Demand for gold jewellery in India has been boosted in recent weeks by the approaching peak of the festival season, reports the Economic Times.
The largest consumer market for gold jewellery has a strong seasonal buying pattern thanks to a number of influences.
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Sep 29
Sep 27
On Monday, Gold powered to an all-time high at $1,300 an ounce as worries about the health of the global economy spurred buying, with top consumer India also defying high prices during the festive season.
Sep 23
The IMF has 88 tonnes of gold still to sell. Time’s running out for the central banks who want it…
SO THE CENTRAL BANK of Bangladesh bought 10 tonnes of Gold Bullion last week from the IMF, notes Julian Phillips at the GoldForecaster.
This leaves 88.3 tonnes still to sell. Who might buy it?
The 10 tonnes that Bangladesh bought cost them around $1260 an ounce. So price was not a determinant in the matter. This may surprise many, but it highlights something about why central banks in general are Buying Gold now.
The potential, not just for currency crises, but serious foreign exchange structural problems is huge. The international level of cooperation between nations is poor, as we are seeing in the US China faceoff over the Yuan exchange rate against the Dollar. That leaves us uncertain at the prospect of unstable currency markets, and this has vastly increased the attraction of Buying Gold as a reserve asset.
As such, the price paid for gold in foreign exchange reserves is hardly relevant. Because when that dark and rainy day comes when owning gold is what matters, its use in settling pressing foreign obligations will heavily outweigh what the gold cost. It’s having the gold to pay these obligations or guarantee foreign currency obligations that will matter then.
The International Monetary Fund (IMF) slated 403 tonnes for sale starting in summer 2009. It has since chosen to sell that gold in only two ways:
- Selling direct to central banks, announcing each sale after its completion;
- Selling the remaining gold on the open market, through the bullion banks, over time and in a manner that would not influence the price.
This second route has resulted in just a couple of tonnes being sold in one go, right up to 15 or more tonnes sold in any month.
Now, you may be surprised that China has not made a direct bid for the IMF’s gold, but there are good reasons why they have not bid. The Chinese central bank, the People’s Bank of China does not Buy Gold for its reserves direct from any market or auction. It uses an agency to do the buying. This agency can hold the gold for five years and then pass it to the People’s Bank. Only at that point does the central bank declare it has bought it.
This anonymity is very important to China. If it were known that China had a serious long-term commitment to Buying Gold there is no doubt that it would precipitate such a jump in the Gold Price that the market could destabilize and China not be able to access open market gold.
Because of these considerations of a direct and then announced approach by China to the IMF we doubt very much if China will now be a buyer. They will continue to buy in the open market anonymously.
If the IMF had been willing to sell direct to large institutions (such as China’s buying agency if they had been a buyer) the gold would have been sold to it and/or to other private funds and sovereign wealth funds very quickly after the initial announcement to sell gold had been made by the IMF In fact, there are many non-central bank institutions that want to approach the IMF to buy the gold, but the two selling routes are inviolate. This means that, with only 88.3 tonnes left to sell it the opportunity to Buy Gold in a large amount is slowly disappearing.
A potential buyer could have been India, who made the largest purchase of IMF gold at 200 tonnes last October. Just after India bought the 200 tonnes of gold from the IMF it stated that it may be a further buyer of this gold. Will they come in again, or will more Asian central banks come in for the first or second time? Well, both time and supply are running out for all central banks buyers.
As the buying has come from Asian countries who know and love gold, the most likely buyers will be from that part of the world, not from the developed world’s central banks. For the West to be buyers, may well be seen as undermining the paper currency world.
At the present rate of selling in the ‘open’ market the IMF will have completed selling in 6 months time. So the clock is ticking. That’s why we expect one or more announcements from the IMF on further sales to central banks soon. These will come anytime from now and over the next 6 months. We would not be surprised is the entire remaining amount goes in one fell swoop, soon. No-one can say who for sure will be buyers.
The IMF’s announcement that IMF gold sales are complete will be a trumpet signal to the market that supplies have narrowed. Then what?
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Sep 21
The Gem & Jewellery Export Promotion Council has published figures showing a rise of almost a half in exports of gold jewellery from India year-on-year.
