The Gold Season

Posted: August 29, 2013 | Author: | Filed under: Central Banks, China, Gold, India | Tags: , , , , , , , | Leave a comment
Polski: Sztabka złota ważąca 12,5 kg. Własność...

Polski: Sztabka złota ważąca 12,5 kg. Własność Narodowego Banku Polskiego. (Photo credit: Wikipedia)

Gold (GC : NASDAQ : US$1416.10), Net Change: -4.10, % Change: -0.29%


‘Tis The Season? Many old-time gold bugs contend that their season, the gold season, starts at the beginning of September and stretches until the following May. Gold’s outperformance in September has not been matched by silver, zinc, copper, and crude oil in any monthly period over the last 10+ years.

November and December are also strong performance months for gold. Has gold’s seasonality changed? A wide variety of consumer driven reasons have been cited to explain the seasonality. China and India remain the key jewellery markets. In Q1 this year, China and India accounted for over 60% of jewellery demand. In India, jewellery purchases, prior to the various festivals, including the wedding seasons (November-December and mid-January to May), Diwali (occurring either in October or November) and Akha Teej (late April or early May) has historically been a time of peak demand in that country. Increased import tariffs on gold into India do not seem to have dampened demand and, if anything, expect the price pullback to be supportive of demand in these countries over the balance of the year.

In the U.S. and Europe, purchases prior to Christmas, as well as Lunar New Year in Asia, have also been cited for bumping gold prices late in the calendar year. It’s worth noting that U.S. consumer demand increased in Q1/13 over Q1/12, the FIRST year-over-year increase since late Q3/05. Some market watchers contend that gold’s seasonality has changed due to non-seasonal investment demand (gold ETFs).

After the rough year we’ve been through, it looks like total holdings in gold ETFs appear to have
stabilized, which in the short term seems to have reduced the pressure on the gold price. With gold prices now up ~20% from
their 52-week lows, does the gold seasonality trade still have upside?

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The Japanese Are Buying Up Gold In A Big Way

Posted: November 20, 2012 | Author: | Filed under: Gold, India, Precious Metals | Tags: , , , , , , | 1 Comment
Gold-mm14c

Gold-mm14c (Photo credit: Wikipedia)

Ben Davies, the CEO of Hinde Capital, gives a run-down on the state of the gold market and the new buyer he believes will push prices higher in a new interview with King World News,

Davies thinks Japan’s structural financial problems and debt burden are beyond recourse, and sees a “non-negligible risk of hyperinflation.”

In light of this, he says, Japanese investors are turning to gold:

I suspect that Japanese pension funds, insurance companies, banks, although they have to buy government bonds as almost a public edict because they can’t place the bonds, but talking to managers, there are switches going into the precious metals market.  They are definitely buying up gold.  Pension funds are doing that (buying gold).

In the short term, Davies believes the slowing growth of the Chinese economy will adversely impact gold, but any losses will be more than recovered by the Chinese New Year and a robust Indian wedding season.

Though the market has been relatively stable, Davies is bullish on gold and has a target in mind :

So I really think that the market feels very quiet at the moment, but I think the complacency is very much apparent in the pricing of volatility.  I maintain that we will be knocking on $2,000 by the end of the year into January time. That’s the thought process.

And if they (Japan) do it themselves, and if they do it badly, ironically, having not had inflation for such a long time, they could actually cause it (inflation) to ratchet up demonstrably.  And, yes, there is a non-negligible risk of hyperinflation.  

Now within that prism, clearly hard assets remain a very important part of one’s portfolio.  I suspect that Japanese pension funds, insurance companies, banks, although they have to buy government bonds as almost a public edict because they can’t place the bonds, but talking to managers, there are switches going into the precious metals market.  They are definitely buying up gold.  Pension funds are doing that (buying gold).  So there will be allocation shifts there.

It’s interesting, of late people have been talking about China’s slowdown and how it’s been negative for demand in the last quarter.  I suspect that’s been the case.  Of course if we are going to argue that demand for gold is a demographic situation where middle-income individuals in China have savings and they put it into gold, well, sure, when the economy slows down, probably less money goes into gold.

But coming into next quarter we have the Chinese New Year and we are going to see demand pick up again.  So I think it’s far too early in terms of trying to call the end of Chinese demand.  Of course, more importantly the official demand is going to continue as they divest out of dollars.

Interestingly, this gentleman at one of the Indian banks said that the auspicious wedding season is going to be in full swing next year in India.  So we are going to see a pickup of 25% (in terms of) demand, which would be welcome indeed.  Obviously the Indians have been on the back foot a little bit because with gold at all-time highs in rupee terms, there have been less buyers.  But like all of these markets, when you get used to a certain price, eventually buyers come back in.

I suspect the way the option market is priced is very conducive to an upside move.  Historically when we’ve seen these levels of low implied volatility relative to historical vol., the move tends to be a trajectory higher.”

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Bloomberg Survey On Hedge Fund / Investor Gold Bets

Posted: October 26, 2012 | Author: | Filed under: China, ETF, Forecasts, Gold, India | Tags: , , , , , , , | Leave a comment

Oct 26

Gold traders are the most bullish in three weeks as investors’ bullion holdings rose to a record on mounting speculation that central banks will add stimulus to bolster economic growth.

