Gold Rush From Dubai to Turkey Saps Supply as Premiums Jump

By Glenys Sim April 30, 2013

Surging demand for gold from Dubai to Istanbul has pushed physical premiums in the region to levels not seen in years as the biggest price slump in three decades lures consumers, according to MKS (Switzerland) SA.

Premiums paid by wholesalers and bulk buyers in Dubai to secure a 1 kilogram bar of bullion are being quoted between $6 an ounce and $9 an ounce over the London cash price, said Frederic Panizzutti, global head of marketing and sales at the Swiss-based bullion refiner. That compares with about 50 cents before the rout, Panizzutti, also chief executive officer of MKS Precious Metals DMCC, said in an interview from Dubai.

Gold fell to the lowest in more than two years this month on speculation that the global economy is recovering, unleashing a purchasing frenzy among coin and jewelry buyers from China to the U.S. Consumer demand for jewelry, bars and coins in Turkey and the Middle East represented about 9.4 percent of the global total last year, according to the World Gold Council. Bars have been cleared from display in the souks, according to Gerry Schubert, head of precious metals at Emirates NBD PJSC.

“Physical demand has been tremendous in a way I haven’t seen for a number of years,” said Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc., who’s worked in the industry for more than three decades. “The price collapse prompted a physical gold rush and the evidence of the extent of that is the prolonged period of high premiums that we’ve seen. Reports from the gold souks are that business is good,” Rhodes said from Dubai.

Bear Market

Prices plunged 14 percent in the two sessions to April 15, the most since 1983, and reached a low of $1,321.95 an ounce on April 16. Since then, spot bullion has rebounded 11 percent to $1,469.54 today as the surge in physical demand offset record outflows from exchange-traded products. Gold is still lower in April, heading for the worst monthly loss since December 2011 amid a bear market.

In Turkey, the fourth-biggest gold consumer last year, bullion on the Istanbul Gold Exchange traded at premiums of as much as $25 an ounce over the London spot price, something that hasn’t happened in “a very long time, we’re talking years,” said MKS’s Panizzutti.

“In the gold souk, you see some coins left over, but the investment bars are all gone from the windows,” said Schubert at Dubai-based Emirates NBD, the United Arab Emirates’ second- biggest bank by assets. Domestic retail prices moved to a premium of about $5 an ounce from a small discount before the rout, said Schubert, who has traded the metal since 1979.

Largest Center

Dubai is the largest gold-trading center in the Middle East, according to the Dubai Gold & Jewellery Group, an industry body that includes manufacturers and retailers. Trade was worth about $56 billion in 2011, up from $6 billion in 2003, according to data on the Dubai Multi Commodities Centre website.

Gold jumped 4.2 percent last week, the most in 15 months, as coin demand from mints in the U.S. and Australia to the U.K. soared. The volume for the benchmark contract on the Shanghai Gold Exchange surged to a record last week, while premiums to secure supplies in India jumped to five times the level before the slump. China and India are the world’s largest buyers.

Consumers in Singapore and Hong Kong are paying premiums of about $3 an ounce, compared with about $2 just after the rout, according to Ng Cheng Thye, head of precious metals at Standard Merchant Bank (Asia) Ltd.

‘More Patient’

“Physical metal is still not available,” Ng said by phone from Singapore. “The Chinese are on holiday these few days and at this level, the market might slow down a bit on the demand side. People are a little bit more patient now compared with two weeks ago, where everybody was rushing for physical metal.”

Chow Sang Sang Holdings International Ltd. said that jewelry sales at its 44 shops in Hong Kong more than doubled in the two weeks ended April 27 from a year ago. In China, financial markets are closed through May 1.

“It’s not just a Middle East story, it’s all across the globe,” said Panizzutti. “The fact that premiums are so high, it means that no one is making enough. We are producing 24 hours a day.”

To contact the reporter for this story: Glenys Sim at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

http://www.businessweek.com/news/2013-04-29/gold-rush-from-dubai-to-istanbul-drains-supply-as-premiums-jump

China Goes Gold Crazy. Why Now?

OP/ED 

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4/28/2013 @ 4:16PM

Spurred by a sudden drop in prices, Asians in the last two weeks have gone on a gold-buying binge.  The Indians, the world’s largest net importers of the yellow metal, have been snapping it up of course, and so have the Japanese, now concerned about a falling yen and rising inflation.  Hong Kong residents descended on the stores, but none have been so enthusiastic in stocking up on the commodity as Chinese from the Mainland. 

