New from HardAssetAlliance: "As Gold Continues To Move From West to East, Should Yours, Too?"

170
Thu, Jul 25, 2013 - 12:07am

Currently, the only two bullion and storage affiliations we have are with GoldMoney and the Hard Asset Alliance. We often feature Alasdair Macleod and some of the other GoldMoney regulars. This piece from Hard Asset Alliance is equally informative.

Please keep in that I chose to affiliate with Hard Asset Alliance because they are such a unique company. They offer storage and/or delivery of 100% allocated, physical precious metal. They even provide liquidity should you ever need to reposition or otherwise sell a few ounces. It's a tremendous service and I highly encourage you to check them out. Use this link when you do: https://www.hardassetsalliance.com/clk/cl/1/?affid=TFM

"As Gold Continues to Move from West to East, Should Yours, Too?"
Hard Assets Alliance Team July 24, 2013
By Jeff Clark, Editor of BIG GOLD

It's no secret that demand for gold has always been strong in the East. But since gold's mid-April correction, the move from Western economies to Eastern ones has picked up steam. It's not because vaults in North America are less secure; part of the reason is that Western governments own more gold than their Eastern counterparts, especially as a percent of total reserves. But the Eastern world is also seeing more inflation and is, generally speaking, more wary of political promises and assurances.
This trend is increasing, and carries with it a message for investors.
First, here's what has occurred in just the past 45 days in the Eastern parts of the globe…

Deutsche Bank opens gold storage facility in Singapore.
The bank's now second-largest vault has the capacity to store up to 200 tonnes of bullion. JPMorgan and Malca-Amit recently opened vaults in the country as well. "Demand for physical gold storage in the region is growing," says Mark Smallwood of the bank's asset and wealth management unit in the Asia Pacific region. Further, Singapore last year stopped charging sales tax on gold traded for investment purposes.
While some US states are exploring the possibilities of making gold a currency in their jurisdiction, they are clearly in the minority, have had little success, and there's no discussion from any government official that we know of to lower or eliminate taxes on precious metals. Given debt levels and ongoing deficit spending, one won't be coming either.

China approves two gold-backed ETFs.
The new gold funds will trade on the Shanghai Stock Exchange, tracking the spot gold price, just like GLD.
Meanwhile, the overriding message from the North American mainstream is that gold is a dead trade. We think this quote by Zhang Bingnan, secretary-general of the China Gold Association, is quite prescient: "The dumping recently of holdings in gold exchange-traded products by overseas investors may not prove to be a wise move."

Gold demand in Asia is already reaching quarterly records.
Wonder where some of the bullion went from the selling of gold ETFs?

  • Net gold imports into China reached between 160-170 tonnes in April alone, and physical demand shows no sign of abating. Chinese gold imports are expected to swell further after more than doubling to an all-time high in March. "Consumers and industrial users tend to see price drops as buying opportunities," Zhang Bingnan, secretary-general of the China Gold Association, told Reuters. "Investment demand should continue to stay strong through the rest of the year because of limited investment alternatives," said Zhang. Jewelry chain Chow Tai Fook, the world's largest jewelry retailer by market value, told Reuters that traffic at its China stores jumped 50% during the recent "May Day" holidays.
  • Indian imports are expected to reach 350-400 tonnes in the April to June period, 200% higher than a year earlier and almost half of last year's total. This is also significantly higher than the 256 tonnes imported last quarter. The jump was due to lower prices; Indians looked at the "crash" in April and said, "Thank you!"

This is in stark contrast to how many GLD investors reacted when the gold price fell.

China is now lead financier to new Australian mines.
Beijing has now committed more than US$1.5 billion to projects it wants to see developed to ensure a long-term supply of metals. US and European financiers have retreated from the sector, so China's network of state-controlled banks, mining companies, and engineering and construction groups are taking up the slack. I wonder who will be better positioned by the end of the decade?

US outflows vs. Shanghai inflows.
The SPDR Gold Trust (GLD) has now seen six straight months of outflows. But in Shanghai, it's all about inflows…


The crash in gold was met with a quadrupling of volume, the exact opposite of the reaction in North America. And it should be noted that many Asian exchanges deal in more physical metal than the paper forms the Comex does.

