stronger at $1.1120 after yesterday’s $1.1131: €1.

         The Dollar index was stronger at 97.73 after yesterday’s 97.57

         The Yen was weaker at 111.25 after yesterday’s 110.77:$1. 

         The Yuan was weaker at 6.8929after yesterday’s 6.8902: $1. 

         The Pound Sterling was weaker at $1.2950 after yesterday’s $1.3036: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    19

     2017    5    18

     2017    5    17






Trading at 279.75



$ equivalent 1oz at 0.995 fineness

@    $1: 6.8929

       $1: 6.8814

       $1: 6.8919     







Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 The Shanghai Gold Exchange trading level towards the close translates into $1,257.34. New York closed at a $8.44 discount to Shanghai’s close yesterday. London opened at a discount of $9.14 Shanghai’s close today.

As you can see above, Shanghai did not pull back today as far as New York did.  With Shanghai now proving less volatile than London or New York we expect the pattern being formed now will lead to Shanghai giving a better indication of the direction of the gold price. At the moment that is higher, after this consolidation.

Silver Today –Silver closed at $16.61 yesterday after $16.89 at New York’s close Wednesday.

LBMA price setting:  The LBMA gold price was set today at $1,251.85 from Thursday’s $1,261.35.  The gold price in the euro was set at €1,120.68 after yesterday’s €1,135.02.

Ahead of the opening of New York the gold price was trading at $1,253.00 and in the euro at €1,121.55. At the same time, the silver price was trading at $16.80. 

Price Drivers

With the gold price shrugging off potential falls, we now expect to see it trade in a tightening range until the gold market is in balance, before the next strong move either way.The dollar is slightly stronger today in what is a normal market reaction, but we do not expect this to last for long.

India & GST

While the list of GST levels to be imposed in July has now been issued, the duty to be levied on gold [and services] is still to be finalized.  It is expected to be 3%.

When we look back at the actions of Modi and his government in India and on gold, since he came to power, we see that Indian governments are still unhappy with gold in the country and will always be. This is not a small problem for that government, when you consider that the total gold holdings of the world’s central banks is around 34,000 tonnes, private citizens and institutions in India hold around 24,000 tonnes, an amount that is rising by around 1,000 tonnes a year.

Why their dislike? Because gold lies outside government control, just as it did in the U.S. before it was confiscated in 1933. Thereafter, when all U.S. citizens could only use banknotes and the banking system, the U.S. government completely controlled the financial system. All governments need to do that if they want total control of a nation’s finances, despite any objection from their own people.

Every attempt to pull the Indian gold trade into the Indian banking system [as it is in the west] has failed and will continue to fail because of the financial mistrust between the government and its citizens.

But gold in India is far more to its citizens, than it was to U.S. citizens, prior to 1933. In India, it is tied in with religion, family as well as financial security. It is part of the fabric of society. This is unlikely to change in the future. It is unlikely, that any ban on gold dealing there would work because it didn’t work in the past.

So the expected 3% GST level being mooted in India is simply expected to incite more black market activity including making extremely profitable the business of smuggling of gold into the country

Gold ETFs – Yesterday, saw sales of 1.184 tonnes from the SPDR gold ETF (GLD) but purchases of 0.53 of a tonne into the Gold Trust (IAU). Their holdings are now at 850.891 tonnes and at 202.82 tonnes respectively.

Julian D.W. Phillips | | StockBridge Management Alliance 


Greenspan, Inflation and China boost gold

By Frank Holmes – CEO and Chief Investment Officer US Global Investors

With U.S. inflation rising, a March rate hike now looks all but imminent. Many economists—including the Goldman Sachs economists I had the pleasure to hear speak this week—expect to see at least three such hikes this year alone.

US Inflation Zooms up 5 Year High
click to enlarge

Gold responded accordingly, closing above $1,240 for the first time since soon after the November election. Below you can see the gold price charted against the inflation-adjusted 10-year Treasury yield, which is now in subzero territory.

US Inflation Zooms up 5 Year High
click to enlarge

The question I have is: Why would an investor deliberately choose to lose money? But that’s precisely what’s happening now with inflation where it is.

