Bundesbank Sold Gold "Just for Commemorative Coins", Silver Industrial Demand Forecast to Rebound in 2013

By: Ben Traynor, BullionVault

-- Posted Thursday, 22 November 2012 | Share this article | Source: GoldSeek.com

London Gold Market Report

THE U.S. DOLLAR gold price traded close to $1730 an ounce during Thursday morning's London session, holding onto gains made a day earlier, as European stock markets edged higher, with US markets closed today for Thanksgiving.

"We believe that the German Bundesbank's sale of 4.2 tonnes of gold was intended solely for producing commemorative coins," says today's commodities note from Commerzbank, referring to International Monetary Fund figures published Wednesday showing October's buying and selling of gold by central banks.

"By its own account, the Bundesbank keeps 7 tonnes of gold ready each year for the production of coins, gold which it sells to Germany's Federal Ministry of Finance. In October 2011, the Bundesbank had sold 4.7 tonnes of gold for this purpose."

Silver hovered below $33.50 an ounce this morning, like gold holding gains from Wednesday, as oil prices ticked lower and copped gained.

Industrial demand for silver is forecast to rebound next year following an estimated 6% drop in 2012, according to a report by precious metals consultancy Thomson Reuters GFMS published by the Silver Institute.

"This will owe much to a new peak in China," the report says, "while a jump in the Indian market will see the country post its second highest total on record."

Industrial demand accounted for more than half of total silver demand last year, with that share projected to grow to around 60% in 2014, according to GFMS.

China's manufacturing sector has shown improved activity this month, according to the provisional release of HSBC's purchasing managers index published Thursday. HSBC's flash PMI rose 50.4, up from 49.5 a month earlier, with a figure above 50 indicating an expanding sector.

In Europe meantime, flash PMI data published by Markit show improved manufacturing conditions in both Germany and the Eurozone as a whole this month, although the sector PMIs remains below 50.

Increasing the European Union's budget would be "quite wrong" said British prime minister David Cameron this morning as he arrived in Brussels ahead of a summit that will see discussions of the EU's budget over the rest of this decade.

Cameron's coalition government lost a parliamentary vote at the end of last month when members of his Conservative party joined opposition Labour in backing calls for an outright cut in the EU's budget rather than just a freeze.

"[Cameron's] people expect the impossible," says Tim Bale, professor of politics at Queen Mary University of London.

"That's the problem, they want him to fail. They don't want him to bring back the deal that can possibly be done, because that will prove [Britain] can't deal with the EU and the only solution is to get out of it."

The Euro extended yesterday's gains this morning following reports that Euro members could contribute an additional €10 billion to temporary bailout fund the European Financial Stability Facility in order to fund Greece while it waits for international lenders to agree payment of its latest tranche of bailout funding.

Argentina meantime must $1.3 billion to hedge funds that did not agree to the country's sovereign debt restructuring in 2001, a US court ruled Wednesday.

Judge Thomas Griesa has issued an injunction against Argentina, adding that this extends to "other persons who are in active concert or participation with the parties or their agents."

This includes Bank of New York Mellon, which is trustee for Argentina's restructured debt, and extends to the US payments system, the Financial Times reports.

A ship from Argentina's navy was seized in Ghana last month following an application by a subsidiary of US hedge fund Elliot Capital Management, one of the holdouts from the 2001 default.

India's government is examining the creation of financial investments linked to gold, such as gold-backed bonds, the Hindustan Times reports.

"Recent [central bank] data showed a declining trend of savings by Indian households including bank deposits," an official from India's finance ministry said, "[so] in order to attract household savings, paper products that are linked to gold [should] be developed." 

Ben Traynor

What Will the Price of Gold Be in January 2014?

What Will the Price of Gold Be in January 2014?

19/10/2012

While many of us at Casey Research don't like making price predictions, and certainly ones accompanied by a specific date, it's hard to ignore the correlation between the US monetary base and the gold price.

That correlation says we'll see $2,300 gold by January 2014.

There are plenty of long-term charts that show a connection between gold and various other forms of money (and credit). Most show that one outperforms until the other catches up. But let's zero in on our current circumstances, namely the expansion of the US monetary base since the financial crisis hit in 2008.

Here's the performance of the gold price compared to the expansion of the monetary base since January 2008.

You can see the trends are very similar. In fact, the correlation coefficient is an incredible +0.94.

Since the Fed has declared "QEternity," it's logical to conclude that this expansion of the monetary base will continue. If it grows at the same pace through January 2014, there is a high likelihood the gold price will reach $2,300 at that point. That's roughly a 30% rise within 15 months.

And by year-end 2014, gold could easily be averaging $2,500 an ounce. That's 41% above current prices.

Some may argue that there's no law saying this correlation must continue. That's true. And maybe the Fed doesn't print till 2014. That's possible.

But it's not just the US central bank that's printing money…

• European Central Bank (ECB) President Mario Draghi has declared that it will buy unlimited quantities of European sovereign debt.
• Japan's central bank is expanding its current purchase program by around 10 trillion yen ($126 billion) to 80 trillion yen.
• The Chinese, British, and Swiss are all adding to their balance sheets.

The largest economies of the world are all grossly devaluing their currencies. This will not be consequence-free. Gold and silver will be direct beneficiaries –along with mining companies– starting with rising prices.

There are other consequences, both good and bad, of gold hitting $2,000 and not stopping there. We think investors should be prepared for the following:

• Tight supply. As the price climbs and attracts more investors, getting your hands on bullion may become increasingly difficult. Delivery delays may become commonplace. Those who haven't purchased a sufficient amount will have to wait in line, either figuratively or literally.

• Rising premiums. A natural consequence of tight supply is higher commissions. They won't stay at current levels indefinitely. Premiums doubled and more in early 2009, and mark-ups for silver Eagles and Maple Leafs neared a whopping 100%.

• Swelling profits for the producers. If margins on gold production average $1,000 per ounce now, what will earnings be like when they average $1,500? At $2,000? Gold can rise much faster than operating costs, so this could happen. Imagine what this could do to dividend payouts, especially those tied to the gold price and/or earnings.

• Tipping point for a mania. There will be an inflection point where the masses enter this market. The average investor won't want to be left behind. Will that happen when gold hits $2,000? $2,500?

The message from these likely outcomes is to continue accumulating gold – or to start without delay. Waiting will have consequences of its own.

People say that there's nothing certain in life except death and taxes. In my view, $2,300 gold is a close second.

Source: http://www.wealthwire.com/news/metals/4022?r=1