PRECIOUS METALS: Gold, Silver Up Despite China's Tightening

NEW YORK (Dow Jones)--Gold locked in a third straight week of gains Friday, while silver reached 31-year highs, despite China's monetary tightening.
The most-actively traded contract, for April delivery, settled up $3.50, or 0.3%, at $1,388.60 per troy ounce on the Comex division of the New York Mercantile Exchange.
The thinly traded February-delivery contract settled up $3.50, or 0.3%, at $1,388.20 per troy ounce.
China's move to raise bank reserve requirements by 0.5 percentage point for the second time this year pressured gold futures Friday. The decision aims to constrict credit availability to the Chinese economy by making banks set more capital aside for existing loans. Chinese authorities have been drawing the purse strings since inflation rates hit a two-year high of 5.1% in November.
"The market is weighed down by the Chinese reserve rate rise," said Jim Steel, senior vice president and metals analyst with HSBC in New York. But "it's not enough to offset all the other factors supporting gold."
China last raised reserve requirements Jan. 20, while the People's Bank of China raised benchmark interest rates by 0.25% on Feb. 8. Such moves tend to trim gold prices, as easing inflation concerns curb investor demand for safe-haven assets like gold.
Gold futures resumed their upward march in Friday afternoon trade, as market participants eyed simmering tensions in the Middle East. Egypt allowed two Iranian warships to pass through the Suez Canal on Friday, while Israel had earlier described Iran's move as a "provocation." Meanwhile, violent clashes between security forces and pro-democracy protesters in Yemen and Bahrain underscored the rising political instability in the region.
"The market is being supported by a bit of uncertainty," said Ralph Preston, analyst with Heritage West Financial.
Gold's recent gains have some market participants gearing up for a test of records. Gold futures crossed above their 50-day moving average of $1,372.40 earlier this week, a sign technical traders and algorithms consider a positive signal for prices.
"Today's positive close has set the stage for a challenge of the all-time high next week," Preston said.
Silver prices ended Friday at 31-year highs amid strong industrial and investment demand for metal.
The most-actively traded contract, for March delivery, settled at $32.296 per troy ounce, up 72.6 cents, or 2.3%. This was the highest settlement price since 1980, when the Hunt brothers of Texas attempted to corner the silver market.
Silver's recent price gains, however, stem from robust industrial demand for the metal. Silver is widely used for electrical and electronic applications in everyday consumer devices like smartphones and solar-power panels. The precious metal also plays a key role in manufacturing polyester.
"The strength of industrial demand has tended to surprise to the upside, and that's part of prices escalating to where we are today," said Philip Klapwijk, chairman of metals consultancy GFMS.
Investment demand for silver has also been on the rise. Major physical-silver exchange-traded funds are seeing investors return after strong redemptions in January, while the U.S. Mint sold 6.4 million 1-ounce American Eagle coins in January, nearly double the 3.6 million coins sold a year earlier.
"Demand for silver coins has been nothing short of spectacular since the first of the year, and it's been going on for longer than that," said Michael Haynes, chief executive of American Precious Metals Exchange, a large bullion and precious coins dealer. "To some degree, people see silver and gold moving parallel, and because of its price point, people see that they can acquire 10 ounces of silver for less than a single ounce of gold."

SIP in gold from Reliance Mutual Fund

Reliance Mutual Fund announced the launch of systematic investment plan (SIP) in gold through Reliance Gold Savings Fund. Sundeep Sikka, CEO, Reliance Capital Asset Management, introducing the SIP in gold here, said the scheme was aimed to cultivate a regular savings habit among investors to accumulate gold in small amount through SIP mode, Mr. Sikka said.

The fund allows small regular investments as low as Rs. 100 a month and in multiples of Re 1 thereafter.

The new fund offer is a convenient way to diversify investment portfolio and reap the returns of gold from a long-term perspective. The investment objective of the scheme is to provide returns that closely correspond to the returns provided by Reliance Gold Exchange Traded Fund, Mr. Sikka said.

Investors can directly subscribe or redeem units on all business days directly from the AMC through the physical mode at the various designated investor service centres.

The fund helps the investor easily avail add-on facilities such as systematic transfer plan, systematic withdrawal plan, auto-switch and trigger facility.

The Fund enables the investor to avail long-term taxation benefits from first year.

Entry load is nil for the scheme, as per the Securities and Exchange Board of India's guidelines, whereas the exit load is two per cent, if redeemed or switched out on or before completion of first year from the date of allotment of units.

