Gold in 2015: What the Gold Repatriation Movement Tells Us

by Peter Krauth • December 5, 2014

This is a syndicated repost courtesy of Money Morning. To view original,click here.

Germany, Poland, Venezuela, Ecuador, Mexico, the Netherlands, and Switzerland are just a few of the countries that have recently repatriated their gold or hosted movements to do so.

And now France joins the list.

This growing trend provides a clue about gold in 2015 – and we’d be wise to track it very carefully…

Netherlands Repatriates 122 Tons of Its Gold

The Netherlands’ central bank, De Nederlandsche Bank (DNB), recently had 122 tons of its gold shipped to Amsterdam from New York.

According to DNB, 31% of its gold reserves are now held in Amsterdam, with the rest held outside of the country. About 31% is with the Federal ReserveBank of New York, 20% is with the Bank of Canada, and 18% is with the Bank of England.

Here’s what’s really interesting about the repatriation of Holland’s gold: It was only made public after the fact.

It’s possible that Holland wants to prepare in advance of a potential future crisis.

In a recently released statement, the DNB said, “In addition to a more balanced division of the gold reserves… this may also contribute to a positive confidence effect with the public.”

And Holland is not alone.

As I discussed recently, the Swiss gold referendum held last Sunday did not pass. In fact, a large and concentrated campaign against the initiative was mounted by both the government and central bank.

Their main arguments were that the conditions of the initiative would tie the SNB’s hands, constraining its ability to maintain its current peg to the euro and to weaken the franc against other currencies should it be deemed necessary.

Although it didn’t pass, the referendum may have had a profound effect on people, governments, and their central banks – and how they view their nation’s gold.

The push to repatriate and shore up Switzerland’s gold reserves looks to have inspired its neighbor France to bring home its own gold.

Here’s why this is so remarkable – and what it means for gold in 2015…

French Leader Calls for Gold to Come Home

Marine Le Pen is the leader of the Front National party of France, which finished first in European parliamentary elections this past May.

While the next federal election is still only set for 2017, should she run, Le Pen is a frontrunner to become France’s next president, potentially unseating current President Francois Hollande.

Given Le Pen’s popularity, her recent requests regarding France’s management of its gold reserves are all the more remarkable.

In an open letter to the Banque de France (France’s central bank), Le Pen made several demands that closely echo those of the Swiss initiative.

Her letter to Christian Noyer, the governor of Banque de France, demanded that all the country’s gold reserves be repatriated:

The monetary institution that you lead has historically served as the reserve central bank for France’s monetary and gold reserves. In our strategic and sovereign vision, these do not belong to the state, nor the Bank of France, but to the French people, which serve as the ultimate guarantee of public debt and our money.

But she did not leave it at that. Le Pen raised several of the same issues as the Swiss initiative, and even some of her own.

As leader of the Front National, she asked the Banque de France to urgently repatriate all the nation’s gold reserves located abroad, end all gold sales programs, and progressively move foreign exchange reserves into more gold by buying during marked price declines (around 20% recommended).

She went further still, asking for a complete inventory of the nation’s physical gold and its quality (purity and serial numbers). She asked for an independent audit and inventory, indicating where gold reserves are stored both in France and abroad.

Le Pen also requested that any gold loans or leases by the central bank be made public. She further stated that France’s sale of 615 tonnes of gold from 2004 to 2012 was costly, constitutes a serious violation of the national heritage, and was made without democratic consultation.

Why Gold in 2015 Will Move Higher

In early 2013 Germany asked for a large portion of its gold back from the New York Fed. It’s a slow process that’s running behind schedule, prompting many to doubt whether the Fed even has all the gold it purports.

After all, it’s a relatively simple task. Even worse, the Fed has refused Germany’s requests to audit its gold.

I’ll leave you to draw your own conclusions on that one.

People and governments are starting to wake up to the idea that gold has always been the ultimate form of insurance.

In the last several years we’ve witnessed more than our fair share of crises.

With that kind of backdrop, it’s little wonder the push to repatriate national gold reserves is growing ever stronger.

And that’s yet another reason the outlook for gold in 2015 remains very bright. Gold priceswill be heading higher.

More from Peter Krauth: Switzerland’s historic gold referendum failed after some strong campaigning, with 78% voting against the initiative. A “yes” vote would have been bullish for gold. But despite the “no” vote, gold prices rose anyway. Here’s why gold moved higher after the Swiss vote – and why we are bullish on gold into 2015…

The post Gold in 2015: What the Gold Repatriation Movement Tells Us appeared first on Money Morning 

http://wallstreetexaminer.com/2014/12/gold-in-2015-what-the-gold-repatriation-movement-tells-us/

Central Bank Credibility, the Equity Markets and Gold

Central Bank credibility is at all-time highs.  As a consequence, we suggest, equities are near all-time highs too while gold is scraping multi-year lows. A change though may be in the offing with all three. Not today, nor tomorrow. But perhaps sooner than most think.

Here’s how we see it…

In the context of five plus years of the most unconventional monetary policies the world has ever seen, there is a near universal belief that a group of Keynesian/Monetarist schooled, largely academic economists have got it all figured out; namely, that super-sized, well-orchestrated, easy money policies – zero even negative benchmark interest rates, a smorgasbord of essentially free lending programs and of course mega-size asset purchase programs (QE) – can produce sustainable, economic growth.  In other words, central bank credibility and the efficacy of their policies are in the heavens.

No central bank is more revered in this regard than the Federal Reserve.  As we discussed here, the Federal Reserve, it is said, is “pulling it off.”  Because of its heroic, unconventional, all-in easy money policies, the Federal Reserve is said to have “saved” America from an almost certain depression and then, because of its continued easy money policies, is the driving force behind America’s now accelerating economic growth. Just look at the economic numbers, say the pundits. The Federal Reserve’s monetary policies are working. Yes, not as fast as we would like, but going in the right direction. Only one task left – a well-calibrated, data-driven exit from these unconventional policies.  The strengthening economy can take it, they say. In fact, the exit should be welcomed because it signals a strong and growing economy, one that will no longer require any Federal Reserve support.

Of course, this is music to U.S. equity market investors and speculators alike, so much so that U.S. equities have become the asset class de jure.  You can’t lose, proclaim one investment manager after another. Don’t “fight the Fed,” they say, embrace it.

This unwavering faith in the prowess of central banks is seen with greatest clarity in the Euro zone.  Observe the near universal belief that if only the Germans would get out of the way and allow ECB head Mario Draghi to implement a Federal Reserve style, open-ended, sovereign debt based QE program, the Euro zone economy and especially its equity markets would boom. Isn’t that what the recent sell-off in Euro zone equities is saying, post the disappointing news that the ECB has no plans for a such a QE program. To us it’s obvious why so many people think this way.  It’s because recent U.S. economic data seems to confirm that the Federal Reserve’s unconventional, all-in easy money policies are working.  And if such policies can work in America why not in the Euro zone too?

We reject this unwavering belief in central banks and their policies, outright. As the Austrians teach, easy monetary policies sow the seeds of their own demise.  Flooding the economy and financial markets with money (and credit) created out of thin air – thereby distorting interest rates and price signals and, in so doing, creating malinvestments – is no way to create sustainable, economic growth and ever rising equity prices.  Sure, at first glance, the malinvestments and attendant booming equity prices look like genuine growth and wealth creation. But they are not. As we explored here, they are instead unsustainable bubbles that turn to bust when the growth in those money supply (and credit) footings decelerate; i.e., when the easy money abates.

Today we posit some questions we think every equity investor needs to answer. What if the Austrians are right?  What if unconventional, all-in easy money policies do not produce sustainable, economic growth?  Contrary to the expectations of nearly everyone, what if the next big event is in fact a bust?  What will that mean to the equity markets going forward?  And then, what will that say about the credibility of central banks?

Well, if the Austrians are right, as we wrote here, given the size of this monetary experiment, one can expect a pretty big swoon in equity prices if not an ugly crash.  More important though is the very real possibility that a bust could put a dagger in central bank credibility, severely damaging if not destroying the belief that unconventional, all-in easy money policies can goose the economy and equity markets anywhere near as effectively as in the past. Maybe, in real terms, not at all. Truly a problematic situation the next time central banks step in to “save” us. This we think is especially true if a bust occurs right here in America.  Consider this: The former Federal Reserve Chairperson Ben Bernanke (and world renowned expert on the Great Depression) and his closest adviser current Chairperson Janet Yellen  birthed the largest, most heralded, monetary support apparatus in world history and it was found unable to produce sustainable, economic growth, unable to float equity prices ever higher. Instead, it did the exact opposite. How many investors/speculators will then put their unswerving faith in any central bank, at least for the foreseeable future?  We’re thinking a lot, lot less than today.

The Federal Reserve is in the process of exiting its grand experiment in unconventional monetary policy.  QE3, a two plus year asset purchase program that at its peak injected an annualized $1 trillion of monetary fuel directly into the financial markets, is winding down.  What’s more, though “data dependent,” the Federal Reserve is signaling that it will begin raising interest rates in mid-2015.  Of course, nearly every economist and nearly every investor expects this plan to work. Yes, a bit of transitional weakness in the financial markets – like we are seeing now – but after that, up and away.

We of course say not so fast.  Given the fact that this exit means a further deceleration in the already decelerating trend in the rate of monetary inflation, the risks are growing that the next big move in the economy and the equity market is not up but down.  In fact, if the banking system does not step up and fill the monetary inflation void being vacated by the Federal Reserve we think a bust could begin rearing its ugly head sooner than anyone thinks.*

Enter gold, the much maligned, near universally hated asset.  It’s presently on no one’s radar screen, except maybe the shorts.  And why should it be. Thanks to supposed central bank infallibility, economic growth appears to be strengthening and the equity markets are in a major bull run. As James Grant, editor of Grant’s Interest Rate Observer likes to say, gold is the reciprocal of central bank credibility. We agree. Central bank credibility is at a peak, so gold is in the dumps.

Gold wasn’t always in the dumps.  It rose right along with equities, indeed outperformed equities, from the 2009 Great Recession bottom – when central banks the world over first began implementing their unconventional monetary policies – straight through to its September 2011 top.  The reason we think it did is quite simple.  Coming out of the Great Recession, central bank credibility – their ability to “pull us out” of the Recession – was being severely questioned by investors. Thus, a good portion of investor money found its way into gold. That changed in 2011. Underwritten by these same central bank easy money policies, the as yet unresolved malinvestments of the Housing Bubble turn Credit Bust turn Great Recession, which were in the process of a healthy liquidation, were short circuited, while new, yet to be revealed malinvestments (we think the largest being anything in and around financial engineering) were starting to bear fruit.  The belief took hold that the heroic policies of these central banks were finally working, finally restoring long term vitality to the economy. Gold then sunk while equities marched ever higher.

So here we are…

In our minds, get that bust in America (or even a real scare playing out in the U.S. financial markets in anticipation of a bust); then, get the near certain response from the Federal Reserve; i.e., another perhaps even bigger round of easy money policies, and maybe investors will be looking to overweight their portfolios with the reciprocal of central bank credibility instead of equities, forthwith.

* We will have more on this important dynamic in future posts.

http://www.forbes.com/sites/michaelpollaro/2014/10/12/central-bank-credibility-the-equity-markets-and-gold/

Gold Price Forecast: How the Yellow Metal Will Reach $5,000 per Ounce By Peter Krauth

By: Money Morning

September 10, 2014 at 17:20 PM EDT

A few years ago I issued a gold price forecast of $5,000 an ounce. I still believe that's a realistic price target - and now prominent gold mining experts are following suit. Rob McEwen, founder and former chair and CEO of GoldCorp, said in a recent interview, "I'm a long-term believer in gold and I see it ultimately getting to $5,000 an ounce." The post Gold Price Forecast: How the Yellow Metal Will Reach $5,000 per Ounce appeared first on Money Morning - Only the News You Can Profit From .

Gold price forecast, Sept. 10, 2014: In April 2010 I made a somewhat controversial prediction that gold would reach $5,000 an ounce. I still believe this to be a realistic price target - and now prominent gold mining experts are following suit.

Rob McEwen is more than qualified in the realm of gold mining - he's the founder and former chairman and chief executive officer of GoldCorp Inc. (NYSE: GG), a $20 billion Canadian gold miner and the world's largest by market cap.

And in an interview on CNBC's "Fast Money" in August, McEwen said "I'm a long-term believer in gold and I see it ultimately getting to $5,000 an ounce. Anything short of that, I wouldn't be hedging."

McEwen expects gold to hit his $5,000 target within the next three to four years.

And I agree.

A look at the metal's recent history shows how McEwen and I arrived at this gold price forecast...

Price History Shines a Spotlight on Gold's Potential

After a decade-long run up, gold's price peaked in September 2011 at $1,900. It's since off by about a third and has been languishing in the $1,300 range for nearly a year and a half.

That's caused many to claim that gold's bull run is over.

But others, including me, believe it's only consolidating before it finally resumes its climb much higher.

That's exactly what happened to the secular gold bull market in the 1970s, when despite a 50% correction that took it from $200 down to $100, gold managed a spectacular run from about $37 to an eventual peak of $800 per ounce. That produced a bull market return of more than 2,000%.

And now a few key catalysts are lined up to drive gold prices higher once again...

Gold Price Forecast: Gold Will Hit $5,000 on These Drivers

A number of fundamental drivers are still firmly in place that will ensure gold reaches new heights:

• The extended low gold price has caused many gold producers to shutter unprofitable operations, crimping gold output and limiting supply.
• Fewer gold discoveries have been made, despite massive exploration budget increases since the start of the 2001 gold bull.
• Producers are resorting to "high-grading" - favoring higher-grade ores over lower-grade ones just to turn a profit.
• Central banks have been net buyers of gold for the past four years, and official sector gold sales have slowed markedly.

Other drivers that could spark higher gold prices include ongoing geopolitical risks, a currency/inflation crisis, and an eventual announcement by China of its new (much higher) level of gold reserves, among others.

Even at the 2011 peak of $1,900, gold's run from 2001 at $256 was still "only" a 640% gain.

And keep in mind that a gold price forecast of $5,000 an ounce would actually be an 1,800% return, which is still below that of the 1970s.

Consider too that the fundamental drivers this time around are more powerful by an order of magnitude.

Come to think of it - $5,000 gold may end up being rather conservative.

Read more at http://api.wnd.com/market-overview/#3KCSr1Li1qTqZkXE.99

Only A New Gold Standard Will Save The U.S. Dollar - Steve Forbes

(Kitco News) – A weak U.S. dollar is a threat to the global economy and the only way to stop the greenback’s decline is to reintroduce a gold standard, said media tycoon, Steve Forbes.

Forbes, the editor and chief of Forbes Media, was one of the keynote speakers at the annual Freedomfest conference in Las Vegas, an annual convention that looks to gather free minds for open discussions on politics and the economy.

In an interview with Kitco News’ Daniela Cambone, Forbes talked about gold’s role it the U.S. economy, which is also highlighted in his latest book MONEY: How The Destruction Of The Dollar Threatens The Global Economy And What We Can Do About It.  He said to stop the decline in the U.S. dollar it only makes sense to link it to gold.

Forbes said different currency valuation methods have been tried for “more than 4,000 year,” and experience shows that having a gold standard is the way to go. He added a gold standard “done right” provides stability and value when it comes to money supply.

Steve Forbes, the editor and chief of Forbes Media, talks to Kitco News at Freedomfest 2014 in Las Vegas

“Just as scales measure weight, money should measure value and it does that best when it has a fixed value,” he said. “Nothing else works.”

Although Forbes said that it is only a matter of time before the U.S. economy reverts back to a gold standard, it will take a dramatic shift to bring the change about because a big government prefers a weaker U.S. dollar. However, he sees some big changes on the horizon.

“A weak currency always means a stronger government and a weaker private sector,” he said. “I think people are looking forward to the elections. I think there are going to be some very big changes in our mid-term elections in November and that is going to set the stage for some very interesting showdowns in 2015.”

Also not helping the decline in the dollar is the continued action by the Federal Reserve. Forbes has been critical of the U.S. central bank and again said despite the new leadership from Chair Janet Yellen, it is still “rudderless.”

“(The Fed) has no appreciation for the need for a stable U.S. dollar,” he said. “She does not get it any more than (former Chairman Ben) Bernanke did.”

Although Forbes remains critical of the Fed, he admitted it is good the central bank will eventually exit its monthly bond-purchase program. On Wednesday, minutes from the June Federal Open Market Committee meeting revealed that the committee members favor exiting their quantitative easing strategy by October.

Looking at the gold market, Forbes said he is not expecting to see a significant rally in the yellow metal, unless geopolitical tensions rise out of control.

“Barring some international crisis, I think gold will be treading water as the Fed stops quantitative easing, as people get geared up for higher interest rates,” he said. “I think gold’s play will wait for a while until the Fed does something crazy again.”

http://www.forbes.com/sites/kitconews/2014/07/10/only-a-new-gold-standard-will-save-the-u-s-dollar-steve-forbes/

Fear of post-poll price drop draws people to sell gol

KOLKATA: The anticipation that gold prices will fall because of a stronger rupee after the elections has triggered a spate in the sale of household gold. Scrap gold movement has picked up in the last three weeks, improving the supply of the metal in the market to meet the orders booked during Akshaya Tritiya. 

Read more at:
http://economictimes.indiatimes.com/articleshow/35100734.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

2250 tons or 40% of world's gold passes through Dubai

Dubai became the biggest transit city for gold in the world last year with around 40 per cent of the global physical gold trade passing through the city at 2,250 tonnes, according to the executive chairman of theDubai Multi Commodities Centre Ahmed bin Sulayem speaking at the opening of the annual Dubai Precious Metals Conference today.

‘The Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum set us a target of 50 per cent when the DMCC started in 2002 and we are still a little short,’ he said. ‘Gold worth a total of $75 billion was moved through Dubai in 2013.’

African summit

The theme of the conference this year is African engagement. Mr. Bin Sulayem commented that out of the 8,300 companies employing 89,000 staff in the DMCC there are 633 from Africa. Both gold and diamonds from Africa are processed in Dubai.

The key address this afternoon came from gold industry veteran John Hathaway from Toqueville Asset Management in New York who has $2 billion under his management. He expressed ‘confidence in the gold price resuming its upward path because of the ‘architecture of the gold sector and monetary policies around the world.’

However, he warned of third party risk even in allocated gold accounts where the bank’s assets were likely to be seized, and suggested non-banking institutions were better places to hold gold.

In his view the ‘architecture of the gold sector’ is liable to breakdown at some point due to ‘complex and arcane leasing processes’ and the ‘leverage of paper against physical gold’.

No forecast

That said he would not give a gold price forecast, let alone try to time one. Maybe he is just tired of being wrong as are many gold commentators. The last bull throwing in the towel is usually a very positive indicator.

Next up was the president of the American Business Council of Dubai & the Northern Emirates, Ramsey B. Jurdi with a stern lesson of how US sanctions on Iran were also designed to impact local businesses if they traded in precious metals with Iranians. Basically they would have the same sanctions imposed on them, preventing US dollar transfers, for example and business with US entities.

Maybe the atmosphere of the DPMC was a little subdued this year after the gold price falls of 2013 but the audience was up from 350 to over 500, a better reflection perhaps of the strength of the bullion trade in Dubai.

http://www.albawaba.com/business/dubai-gold-trading-566861

Hedge funds bullish gold bets surge to 13.8m ounces

Net long positions in gold amassed by large investors jump 12.5% to a more than one-year high

The gold price ended higher Friday after bullish positions held by large investors soared again.

By the close of regular trade on the Comex division of the New York Mercantile Exchange, gold futures for June delivery – the most active contract – rose to $1,335 an ounce but remained sharply off for the week.

On Monday the metal hit a high above $1,380, the best level since June and up 14.8% since the start of the year.

Long positions – bets that the price will go up – held by so-called managed money increased to 151,939 lots in the week to February 18 according to Commodity Futures Trading Commission data released after the close of business on Friday.

At the same time short positions, indicating weaker prices ahead, were cut by 7,563 to just under 13,510, which translates on a net basis hedge funds holding 138,429 lots or 13.8 million ounces, the highest in more than a year.

The 12.5% jump was the sixth week in a row that large investors increased bullish positions and more significantly it showed fresh buying, compared to the increases of previous weeks which were to cover short positions.

In December 2013 longs fell to a paltry 26,774 lots while shorts held by large investors peaked at more than 80,000 lots, the highest since 2007, back when gold changed hands for $700 an ounce.

It's not only gold derivatives that are finding favour from the smart money in 2014.

Investors in gold-backed ETFs are also returning to the market in droves

Investors in gold-backed ETFs are also returning to the market in droves after 2013 saw net redemptions of a staggering 800 tonnes.

Holdings of SPDR Gold Shares (NYSEARCA: GLD) – the world’s largest gold ETF holding more than 40% of the total – on Friday shot up 4.2 tonnes, bringing year to date gains to 18.75 tonnes.

While the additions have been fairly modest it is in sharp contrast to last year when GLD recorded only 17 days of inflows over the course of the 12 months and almost 540 tonnes left the fund.

In the week to 14 March global gold ETF holdings rose 12.3 tonnes the biggest move since November 2012, taking total holdings to 1766.4 tonnes, the highest level since December 27 and more than 30 tonnes above the lows for the year.

Gold bullion holdings in global ETFs hit a record 2,632 tonnes or 93 million ounces in December 2012.

Image of traders at Sao Paulo stock exchange by Rafael Matsunaga

http://www.mining.com/hedge-funds-bullish-gold-bets-surge-to-13-8m-ounces-81404/

Gartman: This could send gold prices soaring

Gold Prices Today Soaring on the "Ukraine Effect"

SPDR GOLD TRUST ETF

NYSE: GLD

Mar 03

Price: 130.29 | Ch: 2.67 (2.0%)

Gold prices today (Monday) hit a four-month high, surging over 2% on fallout from the Ukraine-Russia conflict; silver prices climbed alongside.

The yellow metal lost 28% in 2013, logging its first annual loss in 13 years. Behind the plunge was the U.S. Federal Reserve's decision to scale back its bond-buying program; however, gold has begun to steady since.

Gold has rebounded 13% so far this year, earning bullion the title of the third-biggest gainer in 2014 behind coffee and lean hogs, according to the Standard & Poor's GSCI Spot Index of 24 commodities.

In the week ending Feb. 25, hedge funds and other money managers upped their net-long positions on gold to 113,911 contracts - a 25% increase - marking the highest since December 2012, according to data by the U.S. Commodity Futures Trading Commission.

And today, the precious metal is headed for its biggest daily gain since Jan. 23.

• Gold futures for April delivery rose 2.4% to $1,353.80 an ounce on the COMEX division of the New York Mercantile Exchange.
• Gold prices hit $1,355 an ounce - the highest for a most-active contract since Oct. 30.

Behind today's gains were tensions that heavily mounted over the weekend between Russia and Ukraine. Here's why the conflict is having such a significant impact on gold prices today...

Ukraine Conflict Lifts Gold Prices

On Sunday, Ukrainian Prime Minister Arseniy Yatsenyuk said his country was "on the brink of disaster" after the Russian parliament approved use of military force in the country.

Russian forces are already on Ukrainian soil. This morning, the Ukrainian State Border Service said that "the pressure from the Russian military" has significantly increased and that Russia is massing armored military vehicles on its side of a narrow sea crossing close to eastern Crimea.

In response, the United States and other major nations are considering imposing sanctions, according to Secretary of State John Kerry on Sunday. U.S. President Barack Obama warned Russia not to intervene, stating that the United States stands by Ukraine.

Gold prices are reacting on the news as investors look to gold's staying power in times of economic crisis. Unlike currencies, precious metals supersede country and governmental boundaries.

And currencies are indeed suffering at the hands of the Ukraine-Russia conflict today. Stock futures are looking grim, with the Dow Jones Industrial Average dropping 1.10% (179.81 points) so far on the day, the S&P 500 down 0.72% (13.43 points), and the Nasdaq Composite down 0.88% (38.03 points).

"The uncertainty surrounding Ukraine could push gold prices higher in the next few weeks... although diplomatic and political solutions are going to be sought... a lot will also depend on investor positioning," Societe Generale analyst Robin Bhar said to Reuters.

Gold prices today aren't the only safe-haven investment getting a boost from the conflict. Look at these other noteworthy increases...

http://moneymorning.com/2014/03/03/gold-prices-today-soaring-ukraine-effect/