Gold Price - Where is it heading?

[ducati916]

Re: GOLD Where is it heading?

Gold Supply and Demand – Q1 2006
Total identified demand for gold in the first quarter reached 835.7 tonnes, worth $ 14.9 billion

This represented year-on-year growth of 9% in dollar terms, but a decline of 16% in tonnage terms in the face of a quarterly average price that has increased by 30% since Q1 2005

Of all main categories of demand, investment in gold ETFs was the strongest source of growth, at 23%, followed by industrial demand which increased by 5% relative to Q1 2005 (both in tonnage terms)

Unfortunately I cannot grab the table, but *Bar Hoarding* has dropped by 54% into Q1 2006.

ETF demand, is up, but as this is SPECULATIVE demand this will be subject to speculative revision, which means it can change as quickly as the wind. The overall numbers are not painting a pretty picture from a demand point of view.

Jewellery consumption drops 22% so those Indians seemingly disagree about gold being an investment at any price!

India is the world’s largest gold jewellery market by volume accounting for around 590 tonnes of consumption demand in 2005. Traditionally gold is 22 carat. Gold jewellery buying is associated with a number of festivals and, in particular, with weddings. The gold given at weddings is important for women as it traditionally remains her property. For festivals, Diwali is a traditional gold giving occasion. Akshaya Tritya has become important in the south, encouraged by WGC promotions.

A feature of Indian demand is its extreme sensitivity to price volatility – this is the country where that factor is of most importance in affecting gold demand.

Over half of demand comes from rural or rural town areas. Demand here is largely traditional. It is affected by incomes and thus the quality of the monsoon is important. In these areas gold is also important as a means of saving – a gold chain or bangle which can be worn on the person is considered a relatively safe way of storing wealth.

In urban areas demand is more influenced by western tastes. Like similar markets, gold here faces competition not just from other forms of jewellery but also from the broader competitive set of luxury goods, electronics and consumer services. Promotion is thus important in order to maintain and boost demand.

So, basically your argument, according to World Gold, is nonsense.

jog on
d998

 

[LPA]

Re: GOLD Where is it heading?

*watches Ducati stroke his own ego over and over again....wonders why somebody gets so worked up over gold price analysis*

 

[rederob]

Re: GOLD Where is it heading?

ducati
Play with the number to your heart's content.
Year on year total demand has increased noticably.
Year on year mine supply is relatively unchanged, and despite your assertions of ramped up output (and given this "ramp up" has been in place for over 3 years) there is no evidence to date that a difference is made.
An important reason here is due to average grades, which are at historical all time lows. This means it is possible to significantly increase mined ore, and this happenng, without increasing average gold output.
Mine supply is not enough to meet jewellery fabrication alone.
To meet other demand, old gold and Central Banks offer it into the market.
The "liquidity" issue realates to how much people are willing to pay for gold.
In very simple terms, while mine supply is in deficit, people will be willing to pay enough for individual gold owners to bring out their old gold and sell it.
The "speculative" demand for physical gold is largely confined to ETFs.
Speculation over the price of gold in the market via futures or other financial instruments can be linked back to the physical demand situation, but of itself is an insignificant driver of actual physical demand. Can that be true? The answer is if you needed gold for jewellery and industrial uses only, then then mine supply would not be adequate.
One needs to have an open mind to the role of physical demand on the price of gold, as the traditional laws of supply and demand will always outweigh the temporary influences of sheer speculation.

 

[ducati916]

Re: GOLD Where is it heading?

LPA

I can see that you are cognitively challenged.

rederob

Year on year total demand has increased noticably.

Incorrect.

Gold Supply and Demand – Q1 2006
Total identified demand for gold in the first quarter reached 835.7 tonnes, worth $ 14.9 billion

This represented year-on-year growth of 9% in dollar terms, but a decline of 16% in tonnage terms in the face of a quarterly average price that has increased by 30% since Q1 2005

From the figures, that originate from World Gold, your preferred reference, we can see that your assertion is nonsense.

Within the next quote, from yourself, again you need to pay attention to the details as your work is becoming increasingly shoddy;

Year on year mine supply is relatively unchanged, and despite your assertions of ramped up output (and given this "ramp up" has been in place for over 3 years) there is no evidence to date that a difference is made.

