Monday, Sep 27, 2010
Catalyst for higher prices, as sterling is weakened to give the false impression of HPI?
FT: Europe’s central banks halt gold sales
Europe’s central banks have all but halted sales of their gold reserves, ending a run of large disposals each year for more than a decade. The central banks of the eurozone plus Sweden and Switzerland are bound by the Central Bank Gold Agreement, which caps their collective sales. The lack of heavy selling is important for gold prices both because a significant source of supply has been withdrawn from the market, and because it has given psychological support to the gold price. On Friday, bullion hit a record of $1,300 an ounce.
Posted by hpwatcher @ 08:28 AM (2212 views) Add Comment
58 Comments
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1. hpwatcher said...
Europe’s central banks have all but halted sales of their gold reserves, ending a run of large disposals each year for more than a decade.
The central banks of the eurozone plus Sweden and Switzerland are bound by the Central Bank Gold Agreement, which caps their collective sales.
The sales are the lowest since the agreement was signed in 1999 and well below the peak of 497 tonnes in 2004-05.
The shift away from gold selling comes as European central banks reassess gold amid the financial crisis and Europe’s sovereign debt crisis.
In the 1990s and 2000s, central banks swapped their non- yielding bullion for sovereign debt, which gives a steady annual return. But now, central banks and investors are seeking the security of gold.
The lack of heavy selling is important for gold prices both because a significant source of supply has been withdrawn from the market, and because it has given psychological support to the gold price. On Friday, bullion hit a record of $1,300 an ounce.
“Clearly now it’s a different world; the mentality is completely different,” said Jonathan Spall, director of precious metals sales at Barclays Capital.
2. general congreve said...
Mugs. Don't they know you can't eat gold, whereas debt tastes lovely with a bit of gravy on the side.
3. debtfree said...
but gold is in a bubble ?
you gotta laugh.
4. mark wadsworth said...
As I've said before, one of the main functions of government seems to be providing opportunities for speculators.
5. sureseam said...
So we have an apparent decision by central banks to stop sales (and maybe even accumulate a little more).
Point 1: Frankly central banks are not known for timing the gold market better than the rest of us. Gordon Browns big gold sales were not isolated in that era - yes even the Swiss (AFAIR).
Point 2: You only really find out what central banks have been upto in the gold market; some considerable while later. In between times there is the occasional anodyne press release and a lot of poker faces.
So maybe this is really a contrarian indicator.
6. sureseam said...
For those that are interested in gold and understand something of Elliott Wave then take a look at this:
http://www.elliottwaveforex.com/2010/09/24/gold-elliott-wave-analysis-%E2%80%93-22nd-september-2010-video/
There is also a text and graphic commentary.
7. hpwatcher said...
but gold is in a bubble ?
you gotta laugh.
There will be a bubble in gold, but not for a long time yet. The real bubbles are in houses, equities and the biggest of the lot, govt bonds - not that really is a massive bubble!!!!
For those that are interested in gold and understand something of Elliott Wave then take a look at this:
Those EW folks have been wrong on most things for the past 5 years. I guess even a broken clock is right twice a day.
8. general congreve said...
@6 - Cos Prechter has been right on gold for so long of course. Not to say that tech analysis is useless, but it is only right 55% of the time, so hardly a foolproof philosophy. I prefer to look at the big picture when making decisions about my financial future.
9. str 2007 said...
I while ago I read an article staing the long term ratio between Gold & Silver was about 40-45, but recently been upto 65.
I moved some Gold savings into Silver and since the ratio has reduced to 61.
IE Gold is going up but Silver is going up faster.
Just thought some of you may be interested.
Also for small amounts of savings you get alot more silver for your money (obviously).
Thought I'd mention that on a metal link as some of you may have opinions on the subject.
10. general congreve said...
Got a position in silver too, although only 10% of my PM's are in silver, due to the VAT implications and the fact it's a b@stard to store due to it's relative weight to gold.
