On-going and spreading societal unrest in North Africa and the
Middle East (Libya, Yemen, Iran, Bahrain all experienced varying
degrees of turmoil over the past 24 hours) offered support to
gold prices on Thursday, as did a weaker US dollar during the
night. The greenback however recovered a bit following the
release of US CPI and jobless claims data early in the New York
trading session. Freshly-filed jobless benefits applications
experienced a modest (25,000) jump during the latest reporting
period being tracked by the US Labor Department. However, such
filings have been on a downward-pointing curve ever since they
peaked above the half-million mark last August.
Meanwhile, US consumer prices rose 0.4% last month but the Fed
remains relatively 'calm' about such figures as it sees very
little in terms of wage pressures to the upside. Nevertheless,
the release of Fed meeting minutes yesterday indicated that
Federal Reserve officials were confident that the economy was on
firmer footing and that they anticipate better US GDP numbers
Some of what the Fed expects from the US economy in coming
months was reflected in this morning's Philadelphia Fed factory
index figures. The metric showed a jump to the highest level of
manufacturing activity in the region since 2004. The gauge's
reading was 35.9 this month, and was far larger than what
economists had anticipated (namely a more modest rise to near
Thus, it should come as no surprise that, at the Fed's January
meeting, some of the policymakers were noted to be "wondering" as
to whether the central bank could now scale back its $600 billion
QE2 program. The meeting summary saw "a few members [who] noted
that additional data pointing to a sufficiently strong recovery
could make it appropriate to consider reducing the pace or
overall size of the purchase program."
No change in the cards for US interest rates just yet, but, as
was noted yesterday, some 70% of investors
envisage the Fed beginning its "mopping-up" operations before
year-end. The same could be said about the UK, where the recent
reading of 4% inflation levels has "paved the way" for interest
rate hikes and prompted BoE policymaker Andrew Sentence
to...sentence low interest rates to an early execution. See the
sterling jump against a basket of nine other currencies this
morning, even as Mr. King remains reluctant to start lifting
Spot gold trading opened with a $5.60 per ounce gain this
morning, and the precious metal was quoted at $1,381.20 on the
bid side. Silver added 11 cents to open at the $30.59 level on
the bid side and it later touched and then backed off of the
$31.00 round figure resistance point. For a fourth time now,
silver is bumping up against major resistance walls thought to
reside between $31 and $31.50 an ounce. More on silver market
physical ebb and flow follows below.
Platinum started with a $1 gain this morning, quoted at
$1,830.00 the troy ounce, while palladium retreated by $3 to the
$836.00 per ounce mark. Rhodium offered nothing to get excited
about as it remained at $2,430.00 for another trading day. Crude
oil also remained largely static, marking time at the
$85-per-barrel level, while the Dow showed lethargic trading
action and was hovering near 12,280 at last check.
Finally, we have had some "straight-setting" of the "record"
in the silver market. Much bullion dealer and newsletter-driven
hype about silver investment item shortages, backwardation in
silver, and such, has been on display in various forums and
blogs. It turns out that, to the extent there is
in supplies of
certain silver products
they are limited to higher purity metal in specific forms and
locations, at most."
by New York-based metals research and consultancy firm CPM
Group (a firm that ought to know a few things about silver given
its extensive silver-producing clientele) noted that
"there is talk in the market of shortages of 100-ounce
investment-sized bars and coins, but its investigations dispute
CPM Group said it surveyed three bullion dealers in the first
week of February about the supply of these metals. Conclusion:
You want to buy silver? You can do so, and with relative ease.
Just bring lots of dough...
CPM researchers found that
"There were hundreds of thousands of ounces in 100-ounce bars
available for immediate delivery, and NWTM said it was steadily
producing more each day."
CPM added that "
[of the "urban myths" regarding silver "tightness" and
exclamation marks regarding backwardation]
." Nothing new. At all.
new this morning, on the other hand, were the fourth
quarter 2010 and full-year 2010 gold market supply/demand
statistics, as provided by the World Gold Council. We will let
other tea leaf readers highlight all of the positives (which they
certainly will) but continue to focus here on some of the
under-the-hood realities which no level-headed gold investor
ought to let be swept under the rug at this (price) juncture. The
gold market remains in a potentially precarious situation if one
does take all notable factors into account.
To wit: During 2010 (a year during which we were
bombarded with declarations of 'record' investment demand)
it turns out that global...investment demand [such as bars, coins
and exchange-traded products] was labeled as "more or less
stable," dipping 2% to 1,333 metric tonnes.
However, the net tonnage differential between 2009 and 2010
for the entire investment demand category shows a clear
contraction on the order of 14.3% - more than 271 tonnes lower.
Demand for gold in exchange-traded-fund (
) and similar products however, came in at only 338 metric tonnes
last year, and it was down 45% from the previous year. Will you
read about that in the next installment of your "How to Survive
TEOTWAWKI" newsletter? Doubtful.
You are also unlikely to encounter the dissection of figures
related to jewellery demand in various parts of the world. Much
will be made of the 135 tonne increase in Chinese full-year gold
jewellery demand. Good thing it was higher, too, because of one
adds up the nearly 80 tonnes of such demand that were lost in the
rest of the world
(including important regions such as the Middle East,
Europe and the US) the market
"ChIndia" to pedal as hard as possible in this sector of demand.
You can see here why this is so:
As well, market inflows of scrap gold remained well above
their historical levels, virtually tying their record 2009
inflows and coming in at 1,653.00 tonnes during the past year.
Record-high prices were cited as the catalyst for that
development. Meanwhile, during a year when we were being
guaranteed that the official sector was going to turn into a
'massive' buyer of gold, the world's central banks bought...al of
87 metric tons of gold more than they sold.
The good news is that the world's central banks did
come to market with the amounts of bullion they had been
selling over two decades, on a yearly average basis. The
potential to mobilize some official sector gold-even if not a
lot-from reserves remains very real, however. The
percentage-in-reserves that $1,400 gold has now yielded on the
balance sheets of many a 'budget-squeezed' and 'credit
crisis-bruised' central bank is sure to raise some questions and
engender some vigorous debates in 2011 and 2012, at various
policymaking meetings, here or there. Stay tuned. The odd of
sales by the IMF and the plight of poor nations, and such, that's
a whole different topic, for another day.
While central banks collectively
net buyers for full year 2010,
of gold still outpaced purchases during Q4 of the year.
Finally, for 2010 as a whole, (again, this was a year during
which there was no shortage of "peak gold" alarmism being pumped
into the marketplace) total mine supply of gold
by 9% to 2,543 metric tons, according to the report- data for
which was compiled by the London-based consultancy firm, GFMS.
Also noted were huge drops in producer de-hedging (a process
which is thought to have added much to gold's hefty price gains
over the past decade).
Kitco Metals Inc.
US & Canada Toll Free: 1 (877) 839-8036