Central Banks Moving Into Gold

August 7, 2012

Punctuated by a sharp increase in gold holdings by South Korea’s central bank, world central banks are moving into gold, expanding their gold holdings in a major way.

What do these ultimate insiders know that the average investor doesn’t know? Central bankers have access to information and statistics that we are kept in the dark about. This makes their move into gold an important signal for the rest of us.

Do not dismiss South Korea as a minor player in the world economy and financial markets, they’re not. South Korea is an Asian economic juggernaut, with one of the fastest growing economies over the past quarter century.

More from Reuters:

South Korea buys gold; central bank purchases set to rise

South Korea boosted its gold holdings by nearly a third in July, buying 16 tonnes as
part of the central bank's efforts to diversify its massive foreign exchange reserves.

South Korea is Asia's fourth largest economy and its central bank said on Thursday that it now holds 70.4 tonnes of gold,
after paying $810 million last month for the purchase.
    
The increase barely lifted gold prices but supported expectations that central banks will remain gold's key buyer as
increased volatility in global markets and waning confidence in the U.S. dollar fuel a global drive to vary foreign reserves
away from the U.S. currency and government debt securities.
CENTRAL BANKS TO BUY MORE GOLD
    
The latest purchase was the third by the Korean central bank since June last year, when it started increasing its reserves
after leaving them unchanged for more than a decade. 

In the last 13 months, South Korea's gold reserves have grown five-fold but remain only a fraction of China's over 1,000
tonnes and Japan 765 tonnes, according to the World Gold Council (WGC).

Central banks bought 80.8 tonnes of gold in the first quarter, adding to 2011 purchase of more than 450 tonnes, the
WGC said. In recent months, a number of countries including Russia and Kazakhstan also increased their gold reserves, data
from the International Monetary Fund showed. 
"We have been of the view that we would increasingly see more diversification of reserves and investments into gold,"
said Chirag Mehta, gold fund manager at Quantum Mutual Fund in Mumbai, India. "This trend is likely to continue".
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Some startling predictions for gold

July 9, 2012

Coming out of the recent Independence Day week, there are 3 very positive predictions for the price of gold that investors should be aware of.

The first comes from Jim Sinclair, editor of Jim Sinclair’s Mineset. Sinclair is a veteran precious metals and currency analyst who has been tracking the markets since 1977.

In a bulletin that he called his most important since 2001, Sinclair is calling for the price of gold to reach $3500 per ounce, or more than double current levels.

Meanwhile, Ben Davies, co-founder of Hinde Capital Ltd., told Bloomberg news last week that gold could head as high as $6,000 per ounce. You can watch the video below:

http://www.businessweek.com/videos/2012-07-03/hinde-capitals-davies-on-gold-prices-outlook#r=related-rail

Finally, Paul Brodsky, bond market expert and co-founder of QB Asset Management, says that central banks have reached the “inflate or die” point and as a result, investors should “hold tightly to your gold.”

The world has simply gotten itself into too much debt. There are creditors that expect to be paid, and debtors that are having an increasingly difficult time making their coupon payments. No amount of political or policy intervention is going to change that reality.

Looking at the global monetary base, Paul sees it dwarfed by the staggering amount of debts that need to be repaid or serviced. The reckless use of leverage has resulted in a chasm between total credit and the money that can service it.

So how will this debt overhang be resolved?

Central bank money printing — and lots of it.

At this point, the danger posed by the instability of our monetary and fiscal house of cards is so great that trying to time an investment program to when this avalanche of printing will occur is too risky, in Paul’s opinion. It’s time to shift your remaining capital into hard assets.

 


CNBC – Yoshikami: Four Things You Need to Know About Gold Now

May 25, 2012
Published: Friday, 25 May 2012 | 10:26 AM ET
Michael Yoshikami
CEO, Founder & Chairman, Destination Wealth Management

Gold is negative for the year and has caused some to say it is time to abandon this metal as an investment. After all, isn’t gold supposed to rise consistently every year and always rise when equity markets drop?

