Adrian Ash (The Daily Reckoning):

The collapse in India’s gold demand during 2007-09 might seem good reason to question the fundamental strength of gold buying worldwide.

After all, if the world’s No.1 gold buyers can’t keep up with record-high gold prices, who can…?

But the plain fact, as BullionVault first forecast in spring 2009, is that China has overtaken India as the number one private gold buyer this year. The typical Chinese New Year gold rush has already begun (thanks in part to 3% discounts at major retailers), and robust demand looks likely to continue through 2010 if not beyond.

Full-year 2009 private demand in mainland China could outstrip India, the former No.1 buyer, by one quarter if not one third. Short of a (very unlikely) collapse in Q4 demand, full-year private gold buying – including jewelry and retail investment – is set to have grown 10% from 2008’s record in volume terms, rising 26% by value to equal $13.5 billion or more.

On recent trends, that would equate to more than 2.0% of China’s famously massive household savings (up from 1.0% ten years ago) and account for almost one ounce in every eight sold worldwide.

Basis the GFMS consultancy’s data (published by the World Gold Council), physical gold purchases by mainland Chinese households in 2009 was already running 19% ahead of India’s private demand for Q1-Q3.

Given China’s continued economic growth (certain to hit Beijing’s 8% target according to the Chinese Academy of Social Sciences) – not to mention the surge in money-supply and credit growth over and above GDP (put at 23 and 27 percentage points respectively by Deutsche Bank) – private gold consumption in Q4 most likely remained very robust. Whereas India’s private gold off-take during Oct-Dec. continued to shrink in the face of record-high prices. Indian bank and wholesale dealers have reported below-market bids from their clients throughout the autumn. Comments from the Bombay Bullion Association put Q4 imports 54% lower from 2008’s already disastrous finish.

Fourth-quarter Chinese consumption should be in the range of 116 tonnes (if it adds 37% to Q1-Q3 volume, as per the 5-year average) to 128 tonnes or more (if Q4 tops Q3 by volume, as it has each year since 2004). The running total to end-Sept. was 315 tonnes. It is likely to finish full-year at 431-443 tonnes.

India’s private demand, in contrast, ran 45% below 2008 levels during the first 9 months of the year, most notably depressed during Q1 (down 83% from Q1 08, with Indian investors becoming physical dis-hoarders on GFMS’s data; overall, India was a net exporter of gold for the first time since the Depression according to market historian Timothy Green). Applying the 5-year average ratio of Q4 demand to Q1-Q3 figures (27% added to 264 tonnes), full-year private off-take would come in at 336 tonnes, the lowest total since at least 1991 on GFMS’s data. . . .

Click here for the rest of Mr. Ash’s analysis at The Daily Reckoning.

U.S. data showed the number of U.S. workers filing new claims for jobless benefits rose slightly more than expected last week, but a gauge of underlying labor trends fell for a fifth straight week.

Spot gold was bid at $933.50 an ounce at 1311 GMT, against $929.00 an ounce late in New York on Wednesday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange rose $6.20 to $933.40 an ounce.

“If this is welcomed by the equities market and triggers a fresh boost, that could benefit gold,” said CMC Markets strategist Ashraf Laidi.

The dollar was down 0.39 percent at 79.3 against a basket of currencies and was lower against the euro following the data. Traders are now eyeing U.S. data on second-quarter GDP due on Friday for clues as to the next direction of the economy.

European shares rose as investors digested a raft of broadly positive corporate earnings, while U.S. stock futures extended gains after the jobs report.

Oil was also boosted by stock markets and rose above $64 a barrel. Firmer crude prices can support gold, which can be used as a hedge against oil-led inflation.

Gold demand in India, the world’s biggest bullion consumer, is recovering after recent price falls, but a further decline will be needed for buying to significantly recover.

“There are advance orders in decent quantities in the range of $900-920 an ounce,” said one dealer with a state-run bank.

Overall demand in India remains weak, however. The country’s gold imports have reached a provisional 8-10 tonnes in July so far, well below the 24 tonnes recorded last June, the Bombay Bullion Association said.

INVESTMENT SOFT

Investment demand for gold remained soft, however, as ETF holdings slipped further. Holdings of the largest bullion ETF, the SPDR Gold Trust, fell over 10 tonnes on Wednesday, and are down nearly 48 tonnes in the last four weeks.

Jason Toussaint, managing director for exchange-traded gold with the World Gold Council, said there was evidence investors were selling out of the SPDR fund to buy shares.

