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

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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.

My posts on other sites

As regular readers of lawrieongold will know, I also write for other websites – notably sharpspixley.com, biznews.com and seekingalpha.com.  Here are some links to my recent posts on these sites which readers may find of interest:

SHARPS PIXLEY

The COMEX gold warehousing debate – the truth

We have seen articles suggesting that COMEX gold warehouse gold stocks are low to the point of serious concern in the ability to provide physical gold on contracts which demand it.

An event for the gold and silver great and good!

This year’s Denver Gold Forum starts this weekend with presentations from key executives from virtually all the world’s top 20 gold mining companies as well as a series of keynote addresses.

The implications for gold of a global stock market crash

Global stock markets are ALL well below their 52 week highs and behaving with considerable nervous volatility. Could this be the beginnings of a major market crash and if so what would happen to gold?

China’s SGE gold demand beating global new mined supply

Lawrence Williams – July and August Chinese gold demand figures as suggested by SGE withdrawals are actually higher than the world’s total supply of newly mined gold.

Could gold drop below $1,000? If there’s a stock market crash – yes.

Lawrence Williams – Gold could fall back below $1,000 but not directly as a result of Fed interest rate rises, but if there is a major stock market crash again as in 2008.

SEEKING ALPHA

July/August Chinese Gold ‘Demand’ Exceeded Total Global Supply

BIZNEWS

Randgold/Anglogold JV to rebuild Obuasi gold mine in Ghana

The Obuasi mine was the key Ghanaian asset of Ashanti Goldfields in the merger…

ex-Gold Field’s Mali project, Humming along to first gold

Hummingbird Resources appears to be making excellent progress on bringing Gold Fields’ former Yanfolila…

China’s SGE gold demand beating global new mined supply – posted on sharpspixley.com

 

As we have pointed out in previous articles, Chinese gold demand as represented by deliveries out of the Shanghai Gold Exchange (SGE) has been exceptionally strong over the summer months – a time when demand is usually weak.  But quite how strong has been remarkable by any standards….  To read my latest post on SGE deliveries which exceeded global new mined production during July and August – normally weak months for Chinese demand, click on this link.

All change on the gold commentary front

This is to report a switch in the publication of my gold commentary articles from tomorrow onwards.  After running, and then writing freelance for, Mineweb for the past nine years, I will be ceasing to do so by mutual consent from midnight tonight.  However I will not be ceasing to write!  For the foreseeable future I will be writing precious metals commentary for www.sharpspixley.com and www.biznews.com/gold as well as here on lawrieongold – with maybe the occasional article on Seeking Alpha.

If you enjoy reading my material, or find it valuable, you may be best served by adding the sharpspixley and biznews sites into your bookmarks – they are both totally free to access.

Sharps Pixley is a London-based precious metals dealer and information supplier and is part of the huge German Degussa group.  It is run by Ross Norman, a very well known forecaster and commentator on gold and precious metals markets in his own right.  It has one of the oldest names in precious metals trade and is launching a brand new bullion sales ‘shop front’ outlet in London’s West End later this year.  The site publishes daily updated precious metals news headlines as well as commentary written specifically for it by its own group of writers.

Biznews is a South African general investment site and its gold section has been set up recently aimed at an international audience.  Biznews is owned and run by Moneyweb and Mineweb founder, Alec Hogg, a hugely respected South African financial journalist.  It is a recent and rapidly growing website, still largely focused on southern Africa, and will enable me to renew my association with Alec who originally hired me to manage, edit and write for Mineweb nearly a decade ago.

Gold: A Short Covering Rally Does Not A Bull Market Make. But …

By Ross Norman, CEO – Sharps Pixley

A couple of weeks ago, gold touched the 50% retracement at $1087 between the 21 year low in 1999 at $254 and its all time high at $1922 in Sept  2011 and has since then showed some impressive gains.

The initial rally to $1124 looked to be based upon short-covering in the wake of the yuan devaluation as bears caught fright as it dawned upon them that their four year reign of terror may be ending … markets can indeed go up as well as down. It has proven hitherto highly profitable to follow the narrative of the Fed but there are alternative dialogues too.

The likely delay in Fed rate tightening seems to have prompted a further bout of short-covering.

Gold has done impressively well in breaching overhead resistance between $1132 and $1142 and is now on its way to challenge the $1170 level which marks not only an important downtrend but also the 100 day moving average.

There are a number of reasons to be cautiously bullish …

Firstly COMEX traders hold record short positions for the first time since data was collated in 2006 – being short gold is looking like a very crowded trade …

Secondly, gold is trading at a small backwardation which suggest tightness in the market (possibly because of the red hot physical demand or possibly as a pre-amble to a market squeeze to the upside ???). Backwardation is a rare and un-natural phenomenon in gold and certainly indicates something is afoot of a bullish nature…

Thirdly physical demand is looking good – Sharps Pixley’s parent company Degussa, which is said to be the largest in Europe in retail physical coins and bars, is seeing volumes in Germany and Switzerland up about 50% in H1 2015 over the corresponding period in 2014…

Does the German market matter ???  You betcha – it’s third behind China and India and roughly twice the size of the US market.

