asia

Gold is Transported from West to East

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I came across an interesting chart on King World News and want to store it on this blog. It can come in handy later on.

As I talked about central banks accumulating gold, apparently it’s mostly the Asian economies that are the ones accumulating gold and the Western economies that are selling gold (Chart 1).

Chart 1: West/East Gold Reserves

But as you can see, even the Western banks are now buyers of gold since the eruption of the 2008 crisis.

The top in March 3, 1965 is a very peculiar year. That year, president Johnson approved the Gold reserve law, repealing the backing of Federal Reserve deposits with gold. This law marks the trend to remove gold from the monetary system. In 1967, only 3 nations backed their monetary systems with real gold, now nobody does. The law was a means to expand the monetary system as gold would become less important concerning reserve requirements. And then in 1968, gold backing of Federal Reserve notes was repealed too. So nobody was interested to hold gold in their central bank.

But today, with the expansion of all this paper money and bonds, the gold standard should be reimposed and central banks know this, even Western central banks are now again buying gold as you can see on the blue trend on chart 1.

Silver Prices Decouple Between Asia and Western World

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Andrew Maguire on King World News reveals a shocking truth about the dislocation of silver prices between Asia and London. I already warned in February 2012 that prices between Asia and the Western world would diverge from each other and that manipulation of prices in the U.S. and London will end because of the emergence of Asia and their Shanghai Metals Market, which just recently started trading in silver (in April 2012).

Now, finally, the decoupling is happening and this should be an eye opener for everyone.

Apparently, silver traded at $29.61/ounce in London, while it traded at $32.50/ounce in Shanghai. That’s a premium of 10% over London Spot Price. When the market closed it still traded at around 4% premium.

Of course there could be price disruptions between the two markets because of domestic spot trading. But 10% is a bit over it. Ultimately it’s Shanghai that will win, because their exchange is backed by the real thing, while the COMEX is backed by nothing.

I would like to monitor this premium, but I can’t find live quotes anywhere on the internet (which are free of charge). If I could monitor this premium divergence, it could be a tool to predict if the price of silver will go up or down.

Chinese buying copper

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At the London Metal Exchange (LME) the copper stock levels keep declining as can be seen on following graph:

LME copper warehouse
LME Copper warehouse level

The Chinese were importing copper at record levels during December 2011 to restock their inventory. There has been a concern that in 2012, there will be a copper deficit, which resulted into this buying frenzy.

As a result we can see that since September 2011 the copper price was going up, just at the same time that LME stock levels were going down.

copper price
Copper price

I can’t blame the Chinese to buy copper, they want real assets and not some US government paper, which they are dumping by the way as can be seen on following graph:

China US treasury
China US treasury holdings

I think the buying frenzy is not over yet, as China is positioning itself to create competition against the London Metals Exchange in June 2012. On that date China will open the Pan Asia Gold Exchange, also known as PAGE, challenging the LME and COMEX.

I predict that gold and silver will explode on that event. Interesting times will emerge later in 2012, so prepare accordingly by buying precious metals!