What drives the price of gold?
hchcoin
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1. Gold Demand - virtually unchanged down just a fraction - down 14tons to 4,212 in 2015
Weakness in the first half of the year was cancelled out by strength in the second half. Fourth quarter growth was driven by central banks (+33t) and investment (+25t), offset by a marginal contraction in jewellery (-6t) and continued declines in technology (-6t).
2. Value of U.S. dollar - up 4.9% in 2015
3. Gold Mine Production - increased by the slowest rate since 2008 (+1%) in 2015
4. Total supply declined 4% to 4,258, the lowest since 2009 in 2015
5. Wealth Protection - The S&P 500 was basically unchanged in 2015. During times of economic uncertainty, investors flock to safe haven assets such as gold. 2016 has seen a huge drop and then a recovery already in just 4 months. It does not seem as if investors are flocking to gold because of the stock market, economic uncertainty or political unrest/terrorist activity.
Gold Demand Trends Full Year 2015
Weakness in the first half of the year was cancelled out by strength in the second half. Fourth quarter growth was driven by central banks (+33t) and investment (+25t), offset by a marginal contraction in jewellery (-6t) and continued declines in technology (-6t).
2. Value of U.S. dollar - up 4.9% in 2015
3. Gold Mine Production - increased by the slowest rate since 2008 (+1%) in 2015
4. Total supply declined 4% to 4,258, the lowest since 2009 in 2015
5. Wealth Protection - The S&P 500 was basically unchanged in 2015. During times of economic uncertainty, investors flock to safe haven assets such as gold. 2016 has seen a huge drop and then a recovery already in just 4 months. It does not seem as if investors are flocking to gold because of the stock market, economic uncertainty or political unrest/terrorist activity.
Gold Demand Trends Full Year 2015
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That is why it can be down in Argentina at the same time it is up in the US.
Currently, good indicators of gold price movement are the dollar index (inverse relationship) and oil (direct relationship). Good indicators for dollar index movement are movements in the euro and the yen (inverse relationships).
Fundamentals are good only for long term expectations. Fundamentals went out the window for short and intermediate term analysis when central banks became the behind the scenes market maker in 2008. Your central bank decides what is best for you in the short term. Their limited view that focuses on short term needs should be the driver of where your faith lies in the long term.
Follow the FED in the short term, bet against them in the long term. Duct tape is only a temporary fix.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The value of the US dollar is not near a big a player as the cross pair values of Yen/USD, Aussie/USD, and Canadian dollar/USD. The USDX alone has not correlated near as well to gold as those other currency pairs.
Gold mine productions plays almost no role in the price. It's sort of a red herring. It's not like silver where's no huge stock pile that could come on the market at any time. Considering there is estimated to be 165,000 tonnes of gold above ground, the addition of 3,200 tonnes per year from miners is less than 2% of total supply. And most of that supply from miners is already spoken for in forward production and contracts. It's not like any of us can get it. China is the world's leading gold miner at approx 450 tonnes per year and all that gold stays in China. What really matters is what the owners of the 165,000 tonnes of gold tend to do during any particular year. There are not too many markets where a 40 year supply is sitting above ground. Gold mining production will probably slide for a while as so many projects were cut back from 2012-2015. It will take years to ramp all that back up again.
Wealth Protection is a factor for the US owners of gold. While the US was dishoarding gold in 2014-2015, the Asians were ramping up. Be assured that non-US investors have been flocking to gold for over a year now.
One item missed on the list were gold derivatives. Those are highly leveraged bets requiring little to no actual gold capital. In 2015 the reporting big banks went to town on increasing gold and commodity derivatives by 17X ($260 BILL to $4.1 TRILL in one quarter). I think that was their (JPM's) attempt for one last crush down so that they could unload most of their short positions and start looking at the long side. In 2014 gold derivatives had been around $70-90 BILL per quarter. In 2015 the bean counters decided to merge them with the 400x larger FX derivatives. So now the gold derivatives are completely opaque in any govt reporting as they are now 0.25% of the $30 TRILL in the new category of combined FX+Gold derivatives.
