Excerpts From - "Gold Forecaster - Global Watch"

By: Julian D. W. Phillips | Mon, Jan 16, 2006
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HIGHLIGHTS in "Gold Forecaster - Global Watch"
Silver - COT, Gold : Silver Ratio EDR.V, SSRI, PAAS, SIL / Platinum.
SHARES: HUI, NEM, FCX, DROOY, NG, VGZ, Notes - Buys & Sells, Accredited Investors

1-2. Market Forecasts / Short-term forecasts across the Board!
2-3. Comex forecast 2006/ Commercial Shorts Forecasts 2006
3-13. Central Bank Gold Agreement Sales in 2006 / China Makes a Move / Exchange Traded Funds 2006/ Indian demand 2006/ 2006 Oil Crisis / Prospects for the U.S. $ 2006 / Gold: Oil Ratio / Dow Jones / Technical Analysis of the Gold Price: Long / Gold price drivers 2006 / Short term in the U.S. $ / Treasury Notes / CRB Index
13 - 26. International Gold Markets / Silver / Platinum/ Silver & Gold Shares

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That was the week that was.

And suddenly the Exchange Traded Funds took control. StreetTRACKS Gold Trust saw its holdings jump by an enormous 10% in the year to date (2006)! These volumes are sucking in all the Central Bank Sales and some. On the other side, no one wants to sell.

The funds decided after trimming their holdings at the year-end to add to their positions and came in with more buying, but not for long before they sold as well, taking short-term trading positions only. The effect was that the funds did not have a significant influence overall, on the gold price.

The jewellery market [including the Indian importers] were noticeable only by their absence. The Japanese returned from their holidays to show interest in the market too, but it was the E.T.F.'s that dominated, taking in as much as four times more than the Central Banks sold in this last week.

The long awaited long-term Investors had arrived and in force. We expect them to come in "on the dips" but without chasing the prices too much, as professionals should. What's more now that they have arrived we think they're here to stay! The trouble is that they've taken supplies that will be wanted by other currently absent buyers in the short-term, so setting the stage for further price advances.

The longer this market consolidates at this level the more likely absent buyers, such as the Indian market will be to come in. There are a lot of price-frustrated buyers waiting out there and very few sellers! Amongst these we are inclined to add some de-hedgers and some remaining short sellers.

Hold tight to your positions and buy on the dips!


The same applies to the Silver market. The funds in this market are in a position to drive the prices up and we believe they will in line with Gold's movements.

Every day brings the possibility of a drop in supplies as "Official" Chinese selling dries up, so better to be long than out of this market.

Indian Demand in 2006

Still no demand for imported gold into India. They still believe that $480 is a fair price and don't want to pay more! So demand is absent at present with scrap gold supplying the needs of the industry.

One of the reasons Indian buy gold and why it is a money of last resort was demonstrated in India this week. Gold depends on no man's promises and cannot be controlled by any government or bank, much to their considerable annoyance, as they are currently showing.

In the last budget, after the imposition of Excise duties on all "Branded Jewellery", there was huge outcry over this levy. But then, last year the Indian Finance Minister clarified that the law imposing these duties would not affect small jewellers who put their identification stamp on jewellery. At that the matter seemed to die.

Now India's Excise Duty Department has decided to press the case and impose the duty on all jewellers. The Excise duty Department has become vigorous in imposing penalties on all jewellers who have even some stamp on their jewellery. It seems there is no recourse to the Finance Minister who is proving to be of little help. Consequently small jewellers, who constitute the bulk of gold's consumers, are in danger of closing down, as they have neither the means nor ability to observe the needed Excise formalities.

This is why people want to hold gold in hidden places, bought with means beyond prying eyes and government duty imposition. Governments and banks seek control of law and money. Hidden, privately owned and stored gold is beyond their reach. In India this could cover up to 20,000 tonnes of gold.

In the past, India imported 650 tonnes of gold annually. In the last four months gold imports have totally halted, due to ever appreciating price. Bit now these actions of the Excise Duty Department are set to disrupt the gold market further still.

The liberalised and legalised Gold industry is back in danger. Will we see a return to the old smuggling days? This possibility could move to a probability if such actions continue. And if the Finance Minister cannot impose his will on his department, who can trust government. The traffic on the Gulf of Oman could get busy - Let's see what happens now?

Not gone for good!

To keep a balance on our views, bear in mind that Indians are holding off from buying because the price is too high, nit that gold has ceased to be a good investment. For the very reasons given above, Indians will buy gold and keep on buying this financial security. We are simply waiting for them to accept the higher prices. Those who already have gold sing a different tune to those who have gold in hand. They are seeing the vindication of their persistent purchasing. It would be eye opening to know the average price the 20,000 tonnes of gold were bought for over the years. Our rough guess is that it would be around $300 an ounce! No complaints from that quarter.

Give them some more time and reflection and the Indian buyers will be back!

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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.

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