I view it as a bonus investment. If it tanks, I don't lose a great deal of my invested wealth, but if it reverts to the gold/silver mean ratio plus rides up on golds bull market coat tails, then the highly geared returns it'll make will be the icing on my big fat golden cake, yummy!
11. hpwatcher said...
I moved some Gold savings into Silver and since the ratio has reduced to 61.
I hold silver too, and in my view it is massively depressed and very, very undervalued - given it's uses. It should be up there with palladium at the very least.
12. techieman said...
"Those EW folks have been wrong on most things for the past 5 years. I guess even a broken clock is right twice a day."
Well Hpw once again you exhibit bias in your view. if you had bothered to look at the video posted you would realise it isnt Elliott Wave International at all (and Lara's site hasnt been going for five years!!).
Even once you have looked @ around 2:50 you will see the chart is short term bullish. (now she may be wrong of course). Still i supose we should just expect and discount pontification from you. She says herself "for what its worth" at 7:30
GC is right - prechter has been wrong on gold and freely admits it, but to say wrong on most things for the past five years is stretching it ... more than a bit! Still its a nice soundbite.
13. hpwatcher said...
"Those EW folks have been wrong on most things for the past 5 years. I guess even a broken clock is right twice a day."
Well Hpw once again you exhibit bias in your view. if you had bothered to look at the video posted you would realise it isnt Elliott Wave International at all (and Lara's site hasnt been going for five years!!).
EW have been very wrong about most things to do with precious metals, which if you haven't noticed, is the theme of this tread. Well techie, once again you exhibit bias in your view....and please spare the 2 or 3 post rant this time, and go and do something else. Also, just give the backbiting a rest - if you can.
14. jack c said...
I think there is more money to be made from my new handbag stall than gold or silver or stocks for that matter - the daily standoff with handbags at 20 paces should see me through rather nicely! - who's going to first to re-order there battered old handbag? (LOL)
15. techieman said...
"EW have been very wrong about most things to do with precious metals" - if you mean Elliott Wave international then I agree, as does prechter himself but thats not what you said is it.
So me looking at the video and commenting on it is bias? And now you want to take my freedom of speech away - perhaps you should report me to the webmaster if your paranoia suggests what i said was anything other than factual and no way backbiting.
Rather than being man enough to admit you got the wrong end of the stick (for a change!) you somehow want to put some onus on me for you being wrong. Nice try.
What bias have i exhibited? She actually is in agreement with you! All sureseam was doing was providing some thing that some might find of interest. Your comment is just plain factually incorrect. Had you looked at it, perhaps you might have found it interesting too. Then again...
" please spare the 2 or 3 post rant this time" - not ranting at all, and again subject to the rules of this site i believe i can (like you) post whatever i like. i suppose in a way you have a point though, people know you full well by now, so that when you comment on something most realise you have done some at best some selecting reading / viewing of it... and at worst not even bothered to look at what you look at.
Clearly there is something wrong with you, when you always need to have the last word and rather than debate issues want to quell legitimate comment, when its not aligned with your own view. In case you hadnt realised this is actually a forum for debate.
16. str 2007 said...
gc
''due to the VAT implications and the fact it's a b@stard to store''
So far as I'm aware VAT is only payable if withdrawing it from the vault.
I'm guessing this is the least of your worries if things have got to the point that you actually need the stuff in your hand.
Mind you with VAT going up, you need to see at least a 20% gain should a truly apocalyptic scenario take place, to brek even.
17. techieman said...
Jack maybe the stall will eventually become a full internet site. Surely your grandparents didnt go through all that just for hpw to give us cheap comments.
Compare the handbag dot com?
Actually i feel strangely intrigued by hpws personality - funny isnt it. I have been told that people like this do exist, but i have never met one before. Maybe its just a north london thing.
18. will said...
Apparently all of the gold ever mined throughout history could fit into 2 Olympic sized swimming pools. Most of it is already owned globally and because of this it is almost impossible to buy the real thing.
How many people have bought into the Gold ETF story and do not actually possess the real stuff? When the bank which runs the particular gold tracking fund goes bust, those holding the ETFs will loose all.
