Explore the latest exciting developments in the silver industry with the February edition of Silver News. Its front-page story covers how silver nanowires are being explored as an alternative to widely-used indium tin-oxide. Once testing is complete, silver could become even more essential to the manufacturing of touch-screens, plasma televisions, and other common electronics.
Perhaps even more exciting is the new commercial release of a 3D printer that can simultaneously print conductive silver inks inside plastic designs. Everyday consumers can now print customized electronic devices. This advancing technology could add significant demand to the electronic silver market beyond large manufacturers. You can watch a video about this new printer from Voxel8 below.
Chinese Gold Demand Outpaces World Production
Forbes – More than 315 metric tons of gold were withdrawn from the Shanghai Gold Exchange from the beginning of January to mid-February. During the same period, only 300 tons were newly-mined around the globe. The gold demand came in preparation for the Chinese New Year, the country’s biggest holiday. China is already the world’s second largest gold consumer, but its bullion demand will likely surge with changing demographics. In the next 5 years, China’s middle class is expected to grow 66% to 500 million.
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The US Justice Department has begun to investigate whether 10 of the world’s largest banks have manipulated gold and silver prices. The Justice Department is just the latest in a series of financial regulators to investigate possibilities of precious metals manipulation, including the UK Financial Conduct Authority, Germany’s BaFin, and Switzerland’s competition commission WEKO. On top of that, there are a number of pending civil lawsuits in New York against some of these same banks for gold price rigging.
What should physical gold and silver investors take away from this news?
374 metric tons of gold were withdrawn from the Shanghai Gold Exchange (SGE) in the first 6 weeks of 2015. During the same period, about 300 tons of gold were newly mined in the entire world. Using these figures, China is currently consuming more gold than the world is producing.
The surge in Chinese gold consumption comes from preparations for the Chinese New Year celebrations, which began last week. Gold is one of the most traditional gifts to give during this holiday, but it’s not the only product the Chinese buy. They spend astounding amounts of money during this celebration: $100 billion in 2014, which was twice what Americans spent during the Thanksgiving and Black Friday holiday weekend.
Renowned hedge fund manager John Paulson is committed to gold. A new government filing from Paulson & Co. shows that as of December 31st, it remains the largest holder in the SPDR Gold Trust (GLD). It owns 10.33 million shares of GLD, the biggest gold exchange-traded fund in the world. Paulson’s company has maintained this stake for a year and a half.
Gold-backed ETFs saw nearly 70 tons of gold inflows in January, the largest since September 2012. The majority of that – 49 million tons – occurred in GLD. However, speculative interest in the metal has dropped again in February, and GLD has fallen more than 8% from its January high.
Speculators think the January surge in the gold price was a short-term reaction to volatility in Europe, and many investors are now placing their bets on the supposed economic recovery of the United States. Paulson seems to be looking at things differently and sees inflation looming in America’s future.
Wal-Mart announced yesterday that it is going to raise its minimum wage to $9 an hour, which will affect a half-million employees. Many are praising the company and saying this will improve the lives of low-wage workers, while also providing a boost to the American economy. However, Peter Schiff isn’t so optimistic. He explained to Yahoo! Finance why Wal-Mart’s minimum wage increase isn’t necessarily a net positive for the economy.
The wage increase will cost Wal-Mart about $1 billion this year. Who knows if Wal-Mart will pass along the cost of higher wages to its customers by raising prices? More importantly, Wal-Mart will probably cut back on hiring, which means low-income Americans will have that much more difficulty finding a job.
The dollar dropped while gold rose early this morning as the markets reacted to the release of the Federal Reserve’s minutes from its January meeting. The minutes show that Fed officials are more worried about raising interest rates than most of the markets thought. In fact, there was even talk of easing their monetary policy even further. Quoting from the minutes:
A few (members) expressed concern that in some circumstances the public could come to question the credibility of the Committee’s 2 percent goal… Indeed, one participant recommended that, in light of the outlook for inflation, the Committee consider ways to use its tools to provide more, not less, accommodation.”
Last week, Peter Hug said that about 25% of all physical gold buyers are “crazies.” The comment is remarkable, because Hug is an executive at Kitco, one of the largest precious metals dealers in North America. In fact, Hug is the Director of Kitco’s Precious Metals Division.
Hug’s reasoning is that a lot of the people who buy physical gold believe that the United States financial system is headed for a dire crisis. Many are worried about a complete collapse of the US dollar. The rationale for this belief is pretty simple and comes back to basic economics.
Analysts are expecting Indian Prime Minister Narendra Modi to cut the huge 10% gold import tax in his budget proposal at the end of February. Late last year, India scrapped its import rule that required 20% of all gold imports to be reexported. Premiums, and consequently smuggling, have both dropped since then. If Modi were to significantly cut the tax as well, India could see an additional 23 million ounces of gold demand in 2015. This would add significant support to global gold prices.
Europeans bought a lot more gold in January. Investors turned to the yellow metal to protect themselves economic turmoil that could result from Greece leaving the eurozone and the oncoming wave of European quantitative easing. The price of gold in euros has already risen 9% in 2015, putting it at a 21-month high.
Europeans are acting fast as the euro continues to lose value against the dollar. Banks and gold dealers around the continent are reporting a huge surge in sales.