Pay attention to the words ramped up output

Investment in the production of the physical is ramping up due to the high spot & futures price, but, demand is falling away, thus you have a classic over supply situation in the making.

You see.........Investment of the production of the physical is ramping up investment must always preceed actual production. Production is lagging. Production may hit full stride, only for demand to have shrunk.

Mine supply is not enough to meet jewellery fabrication alone.
To meet other demand, old gold and Central Banks offer it into the market.
The "liquidity" issue realates to how much people are willing to pay for gold.
In very simple terms, while mine supply is in deficit, people will be willing to pay enough for individual gold owners to bring out their old gold and sell it.

This is where the *price* may well be decided.
I do not see that price much above the $350 - $450 range

The "speculative" demand for physical gold is largely confined to ETFs.

Incorrect.
$140 billion in speculative money entered commodities (futures markets) and a % of that money will be in Gold. One of the strategies they play, is the *backwardation* strategy, this last month they lost 6.4% on a *contango* situation. An anomaly? Possibly. Will they continue to subsidise the high price of gold in a contango situation? I doubt it, thus as they liquidate, price falls.

Where will the volume of speculative money come from to prop up, or take the price to $800+ come from, if, this money goes elsewhere?

Speculation over the price of gold in the market via futures or other financial instruments can be linked back to the physical demand situation, but of itself is an insignificant driver of actual physical demand. Can that be true? The answer is if you needed gold for jewellery and industrial uses only, then then mine supply would not be adequate.

Well for 20+yrs, the price of gold poodled along quite happily at the equilibrium prices. It was only speculation that inflated the bubble prices that we have seen currently. Remove the speculative excess, and have a return to equilibrium, and my range would be $350-$450

One needs to have an open mind to the role of physical demand on the price of gold, as the traditional laws of supply and demand will always outweigh the temporary influences of sheer speculation.

Timeframe.
Fundamentals play out over longer periods.
Speculation, is the fast crowd.
When *price* speeds up............speculative interests are present.

jog on
d998

 

[rederob]

Re: GOLD Where is it heading?

ducati
You continue to selectively use quarterly data to prove short term facts, rather than isolate and understand trends. I carry no truck with shysters that try to claim 3 months data is indicative of a full year on year change
All readers must by now be quite convinced of your ploy.
Investment in gold production is occurring, but as average head grades are declining, the mine supply data shows a fall of almost 100tonnes in the 2 years to 2005. Your evidence of "a classic oversupply in the making" is supported where?
Again, readers will be aware that gold byproduct credit has been increasing in the past few years as base metal production globally has been ramped up. Yet in 2 years of data, no evidence that mine supply is increasing!
With luck the penny may drop, and you could come to grips with true fundamental supply and demand factors.
Then again, as you seem more inclined to defend irrelevances here, I am probably wasting my time.

 

[LPA]

Re: GOLD Where is it heading?

I agree that you are wasting your time Rederob, but thanks for the analysis as I found the data interesting.

*post edited* I unfortunately got caught up in the childish sentiments being displayed by a certain member and this post was just a return of insult to try and 'prove' something....it's not worth it, so I deleted it. *

 

[tech/a]

Re: GOLD Where is it heading?

LPA

Frankly the discussion with rederob and ducati is interesting.
opposing views bring out more info that those in agreement.

Duc's not stroking his ego!!

Right or wrong he is presenting HIS view.
as is rederob,we can then take what we want from each,to question,learn from or act upon.

Neither Duc or rederob have resorted to personal clashes--yet you have?

 

[LPA]

Re: GOLD Where is it heading?

*sigh* ok.....I'm a bad boy.

But if you consider somebody constantly referring to someone else's argument as nonsense, and having a tone of absolute arrogance about them to be conducive to good debate then I guess I wasted a lot of time doing debating in high school....

Anyway, I'm new here and don't want to end up the mangy dog that people can kick around - so I'm dropping this now and will stop posting in this thread.

 

[tech/a]

Re: GOLD Where is it heading?

Thats duc's style he does it to me all the time.

I used to have good self esteem but now!!!

Would certainly have a debate pepped up with duc involved.

 

[LPA]

Re: GOLD Where is it heading?

Thanks for that, I'll keep it in mind

 

[rederob]

Re: GOLD Where is it heading?

tech/a and LPA
The trick is to avoid cenceptual confusion and isolate the key drivers of trends.
It is not useful to discuss liquidity in fundamental supply/demand scenarios unless there are no buyers because there is no money, or because the product prices itself out of the market.
As the data clearly shows, jewellery fabricators cannot rely on mine supply for their entire gold needs.
Jewellery is basic to every known culture, and gold jewellery demand has been rising as both populations increase, and the wealth of populations increase.
It is unlikely that jewellery demand can be stemmed unless the gold price literally prices individual purchases out of the market - and this will probably occur for a short period of time before gold goes parabolic and collapses on itself.
All markets are prone to speculative interest, and gold is no exception.
Speculative interest does not imply demand, merely that demand can be speculated for self interest.
If you removed every speculator from the gold market, what interest would there be in purchasing gold?
The demand figures previously tabled provide an answer.
The next question becomes one relating to how much one should pay for gold.
Without speculators, is there greater demand than there is supply?
From this point one can start developing market pricing models: In fact, these scenarios are the bread and butter of commerce.
I won't play games with tabled information that is obvious to interpret, because it demeans readers.
I just caution readers to take care that what is being stated anywhere is fair, valid, and reliable.
Being human comes with a warning.

 

[markrmau]

Re: GOLD Where is it heading?

Interesting, GOLD coming up as 5th most popular sell on commsec.

 

[rederob]

Re: GOLD Where is it heading?

Interesting, GOLD coming up as 5th most popular sell on commsec.

Mark
These are the times when it's best to buy.
Preferably when gold is the number one sell.

 

[markrmau]

Re: GOLD Where is it heading?

Not real keen on the physical myself. Prefer companies which have the potential for explosive drilling results.

Check out CRE:

26 Apr 2006 14:08 ! High Grade Discovery at Castaway

I think there is potential for significant resource upgrade as the highest grades were on the open side of the drilling program.

Having said that, I think this gold retracement may have a little further to run. But when crude starts to go up with the upcoming hurricane season, gold should start to move up again.

 

[markrmau]

Re: GOLD Where is it heading?

http://www.gold.org/pr_archive/pdf/GDT_1Q06_pr.pdf

Gold demand and production. Facts and figures. I believe the jewelry demand pull back (due to the price run up) will be somewhat temporary. People will get used to paying more for gold.

 

[Sean K]

Re: GOLD Where is it heading?

If $630 is breached is the next support level $550? That will test some nerves.

 

[phoenixrising]

Re: GOLD Where is it heading?

If $630 is breached is the next support level $550? That will test some nerves.

And that by my reckoning is the 200 day ema.
That should trigger substantial buying especialy in the US

 

[nizar]

Re: GOLD Where is it heading?

200dEMA is <$525
Still a long way down

According to Adam Hamilton:

"If gold corrected to near its 200dma in the last Stage Two no less than every single time, isn't there at least some small chance that it will correct to its 200dma today after its first Stage Two upleg this time around? If so, then we are in for one wicked correction, because today gold's 200dma is under $525!"

http://www.321gold.com/editorials/hamilton/hamilton051906.html

This guy recommended investing at commodities in April 2001 (i was reading his article the other day) at a time when every1 was buying dot.coms and commodity prices were at multi-decade lows... a smart cookie...

 

[ducati916]

Re: GOLD Where is it heading?

rederob

The trick is to avoid cenceptual confusion and isolate the key drivers of trends.
It is not useful to discuss liquidity in fundamental supply/demand scenarios unless there are no buyers because there is no money, or because the product prices itself out of the market.

Which is a definite problem.
GDP per capita of India is $3,500
GDP per capita of China is $6,300
GDP per capita of USA is $42,000

Therefore at anything above your $350-$450 price, you can forget about any fundamental demand, as, they simply cannot afford gold at levels above this.

As the data clearly shows, jewellery fabricators cannot rely on mine supply for their entire gold needs.

And as the data clearly indicates, there is no requirement for it, as YOY, demand is falling, since 2004 Q4, it has fallen 37%

Gold mine production = 2,518 tonnes
Recycled gold = 800 tonnes
Central Banks = 552 tonnes
Total = 3870 tonnes

Total end use consumption = 3870 tonnes
Therefore, subtract 37% from 3870 and you have 2438.1 tonnes of total demand.

With total mine production totaling 2,518 tonnes, less, 2438.1 tonnes, we now have a production surplus of 79.9 tonnes

If, production investment has taken place, to increase physical supply, then you will have a further overhang, and further price pressure.
Should producers start to reinstigate hedges, then the selling pressure will be sharp, rather than incremental...........Speculators can play the market both ways, and momentum could accelerate the downside.

Jewellery is basic to every known culture, and gold jewellery demand has been rising as both populations increase, and the wealth of populations increase.

But again this is not the whole story;

Over half of demand comes from rural or rural town areas. Demand here is largely traditional. It is affected by incomes and thus the quality of the monsoon is important. In these areas gold is also important as a means of saving – a gold chain or bangle which can be worn on the person is considered a relatively safe way of storing wealth.

In urban areas demand is more influenced by western tastes. Like similar markets, gold here faces competition not just from other forms of jewellery but also from the broader competitive set of luxury goods, electronics and consumer services. Promotion is thus important in order to maintain and boost demand

Without speculators, is there greater demand than there is supply?

The simple answer is no. Supply exceeds demand. Add in the speculators, and you still have supply exceeding demand, although it's pretty close.
Which really equates to therefore, speculation (speculative demand) currently driving the price. If speculative buying changes to speculative selling, then, $550 won't hold either, you'll be looking closer to $300+

The falling away of jewellery demand is world wide, save China.
Without the speculative demand, anaemia baby!
And this is in the face of reduced selling by Central Banks for timing reasons.
Should the Central Banks resume sales, not good for the longs.

jog on
d998

 

[rederob]

Re: GOLD Where is it heading?

ducati
Your data distortions are mind numbing.
To the extent that if you believe what you trot out you deserve what the market will throw back in your face.

Let's look at the per capita income case presented by ducati.
If I am correct, his point is that Americans can afford to buy a lot more gold than Indians or Chinese.
He's right, they can and they do. Americans per capita possess 1.41 grams of gold - for a population of 300 million - giving rise to total personal ownership of about 425 million grams.
Indians have a per capita ownership of 0.73 grams - for a population of 1.1 billion - giving rise to over 800 million grams: Almost twice the total ownership of American citizens.
Ducati has called my analysis shoddy in the past.
I do not however mislead people into thinking that income dictates demand: It is a factor, but there are other factors that have great importance and must not be ignored.
To remove the egg from his face, ducati should now extrapolate the differential of income growth between USA and India to determine which nation is likely to have a greater impact on gold demand going forward.
Ideally he can also look at their comparative population growth rates to complete the picture.

What about ducati's supply and demand data?
Where is it tabled as it des not tally with anything from WGC?
Putting the data aside, ducati's point is that jewellery fabrication demand declined each quarter of 2005.
He is correct. But he did not tell you that demand was greater in 2005 despite POG being much higher.
Why else were you misled?
For one, the price of gold from January to December 2005 increased by over $100/oz or 25%: Whereas in 2004 gold closed a few dollars lower than it started the year.
Continuing to use quarterly data to prove a case means that one fails to account for "averaging" of data, which reduces statistical volatility.
This is imperative as gold prices change considerably in the course of a year.
ducati's analysis continues to be deceptive and deficient.
He will not acknowledge he does not understand the fundamentals of gold as that is his nature.
A person who believes that a commodity is in oversupply because people are selling their jewellery to meet demand and Central Banks are releasing stocks into the market, deserves to be treated accordingly by the market.
I have greater confidence in the capacity of gold to clear the $800 hurdle this year as the present consolidation of gold prices remains at the high end of analyst's expectations.
The longer we consolidate below $700 the sharper the move north will be.
I expect the next run to be sharper and faster than that earlier this year, that took gold $175 higher in the space of 2 months.