Central banks continue buying.
During the "crash" month of April…

  • Russia bought 269,000 troy ounces
  • Kazakhstan added 85,000 ounces
  • The Republic of Azerbaijan bought 32,000 ounces, the fourth consecutive month of purchases by the former Soviet republic
  • Turkey's central bank bought 586,000 ounces
  • Belarus and Greece also added to holdings, though amounts have not yet been reported
  • Altogether, the IMF says of those that have reported thus far, central banks bought almost a million ounces of gold last month.

The potential for continued strong buying by emerging-market central banks is higher than most analysts realize. If countries in the "emerging market" category raised their gold reserves from the current average of 2.6% to 15%, demand would be 17,359 tonnes, about seven years of global production.
So what does this trend of gold moving from West to East mean?

Eastern countries will increasingly impact demand and price.
China and India already account for over a third of all investment demand for gold. North America? Nine percent. Those figures are based on 2012 data, meaning the gap between the two is certainly greater this year. The upshot is that actions from the East will have an increasingly greater impact on the gold market going forward.

Eastern buying takes metal off the market.
The bullion being purchased by the Asian markets is of a long-term nature and won't come back into the world market any time soon, probably decades or longer. The result will be a shortage of metal when the West decides to reenter the market. Just because investors in New York want a few more ounces doesn't mean it will be available.

Eastern gold storage options are growing.
As the industry matures, expansion efforts have been greater in Eastern countries, as some of the above points show. This trend is widely expected to continue.

The West's need for revenue puts domestic storage at greater risk.
Again, it's not that vaults in the US or other places aren't safe; it's that assets stored here are an easier target by revenue-starved government officials than those stored outside their borders. There is no perfect solution, of course, but having an extra layer between your gold and your local bureaucrat adds a level of protection you wouldn't otherwise have. It is imperative that we all have some gold and silver stored outside our political jurisdiction.
Keep in mind that the issues aren't just confined to US citizens: the European Central Bank reiterated there is "no limit" to the ECB bond-buying program, leading PIMCO to warn that the sterling "will be devalued significantly." The yen is down roughly 30% against the US dollar in the last ten months, the result of Prime Minister Abe's aggressive "whatever it takes" promise to spur inflation.
Given the number of countries today that are basically insolvent and reaching deeper into citizens' lives and wallets, storing some gold in the East may be a very prudent move.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  170 Comments

Spartacus Rex
Jul 25, 2013 - 12:10am

Is Mine?

LOL! Hardly! And never Will.

Magpie
Jul 25, 2013 - 12:11am

First!

And I got nuthin' to post.

edit: not first, still got nuthin'.

Roger Rocker
Jul 25, 2013 - 12:12am

Stack-on!

Turd's giving the West a chance.

Spartacus Rex
Jul 25, 2013 - 12:12am

BTW Turd

At what age do you believe it is appropriate to teach your little ones about the importance of stacking Physical Gold & Silver? Have you started them on that Path yet?

Spartacus Rex
Jul 25, 2013 - 12:18am

@ "got nuthin"

FWIW, you still have my admiration!

El Gordo
Jul 25, 2013 - 12:22am

I'm more...

...confused than ever, so that's why I keep stacking. It's easy when you don't have to make a lot of decisions - just buy or don't buy.

Roger Rocker
Jul 25, 2013 - 12:30am

Kids

Mine know the score, they are 17 and 15. Son has bought his own Au, I've given each of them 1/2 toz for Christmas, last 2 years. Both got a round of silver for Birthdays.

They know about the evils of too much debt, how to live within their means and how to save. Sonny has learned the hard way by being broke, no money for gas. Sweetie seems a natural, very stingy.

I may have started a little late and spoiled them a bit but I think they have more wisdom than most their age. My wife and I have been very open with them concerning the family financial status most of their lives.

Stack-on

Charles S. Hamlin
Jul 25, 2013 - 12:33am

1st?

Hi Turd, You are up late tonight! Thanks for the article...good late night reading...

Okay, now I feel complete. I have one first on the original "Along the Watchtower" and now on "TF Metals Report"

AlienEyes
Jul 25, 2013 - 12:36am

top ten again

top ten again

Charles S. Hamlin
Jul 25, 2013 - 12:36am

Mr Fix?

Anyone know why Mr Fix has not posted in quite some time? Business must be hectic for him as he usually checks in each day at some point.

-Chuck

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Recent Comments

Forum Discussion

by sierra skier, 6 hours 6 min ago
by NW VIEW, 6 hours 8 min ago
by Trail Trekker, 7 hours 28 min ago
by Scarecrow, 11 hours 31 min ago
randomness