Central banks continue to accumulate gold

Central banks across the globe continued to accumulate gold, albeit at a slower rate than the elevated levels seen in 2012, according to a global report.

"Year-to-date, global central bank gold reserves have increased by almost 300 tonnes," said the latest World Gold Council Gold Demand Trends report, which covers the period July-September 2013. " Net central bank purchases totaled 93 tonnes, some 17 per cent down on the third quarter of 2012."

However, the the supply of gold fell by three per cent from the same period in 2012, the report said, adding that a sharp contraction in the supply of gold from recycling accounted for the decline as mine production increased by four per cent.

Likewise, the jewellery sector delivered another quarter of solid year-on-year growth as consumers across the globe, encouraged by lower average prices, showed an increasing demand for higher carat pieces.
The report also revealed that overall demand for gold in the third quarter of 2013 stood at 869 tonnes, down by 21 per cent on the same period a year ago. However, demand remained strong across most countries and sectors. "Total consumer demand in China alone was 210 tonnes in the third quarter if 2013, a rise of 18 per cent compared to the same period last year," it added.

"The third quarter of 2013 was another period of robust demand for gold in the Technology sector," it said, adding that demand related to the use of gold in electronics has shown the most resilience, aided by demand for tablets and smart phones.

The restrictions introduced by the Indian government on importing gold through official channels had the intended effect of substantially supressing demand, with total gold consumption in India standing at 148t in the third quarter, compared to 310 tonnes in the second quarter of this year.
However, the strength of Indian demand in the first half of the year means that full year consumer demand is still on track to narrowly exceed the 2012 total. One side effect of this was that while global recycling of gold fell by 11 per cent compared to the same quarter in 2012, in India the recycling figure increased more than fivefold to 61 tonnes, the report stated.

Likewise, the average gold price for the quarter was $1,326/oz, down by 20 per cent on the same quarter last year. "In value terms, gold demand in the third quarter of 2013 was $37 billion, down by 37 per cent compared to the third quarter of 2012.

Global gold demand up

Global demand for gold in 2011 rose to 4,067.1 tonnes worth an estimated $ 205.5 billion — the first time that global demand has exceeded $ 200 billion and the highest tonnage level since 1997, according to the annual report of World Gold Council.
The main driver of the increase was the investment sector where annual demand was 1,640.7 tonnes, up by five per cent, on the previous record set in 2010 and with a value of $ 82.9 billion.
The pre-eminent markets for investment demand in 2011 were India, China and Europe. Central banks continued the trend established in 2010 of being net buyers of gold.
“From the figures of 2011, we can see that there were two main factors driving the results: Asian growth and optimism on one hand, and western desire to protect assets against uncertainty on the other," managing director of Investment Marcus Grubb has been quoted as saying. "Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year."
It is likely that China will emerge as the largest gold market in the world in terms of demand for the first time, in 2012. "What is certain is that the long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity," the report quotes him.

Gold imports falls to three times

Gold import has plunged by almost three times in last three years.
"The country imported Rs 9.87 billion worth gold in the first five months of the current fiscal year compared to Rs 25.54 billion in the same period of fiscal year 2009-10," according to the central bank.
However, in the same period last fiscal year, the precious yellow metal has seen a whopping drop to Rs 1.33 billion due to government ban on the import that has hit the dollar reserve due to cross border flow at the cost of import duty difference.
Currently, the domestic market is witnessing a shortage of the gold fuelling the price despite the price in the international market has been decreasing.
"The banks are not been able to supply according to the market demand fuelling the price in the market," Nepal Gold and Silver Dealers Association president Tej Ranta Shakya said, adding that Nabil Bank's 50 kg gold was sold out in an hour on Wednesday and Prime Commercial Bank's 50 kg was also sold out yesterday and there is no gold today in the market that will put the pressure of price hike on Sunday.
"Despite rising price, the domestic market's appetite has started to increase also due to marriage season," he added.
Similarly, gold had another positive year in the international market, ending nine per cent higher in US dollar price terms and rising even further in most currencies, according to World Gold Council report 2011.
In spite of an interim increase in volatility, which affected all financial markets, gold outperformed a large number of asset classes – reinforcing its role as a foundation asset in portfolio construction, it said, adding that gold provided liquidity when investors needed it the most, acting as a risk management vehicle and also served as a currency hedge throughout the year, in particular against the US dollar.
While such inverse relationship pushed gold prices down toward the end of 2011, in part driven by profit taking and portfolio rebalancing, it is believed that gold fundamentals of supply and demand remain robust, according to the report that expect it continue to support its demand.
After a tumultuous year in financial markets around the world, gold was one of few asset classes to deliver positive returns.
Gold’s price appreciation was generally higher in currencies other than the US dollar, especially in developing markets, with the exception of China, as they saw marked declines of their currencies against the US dollar in the latter part of the year.
True to its role as a vehicle for diversification and risk management, gold outperformed a large majority of assets, including oil, on a risk-adjusted basis during a year of marked uncertainty and increased volatility. However, gold’s performance was not all smooth sailing throughout the year, particularly during the latter months.
Many investors saw gold as one of the few assets able to preserve capital and protect against tail risks, increasing their participation in the market especially during the summer and by early August, gold had broken the $1,800 per ounce level and reached a record high of $1,895 per ounce on the London PM fix on September 6, having traded as high $1,921 per ounce intra-day.
In all, gold’s price pullback of 15 per cent was labeled by some commentators as a break in gold’s multi-year trend. On the contrary, a careful analysis of gold’s historical performance shows that it has experienced various pullbacks over the last 10 years.

Precious yellow metal price jumps

The local market witnessed Rs 200 jump in a tola (11.664 gram) gold to Rs 52,898 from last Wednesday's closing of Rs 52,698.
Before Tihar — the festival that sees more trading of precious yellow metal — also the gold price has jumped by Rs 400 per tola keeping the buyers away from the bullion market. But price volatility could not impact the sale in the domestic market during Tihar as the festival witnessed three times the regular trading, according to Nepal Gold and Silver Dealers Association (NEGOSIDA).
The gold price could not cool down also due to dollar that is weakening against the rupee, though the domestic gold market follow the international market price of gold.
According to the World Gold Council, in the current economic environment, low real yields around the globe incentivise investors to look for additional sources of return, while increased uncertainty and market volatility have increased the importance of risk management.
A distinct allocation to gold within a portfolio including alternative assets like private equity, hedge funds, real estate and commodities, can preserve capital and reduce risk without diminishing long-term returns, concluded the latest research from the World Gold Council.
In summary, the report, which is the first the World Gold Council has produced on alternatives, suggests that even if investors hold alternative assets, they are no substitute for the protection that a distinct allocation to gold can offer.
Findings demonstrate that portfolios with an allocation to gold of between 3.3 per cent and 7.5 per cent — depending on the risk tolerance of the investor and the currency of reference — show higher risk-adjusted returns while consistently lowering Value at Risk (VaR).

