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MUMBAI - Signs that the world’s second-largest economy China, is gearing into a formal monetary tightening cycle was apparent on Saturday, when the country’s central bank raised interest rates for the second time in two months.
Analysts maintained that gold would get pounded and the dollar rebound as a consequence.
But, on Monday, India’s gold demand was moderate as prices softened a touch on the back of a stronger rupee, and the news from China. However, on Saturday, December 25, gold broke through its five-days losing streak to rise marginally on mild-buying by retailers in Mumbai.
Traders said firmer trends in the global markets and the underlying appetite for the yellow metal continued to remain strong.
“Several buyers are waiting by the kerb for bigger dips as the year comes to a close,” said M Jhaverimal, a gold retailer in Mumbai.
He went on to add that overall, 2010 proved to be a solid year for gold, as the metal rose beyond 26%, after rising 24% in 2009 and 5% in 2008. “If one looks back, prices have not posted a negative annual return since the year 2000,” said Jhaverimal.
Bullion trader Ashish Shah added that the fundamentals for gold were supported by the lack of significant increase in mine outputs during 2010, and a fall in scrap gold sales.
“A sizeable chunk of the Indian population may still be living below the poverty line, but when it comes to buying gold, we are right up there in the front,” Shah added.
Though Indians spent around $ 6.9 billion to buy gold in the first three months (January-March) of the calendar year, and clearly gold demand in India is up, the question doing the rounds is, is it enough?
The figure is nearly ten times the $ 708 million that Indians spent to accumulate gold in the same period of the previous year. This clearly shows that the Indian consumers interest for the precious metal has grown by 10 times since the past year, Praful Sonawala, gold and diamond jewellery exporter said.
“Take a look at China. Its gold imports have already soared to a record 209 tonnes this year, putting it on track to overtake India as the world’s largest consumer,” he said.
China, already the largest bullion miner, imported more than 209 tonnes of gold during the first 10 months of the year, a five-fold increase from an estimated 45 tonnes last year. This clearly indicates that Beijing has overtaken India as the world’s largest consumer of gold.
China is also seen to be expanding its gold buying options for domestic buyers. The country’s regulatory authority has reportedly given its domestic mutual funds a nod to invest in gold ETFs (electronic traded funds) outside China.
The Industrial and Commercial Bank of China has also launched a gold accumulation plan for investors in mainland China. The daily payment scheme is very meagre, paving the way for small investors to invest in gold.
According to a report in a Chinese daily, when the People’s Bank of China announced the interest rate hike, Xia Bin, an advisor of the People’s Bank of China said that China should hold more gold reserves to diversify its forex reserve.
In a recent announcement, the World Gold Council said that as of mid-December, the United States remained the top country to hold reserves in gold and that the Chinese mainland ranked sixth with 1,054 tonne of reserves.
However, in spite of the Chinese mainland’s huge foreign exchange reserves, its gold reserve accounts for only 1.7% of total reserves. This only goes to show that China’s gold reserves are the lowest among the top 20 in terms of proportion.
India’s foreign exchange reserves, on the other hand, totalled $294.6 billion, down from $295.41 billion, as on December 10. According to a release from the Reserve Bank of India, foreign currency assets amounted to $265.4 billion, also down from $266.2 billion recorded in the previous week. At the same time, gold reserves remained unchanged at $22.12 billion.
“Both gold and silver are overbought at the moment. Technically, the market needs a severe correction,” said Shah, “But, the EU economy is still fragile, as are Japan and South America. Investors will still put money in gold,” he added.
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Tuesday, December 28, 2010
Sunday, December 19, 2010
India silver imports to hit 1200 tonnes in 2010
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MUMBAI (Commodity Online): India, the largest consumers of gold and silver in the world, is setting new records in the import of silver this year. Spurred by huge industrial and investment demand, silver import by India is likely to hit a record high this year.
According to the year-end estimates by the Bombay Bullion Association, the apex traders body in gold and silver, imports of silver by India will rise by nearly 25% in 2010 to hit more than 1200 tonnes.
Prithviraj Kothari, president of the Bombay Bullion Association, said that festive season sales and strong industrial demand has pushed up the consumption of the yellow metal in India in 2010.
“Despite the high prices of silver, the consumption of the metal has been rising in India. Silver sales have picked up in India during festivals. Silver imports by India will hit 1,200 tonnes in 2010," Kothari said.
In 2009, India’s import of silver was around 1,000 tonnes.
Kothari said that the increase in silver imports by India is supporting global prices, which have rallied to 30-year highs in December.
India's silver demand averages 2,500 tonnes per year and the country, which produces around 7.3 million ounces a year (206.95 tonnes).
Indian appetite for silver is coming partly from rural buyers as a normal monsoon in 2010 has boosted crop production with a consequent benefit to incomes, after last year's severe drought shriveled spending by farmers.
