India Gold - Customer Zone - Reuters

Gold: Will Risk Aversion 

Banish Correction Fears? 

SPECIAL PDF REPORT AUGUST 2011 

Nine kilograms of gold are seen before being reprocessed in a foundry of the Safina company in the village of Vestec near Prague REUTERS/Petr Josek 

• Gold edges down; eyes on Fed cues on stimulus 

• Gold surge draws prospectors, thieves worldwide 

• Record prices spawn new wave of China gold bugs 

• Japanese cash in on gold price boom 

• Panners, big miners scramble to join Australia's gold rush 

• Some gold bulls say time to cash in, rally overdone

COMMODITIES GOLD: WILL RISK SHIVER AVERSION AFTER BANISH U.S. CREDIT CORRECTION DOWNGRADE FEARS? AUGUST 2011 

Gold edges down; eyes on Fed cues on stimulus 

By Rujun Shen 

SINGAPORE, Aug 31 (Reuters) - 

S pot 

gold edged lower on Wednesday as investors waited for more clues to economic conditions and watched to see if 

the U.S. Federal Reserve would deploy more stimulus measures, but the metal is poised for its biggest monthly gain 

since Nov. 2009. 

Cash gold prices rallied 2.6 percent in the previous session as minutes from a Fed policy meeting on Aug. 9 showed 

the central bank discussed a range of unusual tools it could use to help the economy and more quantitative easing remains an 

option. 

More quantitative easing would push up the inflation outlook and spur buying interest in gold, which is seen as a good hedge 

against inflation. 

"The next data point for gold is some sort of clarity out of the U.S. Fed over the next few weeks on whether they will deliver 

another round of quantitative easing, or not and just let their economy continue on a slow growth path rather than a supported 

high growth path," said Tom Price, global commodity analyst at UBS. 

The Fed is scheduled to meet on Sept. 20 to discuss options to help spur the faltering U.S. economy. 

Spot gold inched down 0.2 percent to $1,833.29 an ounce by 0254 GMT, headed for a monthly rise of 13 percent, its strongest 

gain since November 2009. It has risen nearly 30 percent so far this year, close to the gain for all of 2010. 

U.S. gold gained 0.4 percent to $1,836.50 an ounce, also on course for a 13-percent rise from a month earlier. 

Technical analysis suggested that gold could rise to $1,862 in the day, said Reuters market analyst Wang Tao. 

Gold 24-hour technical outlook: 

( http://link.reuters.com/weg53s ) 

Inflation adjusted gold price: ( http://r.reuters.com/pun62s ) 

Investors are eyeing a string of labour market data due later this week, including unemployment and non-farm payrolls data 

on September 2, after the latest data showed plunging consumer confidence in August. 

In the absence of a third round of quantitative easing by the Fed, gold's rally will run out of steam and prices could drop towards 

the $1,400-$1,500 level from which the rally took off in early July, said Price of UBS. 

A gold bar of melted gold granules is cast at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner 

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COMMODITIES GOLD GOLD: REBOUNDS WILL RISK SHIVER BATTERED AVERSION ON JAPAN AFTER BY BANISH DEBT SHARPEST U.S. CREDIT DOWNGRADE CORRECTION LOSS DOWNGRADE SINCE DESPITE FEARS? MAY CORRECTION FEARS AUGUST 2011 

ASIA PHYSICAL APPETITE STRONG 

Lofty prices have barely shaken Asian investors' interest in bullion, and upcoming festivals in China and India are expected give 

a further boost to gold demand. 

"We are seeing strong demand from China," said a Hong Kong-based dealer, "Physical demand is likely to be strong in September, 

October and November." 

India, the world's largest gold consumer, is approaching the festival and wedding season which peaks in late October's 

Deepavali. 

Retail interest in gold is also expected to rise in China ahead of the week-long National Day holiday in early October. 

Spot gold was little changed at $41.33, headed for a 3.8-percent rise in August, the second month of straight gains. 

Gold surge draws prospectors, thieves worldwide 

By Natalia Konstantinovskaya and Tan Ee Lyn 

TOKYO/BANGKOK, Aug 31(Reuters) - 

I 

t has been called the saint-seducing metal, with good reason. 

As the price of gold rests near record highs, people from Spokane to Bangkok are selling jewelry or buying bullion, some 

are giving up steady jobs to take to panning while theft of gold chains and watches is on the rise worldwide. 

"Panning for gold is becoming a real family affair, more popular now because of the gold price," says Cordell Kent, who 

sells do-it-yourself mining equipment in the 19th century Australian gold rush town of Ballarat. 

"Some people I know are making hundreds, even thousands of dollars on the weekends." 

Locals say rising prices and heavy rain earlier this year are leading to a surge in amateur prospectors, looking for flakes of gold 

washing up on river-beds. 

"We're seeing a whole new gold rush now around Ballarat," Kent says. 

Spot gold sells now for $1,830 an ounce, up nearly a third this year. With currencies and stocks faltering and prices of other 

commodities held back by slowing economic growth, the frenzy for gold has gone global. 

Many are cashing in on the gold they have at home -- or on gold teeth -- although the trend is slowing in the belief prices will 

rise further. 

"The most disgusting thing I had to deal with was a rotten tooth with a gold crown from a customer's grandmother who died," 

said Munehiro Otsuki, the manager of a gold store in the Shinjuku district of western Tokyo. 

3


He also had a customer seeking to sell half a dozen Buddha statues which he had thought were gold, but were in fact brass. 

"When I called him this week after the evaluation, I could tell by the way his voice changed that he was extremely disappointed. 

He never came back." 

At another store in the Kanda district of Tokyo, manager Kenta Okiyama spoke of a middle-aged woman dressed in brandname 

clothes, the smell of her expensive perfume wafting across the store, who poured 30 rings of varying designs out on the 

table in front of her. 

She told Okiyama these were rings she had received from ex-husbands and boyfriends back in the heyday of the 1980s, Japan's 

free-spending "bubble economy" era. 

"When I showed her the 200,000 yen ($2,630) on the calculator screen, the expression on her face changed in a way I will 

never forget," Okiyama said. "She became so happy and smiled, saying 'I'll take it right now.'" 

Ritsuko Aoki, a 40-year-old Tokyo housewife, said she was selling old jewelry to buy domestic appliances. 

