11/04/09 Melbourne, Australia – Well how about that! India pipped China at the post to walk away with 200 tonnes of IMF gold. Granted, India had to pay US$6.8 billion for the yellow metal. But with China steadily accumulating gold as a reserve asset (at the household AND central bank level), everyone thought China has this one in the bag. Not so!
Something more than meets the eye is going on here. The IMF sale was part of a plan to unload 403.3 tonnes of gold. It’s halfway there, and will use the proceeds to fund itself and loans to the developing world (or perhaps Britain and America when they go broke). But what else is going on?
In the past, large sales of gold – mostly by European central banks – swamped the gold price and kept it in check. Why did they sell?
The central bankers believed they had too much gold on their balance sheets doing too little work. In other words, these thoroughly modern bankers would explain, “Gold pays no interest.” So they thought it “prudent” to exchange their gold reserves for interest-bearing assets like Treasury bonds. So far, that’s been a horrible trade…and it is becoming an even more horrible trade as gold advances from record high to record high.
Nevertheless, the central bankers of the West continue to unload their gold reserves to the central bankers of the East….
India’s central bank is now the proud owner of 557 tonnes of gold. That gives it the tenth largest gold holdings among central banks. But it probably isn’t finished. Gold makes up just six percent of India’s foreign exchange reserves. There’s plenty of room for that to grow.
But don’t forget China. China has $2.3 trillion in foreign exchange reserves. But 70% of those – or $1.6 trillion – are in US dollars. It owns over just 1,000 tonnes of gold. That makes up less than 2% of China’s reserves and makes China the seventh largest holder of above ground gold. In fact the gold exchange traded fund (NYSE:GLD) owns more gold than China. France, Italy, the IMF, Germany and the United States round out the top five (from fifth to first).
What this tells you is that China could double (and then double again) its gold reserves and gold would still make up less than 10% of its total forex reserves. Compare that to 66% in Italy, 69% in Germany, 70% in France, and 77% in the US, according to official numbers. So what’s the big deal?
There will always be a threat that European Central Banks release gold supply on to the market. In fact, European central banks just renewed a five-year agreement (including the IMF) to sell down a maximum of 400 tonnes of gold per year from their holdings. They’ve agreed to this to disgorge their gold in an orderly fashion.
But it would not surprise us to see the Europeans fail to sell the gold they’re allowed to sell under the agreement. Our old desk mate in London, Adrian Ash (now with Bullion Vault) is at the London Bullion Market Association’s annual meeting in Edinburgh. Word from UBS analyst John Reade, also at the meeting, is that European Central Bank official Paul Mercier reckons that official holders of gold will, “no longer be net sellers of gold.”
As we predicted earlier this year, the European central banks would rather hoard their gold than sell it in a rising market. There may be a price at which they do sell it, in order to pay down sovereign debts. But psychologically, the fact that central banks want to own gold and not sell it is pretty important.
Also, it shows you how the balance of economic power in the world has shifted East. True, the European banks can still dump gold on to the market to drown the price. But between the ETFs, central bank buyers in India and China, and the average man on the street in Beijing, Mumbai, and elsewhere, there are more buyers of gold now than sellers.
And if we were right yesterday that the GFC is slowly morphing into a sovereign debt crisis, then the case for gold is that much stronger. This explains why gold futures were up by nearly 3% overnight and Old Yeller hit a new high at US$1,084.90.
The only worry? So many hedge fund managers and pundits are singing the same tune: long gold and short US Treasuries. These feel like “crowded trades.” So as a contrarian, you’ve got good reason to be a little worried about becoming a victim right about now.
Nevertheless, in the long term, the end of the Super Cycle in fiat money results in the re-monetisation of gold. That is what you’re seeing now. And it’s probably what you’ll see for a few more years. It also ought to benefit other precious metals, and of course, precious metals shares.
The Daily Reckoning
Well how about that! India pipped China at the post to walk away with 200 tonnes of IMF gold. Granted, India had to pay US$6.8 billion for the yellow metal. But with China steadily accumulating gold as a reserve asset (at the household AND central bank level), everyone thought China has this one in the bag. Not so!
Something more than meets the eye is going on here. The IMF sale was part of a plan to unload 403.3 tonnes of gold. It’s halfway there, and will use the proceeds to fund itself and loans to the developing world (or perhaps Britain and America when they go broke). But what else is going on?
In the past, larges sales of gold – mostly by European central banks – swamped the gold price and kept it in check. The European CBs either felt like they had too much gold doing too little work on the balance sheet. Or, they were manipulating the price of gold down by increasing the supply to the market whenever the gold price began rendering its verdict on global fiscal and monetary policy.
India’s central bank is now the proud owner of 557 tonnes of gold. That gives it the tenth largest gold holdings among central banks. But it probably isn’t finished. Gold makes up just six percent of India’s foreign exchange reserves. There’s plenty of room for that to grow.
But don’t forget China. China has $2.3 trillion in foreign exchange reserves. But 70% of those – or $1.6 trillion – are in U.S. dollars. It owns over just a 1,000 tonnes of gold. That makes up less than 2% of China’s reserves and makes China the seventh largest holder of above ground gold. In fact the gold exchange traded fund (NYSE:GLD) owns more gold than China. France, Italy, the IMF, Germany, and the United States round out top five (from fifth to first).
What this tells you is that China could double (and then double again) its gold reserves and gold would still make up less than 10% of its total forex reserves. Compare that to 66% in Italy, 69% in Germany, 70% in France, and 77% in the U.S., according to official numbers. So what’s the big deal?
There will always be a threat that European Central Banks release gold supply on to the market. In fact, European central banks just renewed a five-year agreement (including the IMF) to sell down a maximum of 400 tonnes of gold per year from their holdings. They’ve agreed to this to disgorge their gold in an orderly fashion.
But it would not surprise us to see the Europeans fail to sell the gold they’re allowed to sell under the agreement. Our old desk mate in London, Adrian Ash (now with Bullion Vault) is at the London Bullion Market Association’s annual meeting in Edinburgh. Word from UBS analyst John Reade, also at the meeting, is that European Central Bank official Paul Mercier reckons that official holders of gold will, “no longer be net sellers of gold.”
As we predicted earlier this year, the European central banks would rather hoard their gold than sell it in a rising market. There may be a price at which they do sell it, in order to pay down sovereign debts. But psychologically, the fact that central banks want to own gold and not sell it is pretty important.
Also, it shows you how the balance of economic power in the world has shifted East. True, the European banks can still dump gold on to the market to drown the price. But between the ETFs, central bank buyers in India and China, and the average man on the street in Beijing, Mumbai, and elsewhere, there are more buyers of gold now than sellers.
And if we were right yesterday that the GFC is slowly morphing into a sovereign debt crisis, then the case for gold is that much stronger. This explains why gold futures were up by nearly 3% overnight and old yeller hit a new high at US$1,084.90.
The only worry? So many hedge fund managers and pundits are singing the same tune: long gold and short U.S. Treasuries. As we mentioned yesterday, the bond bubble could go on much longer than anyone expects. And when so many people agree on something, none of them are usually right. As a contrarian, you’d be worried about becoming a victim right about now.
But yes, in the long term, the end of the Super Cycle in fiat money results in the remonetisation of gold. That is what you’re seeing now. And it’s probably what you’ll see for a few more years. It also ought to benefit other precious metals, and of course, precious metals shares.
Dan Denning
for The Daily Reckoning Australia
Similar Posts:
- IMF Deems Gold An Idle Asset
- IMF Gold to be Used
- Unlike China, India is Not Willing to Learn from its Mistakes
- Buying Gold, Gossip & Russia’s Tu-160 Bombers
- The Rush to Buy Gold
More articles from The Daily Reckoning….
sell gold
Gold is a popular commodity on Runescape for a variety of reasons. Rather than spend tons of money buying gold from other players, you can mine the ore yourself at these locations. This will save you a lot of gp and, as an extra benefit, give you some valuable Mining experience.
The Grand Tree Mine
If you've completed the Grand Tree quest, the Grand Tree mine can be a very lucrative place to obtain gold ore. Here, there are four gold rocks along with several other rocks containing ores such as silver, mithril, adamantite, and coal. Often, you'll be the only miner in the area so you won't have to worry about competing for the ores. Also, there's a bank fairly close by on the second level of the Grand Tree so you can dash to drop off your inventory and return to the mine without wasting much time at all.
For those that have also completed the Tree Gnome Village quest, it's easy to teleport to this area using the Spirit Tree. This is particularly nice if you want to mine for awhile and then go sell your gold ore on the Grand Exchange or smelt it into gold bars at the furnace in Edgeville.
Crafting Guild
If you have a Crafting level of at least 40, you'll be able to access the gold rocks in the Crafting Guild. On top of having the proper Crafting level, you'll also need to be wearing a brown apron to get in the guild. The mine is located in the eastern part of the guild and has seven gold rocks along with rocks containing silver and clay.
The Crafting Guild mine is accessible by all players, both F2P and members. One drawback to this location is that it is a fairly good distance away from the nearest bank in Falador so you may want to take advantage of certain teleport devices, such as the Skills Necklace, to speed up your mining and inventory-to-bank runs. Also, this location can be quite crowded at times, especially on F2P worlds.
TzHaar City Mine
Despite the fact that the TzHaar City mine only has three gold rocks, it's still an excellent place to mine for gold ore because of the limited mining competition and the closeness of the mine to both a bank and a furnace.
This mine also contains three silver rocks, so you can augment your gold mining a bit to help pass the time while waiting for the ore to respawn. Or, if you have the proper molds and gems, you can smelt the ore into bars at the furnace and then craft some jewelry.
Also, this mine is extremely close to the gold rock area near the entrance of the Karamja Volcano, which has four additional gold rocks. So, you can easily dash back and forth between the two locations, having access to seven gold rocks total. The Karamja Volcano Mine area is accessible by all players, but TzHaar City is a members-only area.
Other Gold Mines
There are several other gold rock locations in Runescape, but many of them require the completion of advanced quests or are inconvenient for other reasons. F2P players may want to check out the Al-Kharid mine, the Rimmington mine, or the Dwarven mine, each of which has two gold rocks. There are also four gold rocks on the northeast beach of Crandor.
If you're a member, you may want to head to the north-western mine in Brimhaven, which has 10 gold rocks, or the Arzinian mine, which has an astounding 146 gold rocks. This latter mine is only available to those who have completed the Between a Rock… quest, though, so you might have to put in some questing time if you want access to this mining location.
Mining is very important, as ore pretty much fuels the game. If there was no mining, then there would be a much less diverse variety of weapons and armour available, making the game pretty dull.
That's why it's important to get your mining skill up.
As a Runescape online player , sometimes you may need runescape gold or runescape power leveling.If you have no time to earn rs gold and level up your character, you can buy it from our website .The price is low.If you believe us, we will try our best to help you .
Posted at 01:00PM Nov 12, 2009 Read More…
by Rebecca in Runescape Skill Guides |
I was talking with a friend this past week when I mentioned that I had a gold necklace that I wouldn’t mind selling. “Why haven’t you sold it now? The price of gold is pretty good. What are you waiting for?”
Well, it’s exactly that. I am waiting. Last week, we compared gold prices now, tottering between $1050 and $1060 per ounce, which sounds good initially, but in compared with the highs of the 1980’s, and adjusting for inflation, we see that actually is a pretty low price.
Which ought to make one wonder why invest in gold? Obviously, because the market makes you nervous and, when the dollar falls, gold is generally a safe haven. But right now, the stock market is teeter-tottering up and down and the price of gold is following along.
Here’s what I mean: in 2009, the Dow Jones Industrial Average is up 14%. Gold futures, meantime, seen as a safe haven and purchased by economic naysayers, are also up. They are up 19%. The reason for this: low interset rates and cheap money from the government stimulus package have poured into the financial markets, stabilizing the economy and cementing stock positions.
The long-term net effect of creating all that money? Not good. Creating new money, together with the Fed’s maintaining near zero interest rates and the huge deficits that the U.S. is building will weaken the dollar, fuel inflation and cause untold economic hardship down the road. Investors are pushing into gold to hedge against that future, but at the same time, the efforts of the government are stalling the losses that will undoubtedly be felt in the future because of the weakened American dollar.
Some experts are now predicting that $1000 per ounce is the new floor, and that the dollar will hit $1250 per ounce before the end of this year. If you haven’t noticed, the year has only about two months left in it, and that, dear readers would be a hike indeed.
So no, I’m not ready to sell any of my gold yet. If I were in “investing mode” personally, I think gold might be a likely candidate. Buy on!