India, China propel global gold sales

Sustained momentum in Chinese and Indian jewellery demand is also expected to underpin growth in the jewellery sector throughout 2011, according to the quarterly report of World Gold Council (WGC).
Strong demand in India during the recent Akshaya Tritiya festival and the beginning of wedding season, alongside extensive purchasing on dips in the gold price, underlines the strength of the Indian market,it said, adding that jewellery demand in the first quarter of 2011 registered a gain of seven per cent from year earlier levels of 521.3 tonnes to reach 556.9 tonnes. It equated to a record quarterly value of $24.8 billion.
India and China, the two largest markets for gold jewellery, together accounted for 349.1 tonnes or 63 per cent of the total, a value of $16 billion.
China’s jewellery demand reached a new quarterly record of 142.9 tonnes to $6.4 billion up by 21per cent from 118.2 tonnes in the first quarter of 2010.
The outlook for global gold demand remains robust throughout 2011 against a background of another strong quarter, the geographic and sectoral diversity of demand and strong fundamentals, the report added.
Demand for gold in the rest of 2011 will be driven by a number of key factors like prevailing global socio-economic conditions that is expected to continue to drive investment demand for gold; continued uncertainty over the US economy and the dollar, ongoing European sovereign debt concerns, global inflationary pressures and continued tensions in the Middle East and North Africa.
Net purchasing by the official sector is expected to continue in 2011 as central banks turn to gold as a means of diversifying their reserves into an asset with no credit or counterparty risk. The Central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total of net purchases during the first three quarters of 2010.
"Global gold demand in the first quarter of 2011 totalled 981.3 tonnes, up by 11 per cent year-on-year from 881 tonnes in the first quarter of 2010," it said, adding that in value terms, it translated to $43.7 billion, compared with $31.4 billion in the first quarter of 2010 -- an increase of almost 40 per cent.
The Quarterly Gold Update attributed the increase largely to a widespread rise in demand for bars and coins, supported by an improvement in jewellery demand in key markets.
The quarterly average gold price hit a new record of $1,386.27/oz (London PM Fix), its eighth consecutive year-on-year increase. Despite a period of price consolidation in the early part of the quarter, it climbed to record highs throughout March and has continued to achieve new highs in April and May.
During the first quarter of the year, investment demand grew by 26 per cent to 310.5 tonnes from 245.6 tonnes in the first quarter of 2010. In value terms, investment demand was $13.8 billion. The main growth came from bar and coin demand which increased by 52 per cent year-on-year, to 366.4 tonnes. In value terms, it represented a near-doubling of demand to $16.3 billion from $8.6 billion in the first quarter in 2010.
Similarly, ETFs and similar products witnessed net outflows of 56 tonnes to $2.5 billion. Redemptions were concentrated in January. Despite the outflows, the collective volume of gold held by global ETFs by the end of the quarter was in excess of 2,100 tonnes equating to more than $95 billion.
Technology demand remained steady in the first quarter at 113.8 tonnes to $5.1 billion. A revision to the fourth quarter figures now means that 2010 was the highest year on record for gold demand in electronics at 326.8 tonnes or $12.9 billion.
In the first quarter of 2011, gold supply declined by four per cent year-on-year to 872.2 tonnes from 912.1 tonnes in the first quarter of 2010. The decline was due to a sharp increase in net purchasing by the official sector and a fall in the supply of recycled gold, which was down by six per cent on year-earlier levels to 347.5 tonnes from 369.3 tonnes in the first quarter of 2010.
Mine production increased by 44 tonnes year-on-year, a growth rate of seven per cent from year earlier levels, with negligible net producer de-hedging.

Domestic market remain constant
KATHMANDU: The precious yellow metal remained immovable throughout the week, while silver price continued its decline. Gold started the week with at Rs 42,000 for a tola (11.664 grams) in the domestic market and remained constant throughout the whole week. But silver that opened at Rs 1,050 on the first day of the week dropped to Rs 996 per tola on Wednesdayand closed at Rs 1012 for a tola on Friday. In the international commodities market, gold started off at $1,495 and by the end of the week the price had reached $1,497. Similarly, strengthening US dollar against Nepali rupee did not allow the gold and silver price decreasing as much as it should have been. The exchange rate for a US dollar against Nepali rupee has strengthened this week as the week started with Rs 71.46 on Sunday but ended at 71.62 for a dollar.

