Gold watch - two points of view from Jim Willie and Gold Core

http://implode-explode.com/viewnews/2012-05-15_JimWillieSourceWesternBanksBeingCleanedOutofPhysicalGoldOnPriceW.html


Jim Willie of the Hat Trick Letter (at GoldenJackass.com) has forwarded some tantalizing informant correspondence on the Western banks being cleaned out of physical gold by Eastern interests in recent months on price weakness:

5000 METRIC TONS GONE FROM WEST TO EAST SINCE FEB 29TH RAID
The gold cartel is mortally wounded, drained, but dangerous still
a long summary quote from my best gold trader source (below)
he has been feeding me juicy tremendous info since 2008
/ jim
***
After a seeming tough messy but productive week in the gold trading trench warfare, my reliable gold trader source offered a summary with more expressed satisfaction than ever conveyed in all the years we have been in contact. It is not completely over as a war, but the Battle of the Bulge and Battle of Midway seem concluded, each a major victory. This message is of chest pounding with a foot atop a dead victim. The gold price is surely depressed, but the gold cartel is reportedly mortally wounded. The path upward might be cleared to the point of ending this latest round of price suppression. The Good Guys have finished a mission for this round. The gold trader has a keen knowledge of WW2 and hardened experience of Russia. He wrote, "This is great. The market is cleaned out when it comes to physical. The purchases to drain the cartel are 1000 MT [metric tons] per shot/transaction. The Boyz are illiquid and have to sell at budget bargain prices. The ones they used to patronize and torment are now screwing them back using a telephone pole up the hind quarters with the tip wrapped in razor wire. No prisoners are being taken. I have never seen such merciless executions to that magnitude in my entire career. The target banks call for help and protection, not knowing that they are actually confronted with their executioners. It must be a lonely feeling when the only thing they sense is their own warm blood running down their bodies. They know they are done. It is like the final scene in Enemy at the Gates where Vassili Zaitsev, the legendary Russian sniper, out-maneuvers the German Major Konig sharpshooter. The major takes of his cap, looks at Zaitzev who put a bullet right between his eyes. The real players know when it is game over." This note is encouragement to the extreme for investors to stay in the game, hang onto the gold & silver bars, and wait for the rise like a phoenix in precious metals price since the resistance by the cartel has been significantly removed to the point of assuring victory with a heap of confidence. The Eastern Coalition has transferred over one quarter of a $trillion in gold bullion in under three months from the Western gold cartel camp and munitions cache. They are left defenseless in New York, London, and Western Europe, unable to stop what comes, which in plain terms will be a rise in the gold price that zooms past $2000/oz and finds its rightful level based on value and equilibrium free from the tight grip of suppression. The Jackass cannot promise a date when the historical phoenix rise will occur, but it is on this side of the horizon. The outcome is assured. It is unclear what the laurels will look like or what the air will be like relaxing and healing from the battle waged, sitting on the porch sipping ice tea or whisky sours. Details on the denouement are not at all clear.

***
When my gold trader source was asked how much gold has moved from West vaults to East vaults since the Leap Day Massacre on 29th, he responded without hesitation, 5000 metric tonnes. That is five thousand metric tonnes of gold bars worth between $250 and $260 billion. He explained, "I have seen some major quantities of metal being moved in my many years. However, what I am seeing right now is unprecedented in quantities and capital being moved. The East is converting its unlimited liquidity into hard assets of which Au and Ag are only one core component. The Western depositories are currently being raided at discounts and not premiums, since the time window that has been created allows to do that. However, that window is closing swiftly and once closed, the price for metal will go through the roof."

and......

http://www.zerohedge.com/news/gold-demands-trend-q1-2012-enter-dragon

Gold Demands Trend (Q1 2012) - Enter The Dragon

Submitted by Tyler Durden on 05/17/2012 08:09 -0400

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From GoldCore

Gold Demands Trend (Q1 2012) - Enter The Dragon

Gold’s London AM fix this morning was USD 1,547.00, EUR 1,217.44, and GBP 974.00 per ounce. Yesterday's AM fix was USD 1,537.50, EUR 1,208.73 and GBP 966.31 per ounce.

Silver is trading at $27.48/oz, €21.77/oz and £17.43/oz. Platinum is trading at $1,443.50/oz, palladium at $592.90/oz and rhodium at $1,300/oz.

Gold edged down $2.90 or 0.19% in New York yesterday and closed at $1,539.40/oz. Gold climbed during volatile trading in Asia having recovered from the NY close yesterday. In European trading the yellow metal is hovering near the $1,548/oz level. 

Cross Currency Table – (Bloomberg) 

Gold fought back yesterday after touching its lowest level since Dec 29th, as concerns about Greece’s political instability and possible departure from the euro, prompted investors to buy back into bullion. 

Technically, gold’s trend remains down but gold looks increasingly oversold. Bullion’s 14-day RSI (relative-strength index) was at 25.14, and once it’s below thirty it may indicate a rebound.

The euro rose from a 4 month low against the dollar as Fed policy makers are again suggesting that further QE is needed which will again be bullish for precious metals.

Spot palladium and silver both recovered somewhat from recent sharp falls yesterday. 

Gold Demands Trend (Q1 2012) - Enter The Dragon
The World Gold Council has released the Q1 2012 Gold Demands Trend report.

Gold demand grew 16% over the past 12 months to 1,098 tonnes. This had a US dollar value of just $59.7 billion spent on gold, globally, in Q1 2012.

While global demand was down 5% from the record high of Q4 2011, it was significantly higher than demand in Q1 2011 suggesting that global demand may be consolidating at these higher levels.

Gold Daily Pricing – (Bloomberg)

Investment Demand

Investment demand again dominated as under owned gold continues to be diversified into and accumulated globally.

Gold investment demand (all demand for gold bars, coins and ETFs and similar products) grew by 13% year-on-year to 389.3 tonnes in Q1 2012, equating to a demand value of just US $21.2 billion. 

The key drivers of this increase came from China and global ETFs.

Probably the most important aspect of demand and one of the most important fundamentals in the gold market is that of still very robust and increasing Chinese demand.

In this the Chinese Year of the Dragon – China is becoming a fundamental driver of the gold market.

Global demand was boosted by China posting a quarterly record of 98.6 tonnes of investment demand up 13% from Q1 2011. This increase was a result of investors’ continued move to preserve wealth amid ongoing concerns over inflation, volatility in equity markets and price falls in some property markets.

Jewellery demand in China, much of which is also store of wealth demand, increased to 156.6 tonnes – 30% of the global appetite. 

This increase places China as the largest jewellery market for the third consecutive quarter.

XAU /EUR Currency – (Bloomberg)

Retail and institutional investors buying exchange traded funds (ETFs) accounted for 51.4 tonnes of gold purchased in the three months to the end of March, at a total value of $2.4bn. The World Gold Council stated that this movement was in stark contrast to the first quarter of 2011, when the ETF sector witnessed net outflows.

ETFs and similar products were the beneficiary of solid inflows during the first quarter. The bulk of demand was generated in January and February, with demand tailing off to some extent during March as the gold price stabilised and investors awaited fresh economic data.

While the year-on-year data suggests that it was a challenging quarter for investment demand in Europe, Q1 2011 was an exceptional period for demand, fuelled by European sovereign debt concerns and the Arab Spring. European investment demand remains well above pre-2008 average quarterly levels and indicates sustained investor interest at relatively high levels. 

The report also argues that investment demand should continue to draw strength from continued very low real interest rates and inflationary pressures globally bolstering gold’s appeal as an inflation hedge. 

Central Bank Demand
Central banks across the developed and emerging markets purchased 80.8 tonnes of gold in the first three months of the year, at an average price of $1,691/oz.

Central banks diversified into gold despite prices being 22pc more expensive than a year ago. With risks posed to the euro, the dollar and all fiat currencies due to very poor public finances this central bank demand is set to continue.

Luxury/Jewellery
India and China, the two largest jewellery demand markets, provided the main stories of the quarter from a jewellery perspective.

Jewellery demand in China also increased significantly to 156.6 tonnes, accounting for 30% of global jewellery demand making China the largest jewellery market for the third consecutive quarter. 

The first quarter of 2012 was an unprecedented period for India, with a number of market forces converging to dampen demand. Weakness in the rupee resulted in elevated local prices while consumers digested a rise in import taxes on gold and the introduction of an excise duty on gold jewellery, which prompted jewellers’ country-wide to strike. However, in May, the government withdrew the new tax on jewellery and the market is already responding positively.

High gold prices continued to erode jewellery demand in western markets. However, the World Gold Council believes that demand will move upwards in these markets, as gold becomes re-premiumised; high-end consumers, searching for “fewer, better things” will return to gold’s unique value proposition, combining emotional and intrinsic value in a way which defines true value.

XAU/GBP Currency – (Bloomberg)

Technology
The report reveals that in Q1 2012, demand for gold in the technology sector decreased by 7% year-on-year to 107.7 tonnes, with demand falling across all segments of the technology sector.
Much of the weakness in the technology sector can be attributed to high gold prices and the continued fragile global economic environment, which resulted in lacklustre growth (if not recession) in a number of the key markets for consumer goods containing gold. 

There was strong consumer demand for wireless products such as mobile phones and media tablets. Similarly, a rise in end-use by the auto sector has also benefited demand, even though production volumes in Europe remained under severe pressure. Further growth within the NAND flash memory market also helped offset losses elsewhere, thanks to major sales drivers such as ultrabooks equipped with solid-state-drives and smart phones.  

Conclusion
While demand remains robust globally and particularly from institutional investors, Asian store of wealth buyers and central banks, gold remains very under owned vis-à-vis other assets such as equities, bonds and cash. 

The entire global gold demand in the first 3 months of 2012 was just $59.7 billion and all the investment demand for gold in the world was just $21.2 billion in the same period.

By putting this number in perspective we can see how small the gold market remains and how there is the possibility of much more demand which could push prices higher in the coming months and years.

The US trade deficit for just one month has been close to or over $50 billion dollars for a number of years now.

Tomorrow, Facebook will float an event that is expected to value the business at around $100 billion and there are hundreds of examples of valuations in the tech sector which seem optimistic at best given the macroeconomic, systemic and monetary challenges facing the world.

An example of this potential systemic risk is the $3 billion loss by JP Morgan. One investment bank lost $3 billion on a few trades. This equates to a value of one tenth of the dollar value of all the gold in the world that was bought for investment purposes in Q1 2012.

This suggests that the bubble may again be in debt, in finance, in the leveraged banking sector and in the tech sector and when the bubbles in these sectors burst, some of that capital will flow into the very small physical gold market.

This could lead to dramatically higher prices and means that our long held price target of $2,400/oz (the inflation adjusted high from 1980) is becoming increasingly conservative.

However, as ever physical gold bullion should be bought for wealth preservation reasons rather than the blind pursuit of capital gains. 

The World Gold Council’s Q1 2012 Gold Demands Trend report can be read here.