#China stands out as largest buyer of #gold this year

Central banks have bought 800 tonnes in first nine months of the year, up 14% year-on-year, according to a report by the World Gold Council 

Central banks in emerging markets look to reduce reliance on US dollar for reserves holdings

China has stood out as the largest purchaser of gold this year as part of a 11-month buying streak. The People’s Bank of China has reported snapping up

Charted: 30 Years of Central Bank #Gold Demand

Globally, central banks bought a record 1,136 tonnes of gold in 2022. 

Nearly one-fifth of all the gold ever mined is held by central banks.

Besides investors and jewelry consumers, central banks are a major source of gold demand. In fact, in 2022, central banks snapped up gold at the fastest pace since 1967.

The record gold purchases of 2022 are in stark contrast to the 1990s and early 2000s, when central banks were net sellers of gold.

How has central bank gold demand changed over the last three decades?

See the whole piece on Visual Capitalist here: Charted: 30 Years of Central Bank Gold Demand

As #Gold prices rose in 2019, investors jumped into #ETF’s | World @GoldCouncil



Huge rise in ETF inflows almost equalled the sharp drop in consumer demand in 2019

The net result was a marginal 1% decline in annual demand to 4,356t.

Global reserves grew by 650t – the second highest annual total.

Low/negative interest rates and geopolitical uncertainty fuelled this growth, while the gold price rally also attracted momentum-driven inflows.

Highlights

Annual gold demand in 2019 dips 1% to 4,355.7t

Total fourth quarter demand fell 19% y-o-y to 1,045.2t. Two main contributors to the y-o-y drop were jewellery and physical bar demand, both of which reacted to the elevated gold price. In US dollar value terms, the decline in Q4 demand was much shallower – down just 3% to US$49.7bn.

Inflows into global gold-backed ETFs and similar products pushed total holdings to a record year-end total of 2885.5t. Holdings grew by 401.1t over the year, with 26.8t added in Q4. Inflows were heavily concentrated in Q3 as the US dollar gold price rallied to a six-year high.

Central banks were net buyers for a 10th consecutive year: global reserves grew by 650.3t (-1% y-o-y), the second highest annual total for 50 years. Purchasing in Q4 of 109.6t was 34% lower y-o-y, although this was partly a reflection of the sheer scale of buying in 2018. 

China and India held sway over global consumer demand.

BIS may consider making gold a Tier 1 asset for commercial banks with 100% weighting rather than Tier 3 asset with just 50% risk weighting as it does today.

Dennis Gartman noted today the following:


Despite the one day, onerous and expensive bearish shift... which has been replaced by the bullish reversal yesterday... we note the following comments made earlier this week by Mr. Ross Norman, the CEO of Sharps Pixley in London, entitled: The Next Big Thing in Gold: Possible Purchase of 1700 Tonnes:


Banking capital adequacy ratios, once the domain of banking specialists are set to become centre stage for the gold market as well as the wider economy. In response to the global banking crisis the rules are to be tightened in terms of the assets that banks must hold and this is potentially going to very much favour gold. The Basel Committee for Bank Supervision (or BCBS) as part of the BIS are arguably the highest authority in banking supervision and it is their role to define capital requirements through the forthcoming Basel III rules.


In short, they are meeting to consider making gold a Tier 1 asset for commercial banks with 100% weighting rather than a Tier 3 asset with just a 50% risk weighting as it does today. At the same time they are set to increase the amount of capital banks must set aside as well. A double win potentially.


Hitherto banks have been much dis- incentivised to hold gold while being encouraged to hold arguably riskier assets such as equity capital, currencies and debt instruments, none of which have fared too well in the crisis. With this potential change in capital adequacy requirements. Bank purchases of gold would drive up its value relative to other high quality qualifying assets, increasing its desirability for regulatory purposes further. This should result in gold being re-priced to bring it on a par with all other high quality assets.

Currently banks have to have core Tier 1 capital ratio of 4% of which will rise to 6% from the beginning of next year. In addition to its store of value merits, central to the argument in favour of gold as a bank reserve is its countercyclical nature to most other assets in that it tends to be inversely correlated. Gold is ideal as it bears no credit risk. It involves no other counterparty and it is no one's liability. It is a reserve asset diversifier if you like.

