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Gold As a type of precious metal, approximately 150,000 tons have been turned out since the dawn of history, and it's rarity is high. With the present annual mining amount at a little under 2500 tons, countries such as the Republic of South Africa, the United States, Australia, and China are chief producing countries.

Possessing a side as a historically long-used currency, it has become a means for the economy and savings. It's present uses are greatly divided, existing in the forms of jewelry, investments, and construction. As a method of investment, there are gold bullions (gold bars) and gold coins, as well as such forms as an exchange-traded fund (ETF).

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With the world's investment demand at approximately 417 tons between the months of April and June this year, it has been swollen by 2.6 times from over the same period last year. In situations such as the economic crisis, where trust in the dollar as the principal currency has begun to shake, there is the tendency for capital in which gold is focused upon to flow.

Q: The international value of gold is approaching a historic high. What are the reasons for this?

Last week, New York gold futures (central contract month of December futures) rose up to $1020 per troy ounce. This is an expansion coming close to the highest value of 1033.9 dollars that came about in the after hours trading last year in March. Short term futures have already updated to the highest value on the 16th. On the technical side, as a result of the pick-up in momentum, Standard Bank's Tokyo branch manager Yuichi Ikemizu spoke regarding the "complete stop loss repurchase when the value surpassed $1010."

At the bottom of all this is the anticipation of the dollar's fall. Recently, the Federal Reserve Bank (FRB) is expected for the time being to continue it's low interest policy, and money is flowing from dollar assets to the commodity market and high interest currencies.

Q: Apart from the movement of money speculation, how is the actual demand for gold?

The actual demand is stagnating. In India, which is the country in highest demand, the demand for jewelry stopped at 88 tons from 2009/4~6, a 3% drop from the same period last year. This is a result of India's sluggish domestic consumption. There is also the explanation that the affect of India's representative agricultural produce, sugar, which has been rising in value from a poor harvest in sugarcane, has been resounding. The price hike in sugar, which is a product vital to the livelihood of people working in agriculture, puts pressure on their disposable income. As on one hand the value of gold rises, the number of those selling on hand jewelery increases, and scrap (secondhand) supply and demand is loosening as a result.

Q: The International Monetary Fund (IMF) announced the sale of gold, but what effects will this have?

The IMF announced on the 18th that they have decided on the sale of at maximum 403.3 tons of gold, which is equivalent to 1/8 of it's total holdings (over 3200 tons). In reality, the gold sale policy and amount being sold are part of an already existing plan. Nevertheless, on the 21st there was a scene where the New York market's gold futures temporarily forced their way to $1000. World Gold Council's Itsuo Toshima/Japan-Korea regional representative explained that in the increasing wariness of high values, it has become a psychological bearish factor.

Q: Crude oil price recovery are also remarkable. Besides gold, what products is money drawing toward?

The price movement of New York oil futures putting in $70 per barrel is continuing. In comparison to the end of last year's low prices, the standard has gone up by two times. With American stocks raising expectations of economic recovery in the background, funds and such have given birth to a surplus in capital, and the flow of money into crude oil is likely to rise.

Putting the cheap dollar and inflation observation in the background, there is a strong investment motivation towards products tied to American investors. According to a survey in the U.S., the August market scale of ETF products (exchange traded funds), where there are famous individual investors, has approximately doubled from one year ago to $545 billion. This is becoming a case where the new approximately $218 billion capital from the beginning of the year has flowed out. The remarkable capital outflow in the large scale ETF, which is connected to the stock price index, is indeed a contrasting movement.

In the London market as well, 3-month copper bullion futures rose up to around $6500 per ton for the first time in a year during the first half of September. The actual demand, for example, for China to reconstitute it's strategic stockpile is wavering. Fixing attention on this, speculation money is also flowing here. Trading companies and the like view that from the end of the year China will again move to an active copper bullion supply. Anticipating this, the possibility of capital further flowing is circulating.

Having received resources/sudden energy rises up to the second half of last year, the criticism that speculation money will make the commodity market more volatile and upset the economy has risen all over the world. There is also the movement toward tougher regulations.

What speculators are paying more attention to is certainly the strengthening of regulations by the U.S. Commodity Futures Trading Commission (CFTC), which plans to introduce trade limits in energy like crude oil, and the agricultural market. Anticipating this, the movement towards abolishing ETN products (private bonds) and halting new sales of ETN products is succeeding one after the other.

In trying to confine the affects of such regulations to a minimum, the movement to find that loophole is also active.America's prominent ETF products, United States Natural Gas Fund (UNG), etc., are reducing the amount of trading in the futures market, and instead are increasing trade in the over-the-counter (OTC) market, where regulations are slack. Recently in the New York market, a new ETF type has appeared that connects to the index that targets stock prices for 142 companies that involved in petroleum and fertilizer products. Commodity market players are all desperate for survival.

Q: It looks as though the plan to move money to the commodity market will continue. What are things to keep aware of from here on forward?

It is still the trend of gold. A key man in the commodity market, James Burbage of Lloyd's Asset Management, is saying that gold will rise up to $1500 in two years. Individual investors will tend to move to where news of things such as high value updates accumulate. Gold rises closely to the highest value, and it is seen the same as new money to be invested in large quantities. Naturally looking to the long term, the status of confidence in the dollar largely affects the price of gold. In the semi-long term, it is by this principle that a close eye will be kept on the ability of the U.S. to grow, and from the movement of finance and current accounts as well.

The status of the world economy in commodities other than gold are definitely important. Mitsubishi UFJ Bonds Economic Circulation Research Institute's Yuji Shimanaka has been saying that as the commodity market is an indicator of the economy's whereabouts, money will flow if an economic recover can be brought about clearly. There are also those speaking out, indicating a low second possibility in an unclear economic environment. Either way, if the commodity market greatly distances itself from the economy and actual demand, and rises in money leadership, caution is best advised.

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Posted in Computer Post Date 05/21/2021