Since the price of gold [GCCV1  1571.90    14.40 (+0.92%)   ] has not ratcheted up in this latest Europe driven downturn, some say surely that must mean that the wisdom of owning gold is now null and void.

I disagree; gold should still be a part of your investment plan.

Here are a few thoughts to keep in mind as you consider investing in gold for your portfolio strategy.

1. Recognize that investing in gold is not a guaranteed positive return investment every year; gold can and will lag other asset groups depending on the current environment. This is particularly the case when liquidity becomes a concern in global markets and gold is sold to raise cash. Remember, this asset will rise and fall in value like any other asset; a longer-term time horizon is required when buying this precious metal.

2. Central banks will continue to diversify out of US dollars and European currency. Having just returned fromAsiathis week, it never ceases to amaze me the level of skepticism that businesses and governments have regarding the fiscal prudence of US and European leaders. The bottom line is they simply don’t believe that responsible decision-making will occur leading to currency stability. For that reason, central bankers around the world will continue to buy gold as a substitute for unstable currencies.

3.India andChina will continue to consume record amounts of gold as affluence rises. One only needs to spend time in Macau orBombay orShanghai to see that the demand for gold has never been higher as emerging countries continue to increase wealth. inIndia andChina, gold is symbolic of good luck, affluence, and status. Despite the bumps thatIndia andChina might encounter in their economies, gold consumption will continue to accelerate.

4. One day inflation will emerge. And when inflation does rise, tangible assets will provide some level of inflation protection. Given the incredible stimulus policies around the world, it’s hard to imagine that pent-up inflation is not bubbling below the surface in global economies.

Assets such as commodities and other tangible goods tend to do well in inflationary environments. Gold is no exception to this trend.

While it is tempting to be shortsighted when investing in any asset, it is critical that one analyze the role of each position in a portfolio strategy. This analysis is required to assure that a plan for investment factors in not only what might go right with an investment plan, but also what might go wrong as well.

When inserting gold into your strategy, make sure it is part of an overall plan. Do not get caught up in short-term price movements when building a long-term investment allocation. There have been many times in the past when gold has underperformed other capital assets only to see valuations roar back. Don’t get left behind when gold makes its latest recovery.

And be prepared to increase your position when inflation begins to emerge. Be tactical but long-term in perspective and make gold part of your offensive and defensive investment strategy.


China’s Lesson from The Fed: When in Doubt Print More Money

May 24, 2012

When you see China heading down the same path as Bernanke & the Fed manipulating the economy to meet artificial economic expectations it makes one wonder. The second largest economy is not recovering as fast as the manipulators would like to see, so out come the printing presses.

As investors in rare coins & precious metals it should give you encouragement to acquire more Silver & Gold during the current dip. 2008 saw a retraction in prices before this last run that took metals to new & near high levels. As you read below we could see a mini repeat of 2008 from Europe & China. This further proves that the underlying trends in the economy are shaky at best! Read more:

CNBC: China Seen Launching ‘Aggressive Stimulus’ as Growth Slows Further

Beijing to launch aggressive stimulus measures in order to prevent a further deterioration of growth like the expansion in the eastern part of the city.

Published: Thursday, 24 May 2012 | 6:34 AM ET
By: Ansuya Harjani 
Assistant Producer, CNBC Asia

Continued weakness in China’s economic data, as well as growing risks of aGreek exit from the euro zone, will drive Beijing to launch aggressive stimulus measures in order to prevent a further deterioration of growth in the world’s second largest economy, economists and strategists tell CNBC.

On Thursday, the HSBC Flash Purchasing Managers Index (PMI), the earliest indicator ofChina’s industrial activity, fell to 48.7 in May from a final reading of 49.3 in April. It marked the seventh straight month that the HSBC PMI has been below 50, indicating contraction.