This is a treble win for gold - it would be a major endorsement of its role in preserving wealth and as a store of value from the highest financial authority, it would lead to significant purchases of gold by major financial institutions and it would lead to a reappraisal of its value with respect to other Tier 1 capital such as quality sovereign debt. Under the new rules gold could become a very significantly larger proportion of a reserve pool which is about to grow very much larger.

This is very bullish news for gold... very bullish; but at the moment it matters really very little, although it shall in the not-too-distant future. At the moment, the only thing that matters is Europe and that means deflation, liquidation and cash. All else is of little interest until further notice. 

Defriended gold still has room to run - Holmes

Defriended gold still has room to run - Holmes

Frank Holmes maintains gold may not go up vertically from here, June and July are traditionally weak months for the metal, longer term the metal will rise.

Author: Frank Holmes (US Global Investors)
Posted: Tuesday , 22 May 2012
SAN ANTONIO (U.S. Global Investors) -

Facebook's highly anticipated initial public offering Friday helped the company raise $16 billion, a record for tech IPOs. It's refreshing to see investor excitement rally around the stock, as the U.S. needs innovative businesses to thrive and attract capital. However, as behavioral finance warns, be cautious of a herd mentality.

Last November, the IPO deal of the day was Groupon. On the first day of trading, shares rose to a high of $31 from an initial offering price of $20.

By Thanksgiving, the stock had fallen below the IPO price, and only a few months later, uncertainty popped up around the company's accounting methods and financial controls. The stock fell further, with the market devaluing Groupon by about 50 percent in only six months. How's that for a group buy?

It's interesting to note that the value of Groupon's stock has lost more than $13 billion since the peak on the first trading day through April 30. For comparison, if you look at the total net assets in Lipper's precious metals mutual fund peer category, assets fell $8.3 billion over the same timeframe. Investors lost more than $5 billion more in one tech stock alone than in all of the precious metals funds combined.

Gold-A Reality Check
Investors have "defriended" gold recently in favor of the dollar, as Greek and French voters rejected austerity measures. Greeks have been responding to their escalating debt issues for a while by steadily pulling money from overnight deposits. I often say, money goes where it is best treated, and these deposits will need to find a safe haven.



It's not only Greece the market is worried about, says BCA Research. In a special report aptly named, "In Case of Emergency Grexit," the firm says there's extra pressure on Spain and Italy, "which imminently needs a large bailout of its banking system." The 10-year yields for each country have reached 6 percent today, and while there are funds to sufficiently cover Spain, there aren't enough funds for Italy, too, says BCA.

So if the European Union (EU) stops the flow of bailout funds, Greece, unable to pay wages, would invoke social unrest, according to BCA.

More importantly, without funds from the EU, Greece would default on its bonds. Looking at what the country owes this year alone, $1 to $7.6 billion is due each month, says BCA. The European Central Bank would then most likely stop providing funds to Greek banks, causing more individuals to pull money. "With deposit flight, and no injections from the ECB, the banks would be bust and Greece would be hemorrhaging money," says BCA.

It's also important to look at the investors of Greek debt. According to the London Evening Standard earlier this year, French banks are the largest holders of Greek government bonds and private-sector debt in the eurozone, with $47.9 billion exposure to Greece.

In the end, I believe governments in Europe lack the courage to be fiscally disciplined. Earlier this week, I told Aaron Task and Henry Blodget on The Daily Ticker that when push comes to shove, Europe will likely continue to print money. This should be positive for gold.

At the Hard Assets Conference earlier this week, Greg Weldon compared the money printing situation to a sink. In an interview he gave with The Gold Report, Greg said:

"It's going to be very difficult to see how economies in Europe, the U.S. and Japan can stand on their own two feet without the assistance of central banks debasing currency through debt monetization. I liken it to filling the sink halfway up with water and pulling the plug out of the drain. Of course, the water level will recede unless you turn the faucet on and start more water pouring into the sink. The level of water represents asset prices, the water flowing out of the faucet represents liquidity provided by global central banks and the drain represents the real macro economy, which has not been fixed.