Global gold demand touches a decade high

Global gold demand in 2010 reached a 10 year high in tonnage and an all time high in value, with strong demand across all sectors, according to the World Gold Council (WGC).
"Gold demand for the year reached a ten year high with annual demand of 3,812.2 tonnes worth approximately $150 billion," it said, adding that the demand was up by nine per cent year-on-year, and marginally above the previous peak of 2008 despite a 40 per cent increase in the annual average price level between 2008 and 2010.
In value terms, total annual gold demand surged by 38 per cent to a record of $150 billion. "On November 9, 2010, the demand led to a new record gold price of $1,421/oz on the London PM fix," the World Gold Council's Gold Demand Trends (GDT) report revealed.
Similarly, the jewellery sector enjoyed a strong recovery in 2010, with annual demand for gold jewellery rising by 17 per cent from 1760.3 tonnes in 2009 to 2059.6 tonnes. The rise in annual average prices over the same period was 26 per cent. In value terms, this resulted in record annual jewellery demand of $81 billion.
Asian consumers drove jewellery demand, particularly in China and India, it said, adding that the Chinese demand is expected to continue to increase rapidly during 2011 as economic growth in China remains strong, while Indian gold jewellery demand is likely to remain resilient and grow.
Asian consumers led demand with the revival of the Indian market and strong momentum in Chinese gold demand, which together constituted 51 per cent of total jewellery and investment demand during the year.
According to the annual report, a structural shift in central bank policy towards gold meant that in 2010 central banks became net buyers of gold for the first time in 21 years, removing a significant source of supply to the market.
Similarly, investment demand was down by two per cent compared with 2009, but was the second highest year on record at 1,333 tonnes, which equated to $52 billion. Investment demand for gold as a foundation asset in portfolios is likely to remain strong, fuelled by ongoing uncertainty surrounding global economic recovery and fiscal imbalances, as well as fear of impending inflationary pressures and currency tensions, it added.
Investment demand, comprising bar and coin demand, ETFs and similar products, but excluding OTC investment demand, remained stable in 2010, down just by two per cent from the exceptional levels seen in 2009. It equated to a 23 per cent rise in value terms from $43 billion in 2009 to $52 billion in 2010.
Physical bar demand was particularly strong during the year, recording an annual gain of 56 per cent at 713.2 tonnes. "Demand for gold ETFs and similar products totalled 338 tonnes during 2010 or nine per cent of total demand, the report said, adding, "although this was 45 per cent below the 2009 peak of 617.1 tonnes, it was nevertheless the second highest annual figure on record."
As at the end of 2010, total gold holdings in ETFs and similar products stood at 2,175 tonnes with a US dollar value of $96 billion. Demand for gold used in technology was 419.6 tonnes, 12.4 per cent higher than in 2009 as the electronics segment fuelled recovery in the sector, with demand returning to long-term trend levels.
Demand soared by 41 per cent year-on-year in US dollar terms to a record $17 billion. "India was the strongest growth market in 2010. Total annual consumer demand of 963.1 tonnes registered growth of 66 per cent relative to 2009, which was largely driven by the jewellery sector. In value terms this was worth $38 billion," it added.
China was the strongest market for investment demand growth. Annual demand for small bars and coins increased by 70 per cent year-on-year, totalling 179.9 tonnes, which is worth approximately $7 billion.
Total supply is estimated to have increased marginally, two per cent higher year-on-year for the full year 2010, with a number of new projects across a range of countries and regions contributing to higher levels of mine supply. Within total supply, recycled gold, which accounts for 40 per cent, fell by one per cent compared with the previous year to 1,653 tonnes.

Gold price rises by 29 per cent

The gold price rose by 29 per cent in 2010, according to the World Gold Council (WGC).
The gold price rose for the tenth consecutive year driven by recovery in key sectors of demand and continued global economic uncertainty. Not only was gold’s performance strong, but its volatility remained low, providing a foundation for a well diversified portfolio.
By comparison the S&P Goldman Sachs Commodities Index (S&P GSCI) rose by 20 per cent, the S&P 500 rose by 13 per centm, the MSCI World ex-US Index increased by six per cent in US dollar terms, and the Barclays US Treasuries Aggregate Index rose only by six per cent over the year, the digest said.
Gold price witnessed 16 per cent volatility on an annualised basis in 2010 and remained consistent with its long-term trend. By comparison, volatility on the S&P Goldman Sachs Commodity Index was 21 per cent during the year, based on daily returns.
The precious yellow metal benefited from the continued contagion from European sovereign debt problems as investors’ hedge their currency risk, it said, adding that it was evidenced by strong gold buying in ETFs, bars, coins and other investment vehicles in Europe and other parts of the world.
The investors bought 361 tonnes of gold in the ETFs, the WGC monitors in 2010, bringing total holdings to a new high of 2,167 tonnes, worth $98 billion. "It represents the second largest yearly inflow on record, after the 617 tonnes of net inflows experienced in 2009," according to the digest.
During the first nine months of 2010, global jewellery demand totalled 1,468 tonnes, increasing by 18 per cent from the same period during 2009. Gold demand for technological and industrial applications continued to recover during the first nine months of 2010, registering a 19 per cent increase over the same period in 2009, said the report.
Central banks became slight net buyers of gold for the full-year, after two decades as a steady source of supply to the market. The IMF successfully completed its gold sales programme of 403.3 tonnes without disruption to the market. The IMF sold 200 tonnes to the Reserve Bank of India, 10 tonnes to Sri Lanka, 10 tonnes to Bangladesh and 2 tonnes to Mauritius, all in off-market transactions executed at market prices. The remaining sales were conducted through on-market sales within the ceiling set by the third Central Bank Gold Agreement (CBGA3).

