Statistics - foorex2day

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China has 6,355 tonnes of gold

Further to my article on Chinese gold imports, I have a follow up analysis of China's gold stock at the corporate blog . OK, 6355 tonne...

Bank of England holds 4700t of gold

<div style="text-align: justify;">Stumbled on the value of gold the BOE holds on custodial basis from a link in a <a href="http://www.goldensextant.com/GLD.html#anchor501777">Golden Sextant</a> article.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Unfortunately, the <a href="http://www.bankofengland.co.uk/publications/annualreport/index.htm">annual reports</a> only list gold value from 2005 onwards (note that BOE financial year end is 28 Feb):</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Year, GBP value, ounces (based on GBP london PM fix on 28 feb)</div><div style="text-align: justify;">2005, 25b, 110,368,454</div><div style="text-align: justify;">2006, 35b, 110,035,903</div><div style="text-align: justify;">2007, 43b, 126,857,129</div><div style="text-align: justify;">2008, 72b, 147,283,237</div><div style="text-align: justify;">2009, 102b, 152,282,217</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Interesting that it was stable from 05 to 06, then starts increasing. 152 million oz = approx 4,700t, or 3% of all gold ever produced (160,000t). Hard to read anything into it as the holdings include central bank metal (reported in other figures) as well as other bullion bank and institutional metal, so you couldn't just add it to other reported figures as it would result in doubling up.<br /><br />However, it is another indicator of increasing interest in gold as well as giving us an insight into the amount of metal held in London. On that last matter, consider that total COMEX registered and eligible stocks are currently 10.74 moz compared to the BOE stocks of 152.28 moz.</div>

Stumbled on the value of gold the BOE holds on custodial basis from a link in a Golden Sextant article. Unfortunately, the annual reports ...

