Six recent posts by Lawrie on sharpspixley.com

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 info.sharpspixley.com

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.

 

 

The Curious Case of Swiss Gold Flows – Next Episode

We have commented here before on the strange reversal of gold flows in and out of Switzerland so far this year, where the main sources of supply have been countries which would normally be recipients of Swiss exports of re-refined and re-sized gold products (mostly small bars and coins).  Conversely some of the normal major suppliers of gold to Switzerland for re-refining and re-distribution have become the major recipients of Swiss gold exports.  We had speculated that perhaps one of the reasons for the latter had been the huge needs earlier in the year for supplying gold to the big gold-backed ETFs, but the ETF inflows have diminished sharply since the end of the second quarter and these contrary gold flows are continuing – and even getting bigger.

Take the chart below for Swiss gold exports for the month of August from Nick Laird’s excellent www.goldchartsrus.com service:

While the chart shows the continuation of gold exports to the world’s principal consuming nations – China plus Hong Kong and India as one would expect, more than half was destined for the United Kingdom which has traditionally been itself an exporter of gold to Switzerland of London Good Delivery gold bars for re-refining and re-sizing into the small bar sizes in demand from Asia.  Much of the major ETFs’ gold – notably that of the SPDR gold ETF (GLD), the biggest of them all – is vaulted in London, but in August GLD’s gold holdings actually fell by 8.6 tonnes, yet Swiss gold exports to the UK came in at 84.6 tonnes over the month.  This was even higher than the 65 tonnes of gold exports to the UK in June (when GLD was riding high) and 78.7 tonnes in July.

We had heard that inventories of unallocated gold in London’s gold vaults had been getting extremely low – indeed one analyst had even come up with research data suggesting they had moved into the negative, largely because of the necessity to supply unallocated gold into the ETFs which had been so strong in the first half of the year.  It could be that the latest Swiss gold export figures to the UK are an attempt to rectify this situation – if indeed it ever existed.  But again this is speculation.

But where is Switzerland importing its gold from.  That is the other side of the curious equation.  The biggest sources of this gold are nations/states which traditionally are importers of Swiss gold – namely the United Aran Emirates and Hong Kong.  See the imports chart below from www.goldchartsrus.com :

As expected many of the countries exporting gold to Switzerland that month were gold mining countries, but the UAE and Hong Kong figures stand out.  Other nations usually seen as fabricators are also represented in the list – notably Thailand and Italy.  Those following central bank data will perhaps be relieved to see that Venezuela apparently did not ship any gold to the BIS in Switzerland during the month, after being a heavy exporter in earlier months.

The USA, the world’s fourth largest producer of gold, also showed strongly in the Swiss import figures for August after appearing as a significant export destination in the two previous months, which had attracted considerable comment as to why that should be from US commentators!

Our comment on these overall gold imports – notably from the UAE and Hong Kong – we have put down to the overall slippage of gold demand outside the West so far this year prompting traders, who may have built up large inventories in anticipating better markets, taking advantage of the higher gold price so far this year and liquidating some of these at a decent profit.  Our views on that are unchanged.

article lightly edited version of one which first appeared on sharpspixley.com

Britain, Brexit, Bullion and the Pound

Against most predictions, Britons voted to leave the European Union in yesterdays’ referendum.  Pollsters, and even the bookmakers, had obviously failed to account for the huge underlying anti-EU sentiment across the country.  In regional terms only Scotland, Northern Ireland , and perhaps most importantly London and the odd pocket in the richer south-east of the country, voted to remain in the Union.  This will undoubtedly build-up problems ahead, particularly should Scotland, as its leadership has threatened, push for a new referendum with the intention of gaining independence and rejoining the EU on its own.  In Northern Ireland the prospect of having to re-implement border controls with the Republic, which is in the EU, could reignite sectarian differences.  Should Scotland secede and join the EU, the imposition of border controls with England, which would presumably become necessary, and free movement of people between the two countries, would be another extremely touchy subject!

