Dear rss free blog,
The World Gold Council is sponsored by the gold-mining industry. Its mandate is to develop the use of gold as an investment vehicle. The WGC sponsored the creation of what is now Streettrackers Gold, GLD, the exchange-traded fund investing in physical gold.
Thus its most recent report on Q3 gold market trends is an eye-opener, coming from preachers to the converted. Gold demand fell 34% in this year’s Q3 from last year’s, the WGC reports, mainly because of a dramatic drop in jewelry purchases. Buyers were discouraged by the high price of gold. Major markets in India and the Middle East soured on gold because of high prices. Indians feted Diwali without buying more gold bangles this year, a break with tradition. In fact, Indians are selling jewelry to raise cash.
Chinese shoppers are still stocking up on gold but they are switching to a lower priced precious metal, platinum, where there has been a “dizzying increase” in jewelry demand at the expense of gold. Chinese platinum jewelry demand is up 80% this year so far; but, from a larger base, gold jewelry demand is only up 5%. Platinum is cheaper because of the economic downturn which cut automobile platinum consumption but thanks to Chinese buying its price is up 55% so far this year.
While individuals did not buy gold to adorn themselves, there was a lot of bullion buying by investors, mainly through the ETFs like GLD and IAU. And central banks, in a switch, became net buyers of gold, whereas earlier they had been net sellers.
Moreover, goldmining companies had massively de-hedged as the price rose. This allowed them to cut the gold they were selling which supported higher prices.
It is signficant that hedge fund manager John Paulsen, who is now the largest shareholder in GLD, the ETF, is planning to create a new gold fund for retail investors, according to the Wall Street Journal. Paulsen, a shrewd investor, can raise cash to diversify his holdings without actually selling the ETF shares if he can persuade the public to join his new fund, which goes live Jan. 2.
Apologies for two errors in yesterday’s blog. The total owed by Rusal to its bankers is $18 bn, not $78 bn; I misread my notes. Secondly, as General JS and Captain PL pointed out, the Candy-Dubai building project in Chelsea, London, now derailed, was not to be on the site of the Royal Hospital, designed by Sir Christopher Wren, and untouchable; it was to go up where some mediocre 19th century barracks stand. The red-coated pensioners will remain in Chelsea and march around on occasion.
What observers are calling “Brazil’s bizarre rules” have pushed down the local and ADR markets for Brazilian shares. Yesterday, Brasilia authorities decided to impose a 1.5% tax on local companies issuing American Depositary Receipts to encourage them to list in Brazil instead. This follows an earlier 2% tax on foreign investors in Brazil’s bolsa, a sort of Tobin tax.
Bizarre is a misnomer. Both measures are designed to stop currency inflows which have pushed up the Brazilian real to levels hurting exports.
More about Brazil follows for paid subscribers after a new cheap Internet stock recommendation from the webmaster and another source, written up by me. Remember that our stock advice is not available to pre-subscribers. To get our money-making ideas, you have to pay for a subscription.