“All signs point to the fact that the slowdown is not letting up as fast as authorities had expected, partly because of challenging external conditions and partly because of the fact their tightening last year was too effective,” Donna Kwok, HSBC, Greater China economist, told CNBC Asia’s “Cash Flow.”

“We are going to have to see more active support being directed directly to consumer and business rather than through the monetary system via the banks,” Kwok added.

China, which began to tighten its monetary policy in late 2009 to stem risinginflation  , is now facing a sharp slowdown in the economic activity, raising fears of a hard landing for the economy.

In a sign the government is already growing worried about the slowdown, a state-backed newspaper reported on Tuesday that China will fast-track approvals for infrastructure investment.

Dariusz Kowalczyk, senior economist and strategist, Asiaex-Japan, at Credit Agricole, said the weak HSBC Flash PMI data strengthen the case for easing and he expects more fiscal stimulus.

“The focus of the stimulus is likely to be on the fiscal side, probably as a ‘mini-Lehman crisis’ package of state-directed lending for investments in infrastructure, because this is the fastest way to boost aggregate demand,” he said in a note to clients.

While Kowalczyk believes monetary policy is unlikely to be used as aggressively, he expects a push towards quantitative easing through “pressuring” banks to lend more via further reductions in the reserve requirement ratio (RRR).

Chinahas cut the RRR three times since November 2011, with the last move on May 18, and Kowalczyk expects up to 150 basis points in RRR cuts and 50 basis points in interest-rate cuts this year.

‘Grexit’ Scenario

In addition to a deterioration of domestic economic indicators, headwinds from Europe’s debt crisis, particularly risks surrounding a Greek exit from the euro zone, are growing a concern and could trigger “massive” stimulus measures, said Peng Wensheng, chief economist at state-owned investment bank China International Capital Corp.

According to Wensheng, ifGreecewere to leave the currency bloc,Chinawould need a 600 billion yuan ($94.7 billion) stimulus package to shield the economy from any fallout by the exit and meet its 7.5 percent growth target.

A Greek exit, which would hurtChina’s exports and result in large capital outflows, could drag economic growth in the mainland down to 6.4 percent in 2012, he said.

“Assuming a Greek euro exit drags down global economic growth by half as much as the 2008-2009 global financial crisis did, China’s economic growth would fall to 6.4 percent in 2012, 1.7 percentage points lower than our baseline forecast of 8.1 percent,” he said in a research note.

Undershooting Growth Target

Sean Darby, Hong Kong-based chief global equity strategist at brokerage Jefferies, said that according to many ‘on-the-ground’ measures of economic growth, gross domestic product  in China is running at 5 percent, which is much below the government’s 7.5 percent target.

“A number of them such as inventory growth, working capital loans, and letters of credit issued in Taiwan (a major trading partner) are on a similar trajectory experienced through the first half of 2008,” Darby said.

A large reason for this is that recent tightening measures have lessened the availability of working capital — an important component for the country’s manufacturing sector, which accounts for more than one-third ofChina’s GDP, he said.

“Working capital is the lifeblood of developing economies, since it is the oil that lubricates the flow of money internally,” Darby said. “If it gets ‘stuck’ or glued, economic growth can slip far below trend.”

“Chinese authorities are clearly behind the curve if they wish to support their economic growth anywhere close to the desired 8 to 7.5 percent target. It is working capital that needs to grow in the economy,” he said.

By CNBC Asia’s Ansuya Harjani

© 2012 CNBC.com


China Acquires 436 Tonnes of Gold in Eight Months

May 23, 2012

China has now imported 436 tonnes of gold through Hong Kong over the past 8 months, compared with only 57 tonnes over the same 8 month-period a year earlier.

We recently saw a video last month that discussed China’s belief in a version of Manifest Destiny by taking their self-proclaimed rightful place as the #1 economic titan in the world.  It also made an interesting point about China using the West’s economic policies & regulatory loop-holes to strengthen their economic position globally.

