Where Is <b>Gold Price</b> Heading? - A Supply And Demand Point Of <b>...</b> |
- Where Is <b>Gold Price</b> Heading? - A Supply And Demand Point Of <b>...</b>
- Silver and <b>Gold Prices</b>: The <b>Gold Price</b> Rose $2.80 to Close at <b>...</b>
- Singapore <b>gold</b>-<b>price</b> contract seen fueling demand | MINING.com
- Geopolitical Tensions are Supporting <b>Gold Prices</b> in the Short and <b>...</b>
- CHARTS: <b>Gold price</b> entering make or break territory | MINING.com
| Where Is <b>Gold Price</b> Heading? - A Supply And Demand Point Of <b>...</b> Posted: 27 Jun 2014 12:11 PM PDT Summary
Since the second half of 2013, gold price has hit low three times. It seems that there is strong support at $1250/oz level. Whether the price of gold will go up or go down from here, there is a great debate. See chart below for the recent gold price: (click to enlarge) Gold, like any merchandise, changes price according to supply and demand. In this article, we will look at the supply and demand to understand where gold price is possibly heading. Demand(click to enlarge) Gold demand is best summarized by the data from World Gold Council. The demand can be categorized into jewelries, industrial use, bar and coin investment, ETFs, and central bank net purchase. The breakdown demand in each category is listed in the Table 1. The total worldwide demand per quarter is around 1,000 tonnes for the last eight quarters. However, we notice that the ETF demand has been negative in 2013. ETFs were a net seller of gold in 2013. In Q1 2014, the outflow of gold from ETFs has stopped. Whether ETF gold will revert to inflow in the next few quarters remains to be seen. SupplyAccording to the World Gold Council, the supply of gold is coming from mining and recovery from the consumed gold by the industry. We will talk about the gold recovery later. Let us look at the supply from mining in Table 2: (click to enlarge) The supply of gold from mining is around average about 730 tonnes per quarter and is trending up slightly. What is not shown in this table is the cost of producing gold today. The average cost per ounce of gold produced by four major gold miners - Goldcorp (GG), Newmont (NEM), Kinross (KGC) and Barrick Gold Corp (ABX), are shown in Table 3 (Visual Capitalist):
Many smaller miners without the economy scale have much higher costs than the big ones. That is the reason all miner shares were hit much harder than the gold price itself in the gold bear market. The reason for the high cost of gold production is because an average grade gold mine produces only 5.3 grams of gold for each ton of earth mined. The cost will continue to rise when the higher grade ores are getting scarcer. The gold bear market in the last two years has been devastating to the gold miners. The gold miner stocks as well as the Market Vectors Gold Miners ETF (GDX) and Market Vectors Junior Gold Miners ETF (GDXJ) all suffered much more than the gold price itself. While gold price dropped by 30% from its high, the gold miner shares dropped more than 50%. GDXJ, ETF of smaller gold miners, dropped by a whopping 73% from its high. If the gold price drops below $1,100, many unprofitable mines will be forced to shut down or reduce production. The gold supply from mining will reduce dramatically. This provides a very strong support for the gold price at $1,100. The gold production is decreasing in the four major gold producing countries - South Africa, Canada, the US and Australia - despite the fact that the world top 20 gold producers increased their gold exploration budget from $300 million in 2002 to $1.4 billion in 2013. The decline is particularly significant in South Africa, where the gold production fell 50% in the last decade. The higher investment and the employment of better technology in gold exploration do not help to produce more gold. The outlook of gold supply is not bright. The worldwide gold production is saturating (World Gold Council Report). The declining of gold production in the above mentioned four major gold producing countries is offset somewhat by the gold production in China. China's gold production has been rising - now at the level of 428 tonnes per year in 2013 (Xinhuanet), overtaking South Africa as the world leading gold producer since 2007. China produced about 15% of the gold in the world in 2013. However, the China's gold production may not help to suppress the gold price for two reasons: First, China locked the domestically produced gold in China for strategic reason. Growth in the gold reserves is one of China's strategic targets, outlined in its Eleventh Five-Year Plan period (2006-2010). The plan sets out to increase China's gold reserve to between 3,000 and 3,500 tonnes by 2017. It is trying to diversify its foreign currency reserve by shifting toward gold away from US dollars. The last officially released gold reserve in China in July 2010 was 1,054 tonnes. It represents only 1.4% of China's foreign currency reserve vs. 74.5% of US, 71.4% of Germany, and 71.1% of France (Bullion Street). China has a long way to go to match its gold reserve to anywhere near the level of major Western countries. In addition, all Chinese gold miners are small scale, and most of the ores are low and medium grade, thus high production cost. It is quite possible that the gold production cost in China exceeds well above $1,200 per ounce. At current gold price, China finds that imported gold is cheaper. Therefore, despite that China is the world leading gold producer; China is also the world leading gold importer. Secondly, China's known gold mine reserve is estimated at 8,000 tonnes, less than three years of worldwide production. At the current mining rate, it will be depleted in two decades. The reason that China today still has enough gold mines is because China is a late comer in the gold production and most of its mines are relatively new. As late as 1980, China's gold production was only 10 tonnes. The supply / demand gap(click to enlarge) The supply and demand data show that there is a gap, as shown in Table 4. Demand is exceeding supply by a wide margin. Apparently, the gold has to come from someone's inventories or vaults. The gold price and the gap between supply and demand are plotted in the Chart below. We can see a rough correlation between these two. (click to enlarge) The World Gold Council attributes the gap filler as being the recovered gold from industry. However, this is not a satisfactory explanation. If we look at the gap of supply and demand and the industrial use of gold, we will find it is hard to reconcile. (click to enlarge) The supply demand gap is in average 3.28 time as large as the industrial usage during the time frame of analysis. It is physically impossible for the recovered gold from industrial usage to fill up this gap because the industry cannot spit out more gold than it consumes. Even if the industry can recover 100% of the gold it consumes, it is still far from enough to close the gap. That leaves us to identify other possible sources of the supply. One possible source is the reduction in the COMEX inventory. The quarterly COMEX gold inventory is listed in Table 6. (Source: Habba Investment)
In 2013, COMEX had a net outflow of gold 103.7 tonnes. The COMEX gold inventory level today is already as low as the level in 2008 right before the gold price doubled in the next four years. In fact, the COMEX inventory level is much worse today because the open interest of paper gold trading is much higher today than in 2008. The potential owner for each ounce of gold is at a scary level of all time high of 55. (see here)
There are other outflows of gold into the market. For example, it is published that the gold holding of SPDR Gold Shares has been down dramatically from 1,286 tonnes in 2012/Q1 to 785 tonnes in 2014/Q2, as part of the ETF outflow, which is already counted in the demand (Table 7). But the gold SPDR Gold Trust sales to pay Trust's expenses is not part of the ETF outflow. It contributes to the supply.
Net gold buying by Central banks Central banks are the largest owners of the gold in the world. The historical gold holding of the Central Banks is shown in the Figure below: (click to enlarge) Since 2007, Central banks have reverted their positions collectively to net gold buyers from net sellers since 1965. This is a significant change because of their huge positions in gold. The gold reserves of the three largest economic entities in the world: the European Union, the United States and China, have over 8,972.6, 8,133.5 and 1,054 tonnes of gold reserves, respectively. China is trailing far behind, and doing everything to catch up. On 19/5/2014, the European Central Bank and 20 other European central banks signed the fourth Central Bank Gold Agreement. In this agreement, the signatories agreed that gold remained an important element of the global monetary reserves and self-imposed a sell limit. Even before the signing of the agreement, in the last five years, major gold holders from European central banks have virtually stopped all gold sales - selling less than 25 tonnes of gold against an agreed limit of 2,000 tonnes. Gold flows from West to EastChina's catch-up game to increase its gold reserve on par with the US and EU is apparent from its gold import. Chart below (Chart of the Day) shows China's accumulated import since September 2011. Luckily, due to the negative sentiment of gold in the West, China is able to buy gold at a cheap price. SPDR Gold Shares ETF alone dumped 501 tonnes of gold between Q1 2012 and Q1 2014. China is like a black hole for gold - whatever goes in, does not come out again. Now that the ETF gold outflow has stopped (Table 1), there is likely to be a squeeze in the gold market in the near future.
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| Silver and <b>Gold Prices</b>: The <b>Gold Price</b> Rose $2.80 to Close at <b>...</b> Posted: 30 Jun 2014 05:19 PM PDT
First, I am baffled by the GOLD PRICE today. One of the analytical services I receive sent a special message yesterday about the sudden rise in Commercial Short positions in the Commitments of Traders Reports. Generally Commercials are the "smart money", and when they short, you can prepare your heart (& pocketbook) for a drop. Silver's CoT Commercial Shorts grew even more than gold's. But in the face of that the GOLD PRICE rose $2.80 to close at $1,321.80, and that Comex close looks like a Potemkin Close because immediately after the close gold shot through $1,326 and remains at $1327.90 in the aftermarket. Painting the tape, Nice Government Men? The SILVER PRICE gainsaid gold by losing 7 cents to close at 2100.7c. What do I not like about silver? That flag on the chart that looks like it is rising, which is a bearish sign. And it's as overbought as a pretty girl's cake at a county fair bake sale. But if it closes above 2150c, it'll fly. US dollar index is pushing the gold price up. It lost 26 basis points to 79.81, down 0.33%. Drop started about 10:30 a.m. and breaks through the old downtrending channel line, and support around 80, and the 50 DMA, and it's just a wretched mess. Will sink further, as witness the rising Euro (up 0.32% to $1.3692 & above its 200 DMA & the Yen at 98.69, above its 200 DMA but up only 0.05%. Stocks finished down on the day but up for the month. Dow lost 25.25 (0.15%) to 16,826.60 while the S&P500 shaved off 0.73 (0.04%) to 1,960.23. Dow in gold and Dow in silver both fell today. At least that indicator isn't welching on us. Y'all have mercy, my wife is pulling up! Watch for gold tomorrow. A close above $1,331 carries it aabove those COT worries for a while. Aurum et argentum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger © 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose.  | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Singapore <b>gold</b>-<b>price</b> contract seen fueling demand | MINING.com Posted: 27 Jun 2014 03:29 PM PDT
 A physical-gold contract Singapore is instituting this fall is predicted to intensify already booming Asian demand for the yellow metal. The exchange-traded Singapore Kilobar Gold Contract, expected to go "live" as early as in September, will introduce centralised trading and clearing of physically delivered gold, the World Gold Council (WGC) said in a release. The Asian city-state's move to introduce the contract is part of regional efforts to set new price standards as the global benchmark, the so-called London "fix," has come under regulatory scrutiny. The kilobar contract for 25 kilograms of 99.99% fineness is seen as providing a viable price benchmark in Asia. It shows how Southeast Asian markets are hurrying to facilitate transparency in gold trading, WGC investor relations manager John Mulligan told Mining Weekly Online. That should fuel demand for physical gold. "Wherever we've seen gold made more accessible, we've rapidly seen the growth, so we expect something similar," Mulligan said. With Asia, particularly China, processing and consuming an increasing amount of gold, exchanges in the region are developing more bullion products to establish their own supply chains and work more efficiently. "The center of the world for gold consumption is Asia," said Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. "So it makes sense that the center of price discovery for the physical market moves that way." "It's only going to be positive for Asian gold demand," he said. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Geopolitical Tensions are Supporting <b>Gold Prices</b> in the Short and <b>...</b> Posted: 01 Jul 2014 10:53 AM PDT Gold prices remain well above the important support level of $1300 an ounce as geopolitical tensions in Ukraine and Iraq continue to spur demand. Also, despite the printing of trillions of dollars, the U.S economy tanked in the first quarter putting pressure on the greenback. Gold prices rallied during early afternoon trading on Comex on Monday pushing the price of the yellow metal to a 10 week high while the U.S dollar continues to languish at seven-week lows against a basket of major currencies. The price of spot gold hit an intra-day high of $1329.10 an ounce but ended slightly lower. Last week, news that the U.S. economy contracted in the first quarter by the most since the depths of the last recession as consumer spending cooled, sent gold prices slightly higher as the greenback fell against other major currencies. The dollar index extended its recent fall from 81.00 to reach as low as 80.01 before closing at 80.00 at the end of week, only to continue its slide on Monday. The dollar index fell to a low of 79.759, a low not seen since May 9, while the euro hit a six-week high near $1.3700, a move that is bound to put more pressure on the European Central Bank. According to the U.S. Department of Commerce, Gross Domestic Product (GDP) fell at a 2.9% annualised rate, more than forecast and the worst reading since the same three months in 2009, after a previously reported 1% drop. It marked the biggest downward revision from the agency's second GDP estimate since records began in 1976. According to consensus forecasts, economists were anticipating the worst, expecting GDP to fall 1.8% in the first three months of the year. "With the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was smaller than previously estimated, and the decline in exports was larger than previously estimated," the report said. The figure just goes to show that the expansionary monetary policies of the US Federal Reserve have done little if anything to stimulate the economy. And, as I have stated on numerous occasions, all it has done is to artificially prop up prices of stocks, bonds and in some instances houses. Also, the latest report on inflation from the Bureau of Labour Statistics showed that the final first quarter price index was unchanged from the preliminary increase of 1.3%. Excluding food and energy costs, the core price index also remained unchanged at 1.3%, down from the fourth quarter's reading of 1.8%. Durable goods orders increased 1.2%, down slightly from the preliminary estimated increase of 1.4% and down from the fourth quarter increase of 2.8%. Yet, despite the US government assuming that inflation is running at a rate of 1.3%, to anyone who eats prices show a very different story. Over the last 3 years, prices have increased substantially. And, the price of fuel in the U.S is at record highs in many states. It seems that the U.S government is using deceptive inflation numbers when calculating GDP and inflation is a lot higher than reported. Fears are mounting that the dovish Fed will risk out-of-control inflation in a desperate gamble to spur growth. Last week, Ukraine signed a landmark economic trade pact with the European Union. Petro Poroshenko, the president of Ukraine, signed the accord at a ceremony in Brussels, calling it a "new perspective for my country". The leaders of Georgia and Moldova also signed "association agreements" in a historic step for the three former Soviet countries. The EU agreements signed with Ukraine, Georgia and Moldova lift trade tariffs and promise help with economic reforms, while stopping short of a pathway to membership. The deals are seen as part of an ongoing struggle between Russia and the West to exert influence over former Soviet states. Moscow had tried to entice Kiev into membership in a customs union with itself, Belarus and Kazakhstan, and may raise its own tariffs in retaliation at the EU agreement. The trade deal came amid tense talks over a peace plan suggested by Mr Poroshenko. He er announced a week-long ceasefire in an attempt to persuade pro-Russia rebels in the east of Ukraine to lay down their arms. However, Poroshenko has ended the ceasefire with separatists in the east, saying: "We will attack, we will free our land." Mr Poroshenko said the chance to implement a peace plan was lost because of the "criminal activities" of pro-Russian militants. Both sides have accused each other of violating the truce. "The decision not to continue the ceasefire is our answer to terrorists, militants and marauders," Mr Poroshenko said. With regard to the other current hot-spot violence continues to rage in Iraq. Iraq says it has received the first batch of fighter jets it ordered from Russia to help it as it fights an offensive by Sunni rebels. Fresh clashes have been reported between jihadist-led Sunni rebels and government forces around the Iraqi city of Tikrit. A local source told the BBC the rebels had meanwhile seized parts of a nearby military base in a counter-attack. US President Barack Obama has announced he is sending about another 200 troops to protect the US embassy in Baghdad. This means about 750 US troops are in and around Iraq, but President Obama has ruled out sending combat troops to fight alongside the Iraqi army. While Western governments together with their financial institutions continue to propagate misinformation about gold, Asian countries look at it with an entirely different perspective. For them, owning gold is essential and they are doing whatever they can to encourage their citizens to have some of the yellow metal. In the longer-term, developments in Dubai, Singapore and China are most certainly going to help boost the price of gold. The Shanghai Gold Exchange (SGE) have plans to introduce a global trading platform in the city's pilot free trade zone, a move that could challenge the dominance of New York and London in gold trade and pricing. SGE, the world's biggest physical gold exchange, where domestic banks, miners and retailers buy and sell gold, could also open up the international platform to foreign brokerages and gold producers. Evidently, according sources, the SGE is looking to launch three yuan-denominated physical gold contracts, of 100 grams, 1 kg and the bigger London good delivery bar weighing 12.5 kg. According to Thomson Reuters GFMS, the SGE is the biggest physical exchange. And, it has the world's second-most traded gold futures contract though trading is largely limited to the domestic market with volumes of about 41,176 tons last year, still well behind COMEX's 147,083 tons. So, instead of flowing through the gateway of Hong Kong, much of China's gold imports in the years ahead will be coming directly into Shanghai's free trade zone. This will make it difficult to correctly determine the quantity of gold flowing into China, since China doesn't release trade data on gold. Information through the SGE comes out months after the fact, and there are questions about its accuracy. Traditionally, most gold imports into China have been transported through Hong Kong. And, the data provided by the Hong Kong authorities was very transparent often being used as proxy for overall Chinese gold demand. So, the more gold that flows into China via Shanghai, the more difficult it is going to be to get an accurate read on China's gold demand. In