What really has moved gold for the past 5 years are the leveraged paper bets that are placed in NY and London every day. With the Shanghai Gold Exchange planning on commencing a Yuan-gold fix this month, that should commence a slow shift towards the east for true physical gold price discovery....not the paper price fixing that has been the norm for decades at the LBMA.
Be leery of anything put out by Thomson Reuters/World Gold Council or any of those large gold "research" outfits. They are just tools of the gold cartel/bullion banks to spread whatever propaganda is desired at the present time, including bogus supply/demand stats.
What I really like is that they massaged the later quarters of 2015 data to apparently cover over the $4 TRILL rise in commodity derivatives that occurred in the 1st QTR report. You won't see any sign of the $4 TRILL in the 4th QTR report. Yet, they never went back to the 1st QTR report to make sure it matched the later ones where there is no such $4 TRILL monster increase. Gotta love that kind of reporting.
4th QTR 2015 OCC report - page 36
I also like that they massaged out the large "precious metals" $75 BILL derivatives spike in 1st QTR as well. It doesn't show up either in the 4th QTR longer term graphs (Page 35). This category includes non-gold PMs (silver, plat, pall, etc.). And that has been consistent for years.
Think about it. We expect the Reuters/WGC to get world supply and gold demand reported accurately, yet here in the OCC reports we have a complete mess of inconsistency.
Check out page 23 of the 2015 1st QTR OCC derivs report
What I really like is that they massaged the later quarters of 2015 data to apparently cover over the $4 TRILL rise in commodity derivatives that occurred in the 1st QTR report. You won't see any sign of the $4 TRILL in the 4th QTR report. Yet, they never went back to the 1st QTR report to make sure it matched the later ones where there is no such $4 TRILL monster increase. Gotta love that kind of reporting.
4th QTR 2015 OCC report - page 36
I also like that they massaged out the large "precious metals" $75 BILL derivatives spike in 1st QTR as well. It doesn't show up either in the 4th QTR longer term graphs (Page 35). This category includes non-gold PMs (silver, plat, pall, etc.). And that has been consistent for years.
Think about it. We expect the Reuters/WGC to get world supply and gold demand reported accurately, yet here in the OCC reports we have a complete mess of inconsistency.
Great stuff Roadrunner!
Look at page 47 of the 4th quarter report:
JP Morgan owns almost 1/2 of all the gold derivative contracts. 13472/27503=49%
When you add in Citibank it is almost 3/4. (13472+6385)/27503=72%
Talk about cornering and controlling a market. How much physical gold does JP Morgan have backing those positions?
How these banks are suppressing prices
China's Yuan Gold Benchmark
China is adding to its gold reserves
China is now 6th in gold reserves with 1788.4 tonnes versus the U.S. in 1st with 8,133.5 tonnes
Correct me if I am wrong but the U.S. gold reserve has not changed in a long time
China is now 6th in gold reserves with 1788.4 tonnes versus the U.S. in 1st with 8,133.5 tonnes
Correct me if I am wrong but the U.S. gold reserve has not changed in a long time
gold holding figures are suspect. They report only what they want you to know.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Said the most interesting man, never.
Look at page 47 of the 4th quarter report:
JP Morgan owns almost 1/2 of all the gold derivative contracts. 13472/27503=49%
When you add in Citibank it is almost 3/4. (13472+6385)/27503=72%
Talk about cornering and controlling a market. How much physical gold does JP Morgan have backing those positions?
