Timeline of articles below:
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4 May 2011 – Mexican central bank buys 100 tonnes of gold
20 May 2011 - China becomes world largest gold investment market
6 June 2011 – The Federal Reserve admits it does not own any gold
16 June 2011 – Congressman Ron Paul calls for audit of Fort Knox gold
18 June 2011 - Russia warns it will continue to sell US debt
20 June 2011 - India’s May 2011 precious metal imports up 222 per cent on May 2010
20 June 2011 – China’s central bank to mint more gold and silver coins
22 June 2011 - Greek savers rush for gold
7 July 2011 - Swiss Parliament to discuss gold franc
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plus:
Dow-gold ratio, US home-gold ratio, and interesting videos later in this post.
4 May 2011 – Mexican central bank buys 100 tonnes of gold
FT.com reports:
Mexico has quietly purchased nearly 100 tonnes of gold bullion, as central banks embark on their biggest bullion buying spree in 40 years.
The purchase, reported in monthly data published by Mexico’s central bank, is the latest in a series of large gold buys by emerging market economies intent on diversifying reserves away from the faltering US dollar.
China, Russia and India have acquired large amounts of gold in recent years, while Thailand, Sri Lanka and Bolivia have made smaller purchases.
Central banks became net buyers of gold last year after two decades of heavy selling.
As a result of Mexico’s purchase, central banks, sovereign wealth funds and other so-called “official sector” buyers are on track to record their largest collective purchase of gold since the collapse of the Bretton Woods system, which pegged the value of the dollar to gold, in 1971.
Mexico bought 93.3 tonnes of gold in February and March, according to the central bank, in a haul valued at $4.5bn at current prices and equivalent to 3.5 per cent of annual mined output.
20 May 2011 - China becomes world largest gold investment market
In 2007, China overtook South Africa to become the world’s largest gold mining nation, however it continued to lag India in overall gold demand. Despite producing 351 metric tons of gold in 2010, China’s gold demand last year hit 700 tons.
On 20 May 2011, the World Gold Council said in a quarterly report that Chinese buyers overtook Indians as the world’s largest purchasers of gold for the first three months of this year.
China's investment demand for gold more than doubled to 90.9 metric tons (mt) in the first three months of the year, outpacing India's modest rise to 85.6 metric tons. China now accounts for 25% of gold investment demand, compared with India's 23%.
The report underscores the rising appetite for gold among the growing middle-class in China. Fears of the country's soaring inflation, as well as a search for new investments, is luring investors to gold, and marketing of the precious metal has also increased in recent months.
Historically, India has been the largest investment market for gold. In 2007, just before investing in gold began to take off globally, India's physical gold demand accounted for 61% of the world's total. China's was 9%. In terms of total consumer demand, which also included jewelry, India is still a bigger consumer of gold than China, taking in 291.8 tons in the first quarter, compared with China's 233.8 tons.
Aside from having more money, Chinese investors are also focused on using gold as a protection against rising consumer prices. Unlike paper currencies, gold retains its value when prices increase. That has prompted many Chinese investors to flock to the precious metal.
Gold also is favored by savvy investors as an alternative investment vehicle to assets like shares and real estate. Chinese stock markets have been a disappointment recently, and the government has pledged to clamp down on housing speculation.
The report covers only private-sector demand, but one wild card for the world's gold market is how much gold China as been adding to its foreign reserves. Governments tend to announce their purchases after they buy.
To put this into another angle...
The not realised important fact that the people of China were banned from owning gold bullion from 1950 to 2003, means that the per capita consumption of over 1.3 billion people is rising from a tiny base.
6 June 2011 – The Federal Reserve admits it does not own any gold
Goldsilver.com reports
Video:
Thats right. The Fed owns NO gold. Zero, zip, ziltch.
For those of you who did not watch yesterday’s monetary policy hearing in the house of representatives, you most likely missed this bombshell exchange between Federal Reserve lawyer Scott Alvarez and committee chairman Dr. Ron Paul. My jaw literally dropped when I heard the Fed’s general counsel declare that the Federal Reserve owns no gold. After 1934, Alvarez explains that the Fed handed its gold over to the Treasury in exchange for gold certificates. When pressed further, Alvarez noted that the gold certificates do not represent any interest whatsoever in the gold itself. He explained the gold certificate listings on the Fed balance sheet, not as a claim to gold, but at most a claim to dollars from the Treasury. See the quotes here (and watch the videos at the bottom of the post):
Scott Alvarez: “The Federal Reserve does not own any gold at all… we have not owned gold since 1934, um, so we have not engaged in any gold swap. Before 1934 the Federal Reserve did, we did own gold. We turned that over by law to the Treasury and received in return for that gold certificates.”
