Demand for gold up and supply down according to the WGC – November 2015


Welcome to illuminati silver, we tell you
the truth about silver. Today is Thursday 19th November 2015 and we
are covering World Gold Council’s Report on Gold Demand Trends and reactions to it.
Last week the World Gold Council issued its latest Demands Trend – Third Quarter Report
and this is what it said: “Third quarter gold demand rose by 8% year-on-year,
reaching a two-year high of 1,120.9 tonnes. Q3 2015 was a period of two distinct halves:
ETF outflows contributed to a price dip in July, which boosted consumer demand around
the world. Subsequently, a positive shift in institutional investor attitudes led to
modest ETF inflows in August and September, which pushed prices back up. Central banks
bought another 175 tonnes, in recognition of gold’s diversification benefits; and
after a long period of growth, the supply of gold from mine production contracted by
1% in the third quarter.” So, global gold demand rose 8% year-over-year
in Q3, while global investment demand rose 27%. On the retail side, gold coin and bar
demand in the U.S. rose 207%, its highest level in five years.
December Comex gold futures lost approximately 5% in Q3, hitting a high of $1,175.70 an ounce.
Commenting on the findings, Juan Carlos Artigas, director of investment research for the WGC,
told Kitco News “We do think there are good signals in the long run for the demand and
for the balance of demand and supply in the market.” He also added; “Interestingly
enough, central banks this quarter had a very strong performance. It was actually the second-strongest
net buying that has occurred.” On the issue of supply he stated; “The reality
is that from the supply side, it’s not only mine production, it’s a combination of mine
production and recycling, and that, overall, has been fairly constrained …… We expect
mine production to taper off over the next year or two.”
The WGC reported that central banks collectively were net buyers for the 19th consecutive quarter,
with purchases by the official sector reaching 175 tonnes, almost matching the record high
of 179.5 tonnes in the third quarter of 2014. The gold price however continues to struggle
under $1,100 per ounce, as traders look at and examine inflation data for clues on the
likelihood of Fed rate rises. In dollar terms the gold price has fallen to a five year low
on expectations the Federal Reserve will start to raise rates this year. However, many doubt
the Fed will increase rates with economic data suggesting the global economy is contracting.
Japan is in recession and the emerging markets are struggling to repay their U.S denominated
debts as commodities continue to fall. Gold is currently trading at $1073 per ounce
having recovered slightly from its dip earlier to a six year low of $1064.
US inflation data, which showed consumer prices returning to growth and rising by 0.2 per
cent in the year to October, is another factor in gold’s latest slump. The official figures
were above analyst expectations, adding further weight to the argument that the Federal Reserve
may decide to raise interest rates at its final meeting next month.
According to the publication ‘The Week’; “Traders, meanwhile, see little chance of
anything in the FED minutes, or elsewhere, providing support for a significant upward
movement (in gold) ….. In fact, a poll of investment bankers by the Wall Street Journal
suggested the eventual increase in interest rates – whether it comes in December or
next year – would hold gold at a lower price throughout next year.”
It added “Gold has averaged $1,156 so far this year and the ten bankers surveyed reckon
it will average $1,114 next year. Given that they also expect a recovery in the final months
of the year when further rate rises will have been thoroughly priced in, this could spark
an initial 2016 move towards – or even below – $1,000 an ounce.”
So what is our view, the Gold Council predicts slightly rising demand and a small reduction
in supply, yet analysts are predicting further price falls. We can sum it up quite simply
– “The dollar and interest rates”. Yes gold has in our opinion now become a ‘dollar
and interest rate play’. The basic fundamentals of the metal are reasonably straightforward.
World political events seem to have only a temporary and small impact on prices. Supply
is curbed for the foreseeable future, and so gold as a monetary metal/investment is
now subject to the whim of the traders and confidence of the investors.
As the dollar strengthens, the price of gold in dollars is likely to decline. Should the
economy be seen to pick up and interest rates are raised, the opportunity cost of holding
gold becomes greater or more expensive and therefore its price will probably decline.
If however, we see no rising of interest rates and a falling dollar value, then this is likely
to be bullish for gold. We believe that gold will fall close to, or slightly below, $1000.
$950 is not impossible. However it being then close to the cost of production/extraction
for most firms, it then lends itself to be a cheap commodity to purchase for the medium
to long term. Is there great risk at current levels? Well that all depends on how much
one is considering purchasing. In our view the upside potential is greater than the downside
risk, though we like to extract as much profit potential as we can before purchasing.
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Please also share this video on twitter and follow us at illuminatisilv1. Disclaimer: Silver Illuminati owners come from a background
of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of
its owners.

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