goldGuest Post, by Michael Lombardi

Skepticism toward gold bullion prices is increasing. The bears and the mainstream media are focused on the price decline of gold bullion and are clearly not looking at the demand of the metal. The reality: demand for gold bullion is increasing.

As gold bullion prices have declined a little since the beginning of 2013, purchases of gold by central banks have increased. In January, central banks from countries like Russia, Turkey, and Kazakhstan continued to buy more gold bullion.

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According to the International Monetary Fund (IMF), the Russian central bank increased its gold bullion holdings by 12.2 metric tons in January to 970 tons. During 2012, the Russian central bank increased its holdings by 8.5%. (Source: Bloomberg, February 25, 2013.) If Russia keeps its gold-buying pace throughout 2013 at the same level as January, it will increase its holdings of gold bullion by 15% during the year.
Similarly, the central bank of Kazakhstan increased its gold bullion holdings by 1.5 tons in January, bringing its total holdings to 116.8 tons. Over 2012, Kazakhstan’s central bank increased its holdings of gold bullion by 41%.
Turkey’s central bank increased its gold bullion holdings by 84% in 2012. In January, the bank bought another 10.3 tons of the precious metal.

Keep in mind that these are not the only central banks buying gold bullion. As the list of central banks printing more money has increased, the number of gold bullion purchasers has grown.
Demand for gold bullion in India, which is the world’s biggest buyer, remains high. As the World Gold Council cites, gold bullion imports in India increased 62% in the fourth quarter of 2012 to 255 tonnes. About 80% of India’s current account deficit (exports minus imports) is due to imports of gold bullion. (Source: The National, February 22, 2013.) To curb the demand, there are fears that the government of India might increase its import taxes on the gold bullion for the second time this year.

With all this demand for gold still present, what still holds true is that the supply for gold bullion hasn’t increased, while central banks around the world and consumers alike are running to buy the precious metal.
According to National Bank Financial, gold production is going to fall off a cliff in 2017. The main reasons: there hasn’t been any major discovery of the precious metal, and miners are delaying or cancelling projects due to increasing costs. (Source: Financial Post, February 5, 2013.)

Gold bullion, as I have repeatedly said in these pages, looks to be in a shiny spot. The current correction in gold prices we are experiencing is very normal in any long-term bull market. I continue to be bullish on gold bullion, because I still see increased demand by central banks and declining long-term supply. Until this imbalance of demand to supply changes, I expect gold bullion prices to outperform. (Also see “Gold’s Price Correction: Separating the Men from the Boys.”)


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    • Whatever else these central banksters may be, they are not idiots where money is concerned.  They are buying lots of gold and there is no doubt in my mind that there is a VERY good reason for them to be doing that, otherwise they would not be doing it.  Because of this, it seems a wise idea to collect some gold of my own.  While the bulk of my PMs will likely always be silver, having a solid gold core in my hoard appeals to me… a lot.  😀

  1. You bet there is a spike coming, I just got my tax return done and my nice government refund will be going straight to my bullion dealer for some nice silver maples!!
    Gut check time boys and girls ………are you in or in the way?
    I’m in.
    Goldman forecasts $1200 gold hahahaha……….ya maybe paper price, you won’t find any phyzz in size if that happens.just like when they smashed silver to $8 I couldn’t find any in British Columbia.
    Hey Loyld sell gold just like Heinz!! lol good one.

    • “Goldman forecasts $1200 gold hahahaha…”
      Yeah.  Weren’t they the same guys who were beating the drum so hard to sell sub-prime mortgages all the while betting heavily against them?  Seems like their kind of scam.  If they are SAYING $1200 gold, they are probably BETTING on $2400 gold!
      When silver prices got smashed below $10 an oz. a few years ago, that was a complete paper-phyzz price disconnect because NO ONE was selling phyzz for the lowly paper price. It was not until prices recovered to at least $15 an oz. that the phyzz started flowing again… and the phyzz MUST flow!

  2. @Silverbullet1976
    You are lucky you are even getting any money back. I don’t live very high on the hog TRUST ME but I owe the U.S. Government $10,467 and that was with paying 1500$ down in quarterly’s over 2012. I hate this government. I hate this ponzi scheme. When will this nightmare be over?

    • Now we can see why they invented the ‘tax withholding’ scheme for most taxpayers.  If everyone had to write out checks to pay, the rates would be a lot lower.  Withholding helps us celebrate our refunds, rather than protesting over the payments.

  3. I am quite sure that our government is fully aware that sovereign nation’s are acquiring gold.  They probably have much better estimates than we do for how much gold China and India is buying.  The US also knows they will never get the gold back that it has leased out.  The US knows it can never pay its debt.  So they are continuing to borrow.  The US also knows that our economy will eventually collapse so it is buying plenty of ammo and building prisons.  I wonder when or if the US gov will ever come clean and let the people know what it has done?

    • “I wonder when or if the US gov will ever come clean and let the people know what it has done?”
      They don’t dare.  If they did, 100,000,000 of us would march on DC and hang them all from lamp posts.

    “As gold bullion prices have declined a little in 2013, purchases of gold by central banks have increased.”

    They move heaven and earth keeping it low in order to buy it.  They aren’t like us, when I want something I might have to pay a little extra to win the bid.  When they want something they first demoralize its owner, impugn its value, secretly act behind the scenes to start a stampede, then buy what they want of it on the cheap.  These people never pay retail, you know?   That’s why gold is low, because they want it now.

  5. I don’t fault the Chinese for being good businessmen.  Asian people are great savers and live below their means in order to save.  It is just their way.  My first wife is Asian.  She used to check the change dispensers in the telephone booths.  She stole the sugar and ketchup packets in restaurants.  I bet she still has the first penny she ever made.  Now, she made me miserable but she is not broke like I am.  Chinese thrift is going to win the day.  The American way of doing things is not working out so good. 

    • Agreed… and we can bet money that much of what is happening in the world today is the direct result of Chinese plans coming to fruition.  I have thought about this in considerable detail and still have not decided whether or not this is a bad thing.  Perhaps this country would truly thrive under new management.  😉

  6. With Helicopter Ben and the Fed directly manipulating PM prices to an artifically low level (in order to mask the decimation and devalution of the US dollar he has wrought), it is allowing China and Russia to scoop up vast amounts of Gold and Silver. Helicopter Ben should be charged with undermining the National Security of the US…along with his cohorts Jamie Dimon and Bart Chilton!!!!!!!

    • That list is likely to be LONG and include virtually every Gov and Fed official in DC as well as even more numerous state-based crooks.

  7. Speaking of tax refunds, if you bought silver at $36 and sell it for a loss at $29, you can harvest a tax loss.  500 ounces of silver creates $3,500 capital loss for 2013.  This might help shelster some income and you can buy the silver back.  Yes, there is a wash sale loss but who cares.  Just do it, take the tax loss and rebuy the next day. 

  8. Silvermail     thanks for the question. 
    What I was referring to was a sale of an asset for a loss. It could be a stock but in this case if you bought 500 ounces of silver at $36 an ounce, the cost basis of the silver is $18,000.  If you decided to sell the 500 ounces for $29 an ounce, netting $14,500,  you would report a loss of $3,500.  That loss might be taken if you needed the money for other expenses or if you decided to take the capital loss for the sake of the loss itself. 
    Either way you have suffered a $3,500 loss. 
    This loss could then be used to shelter a capital gain or simply be applied to other income, sheltering that income with your loss. In the US you can take up to $3,000 against income or the entire loss against other capital gains. 
    If you are in the 35% tax bracket for state and federal taxes that $3,000 would be worth about $1,050 in taxes saved. I realize that selling silver is hard on the psyche and there are costs. But if the loss exists in your buy position, I can’t see a reason to not take it.   Silver has no income or dividends so this is a way to get something back on the silver trade.
    There are a number of rules and tax rates to work with so check with your accountant.  In the US, you have to wait 30 days to rebuy silver due to what’s called the wash sale rule.  I call that BS. The chances of me complying with that rule are slim to none.   The reason I mention this is that some of my recorded silver purchases were around $35 an ounce.  I would take advantage of this tax loss this year but for the fact that I got some bad news that a small investment in a private firm was a total write off in 2012. This gives me the $3,000 in 2012 and enough to give me $3,000 for the next couple of years.  Bummer on the loss but the tech firm did not survive the 2009-2010 business downturn.
    It may not seem like much, this $3,000 loss on silver sale,  but if you can sell for spot or just over, and then buy back a day later from Doc at $1 over spot for silver rounds etc, this might mean a $1,000  tax refund back in your pocket.  That’s over 30 ounces of silver.  If you buy silver in anticipation of selling and want to cmoply with our silly rules, then you can buy silver 31 days  prior to the anticipated sale of a similar amount of silver and still harvest the write off later.
    On another  other point, if you had a large capital gain during 2013 due to exiting a profitable stock position, and this might be a good time to get out of equities,  and you wanted to reduce your capital gains, you might want to sell a large amount of silver at a loss.  All of that depends on your buy price for silver and the amount of silver you wanted to sell at a paper loss to shelter the gain in the stock.  This is more applicable to US tax laws but I think the principal would be the same in other countries. 

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