Ron Paul: “…You have the securities for essentially all the gold?”
Scott Alvarez: “No. No we have no interest in the gold that is owned by the Treasury. We have simply an accounting document that is called gold certificates that represents the value at a statutory rate that we gave to the Treasury in 1934″
In any case, we can analyze the implications of the basic facts and come to a couple of conclusions:
1) The widespread notion that the Fed owns gold is false. The corollary to this is the mistaken belief that the Fed understates its gold holdings on its balance sheet by only reporting certificates based on the $42.22 statutory gold value. The Fed does not in fact own the US gold stock multiplied by the market price of gold, unless the Treasury defaults and even then its not clear. The Fed does, however, own a claim to currency totaling $11.1 billion and this value has a remote chance of going up significantly if the Treasury revalues its gold and maintains the practice initiated in the Par Value Modification Act.
2) The fact that the Fed owns no gold, nor claims to any gold, means the fundamental value of the dollar lacks any backing besides dollars themselves, not including Fed building and equipment. Dollars are in essence worth a lot less than many people thought, and the Fed is much more impotent in using the prowess of their assets, and conducting monetary policy in general, than many believed. In all, Alvarez’s clarification strengthens the case for gold’s high dollar value immensely.
16 June 2011 – Congressman Ron Paul calls for audit of Fort Knox gold
Businessweek.com reports
Ron Paul, the quixotic congressman and three-time Presidential candidate, has won a following among libertarians and government skeptics for his campaign to abolish the Federal Reserve. Now the Texas Republican has embarked on a new monetary mission: He wants to throw open the doors to Fort Knox.
Paul isn't so sure the nation's supply of gold is all accounted for and thinks it might not exist at all. He has introduced legislation that would require an independent count of the 5,000-plus tons of gold bullion that's sacked away in the Kentucky vault, as well as smaller amounts held in government facilities in Denver, West Point, and New York City. Paul also wants a lab to test the bars, to prove it's as pure as the U.S. Treasury Dept. says.
As chairman of a House Financial Services subcommittee that oversees the gold stores, Paul called a hearing on the matter for June 23. One man who's looking forward to refuting the congressman's doubts: the person in Washington who has actually held those gleaming, 27-pound gold bars in his own hands. Eric M. Thorson, the inspector general of the Treasury, is responsible for keeping track of the U.S. Mint's deep storage gold and silver reserves. Last September, he became the first outsider in 37 years to be granted full access to the U.S. Bullion Depository, as Fort Knox is formally known.
Opened in 1937, the vault is encased in 16,000 cubic feet of granite and 4,200 cubic yards of concrete. Until September, even Thorson and his team of auditors had never stood in the presence of all the gold. Their annual reviews mostly consisted of making sure the locked compartments hadn't been opened. At the time, the tamper guards were decidedly 18th century: Each door was secured with special tape and sealing wax. Thorson tried to reassure Paul that the loot is all there.
The congressman's two-page bill, introduced in April, calls on the Treasury to conduct a full audit of the gold. The Government Accountability Office would then review the results. It also orders a full assay of the government's gold reserves. A small portion of each of the approximately 700,000 gold bars would be extracted and tested for purity.
18 June 2011 - After Dumping 30% Of Its Treasury Holdings In Half A Year, Russia warns it will continue to sell US debt
The WSJ reports that "Russia will likely continue lowering its U.S. debt holdings as Washington struggles to contain a budget deficit and bolster a tepid economic recovery, a top aide to President Dmitry Medvedev said Saturday. "The share of our portfolio in U.S. instruments has gone down and probably will go down further," said Arkady Dvorkovich, chief economic aide to the president, told Dow Jones in an interview on the sidelines of the St. Petersburg International Economic Forum."
Russia has now cut 30% of its Treasury holdings in the past 7 months.
Contrast the above chart with the next chart:
The Central Bank of the Russian Federation updated their website showing that during the month of May, Russia purchased 200,000 ounces of gold for their reserves...and currently hold 26.7 million ounces of gold bullion.
20 June 2011 – China’s central bank to mint more gold and silver coins
Mineweb.com reports
According to a report by Chinese news agency Xinhua, China has been sharply increasing its output of gold and silver coins to meet seemingly ever-increasing popular demand for precious metals as people buy to protect against perceived rising inflation. Indeed it has more than doubled the maximum issuance for 2011 for some popular gold coin sizes from its previously announced levels.
China produces gold and silver Panda coins. The Peoples Bank of China (PBOC) has announced that in view of the rising demand for the coins, the number of one ounce gold Pandas will be raised from the previously announced 300,000 units to 500,000 this year. The smaller coins in the series will have their maximum circulation numbers increased from 200,000 coins to 600,000 for each series. This is a huge increase from the previously announced levels for 2011 which in turn were sharply higher than in earlier years.