Actually, they only show $27.5 BILL in "precious metals" derivatives on page 47. Look at the 1st QTR report and it was $75.62 BILL! That's a big position at an average price of $16 silver....approx 5 years of world production! The sum of all producers couldn't possibly hedge out that far and that much. So where did that recent $75 BILL all go to?.....lol. These guys are a hoot. If you look at the 1st QTR report, Citibank piled on $50 BILL of silver derivatives in one quarter to take 70% of the US market share from JPM. It was a huge increase for them. It could be that they were just keeping the heat off JPM since those guys just finished being investigated (unsuccessfully) by the CFTC from 2008-2013. Something was up. Now the later QTR reports suggest it never happened or they unwound those positions during 2015. 3 bullion banks were recently found guilty of manipulating silver prices for years. Same guys now found guilty of doing it with gold too. Who knew?.....lol.
You missed my earlier point about what "precious metals" means in OCC reports. That's only silver, plat, and pall (ie PMs other than gold). Gold is not included in those totals. Been that way for years. Gold had its own separate category up until 1st QTR 2015. Now the gold derivs are included with the FX/currency derivatives, a new 2015 category of "FX + gold." While physical gold is now a BIS Tier 1 asset concession, it also completely makes gold derivs opaque. How can you find $100-$500 BILL in Gold derivs when that new category is a massive $30 TRILLION? Gold derivs are now effectively "unreported" as they are "unrecognizable." It's like trying to find 2 needles in a haystack.
Thanks for clarifying roadrunner. Fascinating stuff. Trying to read those reports is about as confusing as reading the IRS regulations.
Happy to help. What I really love is those people who don't bother to even crack one of these BIS, OCC, SGE, LBMA, FED, CFTC, etc, reports open and then comment how they don't prove anything when the numbers "blow up" or "collapse."
Knowledge is the enemy of fear
Liberty: Parent of Science & Industry
I knew it would happen.
Deflationary collapse looks more likely now. Then again, the Fed might end up owning everything, including real estate and paintings - if China doesn't buy it first.
7 years ago we all, (except one
Knowledge is the enemy of fear
I don't think I have confidence in deflation, just that it looks more likely. Or, I should really say that it's more obvious because the Fed isn't raising rates like they indicated they would. It's not what they desire, but it looks like the trend that's been in place for awhile.
If I was wrong about inflation, it's only because the Fed ramped up free money for banks and failing cronies to pay off bad highly-leveraged bets. We're still being Corzined. Nothing has changed. The money didn't make it to the public, or inflation would have been obvious. The debt increased significantly, that much is obvious.
Public debt continues to finance asset purchases by the favored groups having political connections.
They can't afford to let deflation run it's course because falling prices will collapse the whole debt structure. They can't let rates rise because it then becomes a problem of keeping high rates of inflation from becoming hyperinflation in the face of accelerating debt burden.
As we both know, this will continue as long as they can get away with it, but not indefinitely.
I knew it would happen.
Also look at commodities as input costs. Are those cost low or high now? To tie two threads together, most people when reading charts look backward and is why they fail. Dont look at where you've been, but where you are headed.
Knowledge is the enemy of fear
Why this logic has so far failed:
Money supply inflation leads to price inflation. As can be seen by the charts increasing the money supply is only the first of two steps - it has to be used to create increase demand. There are numerous reasons why consumers have been spending less since 1999 but I suspect the biggest reasons are their personal debt loads and their financial uncertainty. This could be a good thing if consumers have finally learned a lesson on excessive debt. If only the spenders of our tax dollars could learn the same lesson.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
MV is little discussed by the media but remains the key to what the FED should be focusing on and is our indicator of what "flation" should be expected to do.
At the moment and under current conditions stagflation is probably the best the FED can hope for. This is why I expect them to act.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Add to that a group of central bankers/planners/regulators/manipulators - each with their own set of objectives and motives - and you have a free for all. No fundamentals allowed.
I knew it would happen.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
In 1912 an acre of farmland was $42, now $3000...a gain of 71 times.
Stocks provided dividend income. Land provided food and rental income.
Obviously, gold has provided poor insurance relative to other asset classes.
Let's hope and pray (religion), that gold catches up.
Knowledge is the enemy of fear
In 1900 the Dow Jones was 65, now 18000...a gain of 276 times.