19. techieman said...
3rd rant : i just saw this - sounds kinda familiar... http://www.experienceproject.com/stories/Dislike-When-People-Always-Have-To-Have-The-Last-Word/301483
Ok now as for the subject - i do think this indicates the maturity of a trend, although we might very well have a blow-off phase, in the yellow stuff. Once we do though it might again be like the prior tops in gold and the bunker hunt inspired moves in Silver. Commodities in general reverse to the downside aggressively once buying is exhausted. Spotting the top of a bubble only really takes place after the event. So actually we might have some further upside and gold may even go parabolic. Personally i am happy with what i have and wont add to it.
20. uncle tom said...
If you must buy gold and silver, don't get suckered in to buying new overpriced 'special edition' coins - look at buying somewhere like here:
http://www.dnfa.com/auctions.asp?view=saledetails&aucno=30394&avail=0
The catalogues usually give the weight of metal and grade, and you will normally be buying at scrap value, which is a few percent less than the current quoted bullion price.
21. general congreve said...
@ 18 - Yep, quite. When/If the ETF's are possibly exposed as fraudulent the lid will be well and truly blown off and gold will fly.
22. estrader said...
18 @ will,
So you read somewhere that all of the gold ever mined throughout history could fit into 2 Olympic sized swimming pools.
Then you read somewhere that Most of it is already owned globally and because of this it is almost impossible to buy the real thing.
Then you read somewhere that the Gold ETF do not actually possess the real stuff?
Then you think that a bank runs the physical ETF and if the bank goes 'bust' the ETF will lose all! Thak makes ZERO SENSE!
23. will said...
estrader
The point I am making is that the a bank cannot guarantee the value of a commodity if the bank who 'tracks a value' goes bust.
24. jack c said...
The regulators normally shut the stable door long after the horse has bolted but they are currently becoming increasingly concerned over ETF's - See www.ifaonline.co.uk/etfm/feature/1730829/etfs-alternative-access
25. estrader said...
Will,
Commodity values are never guaranteed by anyone. What you are referring to is counterparty risk on SWAP based ETF's and NOT Physical ETF's. A few companies that sell SWAP Based ETF's now use more than one counterparty to reduce the risk. My advice is to ONLY buy PHYSICAL ETF's for shares and precious metals.
N.B: There has been no, none, zero, zip factual evidence for a case against Physical ETF's, just people ill-informed "Thinks". "I heard", "I read" etc...etc
26. estrader said...
Jack,
That article has nothing to do with Physical ETF's.
Quote: "The development of *alternative products* allows investors to tap asset classes that are *otherwise hard to access*. But do these new breeds undermine the appeal of ETFs?"
27. hpwatcher said...
@ 19. techieman Clearly there is something wrong with you, when you always need to have the last word and rather than debate issues want to quell legitimate comment, when its not aligned with your own view. In case you hadnt realised this is actually a forum for debate.
Rant, rant rant.
@ 20. uncle tom If you must buy gold and silver, don't get suckered in to buying new overpriced 'special edition' coins - look at buying somewhere like here:
Yes, whatever you do DO NOT BUY collector, special edition or commemorative coins. The gold value usually isn't that high - best thing is bullion coins, and only buy from a reputable source too.
28. bystander said...
All this gold bugging reminds me of the same arguments for High and higher house prices, supply and demand etc. etc. Could someone please explain why it is alright on this site to ramp gold i the same way we lambast others for ramping property???
29. hpwatcher said...
Then you read somewhere that the Gold ETF do not actually possess the real stuff?
This is a really important point; a lot of gold that is traded isn't actually the real thing, it's an entitlement to gold. I read somewhere that the ratio of paper gold to real is about x10, so for every 10 ounces of ETF gold that is sold, there is only 1 ounce of the real stuff. It's best to buy physical and store somewhere.
30. hpwatcher said...
