Greek Money Mystery - 3rd May 2010

How Greek savers are choosing to flee the worst currency crisis in three decades...

THERE IS NO last mover advantage in fleeing a debt default. Not least when it's so clearly flagged in advance.

So whether or not the Greek government has to restructure its finances – screwing one set of creditors or another – you can't blame Greek savers for moving a chunk of their money out of the country since New Year.

Holders of Eurozone bonds fearing a little inflationary "solution" might like to take note. But where to go instead? Let's see where Greek savers have gone.

Did the €10.6 billion in cash pulled from Greek bank accounts by private individuals and private businesses during the first quarter simply vanish into wallets and purses? Perhaps, but non-Greek branches of Greek banks is a better guess. Because, all told, Greek-bank liabilities as reported by the European Central Bank rose to a new record in March.

Non-Greek banks altogether were a likely choice too, as were non-Euro currencies. Overall, total Eurozone banking deposits crept 0.02% lower during the first quarter, as the ECB's chart of M3 year-on-year money supply growth shows below.

And certainly, a little of the money leaving Greece came here to BullionVault, where it was swapped for Physical Gold.

Euro transfers from Greek bank accounts more than doubled at BullionVault in Jan-Mar., reaching their best quarterly level since the global flight into gold at the end of 2008. Daily traffic from Greek I.P. addresses has also doubled from the start of this year, hitting over 300 visits per day.

Note, we are talking about very small sums here, especially as part of that €10.6bn exit. But it's a straw in the wind, perhaps. And seeing how – on 2009's full-year data from the World Gold Council – European gold demand overtook total demand from both US and Middle Eastern households, jumping by 21% in tonnage terms to stand in third place only to India and China, it might not be the last either.

Currency crises typically prove good for gold prices, if only because it rises in terms of the sunken money. And the world hasn't seen a reserve currency hit quite this much trouble since US Treasuries became "certificates of confiscation" in the late '70s.

Want to buy and own the most secure Gold at the very lowest costs...?

Adrian Ash, 03 May '10

Source :goldnews.bullionvault.com/greek_money_050320102

Gold Jumps as Greece Debt Cut to "Junk" Status, Other Precious Metals Dive with Stocks, Crude Oil - 28th April 2010

From Chris Mullen at GoldSeek.com...

Gold traded mostly higher in Asia on Tuesday before it fell back off in London to see a loss of $7.45 at $1146.00 an ounce by about 09:00 ET.

The Gold Price in Euros then leapt to new all-time highs above €880 an ounce as the single currency fell on news that Greek government debt was downgraded by the credit rating agencies to "junk" status. Portugal's debt rating was already lowered.

Gold in Dollars shot to a new session high of $1164.40 by late morning in New York, seeing a gain of $10.95 an ounce, but it fell back off into the close and ended with a gain of 0.7%.

Silver fell to $18.06 and rose to $18.397 before it fell off rather markedly in the last couple of hours of trade and ended near its late session low of $18.025 with a loss of 1.1%.

Both gold and Silver Prices then rose in after-hours access trade.

Oil fell as the US Dollar index and Treasuries rose. The Dow, Nasdaq, and S&P lost about 2% on the day. Tuesday's auction of 2-year US debt drew a high yield of 1.024% with a bid to cover of 3.03 times.

US home prices on the Case-Shiller index crept just 0.7% higher in Feb., new data showed, not quite reversing Jan.'s fall and missing Wall Street expectations.

Consumer Confidence, in contrast, rose sharply this month.

Wednesday at 14:15 ET brings the latest Federal Reserve monetary policy announcement, expected to keep the fed funds rate in its record low range of 0.00% to 0.25% "for an extended period."

Platinum lost $24 to $1714, and copper fell over 16 cents to about $3.36.

Gold Mining and silver equities fell over 1% at the open before they rallied to see slight gains by late morning and then fell back off again to see over 1% losses by early afternoon, but they rallied back higher in the last few hours of trade and ended mixed and near unchanged.

Ready to Buy Gold...?

Chris Mullen, 28 Apr '10

Chris Mullen is chief content manager of the GoldSeek family of websites, a leading source of gold news, comment and mining-stock data for private and institutional investors. 

Source : http://goldnews.bullionvault.com/gold_greece_042820101

Fear, Evil & Gold

Gold is fast finding new buyers, yet it remains under-invested compared to previous crises...

"FEAR, Mr. Bond, takes gold out of circulation and hoards it against the evil day," as 007 learns from a Bank of England officer in Ian Fleming's Goldfinger (1959).

So "in a period of history when every tomorrow may be the evil day, it is fair to say that a fat proportion of the gold dug out of one corner of the earth is at once buried again in another corner."

Evil-day gold buying really motored since the credit collapse began in August 2007. Soaking up investment dollars worldwide, in fact, new allocations to the metal – whether trust-fund or owned outright – swelled by 38% during the first quarter of 2009 compared with total demand between Jan. and March 2008, according to marketing-group the World Gold Council (WGC).

Within that figure, what the GFMS consultancy (who supply the WGC with its data) calls "identifiable investment" leapt 248% compared to Q1 '08. And Gold ETFs made the headlines once more, sucking in "another quarterly record" as new inflows required 465 tonnes of metal to back them, thus dwarfing the previous record of 149 tonnes set in the third quarter of last year.

That doesn't mean the world's investors are now all in, however. According to the World Gold Council's Marcus Grubb last month (using we-don't-know-which data), current Gold Investment allocation stands at less than 0.6% of total global wealth.

It makes a nice pie chart, and it offers a useful snapshot of different asset classes vs. each other. But here at BullionVault, we also think the idea's worth refining. Because this estimate both over-states liquid assets in toto and under-estimates the stock of gold available to investment flows – whether retail or wholesale.

First, note the scope for double-counting between pension, mutual and insurance funds. I'm not saying the WGC's data trips up on that error, but you can see how likely it seems given the end-allocation categories applied. For instance, "hedge funds" are stripped out separately (as are REITs and private-equity), even though institutional allocations via funds-of-funds will be counted elsewhere under the broader "funds" title.

Similarly, but more pertinent, the outstanding quantity of "gold – investment stocks" underplays the true volume of metal held as a store of wealth. Simply counting the "investment" volume excludes fully 84% of the above-ground supply, as another chart from the WGC's presentation shows.

Why not also include "official sector" gold hoards? Sovereign wealth funds and FX reserves were included on the other side of the ledger, after all.

More crucially still, why not include jewelry? Trying to split out the volume of trinkets held for aesthetics alone might feel easy enough to a Western analyst just back from window-shopping at Mappin & Webb. But across south-east Asia, and most particularly in India – typically the world's No.1 destination for physical gold each year – large, chunky necklaces and bracelets make for "investment jewelry", acting as a store of wealth in the absence of any formal banking network.

Still, the point is well made, we believe. Gold remains but a sliver of investable wealth – albeit a fast-growing sliver as the value of other assets has dropped.

"Gold [has] been deprecated and reduced as a financial asset," as Jeffrey Christian of the CPM consultancy put it earlier this year. "In 1968 gold may have represented 4.5% to 5.0% of the world's wealth...By the 1990s it was down to 0.2% of the world's wealth. Not that gold was falling in value so much as the other wealth – stocks, bonds, paper assets, government bonds, corporate bonds, bank deposits – were exploding once the tie to gold was severed.

"In 2006 gold represented 0.2% of world wealth. At the end of 2007, it was about 0.4%. Depending on what you think about wealth destruction in 2008, it may have been 0.6%."

That figure just about matches the WGC's estimate of 0.7% (perhaps they used the same inputs and excluded the same volumes of central-bank and jewelry gold?). It also contrasts with our own Estimate of Gold as a Proportion of Investable Wealth at nearer 2.7% by the close of 2008...which itself shows gold remaining significantly under-invested right now compared with the last two peaks of global investment panic, 1982 and 1932.

Either way, gold is fast-attracting attention – both from nay-sayers, retail investors and new die-hard bulls amongst the professional institutions. Regulatory filings show legendary hedge-fund manager John Paulson took his position in the SPDR Gold ETF to 30% of his portfolio during the first quarter of 2009. Paulson & Co. now owns 8.7% of that paper – as well as significant chunks of the Gold Miners ETF (GDX), Kinross Gold (KGC), Gold Fields (GFI) and AngloGold Ashanti (AU) – if not any actual Gold Bullion itself.

Does that in itself make gold a buy? Of course not. But compared to the evil days of 1930s depression – or the fearful inflationary panic of the late 1970s – the world's wealth remains very under-invested in metal right now.

Adrian Ash, 21 May '09

 

Adrian Ash runs the research desk at BullionVault, the world's No.1 private investor gold service online. Formerly head of editorial at Fleet Street Publications – London's top publisher of financial advice for private investors – he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to 321gold, FinancialSense, GoldSeek, Prudent Bear, SafeHaven and Whiskey & Gunpowder among many other leading investment websites. Adrian's views on the Gold Market have been sought by leading news organizations including the Financial Times, the Economist, Bloomberg and Der Stern in Germany. 

Source :http://goldnews.bullionvault.com/gold_fear_052120093