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... implies stronger reduction in speculative buying, leaving gold coins demand more dependent on long term hedging objectives and as the tool for preservation of wealth. In other words, less speculation, more long term demand. This is not what we should see in a bubble 'bursting' stages.
Once again, caution is due - I am not arguing if there is a bubble in gold markets overall. This is just analysis of the coins sales. I am simply suggesting that we are seeing a well-predicted reversion to the mean along upward trend in demand. We are also seeing, in my opinion, gold coins doing exactly what gold in general is expected to do - providing long term hedge instrument against risks associated with other asset classes.
... Gold ETFs have been a popular investment vehicle since their inception around 2003. However, starting in 2010 a new trend of selling “paper gold” and buying physical gold seems to have emerged.
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Investors in India are withdrawing from government bonds and national-savings schemes to pour record amounts into gold.
Funds that invest in sovereign debt shrank 4 percent from a month earlier to 30.2 billion rupees ($606 million) in September and those that buy gold rose 8 percent to an all-time high of 81.73 billion rupees, according to the Association of Mutual Funds in India that is also known as AMFI. ...
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“There is asset-switching, and people are betting more on gold as it is a safer asset and offers a hedge against India’s high inflation and the economic uncertainty affecting the world,” Debasish Mallick, the Mumbai-based chief executive officer at IDBI Asset Management Ltd. that oversees about $1 billion, said in an interview on Nov. 9. “Investing in gold is a very prudent asset-allocation strategy.”
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... the Swiss brokerage house EFT Financial Products in Zurich, which, in a brochure marketing its new gold-related products, notes that much if not most of the gold the Western world thinks it has is only imaginary "paper gold." Page 12 of the brochure says:
"Gold is excessively leveraged via the OTC and futures markets. Whilst many commodities are rarely settled physically, as it would be impractical, we could see a surge in demand for delivery of physical gold during a financial crisis. With the current 92-1 leverage in the markets, should 1 percent of investors request physical delivery, then the whole system would come under considerable strain."
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Gold Demand Trends (Q3 2011) released today by the World Gold Council (see commentary) shows that investment and central bank demand for gold were key drivers of total gold demand last quarter. Third quarter gold demand increased 6% year on year to 1,053.9 tonnes with investment demand rising a significant 33% y/y to 468.1T.
Virtually all markets saw strong double-digit growth in demand for gold bars and coins. Investment demand in Europe surged 135% due to the deepening sovereign debt crisis.
Significantly, 390.5 tonnes of the 468.1 tonnes of investment demand went into physical bullion in the form of bars and coins.
ETF demand was 77 tonnes and nearly 50% of that was from European investors and institutions.
The increase in overall investment demand was quiet impressive considering the higher average price in the quarter and the price correction in September but not surprising given the scale of the global economic crisis.
A huge and paradigm shifting change in the gold market is central bank buying which rose 556% to 148.4T from 22.6T in Q3 last year. For the past 15 years there has been net selling of around 400 tonnes per annum from central banks.
Importantly, the World Gold Council can only identify about 40 to 50 tonnes of the 148.4 tonnes bought by central banks.
The WGC note that "additional purchases were made by a number of countries' central banks, which cannot currently be identified due to confidentiality restrictions". Central banks do not have to reveal immediately who purchasers are.
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Thomson Reuters GFMS annual gold survey released today shows that global investment increased 20% last year to $80 billion, leading to the nominal high last September of $1,920/oz. This is primarily attributed to the physical buying of bullion.
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Gold coin purchases gained 13% last year and will increase 2.7% in the first half.
Purchases of gold bars increased by 36% to nearly 2,000 (1,194) metric tonnes, concentrated in China, Germany, Switzerland and Austria.
East Asia demand for gold bars rose 53% to 456 metric tonnes.
India rose 9% to 297 metric tonnes and western markets demand for gold bars rose 41% to 335 metric tonnes.
Central banks increased net purchases by a massive fivefold to 430 tons last year, and may buy another 190 tons in the first half, GFMS said.
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Silver grades were lower than anticipated across all zones but the most noticeable impact was from the lower than expected silver grades at the 525 metre level of Cata. Looking ahead, the focus at the Guanajuato operation will be on grade control as these lower grades will have a measureable impact on operating costs.
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Things in the US have gotten so bad, not only are most online dealers backlogged weeks and months in advance for most PMs (as the CEO of Texas Precious Metals explained in detail), but respected bullion vaults are also now on the verge of running out of inventory. As Reuters described, "Michael Kramer, president of Manfra, Tordella & Brookes (MTB), a major U.S. coin dealer in New York, has been inundated by orders from existing and new wholesale and retail customers. "It's panic. This is one of the busiest times in quite a while. People think gold's at the lows and they want to take advantage."
It was only a matter of time before the last bastion of paper money, London, also succumbed to the soaring demand for physical, and sure enough moments ago Bloomberg reported that the "Britain’s Royal Mint, established in the 13th century, sold more than three times more gold coins this month than a year earlier as prices declined."
Sales are more than 150 percent higher than last month, according to Shane Bissett, director of bullion and commemorative coin at the Royal Mint.
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