Tag Archives: New York Mercantile Exchange

Exploding Gold Demand In 2010

Demand for the most precious of metals just keep on rising. It’s really not a good sign, as gold traditionally is seen as an insurance against turbulent markets, natural catastrophes and wars. In 2010 the global demand for gold reached the highest in a decade, at 3.112,2 tonnes, worth about 159 billion USD, the World Gold Council reports. The price reached a new all-time-high at 1.421 dollar an ounce.

Emerging country banks are likely to continue purchasing gold as a means of preserving national wealth and promoting greater financial market stability.”

George Milling-Stanley


“As anticipated, 2010 was a great year for gold with demand strong across all sectors. The opening weeks of this year have been characterised by an East/West divide. The dip in the gold price in January resulted in a reduction of ETF tonnage and a decline in the net speculative long position on COMEX. This has been counterbalanced by very substantial physical demand flows in Asian markets,” Marcus Grubb, Managing Director at the World Gold Council says.

The shift in central bank activity was the result of two distinct market forces. Emerging market economies, experiencing rapid growth, have been large buyers of gold to diversify their external reserves.

Meanwhile, European central banks have virtually stopped sales in the wake of the financial and European sovereign debt crises.

The latest Gold Demand Trends report, released Friday, examines the impact of this development on the gold market in more detail.

“Emerging country banks are likely to continue purchasing gold as a means of preserving national wealth and promoting greater financial market stability. Any gold sales from advanced economies are unlikely to be significant as the official sector remains highly risk-averse. Collectively, the official sector is still a significant holder of gold. Central banks remain committed to its importance and relevance in maintaining stability and confidence as they have been for hundreds of years,” George Milling-Stanley, Managing Director, Government Affairs at the World Gold Council, says in a statement.

Here’s some of the highloghts of the report:

  • Gold demand in 2010 reached a 10 year high of 3,812.2 tonnes. Demand was up 9% year-on-year, and marginally above the previous peak of 2008 despite a 40% increase in the annual average price level between 2008 and 2010. In value terms, total annual gold demand surged 38% to a record of US$150 billion.
  • Jewellery demand was remarkably robust in the face of record prices in the majority of currencies. Annual demand for gold jewellery rose 17% from 1760.3 tonnes in 2009 to 2059.6 tonnes. The rise in annual average prices over the same period was 26%. In value terms, this resulted in record annual jewellery demand of US$81 billion.
  • Investment demand, comprising bar and coin demand, ETFs and similar products, but excluding OTC investment demand, remained stable in 2010, down just 2% from the exceptional levels seen in 2009. This equated to a 23% rise in value terms from US$43 billion in 2009 to US$52 billion in 2010. Physical bar demand was particularly strong during the year, recording an annual gain of 56% at 713.2 tonnes.
  • Demand for gold ETFs and similar products totalled 338.0 tonnes during 2010 or 9% of total demand. Although this was 45% below the 2009 peak of 617.1 tonnes, it was nevertheless the second highest annual figure on record. As at the end of 2010, total gold holdings in ETFs and similar products stood at 2,175 tonnes with a US$ value of $96 billion.
  • Demand for gold used in technology was 419.6 tonnes, 12.4% higher than in 2009 as the electronics segment fuelled recovery in the sector, with demand returning to long-term trend levels. Demand soared by 41% year-on-year in US$ terms to a record US$17 billion.
  • India was the strongest growth market in 2010. Total annual consumer demand of 963.1 tonnes registered growth of 66% relative to 2009, which was largely driven by the jewellery sector. In value terms this was worth US$38 billion.
  • China was the strongest market for investment demand growth. Annual demand for small bars and coins increased by 70% year-on-year, totalling 179.9 tonnes, which is worth approximately US$7 billion.
  • Total supply is estimated to have increased marginally, 2% higher year-on-year for the full year 2010, with a number of new projects across a range of countries and regions contributing to higher levels of mine supply. Within total supply, recycled gold, which accounts for 40%, fell 1% compared with the previous year to 1,653 tonnes.

The Gold Demand Trends report sets out the key factors that drove gold demand in 2010,but also provides an outlook for 2011.

This is the main trends:

  • The jewellery sector enjoyed a strong recovery in 2010, with annual demand 17% higher than in 2009. Asian consumers drove jewellery demand, particularly in China and India. Chinese demand is expected to continue to increase rapidly during 2011 as economic growth in China remains strong, while Indian gold jewellery demand is likely to remain resilient and grow.
  • Asian consumers led demand with the revival of the Indian market and strong momentum in Chinese gold demand, which together constituted 51% of total jewellery and investment demand during the year.
  • A structural shift in central bank policy towards gold meant that in 2010 central banks became net buyers of gold for the first time in 21 years, removing a significant source of supply to the market.
  • Investment demand was down 2% compared with 2009, but was the second highest year on record at 1,333 tonnes, which equated to US$52 billion. Investment demand for gold as a foundation asset in portfolios is likely to remain strong, fuelled by ongoing uncertainty surrounding global economic recovery and fiscal imbalances, as well as fear of impending inflationary pressures and currency tensions.

“As anticipated, 2010 was a great year for gold with demand strong across all sectors. The opening weeks of this year have been characterised by an East/West divide. The dip in the gold price in January resulted in a reduction of ETF tonnage and a decline in the net speculative long position on COMEX. This has been counterbalanced by very substantial physical demand flows in Asian markets,” Managing Director at WGC, Marcus Grubb,  says.

The shift in central bank activity was the result of two distinct market forces.

Emerging market economies, experiencing rapid growth, have been large buyers of gold to diversify their external reserves. Meanwhile, European central banks have virtually stopped sales in the wake of the financial and European sovereign debt crises, the report states.

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Here’s a copy of the full report.

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Civil And Criminal Probes Against JP Morgan For Silver Manipulation

Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The New York Post reports.

“It is alleged that in shorting silver, JPMorgan sells large blocks of silver option contracts or physical metal — actions that would bring down the price of the metal — closely following news that would otherwise move the metals higher.”

The New York Post

The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, according to sources.

The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice‘s Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.

The probes are far-ranging, with federal officials looking into JPMorgan’s precious metals trades on the London Bullion Market Association‘s (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.

JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.

Regulators are pulling trading tickets on JPMorgan’s precious metals moves on all the exchanges as part of the probe, sources tell The Post.

JPMorgan has not been charged with any wrongdoing.

The DOJ and CFTC each declined to comment, as did JPMorgan.

The investigations stem from a story in The Post, which reported on a whistleblower questioning JPMorgan’s involvement in suppressing the price of silver by “shorting” the precious metal around the release of news announcements that should have sent the price upwards.

It is alleged that in shorting silver, JPMorgan sells large blocks of silver option contracts or physical metal — actions that would bring down the price of the metal — closely following news that would otherwise move the metals higher.

Last week, The Post got a telling e-mail the Justice Dept. sent to a concerned investor. “Thank you for your e-mail regarding allegations that JPMorgan Chase, and perhaps other traders, are manipulating the silver futures market,” the e-mail read.

Telling, indeed, as the concerned investor, in an e-mail to Justice’s Anti-trust division, never mentioned any companies or traders.

Original article here.

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