Update March 19

An interesting Bloomberg article regarding Central bank holdings of Gold


March 18 (Bloomberg) -- Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.
Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show.
Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.
“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”
Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.
Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.
‘At the Edge’
“Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge-fund manager, said in his Gartman Letter today. “The trend shall continue months, if not years, into the future.”
Gold is up 2.7 percent this year and traded at $1,126 an ounce at 11:29 a.m. in London. The U.S. Dollar Index, a six- currency gauge of the greenback’s value, is up 2.7 percent this year after slipping 4.2 percent in 2009. Bullion typically moves inversely to the U.S. currency.
Higher prices for gold, especially in euros and sterling, may deter countries from adding further to reserves, RBS’s Moore said. Bullion climbed to a record 838.43 euros on March 5, Bloomberg data show.
“Central banks might feel somewhat embarrassed to be buying gold at records” in some currencies, Moore said. “When you have an asset trading at an all-time high, the temptation is not to purchase more.”
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net. 


Gold price daily average in NZD$

Gold price daily average in EUR

           Gold price daily average in GBP

Gold update March 2010

Welcome to 2010,and the resumption of service for the NZ Mint bullion blog.

Today's blog is all about comparisons over the last 10 years. We've seen significant growth in the stock markets and real estate markets, and I thought it was a good time to compare this growth against the Gold markets locally.

Gold price vs NZX50

This chart shows the movement over the last decade of the gold price( right hand axis) vs the NZX50 index ( left Axis). The left hand axis shows the NZD$ price the NZX50 index reached from Q1 2001 through to Q1 2010, the right  the Gold price in NZD valued gold.
The growth of the NZX50 index has been strong, reaching a high in 2007 of ~NZD$4400 (increase of 258%) dropping down to 3225 ( growth of 189%). In the same period NZD$ valued gold climbed to a high of ~NZD$1950 (growth of 325%)and has pulled back to around NZD$1570 ( growth of 261%) since 2001.

Median house price vs Gold Price

This chart shows the median house price (LHS axis - greeen bars) in NZ from 2000 to 2010. ( stats from the REINZ ) compared to the USD$ gold price (RHS axis -blue line) over the same period.
Growth in housing prices increased from NZD$170,000 in 2001 topping out in Q1 2010 at NZD$360,000 - a growth of 211%. The gold price climbed from USD$295 topping out in 2009 at USD$1195 ( growth of 405% ) before pulling back to USD$1100 (370%) or NZD$ terms starting at NZD$600 topping over NZD$1900 ( 316% ) and back down to NZD$1550 (258%)

From Mineweb:

$1,000 gold now more floor than ceiling

The price that was once an invisible ceiling, is now more likely to be the level at which a fall in the gold price bottoms out

Author: Ross Louthean
Posted: Monday , 15 Mar 2010

PERTH -
The once magical US$1,000 an ounce price for gold - once considered unachievable - will be increasingly regarded more as the future "bottom out" floor price in the immediate years ahead, according to a senior economist with the major Australian bank Westpac.
Senior economist Huw McKay told the Paydirt Australian Gold Conference in Perth today that the gold price had stepped up year on year by about US$100 an ounce above predictions, for at least the past five years.
"What we did not know was going to happen was that we were going to have such an enormous collapse in risk appetite that pushed gold beyond the US$1,000 magical barrier," McKay said.
"That has changed gold trends forever and what was once an invisible ceiling, is now more a level where we talk about the US$1,000/oz price as more of a floor price going forward.
"It is now being seen as the level at which any plunge in the gold price will start to pull out of such a dive."
McKay attributed the gold price pressures as due to the change in demand for jewellery - from two thirds of world gold consumption in 2007 to around 40% currently.
"In parallel with this, there has been an expansion in exchange traded products which have grown from accounting for 7% of total gold consumption in 2007 to 19% now.
"This is a dramatic trend movement move and it is here to stay," McKay said.
"World equity markets and financing has so much uncertainty to it that the allure of gold has never been stronger.
"Demands for gold has shifted to the investor, with very strong fundamental trends coming together to fuel investor appetite for things they can see, touch, hold and put in a warehouse. Gold certainty meets those criteria."
McKay said the turn towards gold had come out of all other asset classes as "investors try to get into something that holds value".
The Westpac executive predicted gold holding at around US$1,006/oz by the end of this year, moving only slightly higher to around US$1,030 by 2011.
and Goldcore:

Gold Supported by Geopolitical and Sovereign Risk as S&P and Moodys Warn US

Published by Maria Sutt under Market Updates | Precious Metals Update |

Gold
Gold fell in US trading on Friday from $1,119/oz to $1,098/oz to close with a loss of 0.54% and a loss of nearly 3% for the week. Silver was again more resilient and fell less than 2% last week. Gold has range traded from $1,102/oz to $1,106/oz so far in Asian and European trading this morning. Gold is currently trading at $1,103.00/oz and in euro and GBP terms, gold is trading at €804/oz and £732/oz respectively.
World equity markets are under pressure after mixed US economic reports and Chinese monetary policy tightening concerns. Asian stocks were mostly down, as are European shares so far this morning. Increasing geopolitical tensions between the US and China is likely making markets somewhat jittery (see below).
Sovereign debt issues and currency risk remain prevalent and look set to keep gold buoyant for the foreseeable future. Indeed, gold is increasingly being seen as a safe haven currency as seen in the recent record (nominal) highs in euro and sterling due to the challenges facing the UK and European economies.
These sovereign debt issues also face the US and thus the world’s reserve currency the dollar. Late last week, S&P warned that the US’ AAA credit rating is not guaranteed and today Moody’s is warning that unless the US gets public finances into better shape, there would be “downward pressure” on its triple A credit rating.

Concerns about gold being a bubble are overdone with gold today only 19% above the price it was 12 months ago (and up 11% in sterling terms and 9% in Euro terms). While many equity markets are up by some 40% to 70% in the same period.
Silver
Silver reached as high as $17.08/oz this morning in Asia. Silver is currently trading at $16.96/oz, €12.38/oz and £11.27/oz. Silver outperformed gold again last week and continues to exhibit signs that it might soon begin to play catch up with gold and target recent record (nominal) highs.
Platinum Group Metals
Platinum is trading at $1,610/oz and palladium is currently trading at $464/oz. Rhodium is at $2,550/oz.
News
Geopolitical tensions between China and the US appear to be escalating which is another bullish factor for gold. China PM, Premier Wen Jiabao, has defended China’s increasingly assertive trade and foreign policies and vowed to fight any new signs of economic crisis and currency “protectionism”. Tensions over Taiwan and Tibet continue and he chided the US for a 'disturbance' in relations. Wen turned the tables on the U.S., renewing appeals for assurances from Washington about the safety of China's $800 billion in foreign exchange reserves invested in U.S. Treasury securities. Wen said the value of the U.S. dollar was a "big concern" and asked Washington to take unspecified steps to reassure investors.
The UK housing market has stalled again, fueling fears of a double-dip recession. There are growing concerns that the housing market could be facing a double-dip recession, as data released today shows house prices in March have risen by the smallest margin on record.
Finance ministers from the 16 countries using the euro meet today in Brussels to discuss the Greek debt crisis and Greece’s progress in introducing the austerity measures needed to regain the confidence of the markets.


From AP:

China trims holdings of Treasury securities

China trims holdings of US Treasury securities for third month as US federal deficit soars

Martin Crutsinger, AP Economics Writer, On Monday March 15, 2010, 5:02 pm EDT

WASHINGTON (AP) -- China retained its spot as the biggest foreign holder of U.S. Treasury debt in January even as it trimmed its holdings for a third straight month. The string of declines underscored worries that the U.S. government could face much higher interest rates to finance soaring budget deficits.
The Treasury Department said Monday that China's holdings dipped by $5.8 billion to $889 billion in January compared with December. Japan, the second-largest foreign holder of U.S. government debt, also trimmed its holdings but by a much smaller $300 million, to $765.4 billion.
Net foreign purchases of long-term securities, a category that includes both government and corporate debt, totaled $19.1 billion in January, as net purchases of private corporate bonds fell by $24.8 billion, the biggest drop on record.
A month ago, Treasury initially reported that China had cut its holdings so sharply that it had lost its top spot as America's largest foreign creditor, a position it had held since its holdings overtook Japan in September 2008.
However, 10 days later, Treasury released its annual update of the figures. The revised data showed that China, while reducing its holdings, still retained the top spot. Treasury revises the data based on more detailed readings of the statistics, which do a better job of sorting out actual ownership of the bonds. This review determined, for example, that some bonds credited to Britain because they were purchased there were actually purchased on behalf of Chinese investors.
The decline in Chinese holdings is coming at a time of increased tensions between the two nations. Chinese Premier Wen Jiabao on Sunday rejected American pressure on China to allow its currency to rise in value against the dollar, saying such efforts amounted to a kind of trade protectionism.
A group of 130 House members sent a letter to the administration on Monday urging the Treasury Department to cite China as a currency manipulator in a report that is scheduled to be released next month. The group also called on the Commerce Department to impose trade sanctions on China on the basis that its currency system was an unfair trade practice.
"If the administration fails to act on this issue it will hold back our economic recovery and hurt the ability of American small businesses and manufacturers to increase their production, keep their doors open and create jobs," said Rep. Mike Michaud, one of the signers of the letter.
Treasury spokeswoman Natalie Wyeth said Treasury was still reviewing the congressional letter. She said there would be no direct response to Wen's comments beyond President Barack Obama's comments in a trade speech last week. Obama said that China would make an "essential contribution" to rebalancing the global economy by moving to a more market-oriented currency regime.
The Obama administration is hoping China will resume allowing its currency to rise in value against the dollar as a way of trimming the huge trade gap between the two nations. The United States ran a deficit of $226.8 billion with China last year, the largest deficit recorded with any country. A cheaper dollar would make American products less expensive in China while making Chinese goods more expensive for American consumers.
Treasury's latest report on international capital flows showed that foreign holdings of Treasury securities increased by $17 billion in January to $3.71 trillion.
While China and Japan decreased their holdings, oil exporting countries boosted their holdings to $218.4 billion, up from $207.4 billion in December, and holdings of Treasury securities in Great Britain rose to $206 billion, up from $178.1 billion.
Rick McDonald, an economist at Action Economics, said the January report reflected a normalization of purchasing activities following a two-year credit crisis in which investors had flocked to the safety of U.S. securities in the wake of severe turmoil in global financial markets.
Julian Jessop, chief international economist at Capital Economics, said the Treasury report just affirmed market information in January that showed the dollar rising in value against most currencies with Treasury interest rates falling. Jessop said this pattern did not support concerns that foreigners were losing their appetite for U.S. bonds.
Strong foreign demand for U.S. Treasury debt helps to keep the interest rates that the government pays for that debt from rising. However, there are other factors that influence U.S. interest rates beyond foreign demand, including decisions by the Federal Reserve.
Fed policymakers have kept a key short-term interest rate at a record low of zero to 0.25 percent for more than a year and many economists believe that the Fed will continue to pledge to keep rates exceptionally low as a way to boost the economy when they conclude their regular meeting on Tuesday.
The federal budget deficit hit an all-time high of $1.4 trillion in 2009, and the Obama administration is projecting that this year's deficit will climb even higher to $1.56 trillion. But the administration is also pledging to get the deficits under control once the economy has resumed sustained growth.