"We did not even think that my old gold accessories were worth anything before we saw news about people selling their gold 

on TV," she said. "If gold prices rise more, I'll look for more accessories in the depths of my closet." 

VOLATILITY, HEDGING 

But experts say sales of recycled gold will rise only about 5 percent this year, against 30 percent in 2009. "Either people are 

waiting till the price hits $2,000 or they are running out," says Mariabi Peenya, a street side dealer in New York's Diamond 

District. 

Nevertheless, canny investors see opportunities in gold's price volatility. Although prices have been rising steadily since the 

start of the year, gold has veered between as low as $1,600 per ounce to as high as $1,900 in August. 

And if dealing in physical gold, it's much easier since there are no brokerage fees or delays in payment. 

"We bought and sold twice and made a nice tidy sum," says Ivy Mok, a mother of two who lives in Bangkok. "Not very huge 

because we sold, and then the price went even higher." 

She and her husband dealt in small gold bars bought and sold in the well-guarded upstairs rooms of stores in the city's Chinatown 

district. 

"People buy and sell their gold bars right there," Mok said. "But it was very stressful for me because once you are on the 

streets, you are on your own with all your gold bars and you feel very vulnerable." 

Her fears are not unfounded. One of the unsavoury sides of gold's price surge has been a matching surge in crimes associated 

with the metal. 

4


Dubai, Casablanca, Pathanamthitta in southern India, all have been hit by major robberies linked to gold in recent weeks. In 

Ghana, a gold dealer is being accused of fraud after he alleged he was held up and robbed of gold he had promised to customers. 

Snatchings of gold chains are on the increase in London, China, across the United States and many other parts of the globe, 

but especially in India, which is the world's biggest buyer of gold. 

In northern Vietnam, a gold shop owner, his wife and 19-month-old daughter were killed and the shop robbed 10 days ago in 

one of the most violent crimes in the country in years. Another daughter was discovered cowering under a bed with her hand 

severed. 

In France, there were 183 armed robberies of jewellers in the first half of 2011, up from 138 in the year-earlier period, according 

to OCLCO, a police agency that tackles organised crime. "If gold is a safe haven for people with savings, it is also becoming it 

would seem a safe haven for armed robbers," said Frederic Doidy, an officer with OCLCO. 

Record prices spawn new wave of China gold bugs 

By Fayen Wong 

SHANGHAI, Aug 29 (Reuters) - 

R 

ecord gold prices, rather than denting China's enthusiasm for bullion, have emboldened investors to plough more 

money into gold bars and riskier bullion-based derivatives. 

August is traditionally a slow month for Chinese jewellers, but many shops in Shanghai visited by Reuters reported 

surprisingly solid gold sales over the last few weeks, with shoppers unfazed by gold's stellar price gains over the past 

few months. 

"The surge in prices has sparked another gold-buying craze. The 50 gram and 100 gram gold bars were selling like hot cakes," 

said Ms. Liu, a store manager at Shanghai's major jeweller Lao Feng Xiang Co Ltd , who said gold sales this month were up at 

least 30 percent from a year ago. 

The attitude of Chinese consumers -- expected to soon overtake Indians as the world's top buyers of gold -- will be an important 

influence on longer-term trends. 

Demand from the world's most populous country, which is adding hundreds of thousands of people to the ranks of affluent 

and middle-income consumers every year, implies that the long-term price floor for gold is set for a steady increase. 



Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner 

5


BUYING ON DIPS 

That demand may also help smooth out temporary drops in prices. 

Spot gold has come off its record highs of over $1,900 an ounce hit last week, falling back to around $1,820 an ounce, but 

such dips appear only to embolden consumers. 

"Many Chinese investors and consumers see price corrections as buying opportunities. The view that gold is an enduring store 

of value is firmly rooted in Chinese cultural traditions," said Hou Xingqiang, a gold analyst at Jinrui Futures. 

"Gold's rally over the past two years and the debt worries in the West have only strengthened Chinese investors' belief that 

they need to own the metal as an investment asset." 

There is no shortage of bulls on Wall Street forecasting even higher gold prices, with J.P Morgan predicting at least $2,500 an 

ounce by the end of the year. 

Amid the gold frenzy, China's banks and brokerages have been quick to offer paper gold investments to cash in on the trend. 

Trade sources at the Bank of China and Industrial and Commercial Bank of China say demand for their gold-linked savings 

products has soared, while a growing army of retail investors are also eager to dive into the paper gold market. 

Expectations that gold will extend its bull run have also encouraged investors into the country's nascent gold derivatives markets, 

such as the forward and futures contracts on the Shanghai Gold Exchange (SGE) and Shanghai Futures Exchange. 

Volumes for SGE's most popular gold forward contract hit a record high of 350,670 grams in August -- double the volume in 

July. 

"More investors are moving into paper gold because of the lower capital costs. The prospect of making big and quick bucks by 

betting on gold's ascent is beginning to look like a fairly easy way to make money," said He Wei, a gold analyst at Nanhua Futures. 

RISKY BETS 

That could create other risks down the road, however, which authorities are trying to fend off. 

Investors buying gold swaps and forwards generally do so on margin, putting up only a part of the money themselves -- potentially 

setting themselves up for much bigger losses should the market turn sour. 

Alarmed by the surge and worried that the giddying climb in prices was encouraging excessive risk-taking, the SGE raised 

margin requirements twice this month to 12 percent. 

The explosive interest in gold investments has also led investors to move to less mainstream derivative products offered by 

over-the-counter exchanges that have sprung up in recent years, bringing about new risks given the lower margin requirements. 

The Tianjin Precious Metals Exchange, established in 2010, has seen a leap in demand for its swap contracts. 

"The capital outlay for swap contracts is even lower and it's becoming a popular investment instrument," said Han Qingsheng, 

a trading manager at Gold Day, a brokerage for the Tianjin Precious Metals Exchange. 

While the government is taking a somewhat cautious approach, people's thirst for new investment products will no doubt accelerate 

China's opening up of the gold sector -- a move long awaited by foreign banks. 

In a sign that more 

changes are afoot, the 

China Banking Regulatory 

Commission has already 

granted membership to 

two foreign banks to trade 

gold futures on the Shanghai 

Futures Exchange. 

