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Dave Kranzler
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I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance. Currently I co-manage a precious metals and mining stock... More
My company:
Golden Returns Capital
My blog:
Investment Research Dynamics
  • The Asians/Indians Are Aggressively Buying Gold While America Sells on the Cheap 0 comments
    Mar 26, 2010 12:16 PM | about stocks: GLD
    Make no mistake about it, China/India/Viet Nam/Thailand and others in the eastern hemisphere are buying this correction in the gold market with both hands. I don't know that the west has much physical gold to dump on the market - and clearly the ECB system has been a net buyer over the past 2 months - but the east is hungrily and greedily scooping up whatever is out there.

    As you'll see from the market color and articles below, the supply of "big boy" gold is dwindling rapidly (I'm not talking about coin dealers with 1 oz. bullion coins and crappy private-minted junk being offered at big premiums to spot. I'm talking about 400 oz. bona fide AND deliverable-on-demand LBMA bars).

    "JB" is an articulate, witty and perspicacious metals market professional who shares news and insight on the eastern hemisphere physical gold/silver markets with subscribers to http://www.lemetropolecafe.com/.  Below I've pasted his commentary on the eastern markets - he gets his information directly from traders and news reports:

    Here's Thursday's commentary based on the overnight markets in the east:

    Intriguingly, so also may be China [buying aggressively]. Mitsui-HK today explicitly says: "While euro tried to pull the yellow metal lower, Chinese buying wanted to push it higher”...More concretely, the Shanghai market closed at a $6.08 premium to world gold of $1,091.98, the second day of unusually high premiums.  Indian ex-duty premiums: AM $8.18, PM $7.85, with world gold at $1094.91 and $1098.04. Lavish for legal imports.

    [please note, the presence of premiums this high in China and India is consistent with the fact that buyers in those countries are scrambling to buy as much gold as they can.  While premiums are required for importation, premiums this high are not common.  Same with Viet Nam]

    Here's the overnight action reported this morning:

    Early on Friday morning local Vietnam gold stood at a $29.10 premium to world gold of $1,091.80 (Thursday $27.89/$1,087.20).  Private communications today suggest that Chinese gold imports have indeed grown appreciably lately. Also since last Friday Istanbul gold premiums (which are awkward to measure) have been clearly supportive of Turkish gold imports: the kilo bar premium today was an import-friendly $9.42..

    Jewellers across Asia chased gold bars after bullion prices dropped more than $10 this week, while main consumer India was stocking up as the wedding season begins again in April, dealers said on Friday…"We are actually running out of stocks. There's not enough time to replenish gold bars. Thailand is the hottest buyer. Their demand is really good because they are quite price-sensitive," a physical dealer in Singapore said…Premiums were steady at 80 cents to $1 an ounce to the spot London prices in Singapore, their highest since early February, but they could rise next week because of the strong demand and tight supplies.”

    The quote underlined above comes from this reuters report:  Asia chasing gold while it's under $1100

    All of the above market color is backed up by this report out of Mumbai, which was posted at http://www.commodityonline.com/ two days ago:  
    Gold refineries are facing a strange problem in India now. There is no yellow metal for them to process now. When the gold boom was at its peak in 2008 and 2009, the quantity of scrap gold used to come to the market was very high and many refiners had increased the capacity to process the scrap gold.  But, time has changed and the scrap gold flow to these refineries has halted.  (Here's the link:  LINK)
    The moral of this is that just because the U.S.-centric media, financial advisors, brokers and politicians believe that gold is a useless, barbaric relic not worthy of investment, the rest of world is accumulating as much as they can before the REAL fireworks begin in the price.  Don't forget, gold has appreciated, in the face of extreme Fed/BOE/ECB intervention, every year for NINE YEARS against ALL fiat currencies - and an average of about 16%/yr. at that. 

    How did your financial advisor/broker, who treats you to beautiful rounds of golf and lavish meals do vs. that?  While the hoi polloi of America watch reality t.v. and dump their scrap gold into cash-for-gold scammers, the rest of the world is sucking up all the gold they can.  Keep selling America.  It's consistent with the politicians and big bankers, who have been selling this country short for years....

    (source:  Vronsky, et al)
     


    Disclosure: very long gold and mining stocks
    Themes: gold, silver, Fed, XAU, HUI, SPX Stocks: GLD
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