Analysts fear a broader liquidation of ETF gold holdings resulting from a recovery in risk appetite could jeopardise gold’s gains.

“Without strong physical demand to absorb metal coming back into the market and with funds cutting long exposure, the metal is at risk of a deeper correction,” said TheBullionDesk.com analyst James Moore.

On the supply side, the world’s largest gold producer, Barrick Gold , said it produced 1.87 million ounces of gold in the second quarter and is on track to meet its 2009 output target of 7.2-7.6 million ounces.

Among other precious metals, silver tracked gold up to $13.44 an ounce against $13.28. Spot platinum was at $1,177 an ounce against $1,170, while spot palladium was at $255 against $252.50

LONDON, July 30 (Reuters)

Silver Wheaton is one of a few well-known silver plays. And I’m behind silver for a lot of reasons…

Over the last 200 years, the mean gold/silver ratio has been 31.32. Today it’s surged to 69.

A simple reversion to the mean makes a great play here. For those of you without finance books handy, it means that silver is more likely to move up to maintain the average ratio.

But that’s not all…

Silver – A Consumption Commodity

Silver isn’t just a store of value, it’s a consumption commodity.

Globally, 63% of demand for silver comes from industry or photography. Only 27% ends up in coins, medals or jewelry. Silver goes into everything from batteries to ball bearings, electronics to electroplating, and medical devices to mirrors.

Only 11% of gold demand comes from industrial uses, and the gap is widening.

Researchers find new uses for silver constantly. For example, UK researchers found that coating medical equipment in silver ions prevents infections. Coating lumber with a fine silver mist makes it resistant to mold and mildew.

As industrial consumption increases, less of each year’s production will be available for holding as a precious metal.

However, this does make silver dependent on a consumption economy… which we seem to be lacking at the moment. Silver won’t really move until we get a turnaround in the global economy. But that doesn’t mean that Silver Wheaton Corp will have to wait that long.

Source: Silver Wheaton Corp (NYSE: SLW): Stock of the Day

The closure of the U.S. markets for the Presidents Day holiday is likely to keep traders on the sidelines this session.

Spot gold was little changed at $940.20/942.20 an ounce at 1233 GMT from $939.40 late in New York late on Friday.

Bullion prices rose nearly $30 an ounce last week as concern over the economic outlook and turmoil in the financial sector prompted investors to buy the metal as a haven from risk.

Wolfgang Wrzesniok-Rossbach, head of sales at precious metals group Heraeus, said however that with jewellery demand soft, gold was likely to consolidate before its next leg higher.

“The trend for the next hours and days is probably a little lower before we make a new attempt higher,” he said. “Between $935 and $930, there is danger that the metal will break (its) recent uptrend, and then we might head a little lower.”

But turmoil in the financial markets and economic worries are still supporting demand for gold as a safe store of value.

Equities fell on Monday after a lack of concrete action following a G7 meeting this weekend and as data showed Japan is sinking deeper into recession. Japan reported its worst quarterly contraction in 35 years on Monday.

Fear-driven demand for investment products is helping balance a drop-off in jewellery buying in traditional gold markets such as China, India and the Middle East.

The world’s largest gold-backed ETF, New York’s SPDR Gold Trust (GLD) , said its holdings rose more than 15 tonnes to a record 985.86 tonnes on Friday. The trust’s gold holdings are up more than 205 tonnes or 26 percent so far this year.

But India’s gold demand was slack on Monday as high prices put traders off purchases. “Gold demand is very sluggish, and everybody is waiting for a dip to $900-$920,” said a dealer at a state-run bank in Mumbai.

The head of the Bombay Bullion Association said on Friday that there have been no gold imports into India so far in February.

Scrap supply from India and China is rising, however, as the climb in spot prices prompts existing gold holders to cash in gains.

DIRECTION

Gold took little direction from its usual main external drivers, the dollar and oil prices.

The dollar gained ground versus the euro as grim Japanese data intensified global recession fears and encouraged buying of safer assets.

Gold typically trades in the opposite direction to the U.S. currency, as it is often bought as a hedge against dollar weakness. However, both are currently benefiting from rising risk aversion.

Oil prices were steady just above $37 a barrel, pausing after Friday’s 10 percent rally, as investors awaited further direction from the signing of a U.S. stimulus package later this week.

Among other precious metals, silver also took support from strong investment.

Holdings of the biggest silver ETF, the IShares Silver Trust (SLV) , were at a record 7,607 tonnes on Friday. Spot silver edged down to $13.53/13.61 an ounce from $13.62.

