Indian Households Said to Spend 8% of Daily Consumption on Gold - www.caseyresearch.com
By Ed Steer
December 11, 2014
The Wrap
After Tuesday's big 'orphan' run-up in precious metal prices, it appears that we're back to twiddling our collective thumbs until the next out-of-the-blue rally puts in an appearance. And as Ted mentioned in his quote further up, we await the Commitment of Traders numbers on Friday to see what the big 4 and 8 short holder in gold and silver did during that rally.
I'd be happy if it was just the technical funds in the Managed Money covering the remainder of their short positions while the raptors [the Commercial traders other than the Big 8] sold what was left of their long positions at a big loss once again. That's my Christmas wish, but JPMorgan et al would hardly pass as Santa and his elves---and Christmas is still a long way away.
Here are the 6-month charts for gold and silver:
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| Casey Research |
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| Casey Research |
Critical Reads
Guest Post: Guilty Gold
Nearly half of the gold looted by the Nazis from the Dutch central bank during the Second World War remains to this day in Switzerland, a reminder of the Alpine nation's controversial role as a financial conduit for Hitler's regime. About 61,000 kg of Dutch war gold, currently value at about €2bn, is believed to be still in Swiss possession.
During the Nazi occupation of the Netherlands, 145,650 kg of monetary gold and gold coins that Dutch citizens were forced to hand over to the central bank were transported to the Reichsbank in Berlin. After the war, the Tripartite Gold Commission (TGC), set up in 1946 by the US, France and the UK to return gold stolen by Germany, handed back about 71,820 kg of gold to the Netherlands - less than half of the total. In 1998, the TGC made its final share-out and was dissolved.
The story of the looting of Dutch gold and how it ended up in Switzerland is told in my 'faction' thriller Fout Goud (Guilty Gold). The book, which is currently only published in Dutch, combines historical facts with a fictional plot.
The Reichsbank sold about 80% of the gold it stole from occupied countries to Switzerland to obtain convertible Swiss francs to pay for imports needed by Germany's war machine. Smaller amounts were sold to Sweden, Spain, Portugal and Turkey.
This extremely interesting guest commentary by writer Roel Janssen appeared on the bullionstar.com Internet site yesterday sometime---and it's definitely worth reading. I thank South African reader B.V. for bringing it to my attention---and now to yours.
Read more...
Indian households said to spend 8% of daily consumption on gold jewellery and coins
An Indian household spends 8% of its daily consumption on gold jewellery and coins, which is only marginally behind medical expenses and education, according to a joint report by industry body Ficci and the World Gold Council.
This startling revelation comes at a time when India's current account deficit has widened sharply to $10.1 billion, or 2.1% of GDP , in the second quarter of FY15 due to high gold imports.
India is the second largest consumer of gold, next to China, with an annual consumption of 850-900 tonne. The report says that a gold board should be set up to manage imports, encourage exports and facilitate development of infrastructure needed to ensure that the Indian gold market functions to its maximum strength. It recommends development of accredited refineries in line with international standards, including upscaling the current domestic refineries. Somasundaram said that Indian banks should be allowed to use gold as part of their liquidity reserves which would incentivise them to introduce gold-based savings products.
The rest of this gold-related news item can found on The Economic Times of India website. The story appeared there at 3:29 p.m. IST on their Wednesday afternoon---and I found it embedded in a GATA release.
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Lawrence Williams: Chinese and Indian gold demand boost fundamentals further
Apologies for returning to Chinese and Indian gold demand again - but we do feel these two nations are so important for the future of the gold price given the huge amounts of gold they continue to absorb. This in total has to be close to, or even perhaps will exceed, annual new mined gold production.
It is often pointed out, particularly by those who consider gold irrelevant in today's financial markets, that new mined production is of no consequence given the huge volumes of above ground gold stocks held by Central Banks globally, in the big gold ETFs and hoarded in private hands - much, perhaps most - held in the East. And they have a point if there was a propensity for the Central Banks and private gold holders to sell, but this is such a Western attitude to global gold holdings where profit is almost everything, that it completely ignores a totally different mind-set, which prevails elsewhere in the world.
As we have pointed out before, the value of gold is instilled into us even in the West from our mothers' knees. Numerous fairy stories and legends revolve around gold and its perceived value as a store of wealth and the lengths people, seen as both good and evil, will go to to lay their hands on it. Gold's inbuilt and ever ongoing PR has to be the envy of today's spin doctors!
Now while some of this may have fallen away in the West with modern children's books perhaps eschewing gold, an element still remains, while in many other parts of the world this inbuilt idea that gold is THE great wealth protector remains and never more so in countries like India where gold is often so tied up in religious mythology. But in reality far more of the world sees gold as the best store of wealth than does not. It is also instilled into much of European culture - and the further east one moves the more it seems to be wholly relevant, even in today's world.
