From the Heraeus Weekly Bulletin:
China's recovery from sweeping lockdowns in 2022 is sluggish. Gold demand reportedly increased 29% year-on-year to 192 tons in the second quarter of 2023 (source: World Gold Council).
However, the comparable period in the previous year was characterized by large-scale lockdowns in Shanghai and other large cities. Total Chinese gold demand in the second quarter of 2023 was actually 12% below the long-term average for the quarter.
Despite some government stimulus, prospects for stronger growth for the remainder of the year are questionable.
A high gold price and the decline in real incomes also changed the consumption behavior of Indian consumers in the first half of the year. Gold prices in rupees hit consecutive record-high quarterly moving averages in the first and second quarters. Jewelry demand fell 8% year-on-year to 129 tons in the second quarter and is down 12% year-on-year in the first half (source: World Gold Council). Jewelry demand in Q1 was at its lowest since lockdowns began in Q3 2020.
Even though prices are now back below the peak, Indian demand could still suffer from the overall high price levels. Budget-conscious consumers typically postpone gold purchases when prices remain high, as seen in the first half of 2023. When the price of gold falls, buying often increases, leading to a short-term surge in consumer demand. While gold buyers will adjust to higher prices over time, an incremental increase in purchases will not be enough to stimulate demand more significantly. Another risk is a strong El Niño effect on the Indian monsoon, which could affect demand. Erratic rainfall can impact incomes in rural areas where gold is an important store of value. In the northwest and at the southern tip of the country, a large precipitation deficit has been recorded so far this season.
Global gold demand could fall due to weakness in India and China. Together, India and China accounted for 52% of global consumer demand in 2022. If India's gold consumption is to return to 2022 levels, demand would need to increase by 86% in the second half of 2023 compared to the first half. This will hardly be possible without a significant drop in prices or an event-related increase in demand. Consumer demand is therefore likely to decrease in 2023 compared to the previous year. Positive development in China hinges on an improving macroeconomic environment and a reallocation of discretionary income to jewelry from tourism, which was one of the few sectors to post growth in the first half of 2023 (source: Bloomberg). Should both countries underperform in the second half of 2023, global gold demand could fall for the second year in a row.
GOLD:
Strong central bank demand in the first half of 2023. Despite significant selling by Turkey, global central bank demand reached 387 tons in the first half of the year, the highest since at least 2000 (source: World Gold Council). China's central bank, which continued its regular purchases that began in late 2022, was the biggest buyer in the first half of 2023. From January to June, China's central bank reserves were increased by more than 100 tons of gold. Demand should remain robust in the second half of 2023, especially if China continues its gold buying program. However, the record level of last year is unlikely to be reached again. Assuming buying continues at H1 levels, central bank demand could reach more than 750 tonnes in 2023, which would be the second-highest volume on record.
After Fitch downgraded the United States' credit rating last week, US Treasury yields rose. 10-year government bond yields rose to over 4.1%, the highest level since November last year, while 2-year government bond yields remain close to 5%. Higher yields mean headwinds for gold as a non-returning asset. Gold prices lost 0.93% last week.
SILVER:
More than two million US Silver Eagles were sold in July. Retail investor demand for silver coins rose 41% month-on-month in July. The sale of two million ounces of silver coins increased year-to-date sales to 11.8 million ounces. Elsewhere, silver investment demand has been weaker. The Perth Mint saw sales of silver coins and bars fall 35% to 863,000 ounces. A 10% rise in silver prices in the first half of July may have contributed to the lower sales. Profit-taking also occurred in silver ETFs. Since early July, investors have sold 16.5 million ounces of silver from ETFs, bringing the total ETF holdings to 729.7 million ounces. A further drop in silver prices could lead to ETF inflows again as investors attempt to re-enter at a lower price.
Silver prices have been volatile this past week, closing at $23.65/ounce, almost 3% lower than the week before.
Trust comment:
Gold and Silver continue to fall and this trend could well continue into next year with possibly lower lows than we saw in October 22 now that stock markets have very likely topped the last 10 days and now this is where the process long awaited by the trust begins. US Treasury rates are on the way up and so liquidity is continuing to drain from the markets.
This all comes at the same time as an intervention by the Bank of Japan, which is struggling to keep government bond rates low and is now allowing rates to rise to as much as 1%. This means that the USD/Yen carry trade is increasingly at risk and pressure is also being exerted from this side on US government bonds and the associated rise in interest rates. China and India are also dumping US Treasuries, increasing the chance of a global credit event.
Our forecast of a last fall in gold and silver prices, which is more than a year old, will very likely soon be seen in reality and thus brings what may be the last possibility in the history of mankind of cheap purchase prices against debt money before a revaluation of gold and silver will take place.
Before that, however, it is quite possible (or even probable) that prices will fall noticeably below those of September/October 22.
For silver, this could mean that we could even see prices similar to the corona lockdown of $12-14, as we announced last year.
(charts from elephant capital, twitter)
Since nobody knows how the last few weeks and months of the old monetary system will play out and nobody knows how deep the correction will go in the end, everyone should already hold part of their assets in gold and silver during the last phase the worldwide destruction of credit money is unavoidably at the door, which will soon and increasingly make mankind cry out.
The next downward wave of the markets is imminent and will also find its place in the global media by late autumn, while we could also expect the second wave of inflation in consumer goods prices this year, with which the individual market participants will hear from several sides clamped down while real estate prices are already falling and jobs and orders continue to dwindle.
Thus, the greatest destruction of wealth in history is picture-perfect. (Credit-driven assets = debt)
Gold and silver will emerge from this annihilation as shiny stars, but that may not happen until next year, and until then the bulls will be tested again with their existing stack.
If you don't have a stack yet, you should urgently build one now!
A more detailed article on the fast-paced events currently taking place in the markets is due out later.
The Trust inventory increased slightly last week to 219,726.89 grams of silver. The gold stock has remained the same at 1803.64 grams.
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Second edition of the Jewish year 5783
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