"At the end of the second round of qualitative easing, when the Fed shut off the faucet, the water level (asset prices) started to go down. But now the water is running again-particularly with some of the measures instituted by the European Central Bank, with its three-year loan program, the federal liquidity swaps and the back-ended way that it's managed to involve the International Monetary Fund.

"The problem with all of this is it does nothing to fix the underlying problem, which is too much debt. This is not sustainable. Central banks turning on the water faucet is good for asset prices. The real solutions of fiscal austerity, which are probably not palatable to most politicians in Europe, are the real struggle as we go forward. This problem is not going to go away."

So, during times like we've had recently, when the dollar is chosen over gold, I apply math. The chart below shows the 60-day percentage change of the gold price and the U.S. dollar. Gold's recent weakness has triggered a -2.2 sigma event in standard deviation terms. Over the past 10 years, this has happened less than 2 percent of the time. Historically, each time gold has touched the -2 sigma mark, the precious metal has rallied.

This bounce is exactly what we saw on Thursday and Friday this week.

See more slides from my Hard Assets Investment Conference.

While gold may not go up vertically from here-as frequent readers know, the yellow metal historically has fallen in June and July-with the extraordinary events occurring in Europe, I believe investors will soon "friend" gold once more. As we wait for the central banks around the world to act, I encourage investors to consider dollar-cost averaging. It's a way to stay invested, and more importantly, to avoid making emotional investment decisions.

Frank Holmes is CEO/CIO of US Global Investors.

Read the article online here: Defriended gold still has room to run - Holmes

Ben Bernanke is Every Gold Bug's Best Friend - Money Morning

Ben Bernanke is Every Gold Bug's Best Friend

February 9, 2012

By By Frank Holmes, Guest Writer, Money Morning

After prices fell 10% in December, many investors wondered if the bull market in gold was running out of steam.

That was before Federal Reserve Chairman Ben Bernanke swooped in with a "red cape" and fired the bulls back up.

Since the Fed reassured the world that interest rates will remain at "exceptionally low levels" for another two years, gold has jumped more than 3%.

UBS AG (NYSE: UBS) described the situation simply, "if investors needed a (further) reason why they should be long gold now, they got it yesterday ... a more accommodative policy is a very good foundation for gold to build on the next move higher."

To gold bugs, two more years of near-zero, short-term interest rates means negative real interest rates are here to stay, and this has historically been a strong driver for higher gold prices.

Bernanke and the Fed aren't the only central bankers in the fiscal and monetary bullring.

Brazil has cut its benchmark interest rate a few times and China lowered its reserve rate for banks in December. According to ISI Group, 78 "easing moves" have been announced around the world in just the past five months as countries look to stimulate economic activity.

One of the main weapons central bankers have employed is money supply, which has created a ton of liquidity in the global system. Global money supply rose 8% year-over-year in December, or about $4 trillion, according to ISI. I mentioned a few weeks ago how China experienced a record increase in the three-month change in M-2 money supply following China's reserve rate cut.

Together, negative real interest rates and growing global money supply power the Fear Trade for gold. The pressure these two factors put on paper currencies motivates investors from Baby Boomers to central bankers to hold gold as an alternate currency.

Central Banks are Loading Up on Gold
Adrian Ash from Bullionvault says global central banks are on a buying spree and they have been since the Fed cut interest rates by 25 basis points in 2007. Central bankers' shift to buying gold was a significant sea change for the yellow metal.

You can see from the chart below that official gold reserves have historically been much higher, averaging around 35,000 tons. In the 1990s, central banks began selling, with reserves hitting a 30-year low right around the time the Fed began cutting rates. Ash says that gold holdings are now at a six-year high with the current amount of gold reserves just less than 31,000 tons.

These are countries large and small. In December, Russia, which has been routinely adding to the country's gold reserves since 2005, purchased nearly 10 tons; Kazakhstan purchased 3.1 tons and Mongolia bought 1.2 tons. UBS says "although reported volumes are not very large, it is still an extension of the official sector accumulation trend."



Not all central banks are recent buyers, though. The "debt-heavy West" has sold its gold holdings, while emerging markets increased their gold reserves 25 % by weight since 2008, says Ash.

Reserves as a percent of all the gold mined has also declined, with "a far greater tonnage of gold ... finding its way into private ownership," says Adrian. Since 1979, you can see the percentage of reserves to total gold has declined at a much faster pace as individuals increasingly perceived gold as a financial asset.