Around 50 percent of imports come from China while recycling makes up some of the supply of the metal.
Silver prices globally and domestically are currently running near record highs -- partly hauled up by gains in gold, but the poorer cousin is performing more brilliantly.
Domestic silver prices on India's Multi Commodity Exchange are currently close to records at 43,899 rupees per ounce and the metal is offering better returns than gold.
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MUMBAI (Commodity Online): India, the largest consumers of gold and silver in the world, is setting new records in the import of silver this year. Spurred by huge industrial and investment demand, silver import by India is likely to hit a record high this year.
According to the year-end estimates by the Bombay Bullion Association, the apex traders body in gold and silver, imports of silver by India will rise by nearly 25% in 2010 to hit more than 1200 tonnes.
Prithviraj Kothari, president of the Bombay Bullion Association, said that festive season sales and strong industrial demand has pushed up the consumption of the yellow metal in India in 2010.
“Despite the high prices of silver, the consumption of the metal has been rising in India. Silver sales have picked up in India during festivals. Silver imports by India will hit 1,200 tonnes in 2010," Kothari said.
In 2009, India’s import of silver was around 1,000 tonnes.
Kothari said that the increase in silver imports by India is supporting global prices, which have rallied to 30-year highs in December.
India's silver demand averages 2,500 tonnes per year and the country, which produces around 7.3 million ounces a year (206.95 tonnes).
Indian appetite for silver is coming partly from rural buyers as a normal monsoon in 2010 has boosted crop production with a consequent benefit to incomes, after last year's severe drought shriveled spending by farmers.
Around 50 percent of imports come from China while recycling makes up some of the supply of the metal.
Silver prices globally and domestically are currently running near record highs -- partly hauled up by gains in gold, but the poorer cousin is performing more brilliantly.
Domestic silver prices on India's Multi Commodity Exchange are currently close to records at 43,899 rupees per ounce and the metal is offering better returns than gold.
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
India festive gold sales look bright, may bolster imports
India’s gold merchants are expecting a sustained pick-up in sales for the second round of festivals, as a reviving economy and stable prices may aid sentiment, triggering a reversal in declining trend in imports.
“People have started buying from July for the upcoming weddings, actually they all had money but unwilling to spend it due to recession, now they have started buying,” said Jaipur-based Jewel Ace Chief Executive Officer Justin Varkey, whose company sold Rs 25 million worth of jewellry last year.
India is currently hosting Asia’s second largest gems and jewellry exhibition in Mumbai, displaying gold ornaments from 700 domestic jewellers and 200 overseas makers.
The five-day fair is considered an indicator of order-book demand ahead of the August to November festival and wedding season, when gold buying tends to spike. Gold imports in 2009 fell to its lowest level in more than a decade as the worst monsoon in nearly four decades and fears of recession overseas dented sales.
“There could be a rise of over 10 per cent in imports this year as even monsoon are good, industrial activity is picking up along with employment,” said analyst Nayan Pansare.
Demand for gold in top consumer India hinges on a good monsoon, which boosts farm output and rural incomes. The crucial monsoon rains are likely to be above normal in the remaining two months of the June-September season.
“We have seen a growth in sales this year and are gung-ho for the season. We expect a rise of 50 per cent in sales,” said Mumbai-based retailer Cogent jewellry director.
Gold imports in India, the biggest consumer, rose 18.9 per cent to 155.6 tonnes in the first six months to June, and jewellers say there could be a reversal in trend this year given the positive feedback from consumers.
Prices have fallen more than 2 per cent from their all-time high of Rs 19,198 per 10 grams struck in early June, when investors overseas sought a safe-haven instrument amid the economic turmoil in the European Union. Prices have been in the range of Rs
17,500-18,750 for most part of the year. “It’s going to a cautious year after the recession last year,” said Pansare.
Industry participants say jewellry exports to the US would see a rise compared to other traditional markets like Japan and the European Union. “Order production has already begun for the US for Thanksgiving day and Chirstmas. We see a rise of 4 to 5 per cent in sales this year,” said Pansare, of Yash jewellry, which exported $100 million worth of jewellry last year.
India, which exported $28.41 billion worth of gems and jewellry last year to March 2010, shipped more than 60 per cent to the US, its largest market.
“In all, we feel that there could be a rise over 10 per cent in gems and jewellry exports and especially over 10 per cent from the US as the economy is coming out of recession,” said Gems and jewellry Export Promotion Council Chairman Vasant Mehta.
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Learn How to Buy Gold Below Spot Prices
“People have started buying from July for the upcoming weddings, actually they all had money but unwilling to spend it due to recession, now they have started buying,” said Jaipur-based Jewel Ace Chief Executive Officer Justin Varkey, whose company sold Rs 25 million worth of jewellry last year.