In 1912 an acre of farmland was $42, now $3000...a gain of 71 times.
Stocks provided dividend income. Land provided food and rental income.
Obviously, gold has provided poor insurance relative to other asset classes.
Let's hope and pray (religion), that gold catches up.
Like the dollar did?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
In 1900 the Dow Jones was 65, now 18000...a gain of 276 times.
In 1912 an acre of farmland was $42, now $3000...a gain of 71 times.
Stocks provided dividend income. Land provided food and rental income.
Obviously, gold has provided poor insurance relative to other asset classes.
Let's hope and pray (religion), that gold catches up.
Like the dollar did?
The dollar may have lost 98% of it's value, but much higher wages have, in most part, made up the difference. Thanks to Inflation. Personally, I prefer to live in the 21st Century compared to the beginning of the 20th Century
The great gains you quote in assets and the gold gains the chart quotes are in reality a true picture of the dying currency they are priced in. Increase in value is a result of destruction of currency value.
Your argument proves that a dying currencies drives the price of many things.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
In 1900 the Dow Jones was 65, now 18000...a gain of 276 times.
In 1912 an acre of farmland was $42, now $3000...a gain of 71 times.
Stocks provided dividend income. Land provided food and rental income.
Obviously, gold has provided poor insurance relative to other asset classes.
Let's hope and pray (religion), that gold catches up.
Like the dollar did?
Your comment makes no sense. You start by comparing an asset to the dollar, then end by comparing the dollar to itself.
Knowledge is the enemy of fear
Your argument proves that a dying currencies drives the price of many things.
I think this is where a 7th grader says "no s--- Sherlock".
You stated the time frame and I provided other facts. The argument about gold being fixed until 1970, while factual is subjective. We have no way of knowing at what price gold would have traded at in 1950 or 1930. The 1950s were much like the 1990 in terms of economic growth. It's quite possible gold could have been wOrth much less than $35, just as gold languished and lost half it's value during the 1990s.
We can attempt to pick and choose time frames to prove a point, fact is that all assets priced in a declining currency will rise in terms of that currency. The larger question is which assets performs better relative to those other assets. In you example covering the last 100+ years, gold has dramatically underperformed and grossly underperformed stocks and farmland when considering income and utilitarian value.
Let's all hope and pray gold catches up to its competing asset classes.
Knowledge is the enemy of fear
Depending on your "time frame," maybe it already has.
Glad to see you have finally learned that your currency is dying.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
I never said the dollar was dying, nor do I believe it is. In fact, i believe it will be in existence long after we--you and me--have died.
That makes 3 of us. But at my age, we don't have that long to wait.
I knew it would happen.
However, China today countered the FED's verbal move with a devaluation of the Yuan. Sounds like a dare.
Let the currency wars continue.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Derryb, I see month after month, that you are trying to trade your AGE's for ASE's. Why? Are PM's the only asset class you are investing in?
While there is some drama and petty bickering between you guys, I really do appreciate the discussion.
BST Transactions (as the seller): Collectall, GRANDAM, epcjimi1, wondercoin, jmski52, wheathoarder, jay1187, jdsueu, grote15, airplanenut, bigole
Cohodk, could you share (via forum or pm) what asset classes you are investing in currently? I really can't tell by your posts if you actually invest in PM's or just troll the PM forum.
Derryb, I see month after month, that you are trying to trade your AGE's for ASE's. Why? Are PM's the only asset class you are investing in?
While there is some drama and petty bickering between you guys, I really do appreciate the discussion.
I have a little stack of PMs, equities, and real estate.
I usually maintain a sizable (relative) liquid position. That allows me to take advantage of mispricing among all asset classes.
I've said many times on this forum thst all asset classes have their day in the sun. I prefer to play where its sunny, rather than in the clouds and darkness, where some asset classes have a tendency to dwell.
My sigline has referrrd to sunset and sunrise for an asset class dear to this forum.
