BHP warns Australian mining not ready for low-cost competitors
The boom in demand from China’s industrialization is now “past the period of aggressive growth,” BHP’s Australia President said.
Many investors are calling into question billionaire hedge-fund manager George Soros’s commitment to gold. With higher highs no longer a regular occurrence in the gold market, bears see Soros’s sales as a sign that the party is over.
On closer inspection, and as many analysts have pointed out, Soros’s gold moves – selling ETFs and buying stocks – is probably no more than an act of portfolio rebalancing. And other heavy hitters, including John Paulson who famously bet against sub-prime, earlier this month was quoted in the Wall Street Journal as saying that gold is going to $4,000.
Moreover, looking to only two, albeit brilliant, soothsayers may not be a prudent way of deciding where to put your money. It would be better to take a cue from the millions (maybe billions) of investors in Asia that are pouring money into gold – anything from ETFs to earrings to bars to stocks — and are willing to pay a premium.
Mark O`Byrne writes in the International Business Times on Wednesday that “a clear sign of healthy appetite in China are the premiums being paid for gold bars in Shanghai and Hong Kong. Shanghai gold closed at a premium of $3.57 to world gold of $1,495.95. The premium increased from that seen Monday when it was $3.09 at $1,497.45.” O’Byrne also points to a Reuters report on Monday that showed an even higher demand in Vietnam where gold trades at a $3.92 premium to world gold spot price.
Wednesday also saw the opening of the Hong Kong Mercantile Exchange, where trading took place in Asia’s first precious metal futures contract: 32 oz gold for December 2011 traded at $1,500 and change. By the end of the year, HK plans to offer yuan-denominated contracts, taking more pricing power away from New York’s Comex.
Of course India has long helped to underpin the gold market, mainly through jewellery buying. According to the World Gold Council India is the world’s largest gold market, accounting for nearly 32% of global demand in 2010 at 963 tonnes followed by China, with 579 tonnes. This year again the Akshaya (it means “that which never diminishes”) Tritiya holy festival on May 6, which traditionally accounts for huge spikes in gold sales did not disappoint. Hard numbers are difficult to come by but sales of anything from 15 – 25 tonnes have been quoted which indicates a healthy increase over 2010.
Rajalakshmi Sivam of the The Hindu Business Line has an interesting take on changes in the Indian bullion market: “Previously, gold consumption in India was mainly driven by the metal’s ornamental value and in periods where gold prices rallied, consumption used to drop. But now, the scenario has changed – consumption is rising even as gold prices rule at record highs. In 2010-11, for instance, gold prices in rupee terms, were 27 per cent higher than last year; yet, India’s gold demand rose by over 20 per cent in volume terms.”
The days when the gold price could be swayed by the words of big investors in New York and London may not be over, but Asia will definitely have a much bigger say about bullion’s direction in future.