Industry watchers said 

changes on the horizon 

include night trading for 

the SHFE's gold contracts 

and expanding the list of 

domestic banks allowed to 

import gold -- a big step 

towards a full liberalisation 

of the sector. 

"As physical demand increases, 

the government 

will need to increase the 

6


supply avenues and some foreign banks have an advantage because of links to overseas mints or foreign trades," said a senior 

executive at foreign bank. 

"This would be the next step we're all waiting for." 

Managed money cuts gold length, short copper 

NEW YORK, Aug 26 (Reuters) - 

M oney 

managers trimmed their net length in gold futures and options for a third straight week, even as bullion 

prices shot up by another 7 percent to fresh records above $1,900 an ounce, data on Friday showed. 

But the key speculative group showed some signs of doubt in the copper market, switching to a net short position 

in the industrial metal for the first time since October 2009. 

Managed money in COMEX gold declined to 201,294 lots in the week ended Aug. 23, Reuters data showed. That was down by 

17,110 lots from the prior week and a gradual unwind from the 253,653-lot position recorded in the week of Aug. 7, which 

marked the biggest net long position in more than five years. 

During the week covered by the data, the price of spot gold rallied another 7 percent to a fresh record at $1,911.46 an ounce, 

as persistent worries about global economic growth burnished bullion's safe-haven appeal. 

As those growth concerns added fuel to gold's summer rally, it dented copper's demand outlook and forced hedge funds and 

other large speculators to turn net short by 332 lots. This was the first time the group held a net short position in the metal 

since the week of Oct. 11, 2009, when they were short 2,391 lots. 

Speculators increased their exposure in silver futures and options by 6,437 lots to 29,764 contracts, which marked the highest 

level since the week of April 24. 

"Safe haven" assets start to look risky 

By Jeremy Gaunt, European Investment Correspondent 

LONDON, Aug 26 (Reuters) - 

T 

his year's heady bout of risk aversion on financial markets has ratcheted up demand for gold, U.S. Treasuries and the 

Swiss franc to levels that suggest they may no longer be the "safe havens" they are billed as. 

Some investors see all three as vulnerable to a sharp sell-off should the global economic environment improve over 

the coming months, or simply because prices are too high in the absence of outright financial catastrophe. 

"A safe asset is something that is going to be safe across economic environments," said William De Vijlder, chief investment 

officer at BNP Paribas Investment Partners. "It means you'd better make sure your forecast is right." There are already signs 

the demand froth is coming off, at least in gold and the Swiss franc. 

All three safe havens highlighted have distinct features, so losses from renewed demand for riskier assets would not hit each 

equally. Gold, for one, might fare better given that underlying demand for the metal is not all based on risk aversion. 

But none are "safe" in all circumstances, and their remarkable rises this year may now pose some risk for those holding them. 

Graphic on "Safe havens" ( http://r.reuters.com/jes43s ) 

Ten-year U.S. Treasuries recently traded with yields below 2 percent -- their lowest in generations -- and, according to Merrill 

Lynch data, have returned some 11 percent over the summer. 

The Swiss franc has risen by 15.3 percent and 8.5 percent, respectively, to record highs against the dollar and euro , prompting 

moves from the Swiss National Bank to rein its currency in. Perhaps most spectacularly, gold has risen as much as 33 

percent, taking it to just below $2,000 an ounce -- a startling performance on top of a decade-long rally that has seen the 

metal's price rise more than 600 percent. 

In the last few days, however, there has been a sharp sell-off -- nothing really to dent the asset's major gains, but a reminder 

of how quickly heady gains can run out of steam. 

"It is not difficult to believe that gold could correct a reasonably good amount," said Ashok Shah, chief investment officer at 

London & Capital, adding that this would not necessarily undermine its long-term bullish trend. 

DIFFERENT RISKS 

Of the three assets benefiting richly from the slowing global economy, lower interest rates and debt crises in the euro zone 

and elsewhere, gold is arguably the least vulnerable to a huge reversal. It offers no yield or dividend and can rise and fall rapidly 

based on investor fear alone. 

But the drivers behind its rise are diverse and it may hold up better than others when economic conditions change. 

Demand has been bolstered by central banks buying the metal as part of their diversification of foreign reserves. Even more 

significant may be the buying of bars and coins by newly wealthy Asian consumers, notably those in China. 

7


The World Gold Council estimates there was a roughly 25 percent rise in demand for gold from Chinese consumers between 

the second quarters of 2010 and 2011, 

Gold is also not particularly subject to what BNP Paribas' De Vijlder calls the "feedback loop", which occurs when a significant 

price rise begins to affect economies and prompts policy changes by governments. 

The same cannot be said for the Swiss franc, which has also wobbled recently courtesy of the SNB's moves to cap its gains. 

The SNB has cut official rates to near zero and pumped out more money to lower the franc's value. It has also sold francs in 

the forwards market to drive rates lower and make it expensive to hold the currency. 

This is only a part of what it could do, meaning investors will have to battle to protect gains -- something that detracts 

strongly from the concept of a "safe haven". Charlie Morris, head of absolute returns at HSBC Global Asset Management, believes 

investors have been treating the Swiss franc as something that it is not. 

"It is easy to forget that the Swissie is a relatively minor currency and not the global liquidity pool that it is cracked up to be," 

he said. 

'POINTLESS AND DANGEROUS'? 

U.S. Treasuries, meanwhile, are at the point where investing in them is only slightly more lucrative than putting money under 

the mattress. 

They are supported, like gold, by outside-the-market factors such as Federal Reserve buying and huge inflows from China. 

Some of that will change as the U.S. economy improves or as Beijing diversifies. 

Mainly, though, yields of around 0.2 percent for short paper and only 2 percent for long, offer little. It would not take much of 

an inflationary spike or economic rebound to prompt a rush to the exit. 

"Treasuries are either pointless at the short end or dangerous at the long end," Morris said. "Either we have deflation and 

bonds deliver paltry yields ... or, more likely, inflation resurges and investors in bonds lose their shirts." 

A man melts down gold jewellery in Los Angeles, California August 23, 2011. REUTERS/Lucy Nicholson 

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Gold loses more shine after CME margin hike 

By Rujun Shen 


G 

old fell more than 1 percent on Thursday, extending the previous session's losses, after the CME Group raised trading 

margins by the most in over two and a half years to curb volatility in the bullion that had surged to dizzying 

heights. 