2-Year 3-Year 10-Year
Treasury Yield 1.22% 1.95% 2.45%
Consumer Price Index 2.50% 2.50% 2.50%
Real Yield -1.28% -0.55% -0.05%
As of February 16
Source: Federal Reserve, U.S. Global Investors

These were among some of the topics addressed by former Fed Chair Alan Greenspan, who spoke with the World Gold Council (WGC) for the winter edition of its “Gold Investor.”

Gold primary global currency

“Significant increases in inflation will ultimately increase the price of gold,” Greenspan said. “Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection.”

He also reiterated his view, which I share, that gold is much more than just a metal but a currency:

I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.

Although major stock indices continue to hit fresh all-time highs on hopes of tax reform and fiscal stimulus, it’s important to temper the exuberance with a little prudence. The bull market, currently in its eighth year, is facing some significant geopolitical and macroeconomic uncertainty, and we could be getting late in the economic cycle. This makes gold’s investment case even more attractive. For the 10-year period, the yellow metal has shown an inverse correlation to risk assets such as stocks and high-yield bonds. It might be time to ensure that your portfolio has the recommended 10 percent in gold—that includes 5 percent in gold coins and jewelry, the other 5 percent in quality gold equities and mutual funds.

China and India to Lead World Economy by 2050

The long-term investment case for gold looks just as compelling following bullish reports last week from PricewaterhouseCoopers (PwC) and Morgan Stanley. China and India are the world’s top two consumers of gold, and both countries are expected to make huge economic gains in the next few decades. This is likely to boost gold demand even more, which has a high correlation with discretionary income growth.

China alone consumed approximately 2,000 metric tons in 2016, or roughly 60 percent of all the new gold that was mined during the year, according to veteran mining commentator Lawrie Williams, who based his estimates partially on calculations made by BullionStar’s Koos Jansen. The 2,000 metric tons is a much higher figure than what analysts and the media have been telling us, but I’ve always suspected China’s annual consumption to run higher than “official” numbers.

According to PwC’s models, China and India should become the world’s number one and number two largest economies by 2050 based on purchasing power parity (PPP). China, of course, is already the largest economy by that measure, but PwC sees the Asian giant surpassing the U.S. economy on an absolute basis by as early as 2030.

Top 10 Economies Dominated Emerging Markets 2050
click to enlarge

As for India, it “currently comprises 7 percent of world GDP at PPP, which we project to rise steadily to over 15 percent by 2050,” PwC writes. “This is a remarkable increase of 8 percentage points, gaining the most ground of any of the countries we modeled.”

I think it’s also worth highlighting Indonesia, which is expected to replace Japan as the fourth-largest economy by midcentury. E7 economies, in fact, could end up dominating the top 10, with Mexico moving up to number seven and France dropping off. You can see the full list on PwC’s site.

China Set to Become High Income by 2027

Then there’s Morgan Stanley’s 118-page report, “Why we are bullish on China.” The investment bank sees a number of dramatic changes over the coming years, the most significant being China’s transition from a middle-income nation to a prosperous, high-income nation sometime between 2024 and 2027. (The high-income threshold is a gross national income (GNI) of around $12,500 per capita.) This would make China one of only three countries with populations over 20 million that have managed to accomplish this feat in the past 30 years, the other two being South Korea and Poland.

Top 10 Economies Dominated Emerging Markets 2050
click to enlarge

This trajectory is supported by a number of expectations, including, most importantly, Morgan Stanley’s confidence that China will manage to avoid a debt-related financial crisis, as some investors might now believe is forthcoming. The bank’s view is that the Chinese government will successfully provide “adequate policy buffers and deft management of the policy cycle” to ensure the growth of per capita incomes.

Other key transitions will additionally need to take place for the country to reach high-income status by 2027, including transitioning from a high investment economic model to high consumption and implementing meaningful state-owned enterprise reform. Although China is currently transitioning from a manufacturing economy to one that’s focused on consumption and services, the country will also need to emphasize high value-added manufacturing.


