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Gold Price - Where is it heading?

Sean K

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During 2022, Central banks bought up gold at the fastest pace since 1967.

The World Gold Council in November estimated that central banks had since January acquired 673t, but that is an estimate because we don’t know if there were gold purchases that have not been disclosed.

China and Russia are the main suspects when it comes to piling up gold reserves without making it public. China bought 32t in December, taking the country’s total holdings to 1,190t. However, it is now widely accepted that the Chinese buy figure in December was closer to 300t.

Turkey, Uzbekistan and others were buying with their ears pinned back. Qatar doubled its hold reserves.

Certainly, Banca Italia, the Italian central bank, is a big believer in gold — it holds 2,451t. Only the US and Germany own more (and presumably so does China if it owned up to the real size of their stash).

Banca Italia makes no secret of its enthusiasm for gold, with the following posted on its website:

“Gold is an excellent hedge against adversity. Another good reason for holding a large position in gold is as protection against high inflation since gold tends to keep its value over time.”


Something is definitely stirring in the gold space and has been bubbling for the past 6 months or so since CBs started accumulating. Not sure if it's a good longer term geopolitical strategic signal though. Might spell trouble. Did CBs accumulate gold prior to WW2?
 
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Zoltan Pozar has been all over this like a rash.

From Russia:


Screen Shot 2023-01-14 at 3.50.41 PM.png


Translation:


The tough sanctions blockade has created the necessary prerequisites for a 180-degree turnaround in Russian foreign trade. The main foreign economic partners are the countries - members of the EAEU, China, India, Iran, Turkey, the United Arab Emirates, etc. And with each of these countries, the Russian Federation has a trade surplus. According to preliminary estimates of the Bank of Russia, in January-September 2022, it strengthened to $198.4 billion, which is $123.1 billion more than in the same period last year. This surplus was taken out of the country (at the same time, half went to pay off the external debts of Russian companies with their replacement by domestic ruble lending) and is reflected in the balance of payments item “net capital outflow”.


In friendly countries, the process of de-dollarization is underway, the share of settlements in “soft” currencies is growing. In September, Russia became the third country in the world in terms of the use of the yuan in international payments. According

to the Central Bank, in recent months, yuan trading accounts for up to 26% of foreign exchange transactions in the Russian Federation. The yuan/ruble pair on the Moscow Exchange has more than once overtaken the dollar and the euro in terms of daily trading volume. When using the yuan, rupee, rial, etc. in foreign trade settlements of the Russian Federation and the presence of a trade surplus, the result is the accumulation of multibillion-dollar cash balances on the accounts of Russian exporters in "soft" currencies in the banks of the above partner countries.


The accumulation of funds in "soft" currencies will increase in the future. But since this money is also subject to exchange rate and possible sanctions risks, it becomes necessary to sterilize their excess mass. The best way is to buy non-sanctioned gold in China, UAE, Turkey, possibly Iran and other countries for local currencies. The "foreign" gold purchased by the Russian Central Bank can be stored in gold and foreign exchange reserves (GFR), within certain limits being in the central banks of friendly countries, can be used for cross-country settlements, currency swaps and clearing operations. Part of the gold may be repatriated to Russia.


Russia's transition in relations with friendly countries to trade in national currencies is the right tactical decision, but not a strategic one. If pricing continues in dollars on Western exchanges, trade flows are insured by British companies, then there is no real decoupling from the Western "distorting mirror" - derivative pricing systems.


In the face of unprecedented sanctions pressure, Russia's task is not to learn to play by the "crooked rules" of the West, but to build transparent and mutually beneficial rules of the game with friendly countries, to create their own pricing, exchange trading, and investment systems. And gold can be a unique tool in the fight against Western sanctions, if you count in it the prices of all major international commodities (oil and gas, food and fertilizer, metals and solid minerals).


Fixing the price of oil in gold at the level of 2 barrels. for 1 g will increase the price of gold in dollars by 2 times, calculated the strategist of Credit Suisse Zoltan Pozsar. This would be an adequate response to the "price ceilings" introduced by the West - a kind of "floor", a solid foundation. And India and China could take the place of global commodity traders instead of Glencore or Trafigura.


