Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20
Silver's Massive Undervaluation Relative to Gold Makes It Irresistible - 14th May 20
Bitcoin Halving Passes with no Fanfare, but Smart Money is Accumulating - 14th May 20
Will Job Market from Hell Support Gold? - 14th May 20
The Tragedy Of Missed Covid-19 Opportunities - 14th May 20
Worst Jobs Report In US Economic History - And The Stock Market Continues To Rally - 14th May 20
NASDAQ Sets Up A Massive Head and Shoulders Pattern - 14th May 20
Perceiving Coronavirus as a Disruptive Technology - 13th May 20
Why Financial Trouble Brews on the "Home" Front - 13th May 20
Stock Market ‘Sentiment Event’ Rally Grinds On - 13th May 20
The Fed Now Owns All Markets - 13th May 20
Fruit Trees Gardening to Beat Coronavirus Blues - , Apple, Cherry, Kiwi, Pears, Plums, Grapes, Bananas May 2020 - 13th May 20
Gold Investors Shouldn’t Be Losing Focus - 12th May 20
S&P 500 Bulls Again At Resistance – Now What - 12th May 20
US Fourth Turning Accelerating Towards Debt Climax - 12th May 20
Gold in the year of the Coronavirus Pandemic - 12th May 20
Hi Ho Silver : Away! - 11th May 20
The Great Stock Market Disconnect - 11th May 20
The Big Move In Silver May Be Right Now - 11th May 20
Finding Winners in the Wreckage of the Coronavirus Economic Downturn - 11th May 20
Brave New Corona World – A heated Debate between Steven Pinker and Aldous Huxley - 11th May 20
Coronavirus Catastrophe Stock Market Implications - 10th May 20
US Stock Prices are Ignoring the Economic Meltdown, Wait for it… - 10th May 20
Forecasting Crude Oil: This Method Has Been the Undefeated Champion Since 1998 - 10th May 20
Coronapocalypse and Gold - How High Is Too High for the Yellow Metal? - 10th May 20
The Illusion of Owning Gold - 10th May 20 - Nick_Barisheff
The Financial Crisis Will Continue To Lurk Even If the Lockdown Gets Eased - 10th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold in 2013 the Foundation for 2014

Commodities / Gold and Silver 2014 Feb 28, 2014 - 04:10 PM GMT

By: Alasdair_Macleod

Commodities

The chronological events of 2013 set the background for gold in 2014. It was a momentous year which should ensure a rise in the gold price in 2014.

Before 2013 demand for physical ETFs was high. At the same time Asian demand, from China, India, Turkey and elsewhere, was accelerating leaving Western bullion markets increasingly short of physical liquidity. Hong Kong and China between them in 2012 had absorbed on official figures 1,458 tonnes, and India a further 988 tonnes, ensuring 2013 kicked off with more global demand than available supply from mines and scrap.


The following is a list of subsequent important developments in 2013.

1.       Germany’s Bundesbank announced in January that it would recall 300 tonnes of its gold stored at the New York Fed by 2020. The Bundesbank was criticised for this decision, since gold held in New York amounted to 1,536 tonnes, so why take seven years to repatriate less than 20% of it? In the event by the year-end only five tonnes had been repatriated, fuelling rumours that it didn’t actually exist other than as a book entry.

2.       The Cyprus bail-in debacle in February alerted everyone to the new bail-in procedures being adopted by all G20 member states. Wealthy depositors in the Eurozone suddenly realised their deposits were at risk of confiscation. Governments were no longer going to bail out large euro depositors, let alone those with bullion accounts.

3.       The new bail-in regime was followed by ABN-AMRO and Rabobank’s refusal to deliver physical gold to their account-holders, offering currency settlement instead. Many interpreted this as evidence of long-term holders attempting to withdraw physical bullion.

4.       By end-March it was becoming clear that growing demand for physical bullion was a potential systemic problem. This was followed in April by a co-ordinated attack on the gold price to persuade the investing public that gold was in a bear market.