 In addition, since President Donald Trump has officially withdrawn the U.S. from the Trans-Pacific Partnership (TPP), China could very well use this as an opportunity to take the lead in global trade, Morgan Stanley writes. This view aligns with comments I’ve previously made. China is already reportedly weighing its options with two alternative free-trade agreements (FTAs), one that includes the U.S. (the Free Trade Area of the Asia Pacific) and one that does not (the Regional Comprehensive Economic Partnership). It’s probably safe to say, however, that given Trump’s opposition to FTAs, trade negotiations involving the U.S. are unlikely to happen anytime soon.

Investors Underweight China

Taken together, this is all good news for gold. Again, when incomes rise in China and India, gold demand has historically benefited.

But it also makes China a compelling place to invest in. And yet investors have tended to be shy, underweighting the country for at least a decade in relation to the broader emerging markets universe.

Time Reverse Course China Stocks 2050
click to enlarge

This, despite the fact that China has largely outperformed emerging markets for the last 15 years. According to Morgan Stanley, the MSCI China Index has delivered a compound annual growth rate (CAGR) of 13 percent for the 15-year period, versus the MSCI Emerging Markets Index’s CAGR of 10 percent over the same period.

India to Issue First Sovereign Gold Coin… to Curb Gold Imports

By Frank Holmes – CEO and Chief Investment Officer for U.S. Global Investors

Gold tends not to leave India once it enters. As the world’s largest importer, the country consumes massive quantities of the yellow metal—it’s on track to take in 900 tonnes of the stuff this year—where it remains in private families’ coffers, mostly in the form of jewelry and decorative heirlooms. It’s estimated that less than 10 percent of all Indian gold demand is in bars and coins.

That might change this month—strong emphasis on “might”—as the India Government Mint will issue its first-ever sovereign gold coin, just in time for the fall festival season, which kicks off November 11. The coin will reportedly feature the Ashoka Chakra, the traditional 24-spoked symbol that appears on India’s national flag.

Consider the immense popularity of the American Eagle, the Canadian Maple Leaf, the British Sovereign, the South African Krugerrand and others—and now this month, India’s coin will join their exalted ranks. You might wonder why India, whose notoriously insatiable demand for gold stretches back millennia, has only recently decided to join other nations in issuing a sovereign gold coin.

The answer has much to do with the government’s interest in trimming massive net inflows of the yellow metal and containing its impact on the country’s trade balance. As I said, gold is so highly-valued by Indian citizens that once it enters the country, it stays in the country, largely as family heirlooms.

The World Gold Council estimates that 50 percent of Indian wedding expenses is on gold. And when you consider that about 20 million weddings occur each year on average in India—many of them featuring gold in some capacity—it becomes very clear that this affinity to the precious metal is shared by all.

Furthermore, because many Indians distrust government banks, they prefer to protect their financial security by holding physical gold.

And who can blame them? India’s own central bank holds more than 557 tonnes of the metal for the very same reason: financial security.

But apparently the government takes the position that you can have too much of a good thing, even something as precious and auspicious as gold, and therefore seeks greater control on how it manages net inflows.

“Such an Indian gold coin would help reduce the demand for coins minted outside India and also help to recycle the gold available in the country,” says Arun Jaitley, India’s Minister of Finance.

But will Indians be buying? It’s probably too early to tell.

Indian Government Policy to Change Gold Investing

What can be said is that the plan to issue the coin is part of a broader government strategy to change the way Indians invest in gold. I always say that government policy is a precursor to change, and the new policies announced back in the spring are scheduled to go into effect soon.

One such program involves a gold bond, “which would not be backed by gold,” explains Jeffrey Christian, a managing partner at commodities consultancy group CPM Group, who spoke recently at the Denver Gold Forum. Instead, the bonds would be issued by the Reserve Bank of India, the underlying assumption being that some Indians would prefer gold-indexed bonds to actual bullion.

“And so they think that they can discourage physical gold demand because it put stress on [the government’s] current account balances a few years ago,” Christian says.

Then there’s the so-called “gold monetization scheme,” which is a program designed to encourage individuals and temples laden with gold to voluntarily deposit some of their bullion in exchange for a “2 percent or more” interest rate.