Ross Norman, CEO of UK bullion dealers Sharps Pixley, noted in an early comment this morning: “Gold rocketed this morning as the shock UK referendum result saw carnage in financial markets, prompting a rush to safe haven assets like gold. With sterling falling to its lowest in 30 years, the biggest gains were seen in gold for UK investors which rose 20 pct in just a few minutes before settling this morning at gbp 960, a gain of 12 pct on the day so far.  “

We would add here that markets, perhaps somewhat surprisingly, made something of a significant recovery  with both the pound sterling and the stock market  both recovering about half the ground lost in the initial knee-jerk reaction before slipping back a little again.  Meanwhile gold, at the time of writing, remains about $60 higher than it was before the Brexit vote began to look a reality, but did fall back at one time to a level seen only just over a couple of weeks ago well before the referendum, although at a time when the Brexit possibility appeared to have taken a temporary lead in the opinion polls.  Certainly on initial considered reaction, once the London markets had opened, the pound sterling has not performed nearly as badly as some – notably George Soros, who had predicted a 15-20% drop – had forecast, nor has the gold price risen as much as many market followers had suggested.  But it is early days yet.

Commenting on the retail market for gold in London, Norman said: “At Sharps Pixley we have already seen our busiest day ever with online sales draining our stocks of our larger bullion bars and prompting us to call on emergency reserves of kilobars from Germany. Our stocks of many coins have also been sold out with only limited availability today. 

“Stocks of physical gold for retail investors in small denominations are normally quite modest in the UK compared to markets like Germany where gold buying is more commonly adopted by savers. We have had to call on our parent company in Germany, Degussa (said to to be the largest in Europe in the sector) to help us out with additional bullion. Germans are a cautious people with not only gold reserves owned by the Bundesbank about 10 times the size of the UK Treasury’s very modest 310 tonnes (just a little more than Lebanon’s gold reserves – thanks Gordon) – but Germans have 4 times the propensity to save compared to UK savers. 

Norman went on to note:  “Gold has done what it does best and that is to provide investors with protection against currency weakness and political uncertainty- it is a safe haven asset with wealth preservation properties – the prescient investor has been well rewarded by his caution. We have always cautioned against betting on gold for short term outcomes, but over the long term it does what it should and that is to provide people with financial insurance.

We are thus, in the UK, entering a pretty uncertain time.  Initial market reaction suggests that the financial sector is taking a brighter view on the exit vote than many had suggested would be the case should Brits vote ‘out’.  However they are looking very volatile at the moment and they may take some days, weeks or even months to settle down again.  We doubt the initial fallout will be anywhere near the way things will eventually settle down.

Latest Brexit polls rock sterling, boost gold

I would refer readers to the following paragraph written mid-May in an article entitled: Britain Facing Brexit Bombshell.  What Would Happen to Gold?.  With some new opinion polls published over the weekend suggesting a strong move towards making the Brexit (for the UK to leave the EU) option in the forthcoming referendum on June 23rd reality, it might be seen as prescient!  In trading today the pound sterling has dropped sharply against the US dollar and the gold price in sterling has risen to above £900 an ounce.  The paragraph I’m quoting is below.

This website is largely about gold and precious metals.  What would be the effects of a Brexit on the yellow metal?  We think the impact could be strongly positive for gold.  The yellow metal tends to thrive on economic and political uncertainty and there are potentially far reaching consequences of a Brexit decision, particularly within the EU itself.  For UK holders a mini collapse of sterling as a result of a Brexit decision should it happen, would probably make moving some of one’s wealth into gold a very wise decision indeed.  Gold is in effect financial insurance and if the economists and politicians predicting disaster for the UK economy if Brexit happens are correct and sterling plunges – it probably would in a knee-jerk reaction anyway – then a global gold price rise coupled with a fall in the domestic currency looks to make holding some gold a no-brainer for the UK investor in particular.

Despite the latest opinion polls, which have seen huge fluctuations, Brexit is still certainly not a foregone conclusion.  Bookmakers odds for example still see the UK voting to remain in the EU, as do some other polls, but in the above paragraph we were looking at gold investment very much as insurance against the possibility of a leave vote – and if today’s movements in gold and sterling are a guide then gold investment would have been a very wise move back in mid-May!

It is also worth noting that our view then was that regardless of the UK referendum final decision, gold investment for the longer term would be a positive move in any case.

Re the latest Brexit fears I would commend readers to check out the following abridged version of an article today by Ross Norman – the CEO of London bullion company Sharps Pixley.  Ross is a long-time observer of the precious metals markets and his views carry a lot of weight in the UK precious metals investment space.  The full article is available for reading on the info.sharpspixley.com website.  Click on the headline to go direct to the original article.

Gold Rallies For British Investors on BREXIT Fears
For UK gold investors, the sharply weakening currency is proving a fantastic win for them; gold commenced 2016 at GBP 725.02 per ounce and today was trading at £907.64, netting investors a healthy gain of 25.2 pct in just 5 months. In short, gold provides an easy escape from a declining local currency.