The NFO which opened on February 14 closes on February 28.

Anglo, Brimstone, Freeworld, Gold Reef

Feb. 18 (Bloomberg) -- South Africa's FTSE/JSE Africa All Share Index declined for a fourth day, losing 170.77, or 0.5 percent, to 32,552.14 as of 2:45 p.m. in Johannesburg.

The following were among the most active stocks in the South African market today.

Anglo American Plc (AGL SJ), the diversified mining company that makes up 11 percent of South Africa's benchmark stock index, fell for a fourth day, losing 7.42 rand, or 2 percent, to 373.65 rand, the lowest intraday level since Feb. 2. Anglo will prioritize investments in growth projects over dividends, Chief Executive Officer Cynthia Carroll said.

Brimstone Investment Corp. (BRN SJ), gained 35 cents, or 6.3 percent, to 5.95 rand, the highest intraday level since Aug. 23. The investment holding company said earnings per share excluding one-time items probably rose to between 1.62 rand and 1.94 rand in the year to Dec. 31, from 1.31 rand a year earlier.

Freeworld Coatings Ltd. (FWD SJ), a paint supplier, dropped for the fourth day in five, losing 21 cents, or 1.8 percent, to 11.60 rand. The company's board said it will continue to "monitor developments" regarding Kansai Paint Co. Ltd.'s offer to buy the South African company. The Securities Regulation Panel, which regulates takeovers, yesterday ruled that Kansai's offer circular contained enough information for Freeworld shareholders to make a decision.

Simmer & Jack Mines Ltd. (SIM SJ), a gold mining company, fell the most since Jan. 26, losing as much as 4.4 percent, before recovering to trade 3.3 percent lower at 89 cents. A shaft at the company's Buffelsfontein mine in South Africa was closed yesterday following a fatal accident.

Vox Telecom Ltd. (VOX SJ), an internet-service and software company, fell for a second day, losing 1 cent, or 2.5 percent, to 39 cents, the lowest since Nov. 23. Chief Executive Officer Tony van Marken has resigned with effect from March 31, the company said.

--Editors: Alastair Reed, Karl Maier.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/02/17/bloomberg1376-LGT19W0YHQ0Y01-6C3CD40DF9D1KKVQ9SK6BPDT81.DTL#ixzz1EPzLW6jm
soucer:http://www.sfgate.com/cgi-bin/article.cgi?f=%2Fg%2Fa%2F2011%2F02%2F17%2Fbloomberg1376-LGT19W0YHQ0Y01-6C3CD40DF9D1KKVQ9SK6BPDT81.DTL

Gold gets a strong demand from fresh investment appetite

By Shyamal Mehta
MUMBAI (Commodity Online): Gold prices traded steady in Asian session on Friday, the last day of this week and have risen by more than two percent from the previous week’s close. Gold prices are likely to rise further and bulls have set the targets of 1400 crucial levels in the next few trading days.

Inflation and geopolitical tensions in the Middle East remained the major drivers of Gold in this week. The USD also remained weak against Euro and other major currencies during the week which has also injected some fuel in the Gold’s resumed upward rally from the last couple of weeks.

Gold in international markets last traded strong at 1386 USD an ounce near its five week high. Silver also traded strong at $31.85 per ounce. Silver prices are presently trading at multi years high. Gold may find supports at 1370, 1361 and 1335. While, resistance levels are 1400 and 1431.

Gold prices also got benefitted as safe haven buying emerged from weaker then expected US unemployment data. The initial jobless claims data of U.S. came to 410000 for the week ended 12th February 2011 increased by 25000 from the previous one of 385000. While, continuing jobless claims data 3911 K increased by 1 K against previous claim of 3910 K while expectation was near to 3900 K. Unemployment data of U.S. came on Thursday is supportive for Gold prices while its negative for base metals. Buyers are coming in the gold market on every dips.

Gold prices are seen rising and could touch 1450-1500 levels in this year on the back of strong investment demand. Physical demand from exchange-traded funds is also rising which may also give a boost to Gold prices to go northward.

At MCX, the Indian commodity bourse, Gold April future prices settled marginally up on Thursday at Rs. 20516 per ten grams against last previous day’s close of 20506 up by 10 rupees.

MCX April Gold contract opened weak this morning at 20505, made the same level as an intraday low and last traded at 20551 up by 35 rupees after made an intraday high of 20599.