Theoretically, the gold would be held on deposit. In practice, however—again, according to Christian—it would be lent or sold to the jewelry industry, thereby reducing gold imports.

This means, of course, that the bullion—including everything from gold trinkets to cherished wedding ornaments—would be melted down.

“Not many [Indians] would want to see their long-preserved, family-inherited, emotionally-attached piece of yellow metal lose its identity and ‘feel’ by melting it for meager return,” writes columnist Dinesh Unnikrishnan of Indian news agency Firstpost.

The government’s multifaceted strategy might not be as drastic as the one enacted by President Franklin Roosevelt in 1933, which forbade the “hoarding of gold coin, gold bullion and gold certificates within the continental United States.” For now, Indians’ participation in the two progressed programs is completely voluntary.

“Given the cultural and traditional affinity of Indians to their family-owned gold ornaments,” Unnikrishnan writes, “the only incentive for them to come forward and pledge their gold under the scheme is higher returns.”

Will Indians be enticed?

Take our poll!

1. Are you interesting in buying an Indian sovereign gold coin?
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Indian budget leaves gold import duty at 10%

Julian Phillips sees Indian gold demand continuing upwards again despite the government leaving gold and silver import duties where they were in its latest budget

The Indian budget did not lower duties on the import of gold into the country as was expected. However, the wholesalers who had held back on stocking up until they knew if the duties would be lowered or not, will now move into the market to stock up, knowing now that there is no reason to wait any longer.  Very little in India follows a straight line, so smuggling will continue to make up any shortfall in demand albeit at only slightly lower prices.

When duties are high, legitimate import routes drop as smuggling grows, so now that there is no hope of duties falling now, we expect to see the volume of smuggling continue at present levels, or rise from now on.  Demand for gold in India, even with the 10% duty has been on the rise of late and is expected to rise further in 2015 as the gold buying classes of India become wealthier. With the country set to see strong economic growth under the Modi government this trend will continue to rise for the foreseeable future. Because nothing is straight and definable when it comes to true gold imports, any import numbers that are quoted are inaccurate, because of illegal entry routes for gold into the country. We sometimes see tonnages of gold smuggled into the country quoted. Of course, these are completely inaccurate. We are of the opinion that annual gold imports are of the level of previous records before duties were raised in August 2013 of 1,200 tonnes, simply because the premiums on legitimate gold are low, implying that demand is being met nearly fully [from both legal and illegal entry points] This total is on the rise, constantly.

The euro lurched lower on Friday to $1.1187 but has risen slightly to $1.1225 today with the dollar index at 95.17. There is strong resistance in the marketplace against further rises in the dollar. Will this continue? If it does we expect to see gold and silver rise in the dollar.


New York closed Friday at $1,211.1 up $2.70. Asia took the gold price up to $1,221 before London pulled it down to $1,214. London then Fixed the gold price at $1,216.75 up $11.75 and in the euro, at €1,084.931 up €11.339, while the euro was almost unchanged at $1.1215. Ahead of New York’s opening, gold was trading in London at $1,213.60 and in the euro at €1,081.01.

The silver price closed Friday at $16.57 up 3 cents. Ahead of New York’s opening it was trading at $16.60.

Again there were no purchases or sales into or from the SPDR gold ETF or from or into the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 771.249 tonnes and at 166.43 tonnes in the Gold Trust.  The silver price is moving up cautiously watching to see if the gold price moves back to its recent high of $1,270. We expect it to run ahead of gold, should the gold price move through $1,230.

Julian D.W. Phillips for the Gold & Silver Forecasters and


Chinese gold demand discrepancy explained?

The huge difference between what  the WGC/GFMS describes as Chinese gold demand and SGE figures, is all a question of statistics and how they are interpreted and what is actually classified as ‘consumption’ or ‘demand’

Lawrie Williams

For some time now there has appeared to be an enormous discrepancy between apparent Chinese estimated demand figures as calculated by bodies like the World Gold Council (WGC) and GFMS and the reality of Chinese gold withdrawals from the Shanghai Gold Exchange (SGE).  And it all seems to be down to the way the statistics are calculated and what is included in the words ‘consumption’ or ‘demand’ by the analysts.  To some extent this has been clarified in part by the latest Gold Demand Trends report from the WGC which comments as follows: “The flow of gold into China has far exceeded the amount needed to meet domestic jewellery and investment demand in recent years. The role of the commercial banks in using this gold for financing purposes has been well documented, including in our report, Understanding China’s gold market, and this activity expanded in 2014. To some extent, this helps explain why Shanghai Gold Exchange delivery figures are significantly higher than consumer demand.”