5.       The result was liquidation by weak holders in ETF gold funds. However, lower prices also triggered unprecedented physical demand, particularly from China and India but also across the whole Asian continent. Gold coin sales broke records. None of this escalating demand appears to have been expected by Western central banks, which by elimination had to be the principal source of maintained liquidity.

6.       In July I discovered that in the four months following its 28th February year-end the Bank of England appeared to have delivered up to 1,300 tonnes of gold from its vaults. This amount tied in with record Asian demand in the wake of the April price drop, far greater than can have been satisfied from other known sources such as ETF liquidation.

7.       The new Governor at the Reserve Band of India, Raghuram Rajan, who was once the IMF’s Chief Economist, introduced restrictions on India’s gold imports blaming them for the trade deficit. This overturned official policies which led to the liberation of the gold market in the early 1990s, fuelling suspicions that this move was orchestrated by Western central banks.

8.       Premiums in India rocketed and smuggling escalated to meet demand.

9.        Ben Bernanke in his testimony to Congress in mid-July said “No one really understands gold prices, and I don’t either.” Was he admitting to a policy failure over gold management?

10.   In October both the Swedish and Finnish central banks announced the location of their gold reserves. Additionally, the Finnish central bank’s Head of Communications added further information in Finnish in a blog run on the Bank’s website, to the effect that all 25 tonnes held at the Bank of England was “invested” (i.e. leased or swapped), and that “Gold investment activities are common for central banks”. This appears to be an admission that significant amounts of monetary gold have been sold into the market. Question: How do they get it back, when Asian demand alone absorbs the equivalent of all global mine and scrap supply?

11.   Chinese public demand through the Shanghai Gold Exchange and Hong Kong rose to 2,668 tonnes over the whole year. Add in 50 tonnes of coin, and it amounts to 2,718 tonnes in all. We know this because these are firm figures issued by the SGE and the Hong Kong Government, not the result of surveys, aiming to identify end-users.

12.   We can assume that China’s own mine production of 430 tonnes is not in these figures, on the basis that the government buys all domestic mine production and is unlikely to put gold production from mines it controls through commercial brokers on the SGE. This being the case, Chinese mine production should be added to total demand figures, raising the total to 3,148 tonnes. Furthermore available statistics do not include gold bought outside China by the Government and wealthy citizens and either imported or held in vaults abroad, so we can probably regard this figure as a minimum, even though the SGE deliveries includes scrap of a few hundred tonnes.

13.   Meanwhile the China Gold Association reports gold “consumed” of 1100 tonnes, and the WGC reports identified Chinese demand of 1,066 tonnes. These are the figures commonly accepted by Western analysts as total demand.

In conclusion

The events of 2013 persuaded investors in western capital markets that gold’s bull market had definitely been broken, and that gold would probably go lower or at best move sideways in 2014. The underlying reality is very different, with China in particular managing to corner the physical market with trend-following Western analysts caught unawares.

So far, instead of continuing to fall the gold price actually bottomed on 31 December at $1182, and since then has rallied over 13% to $1340. The position today is that some hedge funds which were short have closed their positions and there are more yet to do so. There is growing evidence for the trend-chasers that the price is entering a new bull phase, with the 50-day and the 200-day moving averages both rising and about to complete a golden cross.

Central banks appear to be facing a problem of their own making. The lesson from Germany’s attempt to repatriate her gold appears to have provided prima face evidence that central banks have little or no physical liquidity left. Minor central banks, such as Finland’s, must now be wondering if gold out on lease will ever be returned to them, so may be increasingly reluctant to make their gold available for further leasing. Instead they are likely to end current leasing agreements as they mature rather than extend them.

In 2014 there is likely to be a growing realisation that the vaults in the West are very low on stock.

2014 should be an interesting year.

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2014 Copyright Alasdair Macleod - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules