Metals Notes

Seven Thoughts On Gold – What’s Currently Driving The Market?

Originally Posted Feb 5, 2014 –

The following is simple assortment of gold related news items for your consideration. There is no theme among these points, although the demand for gold by the Chinese is a recurring topic. The increased demand for physical gold in Asia and the transfer of gold from west to east will continue to significantly impact the cost and availability of gold at some point in the future.

1. China Eases Import Restrictions for Banks – China recently eased physical gold restrictions that previously made gold importation more difficult. For the first time China has granted licenses to multiple foreign banks allowing them to import and ultimately sell gold to Chinese citizens and businesses. Not only does this increase ‘transparency’ in determining Chinese gold demand it could also increase the amount of metal flowing into the country.

2. Gold Mines Closing – In Australia and other gold mining countries. numerous gold mines have temporarily closed due to production costs exceeding current gold prices. Exploration for new gold reserves has also decreased due to lower gold prices. Both of these factors at the very least suggest minimal downside risk at $1200.00 gold.

3. Thoughts from Faber – Marc Faber in a December 2013 Barron’s article stated that corporate insiders are selling shares of their own companies stock “like crazy” and the stock market ‘bubble’ is about to burst. He also suggested that 20% of one’s assets be in physical gold.

4. China & Turkey – China imported over 1000 tonnes of gold in 2013. up from approximately 800 tonnes in 2012. Turkey imported 300 tonnes of gold in 2013. up 150% from 2012 levels!!

5. New Storage Vaults – Since 2012 Brinks has constructed 5 new gold storage vaults in Singapore with a combined capacity of over 300 tonnes. In November of 2013 a subsidiary of UBS opened a new gold storage vault in Shanghai with a 2000 tonne (currently $80 Billion) capacity!

6. J.P. Morgan COMEX Gold Drawdown – On Friday Jan 24th and Monday Jan 27th. the NY COMEX reported that 47% of all of the gold (approximately 20 tonnes) in J.P. Morgan’s New York City gold vault (recently purchased by the Chinese) was withdrawn. J.P. Morgan’s COMEX verified gold holdings dropped from 1.45 million ounces to 815,000 ounces in less than a week! Its current location is unknown to the public but the consensus opinion is that it’s headed to China.

7. Chinese Gold Backed Currency – The following may be more speculative than cold hard facts but a senior Chinese official recently stated that ultimately China not only wants to back the Yuan/Remembi with gold but it wants greater gold reserves than the US allegedly holds and also wants to own more gold per capita than the US or any other country.