The apparent difference between what we will describe as Chinese ‘consumption’ and Chinese ‘total demand’ is thus huge.  WGC/GFMS calculates ‘consumption’ as being made up only of jewellery, technology and investment demand and in mainland China’s case this came to around 814 tonnes in 2014, around 38% down from that of 2013.  But with SGE withdrawals coming to a little over 2,100 tonnes in 2014 – which some equate to total Chinese demand – this leaves a tremendous gap of almost 1,300 tonnes in the two different calculations.  The WGC will tell you that there is an element of double counting in the SGE withdrawal figures, but admits this is probably small, only relating to some recycled gold,  and now suggests the balance is held by Chinese banks (which it classifies as stocks and therefore doesn’t include the figures in its demand classification).

So perhaps we should look at ‘gold flows’ rather than various definitions of ‘consumption’ or ‘demand’ and in this respect ‘gold flows’ from West to East – and into China in particular were very large indeed in 2014 – indeed may have been greater than in 2013 given the big recovery in Indian ‘demand’ which doesn’t appear to be distorted by bank inflows. If we use ‘gold flows’ as a measure the amount of gold ‘flowing’ into China hugely exceeds that ‘flowing’ into India, although on WGC ‘demand’ figures India seems to be interpreted by the media as having regained the world No. 1 spot.  In truth it probably hasn’t really been the No. 1 for three or four years already given this additional, but unconsidered, demand from the banks. Indeed even this year if one adds Hong Kong ‘demand’ into that of the mainland, Chinese demand as calculated by the WGC was still a little ahead of India’s.

The WGC is very excited by what it sees as a big turnaround in Indian jewellery demand, particularly in Q3 and Q4 last year.  It puts this very much down to a change in attitude in the Indian jewellery trade following the election of the Modi government which is, on the face of things, much more pro-gold than its predecessor.  There is a definite suggestion that gold import controls will be further reduced and there will have been some ability within the jewellery sector to respond ahead of likely tax changes.  There is also anecdotal evidence that the incidence of gold smuggling to avoid taxes and the prior 80:20 import restriction has fallen back too.

Speaking to the WGC’s Head of Communications, John Mulligan, at the big Cape Town Mining Indaba, and he was quick to point out that in addition to the big gold flows eastwards, an often overlooked statistic is that in Europe, German investment demand has been particularly strong.  He reckoned that, in fact, German gold investors have been buying more than their U.S. counterparts since 2008!

Other points from the latest Gold demand Trends report include comment that Central Bank purchases held up better than anticipated, largely due to buying from Russia and some other CIS states which between them accounted for around half of such purchases last year.

Sales out of gold ETFs were at a fraction of those of 2013 and while new mined gold production grew by a small 2%, the WGC thinks that this may well have now plateaued so perhaps peak gold is at last upon us.  There are few major new gold projects and expansions still in the pipeline, exploration has diminished drastically, while a number of older operations are facing closure through ore depletion, or because they can no longer mine profitably at current gold price levels and in many cases grades are falling.

To access the latest full 28-page Gold Demand Trends report click on

Gold supply continues in surplus this year – GFMS

Gold supply continues in surplus this year – GFMS

As always the latest GFMS update on its Gold 2014 report makes for interesting, if somewhat controversial, reading.  Excerpt from commentary posted today on – click on to read full article.  It’s also notable that some commentators take the latest GFMS update to show that India has re-overtaken China as the world’s largest gold consumer.  We disagree – the figures just don’t add up!