Spot gold dropped by more than 4 percent on Wednesday, its biggest drop since December 2008, as investors liquidated 

positions after the precious metal surged nearly 35 percent this year to a record high above $1,911 on Tuesday. 

CME increased margin requirements on its gold futures contract by 27 percent, the second hike in a month, following similar 

moves by the Shanghai Gold Exchange and Hong Kong Mercantile Exchange earlier this month. 

Data suggesting the U.S. economy was facing a slowdown instead of a recession also took the shine off safer assets like gold. 

"People made a very good profit in a very short time," said David Thurtell, an analyst at Citigroup. 

"Even though they may expect prices to further rise in the medium term they'll just take money off the table and book profits, 

especially if it has been a very high yield." 

Spot gold slipped 1.2 percent to $1,730.29 an ounce by 0519 GMT. On Wednesday, bullion dropped 4.3 percent, its biggest 

daily drop since Dec. 1, 2008. 

U.S. gold fell 1.3 percent to $1,733.40. U.S. gold futures lost 5.6 percent on Wednesday, the steepest daily drop since March 

2008. Helping fuel Wednesday's sell-off was data showing new orders for long-lasting U.S. manufactured goods rose more 

than expected in July, offering hopes that the ailing economy could dodge another recession and boosting risk appetite across 

markets. 

Before this week's drop, bullion had surged more than $400 since July and scored consecutive record highs as a struggling 

U.S. economy and crippling debt crisis in Europe boosted gold's safe-haven appeal. 

Spot gold has lost more than 9 percent from its all-time high of $1,911.46 hit on Tuesday. The price surged nearly 10 percent in 

the six-day climb before the decline. 

An employee counts some gold bars before he sells them to a customer at a gold shop in Hanoi August 23, 2011 REUTERS/Kham 

9


Gold 24-hour technical outlook: ( http://graphics.thomsonreuters.com/WT1/20112508095642.jpg ) 

NOT SAFE ANYMORE? 

"People always refer to gold as safe haven. When we introduce volatility to the equation, it doesn't seem so safe anymore," 

said a Singapore-based trader, but added that gold's luster looks intact. "Many leveraged longs are going to leave it alone for 

a while. And when prices come down like this, it might be a buying opportunity for real money account like central banks." 

Technical charts suggest that a medium-term uptrend for gold is intact even after the sharp drop over the past two sessions, 

with a rebound likely to push it to $1,784, said Reuters market analyst Wang Tao. 

Holdings in the SPDR Gold Trust dropped 2.2 percent on the day to 1,232.314 tonnes by Aug. 24, its lowest in more than a 

month and down 6 percent from a one-year high of 1,309.922 tonnes hit on Aug. 8. 

ANZ has raised its forecast for gold prices, expecting prices to peak at $2,200 in the second quarter of 2012, from a previous 

forecast of $1,800. 

"The substantial revision has been propped up by an unusual lack of support for the US dollar under the current uncertain 

financial market conditions - effectively channelling stronger than normal safe-haven flows to gold," said ANZ analysts in a 

research note. 

CME hikes gold margins as expected; second time in Aug 

By Antonita Madonna Devotta and Rujun Shen 

BANGALORE/SINGAPORE, Aug 24 (Reuters) - 

T he 

CME Group on Wednesday raised margins on gold futures by about 27 percent, the biggest hike in more than two 

and a half years and the second increase in a month, as gold prices fell sharply after a record-setting rally. 

The hike was widely anticipated after the Shanghai Gold Exchange announced to raise margin requirements on some 

of its gold forward contracts earlier this week. 

The CME group raised maintenance margins on COMEX 100 Gold Futures for speculators to $7,000 per contract from 

$5,500, effective after the close of business on Thursday. 

The margin increase came as the most-active contract dropped 5.6 percent on Wednesday in its worst day since March 2008, 

after strong U.S. durable goods orders data prompted profit taking from the safe-haven's record high on Tuesday. 

A goldsmith works on a gold bangle at a workshop in Kolkata August 1, 2011. REUTERS/Rupak De Chowdhuri 

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Prices of the contract slid to an intra-day low of $1,744 an ounce on Thursday after the CME announcement, before bouncing 

up to $1,763.20 by 0241 GMT. Prices hit an all-time high of $1,917.9 on Aug. 23. 

"A lot of hot money has entered the complex and the rally was done too much in too short a time," said David Thurtell, an analyst 

at Citigroup. 

"Last 24 hours there was definitely profit-taking. With the margin hike, if speculators don't have the money to pull out as extra 

margin they'll just cut their positions. That contributed to the liquidation." 

The new margin would be roughly 4 percent of a lot of the most-active contract, up from about 3 percent. 

The total aggregate margin call on COMEX gold futures contracts would be nearly $1.6 billion, based on calculations on the 

total open interest by the end of Aug. 23. 

CME hike announcement: ( http://link.reuters.com/fyk43s ) 

Spot gold rallied about $400 dollar from the beginning of July to a record above $1,911 on Tuesday, on concerns about the 

faltering U.S. economy and a lingering euro zone crisis. The exchange operator also raised initial margins on COMEX 100 

Gold Futures for speculators, to $9,450 from $7,425 per contract. 

Margins are deposits paid by investors in futures markets, where full payment is made when contracts mature to an exchange 

or clearing house to cover the risk of default by that investor and typically are based on the largest most-likely daily market 

move. 

Japanese cash in on gold price boom 

By Chikako Mogi and Chikafumi Hodo 

TOKYO, Aug 24 (Reuters) - 

F 

or Eriko Ebina, standing outside a downtown Tokyo medical equipment store that has a side business buying gold, the 

recent surge in prices for the precious metal was just too tempting. 

"For more than 30 years, I kept gold jewellery mother bought for me, and with media saying prices are high, I thought 

I would sell them now except for a few keepsakes from her," said Ebina, in her 60s. 

"I earned more than I thought they were worth. I'm not interested in buying gold." 

It is sellers like Ebina who will offset surging investment into gold funds in Japan, which should make the country a net exporter 

for the sixth year in a row. The assets of Mitsubishi UFJ Trust and Banking Corp's physical gold exchange traded fund 

(ETF), Japan's first backed by metal stored in the country, have grown by a quarter since end-July to 21.8 billion yen ($284.9 

million) as of Aug. 23. 