Mainland Chinese purchasers have been ferocious.  First, they emptied stores in their own country.  Caibai, Beijing’s largest gold merchant, had a queue 30 feet out the door on the morning of the 19^th.  “So many people in line,”remarked a customer in Nanjing, where one person splashed out 2.9 million yuan on ten gold bars each weighing a kilogram.  Retailers ran out of stock in Guangzhou.  The China Gold Association reported that on the 15^th and 16^thretail sales of gold tripled across China.  Daily sales soared to five times the usual level at one retail chain.

Volume on the Shanghai Gold Exchange, considered a proxy for the metal’s demand in China, surged, setting consecutive records of 30.4 metric tons on the 19th and 43.3 tons on the 22^nd.  The previous record was 22.0 tons on February 18 of this year.

As Chinese emptied the shelves in their own country, they also went south and swarmed shops in Hong Kong, sometimes in groups.  Chow Tai Fook, the world’s largest jeweler by market capitalization, said some stores popular with Mainland Chinese ran out of gold bars and that demand had not been as strong since the late 1980s.

Demand for “9999” bullion—99.99% pure gold—was five times normal according to Haywood Cheung Tak-hay, president of the Chinese Gold & Silver Exchange Society.  His organization effectively ran out of holdings as members tried to meet supply shortfalls.  “In terms of volume, I haven’t seen this gold rush for over 20 years,” Cheung told theFinancial Times.  “Older members who have been in the business for 50 years haven’t seen such a thing.”

What’s behind the unprecedented surge in buying? Obviously, the Chinese took advantage of a dip in prices—the deepest since 1983—but they kept on buying as the commodity clawed back some of its losses.  

Unlike the Japanese, they cannot be worried about a plunging currency.  Nor can the Chinese be troubled by climbing prices.  For one thing, the consumer price index has been signaling lower Chinese inflation in the months ahead.  In March, the CPI increased just 2.1% from a year earlier, compared to a 3.2% rise in February.  Of special importance were food prices, up 2.7% last month versus a 6.0% spurt the month before.  In Q1, prices increased just 2.4%, about the same rate as the previous quarter. 

Although Beijing’s CPI undoubtedly understates inflation, it nonetheless shows a general weakening of price pressure, something mirrored in the continually falling producer price index.  Because China is still a manufacturing-based economy, the fall in the PPI means the country is actually suffering deflation.  Producer prices fell 1.6% in both January and February and 1.9% in March.

A tumbling PPI is due in part to weakening commodity prices, but global prices are falling largely because of the stumbling Chinese economy.  And that brings us full circle because gold prices plunged on the 15^th in part because China’s National Bureau of Statistics had reported that Q1 GDP growth came in at 7.7%, well below consensus estimates of 8.0%.  

Moreover, the global sell-down on the 15^th—stocks took a beating too—would have been worse had analysts focused on Chinese electricity statistics, manufacturing indexes, and corporate results, all pointing to an economy growing not at 7.7% but in the low single digits. 

It’s probably not a coincidence that the Chinese were the biggest buyers of gold in the last two weeks and, aside from North Korea, China has the most fragile economy in East Asia at the moment.  The concern about the economy is evident throughout Chinese society. 

Especially at the top.  On Thursday, Chinese state media reported that the Politburo Standing Committee convened a special meeting to consider the economy.  Normally, the body takes up economic matters only at fixed times, the beginning, the middle, and the end of a year.  The last time it met to discuss the economy in an April was in 2004.

No wonder the Chinese are now stockpiling shiny yellow ingots, coins, and bracelets.

Follow me on Twitter @GordonGChang

http://www.forbes.com/sites/gordonchang/2013/04/28/china-goes-gold-crazy-why-now/

Bargain hunters go for gold

By LEANNE GOH

Customers at a gold shop in Bangkok’s Chinatown. The biggest plunge in the price of gold in 30 years two Mondays ago saw bargain hunters worldwide rushing to snap up gold. — EPA

IT was probably a combination of savvy Malaysian bargain hunters and the herd mentality that wiped out the supply of gold wafers at the jewellers recently.

The biggest plunge in the price of gold in 30 years two Mondays ago took everyone by surprise, even the local dealers who monitor gold prices daily.

“This round, we were caught by surprise. And the demand is quite unprecedented,” shares a shareholder of a public-listed chain.

He attributes the pent-up demand to high gold prices over the past five years and the “kiasu” mentality of Malaysians.

When I checked in with friendly store manager K last Monday, I was too late to pick up any gold stamped bar of any denomination.

“You’ll have to wait till next week when we’ve replenished,” he says.