Whilst Sharps Pixley has never advocated taking a short term gold position for tactical wins, for the discerning investor with a long term strategic view, it authenticates the case for owning physical gold and for what it does best – and that is as a long term store of value and an effective means of wealth preservation.

The UK is not unique in seeing its currency weaken and physical gold is an easy way of hedging yourself and providing wealth protection for just such an eventuality.

ggg

CHART ABOVE – GOLD IN STERLING TERMS

Although some polls are suggesting the leavers are in the lead, the remain camp still very much has the betting odds in their favour (and crucially this is regarded as the best guide), which sees them likely to secure victory with an implied 64.5 pct probability of winning.

With just 10 days to go before the vote it looks likely that the rhetoric on both sides will scale the fear factor and the British pound is likely to weaken and correspondingly gold in sterling terms may be the winner.

 

Q1 gold and silver rally different this time around

A Paper Gold Rally – Physical Yet To Engage

by Ross Norman – CEO Sharps Pixley Ltd.

The key question in our mind is whether a paper rally in gold can be sustained without the significant engagement of the physical community…

During 1Q16, physical demand for gold declined 23.8% compared to 1Q15 according to GFMS (1025 tonnes Vs 781 tonnes) yet gold prices rallied 22% – res ipsa loquitur.

Gold’s gain year-to-date is impressive – not to say exceptional – and gold bugs will heave a sigh of relief that it has behaved as it should in the face of what is clearly a vulnerable, even fragile macroeconomic outlook. However 2014 and 2015 saw similar rallies before momentum fade set in after Q1 in both years and hence not surprisingly confidence remains light, particularly in view of the size able 45% correction since 2011.

2016 is different.

Yes, gold has seen a similar price action, but the drivers are not the same. The key physical gold markets in China and India are comparatively speaking absent and the erstwhile seller – the West – has turned buyer.  This is not a question of geography, but of motivation, form and tenure.

The correction lower from all time highs at $1922 in 2011 were driven by selling across the spectrum of the gold community in the West. European Central banks had already disgorged sizeable chunks of metal under the Washington Accord and then it was instititutional investors selling of ETFs (roughly 1000 tonnes), coupled by speculators on COMEX who sold their long futures positions and the market went into a rare net short position – and then there was cash-for-gold at the retail end – not in itself significant in size, but it underscored the West falling out of love with gold and cashing it in to sustain the consumption binge of the early 2000’s.

Never before was there such an epic movement of bullion from West to East in exchange for fripperies since the days of Marco Polo and the silk road.

This year on COMEX we have seen a battle royal between the longs and the shorts with the former winning out. The short covering has played a key role in taking the market through key technical levels and net longs stand at close to record highs. This should leave gold bulls – especially contrarians like myself – feeling distinctly uncomfortable. Meanwhile ETF flows have risen at record pace adding 330 tonnes in Q1 (compared to just 36 tonnes in Q1 2015). Now it could be argued that ETFs are paper or physical – this is irrelevant – what matters is how they behave and as we saw since 2011 these players can operate with the same short termism as speculators and rapidly reverse their positions. In short neither can be entirely trusted.

Meanwhile Indian buyers are absent as its government behaves as if it was at war with its gold community (and 3,000 years of history) through punitive taxes ; the market remains lacklustre with prices at a 2 1/2 year high in local terms and is not much helped by a poor monsoon and therefore harvest. The Chinese and indeed Russians meanwhile seem content to pick metal up on any price correction (more traditionally the Indian style) and not chasing the market higher – price supportive, but not a driver. GFMS reports that physical purchases for 1Q16 declined in India by nearly 65% compared to 1Q15.

So what has changed. There is growing perception in the West that Cental Banks may indeed be fallible and that the Keynesian experiment may have run its course – in short, the desire for sound money and by extension a growing concern about the increase in debt to resolve financial crisis is gaining currency. If fear is back in vogue then arguably it may less of a sustainable position then the motivation of many Eastern buyers which is simply as long term store of value.

For gold to see a sustained rally it needs to fire on more than one cylinder and physical players need to join the party. This in turn would put bullion onto the radar of institutional investors who are yet to be convinced that it really is an alternative to more traditional asset classes. This could then bring about the price elasticity – or buying on higher prices – that typified the last bull run. Or equally perhaps physical buyers do not turn up to the party in which case the speculators – sometimes described as behaving like 11 year olds high on e-numbers – could get bored and as easily reverse their positions.