"Investors are seriously treating our gold ETF as a legitimate asset class, just like investing in equities, bonds and currencies," 

said Osamu Hoshi, deputy general manager at Mitsubishi UFJ Trust. 

"They see a need to diversify their assets after seeing volatile moves in currencies and stocks and others," Hoshi said. 

GRAPHIC of Japan gold demand: ( http://link.reuters.com/cah43s ) 

PDF on gold's run to record: ( http://link.reuters.com/syg43s ) 

A downgrade of the U.S. sovereign debt rating amid a deteriorating outlook for the world's largest economy, as well as a 

spreading European debt crisis, have triggered a rush to gold that has boosted prices by 14 percent this month. 

"Inflows have become especially big this month as fears over both the U.S. dollar and the euro have intensified," said Ryosuke 

Okazaki, chief investment officer at ITC Investment Partners. ITC's Japan Gold Funds have about about 2 billion yen under 

management. 

Still, ETF assets are a fraction of physical holdings, and Japanese institutional investors such as pension funds remain reluctant 

about exposure to commodities. 

"They could be holding commodities in hedge funds, like managed futures, but I don't think many want to invest directly in 

gold or other commodities even if returns are extremely attractive," said a fund manager of an industrial material maker, who 

supervises about 50 billion yen in corporate pensions. 

Gold prices may be hitting successive records, but for those buying in yen, they are still down nearly a fifth from a record high 

in 1980. There is also no strong incentive to buy. "The current core investor generation has not experienced real damage to 

the yen's value or a crisis which rocked the country," said Tetsu Emori, a fund manager at Astmax Co Ltd. 

"There is no sense of fear in Japan right now as there is in Europe or in the United States. So, investors who own gold focus 

only on how to cash in from the rise in prices," he said. 

PHYSICAL SALE PREVAILING 

Gold in Japan is not so much associated with risk aversion, but more as an asset that many bought when prices languished for 

30 years. 

11


The retail price at Japan's largest bullion house Tanaka Kikinzoku Kogyo was 4,745 yen per gram on Aug. 23, excluding the 5 

percent consumption tax, the highest since September 1980. Retail gold peaked in January 1980 at 6,495 yen. 

Selling of gold has snowballed since the start of August, unlike in January 2008 when a spike in gold prices led to an explosive 

but short-lived gold sales boom, said Osamu Ikeda, Tanaka's general manager. 

"Selling accelerated in August as gold rallied to historic highs, and that is symbolic of a matured Japan," Ikeda said. 

Ikeda said the amount of gold for investment purposes that the house bought back from customers more than doubled to 10.2 

tonnes as of Aug. 23 from 4.3 tonnes in July. At the Aug. 23 prices this would be worth around 48.4 billion yen. 

Sellers are not limited to retired or retiring generations nor shops confined to established bullion houses. 

"Customers bring all sorts of jewelry, gold cups, watch, teeth, but sometimes desperate ones bring fake gold or even their talismans," 

said Seiichi Nakamura, manager at confectionary retail chain Nakamuraya. 

"A lot of stores of this kind appeared recently, so that it turned into sort of a survival game," he said, adding the number of 

customers, mainly women in their 40-50s, had doubled to 20 a day in recnt days. 

Media playing up the surge in gold is also driving the move. 

"The media helped us, I think. When people learned there is a boom for selling gold now, they decided to do it too. It's like a 

chain effect," said shop manager Kenta Okiyama at antique dealer Otakaraya. 

Tanaka Kikinzoku's Ikeda said buying interest has picked up, even in the physical market, from those in their 30s and 40s, although 

sellers still outnumber buyers by 5 to 1. "It used to be one-way flows of just sellers. Now, there are sellers to book profits 

and some buyers betting on further rises in prices," Ikeda said. 

NET GOLD EXPORTER 

As long as Japanese remain sellers as the price rallies, Japan is set to be a net gold exporter for the sixth consecutive year in 

2011. 

But households' growing desire to profit from a bullish market outlook may cap the total export volumes below the 2008 peak 

of 95.5 tonnes, just as they did last year. Between January-June, Japan exported a total 45.8 tonnes of gold, compared to 46 

tonnes the same period a year go. Net exports at 43 tonnes exceeded 39 tonnes a year earlier. 

Japan exported a total of 91 tonnes of gold and imported 13 tonnes in 2010, resulting in record net exports of 78 tonnes, about 

a quarter of annual output from top miner China. 

Japanese households were seen holding about 1,500 tonnes of gold last year, so the net exports may have reduced the 

amount to around 1,400 tonnes now, industry officials say. 

"There is still lots of gold in this country. Net exports could hit records again this year," Ikemizu said. 

12


Some gold bulls say time to cash in, rally overdone 

By Frank Tang and Rujun Shen 

NEW YORK/SINGAPORE, Aug 24 (Reuters) - 

A 

s gold prices near $2,000 an ounce, some bulls say it's time to take money off the table after the safe-haven rally 

extended too far too fast in recent weeks. 

Gold investors at several firms said gold prices could correct sharply, citing overvaluation. While that does not mean 

prominent bulls are now bears, they recommended investors take profit on gold holdings, after the precious metal 

traded briefly above $1,900 on Tuesday for the first time. Spot gold rebounded more than 1 percent to above $1,853 an 

ounce on Wednesday after sliding more than 3 percent in the previous session in its biggest daily fall in a year and a half. 

Investors in droves have sought a refuge in bullion from a stock market meltdown, fears about sovereign debts in Europe and 

the United States and worries about a recession. 

Gold has gained nearly 9 percent in just the last six sessions before Tuesday's fall and by more than $400 since July. 

Independent investor Dennis Gartman, who has long been bullish on gold priced in non-U.S. currencies, said he was reducing 

his long positions on gold priced in euro and sterling terms. "Perhaps things have become a bit too frothy and reduced rather 

than increased exposure seems reasonable and wise," Gartman said. 

Gartman said gold's rally was not sustainable after SPDR Gold Trust's total assets surpassed that of the SPDR S&P 500 ETF , 

making GLD the largest exchange-traded fund in the world for the first time. "Such senseless things happen after periods of 

euphoric rises in prices of some markets," Gartman said. 