All this gold bugging reminds me of the same arguments for High and higher house prices, supply and demand etc. etc. Could someone please explain why it is alright on this site to ramp gold i the same way we lambast others for ramping property???
I think this is quite different; this is about storing and maintaining wealth as opposed to increasing wealth - at least that's how I look at it. The increasing gold price is indicative of the weakness of the purchasing value of the currency. Haven't you noticed the rate of inflation?
31. jack c said...
estrader@ Monday, September 27, 2010 01:26PM - agreed, the point I was alluding to is that there is now a real concern retail investors are very much in the dark over what they are holding even down to the distinction of physical/swap-based ETF's.
32. str 2007 said...
Hpwatcher
Agreed, it's not about ramping but a small attempt for savers to try and preserve.
33. sureseam said...
estrader @ 25: There has been no, none, zero, zip factual evidence for a case against Physical ETF's
Well, there has been the evidence borne of cross-checking the serial numbers on their bars which caused furore.
Still, I'm sure the Physical Gold ETFs are as safe as Fort Knox.
34. Crunchy said...
30. hpwatcher
Gold buyers are on a worthy crusade. Speculation against the speculators. A pleasant change.
35. hpwatcher said...
Still, I'm sure the Physical Gold ETFs are as safe as Fort Knox.
I would still be happy buying amounts through bullion vault, as I think they are pretty good and I have been impressed with what I have seen.
36. sureseam said...
bystander @ 28: All this gold bugging reminds me of the same arguments for High and higher house prices
Engenders that toppy sense of vertigo doesn't it.
37. sureseam said...
hpwatcher @ 35 : BullionVault
BullionVault are (I think) properly auditted and so I would it imagine are GoldMoney (run by James Turk).
If you have to go the ETF route then the one run by Will Rhind [quoted in NY stored in Zurich] looks best of bunch to me.
Of course, with ETF's in the picture the price drops will be larger and sharper in practice - when they come.
For anyone who missed the joke: Fort Knox was last properly audit in the 1940's(!).
38. hpwatcher said...
Engenders that toppy sense of vertigo doesn't it.
We aren't anyway near a top yet - if the price of gold is adjusted for inflation - the top will be nearer $5,000 an ounce.
Of course, once the excitement of the last few days/week is over, the price of gold will probably drop back to about $1150 an ounce.
39. hpwatcher said...
Of course, with ETF's in the picture the price drops will be larger and sharper in practice - when they come.
Yes, actually, I think ETF gold will be wiped out, as it isn't gold, but just another [oversold] derivative. I think you will find physical gold will be priced differently.
40. inbreda said...
bystander @ 28: All this gold bugging reminds me of the same arguments for High and higher house prices
Quite. When HPC was formed and similar discussions were taking place about house prices we were only mere years away from the top of the market, and only a couple of years further from the real falls.
Plenty of time to buy, hold, and sell gold taking your example.
41. the number cruncher said...
IMHO - goldbugs should join the bankers in being strung up on the lampposts
Men should earn their keep through honest labour. The only reason it will increase in value is if people think it will increase in value, beyond its usefulness in society, just like housing.
One speculator one bullet that s my motto - or perhaps the 'old fashioned' execution for speculators in classical times. They would chain speculators to the forum wall and citizens would take it in turns to cut them a little. It would take the whole day for them to die...
42. techieman said...
tnc - you really dont have to worry. most speculators (sadly in my view), whether it be in BTL, tech, or any other bubble lose, its really just a question of when.
The thing is they get sucked in at or near the top and go on buying, when others have already bought and, if anything, are unloading.
Unless of course you want to kill every speculator in the world... does that include entrepreneurs or are they excluded from the term?
43. str 2007 said...
Tnc
Quite strong words aimed at people trying to do their best to preserve their hard earnt savings against a back drop of near zero interest rates.
44. hpwatcher said...
IMHO - goldbugs should join the bankers in being strung up on the lampposts
And what about BOE and the politicians who allowed and encouraged the madness to flourish?
Men should earn their keep through honest labour. The only reason it will increase in value is if people think it will increase in value, beyond its usefulness in society, just like housing.