 

Time will tell.

Australia’s 2015 gold production rises and may still continue to do so

Most of the world’s principal precious metals consultancies had been predicting an increase in gold production in 2015, despite the lower US dollar gold price – and contrary to the views of a number of commentators.  In the event, as 2015 figures begin to come in it looks as though we will indeed see a small increase, although now the top analysts do see things beginning to turn down.   Chinese output is stuttering, but other countries where the local gold price has been high in domestic currency terms have even seen improving margins for gold miners and in some gold is trading at an all-time high in local currency terms.  This has meant that what many analysts had predicted as marginal, or lossmaking, mines at the lower U.S. gold price are actually nothing of the sort in domestic currency terms.  See: Ill wind. Gold price falls in USD but still positive for many nations and Gold price at all-time high in some major gold mining nations – the latter published here back in January,

Take Australia, the world’s No. 2 gold producer after China, for example.  Figures compiled by Australian consultancy, Surbiton Associates, show that the country’s gold output last year hit a 12-year high at 285 tonnes.  Q4 production was 73 tonnes, marginally up on the Q3 figure. This is higher than the GFMS consultancy’s recent estimates – but then then Surbiton Associates’ 2014 figure at 282 tonnes was also higher.  See below:

Top 10 Gold Producing Nations (tonnes) – 2015 (Estimated) (GFMS)

Rank Country 2014 2015 E Change YOY
1. China 447.8 456.5 +2%
2. Australia 274.0 277.0 +1%
3. Russia 262.2 256.7 -2%
4. USA 209.2 213.8 +2%
5. Peru 173.0 173.3 0%
6. Canada 151.2 152.1 +1%
7. South Africa 163.7 148.9 -9%
8. Indonesia 116.4 133.6 +15%
9. Mexico 117.8 123.4 +5%
10. Ghana 107.4 94.5 -12%
Rest of World 1096.7 1096.3 0%
Global Total 3119.4 3126.2 0%

Source: GFMS, Thomson Reuters

Indeed the Australian gold sector – even before the recent upturn in prices – had very much been bucking the dismal resource sector trend despite the very negative sentiment see in U.S. markets.  As Surbiton director Dr. Sandra Close points out “Once again the local gold sector has benefited from weaker exchange rates against the U.S. dollar.”  Indeed, although over 2015 the US dollar gold price slowly declined to around US$1,050 per ounce near year end, by contrast the Australian dollar gold price remained relatively stable during the year, averaging A$1,540 per ounce, while since January it has risen to over A$1,700 per ounce.

“The Australian dollar has fallen from near 95 US cents in mid-2014, to around 82 US cents at the start of 2015, to around 72 cents by end 2015,” said Dr Close. “Such a significant devaluation has provided quite a boost to the Australian gold sector, as well as to other exporters.”

“I wonder if investors are aware that the Australian dollar gold price, at around A$1,700 per ounce, is only about A$100 per ounce less than the all-time record Australian dollar gold price reached in August 2011,” Dr Close said.

Lower oil and gas prices have reduced the cost of energy in both the mining and processing phases of the industry and that the end of the “mining boom” has reduced pressure on wages and led to lower contract rates for mining and ore haulage.  Factoring in a high local currency gold price together with some lower input prices and tighter cost containment this has seen an increase in overall margins for the Australian gold mining sector overall. “Much of the local gold sector is travelling quite well for the moment.” said Dr. Close

She also noted that there had been recent overseas commentary that Australian gold producers were being squeezed by high costs.

“Such comments are typical of US-centric observers who fail to appreciate the effect of weaker local currencies on the economics of gold production, whether in Australia or in other gold producing countries outside the US,” she said.  Indeed most of the world’s major gold producers have seen sharp falls in their domestic currencies against the U.S. dollar.

Dr Close said a number of mothballed operations were currently being brought back into production which should help boost Australian gold output in the near future. In addition, there was increasing toll treatment of ore by small companies.

Surbiton notes that Australia’s largest gold mines by production for the 2015 year were dominated by the gold majors – Newmont, Barrick, AngloGold and Newcrest:

Operation Ounces Owner
Boddington 794,000 Newmont Mining Corp
Super Pit – JV 640,000 Newmont Mining Corp 50%, Barrick Gold Corp 50%
Cadia East 508,303 Newcrest Mining Ltd
Tropicana – JV 488,939 AngloGold 70%, Independence Group 30%
Telfer 488,817 Newcrest Mining Ltd

The above article is an edited version of one published yesterday on SharpsPixley.com one of the best sources for links to news and comment on precious metals on the web and which also publishes original comment written by its own staff.

London’s brand new showroom for physical gold, silver and pgm buyers

London bullion dealer, Sharps Pixley, one of the oldest names in the business whose roots go back to 1778, has opened London and the UK’s first bullion showroom in the heart of one of the UK capital city’s most prestigious business and shopping areas at 54 St James’s Street, around 100 yards from Piccadilly Circus. The state-of-the-art premises, which officially open today (the 14th January), will allow investors access to fine quality precious metals (gold, silver, platinum, palladium and rhodium) in a variety of forms.  Investment products will range from 1 gram sizes up to 400 ounce market bars as well as coins minted around the world.  The shop also stocks an exclusive collection of jewellery, watches and gifts in high purity gold.

Sharps Pixley's brand new bullion showroom at 54 St James' Street, London
Sharps Pixley’s brand new bullion showroom at 54 St James’ Street, London

The showroom is hugely impressive – a real standout look in this most exclusive area of London.  In addition to the bullion and other sales facilities noted above it also provides world class vaulting arrangements plus 2,500 safe deposit boxes enabling clients to store their purchases, or alternatively offering peace of mind for any other valuables they wish to store in absolute security.  Investors who purchase gold and hold it on the premises are exempt from v.a.t. as long as it remains there.

As Ross Norman, Sharps Pixley’s CEO, says. “There is a strong case for owning gold as a long term store of value, especially during periods of economic uncertainty and geopolitical tensions.  It is our mission to make precious metals both more visible and accessible here in the UK. Gold has exhibited a four thousand year track record of wealth preservation and offers investors protection or insurance against economic crises”.  

London is considered by many as the global epicentre for gold trading at the professional level but in spite of this, physical metal has never in the past been so readily accessible to every day investors in a proper showroom in the UK.

The company’s team of experts will be on hand to offer information and advice to all manner of clients, from institutional investors to first time buyers, as the business is already famed for providing best-in-class information on precious metals. Immediate information is also available on the Sharps Pixley website – www.sharpspixley.com

The showroom also boasts a range of gold bullion testing equipment to verify the assay of the gold and to facilitate the purchase of metal back from clients. It is all in the name of giving investors unparalleled confidence in the quality of the metals they purchase.

None of this would have been possible without the support of Sharps Pixley’s parent company, Germany’s Degussa Goldhandel which reckons to be one of the world’s biggest bullion dealers.  Degussa acquired the Sharps Pixley business just over five years ago.  The German parent already successfully operates 14 similar showrooms in cities across the world including nine in Germany, two in Switzerland and has more recently opened up in Madrid and Singapore. Chief Executive of Degussa, Wolfgang Wrzesnoik-Rossbach, is confident that expansion into the UK will mark a huge shift in the business. He said “Having a presence in the UK is absolutely paramount to our ambitions. London is one of the biggest professional bullion markets in the world and we are uniquely positioned to extend the experience we have gained in democratizing gold, or making it available to ordinary investors in Germany by successfully growing our business to our colleagues in London.”

Sharps Pixley is now the only London-based bullion trader providing retail physical precious metal bars and coins on the High Street to UK investors with secure storage solutions. In addition to the new showroom, Sharps Pixley also offers an online web shop where customers can purchase bullion and which provides an information platform where customers can browse precious metals news, research and analysis.  The website is also a great source for precious metals news and comment, some written by Sharps Pixley personnel, and offers instantaneous gold price information during global trading hours.

Parent Degussa Goldhandel also issues its own gold bars that depict the world-renowned “Sun and Moon” official stamp. The standard range of 4 cast and 9 minted Degussa gold bars comprises – Cast: 1000 g, 500 g, 250 g, 100 g;  Minted: 100 g, 50 g, 20 g, 10 g, 5 g, 2.5 g, 1 g, 10 oz, 1 oz The bars are manufactured in Switzerland by two of the world’s major gold refiners, Argor-Heraeus SA and Valcambi SA.

Sharps Pixley is a full member of the London Bullion Market Association (LBMA) and a member of the  International Precious Metals Institute (IPMI).