In August 2009, $352.27 million (£227 million) of gold jewellery was exported from India to markets outside of the country.
The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.
Aug 20
Early week gains for gold bolstered by India festival season.
The price of gold was up again Tuesday as the US dollar weakened and investors expected more interest from physical buyers of gold for jewelry as India‘s festival season approached, while prices for platinum and palladium were higher on a report that US industrial production expanded more than expected in July.
December gold added $2.10 to [...]
Aug 20
Will there be a Gold rally soon? this article brings up some important points to consider.
By Melissa Pistilli—Exclusive to Gold Investing News
After a slight dip on profit-taking and a brief pause in trading action, COMEX gold prices climbed to a 7-week high of $1233.90 an ounce in mid-session Wednesday. Posting a third straight day of gains, the yellow metal closed at $1230.50 an ounce in New York.
Tuesday, SPDR Gold Trust (NYSE:GLD), the top gold-backed ETF fund, reported its first rise in holdings in nearly a week, from 1,286 metric tons to 1,294 metric tons.
The Fear Factor has returned to the gold market this week as a drop in global equity markets and ongoing concerns over global economic health reawakened safe haven sentiments.
“With gold prices managing to forge higher in the face of a weakening global economic outlook and a weaker US Dollar, it would appear that the flight to quality crowd is back on its feet again,” commented Jaime Greenough, Futures Representative at Global Securities, in a note Tuesday.
Deflation vs. Inflation
The big debate amongst gold market analysts recently revolves around the diverging possibilities of deflation and inflation. Those in the inflationist camp see the quantitative easing measures of recession-gripped governments such as the US as naturally leading to the serious devaluation of currencies (such as the dollar) and eventually skyrocketing inflation. Others argue that deflation is a much more likely scenario, and in fact, may already be taking shape. The fear of gold investors in a deflationary environment is that many will rush to liquidate assets, including gold, for cash, bringing down the yellow metal’s price significantly.
As for signals that inflation is rolling this way, inflationists this week pointed to wholesale producer prices increasing for the first time since April and reports that hedge fund Eton Park Capital Management staked a rather large position, about 6.6 million shares, in SPDR Gold Trust ETF in June.
However, those holding the contrary opinion tried to burst the gold bug bubble this week, including MarketWatch columnist Nick Godt and The Wall Street Journal’s Brett Arends.
Despite all the attention given to the threat of inflation, “the bond market, the ultimate barometer of such things, has been telling another story,” quips Godt. “Yields on benchmark 10-year Treasurys, which rise along with inflation expectations as bond prices drop, did rise Tuesday. But the move comes after yields on Treasurys Monday slumped to their lowest level since at least April 2009, just about when hedge funds and conservative pundits began to warn about deficits and inflation.”
According to Godt, concerns of slow growth in the US economy and the rising risk of deflation is what prompted the Fed to buy bonds on Tuesday. He also points out that while Eton Park may have “boosted its holdings,” one of the world’s largest hedge funds and the largest holder of the SPDR Gold Trust, Paulson & Co., has left its stake in the ETF unchanged since March at 31.5 million shares.
“You’ll hear plenty of voices on Wall Street telling you there’s no serious chance of deflation,” says WSJ columnist Brett Arends, who is not impressed by the arguments used to deny the risk of deflation. “Trouble is, they have a terrible track record of predicting these big, paradigm shifts. Over the past decade, few predicted the bear market, the housing collapse or the financial crisis. Their assurances need to be taken with a fistful of salt.”
Arends cites some distressing labor and housing statistics as signs that “deflation may already be here.” Consumer prices haven’t moved since May, hourly wages have fallen 0.7 percent, with a 2 percent drop in the manufacturing sector, from Q1 to Q2, and housing prices have “been steeped in deflation for years.” While other numbers, such as the Federal Reserve Bank of Cleveland’s median inflation index shows underlying inflation near zero.
Fall Season Just Around the Corner
For now, the outlook for gold going into the 4Q 2010 remains positive with many analysts calling for prices well into the $1300 an ounce range.
