The case for $10,000-an-ounce gold

As gold continues its sell-off, a book by a Toronto bullion fund manager predicts better things lie ahead.

LISI NIESNER / REUTERS

The emblem of Canadian Royal Mint is pictured on a gold bar. (Jan. 16, 2013.) Germany's Bundesbank plans to

By: Adam Mayers Personal Finance Editor, Published on Sun Jun 30 2013

It’s been a dreadful stretch for gold bugs.

The past three months have seen a record quarterly drop in gold’s price. In the bigger picture, gold is more than a third below its peak of $1,900 (U.S.) an ounce, reached in 2011. Last week, the spot price tumbled anew, settling near $1,225.

Goldman Sachs now sees a price of $1,050 by the end of next year. Barrick Gold, one of the world’s biggest gold miners trimmed 100 head office jobs mostly in Toronto. And Australia’s Newcrest Mining wrote down the value of its assets by $5.5 billion.

With news like that who’s buying gold now?

Nick Barisheff, CEO of Toronto’s Bullion Management Group for one.

Barisheff runs several precious metal mutual funds, so always likes gold’s lustre. His funds have been around since 2002 and own gold, silver and platinum bars, rather than mining stocks. BMG’s holdings are stored in bank vaults and the funds are RRSP and TFSA eligible.

Barisheff is the author of the recently published $10,000 Gold: Why Gold’s Inevitable Rise Is The Investor’s Safe Haven (Wiley, $39.95). As the title boldly predicts, he sees the metal at $10,000 an ounce, and soon — within seven or eight years. The timing of the book’s release couldn’t be worse, but even so Barisheff says bullion is down, but by no means out.

“Nothing goes up in a straight line,” he said in an interview. “Every market has pullbacks, but (global) debt problems haven’t been fixed and they’re getting worse.”

His book took five years to write and walks through the history of gold and its relationship to paper money. The book’s central thesis is that, in all cases where financial systems disconnect from a gold standard as the U.S. did in 1971, politicians and central banks gradually lose fiscal discipline. The gold standard forces paper money to be backed by bullion in a vault, so limits the amount of money that can be created.

His oft-cited examples of hyperinflation include Rome, the 1920s Weimar Germany and current day Zimbabwe. Inflation in the African country reached 231,000,000 per cent in 2008. The list could also have included Argentina (1975-1991) and Brazil (1980-1994).

In the book, Barisheff argues there are five stages that lead to runaway inflation and we’re in phase three. In the first two, the gold standard is abandoned. Looser restrictions lead to more money in circulation. Inflation is low. The political focus shifts from repaying debt to using it as a tool for growth.

He believes we’re near the end of the third phase, when a steady diet of low rates causes housing and market bubbles to form and burst. Savers are punished, because savings earn less than inflation. For lack of an alternative, we all invest in the stock market through our pensions and investments. This pumps up stock prices.

In the short run, people feel wealthier because the value of their homes rises along with the size of their stock portfolios. So they borrow more and the party goes on.

The last two phases are the reckoning. Cheap money can’t stimulate any more growth and just creates inflation.

If this is so, why is gold selling off now? The main reason is the run-up between 2008 and 2011 which was caused by the expectations of inflation that didn’t materialize. Central banks flooded their economies with cheap money, but rock bottom rates — prime is at a 77-year-low in Canada — hasn’t revived the patients. With no inflation in sight, precious metals have swooned.

Last week’s slide began when the U.S. Federal Reserve signaled it may wind down its bond-buying program. That would let rates rise, further dampening expectations of inflation. But Barisheff doesn’t see much room for interest rates to go up, because he believes we’re in a cheap money trap.

“Every 1 per cent increase in interest rates adds $180 billion to the annual U.S. deficit,” he says.

The book is well worth the read for its historical perspective. It also has interesting predictions on how the retiring baby boom will affect public finances. But the book ultimately fails to convince that the worst is about to come. It pushes a single outcome while ignoring other possibilities.

Agreed that inflation is likely to rise and yes there are huge sovereign debt problems. But hyperinflation isn’t the only way it all ends.

History never repeats itself exactly. Brazil, once a basket case, is an emerging economic powerhouse. The United States and the countries of the European Union are not Zimbabwe, Bolivia or Kazakhstan. A modest tax increase and spending cuts could tame the U.S. deficit. There are signs Canadian and U.S. consumer debt is falling, suggesting more saving and less spending. Companies are sitting on piles of “dead money.” That cash is waiting to find a productive use with which to create jobs and wealth.

Barisheff keeps all of his personal investments in his funds. He does not recommend that for us, saying a portfolio with a 10 per cent gold holding is a good basic hedge. He acknowledges things may not unfold as he predicts, but firmly believes we’re headed for a period of rapidly rising prices.

amayers@thestar.ca

http://www.thestar.com/business/personal_finance/2013/06/30/the_case_for_10000anounce_gold.html

Gold Crashes Through Production Cost Levels

Published: Friday, 28 Jun 2013 | 2:19 AM ET

By: Rajeshni Naidu-Ghelani | Assistant Producer, CNBC

Gold fell to its lowest level since 2010 on Friday to under $1,200, which is what it costs many miners to produce an ounce of gold, and analysts tell CNBC that miners will be "severely" impacted if prices stay here.

Andrew Su, CEO at brokerage Compass Global Markets said the average cost of producing gold in Australia, home to some of the world's biggest gold miners, has jumped from $500 an ounce in 2007 to over $1,000 an ounce this year.

"What I believe is that the official costs, the costs in reality, are significantly higher than $1,000. So we've had quite a few gold mines close in Australia," Su said on Friday. "We've had some companies actually go bust and we've also got significant job cuts by big miners like Newcrest, Barrick, and Silver Lake Resources."

Su adds that fixed costs like paying workers are actually rising quite significantly while gold prices have fallen, adding more pressure to miners' operations.

According to industry experts, the total cost of production varies between $1,000 and $1,200 an ounce depending on the scale of a miner's operations.

"There's probably a lot more going in the background than we are hearing about. The gold companies are scrambling around," Su said. "We had some companies that have costs that are well above $1,000 and they will be feeling the pinch."

Gold's rout since April has been magnified this week with bullion on track to record its worst quarter since at least 1968 on ongoing worries about the tapering of quantitative easing by the U.S. Federal Reserve. It fell to a three-year low of $1,180.48 in early Asian trade on Friday and is down nearly 14 percent or about $200 an ounce since the beginning of last week.

Gold miners, meanwhile, have been feeling the heat. Shares of Sydney listedNewcrest Mining, the world's third biggest gold producer, fell below 2 percent in morning trade, and are down over 52 percent since April. New York listed shares of Canada's Barrick Gold, the world's biggest gold miner, are also down almost 50 percent since April.

Profitability Problems

Ric Spooner, chief market analyst for CMC Markets said gold falling below $1,200 an ounce is certainly at the level where miners, especially the smaller ones, will face profitability issues.

"Some miners may hold - depending on their cash flow situation - some production and inventory for a while just to see what happens," Spooner said. "We're into that territory now that we will be starting to see a lot of marginal production from a lot of the smaller miners."

Su backed that sentiment, adding that miners will start to close down some of the more costly mines, spend less on exploration and invest less in general.

Smaller Australian miners that have ceased operations over the past year include Central Norseman Gold and Navigator Resources, according to local media reports.

Calls, however, that gold will plunge even further to below $1,000 an ounce is unlikely, according to Su, who said that would mean most of the mines in Australia would become unprofitable.

"It [prices] may fall there for a very brief period of time, but I think the economics of it is such that the entire industry will fail to exist if gold falls further," Su said.

Gold prices should start to stabilize once there's a significant reduction in supply as miners cut back, Su added.

"This fall in the price of gold is not truly based on supply and demand - It's based on expectations of what the Federal Reserve is doing," Su said. "I think that somewhere along the line the gold prices will simply start rising, because production will reduce supply significantly."

- By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter 

@RajeshniNaidu

‘Gold Bears Beware’

By Tomi Kilgore

Bloomberg

Gold has traded so badly the last few months, that it’s starting to look good to some chart watchers.

“GOLD BEARS BEWARE,”Bank of America BAC +1.96% Merrill Lynch technical strategist MacNeil Curry told clients on Thursday. He warned against piling on to gold’s demise at current levels, because his reading of the charts suggest the downtrend may be in its final stages.

Curry based his call on the weekly ADX indicator, which measures the strength of a trend rather than its direction. It tracks the degree of overlap between weekly price bars: the less overlap, the stronger the trend, and the higher the ADX’s value.

And it doesn’t take a technician to see there has been very little price overlap the last few months. Check out Curry’s chart below:

Front month July gold futures settled down 1.5% at $1,211.40 an ounce Thursday, the lowest settlement value since August 2010. Continuous futures have now lost 24% since the end of March.  In electronic trading following the market’s close, futures tumbled through $1,200 an ounce, falling as low as $1,196.10, before rebounding above the key level.

“While gold has been on a relentless downtrend, the weekly ADX…says further weakness is limited,” Mr. Curry said. The ADX has run up to a “trend-ending” extreme level of around 50, he noted. Over the last decade, the three times it reached that level resulted in significant trend reversals in September 2011, March 2008 and May 2006.

For now, he sees support down to $1,200, and then to $1,155.

Meanwhile, a rise above $1,270 would indicate that a bullish trend reversal was developing

http://blogs.wsj.com/moneybeat/2013/06/27/gold-bears-beware/
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Gold’s Plunge, in One Chart

By Steven Russolillo

Bloomberg

Gold’s two-year tumble off record highs is ugly no matter how you slice it.

Gold futures tumbled to $1,229.80 a troy ounce on Wednesday, the lowest settlement price since August 2010. The precious metal is now down 35% off its record settle high of $1888.70 in August 2011.

Gold has pulled back more than 10% on seven separate occasions dating back to 2001, according to the World Gold Council,  an industry association which is funded by mining companies. As WGC’s chart shows, gold has recovered from each of these troughs and went on to make new highs.

The worry now, however, is this time may be different. This particular pullback is deeper than any of the previous six occasions and it’s also been one of the longer plunges, time-wise, dating back to the turn of the century.

As we noted earlier today, gold was once considered a refuge from economic uncertainty and a means of safeguarding wealth, which played a big role in its multiyear rise. But the investors who for years purchased the yellow metal as a hedge against higher inflation and a weaker dollar have since reversed those bets in earnest.

With the Fed more likely to start pulling back QE sometime this year, gold’s declines may be far from over.

http://blogs.wsj.com/moneybeat/2013/06/26/golds-plunge-in-one-chart/

Gold Drop: An Opportunity?

By Patrick A. Heller
June 25, 2013

“When are gold and silver prices going to go back up, if ever?”

This question, or variations of it, is the most common inquiry made of coin dealers today.

As of the COMEX closes Monday, the price of gold is down over 28 percent and silver almost 44 percent from October 4, 2012. Results like these have many “strong hands” owners of precious metals wondering where they went wrong in their thinking. More than a few have bailed out. 

So, will gold and silver prices ever go back up and when will that happen? The obvious answer is that I don’t know. Actually, no one knows the answer. However, there are a number of things from financial markets that indicate that the prices of gold and silver are continuously suppressed for the benefit of the U.S. government rather than prices fell as the result of free market trading. Further, the tactics now used to manipulate prices indicate a greater degree of desperation than did the measures of years past.

For example, when prices fell in mid April and again since last Thursday, the declines were attributable to massive quantities of gold and silver being sold in a short key time, a pattern that does not normally occur in a free market. Parties seeking to liquidate a large gold or silver position at the highest possible price will try to do so while attracting the least attention. Almost always, such sales are allocated among multiple brokers, none who know that they are only handling a small part of the total quantity being sold. Such sales also tend to be sold over the course of multiple days and even weeks and months so as to avoid attracting attention to any broker’s activity.

The suspicious activity in April and this past week involved single massive sales that were executed precisely at critical times during the day. Among these key times are 1) the opening of the London Bullion Market Association, 2) at the London AM gold fix, 3) at the COMEX open, 4) at the London PM fix, 5) at the COMEX close, and 6) during the ACCESS market which opens 30 minutes after the COMEX closes. By large quantities, I mean that some of the individual sales were for paper contracts equal to multiple months of worldwide mining production. About the only entities that could even arrange for the size of some of these sales are a handful of central banks and international institutions such as the International Monetary Fund and the Bank for International Settlements. Effectively, these sales were structured to guarantee that the metals sold for the lowest possible price – not the goal of investors.

I have written many times in other essays on other tactics. In years past, the tactics were much more subtle and hard to detect. The fact that recent price suppression tactics have been so blatant could be interpreted as a sign that the perpetrators are coming to the end of the line. So, the nature of the trading is a sign that gold and silver prices are more likely to rise than continue to decline in the near future.

For gold in particular, the price has fallen low enough that many existing mines can no longer operate at a profit. With the just announced $5.5 billion asset write-off by Newcrest Mining, mining companies have recently booked $17 billion of losses from write-downs of paper assets. Barrick Gold Corporation, the world’s largest gold mining company, and Newmont Mining Corporation, one of the other largest gold mining companies, have not yet booked paper losses. They are expected to do so in the coming weeks. 

Last week, Barrick Gold Corporation announced layoffs of more than 10 percent of its Utah mine workers, other layoffs at its Nevada operations and as much as a 30 percent reduction of its corporate staff. This followed previous announcements that the company may not be able to continue development of some of its largest mining projects in South America (such as Pascua Lama). Barrick’s news followed a recent announcement by Newmont Mining Corporation that, because of falling commodity prices, it was laying off staff at its mines in Colorado.

While the supply for physical gold and silver may be at risk of falling, demand has been soaring. In the months of April and May, China and India together consumed more gold that was produced worldwide by mines or as salvage from recycled scrap during those two months. Beyond that, other central banks were buying gold reserves such as Russia and South Korea. Then you have demand from private investors. Some photos circulated around the Internet about a week ago of about 10,000 customers waiting in line to make purchases from a gold-selling store in China.

Some have argued that investor demand for physical gold and silver is falling, as evidenced by the drop in the number of outstanding shares of the largest gold and silver exchange-traded funds (GLD and SLV, respectively). Contrary to what these naysayers proclaim, I believe that the physical metals were withdrawn from these ETFs in order to meet demand for physical gold and silver from commodity contract owners who want to own physical metal rather than paper.

As for the timing of the price drops, on days when the stock or bond markets or maybe some currencies are weak, it wouldn’t look good for the U.S. government’s interests for the prices of gold and silver to be going up. Some investors, if they saw this happening, just might be tempted to bail out of their paper assets and switch into something safer such and gold and silver. To me it is no surprise that the drops in precious metals prices over the past two weeks occurred at the same time that both the stock and bond markets were tanking. With gold and silver prices falling at the same time as paper assets, it is much less likely that the average investor would get out of paper assets for tangible gold and silver.

In the immediate term, I think the U.S. government has a plan to hold down gold and silver prices through this weekend, which marks the end of a calendar quarter where technical chart traders derive some of their numbers. Next week, I suspect that prices will stay down as many people focus on the upcoming July 4 holiday weekend.

In fact, I have heard from multiple level-headed analysts and traders who remain bullish on the intermediate and long-term outlook for gold and silver. Yet, at the same time they fear that prices could stagnate as long as the next three months. Even though the fundamental supply/demand equation for physical metals is so favorable for much higher future prices, the current doldrums could last until September.

Last Friday, I was interviewed for an article where I stated that a lot of potential buyers of physical gold and silver are growing weary of the eight months-long decline in precious metals prices. Even though their rational mind might tell them that current prices are a bargain compared to what is likely to happen in the coming months and years, they are just as fearful that we haven’t yet touched the final bottom of this correction. To say it another way, I think a number of investors will sit on the sidelines until there is a definite sign that gold and silver prices are on their way back up. 

Although we have seen demand for physical gold and silver pick up at my store in the past few days, it is nowhere close to the buying surge we experienced after the price drop in mid April. I am confident that prices will soar much higher mostly because I am confident that the U.S. government is running out of measures to prop up the value of the U.S. dollar. If, for instance, the price of gold reached $1,420 and silver topped $25 within the next few months, I would expect so much buying to be happening that it will make April’s surge look modest by comparison.

Today, it is still possible to acquire many forms of physical precious metals – and get them at almost normal premiums. By the time September rolls around, I cannot guarantee availability or premium levels. The time to acquire insurance against the risk of falling paper asset values, which I consider to be the most important reason to own physical gold and silver, is when you don’t need it. Don’t wait until paper asset values drop another 10 percent and it is difficult to acquire precious metals, no matter the price.

Yes, I am sticking out my neck in expecting much higher gold and silver prices, but figuring that there will be some time lag before prices go uphill. I am equally convinced that those who made purchases sometime between early October and now will be very happy they did and then held onto them, even though they might wistfully think about how much less these tangible assets might have cost if purchased today.

In the meantime, these lower prices are making coin dealers and hard asset market analysts and newsletter writers look like they don’t know what they are talking about. In the short term, anything is possible. In a couple of years, I expect the epithets that will be thrown at me are for being too cautious in my recommendations. You just cannot please everyone all of the time. 


Patrick A. Heller is the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Other commentaries are available at Coin Week and CoinInfo.com. He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly.” His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing.

http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=26979

Jewellers join government's campaign to cut gold buying

By Siddesh Mayenkar

MUMBAI | Mon Jun 24, 2013 7:35pm IST

(Reuters) - India's biggest jewellers' association has asked members to stop selling gold bars and coins, about 35 percent of their business, adding its weight to government efforts to cut gold imports and stem a swelling current account deficit.

The call by the All India Gems and Jewellery Trade Federation (AIGJTF), which represents about 90 percent of jewellers, comes just days after financial services company Reliance Capital halted sales of its gold-backed funds.

"As a responsible trade body, we have requested our retailers not to sell gold coins or bars. We need to help the government to solve the CAD (current account deficit) problem," said Haresh Soni, chairman of the AIGJTF, which has more than 40,000 members.

India is the world's biggest gold buyer, and soaring imports have sent its current account to a record deficit. New Delhi has raised the import duty on gold twice since January 1, doubling it to 8 percent, and the central bank has imposed measures forcing customers to pay up front for gold.

"We have appealed to members not to sell coins and bars till our CAD situation resolves," Soni said.

"We expect 1,500-2,000 retailers to stop sale of gold coins and bars immediately," he added.

About 30 to 35 percent of last year's imports of 860 tonnes went into investment demand, Soni said. Most of the gold imported into India goes into making gold jewellery, traditionally part of a bride's trousseau and dowry.

"We are safe guarding the jewellery industry ... (which) generates employment and creates revenues for the government," he said.

On Monday, shares in listed jewellers such as Gitanjali Gems Ltd (GTGM.NS) and PC Jeweller Ltd (PCJE.NS) fell sharply on concerns the government measures could hit their businesses.

Soni said the federation had asked the government to reduce the import duty from 8 percent to 4 percent.

Falling world prices from mid-April triggered a surge in demand globally. India's imports hit a record of 162 tonnes in May, more than double the average monthly import level in 2011, a record year.

The government's and central bank's latest actions to curb buying came earlier this month, and Soni said imports in June had declined drastically. He declined to give specific figures.

Finance Minister P. Chidambaram said last week imports had fallen in value to about $36 million a day from $135 million before the curbs.

But the World Gold Council (WGC) estimated imports could still be 300-400 tonnes in the second quarter - almost half the total for 2012 - and the government itself said imports had exceeded 300 tonnes in April to mid-May.

Domestic prices are already back near levels before the rise in the duty, which indicates demand could revive, particularly as a bountiful monsoon starts to raise hopes of increased incomes for farmers and India's large rural community.

On April 16, domestic gold futures hit a contract low of 25,270 rupees per 10 grams, and they are now trading around 26,734 rupees.

The WGC said it expected 2013 demand - largely covered by imports - to be "at the higher end of our estimate of 865 to 965 tonnes", which would be close to the record 969 tonnes of 2011.

"Demand in India is price inelastic ... the fundamental reasons for gold demand in India cannot be addressed through supply restrictions," said Somasundaram PR, managing director for India at the WGC, in an email.

The WGC last month said 82 percent of Indian consumers in a survey said they thought the price of gold would increase or be stable in the next five years. Many Indians see gold as a sound investment in a country that lacks any kind of comprehensive banking system and with real interest rates stubbornly low.

Over centuries, Indians have squirreled away at least 20,000 tonnes of gold - more than is stored in the vaults of the U.S. Federal Reserve - in their quest for a safe investment. (Editing by Jo Winterbottom and Jane Baird)

http://in.reuters.com/article/2013/06/24/india-gold-idINDEE95N0BH20130624

Gold / Silver / Copper futures - Weekly outlook: June 24 - 28

Investing.com - Gold and silver futures ended Friday’s session higher, as investors returned to the market to seek cheap valuations after prices fell to the lowest level since September 2010 earlier in the day.

Sentiment on the precious metals was dampened amid expectations the Federal Reserve will begin to taper off its bond-buying program by the end of this year.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery rose 0.75% on Friday to settle the week at USD1,295.55 a troy ounce. 

Earlier in the session, Comex gold prices fell to a daily low of USD1,268.75 a troy ounce, the weakest level since September 16.

For the week, gold prices lost 6.8%, the worst weekly decline since September 2011. 

Gold futures were likely to find support at USD1,246.20 a troy ounce, the low from September 14, 2010 and near-term resistance at USD1,310.10, the high from September 28, 2010.

Gold prices plunged more than 5% on Thursday after Fed Chairman Ben Bernanke said the central bank could begin slowing asset purchases by the end of 2013 and wind them down completely by the middle of 2014 if the economy picks up as the central bank expects.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.

An exit from the stimulus would deal a heavy blow to gold, which has thrived on demand from investors who buy gold to hedge against the inflationary risks of loose monetary policies. 

Indications the Fed will begin to taper asset purchases sent the U.S. dollar higher across the board. 

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, gained 0.75% on Friday to end at a two-week high of 82.61.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

In the coming week, investors will be closely watching U.S. data on durable goods orders, jobless claims and consumer confidence for signs that the economic recovery is on track.

Any improvement in the U.S. economy could scale back expectations for further easing, putting upward pressure on U.S. yields and boosting the dollar.

Elsewhere on the Comex, silver for July delivery rallied 2.2% on Friday to settle the week at USD20.00 a troy ounce. Despite Friday’s upbeat performance, silver future prices lost 9.15% on the week.

On Thursday, Comex silver prices plunged 7.3% to hit a 33-month low of USD19.55 a troy ounce.

Meanwhile, copper for July delivery climbed 2.1% on Friday to close the week at USD3.100 a pound. Despite Friday’s gains, Comex copper prices dropped 2.95% on the week.

The industrial metal fell to a 20-month low of USD3.019 a pound on Thursday, as a combination of concerns over an end to the Fed’s assets purchase program and fears over a deepening slowdown in China weighed.

http://www.investing.com/news/commodities-news/gold---silver---copper-futures---weekly-outlook:-june-24---28-249355

China to overtake India in gold consumption thanks to 6.6 million bridal gifts

Anthony Halley | June 22, 2013

China is set to overtake India in gold consumption as a result of Chinese wedding gifts of gold and Indian import restrictions.

Roughly two thirds of the 10 million Chinese brides in 2013 are expected to receive golden presents. This is big business for gold dealers despite the collapsing prices.

Chinese grooms are said to "have to hand over several kilos of gold to get the bride to say yes," according to one Indian bullion trader.

The China Gold Association recently stated that in 2013 total Chinese demand could reach between 900 to 1,000 tonnes, which would surpass demand from India.

In India, the trend is towards less consumption as the government continues to tighten its grip on the country's gold trade, announcing last week a hike in the import tariff value of gold to $459 per 10 grams.

In May the tariff value of gold was pegged at $440 per 10 grams.

Gold is India's number two import item in terms of value after crude oil and the government has been trying to curb imports to reduce the country's chronic balance of payments problem.

The government has hiked the import tax from 2% to 6% over the past year, banned traders from importing gold on margin and may announce further regulations this month, including barring state-run entities from importing gold.

http://www.mining.com/china-to-overtake-india-in-gold-consumption-thanks-to-6-6-million-bridal-gifts-68344/

Gold, Silver Tumble to Lowest Since September ’10 on Fed Outlook

By Maria Kolesnikova, Nicholas Larkin & Glenys Sim - Jun 20, 2013 11:52 PM GMT+0400

Akos Stiller/Bloomberg

Gold and silver futures fell to the lowest since September 2010 after the Federal Reserve said stimulus may be reduced later this year as the economy recovers.

Fed Chairman Ben S. Bernanke said yesterday that the central bank, which buys $85 billion of Treasury and mortgage debt each month, may begin reducing purchases this year and end the program in 2014 should the economy continue to improve. The dollar rose to the highest in more than a week against six major currencies and the 10-year yield on Treasuries reached a 22-month high. Commodities dropped.

Bullion has declined 23 percent this year, heading for the biggest annual drop since 1981, as some investors lose faith in it as a store of value, and as speculation grew that the Fed will taper debt-buying that helped the metal cap a 12-year bull run last year. Investors sold 520.7 metric tons valued at $21.6 billion from gold-backed exchange-traded products this year. The price slump hurt billionaire hedge fund manager John Paulson and producer Newcrest Mining Ltd. (NCM)

“The markets are definitely not prepared to wait until the tapering actually begins,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen. “The combination of Fed tapering, a spike in nominal yields and a stronger dollar has put gold under some considerable pressure.”

Gold Price

Gold futures for August delivery plunged 6.4 percent to settle at $1,286.20 at 1:42 p.m. on the Comex in New York. In electronic trading after the market settled, prices touched $1,275.60, the lowest since Sept. 21, 2010. Trading was double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.

The metal may fall an additional $50 in the next few days and will probably drop to about $1,100 in a year, according to Ric Deverell, head of commodities research at Credit Suisse Group AG.Nouriel Roubini, professor of economics and international business at New York University, has forecast a decline toward $1,000 by 2015.

The Standard & Poor’s GSCI (SPGSCI) gauge of 24 commodities dropped 4.8 percent since the start of January, the MSCI All-Country World Index of equities rose 3.7 percent and the U.S. Dollar Index added 2.6 percent. A Bank of America Corp. index shows Treasuries lost 1.9 percent.

Money Printing

Gold futures more than doubled from the end of 2008 to the record $1,923.70 in September 2011 as the Fed cut interest rates to a record low. The unprecedented money printing by central banks around the world has failed to spur inflation. Expectations (USGGBE10) for increases in consumer prices, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 16 percent this year, reaching a 17-month low last week.

Newcrest Mining (NCM), Australia’s largest gold producer, said this month it will write down the value of its assets by as much as A$6 billion ($5.5 billion) after the drop in prices. Paulson, the biggest investor in the SPDR Gold Trust, the largest gold ETP, had a 13 percent loss in his Gold Fund last month. That takes the decline since the start of the year to 54 percent, according to a copy of a letter to investors obtained by Bloomberg News.

ETP Holdings

Holdings in the SPDR Gold Trust slumped 351.3 tons this year to 999.6 tons yesterday, the lowest since February 2009. Global holdings now stand at 2,111.2 tons, the least since March 2011, data compiled by Bloomberg show.

While assets dropped every month this year, bullion’s slump in April spurred purchases of coins and jewelry worldwide. India, the largest consumer, raised gold import taxes earlier this month to limit demand and contain a record current-account deficit.

“We are likely to see buying coming through, but I would be surprised to see the same level as we saw in April,” Walter de Wet, an analyst at Standard Bank Plc, said today by phone from Johannesburg.

Gold may drop to $1,250 in a month, down from a previous forecast of $1,425, Joni Teves, an analyst at UBS AG in London, wrote today in a report. The bank cut its three-month outlook to $1,350 from $1,500, and lowered its 2013 estimate to $1,440 from $1,600. Prices will average $1,325 next year and $1,200 in 2015, it said.

Silver Falls

Silver tumbled 34 percent this year, making it the worst-performing commodity. It reached a record $49.8044 an ounce in London in April 2011. Prices could drop to $10 to $15 “in days or weeks,” according to Robin Bhar, an analyst at Societe Generale SA in London.

“There is a long way down,” Bhar said by telephone today. “In an oversupplied market like silver, the price should approach cost of production.”

Silver futures for July delivery slid 8.3 percent to $19.823 an ounce on the Comex. In trading after the settlement, the price touched $19.56, the lowest since Sept. 3, 2010. Trading more than doubled compared with the 100-day average.

On the New York Mercantile Exchange, palladium futures for September delivery slumped 4.5 percent to $665.10 an ounce, the biggest drop since April 15.

Platinum futures for July delivery declined 4.2 percent to $1,363.80 an ounce, the lowest close since Nov. 12, 2009.

To contact the reporters on this story: Maria Kolesnikova in London atmkolesnikova@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net