Lawrence Williams

The latest update of the annual study by GFMS of world gold supply and demand makes for some interesting reading, and correspondingly interesting interpretations of the figures by the media.  Mineweb has reported one such analysis suggesting that India has re-overtaken China as the World No. 1 gold consumer and some figures published within the report suggest that this may be the case – but this may well depend on what the interpretation of consumption actually is.  The GFMS report suggests that Indian jewellery fabrication at 690 tonnes overtook that of China during the year, but appears to make no such bald statement that total Chinese demand fell back below that of India, although there are figures within the report which suggest this could be the case.

See: India overtakes China as world’s top gold consumer – GFMS

The GFMS report does note also, however, that Shanghai Gold Exchange (physical gold) withdrawals came in at just over 2,100 tonnes for the year and if this has not been ‘consumed’ one has to wonder where it is all going.  Indeed even published figures on gold exports from Hong Kong, plus GFMS estimates on China’s own gold output come to a total of over 1200 tonnes alone and we have demonstrated here that Hong Kong is losing its place as being a proxy for total Chinese gold imports.  This was shown by noting the published data from the USGS that 32% of U.S. gold exports in October went to mainland China directly rather than via Hong Kong – a pattern which started in September………

To read full article on click on: Gold supply to continue in surplus this year – GFMS

Where will gold end 2015 – $1,000, $1,325 or maybe $2,500 or …?

A look at the prospects for gold and silver prices in 2015 – and predictions of end year price levels for the two key precious metals.  (An updated version of this article has now been published on

By Lawrence Williams

Well there’s nothing like being optimistic at the start of a New Year and there are certainly many factors to be optimistic about if you are a gold bull. Gold demand remains strong – notably in China and India with those countries alone probably accounting for 100% or more of new mined gold at the moment.  At the end of this article we will make some not very scientific predictions on the final levels for the gold and silver prices at year end 2015 – perhaps to have these totally shot down in flames when the year end comes. It is always easy to be wise after the event.

China (in the form of the Shanghai Gold Exchange) is looking to perhaps see full year demand fall around the 2,100 tonne plus mark, only a fraction below last year’s record of 2,181 tonnes. So much for the almost incessant mainstream media reports throughout 2014 of a collapse in the Chinese gold market!

India too has seen a remarkable pick-up in demand in the second half of 2014 despite the maintained imposition of 10% import duty on gold and silver – so much so that some commentators have reported that it may have become the world’s No. 1 gold consumer again, retaking this position from China. It hasn’t! But even so, if one takes smuggled gold into account to avoid the import restrictions, it could well have imported close to 1,000 tonnes in 2014 – maybe more – and with world newly mined gold output estimated as likely to be at perhaps just over 3,000 tonnes in 2014 then it definitely looks as though the two Asian giants will indeed have accounted for virtually all of this.

But of course China and India are not the only consumers of gold. Virtually every Asian and Middle Eastern nation has a propensity to accumulate gold, while there are also signs that the jewellery sector – the main non-investment gold consumption market – has also been picking up healthily in the U.S. in particular as the populace is fed a seemingly unending positive spin on a return to economic growth.

Geopolitical events are also impacting positively on safe haven demand for gold. The crisis in Ukraine and Crimea is still playing out and is likely to cause ever more strife moving forwards. Russia’s President Putin in his New Year address made it quite clear that Crimea is now again wholly part of Mother Russia, while Ukraine’s economic plight is dire and one finds it hard to see how it can continue without defaulting on its financial commitments. This could have a major adverse impact on creditor banks and nations, which in turn could have a knock-on effect on financial institutions globally. One can foresee runs on banks and domino bank and fund collapses as a result with the global financial system being so closely interlinked.

But Russia too has seen economic sanctions and low oil prices bite severely and it is also in somewhat of a financial imbroglio. But still it has been buying gold for its reserves which it sees as a stabilising influence. Russian banks are in financial trouble too as access to Western funds is cut off. What should worry the West is that Russia has the capability of itself imposing substantial financial damage on western economies by restricting oil and gas supplies, and possibly by cutting off wheat exports as well as restricting imports from countries imposing sanctions, among others. True this would further damage the Russian economy but the nation’s rulers may feel that is a worthwhile sacrifice – and no-one should doubt the Russian peoples’ capacity for absorbing economic pain, particularly if the internal political spin puts the problems all down to the wicked Americans and their European allies which it is doing very successfully at the moment.

