India’s Gold, Silver Imports Surge 200% to $17.7 Billion in Q2; Chinese Bullion Demand Surging Further

Published in Market Updates  Precious Metals Update  on 8 July 2011

By Mark O’Byrne


Gold is trading at $1,528.33/oz, €1,071.99/oz and £958.08/oz. 

Gold was lower in most currencies except the euro this morning as euro weakness has kept gold close to record nominal highs in euros. Gold is 2.7%, 3.3% and 4% higher in dollars, pounds and euros for the week and looks set to close higher and near nominal highs in all currencies.

XAU-USD Exchange Rate

Futures markets are expected to see thin trade this morning ahead of the key U.S. employment report. It is expected to show improvement in the labor market but if the number disappoints gold should receive a safe haven bid. A good number could see gold ease in the short term but the long term fundamentals remain sound due to robust global and particularly Asian demand.

Cross Currency Rates

While all the focus will be on the US jobs market today, the more important long term factor of robust global and massive Asian demand should continue to support gold around the $1,500/oz level and silver around the $36/oz level.

Bloomberg reports this morning that gold and silver imports into India, the world’s largest importers of bullion, rose 200% to $17.7 billion in the 2nd Quarter of 2011 (April-June).

XAU-EUR Exchange Rate

Commodity Online reports that India’s state-owned trading company—Minerals and Metals Trading Corporation (MMTC)—said on Thursday that it would import 350 tons of gold and 1,200 tons of silver in 2011-12 as demand for the precious metals is rising fast. The company almost doubled its import of gold at 45 tonnes during the April-June quarter this year compared to the same period last year.

Silver prices have remained robust in India thanks to strong demand and short supply in the global market. The demand for silver is rising as buyers expect better returns and it is much cheaper than gold which has become harder for lower income Indians to buy.

China’s $70 Billion Fund Managers Protecting Wealth with Bullion 

China’s increasingly important asset managers, who have been approved to raise $70 billion for allocation overseas, are seeking additional funds to invest in gold and precious metals as soaring inflation spurs interest in alternative assets as a way to protect wealth, according to Bloomberg.

Five companies have been approved this year to raise cash for investment in precious metals products overseas via the qualified domestic institutional investors programme. Twenty more applications for resources and commodity investment are pending.

China Demand
Gold demand in China is expected to continue rising as economic growth boosts wealth and inflation rising at the fastest pace in almost three years drives demand for a safe
haven. 

Investment demand more than doubled in the first quarter to 90.9 metric tons as the nation overtook India to become the largest market for coins and bars, the World Gold Council said in May.

Exchange traded funds, which trade like shares, enable investors to buy precious metal derivatives without taking physical delivery. China does not have gold ETFs yet and investors and savers usually choose to buy physical gold coins and bars.

Chinese speculators, a fast growing and increasingly voracious class, buy and sell contracts traded on the Shanghai Gold Exchange and the Shanghai Futures Exchange.

Inflation Hedge
Consumer prices in China advanced 5.5 percent in May, the most since July 2008 and exceeding the government’s target of 4 percent every month this year. The People’s Bank of China yesterday said it would raise interest rates for the third time this year to curb inflation.

XAU-British Pound Exchange Rate

Massive and Continuing Demand in China & India Not Covered by Media - One Gold ATM in London Is 

One of the most important continuing factors in the gold and silver markets in recent months has been the massive increase in demand seen in both India and China.

The most expensive five words in the investment lexicon are “this time it is different”. However, the huge and increasing demand from India and particularly China is a genuine “game changer”. 

Chinese people could not own gold until 2003 when Chairman Mao’s gold ownership ban ended with the liberalization of the Chinese gold market.

This huge and still growing demand has been reported in the specialist financial press. But it has not been covered in the non specialist financial media and the majority of investors in the world are completely unaware of it. 

As are ill informed ‘analysts’ who either are not aware of the facts and figures or choose to completely ignore them.

In recent weeks there has been a very significant increase in demand for gold and silver bullion from the more than 2 billion people In India and China. This has not been reported and covered in most of the western media. 

Indeed it is curious that the opening of a gold vending machine in London is deemed to be far more newsworthy than the cultural affinity and increasing demand for gold by people ravaged by inflation in India, China and the rest of Asia - the mass of humanity. 

Global Supply and Peak Gold
Meanwhile, growing global demand is being confronted with anemic supply and the real possibility of peak gold. 

Kingsgate Consolidated MD Gavin Thomas, an experienced miner, believes that the peak of gold mining has been reached.  He told Bloomberg that gold production had not increased in spite of the price of gold nearly tripling over the 10 years to 2011. Demand was increasing, but the grade of gold mined and the number of large discoveries was falling.

Simplistic and superficial analysis of the gold market continues despite the availability of much excellent research clearly showing why gold and silver are safe haven assets and very important diversifications in these uncertain times.

SILVER 

Silver is trading at $36.18/oz, €25.38/oz and £22.68/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,747.00/oz, palladium at $780/oz and rhodium at $1,925/oz. 

NEWS
(Reuters) 
Gold holds steady in thin trade before U.S. job data

(Bloomberg)
 
Gold May Advance Next Week as Debt Concerns Boost Demand, Survey Shows

(Financial Times) 
Central banks pull most gold in a decade from BIS

(The Vancouver Sun) 
Kitco moves into creditor protection

(Yahoo News)
Family's fight for rare gold coins reaches court

(Reuters)  
Trial opens in battle over gold coins from FDR Administration

COMMENTARY
(The Telegraph) 
Europe, Free Speech, and the sinister repression of the Rating Agencies

(The Market Oracle) 
Jim Willie: Silver Platter Investor Opportunity

(The NY Times) 
As More Investors Seek Shelter in Gold, Russia Is Only Too Happy to Sell
(Editors note: New York Times headline is misleading – the Russian Central Bank and people are buying gold but their mines are selling gold in the market as would be expected)

(Wall Street Journal) 
Lagarde's Golden Opportunity - IMF Should Return to Gold Standard to Provide Stability

 

 


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