Lines Around the Block to Buy Gold in London…Banks Placing “Unusually Large Orders for Physical”

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

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First, let’s look at the improved fundamentals. Gold bugs will exasperatingly proclaim that fundamentals have been great for the past four years yet the price plunged anyway, so who cares about fundamentals? To this I would respond with two observations. First, large institutional investors and sovereign wealth funds have been anticipating a rate hike cycle for a very long time now. They didn’t know when, but they expected it. The fact that the gold bugs never believed this is irrelevant; what matters is that big money believed it, and it was perceived to be very gold negative. In their minds, this anticipated rate hike cycle would confirm that things were getting back to normal, and if things are normal you don’t need to own gold, right?

The problem is that this assumption is quickly being called into question. Sure the Fed hiked rates once, but it is starting to look more and more like a policy error. Meanwhile, other major central banks around the world are going in the opposite direction, toward negative rates. I am a huge believer in market psychology, and the psychology dominating the minds of most institutional investors over the past few years has been that things were slowly getting back to normal. This has weighed on institutional demand for gold in a big way, and been a meaningful factor in the bear market (manipulation aside). If this psychology shifts, the shift back into gold could be very meaningful.

While that backdrop is interesting in its own right, what may make the move into gold that much more explosive is the lack of alternative investments…

– From the February 3, 2016 post: GOLD – It’s Time to Pay Attention

What a difference a couple of weeks can make. The Telegraph is reporting the following:

BullionByPost, Britain’s biggest online gold dealer, said it has already taken record-day sales of £5.6m as traders pile into gold following fears the world is on the brink of another financial crisis.

Rob Halliday-Stein, founder and managing director of the Birmingham-based company, said takings today had already surpassed the firm’s previous one-day record of £4.4m in October 2014. 

BullionByPost, which takes orders of up to £25,000 on the website but takes higher amounts over the phone, explained it had received a few hundred orders overnight and frantic numbers of phone calls this morning. 

“The bullion market has been building with interest since the end of last year but this morning things have gone bananas,” said Mr Halliday-Stein. “Some London banks are placing unusually large orders for physical gold.”

London-based ATS Bullion added it had been inundated with orders for the past week. The firm has sold 4,000 gold bars and coins since February 1, a 40pc rise on the same period a year ago when it sold 1,500. 

“It’s been crazy – it’s been the best week since 2012. We’ve had people queuing round the block,” said Michael Cooper of ATS Bullion, a family run firm that trades online and also from an outlet in the West End.

But that’s just part of the story. As reported by the World Gold Council, the buying really started to pick up in the fourth quarter, courtesy of the Chinese and central banks. Reuters notes:

Buying by central banks as well as Chinese investors seeking protection from a weakening currency helped lift demand for gold in the final quarter of last year and the trend looks set to continue, the World Gold Council said on Thursday.

Chinese demand for gold coins surged 25 percent in the fourth quarter from a year earlier as consumers sought to protect their wealth after Beijing devalued the yuan currency. But stock market turmoil and a slowing economy knocked consumer sentiment and Chinese demand for gold for jewelry fell 3 percent from a year earlier, WGC said. 

Central banks have been buying gold to diversify their reserves away from the U.S. dollar and their purchases edged up to 588.4 tonnes last year, second only to a record high 625.5 tonnes in 2013, the report showed.

Central bank buying accelerated sharply in the second half of last year and jumped 25 percent in the fourth quarter, from a year earlier, as the need to diversify was reinforced by falling oil prices and reduced confidence in the global economy, WGC said

Chinese demand for gold totaled 985 tonnes last year, followed by India on 849 tonnes. They accounted for nearly 45 percent of total global demand, with consumer demand up 2 percent and 1 percent respectively in those countries.

Think about the lack of gold buying from the U.S. relative to its global wealth and it becomes quite easy to see where the fuel for the next bull market will come from.

Meanwhile, on the supply side…

Global supply of gold fell 4 percent last year to 4,258 tonnes, partly because of slower mine production. Mining companies have scaled back since 2013 in a bid to slash costs and mine production shrank in the fourth quarter of 2015, the first quarterly contraction since 2008, WGC said.

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  • Don Robertson

    Sorry, Midas. The current completely contrived problem in the marketplace is a shortage of dollars. There is no shortage of gold. What good is gold in a world run on dollars? CASH is king. And gold is anything, but cash.

    The kinky gold bums see a reason to buy gold in every event. But this event is clearly a reason to sell gold. Why?

    Because China, India, Iran and all the other countries that have been stockpiling gold are at the end of their fiscal ropes. And everyone in the world is going to be selling gold to buy dollars in order to meet their immediate fiscal needs. There are very few things that can be bought with gold. And when the price of gold begins to collapse due to a run on dollars, No one will take gold for anything.

    Gold is going to drop far worse than any other commodity because the marketplace is going to be flooded with hungry, panicky sellers who for the most part will be clueless as to why the price of gold keeps falling.

    Nothing in this world happens without a reason, folks.

  • Don Robertson

    Don’t get caught in this gold flim-flam.

    Here’s the trend. “Canada sells off most of its gold reserves”

    http://www.cbc.ca/news/business/gold-canada-reserves-1.3443700

    Do you know why Canada is selling its gold reserves? Because cash is king. And there is a shortage of dollars in the marketplace. This trend is going to spread worldwide very quickly.. There’s going to be so much gold in the marketplace a complete crash in the price of gold is inevitable.

    • ArtBell

      If there is so much supply why has the price of physical gold been 10-15% higher than quoted market price for the last decade? Canada is selling its gold because PM Trudope has already blown the budget in less than 4 months.

    • berger friedrich-wolfgang

      For Cleaning Arses , IOU’S are better Suited than “GOLD” ! Since there is No Demand for $$$ , to Buy ENERGY , “Rockefeller’s Sit on their Paper – Mountains For EVER ? !!!

  • Gil G

    So if everyone really talking about gold again that means a boom’s going to happen and the smart goldbugs are going to set themselves up ready for the evitable crash where they can buy more gold cheaply.

    • hidflect

      The smart money buys gold producers, not gold. When they have an AISC (all-in sustaining cost) of $1000/ounce and the price goes from $1020 – $1120 then they increase their profit by 500% and the share price reflects that. Check ASX:EVN, ASX:SBM, ASX:RSG, etc.

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    https://youtu.be/DdLlnqpAgHw

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