This should strike fear in every investor knowing that the Chinese can so easily manipulate and influence our markets. Even when they acquire large quantities of gold, as mentioned in the article below, it is to benefit their long term goals  of global financial domination.

While you may not be able to stop our own governments from hurtling us head-long off the oncoming economic cliff;  you sure can build your personal Tangible Asset Portfolio to provide a safety-net for you and your family. Read on here:

Daily Reckoning: China Buys Gold…No Matter Who’s Selling

By Eric Fry

05/04/12 Laguna Beach, California– Someone is selling in size…Someone is buying in size. That’s what makes markets, as the saying goes. But that’s also what makes market manipulations, according to the bloggers at Zero Hedge.

The seller in this case is very large and very sloppy, perhaps intentionally so. The buyer is also very large, but very patient and methodical. Trapped between these two powerful opposing market participants we find a “range-bound” gold market. Let’s take a closer peek at the curious goings-on…

Last Monday, a large early-morning sell order in the gold market whacked the price of the precious metal by about $15 in a matter of seconds.

“The CME Group Inc.’s Comex division recorded an unusually large transaction of 7,500 gold futures during one minute of trading at 8:31 a.m.,” The Wall Street Journal reported. “The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down to $1,648.80 a troy ounce [from $1,663.00]. The overall transaction was worth more than $1.24 billion.

“Gold traders buzzed with speculation that the transaction was an input error — a so-called ‘fat finger’ trade,” the Journal continued. “‘Or a Gold Finger as it might be known in the bullion market,’ traders at Citi joked in a note to clients.

“Still, not everyone agreed Monday’s slip in gold was caused by a keystroke error,” said the Journal. “Chuck Retzky, director of futures sales for Mizuho Securities USA, said that silver prices suffered a similar leg down at the same time as gold, tumbling 35 cents to $30.805 a troy ounce, but other markets like Treasurys, currencies and stocks were unperturbed. ‘To do it both in gold and silver tells me that it wasn’t a trade done in error,’ Retzky said.”

A second trader chimed in, “No one who has the account size and the money to trade thousands of gold contracts would do it in one transaction, that’s just stupid.”

Or maybe this “stupidity” was intentional, as the folks at ZeroHedge suspect. Again yesterday, a large 3,000-plus lot gold sell order hit the Comex overnight trading system around 1:30 AM,Chicagotime — causing the gold price to quickly fall more than $5. “Volume that size is unusual for that time of the day on the COMEX,” ZeroHedge remarks.

A few hours later, shortly after the Comex opened the gold pits for the regular daytime trading, a couple of very large sell orders knocked $10 off the gold price in a matter of minutes.

These large, sloppy sell orders are no accident, ZeroHedge insists. They are simply some of the most flagrant examples of what could be market manipulation by Western central banks. ZeroHedge does not point fingers at any particular “fat finger,” but it does wonder aloud if the Bank for International Settlements (BIS) may be involved.

“[A few weeks ago],” says ZeroHedge, “somewhat tongue-in-cheekly, we presented the ‘people bringing you currency manipulation on a daily basis,’ or in other words, the BIS execution team for Europe’s central banks, which is most directly engaged in FX and precious metals ‘interventions’ when needed.

“The execution chain we presented was headed by one Richard Austin Jones, head of central bank services at BIS, Basel, yet more importantly the actual trader at the bottom of the totem pole was a Mikaël Charozé, whose various tasks included the ‘management of the liquidity for big amounts’ primarily interventions and portfolio diversification, as well as ‘holding and managing proprietary positions on all currencies including gold.’

“We posted this observation on April 5,” reports ZeroHedge. “Funny then that just 10 days later, one would never know that Mikaël no longer counts ‘holding and managing proprietary positions on all currencies including gold’ among his duties as well as task of ‘management of liquidity for big amounts including interventions.’ [I.e. the BIS Website removed all of this language from Mikaël’s job description]. In fact his entire profile, since our little humorous exposés, appears to have been rather completely altered. Inquiring minds would love to know: why?”

Why, indeed?

Many gold-market participants have long-suspected that Western central banks (and other agencies of currency debasement) conspire to suppress the gold price. According to this conspiracy theory, the central banks periodically pound on the gold price in order to prop up the value of the paper currencies they print.

But despite the anecdotal evidence supporting the conspiracy theory, no one has ever caught one of the conspirators in the act. Like Sasquatch, the conspirators leave lots of great, big footprints, but no one ever manages to trap them in their caves.

So maybe there are no conspirators, just lots of really stupid and sloppy gold sellers.

Meanwhile, the buy side of the gold market is much less mysterious.

“Earlier this month it was revealed that Hong Kong gold imports into China totaled nearly 40 tonnes in the month of February, representing a 13-fold increase over the same month last year.” Sprott Asset Management observes in its April letter. “China has now imported 436 tonnes of gold through Hong Kong over the past 8 months, compared with only 57 tonnes over the same 8 month-period a year earlier (July 2010-February 2011).”

In other words, on the other side of every sloppy gold sale by a BIS trader (or whomever) you are likely to find an eager Chinese buyer. The recent surge in Chinese buying represents a whopping 25% increase in total global investment demand for gold.

“There isn’t a physical market on earth that can withstand that type of demand increase without higher prices over the long run,” Sprott declares, “and the gold market is no different. There are no sellers of physical gold that we know of who can satiate that scale of new demand, and global gold mine supply has been virtually flat for over the last 10 years…Where is the gold going to come from? We ask because we don’t actually know.”

So there you have it…The invisible “fat fingers” are selling gold. The very visible Chinese are buying it. Place your bets!

Eric Fry
for The Daily Reckoning


CNBC – Gold Pullback Presents Opportunity in the Long Run: Pros

May 15, 2012
Published: Monday, 14 May 2012 | 6:15 PM ET
By: Lee Brodie
Producer

Gold bugs are getting squashed.

During Monday’s session, the price of gold [GCCV1 1556.20 -4.80 (-0.31%) ] fell to a 4-1/2-month low to $1,556.61 an ounce, its lowest since December 30, 2011 before paring some of those losses.

For the past several months, gold has declined as growing turmoil in Europe sent investors into the safety of the US dollar [.DXY 80.92 0.31 (+0.38%) ]. A stronger dollar is bearish for gold as well as other commodities nominated in dollars because it becomes more expensive for investors using other currencies.

“Gold is under severe pressure. As long as the dollar is appreciating against the euro it will weigh on the price,” says Daniel Briesemann, analyst at Commerzbank in a Retuers interview.

“I wouldn’t be surprised if we test the December low of around $1,520 an ounce and if we don’t stop there we could go below $1,500.”

In the near near-term the forecast appears bearish.

However, if you have a long-term time horizon, the Fast Money pros consider the current weakness to be an opportunity.

“What I think we’re seeing right now is the decline squeezing some big players out of their positions,” says trader Guy Adami.

However, he sees the growing uncertainty and the ‘race to debase’ as two powerful bullish catalysts.

“A year from now, I expect gold will be trading north of $2000,” he says. Trader Steve Grasso is also positioned for upside. “I’m long the GDX [GDX 40.70 -0.27 (-0.66%) ],” he says, “and I’m not selling my position.”

Posted by CNBC’s Lee Brodie


CNBC: US Is Coming Off Stimulus Induced High

May 3, 2012

This video is everything we have attempted to make our clients aware that is fundamentally wrong with our current printing press economy. Peter Schiff CEO, Euro Pacific Capital tells CNBC the U.S. economy is coming off a stimulus induced high. He goes on to forecast the collapse of the US Dollar along with the oncoming hyper-inflation. You will find he recommends Gold as an asset to hold during the coming collapse.  See more below: