Breaking News

Demand For Physical Gold Remains Strong As Bullion Banks Suppress Prices

By David LevensteinCommoditiesSep 30, 2014 05:16AM ET
Demand For Physical Gold Remains Strong As Bullion Banks Suppress Prices
By David Levenstein   |  Sep 30, 2014 05:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

September has been a poor month for precious metals. Gold is down 5.2%, despite it being gold’s strongest month from a seasonal perspective. The price fall means that gold is heading for the first quarterly loss this year.

As a dollar-driven rally spurred by U.S. economic growth and after the U.S. Federal Reserve indicated it could raise interest rates sooner than expected earlier this month, gold prices have come under pressure for the entire month of September. However, as there has not been any dumping of the physical metal and as demand remains relatively robust one can surmise that this selling can only be the nefarious activities of the large bullion banks trying to suppress the price of the yellow metal once again and thus give the general public that illusion that owing gold is not as good as owning the US dollar or equities.

The Federal Reserve and its bullion bank agents (JP Morgan, Scotia, and HSBC) have been using naked short-selling to drive down the price of gold since September 2011. The latest containment effort began in mid-July of this year, after gold had moved higher in price from the beginning of June and was threatening to take out key technical levels, which would have triggered a flood of buying from hedge funds.

The Fed and its agents rig the gold price in the New York Comex futures (paper gold) market. The bullion banks have the ability to print an unlimited supply of gold contracts which are sold in large volumes at times when Comex activity is light.

On the geopolitical front, the crisis developing between Western nations and the Islamic militant group ISIS is taking on a new dimension. For now, mainstream media have forgotten about Ukraine and Gaza.

On Friday, American-led coalition warplanes struck at targets outside the city of Deir el-Zour on the Euphrates River. Coalition planes pounded a dozen makeshift oil-producing facilities in the same area on Thursday, trying to cripple one of the militants' primary sources of cash — black market oil sales that the U.S. says produce up to $2 million a day.

Syrian activists said the American-led air campaign also hit the Tanak oil field as well as the Qouriyeh oil-producing area in Deir el-Zour on Friday. It said air raids also targeted the headquarters of the Islamic State group in the town of Mayadeen southeast of Deir el-Zour city.

The coalition, which began its aerial campaign against Islamic State fighters in Syria last Tuesday, aims to destroy the extremist group, which has created a proto-state spanning the Syria-Iraq border. Along the way, the militants have massacred captured Syrian and Iraqi troops, terrorized minorities in both countries and beheaded two American journalists and a British aid worker.

Denmark announced that it would also send seven F-16 fighter jets to take part in the airstrikes in Iraq; two days after the Netherlands did so. And, on Friday British lawmakers agreed to join the U.S. led coalition and launch airstrikes on Islamic State in northern Iraq, but the motion did not endorse airstrikes in Syria.

Prime Minister David Cameron described the moves as critical to national security, arguing that facing down terrorists has become a matter of urgency.

Meanwhile the World Gold Council’s second-quarter gold-demand trends report showed U.S. jewellery purchases totaled 26.1 metric tons, a 15% rise over 2013’s second quarter and more than double the tonnage purchased as bars and coin investments. This isn’t a one-quarter anomaly, either, as the data showed that for the 12 months ending with the second quarter, U.S. gold-jewellery demand was up 18% over the time period in 2013 at 125.6 tons.

Sally Morrison, managing director of marketing and jewelry at the World Gold Council, said there’s been consistent growth in the U.S. jewellery market for the past five quarters, following drops in the price of gold, starting last year. Unlike in China and India where the reaction last year to price falls was quicker, it’s taken some time for lower gold prices to trickle into the U.S., she said, with the effects of cheaper prices likely being felt only beginning this year.

While most Wall Street analysts continue to trim down their forecasts for gold prices due to the rising expectations of a U.S. rate increase in 2015 and the geopolitical risks being more under control in Ukraine-Russia and the Middle East, the International Monetary Fund (IMF) has shown that Russia, Kazakhstan, Turkey, and Ukraine have added over 35 tons of gold in their reserves in August.

The latest official gold reserve data from the (IMF) shows that Russia has again added to its gold reserves in August, with the Central bank of the Russian Federation purchasing 232,510 ozs (7.23 tons) and bringing its total gold reserves to 35.769 million oz. or 1,112.5 tons.

The National Bank of Kazakhstan also purchased a massive 795,213 oz. or 24.7 tons in August bringing its total gold reserves to 5.848 million ozs (181.9 tons).Turkey was also a gold buyer in August and the Turkish central bank adding 96,783 ozs (3 tons) to bring its total official gold reserves to 16.45 million ozs (511.6 tons), which is the world's 12th largest official gold holding.

According to the IMF data, other countries which added to their gold reserves in August included the central banks of Azerbaijan and Ukraine.

Kazakhstan now has the world's 23rd largest holdings, just behind the Philippines which has 194.4 tons of gold reserves.

With 1,112.5 tons, Russia remains the world's 6th largest official gold holder, ahead of China (1,054.1 tons) and Switzerland (1,040 tons).

The Swiss National Bank (SNB) has not been a gold buyer recently but this may change if a Swiss gold referendum to be held in November goes through, which would force the SNB to maintain 20% of its reserves in gold and to repatriate all gold held abroad back to Switzerland.

It is widely believed that China's gold reserves are understated as I have frequently suggested. And, I also believe that the gold holdings of the U.S. are completely overstated and I very much doubt that they possess the 8000 odd tons they claim to have.

The ECB and other central banks including the Nationale Bank van België/Banque, Nationale de Belgique, the Deutsche Bundesbank, EestiPank, the Central Bank of Ireland, the Bank of Greece, the Banco de España, the Banque de France, the Bancad’Italia, the Central Bank of Cyprus, Latvijas Banka, the Banque centrale du Luxembourg, the Central Bank of Malta, De Nederlandsche Bank, the Oesterreichische National bank, the Banco de Portugal, Banka Slovenije, Národnábanka Slovenska, Suomen Pankki – Finlands Bank, SverigesRiksbank and the Swiss National Bank recently announced details of the fourth Central Bank Gold Agreement

In the interest of clarifying their intentions with respect to their gold holdings, the signatories of the fourth CBGA issue the following statement:

Gold remains an important element of global monetary reserves;

The signatories will continue to coordinate their gold transactions so as to avoid market disturbances;

The signatories note that, currently, they do not have any plans to sell significant amounts of gold;

This agreement, which applies as of 27 September 2014, following the expiry of the current agreement, will be reviewed after five years.

Demand For Physical Gold Remains Strong As Bullion Banks Suppress Prices
Demand For Physical Gold Remains Strong As Bullion Banks Suppress Prices

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email