The Hindu festival of Raksha Bandhan on August 24th will usher in the buying season in India, the world’s leading gold consumer. Gold prices traditionally rally off the summer lows in September as many players come back to the market. And if this year holds true to that seasonality, says Mineweb’s Laurence Williams, “we could expect to see gold’s high point for the year threatened and surpassed” in what might turn out to be “a good September.”
The Street’s Alix Steel notes that prices for the precious metal have “historically [risen] as much as 2.5 [percent] in September, which would push prices towards their intraday high of $1,264 an ounce.”
Matt Zeman, an analyst at LaSalle Futures Group in Chicago, anticipates gold climbing to fresh highs over the upcoming weeks, all that’s needed is more gloomy global economic reports, which shouldn’t be too much of a stretch.
Ashraf Laidi, chief market strategist at CMC Markets, pegs gold at $1,330 an ounce by the middle of the 4Q on rising economic woes, further quantitative easing measures, lower risk appetite, and escalating tensions in the Middle East.
Despite these positive forecasts, some see little real support for higher gold prices. “As long as you see continued U.S. dollar strength I think gold will remain in a corrective/consolidated phase,” says Atyant Capital managing director, Pratik Sharma, who anticipates the yellow metal remaining rangebound between $1,160 and $1,250 an ounce over the coming months.
Aug 20
Gold jewelery in India might be bouncing back despite record high prices.
Several celebrities have been spotted at India International Jewellery Week (IIJW), which continues to display a large range of gold jewellery.
The five-day event, which is being held for the first time ever, saw Bollywood actress Neena Gupta and her daughter attend the third day of the show.
One of the brands showing its wares at the exhibition was Intergem Exports, which is based in Indore.
It had its new Slices collection on display, which is made from 18-c gold.
Kashi Jewellers, which has been exporting to the UK, US, Middle East and South Africa since 1979, also had several pieces for visitors to look at.
Its collections featured both modern and traditional design influences to give each piece a unique appeal.
Organised by the Gem and Jewellery Export Promotion Council of India, more than 30 jewellery designers will have presentations at IIJW and it is held at Hotel Grand Hyatt in Mumbai from August 15th to 19th.
The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.
Aug 20
It’s important to understand the underlying driving force for gold. Here is an interesting article that highlights this.
The key factors driving Gold Prices, plus those less-important elements…
RIGHT NOW, it appears that the Gold Price is being linked to the state of global economic growth or lack thereof, writes Julian Phillips of The Gold Forecaster.
Is it? Or are there other factors that contribute to the rise in the demand for gold? A look at the different types of demand gives us perspective on the real influences on the Gold Price.
Start with China’s contribution to the Gold Price, because this week saw an announcement that China is now the second largest economy in the world as well as being the world’s largest exporter. This is a landmark announcement as this country is headed fast to be the world’s largest economy with the world’s largest foreign exchange reserves.
As a nation, we do believe China is Buying Gold, eventually for their reserves, from local production as well as in the market. Additionally, the government and its institutions are encouraging the rapidly swelling numbers of newly enriched middle classes to Buy Gold. It is hard to give you an accurate number on this because such growth has never been seen before.
But there is a brake on the relationship of the growth of this class as regards gold. The Chinese are savers and because of their skepticism, recent experience of being poor and inexperience, they are not quick to change from the simplest of saving-account deposits to other investments. But overall they are happy with gold as an investment and are moving across to it, particularly as they understand the benefits of a rising price. Their obedience to government directives is helping the process. They have the lowest per capita holding of gold in Asia. We attribute this firstly to the long history of hardly any disposable per capita in the country. This is changing fast.
The demand is not seasonal except that it reaches a high point at the Chinese New Year, a time for people to celebrate and give presents. After New York closes, Asian demand kicks in at the start of their day pointing towards Indian, Indonesian, etc. demand, including that from China. Watching the market right through to before London opens, also gives on insight into demand from there.
Please note, this demand does not take note of the state of European or US economic growth. Most Chinese gold buyers are not aware of Western economics, but want financial security through savings in Yuan and gold.
Chinese demand is going to be large enough to be a major Gold Price driver in 2010 and 2011 and beyond.