A resurgence in investment demand has fuelled gold's rally in the past decade, particularly during periods of global economic 

slowdown, growing from 4 percent of total demand in 2000 to over 39 percent in 2010, according to estimates from Citigroup. 

"However, we caution that this very aspect that provided support for gold over this time may result in its downfall going forward," 

the bank said in a note. "Even a slowdown, let alone a decline, in net investment flows can have a materially negative 

impact on the gold price from current levels." Still, Wednesday's bounce showed gold's appeal is far from fading as buyers 

picked up the precious metal after its sharp decline on Tuesday. 

"It's premature to call it a correction. But there is quite a bit of downside risk if gold breaks below $1,800 on a sustained basis. 

It may go lower to $1,700 or so," said Ong Yi Ling, an analyst at Phillip Futures. Ong said the current environment of low interest 

rates and a weak dollar remain supportive of gold prices, adding that the potential of further quantitative easing by the 

Federal Reserve to boost an ailing U.S. economy also increases gold's appeal in the longer term. 

BUY THE RUMOR, SELL THE NEWS? 

But UBS metals strategist Edel Tully said the Swiss bank "has certainly noticed an increase in clients looking to book profits." 

In a note on Tuesday, Tully also cautioned that the risk of more margin hikes from CME Group was rising, after the U.S. commodity 

exchange raised margins by 22 percent earlier in August. 

Fund managers said the metal was bid up as an inflation hedge on expectations of further U.S. monetary easing, and bullion 

could sell off if Federal Reserve Chairman Ben Bernanke does not announce a new bond-buying stimulus program at an annual 

Fed conference in Jackson Hole, Wyoming on Friday. 

"There is some potential degree of 'buy the rumor, sell the news' on any future Fed policy that may come out at Jackson Hole. 

Investors might want to have that on the back of their minds as well," said Michael Cuggino, portfolio manager of the $15 billion 

Permanent Portfolio Funds. "Gold being as volatile as it is, it can go down in $100 to $200 and not really blink an eye," 

Cuggino said. 

Analysts said anything short of a third round of quantitative easing would likely provide limited support for gold as the Fed 

had already vowed to keep interest rates low into 2013. Cuggino said that investors should stay put and not add new gold positions 

at current prices, even though the metal is still a safe haven and an integral part of an investment portfolio in longer 

term. 

Mark Luschini, chief investment strategist at Janney Montgomery Scott, a broker-dealer with $54 billion in assets, said that on 

charts, gold is vulnerable for a sharp pullback as it is trading at $400 above its 200-day moving average, a sign of overbuying. 

"From a purely technical standpoint, I think it'd be wise to take some chips off the table," Luschini said. 

SLOW SEASONAL DEMAND 

"Given that we are in the seasonally slow period for physical demand, we believe prices could be subject to temporary corrections 

as profit-taking emerges," Barclays Capital said in a research note. Scrap supply teased out by lofty prices and potential 

margin requirement hikes could act as temporary barrier to gold's ascent, it added. But Barclays said those factors are only 

likely to temper the rally intermittently. 

"Beyond this, we believe the macro environment is evolving increasingly favourably for gold, and a return of market confidence 

in the state of the global economy, coupled with high and rising real interest rates and controlled inflation, will be required to 

quell its gains," said Barclays. Barclays has forecast prices to average $1,800 in the second half of this year and $2,000 in 

2012. 

13


SocGen raises 2011, 2012 gold price forecasts 

Aug 22 (Reuters) - 

S ociete 

Generale on Monday raised its gold price forecast for this year and 2012, predicting that citing political and 

economic policy inertia with regard to debt management will continue to build appetite for the metal. 

The bank raised its average gold price forecast to $1,950 an ounce for the fourth quarter of 2011, pushing its 2011 annual 

average to $1,660 an ounce. 

"$1,900/oz is already within reach, and we expect levels of over $2,000/oz to be achieved before year-end," SocGen said in a 

note to clients. The bank also raised its 2012 forecasts to average $2,275 per ounce, and sees the metal trading around $2,500 

an ounce in the fourth quarter of 2012. 

"A combination of continued highly accommodative monetary policy, anemic growth, and continuing sovereign debt problems 

will continue to push gold to new highs," SocGen added. 

Gold hit a third consecutive all-time high near $1,900 on Monday after staging its biggest weekly gain in more than two years 

last week. Late Monday, spot gold was up 1.6 percent at $1,888.90 an ounce, having earlier hit a record $1,894.10. 

Shanghai Gold Exchange lifts margins for gold forwards 

SHANGHAI, Aug 23 (Reuters) - 

T 

he Shanghai Gold Exchange (SGE) said on Tuesday that it will raise trading margins on three gold spot-deferred contracts 

to 12 percent from 11 percent from Aug. 26 to limit trading risks following recent wild price swings. 

It would also widen daily trading limits for those contracts to 9 percent, up from 7 percent, the SGE said on its website. 

The contracts to be affected include Au(T+D) , Au(T+N1) and Au(T+N2) . The SGE said it was closely eyeing silver contract 

price movements and would consider raising trading margins, transaction fees or costs of rolling over forward contracts 

should volatility persist. 

This is the second time the SGE has raised collateral requirements on gold forward contracts this year -- both times took place 

in August -- as international gold prices hit a series of news highs over the past few weeks, boosted by a flight to safety on 

worries over stalling U.S. recovery and crippling sovereign debt in the euro zone. 

A worker casts a gold bar of melted gold jewellery at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna February 28, 2011. REUTERS/Lisi Niesner 

14


The SGE's move also comes just two weeks after CME Group Inc upped margins on its gold futures by a whopping 22 percent 

on Aug. 11 -- the biggest rise since Feb 2010, reflecting growing concern among exchanges around the world that the metal's 

bull-run could be spurring traders to take excessive risks. Spot gold soared to an all-time high above $1,910 on Tuesday, on 

course for its biggest monthly rise in 29 years, as persistent worries about global economic growth burnished bullion's safehaven 

appeal. 