India is currently hosting Asia’s second largest gems and jewellry exhibition in Mumbai, displaying gold ornaments from 700 domestic jewellers and 200 overseas makers.
The five-day fair is considered an indicator of order-book demand ahead of the August to November festival and wedding season, when gold buying tends to spike. Gold imports in 2009 fell to its lowest level in more than a decade as the worst monsoon in nearly four decades and fears of recession overseas dented sales.
“There could be a rise of over 10 per cent in imports this year as even monsoon are good, industrial activity is picking up along with employment,” said analyst Nayan Pansare.
Demand for gold in top consumer India hinges on a good monsoon, which boosts farm output and rural incomes. The crucial monsoon rains are likely to be above normal in the remaining two months of the June-September season.
“We have seen a growth in sales this year and are gung-ho for the season. We expect a rise of 50 per cent in sales,” said Mumbai-based retailer Cogent jewellry director.
Gold imports in India, the biggest consumer, rose 18.9 per cent to 155.6 tonnes in the first six months to June, and jewellers say there could be a reversal in trend this year given the positive feedback from consumers.
Prices have fallen more than 2 per cent from their all-time high of Rs 19,198 per 10 grams struck in early June, when investors overseas sought a safe-haven instrument amid the economic turmoil in the European Union. Prices have been in the range of Rs
17,500-18,750 for most part of the year. “It’s going to a cautious year after the recession last year,” said Pansare.
Industry participants say jewellry exports to the US would see a rise compared to other traditional markets like Japan and the European Union. “Order production has already begun for the US for Thanksgiving day and Chirstmas. We see a rise of 4 to 5 per cent in sales this year,” said Pansare, of Yash jewellry, which exported $100 million worth of jewellry last year.
India, which exported $28.41 billion worth of gems and jewellry last year to March 2010, shipped more than 60 per cent to the US, its largest market.
“In all, we feel that there could be a rise over 10 per cent in gems and jewellry exports and especially over 10 per cent from the US as the economy is coming out of recession,” said Gems and jewellry Export Promotion Council Chairman Vasant Mehta.
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Learn How to Buy Gold Below Spot Prices
Thursday, December 16, 2010
The Chinese "rushing" to buy gold
Gold prices meandered within a fairly tight range overnight as fewer buyers or sellers were visible on the scene in the absence of substantial market news developments and amid the emergent trend among participants to square their books and head away from trading desks in search of holiday presents. This morning's market radar had two relatively noteworthy blips (one 'hot' the other 'not-so-hot') on display; the first one showed jobless claims filings dipping by 3K to 420,000 (the second lowest level of 2010) and the second one revealed that US housing starts gained by 3.9% in November (remaining sluggish, at best).
Spot gold dealings opened with muted (50-cent) gains this morning, quoted at $1,379.90 per ounce as the Kitco Gold Index revealed an about equal amount of dollar slippage-induced gains as it did losses from profit-taking selling among funds ahead of the end of the year. The low $1,370s remain an important support level that needs to hold, but on the other hand, the bullishness that was so pervasive even just a few days ago is thought to be invalid unless the metal manages to pierce through its most recent price peak. Following the data releases, bullion edged towards $1,375.00 per ounce.
As for future price peaks, well, they may run into a bit of a demand-side snag if the most recent take on the market by LiveMint.com turns out to be correct. LM Reporter Siddesh Mayenkar notes that India's gold demand will "take a hit as increasingly prosperous rural consumers switch to other investment options and step up on discretionary items."
While China's gold demand (provided a sizeable slowdown and/or higher interest rates do not alter the landscape significantly) may go part of the way towards filling such a potentially emergent demand slump, the author cites sources as projecting that "demand for gold from rural areas that account for about 70% of annual consumption, which averages 550 tonnes, is likely to fall to 50% in coming years, industry watchers say. With the government keen to make more savings avenues available, rural consumers would consider the newer instruments, taking away money from gold," said Pinakin Vyas, assistant vice-president with IndusInd Bank, a large gold importer."
Such a decline would amount to roughly 200 tonnes of gold not being sought by India's rural buyers as they shift purchase preferences towards durable goods and automobiles. Despite reports to the contrary and a heavy emphasis on this year's possibly much better gold intake, the bottom line is that India's 2009 gold demand hit its lowest level in nearly twelve years.
Bullion market participants note there are indications of market saturation in the consumption patterns visible of the world's top gold consumer and they fear that local investors are now more likely to switch to other asset classes, including equity mutual funds and real estate. All of this means, that the "pressure" to convince buyers to buy increasing amounts of yellow metals is now going to shift to China. What could be easier than tracking the number of stories on the topic (going forward) that include the country's name?