Indian demand is also crucial. The monsoon this year (south of Pakistan) has been plentiful and expectations are that the harvest will be a good one. As 70% of gold purchases used to come from the agricultural sector, this time of the year is significant still. But as India urbanizes, the seasonality of gold buying there is lessening. Because the disposable income of Indians in the countryside is limited, the tonnage of actual gold purchased by them is falling. On the other hand, the numbers of the middle class is increasing and so is their disposable income.
To a growing extent this is making up the volumes that could be bought. The volume purchased per annum has been as high as 850 tonnes but can fall to 400 tonnes a year. The monsoon has had as much to do with that alongside rapidly rising prices. Please note that this difference is the same as de-hedging demand from the major Gold Mining companies was at its height.
Although India is growing at 8% per annum, the Indian middle classes are not growing as fast as China’s middle class. The main restraint on Indian gold buying is the fear that the Gold Price will fall after they have bought it. This year we do expect them to be more enthusiastic because the Gold Price has been stable over the last year and more at around $1,200.
They usually start to buy just before or after the beginning of September. That’s in two weeks time. Indian demand goes on through the year to May of next year.
Indian demand has been a major gold demand sources and is going to be a growing force, in line with Asian growth in 2010 and for years to come. As with China, western economic growth or lack thereof, does not affect Indian demand.
Developed world jewelry demand will also play a role. With the northern hemisphere and developed world holidays slowing down to early September, manufacturers of gold jewelry there start to gear up for the year end festivities. They Buy Gold for this time in September so that it can be in the shops in November or earlier. This has, in the past been the largest source of demand for gold.
Developed world demand relates directly to developed world levels of disposable income. These are not good this year, so we expect no increase in demand from that source. Disposable income has been well down since the start of the housing crisis, which began towards the end of 2007. We don’t expect them to rise for at least one year. But the buying that will take place will begin round about the beginning of September and last through to November before it slows to the steady flow up to May of next year.
If the Gold Price does not rise by much this demand will rise in significance, but we feel that it will again be sidelined by rising prices soon.
Industrial demand, in contrast, doesn’t matter so much for Gold Prices. Intel’s recent results and following comments showed us that electronics have now joined the category of ‘necessary’ items for households and businesses. As electronics are the main use for gold in industry, we do not expect there to be any significant drop in demand from industry. Overall, industrial demand is not seasonal, but such demand is not a major factor in the Gold Price.
As for demand from Central Banks, we are of the opinion that the turn in the market, by central banks from seller to buyers, overall is a trend that has barely begun. Russia, China, Saudi Arabia, the Philippines and no doubt to be joined by others in the future, are buyers of gold. Previous sellers have now taken a firm grip on their remaining holdings. Last year central bank buying equaled over 400 tonnes.
The monetary crises that lie ahead in the next year or two will, we believe, will incite much more buying by central banks as confidence in the monetary system continues to decline.
The International Monetary Fund’s sale falls out of this category, but is a supplier at the moment. Of its 413 tonnes there remains around 150 tonnes. We expect to see this absorbed completely within one year. Once this has gone prices will rise to the point where dishoarding begins, so providing the market with supply.
Again this demand is non-seasonal. However, it not only leads investment demand, it has the capacity to absorb all available supplies. Further, once its persistent visibility is accepted, it will incite considerably more institutional investment demand. Central bank demand these days is aimed at giving central banks liquidity when its nation faces international monetary credibility problems. We expect to see this demand rise in 2010 and 2011.
Finally, Gold Investment demand. Apart from the huge demand we have seen for the shares of gold Exchange Traded Funds enormous demand for physical gold bullion has been present in the market place. It is persistent and large. However, it will not chase prices. It is professional and aims at buying certain amounts at particular prices. It ranges from small wealthy individuals through to institutions to Sovereign Wealth funds. You need to know how all these demand forces come together and impact the Gold Price!
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Aug 20
Look at the investment outlook for gold. must read article:
Gold Investment has soared in recent years, but looks set to rise further…
MANAGING DIRECTOR for investment at the World Gold Council in New York, Jason Toussaint here speaks to Hard Assets Investor about why institutions are Buying Gold for their portfolios today…
Hard Assets Investor: I’m really happy to have you here, the World Gold Council is a very important organization, representing the gold industry.
Jason Toussaint: Yes, the World Gold Council is a market development organization that is owned by the largest Gold Mining companies in the world. Back in the ’80s, they decided to pool their resources into one organization, which we now know as the World Gold Council. And our goal, and our mission in life, if you will, is to create and sustain demand for gold.
We do that across a number of primary sectors, four sectors to be precise. We have an investment sector, which I manage on a global basis, which is informing and educating the investment public about the merits of gold in portfolio construction and long-term diversification. We have a government affairs division, which works with central banks, many of them around the world, to understand gold as a reserve asset.
We have an industrial sector, which is dealing with semiconductor manufacturers, etc., to increase and find more uses for gold in the industrial segment. And then, of course, last but not least, the jewelry sector, which is the most important and has the largest demand.
HAI: You work with the Gold Investment area. Is it only recently that we’ve seen larger investors, institutional investors, taking sizable positions, and owning gold as a real asset class?
Jason Toussaint: Right. The biggest shift that took place – and I would call it a paradigm shift in this market – is not necessarily the merits of Gold Investment, because those have been around for quite some time, and we’ll discuss those, but the access. And when we launched the SPDR Gold Shares here in the US in 2004, having an exchange-traded product with all the guaranteed two-way markets – infinite liquidity, if you will – of trading on the market, overcame a lot of the issues that investors have had in the past with accumulating gold.
HAI: We should just state that the World Gold Council created the GLD, the very popular Gold ETF that is currently out there right now, and has really taken off among investors.
Jason Toussaint: We sponsored it, through a subsidiary based in New York – World Gold Trust Services. Its market cap is now just below $50 billion, and we are now the second-largest ETF in the world. What is very interesting, if we look back to when we launched the product in November 2004, it surpassed $1 billion in assets under management in its fourth trading day. So, we were absolutely tapping into latent demand by investors who wanted to invest in gold, but didn’t necessarily know how.
Before the ETFs, if you wanted to invest in gold, it was buying Gold Bars and coins, primarily, which is fraught with issues such as price discovery, where do I purchase these things. And then, of course, there are costs associated with transport insurance and storage.
HAI: What percentage of gold demand, prior to the ETF, was represented by investor demand? And, what percentage, let’s say, was jewelry fabrication?
Jason Toussaint: Before the ETFs, investment demand was roughly probably 15% of aggregate gold demand. Now it’s upwards of…depending on quarter to quarter…20 to 30%. It’s pretty much doubled.
HAI: So, the biggest component of overall demand, the most important, is the investment side now?
Jason Toussaint: Right. And I think, kind of coming back to the access vehicle, looking at SPDR Gold Shares and, frankly, other Gold ETFs backed by physical bullion available in the world, has really made gold investable for the first time, for many classes of investors.
For instance, you mentioned pension funds. Pension funds are absolutely asking about the merits. We work with them closely now, about why they should Buy Gold. And then, more importantly, how they do it. Because you can imagine, if a pension fund wanted to buy a billion Dollars’ worth of gold previously, then they would need to worry about, "Well, where do we store it? How is this valued? How do we trade it?" etc. And, trading gold is quite specialized. By putting it on exchange, it is now part of the professional investment process.
HAI: So we’ve seen a doubling in investment demand – you definitely see that growing further?
Jason Toussaint: We absolutely do see investment demand continuing. Even at $50 billion, I like to tell people we’re just barely scratching the surface now. There is a vast market out there that does not hold gold.
HAI: How large is the total capitalization of the gold market, roughly?
Jason Toussaint: Six trillion Dollars.
HAI: Six trillion? So, in the scheme of things, it’s not really all that big – global GDP, what, $60-$70 trillion?
Jason Toussaint: Right…but then, we need to also understand that the primary driver is jewelry. And the primary buyers of gold jewelry, the largest markets, if you will, are the Middle East, India and China. And looking at continued demand, and the relative balance between jewelry and investment, I think what we will see is a continued increasing demand for jewelry in those markets. Because, if you think of their domestic growth rate, and the fact that in the case of China and India, most importantly, the creation of a new middle class, new wealth and an affinity towards gold, that is, I think, a very, very long-term structural shift in gold demand, which I think is often overlooked.
HAI: Well, we’re out of time right now. I want to thank Jason for stopping by.
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