Gold (along with silver) has been the core of the global financial system for millennia, an equivalent, an honest measure of the value of paper money and assets. Now the gold standard is considered "anachronistic". It was canceled in its final form half a century ago (the United States announced the "temporary" closure of the "golden window" adopted in 1944 at Bretton Woods), re-pegging the dollar to oil. But the era of the petrodollar is coming to an end: now they are already talking about the petroyuan and other mechanisms to limit the abuse of the status of the world reserve currency issuer.


Russia, together with its eastern and southern partners, has a unique chance to “jump off” the sinking ship of the dollar-centric debt economy, ensuring its own development and mutual trade in the accumulated and extracted strategic resources.


This is not the first possible attempt by Russia to introduce a hard ruble based on a gold peg. Gold standard in the 19th century Rothschild lobbied in Europe - this gave him (and Britain) the opportunity, through gold loans, to subordinate continental Europe to the British financial system. Russia joined the "club" under Count Witte. "Golden ruble 1.0" ensured the process of capitalist accumulation, while tying domestic bankers and industrialists to sources of Western capital. Russia did not have its own large-scale gold mining then - the industry appeared already under Stalin.


Gold played an important role both in industrialization and in the post-war refusal of the USSR to join the dollar standard (at that time the country accumulated record gold reserves). Having signed the Bretton Woods agreements, the USSR did not ratify them, defining the peg of the ruble not to the dollar (which was a condition for participation in the Marshall plan), but to gold and to "the entire wealth of the country." "Golden ruble 2.0" ensured the rapid recovery of the economy after the war, made it possible to implement nuclear and missile projects.


The reformer Khrushchev abolished the ruble's link to gold, having carried out a monetary reform in 1961 with the actual devaluation of the ruble by 2.5 times and pegging it to the dollar, creating the conditions for the subsequent transformation of the country into a "raw material appendage" of the Western financial system.


Now the conditions for the "Golden Ruble 3.0" have objectively developed.


The sanctions imposed on Russia have boomeranged the Western economy. The geopolitical instability provoked by them, rising prices for energy carriers and other resources, inflation and other negative factors put strong pressure on the global

economy, in particular the global financial market. In 2023, all these circumstances will objectively affect the change in the stereotypes of investment policy in the world - from risky investments in complex financial instruments to investing in traditional assets, primarily gold.


According to Saxo Bank analysts, in 2023, increased demand for this metal will lead to the fact that its price will rise from the current $1,800 per ounce to $3,000. As a result, there is a real opportunity in the very near future to significantly increase gold reserves - both by increasing the physical volumes of gold and by revaluing its value.


Large gold reserves allow the country to pursue a sovereign financial policy and minimize dependence on external creditors. The amount of reserves affects the country's reputation, its credit rating and investment attractiveness. Large reserves make it possible to plan the state budget for a long time, stopping many economic and political risks.


In 1998, the lack of sufficient international reserves became one of the reasons for the crisis, which ended in default for Russia. Now our country already has large gold and foreign exchange reserves, having the fifth index in the world (after China, Japan, Switzerland and India) and ahead of the United States, but this is not enough.


The volume of annual gold production is estimated at only (at current prices) at $200 billion, the volume of accumulated reserves is at $7 trillion, of which the central banks have no more than a fifth, and in the III quarter they bought a record 400 tons of gold.


The People's Bank of China announced for the first time in many years that it was building up its gold reserves. But the Bank of Russia publicly told the market that buying gold is a bad idea, as it leads to excessive monetization of the economy, and set a discount to the world price of 15%.


As a result, gold miners are experiencing double stress: the West has outlawed Russian gold, banning any transactions with it, and the Central Bank of the Russian Federation is pushing gold (as well as currency) abroad, giving companies the right to export everything through intermediaries with remelting or re-branding of the metal in “good jurisdictions”.


In China, which ranks first in the production of gold, there is a legal ban on the export of all mined gold. According to the Shanghai Gold Exchange, over the past 15 years, customers have seized (received in physical form) 23,000 tons of this metal. India is considered the world champion in gold accumulation - more than 50,000 tons (the Reserve Bank of India has almost 2 orders of magnitude less).


For the last quarter of a century, there has been a flow of gold from West to East through the main hubs (London, Switzerland, Turkey, UAE, etc.) with a capacity of 2000–3000 tons per year. Has the "despicable metal" remained in the vaults of Western Central Banks, or is it all "demonetized" through swaps and leasing? The West will never say that, and there will be no audit of Fort Knox.