Support for MCX Gold Apr contract is seen at 20250 and below it; prices can test 19950, while the resistance levels are 20750 and 21050 respectively. Short term range of MCX Gold future prices is 19900-20900.
soucer:http://www.commodityonline.com/marketmovers/Gold-gets-a-strong-demand-from-fresh-investment-appetite-2011-02-18-3098-3-1.html

South African Stocks Fall For Fourth Day, Led by Freeworld, Simmer & Jack

South Africa’s FTSE/JSE Africa All Share Index declined for a fourth day, losing 170.77, or 0.5 percent, to 32,552.14 as of 2:45 p.m. in Johannesburg.

The following were among the most active stocks in the South African market today.

Anglo American Plc (AGL SJ), the diversified mining company that makes up 11 percent of South Africa’s benchmark stock index, fell for a fourth day, losing 7.42 rand, or 2 percent, to 373.65 rand, the lowest intraday level since Feb. 2. Anglo will prioritize investments in growth projects over dividends, Chief Executive Officer Cynthia Carroll said.

Brimstone Investment Corp. (BRN SJ), gained 35 cents, or 6.3 percent, to 5.95 rand, the highest intraday level since Aug. 23. The investment holding company said earnings per share excluding one-time items probably rose to between 1.62 rand and 1.94 rand in the year to Dec. 31, from 1.31 rand a year earlier.

Freeworld Coatings Ltd. (FWD SJ), a paint supplier, dropped for the fourth day in five, losing 21 cents, or 1.8 percent, to 11.60 rand. The company’s board said it will continue to “monitor developments” regarding Kansai Paint Co. Ltd.’s offer to buy the South African company. The Securities Regulation Panel, which regulates takeovers, yesterday ruled that Kansai’s offer circular contained enough information for Freeworld shareholders to make a decision.

Simmer & Jack Mines Ltd. (SIM SJ), a gold mining company, fell the most since Jan. 26, losing as much as 4.4 percent, before recovering to trade 3.3 percent lower at 89 cents. A shaft at the company’s Buffelsfontein mine in South Africa was closed yesterday following a fatal accident.

Vox Telecom Ltd. (VOX SJ), an internet-service and software company, fell for a second day, losing 1 cent, or 2.5 percent, to 39 cents, the lowest since Nov. 23. Chief Executive Officer Tony van Marken has resigned with effect from March 31, the company said.

To contact the reporter on this story: Sikonathi Mantshantsha in Johannesburg at
soucer:http://www.bloomberg.com/news/2011-02-18/south-african-equities-brimstone-freeworld-coatings-gold-reef.html

Gold-plated retirement plans: now you can include bullion in your Sipp

Standard Life has joined forces with GoldMoney – one of the largest providers and holders of physical bullion for retail – to enable customers with a self-invested pension plan (Sipp) to invest directly in the metal.

Standard Life's pension customers will be given online access to the GoldMoney website, where they will be able to buy and sell a total of 2,000 grams of gold a day. The prices at which investors will be able to buy and sell gold are based on the trading prices from the London Bullion Market Association. Any bullion purchased is held in a secure vault in London.

Following soaring prices over the past decade, more and more investors have tried to get exposure to gold – particularly as it is often seen as a hedge against inflation. Over the past 10 years its price has risen from $300 an ounce to more than $1,300 an ounce.

Rather than simply invest in an insurance company run pension fund, Sipp investors are free to chose where their pension funds are invested.

In many cases their money will be split between various investment funds and direct shareholdings. But some Sipps offer a wider range of assets, including commercial property, commodities, hedge funds and currencies. Many Sipps allow investors to hold gold via an equity fund. But most do not have the capacity to enable people to hold gold directly, via bullion.

World Market Overview 15/2/2011

U.S. stocks traded in a tight range Monday, as Wal-Mart weighed on the Dow Jones Industrial Average, but materials gained in the wake of a surge of Chinese exports and imports last month. The Dow Jones Industrial Average was down 0.02% at 12271. Weighing on the measure, Wal-Mart Stores fell 1.4% after J.P. Morgan Chase cut the company's stock investment rating to neutral from overweight, predicting that same-store sales deterioration could last for years, not quarters. Verizon Communications was also weak, down 1.7%. Keeping the Dow's losses in check, energy companies strengthened amid concerns that unrest in the Middle East could spread. Exxon Mobil rose 2.2%, while Chevron gained 1.2%.