Fourteen of 26 analysts surveyed by Bloomberg expect prices to rise next week, nine were bearish and three were neutral. Investors boosted holdings in exchange-traded productsto an all-time high of 2,584.5 metric tons on Oct. 24, valued at $142.4 billion, data compiled by

American Platinum Eagle bullion coin

American Platinum Eagle bullion coin (Photo credit: Wikipedia)

Bloomberg show. Hedge funds’ bets on a rally are near the biggest in more than a year, according to U.S. Commodity Futures Trading Commission data.

Central banks from Europe to China to the U.S. have pledged to do more to boost economies. The yen reached a four-month low versus the dollar this week on speculation the Bank of Japan will further expand stimulus and the Federal Reserve said it plans to continue buying bonds. Gold rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

“The whole economic situation is going to get worse rather than better,” said Thorsten Polleit, chief economist at Degussa Goldhandel GmbH, a precious metal trading and investment company in Frankfurt. “Paper currencies have already lost their function as a store of value and it’s getting worse. People are increasingly putting their savings into precious metals.”

Gold Prices

Gold rose 9.5 percent to $1,711.55 an ounce in London this year, advancing for a 12th consecutive year, the longest winning streak in at least nine decades. October’s average of $1,751 is set to be the third-highest month ever. The Standard & Poor’s GSCI gauge of 24 commodities lost 1.3 percent since the start of January and the MSCI All-Country World Index (MXWD) of equities climbed 9.8 percent. Treasuries returned 1.4 percent, a Bank of America Corp. index shows.

The BOJ, which holds a policy meeting Oct. 30, will consider raising its asset-purchase program by 10 trillion yen ($125 billion) to 90 trillion yen, the Nikkei newspaper reported yesterday. The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015. The European Central Bank has said it is ready to buy bonds of indebted nations and China approved a $158 billion subways-to-roads construction plan.

Some investors buy bullion as a hedge against inflation and a weaker dollar, and the metal generally earns returns only through price gains, increasing its allure as interest rates decline. Inflation expectations measured by the break-even rate for five-year Treasury Inflation Protected Securities jumped 35 percent this year and reached a 16-month high in September.

Investors Buy

Gold ETP holdings gained 7.9 percent since the end of July and now account for almost a year of mine production, according to data compiled by Bloomberg and Barclays Plc. Speculators’ wagers on a rally were the highest since August 2011 in the week to Oct. 9, CFTC data show. They cut their net-long position by 7 percent to 184,404 futures and options by Oct. 16, data show.

Gold dropped below $1,700 this week as “fatigue set in” among fund managers after they boosted bets and as prices failed to reach $1,800, said Edel Tully, an analyst at UBS AG in London. Higher prices also curbed physical demand, said Walter de Wet, an analyst at Standard Bank Plc in Johannesburg.

The U.S. Mint sold 48,500 ounces of American Eagle gold coins so far this month, 29 percent fewer than throughout September, data on its website show. This year’s sales of 530,000 ounces are down 41 percent from the same period in 2011.

Indian Demand

Gold imports by India, last year’s biggest buyer, slid to as low as 170 tons in the third quarter from 205 tons a year earlier, according to Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation. Local prices fell 5.7 percent since setting a record Sept. 13. Gold’s drop this month may spur more physical demand in Asia, Standard Bank said in an Oct. 24 report. Indian consumers usually boost purchases before the wedding season and religious festivals later this year.

Central banks have been expanding bullion reserves to diversify from currencies. Nations may add almost 500 tons this year, the London-based World Gold Council said in August. Brazil raised its gold reserves last month for the first time since December 2008 and countries from South Korea to Russia increased holdings this year, International Monetary Fund data show.

In other commodities, 15 of 30 traders and analysts surveyed expect copper to gain next week and 10 were bearish. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, climbed 3 percent to $7,828.75 a ton this year.

Bass’s book has much more detail on the ins and outs of investing in gold.

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Gold Rises With Central Bank Purchases

Posted: October 25, 2012 | Author: | Filed under: Central Banks, Gold, India | Tags: , , , , , , | Leave a comment
International Monetary Fund

International Monetary Fund (Photo credit: Wikipedia)

Oct 25  Market Morning Update

Gold rebounded, heading for the biggest gain in three weeks, as Brazil and Turkey’s central banks increased holdings of the precious metal and amid signs that purchases are rising in India, the world’s biggest buyer.

Brazil added to its gold reserves for the first time since December 2008, and Turkey also raised its holdings, data on the International Monetary Fund’s website showed. India tends to buy more at this time of year because of jewelry demand for the wedding season and festivals. Prices fell below $1,700 an ounce yesterday for the first time since Sept. 7, which may have sparked some physical buying.

“More and more central banks are getting involved in the gold market,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “We are seeing some value buying after prices slumped, especially in India.”

Gold futures for December delivery advanced 0.8 percent to $1,715.90 at 10:08 a.m. on the Comex in New York. A close at that price would mark the biggest gain for a most-active contract since Oct. 4.

The festival season in India began with Dussehra yesterday and ends in November with Diwali, followed by weddings.

“Physical buying is starting on a strong footing today,” Edel Tully, an analyst at UBS AG in London, said in an e-mailed report.

Silver futures for December delivery rose 1.8 percent to $32.18 an ounce on the Comex, heading for the biggest jump in almost a month.

Bass’s book has much more detail on the ins and outs of investing in gold.