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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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  • India Gold Premiums Coming Down

    The RBI announced an easing of gold imports on 21 May 2014.

    Only banks could import gold under the 20:80 export rule. But now also star trading houses and premier trading houses can import gold under this 20:80 export rule. This revised guideline has come into force with immediate effect.

    Today, the US gold price is $1300/ounce. The total Indian premium was around 20% (import duty of 10% + premium of 10%) a few weeks ago. Today the premium is apparently 82 USD. That's a premium of 6.3%. That means the Indian premium has already started to come down. And it is expected that this premium will come down another 50 USD, which is another 4% lower. Also, it is likely that import tax duty will go back to 6-8% from 10%, which will make premiums go down some more.

    With Indian premiums now dropping, this will lead to a higher physical demand. I expect that this higher demand will send gold prices higher in a few weeks from now.

    Why do I think this? Just look at the chart above. When the Indian gold premium (red line) goes down, the US gold price (grey line) goes up.

    Tags: GLD
    May 25 4:24 AM | Link | Comment!
  • Gold Demand And Capacity

    An interview from Eric Sprott came to my mind today. Apparently, Dubai will build the largest refinery in the world with 1400 tonnes/annum gold refining capacity. You can put that next to the 3000 tonnes/annum Swiss gold refining capacity today. That's a lot of capacity coming online. Now why would someone do this? It's simple, because demand for gold is going up, not down.

    Just like in the oil refining industry, capacity follows demand. The more people consume gasoline (or gold jewelry), the more oil refining capacity (or gold refining capacity) is needed.

    This is the gold refining picture today. If you add it all up we get around 8000 tonnes/annum. Most of these are Swiss companies. But now you can add Dubai's Kaloti to that list.

    I really wonder what will happen at this stage when demand is going up, while gold supply is bound to go down in 2015.

    Tags: GLD
    May 10 7:10 AM | Link | 2 Comments
  • Depletion Curves: What Oil Depletion Teaches Us In Predicting The Silver Price

    Crude oil depletion can be a good indicator of what can happen to the price of something that gets depleted.

    The following is a extraction/depletion curve for U.S. crude oil. The blue area represents the U.S. crude oil reserve. As you can see, the U.S. has already peaked in oil extraction in 1970 as their reserves are diminishing.

    Now let's look at the world crude oil depletion curve. Almost the same, but the peak is delayed from 1970 to 2000. It's this curve that we need to monitor to guess what will happen to the crude oil price.

    When we look at the crude oil price, we can see that the 1970 U.S. crude oil extraction peak had spurred the OPEC crisis and a spike in the crude oil price occurred from $2/bbl to $30/bbl.

    Then, when world crude oil extraction peaked in 2000, we got a second spike in crude oil price from $33/bbl to $110/bbl.

    That's what I call the "price effect" of extraction peaks. Namely, that when the peak occurs, the price will move significantly higher the next few years.

    Now, what I find interesting is that we can easily use this little "theory" on other things and most particular on silver, because I believe we are nearing a depletion stage now on silver in a few years.

    So this is the current world silver extraction curve. We see that the peak will occur in 2020.

    The extraction curve can be seen below. You can see that silver extraction will rise the fastest in 2020. After that, we will only have lower and lower production going forward. And that's the time when the silver price will start to surge.

    Learning from the oil depletion curve is a good way to predict what will happen for silver a few years from now. And it will be rosy.

    Tags: SLV
    May 04 12:59 PM | Link | 2 Comments
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