Posted on 04/13/2006 6:48:44 AM PDT by DebtAndDelusion
A HIGH probability of a sharp slowdown in US economic growth and a slide in the dollar are likely to continue driving investment in gold this year, says precious metals consultancy GFMS in its Gold Survey 2006, launched yesterday.
The main reason for gold’s current strength is investment demand rather than jewellery manufacturing, says GFMS chairman Philip Klapwijk.
Inflationary pressure and political tension in the Middle East should also boost demand for gold.
As the gold price performed well, it would attract new investors.
“We’d only need to see a tiny slice of mainstream assets diverted into gold, which comparatively is a pretty small market, and the price could really take off,” he says.
Despite the sharp increase in the gold price, jewellery demand rose 100 tons in the first half last year and tapered off in the final quarter.
While jewellery fabrication in east Asia rose to its highest level since 2001, Italian jewellery fabrication fell to its lowest level since 1988. Price volatility also encouraged sales of gold scrap, which surged in the fourth quarter.
Klapwijk says trends in the first quarter showed continued weakness in jewellery offtake, with Turkey’s imports of gold in the first quarter falling 60% year on year. Jewellery demand could slump about 500 tons this year, which is not sustainable.
Global gold mine production is increasing, the survey showed.
It rose 2% last year to 2 500 tons, mainly from Latin America and the Grasberg mine in Indonesia.
South African gold production fell to its lowest level on record as mines were closed because of the high-cost domestic environment. SA and Australia remained the highest-cost gold producers.
Global mine production should be 4% higher this year as new mines come on stream or increase capacity.
Last year, gold producers also dehedged less than in the previous year. Hedging is selling future gold production at fixed prices and dehedging is reducing those commitments.
The dehedging was not because the mood had changed to favour gold hedging but because of unusual circumstances, including a slowdown in delivery by Barrick and a slight increase in hedging by AngloGold Ashanti after a substantial decrease in 2004.
GFMS expects dehedging to be 200 to 300 tons this year.
Sales of gold reserves by central banks rose almost 40% to a record level of more than 650 tons last year, mainly from signatories to the Central Bank Gold Agreement, which limits central bank to selling to specified levels each year.
Gold normally goes up on Thursdays. I guess those Islamics like to buy it just before their day of worship. I sure wish America would stop spending so much money she doesn't have but my wishing won't get it done.
When this crash comes it's going to be something and those with gold will manage to eat more than once a day. Oh well, you seen one Great Depression then you've seen 'em all. We were poor in 1929 but we just didn't know it.
Those darn Asians are buying all the gold!
HG
So, assuming I do know what a gold coin is that I find in the street, to eat at McDonalds after the crash, I just chip off a corner of the coin? Or will after a crash of that magnitude occurs, will it take the whole coin? But assuming that the folks at McDonalds weren't smart enough to store up gold coins, will they have any food to sell?
"Those darn Asians are buying all the gold!"
If so, they are buying it at record high prices. Someone ought to teach them about how to invest.
I cannot see why a US slowdown would cause the price of gold to go up. Trade deficit, I can understand... On the other hand, the trade deficit tends to go down when the economy slows down.
Gold looks good right now. I give thanks to Easy Al and his younger brother Easy Ben and their housing bubble. I read somewhere today that since the housing industry is running on fumes (my area McMansions are sitting) that Easy Ben will have to call off the fight against the commodity supercycle and cut rates to pump up America's growth engine the housing industry.
The real investment is guns, gasoline and real estate. Call me in the bunker when it's Armageddon time.
Isn't gold in fact still trading much lower than it's historical highs of the late 70's and early 80's?
Yes, physical gold holders are kidding themselves about maintaining their own economic viability in such a crisis - because the government has bigger guns and will simply take the gold if they want it...and they will. That doesn't mean that precious metals equity investing is a bad idea - but it was a better idea four years ago when we were first discussing it. ;)
I figure gold will buy a few more cans of beans in a severe depression and food shortage. Otherwise, one should stock the beans themselves.
Ahhh the daily, "likely US economic slowdown" thread...seems like this has been going on for years, an years, throw in some more years......YAAAAAAAAAAAWWWWWWWWWNNNNN.
Folks, believe it or not, because of how quickly economic information flows and market corrections can be made in the information age...the only economic slowdown of any magnitude approaching the "Great Depression" will only come from some kind of holocaust.
So, IMHO, previous poster mentioning guns, gas, and real estate...along with numerous cans of tuna would be right.
Well said. Those who invest in huge amounts of business real estate may be in trouble. As for the rest of us, we still need a place to live and while the rate of increase may not be as great, there is still value in real estate and as the old old saying goes, "they aren't making any more of it".
I maintain that if the economic faith and confidence of the people is gone, it won't matter how many coins you have stored.
I've written here before about how Father bringing gold coins back from the Great War allowed us to eat during the Great Depression. Those Hun 20 mark gold coins kept a lot of Germans alive during 1922-23 when the money supply went parabolic. By that time Father had them back home and put away for a rainy day. A small bag of them kept us going until things recovered.
When that thieving dog Roosevelt stole all the people's gold it really started to rain. Some folks think it has been cloudy skies ever since.
The government is printing too much money and I suspect they are buying their own Treasury Bonds with part of it which is another bad sign. Funny thing about the gold price is that it does not lie. It will always tell you exactly what the paper currency of the day is worth.
HG
I've never understood gold bugs. Gold can't be eaten, worn, or burned. It has industrial uses. In the event of an economic collapse, it will be useless.
Those darn Asians are reacting to the overproduction of dollars and preferring to hold gold rather than dollars or currencies that base their rates on dollars. The gold does not depreciate. Dollars are depreciating, at more than 12% annually over the last 6 years. Those darn Asians are not "driving up the price of gold." Lots of those darn Americans are putting their savings in gold and silver, too. Buying gold gives the buyer a small loss overall in absolute terms because he pays a slight premium to buy and gives away a slight discount when he sells. Silver, however, is going up now a bit faster than inflation and the price thereof depends on its heavy industrial use which is about double the rate at which new silver is mined. Gold is a way to retain 90-95% or so of the value of its purchase and is not an investment for increase.
Those increased sales of gold reserves constitute a purchase of currency, mostly dollars and is a reason that prices in the US have not gone up so fast as the value of the dollar has declined. Foreign central banks are incrasing their stock of dollars, perhaps attempting to keep the value of their dollar stocks from declining. It works in that they have the same value of reserves but the reserves are composed of ever more dollars. This keeps price increases in the US down and is fine so long as the European and Asian economies do not go into decline, at which point the central banks will begin to sell their dollars for usable cash which will manifest in a more rapid rise in prices in the US. If that accompanies a downturn here then we will have a return of the Carter Era official (as opposed to real) inflation rates. Rates are fairly high right now but are not reflected in the official numbers because those numbers always omit the prices that rise the fastest- to get what is called "core" inflation, i.e. cpi rises minus energy and housing.
It's more important to own lead if a crash comes. Owning enough lead assures you that you can take all the gold, or whatever else you want.
Owning gold during a crash will only make you a target of those owning lead.
LOL.....YES! Neighbor and I were talking the other day (we live in a condo complex)....and agreed when we found out we both own guns....well "we won't need to worry about food and water if there's an emergency!)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.