And what about holding onto ones hard earned wealth, as the currency is effectively destroyed, to give the appearance of prosperity?
Are we allowed to do that, at least?
One speculator one bullet that s my motto - or perhaps the 'old fashioned' execution for speculators in classical times. They would chain speculators to the forum wall and citizens would take it in turns to cut them a little. It would take the whole day for them to die...
Not sure that statement deserves the dignity of a reply.
45. estrader said...
IMO: The opinions that people here have written about Physical ETF's are no different to someone saying: "You shouldn't drink milk because I read somewhere that farmers p1ss in the buckets."
1) You can buy Physical ETF's on the London Stock exchange, Australian Stock exchange and New York Stock Exchange
2) There are at least 3 different Physical ETF providers which store gold in vaults which are audited.
Of course, if you want to take the ill-informed opinion from people here who THINK they are a bad idea because of some obscure baseless, illogical personal paranoia then that is your prerogative, but do your own research.
46. estrader said...
@41.The number cruncher, that is the stupidest post I've ever read on this site.
47. techieman said...
est - you havent been here that long :)
48. capitalist said...
Actually I quite enjoyed that post from Number Cruncher, a self-avowed socialist. It's a good reminder of the days when the socialists had real power - the USSR, Maoist China, Kampuchea, the National Socialists ... They used to talk just like that.
49. alan_540 said...
Yes, tnc sees himself (herself?) as a little dictator.
50. quiet guy said...
@the number cruncher
"IMHO - goldbugs should join the bankers in being strung up on the lampposts ... or perhaps the 'old fashioned' execution for speculators in classical times. They would chain speculators to the forum wall and citizens would take it in turns to cut them a little. It would take the whole day for them to die..."
Well you are not alone in disliking gold so much. Did you know that there was once a powerful national leader, greatly admired by many of his countrymen that said:
"Gold in the hands of the public is an enemy of the state"
Personally, I find your words a bit harsh. I can understand that you might be offended by failed speculators asking for bailouts or market manipulation.
Unlike housing, participation in the gold market is completely voluntary.
51. tenyearstogetmymoneyback said...
bystander said...All this gold bugging reminds me of the same arguments for High and higher house prices, supply and demand etc. etc. Could someone please explain why it is alright on this site to ramp gold i the same way we lambast others for ramping property???
I think that lots of people who post here are simply looking for any investment that will keep up with inflation.
Not even NS&I offer this any more. Based on Government policy so far there is a good chance that houses
will have gone up in a years time and oil (which is difficult to store) will be £300 a barrel and gold (which can
be stored) £3000 an ounce.
Also I stand by my theory that the only thing that will really finish off housing speculation is a bubble elsewhere.
That is what happened with Technology stocks in the late 1990s. People were selling their houses at bargain prices
to pile into Tech shares (as was documented week by week in "Diary of a Day Trader" in the Sunday Times.
52. stillthinking said...
I don't see that financial speculation in gold somehow manipulates the physical price. Nobody says that if everybody won at the bookies the bookies would be bust, for the simple reason that everybody can't win at the bookies, the punters are betting against each other and the bookie is an intermediary. Same for gold. The companies taking the bets (extremely happy now I should imagine from turnover) just adjust the spread and the higher and lower prices to stay neutral.
If ten people sell an ounce and ten people buy an ounce then they somehow fake an additional twenty ounces, but in fact these bets cancel out to zero. The physical delivery price is determined by people who want to take delivery, and people who want to deliver. Only these two.
For the central banks, imo, they have stopped selling because it no longer suits their plans to do so (because..) there is enough cash being deposited at the central banks as it is. The goal of the US, UK and the others is to pump money into the economies, not take cash out in exchange for gold. We are still in deflation danger zone, does anybody think the London tube is shutting down because the workers don't think their gold allowance is high enough? Or is it because they want cash?