Ash points to China's Gold Accumulation Plan as a recent example of this trend. A joint effort between the Industrial & Commercial Bank of China (ICBC) and the World Gold Council (WGC), the program allows Chinese citizens to buy gold in small increments as a way to build up their gold holdings over time. The WGC reported in September that the program had established 2 million accounts during its first few months in operation and the amount is growing by the day.

These programs open the door for gold as an investment to a whole new class of people in China but that's only a fraction of the tremendous demand for gold that we are seeing from China.

Gold and the "Love Trade"

In addition to the Fear Trade, gold is driven by the Love Trade, which is the strong cultural affinity the East, namely China and India, has to the precious metal.

In 2010, the Indian Sub Continent and East Asia made up nearly 60% of the world's gold demand and 66% of the world's gold jewelry demand, according to the WGC.

Indian jewelry demand has historically increased during the Shradh period of the Hindu calendar, but last year, high prices and a volatile rupee kept many Indian buyers on the sideline.

If you thought $1,900 was too much to pay for an ounce of gold, imagine how Indians felt when the rupee fell against the U.S. dollar, causing a gold price spike in rupees. Gold in Indian rupee terms rose more than 35% from July to November, roughly three times the magnitude of gold priced in U.S. dollars, yuan or yen.

This currency swing significantly impacted Indian gold imports, which dropped 56% in the fourth quarter, according to data from the Bombay Bullion Association.



"Indian buyers will be back" after they adjust to the higher prices, says Fred Hickey. In one of his latest editions of "The High-Tech Strategist," he cites late 2007 as a recent example when the Indian gold market experienced a similar rough patch.

That year, gold demand in India fell off a cliff after prices spiked more than $1,000 an ounce in one quarter, tarnishing the country's love affair with gold for a "brief period." Fred says their cultural affinity for gold as an important store of wealth and protection against inflation will drive Indian buyers back into the market.

The trend was already changing in 2012, as UBS reported that the first day of trading saw physical sales to India were twice what they usually are, according to Hickey. Although this is a very short time frame, I believe the buying trend will continue in this gold-loving country.

In China, "just as in India, gold is seen as a store of wealth and a hedge against inflation," says Hickey. Demand has been growing, especially in the third quarter, when China's gold purchases outpaced India. "Physical demand for gold from the Chinese has been voracious all year," says Hickey. As of the third quarter, China had already obtained 612 tons, eclipsing its total 2010 demand, according to the WGC.

Across the Chinese retail sector, gold, silver and jewelry demand was the strongest performing segment in 2011, says JPMorgan Chase & Co. (NYSE: JPM) in its "Hands-On China Report."

Growth in this segment far outpaced clothing and footwear, household electrical appliances, and even food, beverage, tobacco and liquor, all of which experienced more modest growth.



JPMorgan says the bulk of the increase came from lower-tier cities "where income levels are rising the fastest and improvements in retail infrastructure have allowed for rapid store expansion."

Increasing incomes coupled with government policies that support growth have been the main drivers for rising gold prices. Take a look at the chart below, which shows the strong correlation between incomes in China and India and the gold price. As residents in these countries acquire higher incomes, they have historically purchased more gold, driving gold prices higher.



We anticipated that the Year of the Dragon would spur an increase in the buying of traditional gifts of gold dragon pendants and coins. Gold buying did hit new records, says Mineweb, with sales of precious metals jumping nearly 50% from the same time last year, according to the Beijing Municipal Commission of Commerce.

This should serve as a warning to all of gold's naysayers.

Gold bullfighters beware - you now have to fight the gold bull while fending off a golden Chinese dragon.

[Editor's Note: Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of "The Goldwatcher: Demystifying Gold Investing."

He has been profiled by Fortune, Barron's, The Financial Times and other publications.

If you want commentary and analysis from Holmes and the rest of the U.S. Global Investors team delivered to your inbox every Friday, sign up to receive the weekly Investor Alert at www.usfunds.com.]

Ben Bernanke is Every Gold Bug's Best Friend - Money Morning

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Where in the world is the gold?

Where in the world is the gold?

