vrijdag 26 december 2014

World Gold Council: Gold Supply and Demand

I took all the quarterly numbers from the World Gold Council annual reports on supply and demand, and put it in one chart. Can be useful for the future.

First of all, the massive 2000 tonne/annum demand from China that started in 2008 and blew off in 2013 doesn't seem to be incorporated in this chart.

Second, we see that supply has peaked in 2012 and I see this supply going down in 2015. Demand has started to pick up since September 2013.

Third, we see a massive spike in gold demand in 2008 when the crisis started, will we see this again in 2015?

Greece Government Bond Yields Inverting

The inversion has begun again in Greece government bonds. Normally, higher maturity bonds have higher interest rates, because they are riskier to hold due to inflation. But sometimes the yield curve inverts (see chart below created by Correlation Economics).

As you know, 2012 was the year where Greece defaulted on debt as low maturity bonds crashed (yellow chart peaks out).

We might be seeing take two of that crash in 2015 as low maturity bonds are now re-inverting against high yield bonds. For more info, go here.

woensdag 24 december 2014

Largest Decrease in GLD Tonnage Recorded in Over 1 Year

We recorded the largest decrease in GLD since July 2013. 12 tonnes of gold were withdrawn.

Possible gold repatriation problems, Indian or Chinese gold demand?

maandag 22 december 2014

Crude Oil Vs. Junk Bonds

Energy junk bonds comprise 15% of the total junk bond market. So that is a big chunk and naturally we would find some correlation between these two.

As you can see, the trend is there, but not too pronounced. But lately, after 2008, the energy junk bond market (lead by the oil price) is leading the total junk bond market lower. So plunging oil prices have negative consequences on junk bonds. And lower junk bond prices will eventually lead to a stock market crash.

Conclusion: declining oil prices and higher stock markets are impossible.

For more info, go here.

Sprott Money: Marc Faber

Don't miss this interview with Marc Faber.

Capacity Utilization Rises Above 80%

What nobody reports on is that capacity utilization, for the first time in many years, has gone above 80% in November 2014. History shows that once the 80% level is broken, inflation will most certainly follow.

zondag 21 december 2014

SGE Withdrawals - Unilateral SGEI Trading Volume < Chinese Gold Demand < SGE Withdrawals

I wish Chinese gold demand could be given weekly through the SGE, but the Chinese are making it complicated with the opening of the SGEI. Ok, so let's follow Koos Jansen's new technique:

SGE Withdrawals - Total Unilateral SGEI Trading Volume < Chinese gold demand < SGE Withdrawals

This is because the weekly SGE withdrawal numbers include SGEI withdrawals, which can either be real Chinese gold demand or foreign gold demand. So the Chinese gold demand lies between the SGE number and the SGE - SGEI number.

The reasoning is given here:
Gold bought by domestic banks on the SGEI and withdrawn from the “International Board” Certified Vault in the Shanghai Free Trade Zone (FTZ) to be imported into the mainland is not required to go through the “Main Board”/SGE (click here  for an introduction on the SGE, SGEI, IB, MB, FTZ, etc). Meaning: the volume traded on the SGEI can distort Chinese wholesale gold demand measured by SGE withdrawals numbers. This is because we simply don’t know who the SGEI traders are; domestic banks from the mainland that buy and withdrawal gold to import – in this case withdrawals would count as Chinese demand – or for example buyers from Singapore – in this case withdrawals would be exported to Singapore?

That's all nice and well, but if something were to happen to Koos someday, how can we calculate it ourselves?

First go to this site, which gives weekly SGE withdrawal numbers and SGEI trading volumes: http://www.sge.com.cn/xqzx/xqzb/

The SGEI trading volume can be found in 3 products. The International Board has launched three new physical products international customers can buy and sell. So you need to make the sum of the trading volume of all three products and make it unilateral:
  1. iAu100g       physical product       100 gram gold bar    fineness 999.9
  2. iAu99.99      physical product       1 kg gold ingot          fineness 999.9
  3. iAu99.5        physical product       12.5 kg gold ingot     fineness 995.0

Example: Let's calculate Chinese gold demand for week 50.

Week 50:

SGEI Unilateral Trading Volume = (0.1+1.3+12313.4+4.1)/2 kg = 6159 kg.

SGE Withdrawals = 50027.5 kg

50027.5-6159 kg < Chinese Gold Demand < 50027.5 kg


43868.5 kg < Chinese Gold Demand < 50027.5 kg

zaterdag 20 december 2014

Junk Bonds Vs. Stock Market

There is a correlation between junk bonds and the stock market. The junk bond market is a leading indicator for the stock market. Whenever junk bonds decline in value (yields go up), stocks will follow the decline. In 2007, junk bonds started their collapse, one year later in 2008, the stock market crashed.

This is why we need to keep an eye on high yield debt (blue chart). Since the second half of 2014, this high yield debt has collapsed. Soon, the stock market (red chart) will follow.

vrijdag 19 december 2014

Copper contango update

Copper is looking worse and worse. Even when backwardation steepened, the copper price couldn't go up one inch. If the backwardation starts to come back to contango, the copper price will plunge even more. Avoid copper (and stocks)!

Because China isn't doing particularly well, I see no boost in power consumption yet.

Managed Money Gold/Silver Short Update

I wouldn't expect any price rises in gold and silver in the coming weeks as the shorters have already left the building (See red charts). (Better to invest in palm oil)

APMEX silver premiums have stabilized at the higher plateau and aren't increasing further.

But APMEX gold is rising.

At Shanghai we see silver ticking up again.

SGE gold premiums are at zero.

 If you still want to buy precious metals, go for silver.