And this all has the propensity for escalation from the current uneasy stand-off, to a resumption of the Cold War and even escalation into a limited Hot War should NATO move into Ukraine – a move President Putin sees as totally unacceptable. But increasingly hostile rhetoric and action on both sides could well lead to this taking place. That is indeed a scary scenario for Europe in general and former Soviet Union satellites in particular. Continued escalation on this front could well lead to an ‘insurance’ move back into gold and if financial institutions start to falter, or collapse altogether as a result of Western bank difficulties, the flow could become a flood.

Meanwhile there is no resolution in sight in Syria and Iraq with fundamentalist Islamic forces still firmly in place despite total Western air superiority. How long before the West has to put troops on the ground to hold back, or defeat, the fundamentalist forces? When religion is involved, defeat is perhaps not an apt word – attempted control may be better. Look at Muslim Afghanistan as an example. The Taliban has supposedly been defeated but still is capable of some horrendous day to day impacts, while the spillover into Pakistan and the rise of similar fundamentalist groups in parts of North Africa has to be deeply worrying. ISIS (or whatever it calls itself now) is unlikely to be able to build its Caliphate covering much of the Middle East, North Africa and even parts of southern Europe to emulate the Moorish empire of the past. However its fanatical support, now with access to oil revenues to provide finance to buy ever more sophisticated weaponry, may provide a military headache for the Western/Christian/Moderate Muslim alliances for many years to come.

New mined gold supply is peaking as pipeline projects come on stream and build up (but leaving very little new in the pipeline now to replace depleting and uneconomic resources). The industry’s unprecedented cost cutting exercises will have put back new mine developments by many years and pushed back possible expansion plans.

The other major source of gold for the markets comes from scrap, but the lower prices have put something of a dent in supplies from this source. And much will have also been drawn out in 2009/10/11 when the gold price appeared to be rising inexorably and calls for individuals to sell unwanted gold jewellery were at their peak. Probably much less such metal is available to the markets nowadays.

On the negative side for gold, the metal price has shown weakness for three years now despite many of the above factors already being in play. Chinese demand hit a record in 2013, yet the gold price plunged. Sales out of the big gold ETFs will have been a factor that year. In 2014 too there were some significant sales out of ETFs as well but at perhaps only around 15% of those in 2013 and while there could be more to come from this source the amounts will likely diminish further. Nonetheless there are forces working against the gold price – and these may be even more prevalent in the much smaller silver market. The markets for both precious metals appear to being driven by the paper futures markets with relatively little physical metal changing hands.

There is a theory out there – not one believed by all – that the big money bullion banks are manipulating the gold price for their own ends – either to buy and make enormous profits when the market turns again, or at the behest of the U.S. Fed and other central banks. These may feel that a strong gold price would be seen as yet a further indicator of substantial weakness in the global fiat currency system and would act as a destabilising factor in efforts to portray national economies as being stronger than they actually are. With major bank analysts mostly still bearish on gold – some more so than others – one does not know if this represents collusion with those seeing lower prices as in their best interests, or strongly held beliefs – but regardless of which these do tend to take the form of self-fulfilling prophecies as the big bank analysts will have very strong followings amongst the financial institutions in particular.

So there are strong pressures out there both for and against gold and it is difficult at this stage to predict which will win out in 2015, although one has a strong feeling that the long term future for the gold price is very positive – but then long term is a somewhat indefinite time period. So where will the gold price be 12 months from now. Here I’ll take a leaf out of Martin Murennbeeld’s book and come out with three price scenarios, and apply a weighting to each to come up with a final median prediction.

  1. The high price scenario (probability weighting perhaps 15%) – Gold at $2,500, silver at $55.
  2. Low price scenario (probability weighting 20%) – Gold at $1,000, silver at $12.50
  3. Middle price scenario (probability weighting 65%) – Gold at $1325, silver at $24.

If we average these out we get a final median figure of: Gold $1396.50, Silver $26.35. Well it’s probably as good a guess as any at this time of year!