The demand should come as no surprise as the price is a bargain – down by more than 20% from its high of US$1,920.30 (RM5,819.20) per ounce in September 2011.

It is about 13% lower than the US$1,564.60 (RM4,741.30) preceding the plunge, which has attributed to the aggressive selling of gold by speculative traders and potential selling by the central banks of Cyprus and other weak eurozone economies.

K’s investor clients have been snapping up the gold wafers. He has been receiving calls from them to buy and to book.

Another retailer registered a spike in its Facebook views and its retail gold price was “shared” threefold the normal rate.

Although gold dealers make more when the price of gold is higher – the mark-up from wholesale to retail is about 15% to 20% – the surge in demand causing a shortage of stock is a happy problem.

Factories are working round the clock to mint the bars or wafers that usually come in a grammage of 1, 2, 5, 10, 20, 50 or 100.

The fastest moving ones are those 20g and above. A 50g stamped bar (of 999 gold) that cost RM9,750 two Mondays ago dropped to RM8,750 the next day and RM8,250 on Thursday. In the past week, it has stabilised at around RM8,500 (or RM170 per gramme).

A manager of a chain describes the scenes at her stores as rather surreal.

“When we run out of the bigger grammage bars, the customers will just take whatever we have.

“One even swiped the whole lot of one gram bars left and started counting to buy them all. And when there’s none left to buy, customers happily turn to jewellery as second choice,” she says.

The scene in other parts of the world is similar – whether it’s the brisk sale of the Maple Leaf coins in Canada and the American Eagles coins in United States or tripled retail purchases across China.

Major local retailers report that only 10% to 20% of their customers during this period buy jewellery. They mainly go for the stamped bars, which usually make up 15% of the retailers stock at hand.

A jeweller shares that most of her outlets raked in sales equivalent to half month’s volume last weekend alone. A store in Kuantan sold one month’s worth of purchases in one weekend.

Although sales have slowed down the past week, there is still a buzz on Facebook and some customers are planning to shop this weekend once their salaries are in … and they are keeping their fingers crossed that the price stays down.

The stock is replenished every day as fresh orders are made on a daily basis; there is “no hoarding or hedging” on the part of retailers as they “cannot afford to speculate”. Besides, when they sell cheap, they buy back cheap too from dealers the next day.

If you’re thinking of buying gold jewellery, the cheapest place to shop is Kuantan, followed by Ipoh.

For a 30g necklace of 916 gold that would cost RM4,800 (excluding workmanship charges) in the Klang Valley, you could save RM600 if it was purchased in Kuantan.

Based on Thursday’s price, 916 gold costs RM160 per gramme in Kuala Lumpur, RM155 in Ipoh and RM140 in Kuantan. The reason for the discrepancy is too unwieldy to be explained here.

For gifts, many today prefer to opt for gold wafers as jewellery design is subjective in appeal and the former is a better form of investment.

“I have a client who buys a wafer for his son every birthday. He started off with 10g wafers, but over the years, with more disposable income, he now buys the 20g bars,” shares a manager.

When the price of gold is low, a good friend of mine stocks up 5g wafers for “cham cha” (tea ceremony) for her numerous nephews and nieces’ weddings.

Instead of giving thinner necklaces when the price goes up, everyone gets the same value in gold weight!

If you have deep pockets, you are better off buying “cast bars” as opposed to stamped bars for which a premium is charged for workmanship and packaging.

Cast bars (raw form) usually come in one or half kilo bars.

The purchase price is lower and you lose less when you trade them in for cash.

As a comparison based on current price, if you buy 10 pieces of 100g bars, the total cost is about RM170,000. When you trade the bars in, you stand to lose about 12% to 15%, depending on the jeweller.

But if you buy a 1kilo bar, it will cost RM145,000 and the trade-in loss is 4% to 10%.

So is gold a good investment? Many believe it is a good hedge against inflation but there are economists who disagree.

An old friend who has been professionally buying and selling gold for two decades says investment is a very personal thing. He himself has very limited gold investments but has been putting his money mainly in property.

His view is that gold is a good hedge against inflation but one should buy gold not to make money.

“Buy it so as not to lose money,” he says. Note: My best purchase of gold jewellery was more than 20 years ago when it cost only RM26 per gramme. But for the past 15 years, it has only seen the inside of a safe deposit box.

Feedback welcome at leanne@thestar.com.my

Gold Survey: Majority Of Participants See Higher Gold Prices Next Week

Friday April 26, 2013 12:08 PM

Following this week’s surge in gold prices, the majority of analysts in the weekly Kitco News Gold Survey expect prices to continue to rise.

