Bernard Hickey talks above in a Double Shot interview with NZ Mint's Head of Bullion Mike O'Kane about gold's drop from record highs as two gold trading exchanges tightened their margin requirements to make it more difficult for speculative traders to get in and out of the market.
"They're trying to delverage some of the risk out of the market by increasing their margin requirements, in this case (CME) by 22% this month and 27% last month," O'Kane said.
"They're trying to weed out some of the fly-by-nighters," he said, adding the Shanghai Gold Futures exchange had also increased its margin requirement from 11% to 12% and increased its daily trades limt from 7% to 9%.
Gold mine supply was up 7% over the last year, while demand for bars and coins had risen 9% over the same period, O'Kane said.
However, volume in exchange traded funds (ETFs) in gold had fallen 30% in recent months.
Demand from ETFs for gold had risen from 4% of demand in 2000 to 39% this year, he said.
"It's gone from zero to hero in 10 years, but it's just starting to pull back now as people are trying to get out of that speculative mindset into a safety mindset," he said.
O'Kane said many in the gold market expected central banks to keep printing money for a further 5-10 years.
The gold market was 11 years into a bull run, which typically ran for 25 years, he said.
Silver and platinum
O'Kane said demand for silver in the industrial and jewellry market had increased in recent months as the relative prices between silver and gold had widened.
"We're seeing in China, Turkey and India, the three largest markets in the world for demand for gold, that in the jewellry market people are moving to silver because of the price increases (for gold). We might find as we move into October and the Diwali season where gold typically increases in price because of demand in India, we might see silver take more of the pressure," he said.
Platinum prices had typically between twice that of gold prices before the US car market slumped in 2008 and prices dropped back to be in line with gold. The revival of US carmarkers through 2009 and 2010 had seen demand for platinum recover slightly, given it is a key component for catalytic converters.
Platinum prices have been relatively weak though in recent weeks as gold firmed.
O'Kane said the market consensus was for a rise in the gold price to US$2,000 to US$2,500/oz later this year.
A euro breakup, a banking collapse or a sovereign default could be the catalyst for a rise in the gold price to these levels, he said.
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11 Comments
The Donald has just accepted gold bullion instead of cash. According to my colleague at the Wall Street Journal, Trump accepted $176,000 in bullion as a security deposit on space at 40 Wall Street from Apmex, a precious metals dealer.
http://www.marketwatch.com/story/did-trump-call-the-peak-in-gold-2011-09-16?link=home_carousel
I am thinking;
It is impossible for the major economies to collectively balance their budgets.
A default collapse or restructure is a mathematic inevitability. Between now and that point, gold and silver will go hypermagnaballisticallystratipheric.
No real way of telling when the reset will happen, it’s all reliant on the sheeples confidence in their currencies. 6 months-5years perhaps?
Fantastic addition to the word vault there Banksterbasher......googled it for a did not match ..so it's yours mah boy...well done.
On the fiats ..don't get too ahead of the game ...Maths is a science ...bullshit runs this world and the debasement of currency will relieve a lot of pressure valves untill there's a new game in town.
I've said many times here before the human condition will prevail over the logic of a situation untill there is .............no more.....reason to... and will to.... it ends at this point.
So five years ...no..despite a gold bubble and burst it will be business as usual ...all the while the plebs and serfs will continue to shovel their way through the mire just to exist.
By the by like your name ...wish I'd taken it...keep up the good work ....we may see some out of the tenth window floor yet.
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