Read more: http://www.ibtimes.com/articles/112352/20110214/world-market-overview-15-2-2011.htm#ixzz1E3HPc9XC

Silver Bullion Comex Stocks at 4-Year Low

Gold and silver are higher after last week’s 1% and 3.5% gains in dollars. Silver is particularly strong again this morning and the euro has come under pressure as bonds in Ireland, Spain, Portugal and Greece continue to rise. While Asian equity markets were higher, European indices have given up early gains.

Silver’s backwardation has deepened with spot silver at $30.16/oz, March 2011 contract at $30.13/oz and April’s at $30.00/oz. While spot silver has risen nearly 1% so far today, the July 2012 futures contract was down 0.187% to $29.81/oz.

The gradual drain of Comex silver inventories seen in recent months continues and Comex silver inventories are at four year lows. Total dealer inventory is now 42.16 million ounces and total customer inventory is now at 60.68 million ounces, giving a combined total of 102.847 million ounces.

The small size of the physical silver market is seen in the fact that at $30 per ounce, the Comex silver inventories are only worth some $3 billion. The US government is now paying some $4 billion a day merely on the interest charges for the national debt. It is also the same value as Twitter’s new venture round of financing or Ford’s debt pay down in the first quarter.
source:http://www.resourceinvestor.com/News/2011/2/Pages/Silver-Bullion-Comex-Stocks-at-4Year-Low.aspx

Now you can buy commodities in demat form

Designed for retail investors, E-Series is an innovative investment product which lets you buy gold, silver, copper and zinc from NSEL’s pan-India electronic trading platform and have them transferred to their demat account

The National Spot Exchange Ltd (NSEL) has launched what is called as 'E-Series' products, through which you can buy commodities and hold them in a demat form.

The E-Series currently lets you buy gold, silver, copper and zinc. Retail customers can buy these from NSEL's pan-India electronic trading platform, like they invest in equities from the stock market and have them transferred to their demat account.

E-Series is available on the order-driven electronic trading platform, where investors are allowed to quote their own buying and selling price. The same price is available across the country and so, the buyers or sellers from anywhere in India can buy and sell at this price.

The impact cost (difference between the 'buy' and 'sell' quote) is as low as one rupee. The price quoted on the screen is the actionable price at which investors can buy or sell. This ensures transparency of pricing.

An investor can convert e-gold into physical form too. He has to apply for remat through the depository participant, and once remat is confirmed, he can submit the remat slip and take delivery of the gold. The time taken for this is generally three to four days.

The E-Series products track the respective physical commodity prices. Retail investors can invest in them in smaller denominations-like in systematic investment plans-on a daily, weekly or monthly basis.

Are these products useful? Yes they are.

Take a look at the comparison between E-series gold and gold exchange traded funds (ETFs), which is another option of buying gold in a non-physical form.

One, since E-Series tracks physical prices of gold, it is easer to understand, rather than the net asset value (NAV) of a fund in the case of gold ETFs.

Two, there are no custody charges applicable for holding these products in demat form, while in the case of gold ETFs, one has to pay around 1%-2.25% per annum.

Three, there is no asset management charge (as in the case of gold ETFs) either, and hence returns are higher in e-gold over gold ETFs.

Finally, E-Series also scores because other than gold there are no ETFs available for any other metals.

According to NSEL, commodity exchanges provide good instruments for trading, hedging, price-risk management, speculation or jobbing, but they do not provide instruments for investment, wealth creation or wealth preservation.

Leveraged trading may be good for traders, but it may be detrimental to the interests of the general mass of investors, who may burn their fingers due to price volatility. But E-Series creates an investment opportunity for retail investors.

Anjani Sinha, managing director and chief executive officer, NSEL, said, "E-Series products are taxable as any other electronic holding of a commodity. If one buys or sells these products within three years, then there would be short-term capital gains taxes (applicable). After three years, long-term capital gains tax will be levied on the gain."

To trade and invest in E-Series, an investor has to enroll with a member of NSEL and open a demat account with a depository participant (DP) empanelled with NSEL. Thereafter, one can participate in these contracts, either by making phone calls to the broker or directly through online trading terminals.

Again, a DP minor account is possible and can be credited with E-Series products. The DP normally has an annual maintenance charge and transaction charges on all debit instructions.

An investor holding a demat account for equities has to open a separate demat account for NSEL. However, if one has a demat account opened for MCX trading, the same account can be used for NSEL. An investor can buy and sell demat units during market hours (Mondays through Fridays between 10am to 11.30 pm) through a member of the Exchange.

Dematerialisation of a commodity implies storage of commodities in Exchange-designated vaults/warehouses and keeping a record of its ownership in an electronic form. The owner of the product gets a credit in his account electronically-which is like holding a pass book with a bank. Transfer of ownership against 'buy' and 'sell' transactions is done from one account to the other, just like money transfer through a cheque.

The DP keeps the records of holding and transfers in electronic form. Opening of an account and transfer instructions are also carried out by these DPs.

Currently, NSEL is connected with 53 DPs. Some of the current empanelled DPs include Globe Capital Market, Karvy Stock Broking, Religare Securities, Goldmine Stocks and Aditya Birla Money, among others.

In case of physical delivery, a person gets a warehouse receipt in paper form, while in case of delivery in demat form, he gets a credit entry in his demat account. One can take physical delivery of goods against surrender of demat units at any point of time.

NSEL delivery centres are at multiple locations. The settlement period for E-series products is T+2. Under T+2, funds are collected from buying members, transferred to the selling members and demat credit is transferred from selling members to buying members. Funds and delivery pay-in is at 1pm and pay-out at 5.30pm.

NSEL is also working to make E-Gold fungible with retail jewellers located in different parts of the country, to create an alternative to the delivery centres. Clients having E-Gold can transfer it and get 100gm of physical gold and pay the making charges.

E-Series products are ethical instruments confirming to the standards of Islamic Finance Law and are compliant with the Shariah. There are more than 50,000 accounts opened for investment in E-Series products. Owing to their transparent pricing, seamless trading and zero holding costs, these products are proving to be a very attractive investment option for small investors and a good instrument for portfolio diversification by high networth individuals (HNIs). 

NSEL plans to launch similar trading facilities in about 20 non-perishable agri-commodities by the end of calendar year 2012, which include black pepper, menthol, castor and guar seed.

The turnover of E-Series products has increased from Rs198 crore in September 2010 to Rs9,268 crore in January 2011.
source:http://www.moneylife.in/article/now-you-can-buy-commodities-in-demat-form/13901.html

The Power of Gold: The Risks and Rewards

Gene Allen is intimately familiar with gold ... as a color. Allen co-owns an industrial paint company, and a bright golden yellow is particularly popular with some of his clients. As an investor, however, Allen didn't touch gold for decades. And for good reason: The 56-year-old remembers the metal's 20-year losing streak. "I didn't know how to invest in gold, and none of the bankers I dealt with knew either," he says.

Allen's financial adviser was just as shy—until earlier this year, when he changed his mind and encouraged Allen to start buying. So Allen reluctantly joined millions of other Americans, putting $150,000 of his portfolio in new American Eagle gold coins from the U.S. Mint. He's already made a decent profit on the investment, but he's not exactly happy with it. Gold's value will probably go up, but it's "more just a hedge," he says.

Forget Ugg boots, Glee and Sarah Palin—if you follow the markets, you know that America's biggest obsession these days is with a shiny old friend. Gold's price, though it's tapered lately, has flirted with near-record highs, prompting everyone from hedge fund managers to barbers to talk about the yellow stuff. It's not just talk, either. Americans increasingly want their own personal hoard, and they're buying up coins, bars and bullion at a breakneck pace and storing it in bank vaults, hidden safes or other places perceived as safer than a shoe box. Mall-walkers in Boca Raton, Fla., can even buy gold out of a vending machine whose screen updates the metal's fast-moving price every 10 minutes. Over the past year, Americans have bought more than 100 tons of gold, spending an average of $81 million a week on the stuff. That doesn't include the billions more spent on exchange-traded funds that track the price of gold.
gold-barchart

But this isn't a stereotypical gold rush or even a typical investment mania. Yes, people are buying gold in record amounts, but in many cases they don't really feel good about it. Some are upset about having missed gold's massive price surge over the past decade and are worried about buying too late. Others fear they'll be targets for robberies or scams, or be branded as crackpots by their friends and neighbors. Some financial advisers, who are supposed to act in the best interest of their clients, are embarrassed to even talk about gold. "I didn't believe gold would be a good investment, and it turned out to be a great investment," says Dennis R. Marvin, a financial planner outside Cleveland who only grudgingly started recommending gold in 2009.

Even as it puzzles advisers, gold is intriguing behavioral-finance experts and infuriating investing pros. Those who are buying believe the nation's rising debt and the crises abroad could send the price even higher. At the same time, investors who have been bitten by two stock market crashes and a real estate bubble worry that gold could lose its luster just as fast. It all leaves gold with a unique status in the public imagination—equally fascinating and repulsive.

Read more: The Power of Gold: The Risks and Rewards - SmartMoney.com http://www.smartmoney.com/investing/economy/the-power-of-gold-the-risks-and-rewards-1297268390724/#ixzz1E3DJdFfl
source:http://www.smartmoney.com/investing/economy/the-power-of-gold-the-risks-and-rewards-1297268390724/

Turning assets into gold

HSBC is one of the world’s largest traders in precious metals. So when a client approached us with a multi-million dollar holding of gold coins that he wanted to be converted into the most tradable form, we were able to connect him to our international precious metal experts. Using expertise and a network of offices, the coins were converted into Swiss certified gold bars and stored in safe keeping at the Bank’s vaults, providing the client improved liquidity, lower costs and greater peace of mind.

HSBC is one of the world’s largest traders in precious metals. We have dedicated specialists who can provide advice and services covering gold, jewellery and diamonds.
source:http://www.hsbcprivatebank.com/services/turning-assets-into-gold.html

PRECIOUS-Gold dips as dollar firms, investors shift focus

Gold investment softens as other assets take centre stage * Dollar rises 0.5 percent vs the euro after jobs data * Largest silver ETF sees first inflow since Jan. 24

(Updates prices)

By Jan Harvey

LONDON, Feb 11 (Reuters) - Gold prices eased a touch on Friday, pressured by gains in the dollar and softer investment demand for the metal after a raft of well-received economic data boosted interest in other assets.

Prices have been choppy this week, lacking clear direction, as investors were caught between short-term negative factors like improving risk appetite, and a view that concerns over economic stability will ultimately benefit prices.

Gold is heading for its second consecutive weekly gain, however, recovering some of January's 6 percent price fall.

Spot gold was bid at $1,359.30 an ounce at 1204 GMT, against $1,362.90 late in New York on Thursday. U.S. gold futures for April delivery fell $2.50 to $1,360.00.

Richcomm Global Services analyst Pradeep Unni said better appetite for assets such as equities was keeping gold between $1,345-1,368 an ounce.

"The economy is far better placed for recovery and central banks are at a stage where that they can talk of a rate hike, which they couldn't think of a year ago," he said. Interest rates in major economies have been held down for some time as governments try to nurse economies back from recession.

"Consistent offloading by ETFs, who were pivotal in taking the metal beyond $1,400, and lacklustre physical demand are the key bearish forces curbing sustained gains. Gold is currently in need of additional fundamental news triggers for the next move ahead, as most current factors have been already priced in."

Some support was lent to prices by the unrest in Egypt. Concerns intensified on Thursday after news reports suggested President Hosni Mubarak was on the brink of resigning.

Egyptian protesters enraged at his refusal to step down streamed into Cairo's Tahrir Square on Friday in what organisers billed as their biggest show of indignation.

While more than two weeks of protests have failed to drive gold much higher, they did lift the metal from lows on Thursday.

"(Gold) remains caught in a tug-of-war of downward pressure from a stronger dollar as a result of an improved economy, and an upward push on safe-haven buying as political instability in Egypt continues," said Commerzbank in a note.

DOLLAR RISES

The dollar rose 0.5 percent against the euro, benefiting from well-received jobs data released the previous day and safe-haven flows linked to the Egypt protests.

Dollar strength tends to weigh on gold as it curbs the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies, though the relationship has weakened in recent years.

Investment demand for gold remained soft, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, easing by nearly a tonne on Thursday. They are down just over 55 tonnes so far this year.

In the same period of 2010, they fell around 27 tonnes.

Premiums for gold bars were steady in Hong Kong and Singapore, with no signs of buying interest from China after the Lunar New Year celebration. There was hardly any physical buying in Asia related to unrest in Egypt, dealers said.

Australia's Newcrest Mining, the world's third largest gold miner after its takeover of Lihir Gold last year, said higher metal output had helped almost double underlying first-half profit.

Silver was bid at $29.98 an ounce against $30.19.

Holdings in the world's largest silver ETF, the iShares Silver Trust, rose around 18 tonnes to 10,388.45 tonnes on Thursday, their first increase since Jan. 24.

Platinum was at $1,827.24 an ounce against $1,824.75, while palladium was at $817.72 against $820.25.

(Reporting by Jan Harvey; editing by William Hardy)
source:http://www.forexyard.com/en/news/PRECIOGold-dips-as-dollar-firms-investors-shift-focus-2011-02-11T121220Z-US

Gold: Investment Demand In Flux

As gold prices skyrocketed last year, so too did investment demand, according to the World Gold Council's recent Gold Investment Digest.

Although gold has since pulled back from its record $1,400/oz level, gold prices were still substantially higher in 2010 than the previous year. Last year, the average price of gold rose 25.9 percent year-over-year to $1,224.52, up from $972.35 in 2009. Much of that was driven by investment in ETFs and physical gold, as U.S. unemployment and lingering fears of further economic difficulties in Europe continued to support gold as a safe haven.

Gold & Silver: Going Higher?

If gold is just consolidating before another strong drop, investors need to know – because it could mean that the long-term upwards trend will be broken. For sure, the gold market has moved into one of those "high risk" areas where we must expect a sudden and strong move either way.

But if the Gold Price is going to rise, then investors are at the point where they should be entering (or re-entering) the market at what would likely prove the cheapest prices for long to come. To balance those scenarios, the trader may well find himself taking a 'spreading' position, but the medium or long-term investor must decide to go in or stay out. The technical picture – shown by chart analysis – is not as conclusive as most would like, so they may only enter once they see a clear direction.

What process should an investor go through when the Gold is in this condition?

First, adjust your thinking on the Gold Price. Prior to the de-linking of gold from the Dollar in 1971, gold was thought of as the only real money. Currencies were measured against gold. The fact that President Richard Nixon and his administration cut the Dollar's link to gold and made it the sole global reserve currency did not change that.

People's perception of money in the last 40 years has changed and today people's reference point for gold is the US Dollar price. With the sovereign debt crisis and quantitative easing influencing the value of currencies since 2007 most people now question the value of the Dollar as a 'measure of value', while continuing to see it as a 'means of exchange'.

This takes us back to the need for a 'measure of value' and an adjustment in our perception of the future of gold. With the head of the World Bank recently highlighting the need for gold to be a value reference for currencies we have arrived back (in thought, if not in deed) at Gold Bullion being real money. We want to go further than that so that we have a correct perspective of what is and will, happen to global currencies in the future. We would suggest that one should not see the gold market as going up or down, but currencies that are going up or down against gold. Once we have that perspective in mind a clear picture of gold emerges in the currency world and exchange rates.

To clarify; since the turn of the century, the Euro Gold Price has moved from below €300 to today's London price above €1000 per ounce. Since the turn of the century, the US Dollar price has gone from $275 to the current $1,355. So from that viewpoint we can see that it's currencies which are in a 'bear' market, not gold in a 'bull' market.

If currencies are then in a 'bear' market, do we expect them to recover? The maxim of what goes up must come down takes on a whole new meaning when one applies that to currencies. It implies that gold will not fall back to where it came from.

So what do the fundamentals tell you? Ask first, what will happen to the Dollar and the Euro? Both the Eurozone sovereign debt crisis and the coming US sovereign and state debt crises point to a further real devaluation of both the Dollar and the Euro. The exchange rate between the two may not vary that much over time as they both slide down together masking what is really happening. But as one of the fundamentals that point the way for gold, we fully expect currencies to continue to lose value in the hands of their governments and central banks.

The internationalization of the Yuan may cause people to say that the Yuan must rise in value to reflect the economic strength of China. We would argue against that saying that China has pegged the Yuan to the Dollar to retain part of its global competitiveness via the Yuan. It does not make sense for them to risk losing such business through an appreciation of the currency. It is far more likely that the Chinese would remove the need for such an appreciation through the persistent issuing of the Yuan globally to take the pressure to appreciate, away from the currency.

We go even further and say that it is incumbent upon all but the resource producing countries (where local currency values are secondary to the international price of those resources) to do what they can to prevent the appreciation of their currency. We have witnessed both Japan and Switzerland – neither of which are resource producers – talk and intervene one way or another to prevent an excessive appreciation of those currencies. This is why the head of the World Bank put forward the suggestion that Gold Bullion be included as a reference point for value in the first place.

Therefore the conclusion we reach for 2011 is that currencies will not appreciate in value significantly. So what of Gold Bullion and its demand/supply fundamentals. Newly mined gold supplies will not increase by more than a single figure percentage if at all this year. Central bank supplies will fall sharply compared with last year, as all 400 tonnes of the IMF sales have been completed now. Altogether, central bankers are now Buying Gold, in fact.

The only other source of supply will come from the current holders of gold. We have seen around 100 tonnes supplied by the holders of the shares of gold exchange traded funds (the giant SPDR Gold ETF listed in the United States) but whether this came from holders seeing a recovery slowly accelerate and persuading them to turn to equities, remains to be seen. They could have been either redeeming their gold from the fund or selling to buy physical Gold Bullion offshore, worried about confiscation of their gold by governments sometime in the future perhaps? However, other sales of gold have been sparse.

Will higher prices trigger 'scrap' or current holder sales? We must wait and see. But as a theme in the gold market, it is appropriate to point out that gold is not only an investment but because of its liquidity justifiably can be called cash. If gold is being accepted as collateral by US banks for institutional trading positions now – as it is at J.P.Morgan – we deem it to be cash. While many believe that selling an investment actually does close the position, we realize that selling an investment requires buying cash or moving into another investment.

Cash is an investment. Investors must ask themselves, what type of cash are they referring to? This starts to describe the path of gold back to money acceptable by the banks (something that must be abhorrent to them now). When seen in this light gold, as an investment, adds another facet to its desirability as an investment.

The largest source of demand in 2010 and in the years before that has been from Gold Investment demand. In that figure we prefer to include Indian demand, more usually classified as jewelry demand in the past, but this does not accurately define the purpose behind the buying. The same applies to Chinese demand. Whether jewelry or bar or Gold Coin, investors in those countries are buying as a long term investment that hopefully will give them financial security. With India taking well over 500 tonnes of imported gold this year and China importing over 210 tonnes we prefer to add these amounts to Western investment demand whether it is in bullion form or the shares of the Gold ETFs.

Will one of the several structural crises rushing at us from the horizon encourage more investment in gold? Will the recovery have fund managers, currently holding gold, move them to get out and chase equities of fixed interest investments? We doubt it.

In the developed world, high Gold Prices enhance the attraction of gold. In 2010 we saw a recovery in the developed world's jewelry market back to former levels even at these high prices. There is no reason, except much higher prices, to think that jewelry demand will now fall. Industrial demand is also on the rise in hi-tech applications, but they are price insensitive, so demand from this source should move in step with the global recovery.

On balance, weighing the facts above, which way do you think the Gold Price will go? Where the technical picture may be either indecisive of confusing, how do these facts guide you? If you believe that the problems of 2010 will be rectified and the developed world move into full recovery, then there may be better opportunities in equity markets.
source:http://goldnews.bullionvault.com/gold_price_021120113

Investors buy 361 tonnes of gold via ETFs in 2010

Globally, investors bought 361 tonnes of gold through exchange-traded funds (ETFs) in 2010, according to the Gold Investment Digest of World Gold Council. However, the yearly inflow was 41 per cent lesser than that in 2009.

With this, the total holdings by ETFs rose to a new high of 2,167 tonnes, worth $98 billion. In 2009, the net inflow into ETFs was 617 tonnes. The total gold supply, including mine production, recycled gold and official sector transactions, totalled 2,993.3 tonnes during the first nine months of 2010, a 3.1 per cent decline from the same period during 2009.

However, gold jewellery demand totalled 1,468 tonnes during the first nine months of 2010, increasing by 18 per cent from the same period during 2009.

Gold demand for technological and industrial applications continued to recover during the first nine months of 2010, registering a 19 per cent increase over the same period in 2009.

Recycling activity during the nine months ending September 2010 declined by 2.7 per cent to 1,234.8 from 1,268.8 on year-earlier levels mostly due to the upward trend in gold prices. This has also been partly driven by continued economic growth in emerging economies, especially India and China that substantially contribute to recycled gold supply.

In India, gold medallions and bar sales were strong during 2010 as a whole, and in particular in the fourth quarter, compared to the same period of the previous year. Consequently, the Reserve Bank of India has authorised seven more banks to import bullion. The WGC expects the impact of this measure to be visible during 2011.

Indian investors are responding to strong economic growth coupled with a higher rate of inflation and are raising their allocation to gold to a substantial share of their holdings.