Platinum and palladium remain under considerable pressure from the sluggish outlook for the car industry, a major user of the metals as a component in catalytic converters.

President Barack Obama has decided to launch a government task force for restructuring the struggling U.S. auto industry, a senior administration official said on Sunday.

Platinum edged up to $1,065/1,070 an ounce from $1,059.50, while palladium was at $215/220 an ounce from $214.

London-based ETF Securities said holdings of its palladium-backed exchange-traded commodity rose 30 percent last week as a recovery in platinum and palladium prices cheered investors.

Reuters Monday 2/16/09

The equities market are taking Geithner’s proposal as kindly as flatulence at a funeral. It may be bad news for some investors, but gold bugs love it.

Gold bugs are finally getting the fuel they need to get the price of their precious metal out of the rut it has fallen into.

With the Treasury’s latest banking-industry bailout going over like flatulence at a funeral, more and more investors are turning to the safety of gold. It has been the one asset class Washington has not been able to grossly manipulate… so far.

As I write, the price of an ounce of gold is trading for $914 an ounce, $21 higher than yesterday’s final price. As the market’s tank and volatility increases (just look at the VIX) for what seems like the nine hundredth time this year, investors are looking towards gold with a glistening eye.

Now that Obama is proving he and his team are not the overnight saviors so many voters thought they would be, gold demand is likely to continue its climb. In fact, most analysts expect gold demand to surge beyond 2007 levels this year.

If the precious metal climbed from $600 to nearly $1,000 in 2007, imagine what it could do this year.

We are just over a month into the New Year and already we have plenty of indications of what is to come. The U.S. Mint revealed this week that it sold over 92,000 ounces of its American Eagle coin in January. That adds up to more than four times what it sold during the same time last year.

Even more intriguing for gold bugsis the news trickling out of the gold ETF industry. It just announced that gold inflows increased to 1,317 tons last month, a record surge of 105 tons. That is a lot of gold. It proves investors are searching for safety and appreciation potential.

A golden opportunity

As always, you have several options if you want to take advantage of the bullish sentiment. You can take physical possession of a slab of gold in the form of bullion or gold coins.

But if you live in a rough neighborhood or don’t trust your mother-in-law, you may want to purchase shares of a gold-backed ETF like SPDR Gold Shares (NYSE:GLD). They are less prone to thievery.

Today’s action on the equities market is a good example of the portfolio-protecting abilities of gold. As I write, the S&P 500 is down by 3.68%, but the above-mentioned ETF is up by over 1.5%.

Some gold experts are calling for gold prices to hit $2,500 or even $3,000 by the end of this financial meltdown, but I am much more conservative. The figure is likely to top out at $1,500. That is a 60% gain from today’s prices. Not bad when the rest of the market’s are too afraid to move.

Gold may not be the sexiest or most thrilling investment out there. But we don’t invest to entertain ourselves. When the markets go haywire, you need to take action to protect what you have earned.

Now may be the last time to do it while prices are so cheap.

Source: Gold is getting sexier by the minute

Gold demand has in fact exploded, and not just here and there. Everywhere. Around the world, customers have been queuing up to strip coin shops’ shelves bare. Mints have been running 24/7 and still have been forced to ration coin shipments to their dealers. ETF vaults are bulging.

Now, the World Gold Council has confirmed the trend with hard numbers for the third quarter of this year. In a page-and-a-half press release summarizing 3Q2008 activity, the WGC had to use the word “record” ten times. Some highlights:

• Dollar demand for gold in Q3 was a record US$32 billion, 45% higher than the previous record, set in 2Q2008.
• Identifiable investment demand, which incorporates demand for gold through exchange-traded funds (ETFs), bars and coins, rose to $10.7 billion (12.3 million ounces), double year-earlier levels.
• Retail investment demand rose 121% to 7.5 million ounces, with strong bar and coin buying in the Swiss, German, and U.S. markets. Europe as a whole saw an all-time record 1.64 million ounces of bar and coin buying. France became a net investor in gold for the first time since the early 1980s.
• Gold ETFs posted a record quarterly inflow of 4.8 million ounces in Q3. After the collapse of Lehman Brothers in late September, ETF inflows shot higher by an unprecedented 3.6 million ounces in only five days.
• Demand for gold jewelry hit a record $18 billion. Leading the way was India, which witnessed a rise of 65% in dollar value (1.3 million ounces) compared with 3Q2007. The Middle East, Indonesia, and China all experienced increases of more than 40% in value or 10% in weight, year over year.

At the same time that demand is setting records, supply has been unable to keep pace, falling 9.7% from year-earlier levels, the WGC reported. The drop was largely due to inaction on the part of central banks, which have increasingly shut their vault doors.

Heavy demand, declining supply… small wonder that gold prices have remained near record highs in most of the world’s currencies; that dealers have been marking up coins by 10% or even 15% (when they can get them); and that one-ounce coins still fetch bids close to $1,000 on eBay.

When will the spot price in U.S. dollars, which is set by the futures market, catch up? No one knows. But it will.

The world’s hunger for gold will only grow into a future awash in fiat currency. Gold is the ultimate and, at day’s end, the only safe haven from the kind of currency destruction that is being visited upon the dollar, the euro, even the renminbi, as governments everywhere desperately try to stave off a deflationary depression the only way they know how: by turning on the printing press.

We are in a period of intense monetary inflation. It will be followed, inevitably, by a long period of price inflation. People will be desperate to preserve the buying power of their dollars, euros, etc., and they will turn to the one thing capable of doing just that. Gold.

As gold rises, it will lift the shares of selected mining companies with it. The ones that prosper the most will be those that have positioned themselves to survive the credit crisis — by stockpiling cash, keeping production costs down, and locking up borrowed money on favorable terms.

Companies that have failed to do this will go under, unable to get credit in a frozen market. That will both diminish competition and further curb supply, and those that properly planned ahead will rake in enormous profits as gold goes through the roof. Or more likely, as Casey Research founder Doug Casey puts it, gold “heads to the moon.”

But which are the companies poised to profit the most? The ones we cover in our monthly newsletter for conservative investors, BIG GOLD.

We are dedicated to bringing you the information that will allow you profitably to pick your way through the present economic minefield. We search the world of producing gold miners, to find the best of the best. We pinpoint the investments that will not only hold on through a market downturn, but will rebound spectacularly as the commodities market recovers, which it must.

In addition, we bring subscribers the best ways to invest in physical gold, including where to find coins and bars at affordable prices in times of extreme scarcity — like right now, when mints are not minting, most dealers are out of stock, and those still taking orders are charging exorbitant premiums.

While we specialize in producing companies, we also cover such alternative gold investments as ETFs, mutual funds, royalty companies, and closed-end funds. We strive to find what’s best for you. And we answer your specific questions, each month in our BIG GOLD Responds section.

The elaborate world financial structure that has been erected over the past two decades created a humongous bubble that has now popped. What will come in the aftermath of this cataclysm cannot be foreseen, but it will be different. One thing is for certain, though, gold has been money, in all times and places, for thousands of years. The people of the world are already returning to it as the sole store of value, and that’s a trend that will accelerate in the coming years. You can count on it.

Learn how to make the trend your friend with a 3-month, no-risk subscription to BIG GOLD… and as an added bonus, receive our hot-off-the-press special report “The Crisis in Pictures” absolutely FREE of charge. Click here to continue…

Source: Gold Buyers Smash Records

Demand for physical gold is soaring so much that it is almost impossible to get hold of right now. And gold production is lower than in 2000. Andrew says all this means it will soon be gold’s time to shine…

More from Investor’s Daily Edge:

Gold dropped from $915 to $859 on Friday. That’s not supposed to happen while the market is crashing. What’s going on?

It’s not that gold has lost its luster. But institutional investors were forced to sell gold on Friday to meet margin calls.

If equity and hard assets continue to lose value anywhere near the rate of last week, margin liquidation will continue. And gold could go down even more.

But make no mistake about it. With the market crashing and dozens of governments printing money like there’s no tomorrow, investors want to be in gold.

Before the sell-off on Friday, the price of gold was up more than 20 percent following Lehman’s collapse.

The demand for physical gold this month has surged to what one trader calls “unprecedented” levels. The US Mint has doubled its gold-coin production but it hasn’t been enough.

Gold dealers have had to turn away customers wanting to buy coins and bars.

But it’s the physical demand (for jewelry) that ultimately decides the price of gold. Jewelry demand accounts for 60 percent of total gold demand and it’s down so far this year.

Will it pick up? The world’s biggest gold consumer is India and Diwali – the festival of lights –begins October 28th. Gold sales usually surge with the approach of this festival.

Then there’s this: Gold production today is lower than it was in 2000.

Gold is rarer than ever. The markets are going to hell. It’s gold’s time.

Source: Has Gold Lost its Luster?