One can certainly blame the recent, ultra-high gold prices as the most visible culprit for this Indian trend, but one must also allow for this nascent shift in consumer priorities not only when it comes to investments, but to a 'general' and 'must-have' shopping list among Indian buyers."Sales of large domestic appliances and cars have grown exponentially and this was seen during Diwali itself, while gold sales have not kept pace with this rise," said Daman Prakash, director, MNC Bullion, a large gold seller."
The US dollar also offered little in terms of noteworthy movements as well, but managed to maintain above the 80-mark on the index as remaining concerns about the European debt situation kept bids on the US currency active and pressured regional equities. Moody's has motioned that it may yet need to take out its rating scissors and trim a letter or two off of Spain's current rating.
Over in the US, one of the most oft-gauged metrics of the housing market -foreclosure activity- showed a dramatic drop last month. The number of homes being notified that their title is about to be 'reassigned' to the lending bank fell by 21 percent in November, making for the largest such drop in five years. Part of the reason for such a contraction in troubled real estate filings can be found in a pattern that normally shows a 7 to 10 percent decline in such activity around year-end.
The other component that may be at work in this statistical release is the cessation of filings that resulted from the robo-signing scandal which made headlines during this fall. However, at the end of the day, actual repossessions by banks fell 28 percent last month to tally just over 67,000 US homes.
That is a relatively far cry from September's 100,000 mark, even as the current year's tally could well end up at a record one million homes seized. Nevada led the depressing parade of monthly foreclosures for what is now the fourth year in a row. The state also has the dubious distinction of showing the highest unemployment rate in the US.
Speaking of the Silver State, silver opened with a gain of twenty cents this morning, quoted at $28.99 per ounce as scattered buying was still manifest in fund-land and in ETFs. The white metal has been white-hot but it is precisely such a pattern that has prompted some observers to raise sizeable caution flags on the asset.
Last night's Elliott Wave update remarked that "stories of silver scandals and [market attempts at] corners are becoming so common that they are starting to surface in the mainstream press. No matter the news item or rumor, the interpretation among rabid silver bugs is invariably bullish." EW further notes that "a Wall Street Journal blog called "The Source" assesses the latest silver hysteria: "If you listen to reports and videos popping up on a number of websites these days, the same thing [that happened with the Hunt brother's attempted corner in 1980] is happening again."
"Only this time, [it is touted] silver could reach $500/oz from $29/oz currently, some of the reports suggest, because of the trading activities of a handful of banks that have been craftily cornering the market." Yes, it's happening again, and silver is actually a week past its peak. We could not ask for a more perfect confirmation that a protracted wave 3 down, is on for silver" concludes the update, targeting $25 as the first destination for silver prices as part of said wave that might be in the making.
Platinum opened with a $1 gain in New York, showing a quote on the bid-side at $1,696.00 per ounce. Its close relative, palladium, started Thursday's session with a $2 gain and a spot bid quote at $748.00 per troy ounce. Rhodium remained at rest at $2,280.00 per ounce. India (as shown above) and China remain at the front-centre (along with ETFs to be sure) in the platinum-group metals niche. This morning's announcement that GM sold its one-millionth passenger vehicle in China (a Buick Lacrosse, to a lucky buyer in Shanghai) this month only reinforces the trend.
The US automaker anticipates that is will move 2.3 million units (including minivans) in China this year. GM also looks for a 15% gain in sales for 2011. Hopefully, the possible expiration of government car-buying incentive schemes and (more importantly) China's new penchant for fighting inflation and imminently higher interest rates will not dent the locals' car fever to a significant extent.
Finally today, a round-up of potential winners for 2001 - as relayed by SFGate (the Chronicle) last night. The paper opines that while gold has been 2010's headline-maker, metals such as palladium, silver, lithium, and commodities such as coffee and most other food-related ones are likely to show good returns in the coming year. One must note that twenty-one commodities have "outgunned" the S&P this year, and that 17 of them are showing gains of over 20%. Thus, sustainability questions must also be posed at such a happy tally time.
Perhaps the more 'notable' stories of 2011 might just come from sectors such as the two commodities that were in the "dog house" in 2010: natural gas and cocoa. It's all about upside potential in undervalued niches versus chasing incremental gains (following 20, 30, and/or 50 percent gains already under the belt in certain commodities) at the risk of a trend reversal when least expected (with one possible exception: that to be allowed for certain items that we must all actually consume (or else): food and energy.
Until tomorrow,
Jon Nadler
Senior Analyst
Kitco Metals Inc. North America
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
Spot gold dealings opened with muted (50-cent) gains this morning, quoted at $1,379.90 per ounce as the Kitco Gold Index revealed an about equal amount of dollar slippage-induced gains as it did losses from profit-taking selling among funds ahead of the end of the year. The low $1,370s remain an important support level that needs to hold, but on the other hand, the bullishness that was so pervasive even just a few days ago is thought to be invalid unless the metal manages to pierce through its most recent price peak. Following the data releases, bullion edged towards $1,375.00 per ounce.
As for future price peaks, well, they may run into a bit of a demand-side snag if the most recent take on the market by LiveMint.com turns out to be correct. LM Reporter Siddesh Mayenkar notes that India's gold demand will "take a hit as increasingly prosperous rural consumers switch to other investment options and step up on discretionary items."
While China's gold demand (provided a sizeable slowdown and/or higher interest rates do not alter the landscape significantly) may go part of the way towards filling such a potentially emergent demand slump, the author cites sources as projecting that "demand for gold from rural areas that account for about 70% of annual consumption, which averages 550 tonnes, is likely to fall to 50% in coming years, industry watchers say. With the government keen to make more savings avenues available, rural consumers would consider the newer instruments, taking away money from gold," said Pinakin Vyas, assistant vice-president with IndusInd Bank, a large gold importer."
Such a decline would amount to roughly 200 tonnes of gold not being sought by India's rural buyers as they shift purchase preferences towards durable goods and automobiles. Despite reports to the contrary and a heavy emphasis on this year's possibly much better gold intake, the bottom line is that India's 2009 gold demand hit its lowest level in nearly twelve years.
Bullion market participants note there are indications of market saturation in the consumption patterns visible of the world's top gold consumer and they fear that local investors are now more likely to switch to other asset classes, including equity mutual funds and real estate. All of this means, that the "pressure" to convince buyers to buy increasing amounts of yellow metals is now going to shift to China. What could be easier than tracking the number of stories on the topic (going forward) that include the country's name?
One can certainly blame the recent, ultra-high gold prices as the most visible culprit for this Indian trend, but one must also allow for this nascent shift in consumer priorities not only when it comes to investments, but to a 'general' and 'must-have' shopping list among Indian buyers."Sales of large domestic appliances and cars have grown exponentially and this was seen during Diwali itself, while gold sales have not kept pace with this rise," said Daman Prakash, director, MNC Bullion, a large gold seller."
The US dollar also offered little in terms of noteworthy movements as well, but managed to maintain above the 80-mark on the index as remaining concerns about the European debt situation kept bids on the US currency active and pressured regional equities. Moody's has motioned that it may yet need to take out its rating scissors and trim a letter or two off of Spain's current rating.
Over in the US, one of the most oft-gauged metrics of the housing market -foreclosure activity- showed a dramatic drop last month. The number of homes being notified that their title is about to be 'reassigned' to the lending bank fell by 21 percent in November, making for the largest such drop in five years. Part of the reason for such a contraction in troubled real estate filings can be found in a pattern that normally shows a 7 to 10 percent decline in such activity around year-end.
The other component that may be at work in this statistical release is the cessation of filings that resulted from the robo-signing scandal which made headlines during this fall. However, at the end of the day, actual repossessions by banks fell 28 percent last month to tally just over 67,000 US homes.
That is a relatively far cry from September's 100,000 mark, even as the current year's tally could well end up at a record one million homes seized. Nevada led the depressing parade of monthly foreclosures for what is now the fourth year in a row. The state also has the dubious distinction of showing the highest unemployment rate in the US.
Speaking of the Silver State, silver opened with a gain of twenty cents this morning, quoted at $28.99 per ounce as scattered buying was still manifest in fund-land and in ETFs. The white metal has been white-hot but it is precisely such a pattern that has prompted some observers to raise sizeable caution flags on the asset.
Last night's Elliott Wave update remarked that "stories of silver scandals and [market attempts at] corners are becoming so common that they are starting to surface in the mainstream press. No matter the news item or rumor, the interpretation among rabid silver bugs is invariably bullish." EW further notes that "a Wall Street Journal blog called "The Source" assesses the latest silver hysteria: "If you listen to reports and videos popping up on a number of websites these days, the same thing [that happened with the Hunt brother's attempted corner in 1980] is happening again."
"Only this time, [it is touted] silver could reach $500/oz from $29/oz currently, some of the reports suggest, because of the trading activities of a handful of banks that have been craftily cornering the market." Yes, it's happening again, and silver is actually a week past its peak. We could not ask for a more perfect confirmation that a protracted wave 3 down, is on for silver" concludes the update, targeting $25 as the first destination for silver prices as part of said wave that might be in the making.
Platinum opened with a $1 gain in New York, showing a quote on the bid-side at $1,696.00 per ounce. Its close relative, palladium, started Thursday's session with a $2 gain and a spot bid quote at $748.00 per troy ounce. Rhodium remained at rest at $2,280.00 per ounce. India (as shown above) and China remain at the front-centre (along with ETFs to be sure) in the platinum-group metals niche. This morning's announcement that GM sold its one-millionth passenger vehicle in China (a Buick Lacrosse, to a lucky buyer in Shanghai) this month only reinforces the trend.
The US automaker anticipates that is will move 2.3 million units (including minivans) in China this year. GM also looks for a 15% gain in sales for 2011. Hopefully, the possible expiration of government car-buying incentive schemes and (more importantly) China's new penchant for fighting inflation and imminently higher interest rates will not dent the locals' car fever to a significant extent.
Finally today, a round-up of potential winners for 2001 - as relayed by SFGate (the Chronicle) last night. The paper opines that while gold has been 2010's headline-maker, metals such as palladium, silver, lithium, and commodities such as coffee and most other food-related ones are likely to show good returns in the coming year. One must note that twenty-one commodities have "outgunned" the S&P this year, and that 17 of them are showing gains of over 20%. Thus, sustainability questions must also be posed at such a happy tally time.
Perhaps the more 'notable' stories of 2011 might just come from sectors such as the two commodities that were in the "dog house" in 2010: natural gas and cocoa. It's all about upside potential in undervalued niches versus chasing incremental gains (following 20, 30, and/or 50 percent gains already under the belt in certain commodities) at the risk of a trend reversal when least expected (with one possible exception: that to be allowed for certain items that we must all actually consume (or else): food and energy.
Until tomorrow,
Jon Nadler
Senior Analyst
Kitco Metals Inc. North America
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
China Throttled, Gold & Silver a "Buy"
Hold "at least" 10% of your wealth in gold and Silver Bullion, says this analyst...
WITH THE RISK OF recession looming over the US and foreign economies once more, China seems to be coasting through with continuing growth through its exports, writes Byron King in Bill Bonner's Daily Reckoning.
But this trend does not seem likely to continue in the coming months.
A couple of weeks ago I was in Hong Kong attending the Roskill International Rare Earths Conference. So I was only in "China Lite" as one jaded acquaintance put it. (There's just no pleasing some people...) But it's as if the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Hong Kong just don't tell you enough. No. By some peoples' standards, you have to see the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Shanghai if you really want to experience the China story. But Hong Kong offered plenty of stimulus for one long trip.
Over the past 20 years, the key enabler of China's development was strong, export-led growth. With Hong Kong handling much of the cargo, China exported its way to dramatic prosperity, fueled by boatloads of imported Western currency – Dollars, Yen, Euros, etc. But that good fortune, and easy money from overseas, has come to a screeching, grinding halt.
Why? The global financial crisis has moved in for the long haul. Here in the United States, we're not enduring a typical, post-World War II, run-of-the-mill business cycle recession. It's not just the economic equivalent of a "standing eight count" in boxing. No, I'd say that the US economy is hard down on the mat.
Indeed, I believe that the current US economic situation is far graver than even the much-advertised Great Recession. When something recedes, that implies that it'll come back. If something recedes a lot, then it should come back in a big way, right? Thing is, I can't see how the US economy will come roaring back in any big way, and not anytime soon.
During a US recession in the olden days, for example, businesses would lay people off from a plant and then call the workers back when times were better. Today, businesses have laid people off, but then, in many instances, closed the plant for good and sold all the machinery for scrap. Under these circumstances, there won't be any recalls.
And if history is any guide, the United States cannot have an economic rebound without something like a recovery in housing. That's not happening, what with the banks still broken, lending stingy and the mortgage industry a total mess.
Nor is there significant evidence that other Western economies are poised for a major comeback. Really, which other economies are rebounding? Ireland? Italy? Britain? Japan? Nope. Even the mighty German economy isn't growing fast, and they brag about it.
So looking ahead, where's the continuing export-led growth for China? How can past patterns of trade and prosperity continue for China – and, by extension, for Hong Kong? Or stated differently, what does this mean for the future?
It's likely that the slowdown of external demand will throttle back China's ability to grow at its recent, historic rates. But is the Chinese leadership prepared to process and adapt to this new reality?
In the best light, the decline of foreign demand means the Chinese should channel less investment into their export model. The Chinese should redirect more investment toward internal consumption.
That's easy to say. But will this happen? Can China internalize its growth? Well, to be fair, it's already happening to some extent. Many China-based operations – for example, companies like Foxconn and Toyota – are paying Chinese workers higher wages. This translates into more purchasing power at the Chinese grass-root level.
But then we're also seeing stories about raging inflation in prices for food and energy at the Chinese retail level. And the vast multitude of Chinese people without the pay raises, who do not work for foreign companies, are stuck with the inflation as well.
Point is, there's nothing easy for China in making the transition from massive investment in formerly booming export-led growth to a new focus on internal consumption.
I believe that there's still a lot of thinking and planning in China that's stuck in the mind-set of economic boom times from the early part of this decade. We'll probably still see gross over-investment in obsolete economic ideas coming out of China. Entire industries will pursue growth and expansion in markets that are no longer there. The world will face the consequences of resources filtering through a trade model that's no longer valid. So what does all this mean for investors? Well, it means that there's even less reason to trust in national currencies over the long haul.
Sure, the local currency is how you keep score. It's what you get paid in. It's what you use to buy a house, pay bills, buy groceries, take a trip, etc. But looking forward, in any and every currency, inflation will nibble away at your wealth and savings.
What can you do? You can't change the world, right? No, but it gets back to that idea that you still want to own physical gold and silver as core holdings in your portfolio. For the past couple of years, I've been saying "5-10% in precious metals, or more if it helps you sleep at night." I'm going to change that to "At LEAST 10% in precious metals, or more if it helps you sleep at night."
I believe silver is probably a better play right now, with more upside than gold. I'd go for silver coins, without seeking any numismatic value. Just go for the Silver Eagles - bullion value - or any other high-quality metal issue from reputable mints.
Bill Bonner, 15 Dec '10
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WITH THE RISK OF recession looming over the US and foreign economies once more, China seems to be coasting through with continuing growth through its exports, writes Byron King in Bill Bonner's Daily Reckoning.
But this trend does not seem likely to continue in the coming months.
A couple of weeks ago I was in Hong Kong attending the Roskill International Rare Earths Conference. So I was only in "China Lite" as one jaded acquaintance put it. (There's just no pleasing some people...) But it's as if the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Hong Kong just don't tell you enough. No. By some peoples' standards, you have to see the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Shanghai if you really want to experience the China story. But Hong Kong offered plenty of stimulus for one long trip.
Over the past 20 years, the key enabler of China's development was strong, export-led growth. With Hong Kong handling much of the cargo, China exported its way to dramatic prosperity, fueled by boatloads of imported Western currency – Dollars, Yen, Euros, etc. But that good fortune, and easy money from overseas, has come to a screeching, grinding halt.
Why? The global financial crisis has moved in for the long haul. Here in the United States, we're not enduring a typical, post-World War II, run-of-the-mill business cycle recession. It's not just the economic equivalent of a "standing eight count" in boxing. No, I'd say that the US economy is hard down on the mat.
Indeed, I believe that the current US economic situation is far graver than even the much-advertised Great Recession. When something recedes, that implies that it'll come back. If something recedes a lot, then it should come back in a big way, right? Thing is, I can't see how the US economy will come roaring back in any big way, and not anytime soon.
During a US recession in the olden days, for example, businesses would lay people off from a plant and then call the workers back when times were better. Today, businesses have laid people off, but then, in many instances, closed the plant for good and sold all the machinery for scrap. Under these circumstances, there won't be any recalls.
And if history is any guide, the United States cannot have an economic rebound without something like a recovery in housing. That's not happening, what with the banks still broken, lending stingy and the mortgage industry a total mess.
Nor is there significant evidence that other Western economies are poised for a major comeback. Really, which other economies are rebounding? Ireland? Italy? Britain? Japan? Nope. Even the mighty German economy isn't growing fast, and they brag about it.
So looking ahead, where's the continuing export-led growth for China? How can past patterns of trade and prosperity continue for China – and, by extension, for Hong Kong? Or stated differently, what does this mean for the future?
It's likely that the slowdown of external demand will throttle back China's ability to grow at its recent, historic rates. But is the Chinese leadership prepared to process and adapt to this new reality?
In the best light, the decline of foreign demand means the Chinese should channel less investment into their export model. The Chinese should redirect more investment toward internal consumption.
That's easy to say. But will this happen? Can China internalize its growth? Well, to be fair, it's already happening to some extent. Many China-based operations – for example, companies like Foxconn and Toyota – are paying Chinese workers higher wages. This translates into more purchasing power at the Chinese grass-root level.
But then we're also seeing stories about raging inflation in prices for food and energy at the Chinese retail level. And the vast multitude of Chinese people without the pay raises, who do not work for foreign companies, are stuck with the inflation as well.
Point is, there's nothing easy for China in making the transition from massive investment in formerly booming export-led growth to a new focus on internal consumption.
I believe that there's still a lot of thinking and planning in China that's stuck in the mind-set of economic boom times from the early part of this decade. We'll probably still see gross over-investment in obsolete economic ideas coming out of China. Entire industries will pursue growth and expansion in markets that are no longer there. The world will face the consequences of resources filtering through a trade model that's no longer valid. So what does all this mean for investors? Well, it means that there's even less reason to trust in national currencies over the long haul.
Sure, the local currency is how you keep score. It's what you get paid in. It's what you use to buy a house, pay bills, buy groceries, take a trip, etc. But looking forward, in any and every currency, inflation will nibble away at your wealth and savings.
What can you do? You can't change the world, right? No, but it gets back to that idea that you still want to own physical gold and silver as core holdings in your portfolio. For the past couple of years, I've been saying "5-10% in precious metals, or more if it helps you sleep at night." I'm going to change that to "At LEAST 10% in precious metals, or more if it helps you sleep at night."
I believe silver is probably a better play right now, with more upside than gold. I'd go for silver coins, without seeking any numismatic value. Just go for the Silver Eagles - bullion value - or any other high-quality metal issue from reputable mints.
Bill Bonner, 15 Dec '10
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
JPMorgan Reduces Position in U.S. Silver
JPMorgan Chase & Co. reduced a large position in the U.S. silver futures market, the Financial Times said, citing an unidentified person familiar with the matter.
The decision was made to try to deflect public criticism of its dealings in silver, the FT said. The bank’s silver positions would from now on be “materially smaller” than in the past, according to the paper. Two calls and an e-mail to Jennifer Zuccarelli, a New York-based spokeswoman at JPMorgan, were not immediately answered outside of office hours.
Continued on Bloomberg
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The decision was made to try to deflect public criticism of its dealings in silver, the FT said. The bank’s silver positions would from now on be “materially smaller” than in the past, according to the paper. Two calls and an e-mail to Jennifer Zuccarelli, a New York-based spokeswoman at JPMorgan, were not immediately answered outside of office hours.
Continued on Bloomberg
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U.S. Regulator to Consider Measures to Limit Oil, Gold, Wheat Speculation
The top U.S. commodities regulator will consider today steps to curb speculation in raw materials including oil, gold and wheat as part of the most sweeping rewrite of Wall Street rules since the 1930s.
Four of five members of the Commodity Futures Trading Commission said they will vote in favor of publishing a two-part proposal to restrict the number of contracts one firm can hold. The plan, if approved after a 60-day public comment period, would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an all-month ceiling of 10 percent of open interest up to the first 25,000 contracts and 2.5 percent thereafter.
The Dodd-Frank Act gave the CFTC until January to rein in speculation in the energy and metals markets and until April for agricultural commodities. Yesterday, CFTC Chairman Gary Gensler told lawmakers that the commission wouldn’t meet next month’s deadline because it doesn’t yet have sufficient data.
“At the core of our obligation is to protect market integrity,” Gensler said at the hearing today. The rule will shield the markets from excessive speculation by ensuring positions aren’t too concentrated, he said.
Gensler, along with Commissioners Bart Chilton, Scott O’Malia and Michael Dunn said they will vote today in favor of publishing the rule for comment. Dunn and O’Malia said they may not ultimately support imposing position limits. Commissioner Jill Sommers said she would vote against the rule.
‘Bad Policy’
“It’s bad policy to promulgate regulations that are not enforceable,” Sommers said, adding that the commission lacks the data needed to enforce effective caps.
Continued on Bloomberg
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
Four of five members of the Commodity Futures Trading Commission said they will vote in favor of publishing a two-part proposal to restrict the number of contracts one firm can hold. The plan, if approved after a 60-day public comment period, would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an all-month ceiling of 10 percent of open interest up to the first 25,000 contracts and 2.5 percent thereafter.
The Dodd-Frank Act gave the CFTC until January to rein in speculation in the energy and metals markets and until April for agricultural commodities. Yesterday, CFTC Chairman Gary Gensler told lawmakers that the commission wouldn’t meet next month’s deadline because it doesn’t yet have sufficient data.
“At the core of our obligation is to protect market integrity,” Gensler said at the hearing today. The rule will shield the markets from excessive speculation by ensuring positions aren’t too concentrated, he said.
Gensler, along with Commissioners Bart Chilton, Scott O’Malia and Michael Dunn said they will vote today in favor of publishing the rule for comment. Dunn and O’Malia said they may not ultimately support imposing position limits. Commissioner Jill Sommers said she would vote against the rule.
‘Bad Policy’
“It’s bad policy to promulgate regulations that are not enforceable,” Sommers said, adding that the commission lacks the data needed to enforce effective caps.
Continued on Bloomberg
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
A Must-Have Report for Buying Gold Stocks
If you are interested in Buying Gold Stocks then this report is a must-have. It breaks down all the players in the gold industry so you know exactly which companies are the best buy. Learn how to analyze gold stocks, companies and investments to position yourself to make money. It includes tax deferred strategies for buying gold.
Click here for the Gold Investing Profits Blueprint
Here are some other great books and resources for investing in gold and silver:
Click here for the Gold Investing Profits Blueprint
Here are some other great books and resources for investing in gold and silver:
Buying Gold Below Spot Prices
The gold bandwagon is getting rather filled but there's a good chance that gold's going a lot higher. Still, its hard to lay down $1,400 an ounce for some physical gold. There is a pretty brilliant but straightforward and fairly well known way to buy gold low. It costs only $17 and you can save up to $700 for each ounce purchased at today's prices so I think its worth it.
Click here to find out how to buy gold cheaply
Click here to find out how to buy gold cheaply
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