GoldSeek Web - By: Chris Powell, Secretary/Treasurer, GATA



-- Posted Sunday, 23 October 2011 | Source: GoldSeek.com


Remarks by Chris Powell
Secretary/Treasurer, Gold Anti-Trust Action Committee Inc.
Fall Dinner Meeting
Committee for Monetary Research and Education
Union League Club
New York, N.Y.
Thursday, October 20, 2011

CMRE President Elizabeth Currier chose the title of my remarks -- "Where in the World Is the Gold?" -- and I didn't argue with her, but if I knew where the gold was, they'd have to kill me. And if I knew and told you before they got to me, you'd all have a big problem too.

But for our purposes tonight it is enough to know that we will never be permitted to know, at least not in the current political circumstances.

Having been raising questions about the gold market for 12 years now, I've realized that the amounts, location, and disposition of government gold reserves are secrets more sensitive than the amounts, location, and disposition of nuclear weapons. Indeed, under nuclear weapons control treaties, governments with nuclear weapons have often shared that sort of information, even with hostile powers. But gold reserve information is far more tightly held and most gold information provided officially is actually disinformation.

Why is it this way?

It's because gold is an even more powerful weapon than nukes -- an alternative currency that is not necessarily under any governments power, a determinant of the value of other currencies, interest rates, government bonds, and equities.

It's not just me saying this. Lawrence Summers, former U.S. Treasury Secretary and off-and-on economics professor at Harvard, said so in the study he wrote with University of Michigan economics professor Robert Barsky in the Journal of Political Economy in 1988, a study titled "Gibson's Paradox and the Gold Standard." This study is posted at the Internet site of my organization:

http://www.gata.org/files/gibson.pdf

A few weeks ago, maintaining that his "Gibson's Paradox" study remains dispositive of the gold price issue, Summers provided it to New York Times columnist Paul Krugman -- and did so by giving Krugman the link to it at GATA's Internet site. That's what Krugman wrote on his blog.

This close correlation among gold, interest rates, and government bond values is why central banks long have tried to control -- usually suppress -- the price of gold. For gold is the ticket out of the central banking system, the escape from coercive central bank and government power. As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it. Because gold is the vehicle of escape from the central banking system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.

That manipulation operates through the largely surreptitious mobilization of Western central bank gold reserves and the gold nominally held by the major exchange-traded funds. If the manipulation was done completely in the open, as governments used to manipulate the gold market, through the gold standard and then through what was called the London Gold Pool, the Western central bank gold dishoarding scheme of the 1960s, the manipulation would fail, because then the world would understand that there isn't a free market in gold -- or in any currency, any more than there is a free market in government bonds.

Anyone can determine this for himself just by putting the unanswerable questions to central bankers and treasury officials.

For example, three years ago, as the International Monetary Fund was constantly announcing plans to sell some of its gold, I wrote to the IMF to try to determine exactly where its supposed gold was kept and whether the IMF had control of its own gold or if that gold was only pledges of gold from its member nations. The most I got out of the IMF was that its bylaws allow its gold to be stored in the United States, Britain, France, and India. When I asked if there ever had been an audit of the IMF's gold, the IMF's publicist terminated our correspondence. I was refused information as to where the IMF's gold was.

At the hearing held on March 25, 2010, by the U.S. Commodity Futures Trading Commission to inquire into the precious metals market, the managing director of the metals consultancy CPM Group in New York, Jeff Christian, a consultant to central banks, testified to what he had published in an explanatory essay in 2000. Christian testified that the world's biggest gold market, the London bullion market, is actually part of a fractional-reserve gold banking system where many times more gold is sold than is delivered. Most London gold buyers don't take delivery, and so most gold in client accounts on the books of the London bullion banks doesn't exist. It is just an unsecured claim against the bullion banks, which presumably have assurances that, in an emergency like a short squeeze, they can obtain gold from central banks.

That is, Western central banks have figured out how to increase gold's supply by vast amounts without going through the trouble of digging it out of the ground. They help to invent and sustain "paper gold" -- imaginary gold that many buyers accept, never suspecting that they're being deceived and cheated, fooled into thinking that they are buying a finite resource to hedge against the infinite creation of currency, when what they are buying is just as subject to infinite creation as the currency they want to hedge against.