And showing the big pick up in demand for silver in China, the PBOC says that it is doubling the maximum issuance of one ounce silver Panda coins from 3 million to 6 million. To emphasise this growth in demand the issuance in 2010 was 1.5 million. …
They are technically legal tender in China. The big rises in the maximum issuance for the smaller gold coins and the series of silver Pandas is yet another indication that not only is demand exploding for precious metals among the Chinese growing middle class, but also confirmation that the government is encouraging its citizens to buy precious metals. In itself this helps underpin precious metals prices.
20 June 2011-- India’s May 2011 precious metal imports up 222 per cent on May 2010
zerohedge.com reports
India's heretofore "insatiable" appetite for precious metals will need to find a new adjective to describe it, after it surged by an absolutely unprecedented 500% in May MoM, and 222% compared to May of 2010, touching on a massive $8.96 billion in imports in the past month. Putting this number in perspective the yearly average Indian imports are about $22 billion: in one month the country will have imported about half its average quota for the year! And while inflation may have much to do with it, events like the Sensex flash crash from last night certainly are not helping matters: "The gold story is puzzling" added financial analyst A S Kirolar. "Consumers are shying away from stocks and bonds and heading to safe assets like gold and real estate, but one cannot understand this given the meagre 12% growth in imports of petroleum and oil products." Granted demand is not just at the retail level as ever more institutions are buying up gold: "Analysts maintained that India's central bank, the Reserve Bank of India's decision to grant licenses to seven more banks to import bullion has helped push up demand. Karur Vysya Bank, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, Punjab and Sind Bank, South Indian Bank, State Bank of Mysore and State Bank of Travancore were added to the list. As of the start of 2011, some 30 banks in India have been granted permission to import gold and silver. Jewellers are getting easy supplies which is also helping push up demand. Moreover, the flow of scrap is also expected to fall from a yearly average of 200 tonnes, which could again boost imports, underlining the insatiable appetite of the Indian consumer." Add ongoing Chinese demand for PMs, and one can see why calls for an imminent gold crash absent a global deflationary vortex are largely overblown.
22 June 2011-- Greek savers rush for gold
ft.com reports
Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks.
Sales of gold coins have soared as savers seek a safer and fungible source of value.
“When the global financial crisis started, our sales of coins to investors overtook bullion for the first time,” said Harry Krinakis, at Sepheriades, a Greek precious metals trader. “Now the sales ratio has reached five to one.”
Monthly bank withdrawals were running at €1.5bn-€2bn (£1.3bn-£1.8bn) in the first quarter. Last year, depositors withdrew €30bn, equivalent to 12.3 per cent of total savings, according to the central bank. Greek deposits worth an estimated €8bn were transferred to banks in Cyprus in 2010. But the flow has dried up this year amid fears that Cypriot banks could suffer contagion.
7 July 2011 - Swiss Parliament to discuss gold franc
marketwatch.com reports
The Swiss Parliament is expected later this year to discuss the creation of a gold franc — a parallel currency to the official Swiss franc, with the fringe initiative likely triggering a broader debate about the role of the precious metal in the Alpine nation.
The initiative is part of “Healthy Currency,” a campaign sponsored by politicians from the right-wing Swiss People’s Party (SVP) — the country’s biggest — that is seeking to capitalize on popular fears about global financial turmoil and inflation to reverse the government’s current policy on gold.
Switzerland, which in 2000 became one of the last countries to decouple its currency from gold, is not the only place to contemplate a change in the precious metal’s role amid controversy over government involvement in the economy. In March, Utah became the first state in the U.S. to legalize gold and silver coins as currency, while similar legislation was considered in Montana, Missouri, Colorado, Idaho and Indiana.
Other Stuff
Dow/Gold Ratio:
Median Single-Family Home (US) Price / Gold Ratio:
Videos:
James Turk of the GoldMoney Foundation speaks about currency devaluation and the rising gold price. How the gold price is rising against all major currencies and monetary policy is political, having abandoned all pretence of seeking monetary stability. He warns of the dangers of a hyperinflationary crisis. James also explains why gold should be considered money and not an investment.
He also talks of the coming dollar collapse and the waterfall decline in the dollar, especially since Ben Bernanke’s words on QE. He talks of different examples of hyperinflation from paper money hyperinflation in Weimar Germany to deposit currency hyperinflation in Argentina. The presentation was held on 29 April 2011 in Munich, Germany.
Even ABC's 7:30 program has realised there is a major gold boom occurring in Australia and abroad with a segment called "The booming price of gold"
And lastly - the DEBT elephant remains...
~ Scott
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