The King of Currencies

<div align="justify">A reader has asked me to comment on these two recent GATA articles <a href="http://www.gata.org/node/7908">www.gata.org/node/7908</a> and <a href="http://www.gata.org/node/7911">www.gata.org/node/7911</a>, which claim that London unallocated metal is a fractional reserve system.<br /><br />Adrian Douglas’ assertion is that there is at a minimum four owners for each ounce of unallocated metal held in London. His support for this is to apply the ratio of average daily share trading in GLD (11.9m) to its shares outstanding (325m), rounding to a ratio of 1:30, to an estimate of the daily trading in gold in London to derive the amount of gold London should have. This is then compared to an estimate of what London does have, resulting in the 1:4 fractional ratio.<br /><br />For his estimates of the London market, Douglas relies on a <a href="http://www.gata.org/files/ThunderRoadReport-10-15-2009.pdf">report by Paul Mylchreest</a>. I haven't had time to review Mylchreest’s numbers in detail, but his report takes a very logical approach and is fact based to estimating of the amount of gold in London. His conclusion is that there is<br /><br /><em>"an aggregate pool of gold of just over 16,866 tonnes of gold to support an average of 2,134 tonnes of daily spot gold trade. On this basis, 12.7% of the pool of available gold is being turned over every day on average. … And the entire pool is turned over every 7.9 working days. In my opinion, this level of trade relative to the estimated pool of gold liquidity is excessive and doesn’t pass the smell test."</em><br /><br />Firstly, he makes a series of assumptions to get to his figures. For example, his 16,866t figure relies on World Gold Council/industry estimates of above ground gold and the percentage that is investment. Being a trade organisation representing miners who want a high gold price one should expect that “stock” numbers will be estimated on the downside. When estimating what the real trading volume of gold is, then he steps into a more rubbery area because he is relying on only two guesses from some industry people - we need more than that.<br /><br />As a result, one must consider his 12.7% turnover figure to have a fair margin of error considering all the assumptions and estimations used to derive it. This is not to say that it should be 1%, just that it is not a “hard” number.<br /><br />Secondly, even if 12.7% is correct, I don’t think it logically follows that this “doesn’t pass the smell test", a conclusion he comes to by comparing gold to equity, other commodities and fiat currencies. The last one is probably the most relevant. In this he has to again make some assumptions about currency trading turnover to come to a figure of 2.6% for Sterling, conceding that when including forwards and swaps “daily Sterling turnover is only equivalent to 8.4% of UK broad money”.<br /><br />Why stop at Sterling? If one does the same calculations for the Australian dollar, you get 4.1% for spot and 13.3% including forwards and swaps. Does gold’s 12.7% (which could be lower if some of Mylchreest’s assumptions are changed) now appear as an “excessive amount of gold trading relative to the likely pool of available gold”?<br /><br />Mylchreest’s final conclusion is that either 1. there is “more than one ownership claim on each gold bar” or 2. “there is far more gold bullion held in private hands than is acknowledged by current industry estimates”.<br /><br />I would suggest that there is another OR that Mylchreest has not considered: the very fact that gold is no one’s liability and cannot be printed means it attracts a disproportionate amount of trading and speculation. Why is it assumed that 12.7% is excessive and unreasonable? Could not the 12.7% figure be proof of the special monetary nature of gold, proof that it is the King of Currencies?<br /><br />I have spent a bit of time on Mylchreest’s report because it is the key input into Adrian Douglas’ calculations. Before I move on to his numbers, I would like to say that I have a lot of respect for Mylchreest’s report and look forward to it being improved with more accurate data.<br /><br />On that, I note Mylchreest’s statement on page 25 that “I haven’t a clue what COMEX inventories were in 1997, but let’s assume 200 tonnes …” That information is available at <a href="http://www.sharelynx.com/gold/CMXAUStockpiles.php">Sharelynx.com</a> going back to 1975. A subscription is required but would be worthwhile as Sharelynx has a lot of other data that would be very useful for Mylchreest’s analysis.<br /><br />Now on to Adrian Douglas’ calculations. He is basically applying GLD's turnover of 3.66% to Mylchreest’s turnover figure of 2,134t to come to an implied stock holding that London should have of 64,000t. This is then contrasted to Mylchreest’s estimate of 15,000t of non-leased physical to derive the 1:4 fractional ratio.<br /><br />This analysis assumes that the behaviour of over-the-counter (OTC) players is/must be the same as those trading GLD. Let us consider each of Douglas’ statements in support of this.<br /><br /><em>“The purpose of buying investment gold is for it to store wealth. This necessarily implies that it is held for a long time.”</em><br /><br />This is a very broad statement and one that I don’t think can be supported. Investors have all sorts of different time horizons. Remember we are talking about trading in unallocated and whether that is backed. The fact that it is unallocated rather than allocated bars would imply, if anything, that the investors have shorter time frames rather than long.<br /><br /><em>“If gold is bought and traded quickly it would destroy wealth, not store it, because there would be a large loss due to transactional fees.”</em><br /><br />It is actually the other way around. The quicker you can trade something the less risk you have to changes in prices. Bullion banks have a spread between their bid and ask prices – they MAKE money from quickly trading gold. For those dealing with bullion banks in the OTC market, the tightness of those spreads combined with the volatility of gold mean it is entire reasonable for them to make money day trading gold.<br /><br /><em>“Considering these limitations [minimum trade limit of 1,000 ounces] it is likely that OTC participants would turn over a lot less than 1/30th of the inventory in a day.”</em><br /><br />I do not see how the $1 million trade size must mean a lower turnover. That is not a big figure for wholesale market participants. With bullion bank spreads of $0.50 to $1.00, a 1000oz deal only means $500 to $1000 profit. This would mean that a spot gold trader would need to do a lot of trading to make a decent return on the capital employed, which means they would trade more frequently, rather than less.<br /><br />As with Mylchreest’s comparisions to currency trading, I don’t think Douglas’ comparisions to GLD make any conclusive case that London gold turnover is suspicious.<br /><br />For further support, Douglas notes that<br /><br /><em>“In the last 14 years the supply of dollars has increased from $4 trillion to $15 trillion (+275 percent) while the gold price has risen from $400 in 1995 to $1,000 in 2009 (+150 percent). How could this happen? … There has to be an alternative massive supply of gold to make the price rise slower than the influx of dollars.”</em><br /><br />How it could happen is that those extra dollars were diverted into equities and house prices, rather than gold, pushing up their price more instead.<br /><br />He also says that “<em>If the OTC market traded only gold that was in the vaults on a 100 percent reserve ratio, there could never be a lack of liquidity.”</em><br /><br />Lack of liquidity has nothing to do with stocks, backed or not. It has to do with a depth of buyers and sellers. If you have 100% backed unallocated, but few of the holders want to sell, then you have a lack of liquidity as well.<br /><br />For some closing comments, I’ll quote Lawrence Williams from <a href="http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=90927&sn=Detail">Mineweb</a>:<br /><br /><em>“The big problem, though, with much of this kind of analysis is that the analysts and observers are working with a mixture of real and assumed figures. It thus tends to rely on statistics being manipulated, perhaps subconsciously, to support pre-conceived theories.”</em></div>

A reader has asked me to comment on these two recent GATA articles www.gata.org/node/7908 and www.gata.org/node/7911 , which claim that Lon...

Power pentagons, Hayek, GFMS and Bear Traps

<div align="justify">It is certainly quite in goldland these past few months. Both of my anecdotal indicators are down compared to a year ago when retail shortages were rife: posts on Kitco's forum and comments to article about gold on Seeking Alpha. Seems everyone is distracted by green shoots.<br /><br />I have just finished The Myth of the Machine: The Pentagon of Power, which I mentioned in a <a href="http://goldchat.blogspot.com/2008/09/nibbling-at-edges-of-power-structure.html">Sep 08 post</a> and <a href="http://seekingalpha.com/article/156343-why-buying-gold-is-a-political-statement">republished</a> on Seeking Alpha to very little acclaim :). I have pages of notes to bash into shape, nothing to do with gold but more on management theory (my BComm major) - organisations as totalitarian “regimes”, CEO's as dictators and if this is the environment in which people spend a lot of time and see as normal why would they see any problem with increasing Government intrusion and authoritanism. Considering that, was it a good idea to make organisation's legal entities/persons leading to reification that acts as a shield against any sense of responsibility by the individuals who actually make decisions? Anyway, I did say some panel beating was required.<br /><br />I am currently reading Hayek's Serfdom Revisited (1985), put out by <a href="http://www.cis.org.au/">The Centre for Independent Studies</a>, which should be familiar to Australians. Considering my previous comments about Governmental intrusion, I may wait until I finish this before writing a blog on the Lewis Mumford book.<br /><br />I also found this article of interest: <a href="http://www.gata.org/node/7699">Adrian Douglas: GFMS cooks books to make gold look bad</a>.I do think the GFMS/WGC numbers have some sticky tape and rubber bands holding them together. Admittedly it is difficult to really know what is going on in gold, but they don't really explain how they do their numbers or give some +/- confidence levels. I think they want people to think it is super accurate and this works because a lot of people really treat it as gospel.<br /><br />The dodgy nature of the GFMS numbers is revealed if you go to the WGC website and go through their past Demand Trends reports, which I did when putting together some numbers for the Mint's CEO on general supply/demand trends (as detailed in this <a href="http://goldchat.blogspot.com/2009/03/supply-demand-and-price.html">Mar 09 post</a>). If you go through each Demand Trends report and compare the figures it it to the previous report, you will see all the revisions. And I'm not talking about just revising the prior period's figures, which you can expect. The reports usually have 5 quarters of past data. If you look at a specific quarter as reported originally and then subsequently in the following 5 reports, you can see them changing the figure each quarter, that is, they are revising supply demand numbers every quarter over one year later!<br /><br />If I could be bothered getting the data off it, it would make for an interesting analysis of the accuracy of the data – memo to self: write GFMS expose blog.<br /><br />Finally, I found in the Mint's library/archives a report by <a href="http://www.blanchardonline.com/">Blanchard and Company Inc</a> titled “Gold Bullion: Caught in a Bear Trap”. I remember when it first came out, we got one of the advance copies December 2001 (note the date), 53 pages in all. Quote: <em>“Sell your gold and take your tax losses now, before they get even bigger. If, at some time in the future, you find that you miss your gold, you'll be able to buy more of it for less.”</em> I leave it to <a href="http://www.mineweb.com/mineweb/view/mineweb/en/page15831?oid=13970&sn=Detail">Mineweb</a>, <a href="http://www.321gold.com/editorials/rosen/rosen060602.html">Maurice Rosen</a> and <a href="http://www.gold-eagle.com/gold_digest_02/droke040102.html">Clif Droke</a> to give you more details (everything is remembered on the Internet). Memo to self 2: never make ballsy calls on the direction of the gold price!</div>

It is certainly quite in goldland these past few months. Both of my anecdotal indicators are down compared to a year ago when retail shortag...

Animated Gold Lease Rate Curve

I've been playing around with Google Docs. This chart shows the change in the lease rate curve over time. Key feature is the kick up tha...

Silver ETF League Table

<div align="justify">Further to my post on <a href="http://goldchat.blogspot.com/2009/08/gold-etf-league-table.html">Gold ETFs</a>, below are the figures for silver.</div><br /><br /><table><tbody><tr><td><b>ETF/Custodial Facility</b></td><td><b>Silver Ounces as at July 2009</b></td><td><b>% share of Total Privately Held</b></td></tr><tr><td><a href="http://www.ishares.com/fund_info/detail.jhtml?symbol=IAU">ishares</a></td><td>283,831,312</td><td>20.3%</td></tr><tr><td><a href="http://www.centralfund.com/">Central Fund/Trust of Canada</a></td><td>59,648,793</td><td>4.3%</td></tr><tr><td><a href="http://www.zkb.ch/etc/ml/repository">Zurcher Kantonalbank</a></td><td>52,343,842</td><td>3.7%</td></tr><tr><td><a href="http://www.etfsecurities.com/">ETF Securities</a></td><td>19,133,459</td><td>1.4%</td></tr><tr><td><a href="http://goldmoney.com/">GoldMoney</a></td><td>16,234,617</td><td>1.2%</td></tr></tr><tr><td><a href="http://www.bmsinc.ca/">Bullion Management Group</a></td><td>5,444,685</td><td>0.4%</td></tr><tr><td><a href="http://www.claymoreinvestments.ca/">Claymore</a></td><td>2,235,000</td><td>0.2%</td></tr></tr><tr><td><a href="http://www.e-gold.com/">e-Gold</a></td><td>85,244</td><td>0.0%</td></tr></tr><tr><td><b>Silver "Products" Sub-total</b></td><td><b>438,956,951</b></td><td><b>31.4%</b></td></tr><tr><td>COMEX</td><td>118,227,405</td><td>8.4%</td></tr><tr><td>TOCOM</td><td>250,778</td><td>0.0%</td></tr><tr><td>Total Other Privately Held</td><td>842,564,866</td><td>60.2%</td></tr><tr><td><b><a href="http://www.silverinstitute.org/images/pdfs/SilverInvestReport09.pdf">Total Privately Held</a></b></td><td><b>1,400,000,000</b></td><td><b>100.0%</b></td></tr></tbody></table><br /><br /><div align="justify">Compared to gold, the silver ETFs provide more transparency, which is another way of saying there is less privately held silver stock compared to gold.</div>

Further to my post on Gold ETFs , below are the figures for silver. ETF/Custodial Facility Silver Ounces as at July 2009 % share of Total Pr...

Gold ETF League Table

<div align="justify">With gold looking to attack the USD 1000 level, it is fitting to review the new kid on the gold block – securitised bullion – that many say has been a contributor to gold’s resurgence. I say “new kid on the block” because gold ETFs are only seven years old whereas people have been storing wealth via gold for over 4,000 years.<br /><br />The key change ETFs have brought to the market is transparency. In the past, gold was purchased in bar or coin form and either stored at home, in safety deposit boxes, or with a custodian. Problem is that all this activity was private, with no reported numbers on the volume traded or held. The ETFs, by reporting their balances daily, now provide a small window into the activities of private investors.<br /><br />According to the World Gold Council’s (WGC) 2007 figures, private investors (which includes institutions) hold 16.4% of all the gold ever produced <a href="http://www.invest.gold.org/sites/en/why_gold/demand_and_supply/">(1)</a>. Adjusting for latest mine production, this means that as at March 2009 private investment in gold totalled 865 million ounces.<br /><br />The table below shows all the ETFs and other non-listed custodian facilities who publish regular figures on their holdings. This data has been sourced from <a href="http://www.sharelynx.com/">http://www.sharelynx.com/</a>, who is the guru for data on gold. Sharelynx tracks all of these products daily and has built an extensive history on their movements, making it an essential subscription for any serious analyst of the gold markets.</div><table><tr><td><b>Gold Ounces</b></td><td><b>As at July 2009</b></td><td><b>% share of Total Privately Held Gold</b></td></tr><tr><td><a href="http://exchangetradedgold.com/">Gold Bullion Securities</a></td><td>40,465,445</td><td>4.7%</td></tr><tr><td><a href="http://www.zkb.ch/etc/ml/repository">Zurcher Kantonalbank</a></td><td>4,738,397</td><td>0.5%</td></tr><tr><td><a href="http://www.etfsecurities.com/">ETF Securities</a></td><td>2,716,282</td><td>0.3%</td></tr><tr><td><a href="http://www.ishares.com/fund_info/detail.jhtml?symbol=IAU">ishares</a></td><td>2,323,677</td><td>0.3%</td></tr><br /><tr><td><a href="http://www.jbfundnet.com/">Julius Baer</a></td><td>1,849,375</td><td>0.2%</td></tr><tr><td><a href="http://www.centralfund.com/">Central Fund/Trust of Canada</a></td><td>1,571,037</td><td>0.2%</td></tr><br /><tr><td><a href="http://deutsche-boerse.com/dbag/dispatch/en/listcontent/gdb_navigation/trading/20_tradable_instruments/400_etcs/Content_Files/Xetra-Gold/tm_sp_xetra_gold_intro.htm">Xetra Gold</a></td><td>1,019,540</td><td>0.1%</td></tr><tr><td><a href="http://www.bullionvault.com/">Bullion Vault</a></td><td>583,705</td><td>0.1%</td></tr><tr><td><a href="http://goldmoney.com/">GoldMoney</a></td><td>425,168</td><td>0.0%</td></tr><tr><td><a href="http://www.claymoreinvestments.ca/">Claymore</a></td><td>366,000</td><td>0.0%</td></tr><tr><td><a href="http://www.bmsinc.ca/">Bullion Management Group</a></td><td>92,544</td><td>0.0%</td></tr><tr><td>Benchmark (India)</td><td>68,674</td><td>0.0%</td></tr></tr><td><a href="http://www.e-gold.com/">e-Gold</a></td><td>68,208</td><td>0.0%</td></tr></tr><td><a href="http://www.gldtr.com/">GoldIST Turkey</a></td><td>46,780</td><td>0.0%</td></tr></tr><td>UTI (India)</td><td>46,136</td><td>0.0%</td></tr></tr><td>Reliance Captial (India)</td><td>38,935</td><td>0.0%</td></tr></tr><td>SBI (India)</td><td>23,920</td><td>0.0%</td></tr></tr><td>Kotak (India)</td><td>11,060</td><td>0.0%</td></tr></tr><td>Quantum (India)</td><td>1,961</td><td>0.0%</td></tr></tr><td><b>Gold "Products" Sub-total</b></td><td><b>56,456,844</b></td><td><b>6.5%</b></td></tr><tr><td>COMEX</td><td>9,140,646</td><td>1.1%</td></tr><tr><td>TOCOM</td><td>180,464</td><td>0.0%</td></tr><tr><td>Total Other Privately Held</td><td>798,816,800</td><td>92.4%</td></tr><tr><td><b>Total Privately Held</b></td><td><b>864,594,753</b></td><td><b>100.0%</b></td></tr></table><br /><br /><div align="justify">This table clearly shows that Gold Bullion Securities (listed across many exchanges) is the “King Kong” of gold products. What is more interesting is that it only represents 4.7% of the total amount of gold held by individuals and institutions. Even including in the reported physical inventories of the COMEX and TOCOM futures markets only brings us to 7.6%.<br /><br />While this is a small “market share”, compare it to the situation five years ago. In July 2004 there were only five visible gold products totalling 2.4 million ounces. Combined with COMEX and TOCOM inventories, this amounted to less than 1% of privately held gold.<br /><br />The other interesting feature of this table is the small size of the ETFs listed in Turkey and India. GoldIST has been around since 2004 and the Indian ETFs first appeared in mid-2007. By July 2007, there was 141,271 ounces in ETFs across both of these countries. Two years later is it a mere 237,466 ounces. Compared to the considerable size of the physical gold markets in these countries, this is not an impressive performance and shows their continued preference for physical over paper.</div>

With gold looking to attack the USD 1000 level, it is fitting to review the new kid on the gold block – securitised bullion – that many say ...

Mark Creasy on stocks and flows

<div align="justify">In an <a href="http://www.eurekareport.com.au/iis/iis.nsf/lpages/RWIE-7N92AE?opendocument">interview</a> with Tim Treadgold for the Eureka Report, Mark Creasy makes a point about watching the stocks, not flow, of gold:<br /><br /><em>Scrap gold, and even mine-supply, aren’t really the big players in the (gold) market. There’s about 160,000 tonnes of gold in existence, and the world produces about 2000 tonnes of freshly-mined gold a year, and about 1000 tonnes is generated as scrap. The total amount of mined gold and scrap is less than 1% of the overall gold market. The mine supply isn’t all that important in the gold price. It’s all about sentiment. The people who will influence the value of that 160,000 tonnes are the biggest shareholders, and they are the central banks, which own about 30,000 tonnes.<br /><br />Gold is a bit like a company which has a dominant shareholder. If everyone believes the dominant shareholder is selling the price drops like you wouldn’t believe. A major influence is how people see the biggest shareholders handling their gold.<br /><br />...<br /><br />The best way is look at gold is not on the peripheral, say the scrap market or even mine supply; it’s to ask what are the big shareholders doing. In the past we’ve seen big holders such as the Bank of England and the Swiss National Bank selling, and people think we’re out of this. When they see a big new buyer, people want in.</em><br /><br />Now Mark's point that the flows are peripheral is not to say that they do not have an influence on the price. In the long run, if we have passed a "peak gold" moment (a subject of an upcoming post) then flows reduce and stock levels out which, in the face of increasing demand, is bullish for price. Significant changes in flows can also tip the balance of the buying and selling volumes of the holders of the 160,000t stock.<br /><br />Probably the biggest influence classical "flow" supply/demand analysis by WGC and GFMS has on price is via perception of its effect on price rather than any actual effect due to the physical volume of the metal. Consider that Mark's point about stocks has one problem - how do you measure the position of gold "shareholders"? How much volume of gold will be bid and offered to the market at each price level? Even if you can poll all the holders, the so constructed supply/demand curves of the "stock" will change over time in response to events. This is Mark's "sentiment".<br /><br />Now why "flow" supply/demand is so dominant is due to the fact that it is (relatively) nice and easy to measure. Sentiment is not. Therefore there is a bias towards the numbers, the measurable 3000t flow and away from (or complete disregard for) the unmeasurable 160,000t stock.<br /><br />As <a href="http://www.321gold.com/editorials/maybury/maybury052509.html">Richard Maybury</a> notes in his recent article:<br /><br /><em>... it is so important to see the economy not as a machine but as an ecology. Machines don't feel, they don't have fear, or joy, or optimism. But people, biological organisms, do have feelings. They do fear, and their fears can change instantaneously. The human ecology, especially these days, is driven very largely by emotions.</em><br /><br />As an investor it is important to remember that while "flow" supply/demand numbers from WGC or GFMS do have an effect, it is not the entire story and one should be cautious of the resulting mechanistic analysis. If "fears change instantaneously" then the movement of the 160,000t stock will overwhelm the annual supply/demand balance.<br /><br />There is a bit of circularity or feedback in that perception of annual flows impact sentiment of the holders of stock. Also note that instantaneous change can occur either way - if fear decreases then supply of the stocks will push the price down.<br /><br />Big upward price moves will occur when the sentiment that gold stock holders have is what is commonly called "strong hands" coincides with "weak hands" of holders of dollars. Focusing on annual mine supply or a drop in Indian jewellery demand isn't going to help you identify that move.</div>

In an interview with Tim Treadgold for the Eureka Report, Mark Creasy makes a point about watching the stocks, not flow, of gold: Scrap gol...