For more information, contact Deborah Gottlieb on deborah.gottlieb@sharpspixley.com or by telephone to +44 (0)207 871 0532

Lawrieongold hits 100,000 pageviews

For a new financial commentary site focusing on precious metals (I don’t like the word blog as to me it conjures up thoughts of scurrilous dialogue on some of the baser aspects of life) lawrieongold.com has done  well in terms of global readership.  We have been going for just  under 13 months and have just passed the 100,000 page views metric with readers from over 160 countries (countries as defined by the WordPress statistical  department).  Over half our accesses have been from North America.  The other most prominent sources of readership have been the UK, Australia, Germany, South Africa, The Netherlands, India, Switzerland and Singapore (in that order).

We would like to thank those of you who have been following the site and our commentary, and those external authors who have allowed us to republish some of their material – notably Julian Phillips in South Africa and Frank Holmes in Texas.  As readers will know my own commentary is not restricted to writing on these pages, but I also have material published, or republished elsewhere, of which the two most prominent sites are SharpsPixley.com – which is also one of the best aggregators of precious metals news and views out there as well as providing original comment – and also on Seeking Alpha where I publish articles directly while it also picks up many of my lawrieongold articles too.

I do hope you continue to find the commentary published on this site valuable (hopefully prescient!).  Admittedly my own views (and editorial selections) are largely pro-gold, but not fanatically so.  I call it as I see it.  Thus I do hope you will continue to follow the site this year, and for the future (as long as I keep on publishing it) and do take a look at my work on other sites too, and wish you all the best for the future.

Lawrence (Lawrie) Williams

Scary 2016 ahead, Russia adds gold, SGE withdrawals etc. – and Season’s Greetings

Firstly my compliments of the season to all reader’s of lawrieongold.com, which I have now been publishing for almost exactly one year – and which has achieved just short of 100,000 page views over the period.  Thanks for following.

Here are some pointers to articles I have published on Sharpspixley.com – one of the best aggregators of precious metals news and comment available – in the past few days:

Scary year ahead. Should we be buying gold and silver:  Portents for 2016, according to a number of well-respected observers – are beginning to look decidedly scary. Will this turn the investment sector back into buying gold and silver?

Russia adds another 21.8 t gold and 46t more drawn out of China’s SGEThe Russian central bank has been continuing its gold buying spree increasing its holdings by around 22 tonnes, while China’s SGE sees physical gold continuing to be withdrawn at a strong level

And one you may not have seen, published on Seekingalpha.com pointing to the potential of an investment in the GDXJ if gold and silver do make something of a recovery in 2016: GDXJ- Limited Downside And Great Upside Potential In A Rising Gold And Silver Price Scenario

 

Huge YTD 2015 Chinese SGE gold demand will pass full year record in 2 weeks

Full month figures for October aren’t yet available, but announced gold withdrawals out of the Shanghai Gold Exchange (SGE) up to October 23rd have already exceeded last year’s full year total – and last year was the second highest full year ever for SGE gold deliveries.  The record year of 2013 is now in the sights and will almost certainly be surpassed within the next two weeks.  As I have predicted before a full year total of around an absolutely massive 2,600 tonnes of gold  – over 400 tonnes higher than the previous annual record figure (and amounting to some 80% of total global new mined gold output) will pass through the SGE this year.  And this is all physical gold – not paper!

SGE GOLD WITHDRAWALS – YTD AND PREVIOUS 5 FULL YEAR TOTALS

Year

SGE gold withdrawals (tonnes)

2015 (to Oct 23rd)

2,119

2014

2,102

2013

2,181

2012

1,134

2011

1,043

2010

814

Source: Shanghai Gold Exchange, Sharelynx.com

We have already concluded from published export statistics from countries supplying gold to the Chinese mainland that Chinese gold imports this year are almost certainly heading for perhaps 1300 tonnes plus – a very similar figure to that suggested by China gold specialist Koos Jansen writing on www.bullionstar.com – and domestic production will probably be in the order of 480 tonnes for the full year.  Yet the principal mainstream analysts still see China’s consumption as perhaps only around 1,000 tonnes – and latest GFMS figures for Q2 even put China behind India as the world’s biggest gold consumer – although admittedly not by much.

However, the analysts seem to treat India and China totally differently in their assessments.  Indian gold consumption as they see it pretty much equates to the country’s gold import levels (perhaps they include domestic supply too but as this is only 1-2 tonnes a year this is just about irrelevant).  But Chinese consumption is put far behind its new gold supply, which we calculate as imports plus domestic gold production, equating to some 1700-1800 tonnes.  Add recycled gold into the mix and we are probably talking 2,000 tonnes or more – still well short of SGE deliveries…..