Domestic market
KATHMANDU: Due to surge in the international price, the domestic market has also witnessed a record high gold price in 2010. On December 7, the
precious yellow metal crossed Rs 40,000 and was traded for Rs 40,398 per tola (11.66 gram) but the price has cooled down a little and has been trading between Rs 39,000 to Rs 40,000 per tola lately.

Global gold demand trend

Recent developments in China are likely to have positive longer-term implications for the increasingly important gold market, said the report from Word Gold Council (WGC).The council view that there is huge potential for gold ownership to increase among Chinese consumers, in amarket with tight domestic supply, as discussed in our China Gold Report –Year of the Tiger, March 2010.On the supply side, supportive factors suggest that total mine supply is likely to trend higher, particularly as the scope for producer de-hedging continues to diminish. "Growth in gold demand during the second quarter (+36 per cent Year-on-Year to 1,050 tonnes) largely reflected robustgold investment demand compared to the second quarter of 2009," said the WGC.The climate was more favourable forgold investment with strong growth in most countries. Investment demand surged in second quarter in 2010 due to uncertaintyin the global economic recovery and the spill over of European sovereign debt concerns.As a result, gold investment represented the majority of total gold demand during the quarter. Net retail investment and gold ETF demand increased by 29 per cent and 414 per cent respectively, compared with second quarter of 2009. The total mine output net of producerhedging increased by a moderate six per cent YoY despite a 30 per cent YoY increase in the average gold price. Mine supply, which remains the largest contributor on the supplyside, has failed to track the increase in gold price sincemine supply last peaked in fourth quarter of 2005.On the other hand, recycling flows increased by 35 per cent YoY to 496 tonnes inthe second quarter of 2010. However, this level is stillbelow the record quarterly supply achieved in first quarter of 2009 of 606 tonnes.

Gold price looks to Rs 30,000 per tola, set to shatter all records

Gold is likely to rise up to Rs 30,000 per tola (11.664 gram), hurting the domestic trade. Gold traders are a worried lot as the price is gaining every day, pinching their trade in the wedding season.
"Today, it broke all records and was traded at Rs 29,160 per tola in the domestic market," said Tej Ratna Shakya, president of Nepal Gold and Silver Dealers' Association (NEGOSIDA). Interestingly, silver also jumped to Rs 414 per tola today.
"The weak dollar against the Japanese yen and Euro and poorer performance of global share markets have pushed up the gold price in the international market apart from weak rupee against the dollar at home," he said adding that the price of gold in the international market also is looking to go up to $1000 per ounce. Today, it was around $965 per ounce.
"Speculative market players have also contributed to the hike in gold price," Shakya said. Gold is unique because it is both a commodity and a monetary asset and thus a safe haven for investors. "Gold is seen as a hedge against inflation; while its real value can vary in the short term, its purchasing power has remained stable over centuries," said Shakya.
Today, very little gold was traded, at Rs 25,000 per 10 gram while silver was traded at Rs 355 per 10 gram.
According to World Gold Council's Gold Demand Trends, identifiable gold demand in tonnage terms rose by four per cent on previous year levels to 3,659 tonnes. This year as a whole, the gold price averaged $872, up by 25 per cent from $695 in 2007.
Similarly, global demand for jewellery was also up by 11 per cent in dollar terms at almost $60 billion for 2008 against 2007.
Investors around the world have recognised the benefits of holding back gold during such a time of unprecedented global financial crisis, recession and the spectre of future inflation. Gold has again proven its core investment qualities as a store of value, safe haven and portfolio diversifier. Naturally, this has struck a chord with nervous investors.
Total demand in India, the world's largest gold market, in the fourth quarter of 2008 was up by 84 per cent in tonnage terms, led by a very strong 107 per cent rise in jewellery demand, underpinned by investment attributes of gold.
Similarly, total gold demand in Greater China in Q4 of 2008 was resilient against the global turmoil. Total off-take was up by 21 per cent on the same period last year, with investment the main contributor to growth but jewellery demand also holding up well.