When the central banks offload their gold they take cash out of the economy. Gold is not legal tender. Less cash in the economy, more cash at the central banks. What is interesting would be if the central banks saw a (gold) buyback programme as a way to inject money into the economy. Which would extremely ps me off because a blatant transfer of social wealth to entirely the wrong group of people. If that happens I will have a heart attack. I don't think so. Probably just because they are worried about soaking up cash but I don't know.
53. hpwatcher said...
est - you havent been here that long :)
I don't think you will find anything more stupid that a demand for the purchases of a particular asset class to be executed.
Obviously the work of a very bitter little socialist.
54. bystander said...
hpwatcher @ 38 -We aren't anyway near a top yet - if the price of gold is adjusted for inflation - the top will be nearer $5,000 an ounce.
inbreda @40 - Plenty of time to buy, hold, and sell gold taking your example ('irony' - 3billion dollars by february - get it while you can)
tenyearstogetmymoneyback @51 -Based on Government policy so far there is a good chance that houses
will have gone up in a years time and oil (which is difficult to store) will be £300 a barrel and gold (which can
be stored) £3000 an ounce.
......all seems pretty 'rampy' from where I'm sitting. I understand the need to retain the worth of hard fought/ earned savings, but these comments are straight from the Phil and Krusty Christmas Almanac (just exchange gold/oil for house prices).
55. quiet guy said...
@bystander
I understand that people saying that "gold will go the moon..." etc can be a bit irritating. There is an implication that those who don't "get on board" will miss the boat - somewhat similar to the fearmongering idea that you have to get on the housing ladder before it's too late.
On the other hand, as I pointed out to TNC, participation in PMs is entirely voluntary whereas the property boom couldn't be ignored because you have to live somewhere.
I think the gold bulls are giving what they consider to be good investment advice. You can find arguments for and against Au. In fact I'd go further and say that there's something about the stuff that seems to get people really wound up (bulls and bears.) I don't think anybody takes seriously the idea that this blog influences the price of gold but we have often complained about powerful economic commentators and even central bankers who did try to interfere with the property market.
Personally speaking, I follow Karl Denninger's Market Ticker blog closely even though Karl is a notorious gold bear - he really hates the stuff as an investment. I suspect that there will always be arguments about gold, except for times we are in a real crisis.
I'd prefer it if this sort of stuff was on the forum. I respectfully suggest that you just ignore the Au bulls on the blog.
56. hpwatcher said...
......all seems pretty 'rampy' from where I'm sitting. I understand the need to retain the worth of hard fought/ earned savings, but these comments are straight from the Phil and Krusty Christmas Almanac (just exchange gold/oil for house prices).
Gold going up merely means a currency getting weaker - that should be the only reason to buy gold. (I hope you and your worthless paper will be very happy together!). At least you are fully insulated from someone like Mr Bean from the BOE who is weakening the currency.
57. techieman said...
Good morning!
my link @ 19:
"I have recently ( in the past nine months) become acquainted with someone who always has to have the last word. More often than not it just makes them look like a MORON. No matter what is said she is sure to throw her two cents in. Last word is always like she's playing devils advocate. When you tell her how annoying she is she just goes out of her way to "PROVE" how she's right and everyone else is wrong. Oh yes, not only does she have to have the last word she is also always right. Even if she's not part of the conversation she is sure to butt in. Although I ignore her I notice she does this to other people in my absence. When people have had enough of her she is always the "VICTIM"."
i come on here this morning and wondered who would be the last poster.....
oh maybe by posting this its me! How ironic or will someone else have something else to say.... only one way to find out :). if the former i will have to change the "she" to "he" but if not then the quote stands as is. I wonder if someone will bite their tongue or if they will be unable to resist the obvious challenge to their self proclaimed all knowing wisdom?
58. Jehnavi said...
You wouldn’t really get gold stock on stock exchanges. Instead, you have to invest in companies that are associated with gold in some ways. This would include gold mining companies, distribution companies, gold retail stores, and so on. This is, however, an indirect way of trading in gold. The fluctuation in spot gold prices would immediately affect your investment.