In the Kitco News Gold Survey, out of 35 participants, 24 responded this week. Of those 24 participants, 14 see prices up, while eight see prices down, and two see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Many of the participants were encouraged by the unprecedented demand in the physical gold market and the influence that’s had on lifting benchmark futures prices. Because of the $100-plus an ounce rebound from last week’s lows, they see values marching higher.

“(I expect the) continuation of (a) recovery rally after (an) extreme and abnormal sell-off. The reaction of the physical market to the sell-off suggests that, far from a capitulation signaling the end of the bull market, demand remains very powerful,” said Adrian Day, president, Adrian Day Asset Management.

There others who are bullish, but said the speed of the rallies should be watched carefully. “I remain short-term positive, but get nervous at the $1,520-$1,530 level, if we get there quickly,” said Mark Leibovit, editor of the VR Gold Letter.

Those who see prices weaker said the strong bounce off of last week’s lows isn’t sustainable. “I’m bearish for next week. I see prices going back down to $1,425. We had a nice run-up, but now we’re liquidating,” said Adam Klopfeinstein, market strategist with Archer Financial Services.

The few participants who were neutral or expected range-bound prices said the market might just be in a holding period for the time being.

“The physical buying that has alleviated pressure on the paper gold markets, including the G-Sax (Goldman Sachs) retreat, will probably slow down due to speculative, margin long positions entering the futures and forward market leaving them exposed for a mini-short raid less pronounced and less orchestrated than the last bloodbath,” said Bill Goldman of 3GF Corp.

Allen Sykora contributed to this survey.

By Debbie Carlson of Kitco News dcarlson@kitco.com

http://www.kitco.com/kgs/goldsurvey_apr262013.html

Gold To Top $10,000 Per Ounce: Societe Generale

Analysts at Societe Generale are predicting that gold prices will eventually push over $10,000 per ounce.

Gold prices are heading up to $10,000 per ounce, in the view of an analyst at Societe Generale SA (PINK:SCGLY) (EPA:GLE). Albert Edwards issued a report to investors today explaining his firm’s view on gold. He said the Fed’s quantitative easing efforts have simply made the market more volatile. In fact, he believes that rapid inflation is on the horizon—but only after Americans lose confidence in their central bank, which hasn’t happened yet.

Edwards said the actions of central banks are going to keep pushing the world toward a global recession. He believes we’ve seen nominal U.S. gross domestic product growth peak in the current cycle. He also said all of these factors mean gold is a safe investment.

In the view of analysts at Societe Generale SA (PINK:SCGLY) (EPA:GLE), investing in gold is like making “a bet against central banks’ competency.” He said it’s a bet he’s still happy to take in light of “their track record.” Edwards believes that an imminent recession is more likely than an imminent takeoff, so the real gold yield will likely remain low.

n addition, Edwards referred to a note written by one of his colleagues in September 2011. According to that chart, the “fair value” for gold would now be more than $11,100 per ounce, which would be the price at which the U.S. monetary base would be fully gold-backed.

Societe Generale SA (PINK:SCGLY) (EPA:GLE) analysts said earlier this month that they believe gold prices this year will average around $1,500 per ounce but then gradually fall to $1,375 by the end of the year. That’s a 15 percent decrease, compared to Bloomberg’s consensus of $1,752 per ounce by the end of the year. They believe gold is “in bubble territory” because investors have pushed it up sharply over the last decade, especially amid concerns about the actions of central banks causing inflation.

Edwards pointed out in this week’s note that gold corrected 47 percent between 1974 and 1976 before it rose more than eight times to hit $887 per ounce in 1980. It’s to be expected that a steep correction in the price of gold comes before a parabolic move.

So in his view, this year may be the year of correction in gold prices before they skyrocket.

http://www.valuewalk.com/2013/04/gold-will-hit-10000-an-ounce-says-socgen/

Gold Shortage In Asia: Chinese Gold Exchange Rush-Ordering Supplies From Europe To Meet Heightened Demand

By IBTimes China | April 25 2013 10:38 AM

Translated by Sophie Song

With Asian gold supplies depleted because the recent drop in prices spurred massive demand, the Chinese Gold & Silver Exchange Society is rush-ordering four times its usual amount of gold bars from Switzerland and London to meet the increased demand, according to 21cbh.com.

“Stimulated by the plummeting gold price last week, the gold transactions in Hong Kong have been very active,” the president of the exchange, Zhang Dexi, said. “Daily total transaction multiplied to 160 billion Hong Kong dollars ($20.6 billion). “All of our gold stock is gone now,” Zhang said, “But hopefully by purchasing from Europe, we can satisfy the demand for gold here in Asia.”

Buyers may have to wait, however, until early May to get more gold to buy.

"It’ll be the end of the month before anymore gold makes its way to Hong Kong,” said a dealer of the Hong Kong-based exchange. “Customers will have to be patient, because it will take a week or two to fulfill their orders.”

Due to the demand in Asia, the global gold price has bounced back from $1,320 per ounce last Monday to as high as $1,450 during Asian trading sessions.

“In every corner of Hong Kong, local residents and tourists from mainland China alike are buying up anything gold,” Huang Feichang, president and CEO of Luk Fook Jewelry, said. “I have never seen anything like this in my 30 years in the business.”

The surprising surge of buying has created a premium in some Asian markets.

“The demand for gold in Asia far exceeded the expectation of global investors,” Albert Cheng, the managing director of the World Gold Council, Far East, said. “The premium on gold in Hong Kong and Singapore is as high as $3 per ounce, an 18-month high.”

http://www.ibtimes.com/gold-shortage-asia-chinese-gold-exchange-rush-ordering-supplies-europe-meet-heightened-demand#

Gold Advances as Central Banks Join Consumers in Buying Bullion

By Glenys Sim - Apr 25, 2013 6:25 AM GMT+0400

Gold climbed for the seventh time in eight days, rebounding from the biggest slump in three decades, as rising central bank and physical purchases countered falling exchange-traded product holdings.

Gold for immediate delivery rose as much as 0.4 percent to $1,437.22 an ounce, and traded at $1,436.78 by 10:21 a.m. in Singapore, reversing a 0.3 percent decline. Gold reached $1,439.30 on April 22, the highest level since April 15, the second day of a 14 percent slump.

Russia and Kazakhstan expanded gold reserves for a sixth straight month in March, according to International Monetary Fund data. The volume for the Shanghai Gold Exchange’s benchmark contract has been more than four times last year’s daily average every day since April 16, while sales of gold coins by the U.S. Mint are heading for the highest total since December 2009. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, are set for the largest monthly decline since trading began in 2004.

“Some of the central banks might take this drop as an opportunity to buy as some physical players did,” said Dominic Schnider, head of commodities research at UBS AG’s wealth- management unit. “The ETF selling, which is likely to continue in the short term, just caps the price.”

Bullion has fallen 14 percent in 2013 after climbing for 12 years through 2012, tumbling to a two-year low of $1,321.95 on April 16. Prices are still 8.1 percent below the April 11 close of $1,561.45 an ounce that preceded the slump in two sessions through April 15.

Gold for June delivery rose as much as 0.9 percent to $1,436.50 an ounce on the Comex inNew York, before trading at $1,435.40. The U.S. Mint’s gold coin sales totaled 196,500 ounces as of yesterday, up from 62,000 in March, data on the mint’s website show. The amount for all of December 2009 was 231,500 ounces. The mint said on April 23 it ran out of its smallest American Eagle gold coin.

Cash gold of 99.99 percent purity added 1.4 percent to 294.88 yuan a gram ($1,486.10 an ounce) on the Shanghai Gold Exchange, China’s largest spot bullion market. The contract’s daily volume has topped 20 tons since April 16, compared with last year’s average of about 4.7 tons, exchange data compiled by Bloomberg.

Cash silver gained 0.2 percent to $23.2338 an ounce, while palladium added 0.1 percent to $669.75 an ounce. Spot platinum increased 0.3 percent to $1,434 an ounce, trading below gold.

To contact the reporter for this story: Glenys Sim at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

http://www.bloomberg.com/news/2013-04-25/gold-advances-as-central-banks-join-consumers-in-buying-bullion.html

U.S. Mint suspends some gold coin sales after demand surge

NEW YORK | Tue Apr 23, 2013 6:47pm EDT

(Reuters) - The U.S. Mint said it has suspended sales of its one-tenth ounce American Eagle gold bullion coins as surging demand after bullion's plunge to two-year lows depleted the government's inventory.

This marks the first time it has stopped selling gold product since November 2009, dealers said. A spokesman for the Mint did not return calls seeking confirmation of that milestone.

The U.S. Mint, one of the world's leading gold and silver coin producers, halts coin sales from time to time as it runs out of coin blanks to meet increases in demand.

So far in April, the U.S. Mint has sold 175,000 ounces of American Eagle gold coins, putting it on track to challenge a high of 231,500 ounces set in December 2009.

Since last Monday, U.S. gold coins have been flying off dealers' shelves asretail investors snap up bargains after bullion's historic plunge in price and into bear territory.

Michael Kramer, president of Manfra, Tordella & Brookes (MTB), a major U.S. coin dealer in New York, has been inundated by orders from existing and new wholesale and retail customers.

"It's panic. This is one of the busiest times in quite a while. People think gold's at the lows and they want to take advantage," he said in an interview.

In contrast, investors bought bullion coins after the 2008 economic crisis for fears that they might miss out on gold's next rally.

Even after a small recovery this week from two-year lows of $1,321 per ounce, gold prices are down 16 percent year-to-date and are off 26 percent from the record highs of $1,920 per ounce set in September 2011.

In a memo to its authorized purchases sent late Monday, the Mint said that it continues to offer the one-ounce, one-half ounce and one-quarter ounce coins.

While the one-ounce American Eagle gold coins remain the most popular size, year-to-date demand for the one-tenth ounce coins has been up over 118 percent compared to the same period in 2012, the Mint said.

The spike in gold coin sales often reflects a desire among mom-and-pop investors to have physical metal as a store of value in troubled economic times.

Many analysts expect bullion to post its first annual loss after 12 consecutive years of gains as investors seek out better returns in other assets. U.S. equities have hit record highs.

Gold exchange-traded funds (ETF) have also been hit by a big wave of redemptions as institutional investors pull cash out of precious metals and retail investors seek physical coins and bars.

In addition, the Mint has been allocating its silver coins since late January due to strong demand and limited inventory.

(Reporting by Frank Tang and Josephine Mason; Editing by Gary Hill and Bob Burgdorfer)

http://www.reuters.com/article/2013/04/23/us-usmint-gold-suspension-idUSBRE93M1HE20130423

Gold producer St Barbara moves to ease fears amid price slump

RHIANNON HOYLE 

From:Dow Jones 

April 23, 2013 1:58PM

GOLD producer St Barbara said it was confident its Australian mining operations would remain profitable despite sharp price falls for the commodity in recent weeks.

The gold market recorded its largest-ever two-day selloff this month, knocking the precious metal to its cheapest price in two years.

"Each of the company's gold operations have been reassessed in response to the recent and significant decline in the gold price, and all are expected to achieve satisfactory returns at current gold prices [around] US$1400 per ounce," Chief Executive Tim Lehany said in a statement today.

Early trading had spot gold at US$1422.70 an ounce.

The company's struggling Pacific operations, meanwhile, have increased production volumes and lowered costs in recent months, Mr Lehany said.

St Barbara acquired the Simberi gold mine in Papua New Guinea and the Gold Ridge gold mine in the Solomon Islands in its takeover of Allied Gold last year.

In a third-quarter production report published today, the company said it expected to produce between 366,000-386,000 ounces of gold in the fiscal year ending June 30, narrowed from a previous estimate of 371,000 to 401,000 ounces.

Gold output in the three months ended March 31 rose 8 per cent to 86,818 ounces.

http://www.theaustralian.com.au/business/mining-energy/gold-producer-st-barbara-moves-to-ease-fears-amid-price-slump/story-e6frg9do-1226627090449

Indian gold rush amid plummeting prices

With prices crashing, there is frenzied buying ahead of a festival deemed auspicious for investment by many Hindus.

Deborshi Chaki Last Modified: 21 Apr 2013 12:40

Mumbai, India - With gold prices at their lowest in years, Indians are flocking to shops to buy jewellery ahead of Akshaya Tritiya, a Hindu and Jain holy day believed to bring good luck and success.

"My husband got me a Burmese ruby a year ago from Yangon, but I did not make a ring out of it because gold prices were rising constantly. Now I can make my gold ring with the ruby in it," Kolkata housewife Sarbari Majumder told Al Jazeera.

The price of gold in the city has dropped by nearly $100 per 10 grams in just one week.

"I think it's a great opportunity to invest in gold now - and, being in India, gold can never go to waste," said 28-year-old financial analyst Hamsini Amritha.

"I have been saving to buy gold jewellery for some time now, but was reluctant to buy due to high prices," the Chennai-based analyst told Al Jazeera.

The latest decline in gold prices globally has been the sharpest in the past three decades. “Globally gold prices are going down mainly because people believe that the global economy is going through ‘deflation’ and holding gold is no longer necessary to hedge against inflation” says Chirag Mehta, Fund Manager, Commodities at Quantum Mutual Fund, a Mumbai based Asset Management Company.

“There are also concerns that few a European countries beginning with Cyprus and followed by Spain and Greece will be forced to sell ‘gold’ as part of their restructuring plan” explains.“The worry is that all that extra gold flooding the market will dampen demand as well as prices globally and this has triggered a sell off ” he says.

Gold fetish

But for Indians with an indomitable fetish for gold, the falling prices have come in as a boon and they are making the most of it ahead of Akshaya Tritiya. Its the birthday of the sixth incarnation of Lord Vishnu and one of the four most important days in the Hindu calendar. This year, it falls on May 13. It is also the day on which Hindus believe the sacred River Ganges descended to Earth from Heaven.

While many of the faithful believe spiritual and charitable work undertaken on this day will be specially blessed, many retailers and others have pushed a more worldly agenda, and gifts, particularly jewellery, are often exchanged.  As price of gold fell from its 2011 peak at more than $1,800 an ounce to about $1,400 an ounce in the past week, jewellery retailers in India started to report a surge in sales - and expect volumes to continue to rise in the coming months. "Although in the past, retail demand for gold has been relatively unaffected by prices, we did see some drop in demand of late because prices were at all time high," said Rahul Singh, head of marketing at the Shree Ganesh Jewellery House national chain. "It appears that consumers were waiting for gold prices to correct. In the past week alone we have seen a huge demand in all our stores across the country." The term "Akshaya" means "infinite", or "never diminishing", and gold bought and worn on the day of Akshaya Tritiya is said to bring "never diminishing" good fortune. As such, retailers step up their marketing campaigns around the day. Shree Ganesh, for example, is one of several outlets hoping to entice customers through their doors by offering free gold coins with purchases over set amounts. Other retailers are also bullish over demand, and said such a sales environment may last until October - the beginning of wedding season and the time of Hindu festivals including Dusshera, Durga Puja and Diwali. "What we are seeing currently in India is unprecedented," said Rajesh Mehta, Chairman of Rajesh Exports, one of India's largest jewellery retailers "In the past one week alone we have sold ten times what we normally sell. If the prices remain at the current levels or go down further we may see a new wave of buying," he said. Businessman Datta Phuge recently made headlines with his 3kg, 22-carat gold shirt - worth $240,000 [AFP] For centuries, gold has been synonymous with social status and prestige in India and the precious metal has been an important part of social ceremonies. It is often passed on as inherited legacy. India is believed to be the world's top buyer of gold, accounting for close to 20 percent of global demand. According to the World Gold Council, India imported 864 tonnes last year - even though gold prices were at a near unprecedented level. "It's a question of mindset," explained Naveen Mathur, a senior commodity analyst with the Mumbai-based Angel Broking. "Irrespective of the returns based on prices, gold has always been the top priority for most Indian investors, who prefer it over anything else. "Gold prices have had an unprecedented 12-year bull run until last week, hence investing in gold has indeed paid off for a large number of investors, many of whom had been investing in gold for a long time." India has imported gold worth $38 billion in the fiscal ending march 2013.. And since payments for gold imports constitute a major component of India's current account deficit - consistently hovering at around 4.3 percent of GDP - it is often blamed for the steady decline of the Indian rupee against the dollar seen during the past two years. This in turn, analysts believe, has negatively impacted India's export competitiveness and its investment grading. "The Indian government is keen to reduce gold imports and the official view has been that Indians are spending way too much precious foreign exchange to buy gold, which is adding to the deficit," said Angel Broking's Mathur. Low financial literacy Though this view has been disputed, India's government increased import duty on gold from four percent to six percent in January this year. Analysts says there is a good chance that duty may increase further if imports don't decline. However, given that the price of gold had been surging until very recently, imports in April were expected to drop by a vast 25 per cent - to 53 tonnes against 71 tonnes in April 2012. This is likely to be a blip if prices continue to drop, say observers. "We normally keep inventory for three months but if the current demand sustains, then we may have to replenish it sooner," said Shree Ganesh's Singh. Whether or not imports return to their previous high levels, the reasons behind India's seemingly insatiable quest for gold are not hard to fathom. Afetr India's economic liberalisation began in earnest in 1991, its economy has grown at a rapid pace and millions have found themselves with much higher disposable incomes. Some analysts say, despite rising incomes, many Indians have very little financial literacy, preferring to keep savings in bank deposits or to stockpile gold. "Most Indians tend to have very limited vision when it comes to investment options, which is one reason why India has one of the highest domestic savings rate in the world and has the biggest privately held gold reserves," said Naveen Mathur of Angel Broking. Awareness of investment vehicles such as Exchange Traded Funds, where investors can tap into gold prices without physically buying it themselves is also low. Clearly, there are no definite answers to India's vexed "golden question". But chances are that gold will not lose its safe haven status here - or go out of fashion in a hurry. Follow Deborshi Chaki on Twitter: @deborshichaki

Source: Al Jazeera

After the fall, it is time for gold rush

WGC data show that gold investment in bars, coins and exchange-traded products have dropped. 

WGC data show that gold investment in bars, coins and exchange-traded products have dropped

The dramatic drop in domestic and international gold prices over the past 10 days has shaken investor confidence in the yellow metal, even as the gold-buying-brigade throngs jewellery shops. Does this crash signal the end of the rally that began at the turn of this millennium?

To answer that question, we need to look at what drove the gold prices higher from the low of $254 an ounce in 2001 to the peak of $1,920 in 2011. Data disseminated by the World Gold Council show that it was not the demand for gold jewellery, but the demand for investment that spurred this rally. Gold jewellery purchases, which accounts for more than 40 per cent of the demand, is on the wane, with the galloping prices perhaps dampening the fervour.

The demand for jewellery is down from around 2,500 tonnes in 2003 to 1,908 tonnes in 2012. But investment demand for gold bars and coins has increased from 304 tonnes to 1,256 tonnes during this period. Similarly, the demand for gold from Exchange Traded Funds has doubled between 2004 and 2012.

What fuelled the rally?

With many of the emerging economies entering a growth phase from 2003, inflation too moved higher, making investors zero in on gold as a hedge. That the dollar was on a downward spiral in this period, with the dollar index losing 40 per cent of its value, also helped. The sharp increase in gold prices attracted investment funds in search of high-yielding assets, fuelling the price increase.

Another group that can stoke gold prices is the speculators (hedge funds, investment funds, trading companies and so on), which take a leveraged bet on prices through futures and options traded on exchanges. This market is many times the size of the gold spot market and can take prices above their intrinsic value in a vortex of buying. A classic example was the rise seen in crude oil prices in mid-2008.

One way to track the moves of the gold traders is through the positions they hold in the futures and options on exchanges. These positions surged from 2003 to a peak towards the end of 2011. But trading interest has been down by a third since then. This herd behaviour is typical among traders who chase assets that are rising and move out equally fast once they sense that the price has peaked.

Investment funds and fund managers out to make profits for their investors too lose interest in an asset that is declining or trending sideways. With international gold prices going sideways over the last two years, delivering 10 and 5 per cent return in 2011 and 2012 respectively, many investment managers are also parting with their gold holding.

The trigger for the current bout of sell-off was the news that Soros Fund Management LLC sold half of its holding in SPDR Gold Trust, a gold ETF, in the fourth quarter of 2012. Another big investor, Bacon’s Moore Capital Management, sold its entire holding in SPDR and reduced stake in other gold ETF products. Goldman Sachs slashed its forecast for gold prices in 2014 to $1,350 from the previous $1,490. Deutsche Bank, Barron’s, and Nouriel Roubini are some of the others who have announced that gold prices need to decline.

That gold is losing its lure for investors is also reflected in WGC data, which show that gold investment in bars, coins and exchange-traded products dropped 8.3 per cent to 424.7 tonnes in the fourth quarter of 2012 from a year earlier. For 2012, investments were down 9.8 per cent to 1,534.6 tonnes.

Not the end of the road

With speculators and investors in search of higher returns moving away from gold, does it mean that the prices are now going to continue falling? No, because there are many factors that are still supportive of gold prices.

Gold jewellery demand that was subdued due to higher prices can revive with the price decline. Inflation continues to be a concern in most emerging economies and depreciating value of fiat money will make many investors park at least part of their money in gold or gold-backed assets.

Central Banks will have to continue to increase their gold holdings in a bid to diversify their risk from a weak dollar and euro.

Strength of the dollar is ephemeral since the U.S. government has to resolve how to deal with the debt ceiling in the coming months. Expenditure cuts are likely to affect the nascent growth witnessed there. Sovereign debt troubles of euro-zone countries such as Italy, Greece, Spain and Cyprus are far from over and any trouble there will make risk aversion soar, sending money into gold.

These factors can save the gold prices from a deep decline. But prices could now readjust and settle in a new range, perhaps between $1,100 and $1,500.

But a steep rally taking the gold back to its peak is ruled out in the coming years.

(lokeshwarri.sk@thehindu.co.in)