Knowledge is the enemy of fear
My sigline has referrrd to sunset and sunrise for an asset class dear to this forum.
Was that referring to the sunset or sunrise...
BST Transactions (as the seller): Collectall, GRANDAM, epcjimi1, wondercoin, jmski52, wheathoarder, jay1187, jdsueu, grote15, airplanenut, bigole
My sigline has referrrd to sunset and sunrise for an asset class dear to this forum.
Was that referring to the sunset or sunrise...
both happen every day
Liberty: Parent of Science & Industry
Derryb, I see month after month, that you are trying to trade your AGE's for ASE's. Why? Are PM's the only asset class you are investing in?
While there is some drama and petty bickering between you guys, I really do appreciate the discussion.
Trading gold for silver to re-balance the stack. GSR indicates silver to provide the better returns. My long term stack is limited to American Eagles/gold buffalos only with some RCM 10 oz silver bars.
Playing the paper metals with IRA accounts and one non-IRA account. Profits from non-IRA account periodically rolled into the physical stack.
Holding more cash than I am comfortable to be holding in our current banking environment. I plan to direct it toward real estate over the next year.
Coho and I bicker because we are actually lovers.
Different views are a benefit to the forum.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
My sigline has referrrd to sunset and sunrise for an asset class dear to this forum.
Was that referring to the sunset or sunrise...
both happen every day
Funny.
Still big into diversification baley? Have you been buying all the way down as you rebalance your portfolio?
BST Transactions (as the seller): Collectall, GRANDAM, epcjimi1, wondercoin, jmski52, wheathoarder, jay1187, jdsueu, grote15, airplanenut, bigole
I don't "micro" rebalance, but yes, generally sell some of what's been hot and buy some more of what's been cooler
Liberty: Parent of Science & Industry
Coho and I bicker because we are actually lovers.
Different views are a benefit to the forum.
True...let it be known that I am the pitcher.
Knowledge is the enemy of fear
Derryb, I see month after month, that you are trying to trade your AGE's for ASE's. Why? Are PM's the only asset class you are investing in?
While there is some drama and petty bickering between you guys, I really do appreciate the discussion.
Trading gold for silver to re-balance the stack. GSR indicates silver to provide the better returns. My long term stack is limited to American Eagles/gold buffalos only with some RCM 10 oz silver bars.
Playing the paper metals with IRA accounts and one non-IRA account. Profits from non-IRA account periodically rolled into the physical stack.
Holding more cash than I am comfortable to be holding in our current banking environment. I plan to direct it toward real estate over the next year.
Coho and I bicker because we are actually lovers.
Different views are a benefit to the forum.
Appreciate the response.
So if your long term stack is only AGE/Buff's, that means that you don't necessarily buy all the "deals" that you mention with ebay bucks etc. The deal with gold maples a while back was a killer deal, well under spot after ebay bucks, cc, mr rebate. Did you not buy in this deal? If you did, are you then flipping it out (short or long term) for AGE/Buff or is this something you are holding as well?
BST Transactions (as the seller): Collectall, GRANDAM, epcjimi1, wondercoin, jmski52, wheathoarder, jay1187, jdsueu, grote15, airplanenut, bigole
So if your long term stack is only AGE/Buff's, that means that you don't necessarily buy all the "deals" that you mention with ebay bucks etc. The deal with gold maples a while back was a killer deal, well under spot after ebay bucks, cc, mr rebate. Did you not buy in this deal? If you did, are you then flipping it out (short or long term) for AGE/Buff or is this something you are holding as well?
Correct, AGEs, ASEs and gold buffs. I post other bonus buck offerings for the benefit of others. My physical purchases are limited to what I stack with the exception of modern collector gold and silver (US Mint only) that I have graded for resale. This is another way I fund my stack. I guess that makes me a stacker, an investor AND a flipper.
And yes, I avoided the new Mercury gold as I do all modern commemoratives. Some things you have to learn the hard way. However, I am considering the upcoming gold half dollars.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey