Gold is big news around the world. Russia made its largest monthly gold purchasein September in 14 years; in Switzerland, a populist referendum, Save Our Swiss Gold, that would require the Swiss National Bank to buy 1,500 tons of gold is leading in the polls; and China and India are reporting massive gold consumption.
In the United States the only news about gold is on CNBC about why one shouldn’t buy it.
As we pointed out in the “Importance of Gold to Individuals and Nations”, neither the U.S. government nor its citizens generally are interested in gold. The U.S. Federal Reserve never makes mention of it EVER in their speeches or testimony. Indeed, its only with annoyance that any member of the Federal Reserve will discuss gold, as evidenced in this exchange between former Congressman Ron Paul and Chairman Ben Bernanke.
Ron Paul Asks Ben Bernanke: Is Gold Money?
Having left the Fed, former Chairman Alan Greenspan recently commented that gold will go “measurably higher”.
Here is a brief survey of what is happening with gold around the world:
China and Gold
Shanghai Gold Exchange Volume
The Shanghai gold exchange continues to experience heavy volume with 59.7 tons delivered the week ending October 24, 2014. This follows deliveries of 51.5 tons last week and 68.3 tons the week before. Earlier this year volume was about 25 tons a week.
Shanghai Gold Deliveries 2009-2014
Another strong week of gold deliveries at the Shanghai Gold Exchange.
◾ Chinese consumer gold demand in 2013 was 2,200 tonnes, not 1,100 tonnes as the Wold Gold Council states;
◾ Only for consumer demand, China net imported 1,500 tonnes in 2013;
◾ The People’s Bank of China (PBOC) does not purchase gold through the Shanghai Gold Exhange; and
◾ The PBOC is definitely increasing its official gold reserves.
Russia added 1.2 million ounces of gold to its reserves in September, the most in fourteen years.
India and Gold
India is the second largest consumer of gold in the world behind China. It is estimated that Indian households own about a $950 billion in gold! Indeed, India has a national festival, Diwali, during which Indians buy gold.
Last year China surpassed India as the world’s largest consumer of gold. The relegation of India to second place doesn’t reflect a lack of demand for gold in India, but rather the imposition of heavy import duties placed on Indian gold imports the past few years. Imports of gold to India from Switzerland, however, doubled in September to 58 tons up from 27 tons in January.
India does not have major gold mine (although some geologists believe India may have significant gold deposits), so its consumption is dependent upon imports.
Switzerland and Gold
Swiss Refineries Working 24/7 To Supply Gold to the East
Earlier this month, we covered the Save Our Swiss Gold referendum scheduled for a vote on November 30 that would require the Swiss National Bank to repurchase 1500 tons of gold that it sold during the past decade, repatriate any gold it owns outside its borders and to cease selling any of its current gold holdings.
Swiss Gold Reserves 1990-2014
If the Save our Swiss Gold referendum passes, the The Swiss National Bank would have to buy about 1,500 tons of gold.
We expect resistance to the Save our Swiss Gold initiative to increase as November 30th draws closer.
Miles Franklin’s Andy Hoffman noted: “Per this chart, the U.S. is essentially the only place on Earth where people have purchased less gold since the 2008 crisis, care of history’s most maniacal market manipulation and propaganda campaign.”
In the U.S. gold is wrongly viewed as an investment instead of an asset. Gold has been marketed as a tradeable investment in the United States via ETFs. As the price of gold has declined, so have holdings in gold ETFs.
Gold ETF Holdings 2004- 2014
Gold ETF holdings have been falling along with the price of gold.
Usually during currency crises gold and silver rise in value as they are considered stable monetary metals. Gold and silver don’t default or threaten to default. They don’t shut down and have no counter party risk. This is why they have been universally accepted as money for 5,000 years.
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