To read full article on Sharpspixley.com, click on this link

Gold moving up ahead of FOMC meeting deliberations

Gold moving up ahead of FOMC meeting deliberations

By Lawrie Williams

Gold has moved back above $1180 this morning on the feeling that today’s FOMC meeting will again turn into a can-kicking session as far as potential interest rate rises are concerned. But beware – the Fed may have painted itself into a corner with a…

To read full article on SharpsPixley.com, Click here

New Hong Kong gold exports support record high China demand forecast

Hong Kong exported 97.42 tonnes of gold to the Chinese mainland in September – yet another indicator that Chinese gold demand is not only alive and well – but heading for yet another new record.  Taken together with SGE withdrawals so far this year of comfortably over 2,000 tonnes already this year and annual domestic gold production of perhaps around 480 tonnes, the amount of gold disappearing into Chinese maws remains immense.

To read my latest views on the supporting data on the Sharps Pixley website, Click here

 

 

 

 

Gold through 200 Day Moving Average – could next stop be $1200

 

Lawrie Williams

New York trading yesterday took gold up past its 200 day moving average and it was sitting at well over $1180 at the time of writing and potentially trending higher with short covering coming in with the moving average breach, coupled with a weaker dollar, poor US retail sales figures, equity market weakness in Europe and Asia and the S&P and the Dow opening in the red today, and falling.

This is an excerpt from an article I published on info.sharpspixley.com so to read the full article click HERE

Chinese Gold Reserves Up Another 15 t as Forex Reserves Tumble $43bn

Lawrie Williams

Latest gold reserve figures from the Chinese central bank show that the country added another 15.01 tonnes in September.  At September’s average gold price that will have equated to around a little under US$600 million in value.  But total Chinese forex reserves dived by a massive $43.3 billion to their lowest level in over two years, so the official gold purchase figure – if it is to be believed – forms only a very small part of this.

Some see the additional gold taken into the bank’s coffers as yet another indication of China’s intent to diversify its forex reserves out of the dollar, but the amounts are tiny relative to the size of the country’s overall forex reserves which still sit at a massive $3.5 trillion! The big September fall (1.2%) in the latter either suggests a huge programme of mostly dollar denominated sales in order to maintain the country’s current currency relationship with the greenback and to help prop up the domestic economy, or perhaps some other unknown transactions involved – or a combination of both.

We can speculate that one such other transaction could be that China is buying much more gold than it is saying and holding it in other accounts which it doesn’t feel the need to report to the IMF as part of its official gold reserves….

This article has been published on the sharpspixley.com website.  Please note that the news and price sections on the Sharps Pixley site are now accessed via info.sharpspixley.com.  To read the above article in full CLICK HERE

Is gold investor sentiment picking up at last?

By Lawrie Williams – writing on sharpspixley.com

Over the past few trading days something positive has been seen in the gold investment sector.  The gold price has seen signs of just a little strength – even in the absence of Chinese physical demand with the markets closed there for the 7-day Autumn Golden Week holiday.  While Chinese gold trade will not quite have been zero (there is ongoing retail demand over the period), there will have been no Shanghai Gold Exchange deliveries and imports will also have been negligible and gold price premiums have been falling as a result.

But despite this reduction in physical gold movement into the country, the gold price has been strong (relatively in relation to recent months) driven mostly be at least signs of a minor change in sentiment towards the yellow metal in the West.  This is making short speculators nervous and retail demand in the West has been seeing signs of a change – in part triggered over the past few days by the very disappointing non-farm US payroll figures coming in well below expectations and suggesting to the markets that any Fed interest raising programme may have been yet further delayed……

To Read full article on the sharpspixley.com website, CLICK HERE

Latest SGE gold deliveries suggest enormous 2015 total of over 2650 tonnes!

The huge level of weekly Shanghai Gold Exchange delivery numbers is becoming something of a repetitive news item and is perhaps losing its impact, but it shouldn’t.  Week 37 (ending September 18th) saw another 63 tonnes delivered out of the Exchange, which makes the year to date total 1,892 tonnes – 281 tonnes more than at end week 37 in the massive 2013 record year for Chinese gold consumption.  If we extrapolate from the year to date figure this would suggest total SGE gold withdrawals for the year would come to an enormous 2,650 tonnes or higher – equivalent to over 80% of total global supply of new mined gold.  With SGE deliveries usually rising late in the year in the long build-up to the Chinese New Year, which falls on February 8thnext year, we certainly shouldn’t discount the likelihood of this level being achieved, or even bettered.  There seems to be no slowdown happening as yet.

