Models appearing in the Jena Theo catwalk show at London Fashion Week were decorated in motifs applied to their skin using gold leaf, it has been reported.
In an article on the event by writer Kate Muir in the Australian news source Where I Live, the neutral colour garments being modelled were given sparkle with gold embroidery and Indian trim.
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Sep 21
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 19
Wow a Gold back currency!!! Could it be true?
Islam’s new gold money vs. the crony corporate capitalism of the West…
SOME OF OUR Islamic cousins have seen the light and wish to move away from paper money and back to commodity money, notably gold and silver, writes Toby Baxendale at the Cobden Centre.
It seems that a brave state in Malaysia will be doing this within weeks. We welcome this. The British Pound and US Dollar have declined by 99.42% and 98.17% in value respectively since they were detached from their roots in gold. The beneficiaries of this massive wipe out in the purchasing power money are, firstly, the governments of the day, which can issue excess paper currency to fund their various promises via “monetizing” bits of their debt obligations. Secondly, the handmaiden in this activity – the private sector banks – are next in line to benefit.
Banks use the state-supported apparatus to create new purchasing power out of nothing via the bank credit generated by the new deposits made available to them via the monetization process, and thereby enrich themselves and their favored clients. This is the Crony Corporate Capitalism that we have today.
So fair play to the state of Kelantan, who wish to get the monkey off their back. The Americans, with the Dollar as the world’s reserve currency, have been able to print gigantic amounts with little negative economic effect to themselves. Each time an Asian exporter sells real goods for this newly created paper or bank deposit that has been created out of nothing, he essentially trades his real goods for depreciating purchasing power.
Reporting the news from Malaysia, The Guardian points out that:
“The idea was first mooted by Malaysia’s former prime minister, Mahathir Mohamad, in the aftermath of the 1997 Asian financial crisis. He argued that the coins would never hang their possessor out to dry in the same way that paper money had. As precious metals with intrinsic value, gold and silver are more resistant to market fluctuations and devaluation compared to the US Dollar – an argument he took to the Organisation of the Islamic Conference as a tool to battle western hegemony.”
It will be interesting to watch the UK based Dinar Exchange mentioned in the article:
“Then there is Dinar Exchange, the British equivalent of Indonesia’s WIN. As the ‘official certified supplier of Islamic gold Dinar and silver Dirham in the United Kingdom’, the company had just concluded a month-long series of roadshows in May that saw it promoting the gold Dinar to Muslims in key UK cities such as London, Birmingham and Edinburgh. The group is inviting more to spread this Islamic vision as Dinar agents.”
Immigration is very controversial in this country. Here, at least, I clearly see potential for Islamic immigrants to have a positive ideological influence on the native community, by imbuing new spirit in the fight for Honest Money!
This is the people’s money spontaneously trying to compete with the legal tender Pound Sterling controlled by the state. Bad money crowds out good money with legal tender laws, as Gresham taught us. I do see this as a beacon of light in a very murky world.
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