Over the past 20 years, the volume of gold mining in Russia has almost doubled, while in the United States it has almost halved. It's like with the uranium deal (HEU-LEU): by demonetizing real wealth, the United States has lost competence and interest in the production and processing of these strategic resources (both gold, and uranium, etc.) - the printing press will ensure the purchase of everything we want.


The same thing happened, for example, with the extraction of rare earth metals - it almost entirely went to China. It's time to reap the rewards: the States are frantically buying in Russia (as their customs statistics for recent quarters show) palladium, uranium, and other resources.


Gold mining, which today barely occupies 1% of GDP, may well grow (due to the growth of both production and relative oil prices) to 2–3% of GDP and become the basis for the rapid growth of the entire commodity sector (30% of GDP) and the balancing of foreign trade , which is still based on the tyranny of the issuers of "hard" currencies and the risks of devaluation and insufficient convertibility of "soft" currencies.

In this case, Russia, due to a well-organized global “gold rush” (and the population of Russia, following the world central banks, has already increased investment in gold by 4 times compared to last year) will be able to increase gold production (only due to three large, already commissioned deposits) from 330 tons by 1.5 times to 500 tons, becoming the world leader in this strategic industry as well.

As a "bonus" we will get: a strong ruble, a strong budget and - in the implementation of the accelerated development strategy - a strong economy.

The authors are Academician of the Russian Academy of Sciences Sergey Glazyev and Executive Secretary of the Scientific and Technical Council under the Chairman of the EEC Board Dmitry Mityaev


The amount of mis-information that our governments have been feeding us is staggering. It's interesting that Mr Pozar has not been silenced in some manner already. When you read his stuff, it becomes clear just how fuc*ed the West actually is.

jog on
duc
 

Garpal Gumnut

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Thanks @ducati916 .

I've read a fair few articles by Zoltan Pozsar and agree with his premise and interpretation that you posted.

It is very much a Swiss interpretation, with which I largely agree, although I am ignorant on economic theory and have to do a fair amount of duckduckgo-ing when his input to Credit Suisse is made available publically.

I also follow world strategic politics and war, and it is interesting that the Swiss are on a go-slow on supplying Ukraine ( who I support ) with weaponry. The Swiss always come out winners in any war, and smelling sweet.

Anyways, if I were younger and a multi billionaire I'd be buying Gold and Commodities and shorting US and Australian banks.

As for the Fed and US Politics, as Groucho Marx famously said " Inside of a dog it is too dark to see ".

gg
 
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Good morning,
rcw1 yellow ave purchase price next to be sold by rcw1 p/t/o including coins is $2400 Aust. around $1635 US. rcw1 will be in BRISvagus 14/01/23 + for business and pleasure... Gold Coast Magic Millions races ha ha ha ha ha ha.... If the pog is hovering around that $1950, always nice to be positive ha ha ha ha, give or take... US mark, rcw1 will sell this holding, profit of btw $460 to $500 Australian p/t/o. Just saying ... rcw1 would still be holding some gold, put away over past 40 years or so in the 'small safe' electrified and guarded loyal bodyguards 24/7 ha ha ha ha ha ha - one too many coffees this morning decided where to bet coin on the gee gees,...

Gold is good. Upon the obliteration of fiat currency, through inept financial management, war, famine, pandemic, asteroid collision/disaster whatever, what do you have left?? Anarchy and Crypto?? ha ha ha ha ha

Re: accumulating my Gold stocks whenever they dip... ;

As for gold stocks, nice to have several transactions running simultaneously and be in an out real fast... lightning fast :)
rcw1 will buy on the rise, always.

Have a happy and safe Christmas and prosperous new year.

Kind regards
rcw1
Good morning
rcw1 back in the gods country plenty rain in da north too … Magic Millions wash out … punter’s get to take the good with the bad. Got on the 2nd at Gold Coast with a salute (da good) Didn’t see any mermaids (the bad ha ha ha) on the Gold Coast either.

Holding all physical 😊
Have a very nice Sunday.

Kind regsrds
Rcw1
 
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From Kitco
Russian investors purchased a record amount of gold bullion last year as the country dealt with sanctions in response to its invasion of Ukraine, and the economy faced many risks.

More than 50 metric tons of physical gold was purchased by Russian citizens in 2022, according to a local publication Vedomosti, which surveyed major Russian banks.

Five out of the 13 largest Russian banks sold 57 tons of physical bullion last year, Vedomosti reported. This total is already more than the 40-50 tons Russian Finance Ministry forecasted back in December, the publication said.

To put this new trend into perspective, Russian citizens bought under six tons of gold in 2021, according to the World Gold Council data.
and again fromKitco
The gold market is trading at its highest level in seven months, driven partly by the People's Bank of China's growing appetite for the precious metal.

In an update published Saturday, China's central bank announced that it increased its gold reserves by 30 tonnes in December. This follows November's purchase of 32 tonnes of gold, the first officially recorded purchase since September 2019.

China's gold reserves now total 2,010 tonnes.
So will the US allow two of its biggest "enemies" to buy gold and allow it to rise in value?
I am thinking that over this week, the "influencers" may well drive down the price of gold.
I expect that after Fridays runnup over 1900, there will be more strong rises in OZ gold stocks.
I will be taking some profits today on those that have done well, in the expectation i can buy them back later at a lower price.
Mick
 

Garpal Gumnut

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From Kitco

and again fromKitco

So will the US allow two of its biggest "enemies" to buy gold and allow it to rise in value?
I am thinking that over this week, the "influencers" may well drive down the price of gold.
I expect that after Fridays runnup over 1900, there will be more strong rises in OZ gold stocks.
I will be taking some profits today on those that have done well, in the expectation i can buy them back later at a lower price.
Mick
Thanks @mullokintyre .

One of the good things about Gold is that it has a life of it's own and is not prone to "influencers", although with it being tied to the USD there has been some reactive to-ing and fro-ing with the POG from the Feds interventions. This is due to the American cousins spending too much on burgers, fries ( why can't they call them chips? ) and coke of all descriptions and then expensive drugs to make them thinner. Fat chance of that.

Chinese NY will be a good one this year with the young free to give gold to each other as will the various Indian festivals, one of which a well immersed mate of mine tells me has just started. So retail gold is in demand.

The Chinese and Russian cousins have been accumulating gold to bypass sanctions for the latter and in an attempt to decouple the
USD from the POG and Oil for the former.

It is all quite historical, three empires, two interested in land grabs and one interested in commodities and service expansion.

My own large Gold insurance policy on my SMSF is now well back in profit having dropped, (but not too worryingly as the AUD dropped in tandem) and despite the strengthening AUD is amazing me with it's gains.

I have started in to some US Gold Miners but have avoided Aussie ones for the present, too much weather and still some uncertainty everywhere.

gg
 
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From Kitco

and again fromKitco

So will the US allow two of its biggest "enemies" to buy gold and allow it to rise in value?
I am thinking that over this week, the "influencers" may well drive down the price of gold.
I expect that after Fridays runnup over 1900, there will be more strong rises in OZ gold stocks.
I will be taking some profits today on those that have done well, in the expectation i can buy them back later at a lower price.
Mick
May have been premature.
Holiday for MLK day in US, so markets closed overnight.
Maybe tonight, tomorrow night.
Mick
 
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Busy day at work today but I took a quick peek at the charts during Tokyo session and thought "woof, big downdraft on XAUAUD, much bigger range than you'd expect during a typical Asia session".

Managed to get some time after work to read the AFR and saw there was a big JPY move...just intermarket shenanigans.

1674038916962.png
 
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Japan kept interest rates (unchanged) and commited to buying bonds or increasing bond purchases. As a result, yen down heaps. I couldn't take my eyes off our dollar.....it has cleared 70 cents now

Edit, gold is up $7 as I type
 
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But what is gold hinged on if not currency gg? I can't think the way you do. No other country or currency will take over USD. US and his buddies will rule for a long time to come
 
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That is good news for aud priced gold, a bit less for silver.
The chf position is Interesting in the context of usd going up in time of crisis..maybe not so much anymore imho and another sign of long term usd fall
The problem is, there is not enough CHF sloshing around in the universe to replace the USD.
70% of its exports and 60% of its imports are within the EU, which is a declining economy.
Raw materials, food, vegetable oils, and fuel account for about one-quarter of total imports, so it lacks the basic raw materials itself.
I will pass on the CHF thanks.
Mick
 
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