Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

So How Goes the War on Gold?

Commodities / Gold and Silver 2014 May 16, 2014 - 05:18 AM GMT

By: Michael_J_Kosares


“I can’t remember the exact quote but when I used to trade and Mr. Volcker was Fed chairman, he said something like ‘gold is my enemy, I’m always watching what gold is doing’, we need to think why he made a statement like that. If you’re a central banker or one of the congressmen or senators, watch what gold is doing because this is a no-confidence vote in fiscal and dollar policy.”– Rick Santelli, CNBC

It seems to me that anyone considering gold ownership would want to know if the supports in the market that brought the price to its current level are still present, or if they have diminished thus deflating future prospects. Though the war on gold continues unabated judging from the anti-gold rhetoric issued by the mainstream financial press and some of Wall Street’s largest financial institutions, the market for physical gold stands in stark opposition – a reminder that the metal “still clings tenaciously to men’s hearts,” as British gold analyst Timothy Green once put it.

It should be said, if we are to be objective about the situation, that gold’s opponents are likely just as frustrated about the persistence of physical demand, as the investor/owner is about the constant effort to keep the demand, and hence the price, in check. A permanent tension results at the junction of Wall Street and Main — and one that has been with us from the start of gold’s secular bull market in 2003. In the end though, there is a reason gold is saved by the world’s citizenry, and it has to do with the persistent pull of social and economic entropy – the human condition. We live in an imperfect world, and because it is imperfect there will always be a market for gold.

Despite the relentless criticism, gold continues to offer its owners what it always has – shelter from the gathering storm and some welcome peace of mind. That, more than any advance in the price, is why the attempts to cool demand continue to fall on deaf ears. The best proof I can offer to support this contention is the price itself. If the public agreed with gold’s detractors, it would not have gone from roughly $300 per ounce in the early 2000s to $1300 today with a stop at the $1900 per ounce level in between. There is something elemental in the gold chart that speaks for itself.

I always keep in the back of my mind former Fed chairman Paul Volcker’s admission that “gold is my enemy.”  Rising gold demand, after all, as Rick Santelli suggests above, is essentially a vote against the central bank’s performance and by proxy that of the financial institutions – the public voting with its checkbook. All of which brings me to the World Gold Council’s annual Demand Trends analysis – a report I always approach with more than average interest. Since the study concentrates on world wide demand, I see it as a report from the front on how successfully or unsuccessfully the war against gold is proceeding.  This year’s edition, released in February and covering 2013 (sorry I didn’t get around to it sooner) affirms that many of the trends that have been in place for the last few years remain in place.

To wit. . .

– Overall, the Council reports a “record breaking year” for consumer demand – jewelry, small bars and coins (up 21% over 2012). A big chunk of that demand came last April through June when the price dropped from record levels inspiring a run on gold in China and India. Even the United States, a small market for gold when compared to nations East, experienced a huge demand increase for gold coins and in particular for the American Gold Eagle. Overall U.S. bar and coin demand was up an “impressive 26%” and gold Eagle demand was up 29% in terms of the number of coins sold. A surprise not often mentioned in mainstream media was the pick-up in Japanese gold demand the result of Abenomics. Japan’s biggest bullion retailer reported selling 37.3 metric tonnes of the metal to the retail public.

– Central banks continued their transformation from net sellers of the metal to net buyers. Net purchases amounted to 368.6 tonnes down marginally from the previous year’s record 544 tonnes. The important story in the central bank category is the continuation of the net buyer trend that began in 2009. Prior to that the central banks were major sellers of the metal, so the net difference is significant. In 2005 for example, central banks sold 663 tonnes. Russia led the buying at 77 tonnes. In the final year of the Central Bank Gold Agreement the only seller to materialize was Germany at 3.5 tonnes which went to a coin minting program. The WGC report excludes strong buying activity rumored from China’s central bank.

– Exchange traded funds sold an astronomical 881 tonnes, but as covered at the USAGOLD website in detail most of that gold went to China by way of Swiss refiners. All toll, ETFs have purchased about 2650 tonnes since 2004 with 2013 the first year they were net sellers of about one-third of their total holdings. One wonders how the hedge funds, who reportedly have begun to buy gold again, will react in the future to a sell signal given the strong response from the East at the availability of metal in size.

– On the supply side, recycled gold declined for the sixth consecutive year. Mine supply was up modestly and mine forward selling was minimal. Overall supply backed off about 75 tonnes from 2012. One wonders where the physical gold market might have been without the 881 tonnes from the ETFs.

Gold ended 2013 at $1205 per troy ounce. From there it quickly tracked higher. By mid-March it was trading at $1370 per ounce – up almost 14% over the year-end close. From there it retraced some of the gain amidst reports of continuing strong global demand. To what degree last year’s correction was overdone, remains to be seen, but one thing is sure: Demand remains strong.

So, how goes the war on gold?

Baseline judging from the evidence “not very well. . .”

If you are looking for a gold-based analysis of the financial markets and economy, we invite you to subscribe to our FREE newsletterUSAGOLD’s Review & Outlook, edited by Michael J. Kosares, the author of the preceding post, the founder of USAGOLD and the author of “The ABCs of Gold Investing: How To Protect And Build Your Wealth With Gold.” You can opt out any time and we won’t deluge you with junk e-mails.

By Michael J. Kosares
Michael J. Kosares , founder and president
USAGOLD - Centennial Precious Metals, Denver

Michael J. Kosares is the founder of USAGOLD and the author of "The ABCs of Gold Investing - How To Protect and Build Your Wealth With Gold." He has over forty years experience in the physical gold business.  He is also the editor of Review & Outlook, the firm's newsletter which is offered free of charge and specializes in issues and opinion of importance to owners of gold coins and bullion.  If you would like to register for an e-mail alert when the next issue is published, please visit this link

Disclaimer: Opinions expressed in commentary e do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

Michael J. Kosares Archive

© 2005-2019 - 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