Fourthly, there has been good buying in the options market of the $1200 strike calls (which clearly suggests some players see considerable upside from here )…

And lastly the bullion banks seem, almost in lockstep, to be universally bearish – which as a contrarian tells me this must be a great time to buy.

We did however suggest cautious optimism … gold prices have been horrifically elastic these last 3 years and “momentum fade” has deeply eroded the confidence of the most die-hard bull. We don’t yet have a bull market in place in our view but a figure above the $1240 level will certainly give many renewed confidence – which could potentially be self-reinforcing, just as it was between 2000 and 2008 when the market clipped along at a 12% year on year gain well before any of us had heard the words “sub-prime” even.

The current price is an extension of the gains we saw before the economy took a turn in 2008 – in other words it is based around supply/demand fundamentals… and gold had been effectively saying the economic crisis is behind us … it’s not. Global debt is 40% worse than we had in 2008 and arguably the economy is even more fragile and precarious.

Whether the current price action is sufficient to draw in new investors remains to be seen. Certainly for investors in non-dollar terms gold has performed as expected – down in 7% in US dollar terms but up 6% in Canadian dollars, up 9% in rouble terms, up 4% in euro terms etc etc… in short, gold has done precisely as ordained for those who most need it.

Ross Norman, nowadays CEO of London bullion dealers and specialists, Sharps Pixley, started his career with business guru Sir Clive Sinclair of Sinclair Research in Cambridge, before joining Johnson Matthey as Gold Refining Manager (then the world’s largest gold refiners), then as a gold trader at NM Rothschild & Sons (the Chairman of the London Gold Fixing) and later Credit Suisse, where he was a Senior Dealer in physical bullion trading.

Ross has an enviable record within the London Bullion Market in forecasting the gold price over the last decade and is frequently sought by the media for commentary on the bullion markets. Ross has made frequent appearances on TV (BBC, CNBC, CBC) in newspapers (FT. Wall Street Journal) as well as in the newswires (Reuters, Bloomberg and Dow Jones).

Today’s precious metals headlines from Sharps Pixley

GOLD NEWS

SILVER NEWS

Today’s Precious Metals News Headlines from Sharps Pixley

GOLD NEWS

SILVER NEWS

PGM NEWS

Buy Gold From SharpsPixley.com

Gold, silver, pgms news headlines from Sharps Pixley

Gold News
Silver News
PGMS NEWS

Buy Gold From SharpsPixley.com

Latest Precious Metals news headlines from Sharps Pixley

Today’s top silver stories from Sharps Pixley

Links as published today on www.sharpspixley.com

SILVER NEWS

Today’s top 12 gold headlines from Sharps Pixley

China shocks bullion market with small gold reserve increase

Here’s Ross Norman of London Bullion Dealer Sharps Pixley’s interesting quick commentary on today’s Chinese increased gold reserves announcement.  While the initial reaction on markets was muted, as the news sunk in gold was being marked down quite sharply.  Ross is one of the smartest gold commentators out there.

‘China shocked the bullion market by declaring today its official gold holdings for the first time in 6 years – the surprise was less that they had done so, and more at the incredibly small figure which is less than half the market consensus. China last reported a figure of 1,054 tonnes in April 2009 which has risen to only 1,658 tonnes today – we don’t believe the figure, but we struggle to understand the motivation for down-playing it.

With only 1658 tonnes of gold reserves this would put China in 5th position behind the US (8133 tonnes), Germany (3383 tonnes), Italy (2451 tonnes) and France (2435 tonnes). As a country with the world’s largest economy by some measures, one would have expected they would be well north of the German figure really. So what is at play here …

China is seeking a place at top table in financial markets by having its currency accepted under IMF rules (the so-called Special Drawing Rights) at a meeting to be held in October – in other words, to have the Yuan included by Central banks around the world as a reserve currency. As part of this process, China would need to fully declare its gold reserves ; in that sense the timing is as expected – its just the amount that makes no sense.

Secondly, China is struggling with an equity market in freefall and some have suggested that the timing of the declaration is to give comfort to domestic investors that their reserves are sizeable … but that makes no sense either, because they aren’t !

The third explanation – and here we move into the under-world of conspiracies, is that China wants to downplay gold as part of its reserves – especially as they are world’s top buyers both for domestic jewellery and to top up their official reserves (yes they are also the top producers but they are significant net buyers). This is to say that China may be adopting the reverse of the UK policy of the late 1990’s where it telegraphed in advance to the world its intentions to sell most of its gold reserves – thereby prompting a fall in prices to a 21 year low … thank you Gordon Brown.

I would suspect a decision has already been made by the IMF in principle about the Yuan joining the US dollar as a reserve currency (although I have no proof of that), effectively seeking to fill a void in reserves as Central Banks desert the Euro … and it does therefore need to update its gold holdings.

There is an apocryphal story about the Chinese Premier on a state visit to Paris who was asked what he thought about the French Revolution … “Too early to say” was his reply … which caused a guffaw amongst observers who were aware of China having an uber-long term view on things (actually he misunderstood the question !) … perhaps they are playing the long game both with regards to the economy and with regards to declaring its hand fully and openly on gold.

 

Ross Norman

ross.norman@sharpspixley.com

LBMA top gold forecaster: gold price to average $1321 in 2015, silver $18.56

The annual LBMA precious metals price competition’s top gold forecaster over the years, Sharps Pixley’s Ross Norman, is bucking the mainstream analyst consensus with a $1321 average gold price forecast for 2015.  Silver $18.56, Platinum $1268, Palladium $876.  Slightly modified version of article posted to Mineweb.com – the website for the best global mining and metals news and comment.

Lawrence Williams

In his submissions to this year’s LBMA precious metals forecasting competition, Ross Norman who heads up London bullion broker Sharps Pixley, and who has been probably the most successful forecaster in the LBMA panel in the past, says he is going out on a limb with his forecast for the gold price average this year at $1321. (It would certainly have been out on a limb last month although perhaps seems less so now given the gold price performance so far this year.) He is also looking for a gold price high of $1450 and a low of $1170 during the year. With most of the forecasting panel being bank and institutional analysts, whose forecasts tend to be much more conservative – some would say decidedly bearish – Norman must have a good chance of adding to his wins if gold’s advances continue.  The LBMA is expected to publish its full listing of its annual competition forecasts later this week, along with the analyst participants’ reasons for their predictions.

Norman has been the outright winner of price forecasting sections of the LBMA competition five times in the past  – usually by ‘going out on a limb’ which was a pretty good policy when the gold price was in its bull market phase  Norman has also had numerous Top 10 positions.  Perhaps he tends to favour the more bullish trends so will he be back on track again this year?  If the current momentum in the gold price gathers more strength still his forecasts could even prove conservative but it would perhaps be foolhardy to automatically assume that gold’s good start to the year will not beget a serious correction at some stage later on.

Norman’s stated reasons for his fairly positive predictions on gold this year are as follows: “If markets move on what you don’t know today, but will know tomorrow then it follows that many factors such as a US interest rate rises should already be factored into the current price… it also begs the question what the new drivers for 2015 will be. We see ongoing declines in economic growth prompting central banks to fight deflation by resorting to inflationary pressures in H2.  If our outlook for gold in dollar terms is bullish, in emerging currencies it may be even more so as investors seek to insure or hedge against currency debasement. As such, we foresee good demand for the physical.”

He sees gold already demonstrating that it has turned a corner and sees investor flows returning strongly but reckons there are unlikely to be runaway prices beyond the $1450 level without either significant new product innovations or without the sort of black swan events in the economy that few would wish for, although the potential for these looks ever greater following the SNB’s decision of last week to drop the Swiss Franc peg against the Euro.

He is also fairly bullish on silver, looking for an average price of $18.56 over the year, encompassing a high of $21.75.  In percentage terms these are big rises from the prices prevailing at the beginning of the year.  This is commensurate with the general pattern of silver moving up faster than gold on the upside – and he also reckons that investors will take comfort from silver ETF holdings which have remained firm (unlike gold ETFs) coupled with reported retail sales of the physical – coins and bars -which have also remained robust.

He seems to be a little more sanguine in his views on platinum.  Despite many analysts seeing platinum in serious supply deficit this year, he is looking for a yearly average price at $1268 – somewhat below that of his gold forecast suggesting that at some stage during the year the platinum price will fall back below that of gold as it has now already done on Friday after struggling to stay above the gold price level for most of last week.  He does foresee a high price during the year of $1480 – thus higher than that he sees for gold.

Finally there is palladium – the precious metal probably most supported by analysts in recent months due to what are seen as continuing strong fundamentals.  Norman is looking for an average price over the year here of $876 with a 2015 high reaching $975 as against the price at time of writing of $755.  Palladium was last year’s best performer in the precious metals sector and Ross suggests it may have trouble matching last year’s 10.9% increase, but even so he feels the junior precious metal as having another positive year based on continuing attractive supply/demand fundamentals despite the backdrop of a relatively weak global economy. He also points to an assessment suggesting an ongoing supply deficit in the order of 1.4 million ounces which will keep the metal well bid. Of the four metals, palladium remains once again his favourite, although, on his predictions perhaps gold and silver will do even better!