Overall, SGE deliveries started to pick up in early July (normally one of the weakest months of the year) and have averaged 62 tonnes a week since then.  The figure for the week ended September 11th was the third highest weekly total ever

12 week withdrawal figures on SGE to September 18th

SGE Withdrawal week ended

Physical gold withdrawn

July 3rd

44.3 tonnes

July 10th

61.8 tonnes

July 17th

69.2 tonnes

July 24th

73.3 tonnes

July 31st

53.3 tonnes

August 7th

56.1 tonnes

August 14th

65.3 tonnes

August 21st

73.0 tonnes

August 28th

59.9 tonnes

September 4th*

36.8 tonnes*

September 11th

73.7 tonnes

September 18th

63.2 tonnes

Total

729.9 tonnes

*September 4th figures are for a three day trading week with the Exchange closed for the Chinese Victory Day celebrations on the Thursday and Friday.

These figures fly in the face of the same mainstream analysts’ estimates of Chinese demand this year, which they say is slipping, along with the nation’s declining GDP growth rate – although this is still currently estimated at over 6% .  The disparity between the SGE figures and the analysts’ assessments of Chinese consumption is ever growing – and this year looks as though the difference by the year end may be as much as 1,500 tonnes or more.

As we have noted before, a significant proportion of the difference is down to how the analysts estimate ‘consumption’.  Demand categories such as gold used in financial transactions tends to be ignored by the analysts, yet this is still gold flowing into China and in terms of gold movement from West to East remains hugely relevant.

Jeff Christian of CPM Group, in his recent presentation at the Denver Gold Forum attributed the enormous disparity to a very large proportion of SGE gold being in a loop between jewellery manufacturers and the Exchange which meant that he considers there’s a huge amount of double counting involved.  Yet if this is the case then presumably it would also have applied to 2013 to the same extent and back then there was recognition from all that Chinese demand hit a new record level, although still not as high as SGE gold withdrawals for that year.  With SGE withdrawals so far this year now being 17% higher than at the same time in 2013, then we should expect to see demand as calculated by the analysts at considerably higher levels than even in 2013 – not lower as they are claiming this year.

Jeff Christian and CPM’s view that SGE gold withdrawal figures overstate the demand position by as much as 233% does seem excessive under these circumstances.  It suggests recognition that there is this huge assessed  discrepancy between the SGE figures and actual Chinese demand as calculated by the analysts and then coming up with a theory to fit their own calculations.  This theory is then presented as fact.  I may be doing Christian a disservice here, but given the other mainstream analysts have sometimes come up with differing answers to the massive gap, one has to wonder how accurate any of their Chinese demand assessments actually are.  There is a severe lack of transparency here which presumably the Chinese have no wish to clarify.

If we add up known gold exports to China from Hong Kong, and direct to the mainland, from Switzerland and the UK, all of which publish these data, add in China’s own domestic production plus an assumed level of domestic scrap supply and imports from other nations, all this looks to be heading to a total of 2,000 tonnes or more this year.  This, like the SGE withdrawal figures, is also hugely more than the analysts’ demand estimates.  But this gold is all being ‘consumed’ inside China in some form or other – perhaps including some by the central bank – and continues to demonstrate China’s dominant position in the absorption of global physical gold flows.

According to gold and China watcher Koos Jansen, SGE withdrawals are indeed recognised by the Peoples Bank of China as equating to the country’s real gold demand – but then of course the PBoC has also been complicit in under-reporting the Chinese central bank gold holdings for many years. And there are few outside China who believe that the supposed increase in transparency engendered by now reporting monthly central bank purchases is necessarily any more realistic than the times when information on these purchases was withheld.

The PBoC, of which the SGE is a subsidiary, also tells us that the Gold Exchange rules prevent roundtripping of gold which, if correct, would totally negate Christian’s theory – but then it’s a case of who do you believe to provide the more realistic data – the PBoC, or the World Gold Council, GFMS, Metals Focus or CPM.  Perhaps none of the above.  The analysts are all good at picking up and collating data from reliable sources, but perhaps not from countries like China which can make disinformation into an art form if it suits.

This blog post was originally published on www.sharpspixley.com.  View more of my articles by clicking on the site.