For a technical outlook on gold: ( http://link.reuters.com/waw33s ) 

For inflation-adjusted gold price: ( http://r.reuters.com/pun62s ) 

TRADING VOLUMES JUMP 

Trading volumes on the SGE's most popular Au (T+D) contract surged this month, with a daily average 32,627 trades, nearly 

double July's daily average of 16,376. With seven more trading days left, monthly volumes on the Au(T=D) contract for August 

also looks set to strike a new record, beating the high of 563,188 trades in December 2009. The contract has recorded 

522,280 trades so far this month. Margins are deposits buyers and sellers have to put down as collateral with an exchange to 

cover the risk of default. 

An increase in margin requirements would make it more expensive for speculators and other traders to play in the market. 

The SGE offers a total of 12 spot and forward contracts for various precious metals, including gold, silver and platinum. A spot 

-deferred contract is a forward contract that gives a seller the right to roll the contract forward rather than make delivery on a 

specific date. 

TECHNICALS-Gold prices to repeat 1980 climb -Wang Tao 


T he 

current bull run in spot gold prices could mirror the climb to dizzying heights seen in 1980, Reuters market analyst 

Wang Tao said, adding that bullion prices were increasingly becoming emotion driven. 

In 1980, gold climbed to $835, completing a bull cycle that started at $34.95 in 1970, Wang said. 

That cycle was corrective, made of three small waves labeled as "a-b-c", and the wave "c" traveled 4.618 times the 

length of the wave "a". 

"That ratio may repeat under the present scenario, indicating gold could hit about $4,000 over the next few years," Wang said. 

But he cautioned that it was too aggressive to target $4,000 right now, saying he would rather target $2,345 by the end of this 

year, which is the 261.8 percent Fibonacci projection level of the current wave "C", based on his wave count and a Fibonacci 

projection analysis. 

The wave "C" is composed of five small waves, with the current rally labeled as a wave "V", the final stage of a five-wave cycle, 

Wang said. 

Five-tael (6.65 ounces or 190 grams) gold bars are seen at a jewellery store in Hong Kong in this August 11, 2011 illustration photo REUTERS/Bobby Yip 

15


The final stage is often the fiercest rally in a commodities market, as seen in the sharp rise over the past several weeks, he said. 

While several political and financial uncertainties -- such as high inflation and oil price, Richard Nixon's action to detach the 

U.S. dollar from gold and Soviet intervention in Afghanistan -- led to the rally in gold to $835 in 1980, there are even more 

reasons for a surge in prices now, Wang said. "Today's situation could be worse, as risk aversion has taken tight hold of people's 

psychology." 

The G-7 and U.S. government are seen running out of resources to rescue the economy, which has been hit hard by the bankruptcies 

following the 2008 subprime debt, persistent worries that the sovereign debt crisis in euro zone peripheral countries 

may spread to bigger regional economies, high inflation in emerging markets and soaring commodities prices. 

Central banks from South Korea, Mexico and Russia to Thailand have been adding gold to their reserves in a sign of waning 

faith in the West's benchmark bonds and currencies like the dollar and the euro. Spot gold prices could rise further towards 

the 1980's inflation-adjusted record price of just below $2,500, Wang said. 

** Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own. 

No information in this analysis should be considered as being business, financial or legal advice. Each reader should consult 

his or her own professional or other advisers for business, financial or legal advice regarding the products mentioned in the 

analyses.** 

Gold shines as Swiss franc's haven appeal dims 

By Jan Harvey and Jessica Mortimer 


M 

oves by the Swiss National Bank to curb strength of the Swiss franc will fuel investors' insatiable demand for gold, 

adding to its relentless rise to new record highs as confidence in the franc as a safe store of value dwindles. 

Analysts say this could help gold vault $2,000 an ounce within the coming weeks, with the potential for very large 

spikes if risk aversion on financial markets gains momentum. 

The Swiss franc has fallen sharply from record highs since the SNB bank vowed on Aug. 10 to take steps to curb franc 

strength. The Swiss central bank has flooded the franc market with liquidity and sold the currency via swaps on the forward 

market to dim its appeal. 

A man melts down gold jewelry in Los Angeles, California August 24, 2011. REUTERS/Lucy Nicholson 

16


Since that date, gold priced in Swiss francs has spiked. This reversed a trend over recent months when Swiss francdenominated 

gold stayed relatively steady as gold in other major currencies hit a string of record highs. 

"While gold in euro, sterling and dollar terms was really skyrocketing, gold in Swiss franc terms wasn't doing much, and that's 

telling us that the Swiss franc was being seen as a proxy to gold," said Stephen Gallo, head of market analysis at Schneider 

Foreign Exchange. 

"Now we've seen an enormous spike in Swiss franc-denominated gold, which may indicate that the SNB has succeeded in 

causing the Swiss franc's proxy status to gold to become unhinged." 

Swiss franc-priced gold has risen nearly 20 percent since the SNB's announcement, hitting a record high for the first time 

since June 2010 near 1,500 francs ($1,908) an ounce. Spot gold has climbed just over 8 percent to record highs just below 

$1,900 an ounce in the same period. 

With concerns about high U.S. debt and a weak economy denting the appeal of the dollar and intervention by Japanese authorities 

weighing on the yen, the SNB's measures remove the franc as the remaining accessible safe-haven currency, boosting 

demand for gold. 

"Given that even the Swiss are considering adding liquidity to the market, gold as a currency that can't be printed has a certain 

attraction," said David Jollie, an analyst at Mitsui Precious Metals. 

Maurice Pomery, an analyst at consultants Strategic Alpha, said that now the SNB have "turned off the safety valve", gold 

could surpass $2,000 an ounce within two weeks, while silver will also gain. 

Analysts say gold's appeal is enhanced as the SNB's actions have caused short-term deposit and money rates in Switzerland 

to turn negative. 

"Gold usually does well in currencies that cut rates and have negative real rates," said Tobias Merath, an analyst at Credit 

Suisse. "If you get a negative nominal yield on government paper and a zero yield on gold, then gold looks more attractive." 

WEAKNESS ACROSS THE CURRENCIES 

Once seen as a hedge against weakness in the dollar, gold is increasingly perceived as an alternative to paper currencies in 

general as central banks seek to keep their currencies weak via quantitative easing or through intervention -- described by 

some as "currency wars". 

Central bank intervention in currency markets typically has a significant effect on gold prices. Gold priced in Japanese yen 

rallied nearly 9 percent to a then-record high near 140,000 yen ($1,836) an ounce in the week after the Bank of Japan intervened 

to curb strength in the currency on Aug. 4. 