addition, the Chinese government is also permitting gold imports directly into both Beijing and Shenzhen. But the majority of the gold should go to the SGE. At the same time, it was announced at a conference in Singapore that Singapore intends to launch a physical gold contract as well. The contract is expected to debut in September and will be the first wholesale 25 kilo bar contract, and it will introduce centralized trading and clearing of a physically delivered gold contract in Singapore. The new contract will allow gold suppliers to "connect more effectively with their Asian clientele," the WGC said. There will be six daily contracts, which will give physical users access to competitively priced kilo bars, they added. The moves underscore rising pressure from Asia, home to the top two gold consumers – China and India – to have pricing references that better reflect the region's market dynamics, and the growing disenchantment with prices set in the West. The London fix, the global benchmark for spot gold prices that is determined by a group of four banks over a teleconference, is being investigated by regulators in Europe and the United States under suspicion it may have been manipulated. And, while these two major centres aim to become leading global trading centres for gold, Dubai has similar plans as well. The Dubai Gold and Commodities Exchange (DGCX) which originally planned to offer the first spot gold contract in the Middle East this month, is expected to launch the contract in the next two or three months. DGCX is working with bullion banks and refineries to design a spot gold contract to suit the needs of the sector. The new spot contract is also going to for one kilogram (32 troy ounces) of 0.995 purity gold. As much of 40% of the gold traded globally comes through Dubai, the commercial hub of the United Arab Emirates, with US$75 billion of gold traded through the city last year, according to Ahmed Bin Sulayem, executive chairman of the Dubai Multi Commodities Centre, which facilities the trade. The exchange hopes to attract mining companies, refiners, fabricators, traders and international banks to the new spot gold contract. The DGCX will aim for the delivery of gold within two days of a trade. With slowing growth and rising inflation, I wonder what central bankers will do next. So far, all they have done is create an ocean of credit that is acting as a lifeline to bankrupt countries and financial institutions. And, if the central banks stop printing, these institutions will be in serious trouble. Even worse, governments will lose their main buyer of debt and be in serious danger of default. On the other hand, the inflationary effects of their monetary policy are starting to be felt all over the world. So if central banks keep printing, they will do even more damage to their currencies and anyone who uses them. I am very happy that I own physical gold and silver. Technical picture
Gold prices continue to hover around the $1320/oz. level and above the support at $1300/oz. as well as the 200 and 50 day MA. While it is possible to see a small correction and re-test of $1300/oz. the price looks set to continue in an upward bias. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CHARTS: <b>Gold price</b> entering make or break territory | MINING.com Posted: 25 Jun 2014 03:37 PM PDT The gold price jumped around on Wednesday only to settle in familiar territory. On the Comex division of the New York Mercantile Exchange, gold futures for August delivery in late afternoon trade exchanged hands for $1,319.50 an ounce, down $1.80 from its settlement level in middling volumes. Earlier in the day gold touched a low of $1,305.40, only recovering after a drop in the dollar following a surprisingly large down adjustment in the first quarter US GDP. Last Thursday's nearly $50 an ounce surge in frenzied trading now appears to have been a blip as gold's momentum turns sideways. Ole Hansen, Head of Commodity Strategy at Denmark's Saxo Bank, says for gold to continue to show strength the metal must first clear $1,331: If successful it should be able to make further progress towards trend-line resistance at 1371 USD/oz ahead of the 2014 peak at 1392 USD/oz. However, a move back below 1300 USD/oz would remove the current momentum and most likely result in a renewed period of range-bound trading around 1295 USD/oz. which has been the average price for the past year.
 Technical research and investment blog InvesTRAC's chart of the gold price versus the blue-chip Dow Jones Index, which on Wednesday was again toying with record territory despite the GDP numbers, indicates that gold is set to outperform stocks: The long term downtrend from the top at 1.746 is still intact…the recent weakness held above the 0.725 low and the ratio has now pushed up through the first downtrend which opens the way for an 11 percent rally to the next visible resistance at 0.860. If the ratio can get through this barrier it would suggest that after an almost 60 percent decline it would have the potential to go substantially higher:
 FLASHBACK: Towards the end of May, InvesTRAC produced a chart showing that the uncharacteristically quiet gold market was primed for break-out price move. That bust out if its trading range started out as a big gap down with the gold price hitting $1,244 at the start of June. That was before Yellen and ISIS changed the picture again and a 90 tonne 15-minute trade lit a fire under the metal.
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Conclusion
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