This commentary by Lawrie was posted on the mineweb.com Internet site yesterday---and it's worth reading. I thank Manitoba reader U.M. for today's last story.
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The Aden Forecast - adenforecast.com
It's interesting though that gold has not fallen as much as the dollar has risen. As we write, the dollar index is near 89. So far, however, gold is showing strong buying support.
This alone doesn't mean gold can't go lower in the current D decline. But if gold doesn't fall further than the Nov 4 low at $1140, then the bear market will not be looking bad.
HOW WILL 2014 FARE?
We're just weeks away from year end. And if gold can now stay above $1203, it will close the year higher than it closed the year in 2013.
Last year was clearly the worst and only down year for gold since the year 2000 when it was down 5.5%. This means, in spite of all the fluctuations and downward pressure since the highs of last March, gold may close up, or near unchanged for this year.
Gold lost almost 29% in 2013. Let's now see how this year closes out. If gold falls in a steeper D decline for the next month or so, it will make this year the second bearish year.
But if gold stays like it has, it will be a good sign.
This is another psychological point for gold. Will the D decline become a full-fledged leg down in the bear market, or not? We'll be watching this closely.
DEMAND GOOD
The demand situation seems to also be uncertain, depending on the source. The World Gold Council has different figures than Koos Jansen. The WGC shows demand is down this year whereas Mr. Jansen says it's up.
We tend to lean on the Koos Jansen's information.
Physical metal buying has been ongoing while paper gold has been sold. This month proved another good example of this.
India dropped its restrictions on gold imports this month. And they did this during their high gold buying time, which is the wedding season.
We also know Russia bought more gold once again, but global holdings in ETF products backed by metals slumped to their lowest since May 2009.
This month also gave us some other insight.
There have been ongoing conspiracy theories about gold and how the metals have been manipulated over the years. This is now coming to light.
In a first class action lawsuit of its kind in the U.S., Goldman Sachs and HSBC were sued in New York over claims they conspired for eight years to manipulate prices for the precious metals. This case will very telling indeed.
HIDDEN INFLATION
Inflation failed to accelerate this year, and last year it was down as well. But we all know that it not true at the grocery store.
Rather than raising prices, manufactures are also shrinking their quantity and charging the same price. This is a trick we first noticed in the 1970s.
And considering Wall Street has $12 trillion in derivatives that could be affected if interest rates rise, makes us think that we could see another 2008 repeat at some point, only worse.
Or should we say, more of the same. And this is what the growing global unrest has as a foundation.
GOLD TIMING:
D decline, what's next
Our favorite gold timing tool identifies the intermediate rises and declines in the gold price, and it gives signs of major turns in the trend.
As you know, a D decline has been in process since last March. Gold has declined 10-1/2% since then. D declines tend to be the worst decline in a bear market, when gold falls to new bear market lows.
This already happened on Nov 4. We saw a new low for the bear market. The main question now is, will this be the low for this decline, or is a further leg down still to come?
Looking at our chart, it could go either way. The D decline is still alive and well. The leading indicator shows it's bouncing up from a normal D low area. But since it's still in a downtrend, the decline is not over yet.
We can't rule out a steeper leg down, similar to 2013, but if gold continues to base above the lows and the indicator breaks up, then Nov 4 will likely end up being the low for this move. And it'll be great for the yearly gold action.
Keep an eye on $1140. As long as gold stays above this level, it will continue to base. A sustained rise above $1215 will confirm that an A rise is starting. If gold can then rise and stay above $1270, it'll be very positive and above $1325 would be super bullish.
To read the full article, please subscribe to The Aden Forecast.com.
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Price of Gold Will Get Boost from this Scrapped India Import Law - moneymorning.com
By TARA CLARKE, Associate Editor, Money Morning December 10, 2014
Gold watchers got a surprise two weeks ago when India suddenly changed its highly restrictive gold import law - a major, bullish move for the price of gold...
On Nov. 28, the Indian government officially dropped the "80:20 rule" it imposed in 2013 to curb gold imports. The rule states that 20% of all imported gold must be exported before the country accepts more gold shipments. On Dec. 1 - the first business day after the news broke - shares of the nation's most prominent jewelry companies surged as much as 20%.
"This is a very significant development. I don't think it's gotten anywhere near the press it deserves, and the Swiss vote overshadowed it," Anthem Vault founder and CEO Anthem Blanchard told Money Morning Dec. 5. "This is the story the markets themselves are picking up on."
80:20 Rule History
From May 1 to Aug. 20, 2013, the Indian rupee lost a staggering 20%, reaching all-time lows versus the U.S. dollar. This record-low rupee exchange rate pushed the gold price in India up almost 35% at the same time, to new record highs.
Indians were buying so much gold that it exacerbated the nation's current-account deficit, putting it at a record 4.8% for 2012. Short of banning the sale of gold outright, the Indian government tried nearly everything to slow gold purchases.
First, it imposed import duties on gold. Then it hiked those duties three more times - all the way to 10%. Still not enough, on Sept. 17, the Indian Ministry of Finance raised gold jewelry import duties from 10% to 15%. It imposed the 80:20 rule, by which a minimum of 20% of all imported gold shipments had to be exported before further gold imports could be made.
As a result, higher gold prices and ever-increasing gold taxes weighed on demand. Indian gold imports fell considerably in the latter half of 2013, dropping to 30% of former levels. The effect has continued in the first half of 2014.
Money Morning reported June 19 that we expected India to scrap this regulation sometime in the latter half of 2014. The Indian general election had just wrapped up in May, and saw the seating of a new government (including Narendra Modi as Prime Minister). Political platforms of the newly elected leaders suggested there would be a considerable loosening of import duties.
But the elected officials had still not moved by Q3. They cited uncertainty over oil prices and U.S. monetary policy as their reasons.
The consensus seemed to be that the 80:20 rule would carry into 2015. Somasundaram PR, head of World Gold Council operations in India, told Reuters in early September the rules "might extend into the first quarter of next year."
Then Nov. 28 came.
Blanchard said Russia could have played a role in this sudden change.
"I am speculating, but I think the Indian government lifted the 80:20 rule now based on geopolitical reasons. The energy agreement between Russia and India that transpired a few days before could be correlated," Blanchard said. Russian President Vladimir Putin is set to arrive in New Delhi on Dec. 11 to bolster trade links with Asian nations.
"I get the sense though that whatever it was, Modi is dead serious about liberalizing the gold market - he understands a good store of value and how that's going to propel India's economy. I think it's very exciting," Blanchard said.
The lift on the gold import law is going to have a tremendous impact on the price of gold - all the proof you need is in this one, often-ignored number...
How End of 80:20 Moves the Price of Gold
The key number here is the gold forward offered rate, called the "GOFO" for short. It's the swap rate for a gold-to-U.S. dollar exchange.
For instance, if you own gold and you want to borrow dollars, you can use gold as collateral to secure the loan, much in the same way you can use a house. The GOFO is the interest rate you'd pay on that loan.
The London Bullion Marketing Association (LBMA) publishes values for one-month, two-month, three-month, six-month, and 12-month GOFOs daily. Typically, GOFOs are positive. But on rare occasion, rates dip negative - indicating that people are willing to pay interest to borrow gold, using U.S. dollars as collateral.
"Simply put, when rates go negative, it means people really want physical gold," Blanchard said.
And right now, gold forward rates all the way up through the six-month period are negative, Blanchard pointed out. Here are the GOFO values for Dec. 4:
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GOFO
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VALUE
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Forward Rate 1-Month
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-0.17%
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Forward Rate 2-Month
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-0.12%
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Forward Rate 3-Month
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-0.08%
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Forward Rate 6-Month
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-0.01%
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Additionally, a look at the period between Nov. 28 - when the Indian government announced its repeal of the 80:20 rule - and the following business day on Dec. 1 reveals a steep drop in GOFO values across all time periods.
"People are placing a high value on physical gold-in-hand right now," Blanchard said. "And the 12-month rate is practically zero - that's significant because it indicates a person is willing to give you an interest free loan for a 12-month period as long as you're willing to give back collateral as gold."
A high value on physical gold is a good thing for gold prices - especially when the driving force stems from India. The nation is the second-largest gold consumer in the world. Together with China, it accounts for more than half of global consumer demand for gold, which is calculated by demand for jewelry, bars, and coins.
"Getting rid of the 80:20 rule is going to have a really bullish effect on the price of gold," Blanchard said. "The GFMS's September 2013 survey estimated dropping both the 80:20 rule and 10% import tax would add 50 tons of gold demand per month. At current gold prices, that's roughly $2 billion per month - it's massive. India accounted for 25% of the world's gold market last year. Just dropping the 80:20 rule will probably bring that up to 30% - or over $1 billion per month - in 2015."
Bottom Line: Watch for higher gold prices in coming months.
Removal of the 80:20 rule has already affected GOFOs. What's more, fall and winter are heavy buying seasons in India and China. Both countries' biggest celebrations - Diwali and the wedding season for India, and the New Year for China - drive demand and support the price of gold.
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Jim's Mailbox - www.jsminset.com
Posted December 11th, 2014 at 2:42 PM (CST) by Jim Sinclair
Jim,Just noticed this morning's release of Export Prices.
Down 1.2% after being down 0.8% in the prior month. This trend is unhealthy for industry and the world.
Companies, it appears, are being forced to lower their prices overseas in order to remain competitive, while at the same time, exporting inflation throughout the world.
Chalk it up to an increasingly strengthening dollar.
This will not and cannot last.
CIGA Wolfgang Rech
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In The News Today - www.jsmineset.com
Posted December 10th, 2014 at 5:43 PM (CST) by Jim Sinclair
Gold holds close to 7-week high on safe-haven demand
Reuters | Dec 10, 2014, 02.07PM IST
SINGAPORE: Gold rose for a third session in a row to trade close to a seven-week peak on Wednesday as weakness in the dollar and global equities prompted investors to seek safety in the precious metal.
The dollar index nursed hefty losses after a brutal shakeout of bullish positions, with investors finding excuses to take profits as the year-end looms.
Global equities took a hit from political turmoil in Greece and after China's market posted its worst day in five years.
"The best chance for gold to go higher would be for the financial market to become unnerved over equity declines in China, fresh sovereign risk worries in the euro zone and currency market volatility," said HSBC analyst James Steel.
"There may be some additional short covering left in the market, especially if Asian equities wobble further. Further gains will begin to crimp price-sensitive Asian demand and could threaten one of the planks of the recent rally," he said.
Spot gold rose 0.5 per cent to $1,236.10 an ounce by 0718 GMT. The metal jumped to $1,238.70 in the previous session, its highest since Oct. 23, before closing up 2 per cent.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.37 per cent to 721.81 tonnes on Tuesday, another factor that could boost prices.
More...
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Big Banks Will Take Depositors Money In Next Crash -Ellen Brown - usawatchdog.com
By Greg Hunter On December 10, 2014
By Greg Hunter's USAWatchdog.com
The G-20 met recently in Australia to make new banking rules for the next financial calamity. Financial reform advocate Ellen Brown says these new rules will allow banks to take money from depositors and pensioners globally. Brown explains, "It became rules we agreed to actually implement. There was no treaty, and Congress didn't agree to all this. They use words so that it's not obvious to tell what they have done, but what they did was say, basically, that we, the governments, are no longer going to be responsible for bailing out the big banks. These are about 30 international banks. So, you are going to have to save yourselves, and the way you are going to have to do it is by bailing in the money of your creditors. The largest class of creditors of any bank is the depositors."
It gets worse, as Brown goes on to say, "Theoretically, we are protected by deposit insurance up to $250,000 in the U.S. and 100,000 euros in Europe. The FDIC fund has $46 billion, the last time I looked, to cover $4.5 trillion worth of deposits. There is also $280 trillion worth of derivatives that the five biggest banks in the U.S. are exposed to, and under the bankruptcy reform act of 2005, derivatives go first. So, they are basically exempt from these new rules. They just snatch the collateral. So, if you had a big derivatives bust that brought down JP Morgan or Bank of America, there is no way there is going to be collateral left for the FDIC or for the secured depositors. This would include state and local governments. They all put their money in these big banks. So, even though we are protected by the FDIC, the FDIC is not going to have the money. . . . This makes it legal for these big 30 banks to take our money when they become insolvent. They are too-big-to-fail. This was supposed to avoid too-big-to-fail, but what it does is institutionalizes too-big-to-fail. They are not going to go down. They are going to take our money instead."
Part of the coming financial calamity will involve hundreds of trillions of dollars in un-backed derivatives. Brown contends, "If the derivative bubble pops, nobody knows what is going to happen, and it's obvious it has to pop. It can't just keep growing. Depending on who you read, some people say it is up to two quadrillion dollars. It's virtual money, and it cannot keep going on."
When a financial crash does happen, you can forget about getting immediate access to your money. Brown says, "The banks will say, well, we don't have it. All the money goes into one big pool since Glass Steagall was repealed. They are allowed to gamble with that money and that's what they do. I think maybe Bank of America is the most vulnerable because of Merrill Lynch. Everybody is concerned, and they do very risky deals and they are on the edge. I think they have over $50 trillion in derivatives and over $1 trillion in deposits. . . The Dodd-Frank Act says we, the people, are no longer going to be responsible for the big banks when they collapse. It is not clear the FDIC will even be able to borrow from the Treasury, but even if they could, who is going to pay that money back? Let's say they borrowed $1 trillion. Who is going to pay that $1 trillion back? It will bankrupt all the small banks that had to contribute to this premium. They will say we're raising your premium to everything you got, basically. Little banks will go out of business, and who is going to survive-the big banks. . . . What we're going to have left is five big banks, and everybody else is going to be bankrupt."
Join Greg Hunter as he goes One-on-One with Ellen Brown from the Web of Debt Blog.
(There is much more in the video interview.)
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| Ellen Brown-5 Big Banks will Survive Next Financial Calamity-Everybody Else Bankrupt |
