The gold for fiat rupee scheme had high hopes of Indians turning in 25,000 tonnes of gold. The actual amount turned in to-date is a joke, but there is a new problem that’s not only not contained, but rather, it’s reaching all-out panic mode…
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How the Chinese Market ACTUALLY Works
In a little noticed, but critical, development at the end of February 2015, the World Gold Council’s 100% owned U.S. subsidiary World Gold Trust Services successfully attained (after persistent consent solicitations and consent solicitation adjournments) a majority (51%) of SPDR Gold Trust consent votes so as to amend GLD’s trust indenture to
a) increase the sponsor fee from 0.15% per annum to 0.40% per annum, and
b) to be permitted to compensate the World Gold Council and its affiliates for the provision of marketing and other services to the SPDR Gold Trust.
Most people on this planet who have an interest in gold simply copy the demand numbers from the WGC. The consequences of the world being misinformed on this subject is hard to comprehend.
The WGC mentions SGE deliveries and withdrawals in two separate reports. If they watch SGE withdrawals why not publish these numbers and inform the world on the significance of these numbers?
This is essential information regarding the Chinese gold market.
Why is the WGC reluctant to cover these essentials?
February 18, the World Gold Council released the Gold Demand Trends for 2013. According to this report, total 2013 Chinese consumer demand was 1,065.8 tons.
In my opinion this number is highly disputable (massively understated).
The Chinese mainland officially imported 1112 tons of gold from Hong Kong in 2013. Total net imports according to the CPM Group’s Jeffrey Christian was 1411 tons. Let’s take a look at Christian’s number. How can China import 1411 tons and mine 428 tons (that’s 1839 tons) but only demand 1066 tons? Did they import gold without asking for it? Did someone secretly pushed it across the border and now the Chinese are stuck with it? Or is there a lot of gold demand the WGC doesn’t disclose?
I believe that 1066 tons of Chinese consumer gold demand as reported by the WGC is highly underestimated.
While demand for physical gold remains extremely strong, prices on the COMEX have fallen precipitously. This contradictory situation is the single most important obstacle to a healthy gold mining industry.
In my opinion, the massive imbalance between supply and demand is not reflected in prices because available statistics are misleading. It is not the first time that GFMS (and World Gold Council) statistics come under pressure from the investment community. In his now celebrated “The 1998 Gold Book Annual”, Frank Veneroso demonstrated the inconsistencies in GFMS gold demand data and proceeded to show how they grossly underestimated demand. The tremendous increase in the price of gold over the following years vindicated his conclusions.
I urge the leaders of the World Gold Council, for the benefit of their own members, to improve the quality of their data and find alternative sources than the GFMS, which paints a misleading picture of the real demand for gold. This lack of quality information has certainly been one of the driving factors behind the lack of investors’ confidence towards gold as an investment. Gold has been one of the best performing asset classes since 2000, and the World Gold Council should be promoting it accordingly.
According to the World Gold Council’s Q4 2012 report issued today, Global gold demand in Q4 2012 reached 1,195.9 tonnes, up 4% from Q4 2011. In value terms gold demand for the quarter was 6% higher year-on-year at $66.2bn marking the highest ever Q4 total and driving annual demand in 2012 to a record value of US$236.4bn.
• Whilst Indian full year demand was down 12% on the previous year, the market performed strongly in the final quarter with total demand at 261.9t, an increase of 41% on the same period last year.
• Chinese demand was flat year-on–year, reflecting the impact of economic slowdown. However looking at Q4, total demand was up 1% on the previous quarter to 202.5t. Jewellery demand was137.0t up 1% on Q4 2011 and investment demand was 65.5t, up 2% on the previous year.
• Central bank buying for the full year rose by 17% compared to 2011, totaling 534.6t, the highest level since 1964. Central bank purchases stood at 145.0t in Q4, up 29% on the corresponding quarter in the previous year, making this the eighth consecutive quarter in which central banks have been net purchasers of gold.
The World Gold Council issued a report “Global gold demand reflects challenging global economic climate: ETFs up 56% and India up 9% in Q3 2012” which showed that global gold demand fell 11% in the three months to September from record levels seen during the same period last year, which was curbed by a sluggish Chinese economy and stronger Indian demand limited the drop. In Q3 2012, gold investment demand (total bar and coin demand plus ETFs and similar products) was 429.9 tonnes down 16% from Q3 2011. Although the year-on-year snapshot for investment demand suggests falling interest, this is not the case. Rather, it highlights the strong demand seen in Q3 2011. Interestingly, demand for ETFs rose 56% to 136t, compared to Q3 2011. Demand for gold-backed ETFs in Q3 grew significantly in the quarter partially due to institutions responding to the additional QE measures in the US and Europe. At 87 tonnes, Q3 2012 investment demand for gold surged from 78 tonnes in Q2, a rise of 12%. Examining this over the longer term, Q3 represents the first quarter-on-quarter increase in Indian investment demand since Q2 2011.