Gold Soars to New Highs

The price of gold has broken out to another new high this morning following news that India's Central Bank purchased 200 tons of the metal from the IMF. Previously, the IMF had announced that it would sell around 400 tons, raising speculation that the planned sale would cause a glut of gold in the market. Based on India's $6.7 billion 200-ton purchase, the market may have an easier time digesting the increased supply than previously thought. The average price per ounce for the Indian Central Bank's purchase works out to around $1,045. With gold now trading at $1,079, they have already made $218 million (3.25%). Not bad for a few days' work!

click to enlarge

Comments

[Roger Knights:]

"Based on India's $6.7 billion 200-ton purchase, the market may have an easier time digesting the increased supply than previously thought."

One would think that a buyer would have been in a position to demand a better-than-market price, facing a "motivated seller" with a huge position to unload. Instead, the IMF was able to get India to pay the going rate. It must have had to outbid China (I speculate)--otherwise it would have paid less. It will be interesting to see how high and when the remainder of the IMF's gold is sold.

Nov 03 01:38 PM

[Donald Ingram:]

So much for Nadler's recent article "Gold is not in a bull market"!
Mish has an article on his blog this morning that knocks holes in Nadler's argument that you may drive a bullion truck through!

Nov 03 02:13 PM

[twitee:]

The purchase was made bertween Oct9-30 at an average price of $1045.

Although India is the world's biggest consumer of gold, primarily in the form of jewellery and investment among its billion-plus people, its central bank had given few indications of being a front-runner in the move to diversify into bullion.

The proportion of gold as part of its total foreign reserves had fallen over the past decades, officials said.

India's foreign exchange reserves held at the central bank totalled $285.5 billion on Oct. 23, of which gold comprised just over $10 billion. The latest purchase will lift its share of gold holdings from near 4% to about 6%, much less than most of the developed world but four times China's share.

This is a rare time to buy gold at thease levels....the road is clear for much higher prices in a near future.

Nov 03 02:15 PM

[Donald Ingram:]

Paying the going rate - Recently in a London bullion market deal, it has been rumoured that a 25% premium (cash) was offered to settle a demand delivery default of bullion. Vietnamese premiums per ounce recently have not been less than $10.00 USD. Thanks to the Wall Street bullion banks attempting to cap the price we have this 'underground' market that is growing in size.


On Nov 03 01:38 PM Roger Knights wrote:

> "Based on India's $6.7 billion 200-ton purchase, the market may have
> an easier time digesting the increased supply than previously thought."
>
>
> One would think that a buyer would have been in a position to demand
> a better-than-market price, facing a "motivated seller" with a huge
> position to unload. Instead, the IMF was able to get India to pay
> the going rate. It must have had to outbid China (I speculate)--otherwise
> it would have paid less. It will be interesting to see how high and
> when the remainder of the IMF's gold is sold.

Nov 03 02:19 PM

[DiggerUK:]

Bespoke Investment Group underplays the dimwits, goldbugs and Gatagoons when they claim that the only comments raised were along the lines of :-
" raising speculation that the planned sale would cause a glut of gold in the market."

They were hysterical in their assertions that the gold price would be collapsed by "manipulation" and have been claiming so for a number of years now.
Well, I'm listening very, very hard, and can't hear a sound from them now.

Can't wait for the rest to be flogged off. Maybe we will get another press statement off the IMF manana.
Maybe it's been sold?

Nov 03 02:58 PM

[Dr. O:]

I feel like watching Austin Power's in "Goldmember" again. Gold and gold stocks are just so right here.

Nov 03 04:46 PM

[The Economi...:]

I heard India got .39 over spot from APMEX.

Nov 03 04:48 PM

[The Economi...:]

:)

Nov 03 04:49 PM

[Screwloose:]

DiggerUK

You've got that precisely backwards. It was the "manipulators" [and Nadler] that have been playing-up the, forever-impending, IMF sale - not the very well-informed goldbugs. We know that 403 tons@$13B is nothing when $23 billion dollars of physical is traded in London every single day.

The "spectre" of this long-discussed sale has been raised to "manage" the price on numerous occasions over the years - usually around options-expiry days - by the Boyz and their shills.

Once the sale was authorized and approved - within the terms of the new Washington Agreement - its threat was permanently neutered and the only item left to settle was which central bank would bid the most.

The fact that it was the Indian central bank speaks volumes. The Indian people still use gold to store wealth because they don't trust the management of their own currency - their authorities haven't been such obvious fans of gold for a long time; they sold most of their gold in '94 in fact.

That's the lesson from today's historic action and the reason for the record $1084 close; after disposing of thousands of tons over the years, the central banks have reversed course and become buyers - gold is back on their agenda!


On Nov 03 02:58 PM DiggerUK wrote:

> Bespoke Investment Group underplays the dimwits, goldbugs and Gatagoons
> when they claim that the only comments raised were along the lines
> of :-
> " raising speculation that the planned sale would cause a glut of
> gold in the market."
>
> They were hysterical in their assertions that the gold price would
> be collapsed by "manipulation" and have been claiming so for a number
> of years now.
> Well, I'm listening very, very hard, and can't hear a sound from
> them now.
>
> Can't wait for the rest to be flogged off. Maybe we will get another
> press statement off the IMF manana.
> Maybe it's been sold?

Nov 03 05:37 PM

[R K Lakhotia:]

Fact is gold holdings of most Asian countries is just a fraction of their foreign exchange reserves. For instance China & Japan hold about 2% reserves in gold against 80% for USA. If greater China (Mainland China, Taiwan, Hong Kong), Japan and India were to boost and maintain their gold reserves to just 10% of their consistently increasing total FX reserves, the current level could become a floor against the annual gold production of US dollar 120 billion at current price. Imagine the average stock investor globally has not joined the fray yet. Once that happens – eventually it will – there will be no looking back for the gold prices.

R K Lakhotia, Hong Kong

Nov 03 09:28 PM

[Peter Cooper:]

No sign yet of an obvious spike on the gold price chart - there is room for a short-term setback but the next year should deliver some exceptional returns, for a full analysis see:
arabianmoney.net/2009/.../

Nov 03 11:59 PM

[Screwloose:]

Peter

What charts are you looking at? Does $30 intraday - $20 of that in 5 minutes - not qualify as a spike in your eyes?

You're clearly a hard man to please....


On Nov 03 11:59 PM Peter Cooper wrote:

> No sign yet of an obvious spike on the gold price chart

Nov 04 09:42 AM