BoJ/SNB activity, gold price: ( http://r.reuters.com/pex33s ) 

Asset returns in 2011: ( http://r.reuters.com/suz52s ) 

Gold in different currencies: ( http://r.reuters.com/wun62s ) 

Gold prices have hit record highs in recent weeks in all major currencies -- U.S. dollars, yen, euros and sterling -- as well as 

major commodity currencies such as the South African rand, Canadian, New Zealand and Australian dollars. The devaluation 

of major currencies cannot be seen in currency rates - except until recently against the Swiss franc - because all currencies 

have been losing value, but it can be seen in their value against gold. 

Bank of New York Mellon currency strategist Simon Derrick argues that gold's long-term ascent that began in 2001 coincided 

with the Bank of Japan's quantitative easing programme that began that year and went on until 2006. "Gold is a flight from 

currency debasement," BNYM's Derrick said. "It's not gold going up, it's developed currencies going down." 

Record price to pinch India's festive gold demand 

By Rajendra Jadhav 

MUMBAI, Aug 22 (Reuters) - 

R 

ecord high prices could pinch gold demand in India, the world's biggest consumer, during the key festival buying 

season in September and October, but investment demand will help ensure record imports in 2011, the head of India's 

leading trade body told Reuters. "If prices stay at current levels, demand will be lower during the festival season. 

But if prices fall to 25,000 rupees (per 10 grams), then it will rise," Prithviraj Kothari, president of the Bombay 

Bullion Association, said in an interview on Monday. 

"Overall (India's) imports I think will be more than 1,000 tonnes despite lower sales during festivals," he said. 

India's key October gold contract on the Multi Commodity Exchange hit another record high on Monday at 28,244 rupees 

($618.44) per 10 grams while international prices rallied towards $1,900 an ounce. Interest in the safe haven commodity was 

fuelled by concerns over the global economic outlook. 

"In January to June we have already imported over 500 tonnes. Now people are not only buying during festivals. They buy 

throughout the year. Whenever they get an opportunity, they buy," Kothari said. 

17


India, whose appetite for gold dates back centuries, imported a record 958 tonnes in 2010 and a recent Reuters poll forecast 

imports to fall by 12 percent in 2011. The Bombay Bullion Association's forecast in the poll was 950-1,000 tonnes. 

Indians buy gold during festivals like Dhanteras and Deepavali, falling in October, because they consider them auspicious 

times for gifts and investments. Kothari said though demand has been rising for gold, demand for jewellery is falling as more 

and more people buy coins and bars. 

"Two to three years back, 85 percent of gold consumption was in jewellery form. Now that has fallen to 70 percent. Investment 

demand is continuously rising due to higher (jewellery) making charges and wastage (at the time of sale)," he said, adding in 

coming years the shift towards investment will continue. 

NO INCENTIVE FOR SCRAP SALES? 

Despite record high prices, scrap sales are not rising in India and Kothari says they are unlikely to rise in the current scenario. 

"I don't think scrap sales will rise because of higher prices. The equity market is not giving returns, property prices are steady ... 

they can sell gold, but where will they invest their money after selling?" he said. "Now prices are going up and up only. So I 

don't think Indians will sell old jewellery," he added. 

International spot gold prices retreated from early record highs near $1,900 an ounce on Monday, as a rebound in stock markets 

from last week's lows gathered pace, denting interest in so-called safe haven assets like bullion. 

"I think gold could cross the $2,000 an ounce level, may rise to $2,200 by the end of 2011," Kothari said, given a loss of confidence 

among investors in other asset classes. 

"Interest rates are very low in the U.S. and Europe. Lots of speculative money is coming into the market. Everyone is talking 

about gold, buying gold ... They are losing faith in other asset classes," he said. He added that prices could correct before 

heading over $2,000 per ounce. "It may fall to $1,750 before rising to $2,000," he said, as people paused to take profits in the 

metal. 

Banks race to raise gold price forecasts 

Aug 22 (Reuters) - 

G old 

prices hit a record high near $1,900 an ounce on Monday, boosted by hefty losses in stock markets in recent sessions 

and speculation that a sluggish U.S. recovery could lead to a further round of quantitative easing. 

Spot prices are up by about a third this year and are on track for their biggest quarterly gain in at least 25 years. The 

rally has prompted a number of banks and trading houses to raise their gold price forecasts. 

Below are recent price views for gold. Please note that dates given are those of the reports in which the forecasts appeared, 

which may differ from the dates on which they were made. 

A woman checks a gold waist belt inside a jewellery shop on the occasion of the Akshaya Tritiya festival in the southern Indian city of Hyderabad . REUTERS/Krishnendu 

18


SOCIETE GENERALE (AUG 22) 

* SocGen raised its average gold price forecast to $1,950 an ounce for the fourth quarter of 2011, pushing its 2011 annual average 

to $1,660 an ounce. 

* The bank also raised its 2012 forecasts to average $2,275 per ounce, and sees the metal trading around $2,500 an ounce in 

the fourth quarter of 2012. 

* "A combination of continued highly accommodative monetary policy, anemic growth, and continuing sovereign debt problems 

will continue to push gold to new highs," SocGen added. 

CITI (AUG 22) 

* Citi lifted its 2011 gold price forecast to $1,590 an ounce from $1,440, and its 2012 price view to $1,650 from $1,325. In 2013 it 

sees gold averaging $1,500 an ounce versus a previous forecast of $1,225. 

* "Increased global risk, (dollar) weakness, growing inflationary fears, the USA debt downgrade and continuing sovereign debt 

risks in Europe have increased investor appetite for gold," the bank said in a report. 

* "This has been supported by central banks reversing activities from being sellers for most of the past 15 years to net buyers 

more recently, and is supported by the Fed's stated desire to keep interest rates at super-low levels in the medium term," it 

added. 

NATIONAL AUSTRALIA BANK (AUG 19) 

* National Australia Bank said that in quarterly average terms, it forecasts the gold price to be around $1,600 an ounce in December 

2011. 

* "Recent economic events should help to maintain the price of gold at an elevated level until uncertainty begins to dissipate 

and investor demand for gold unwinds," it said. 

HSBC (AUG 10) 

• HSBC said gold could rally above $1,850 an ounce this year and average more than $1,700 an ounce for the remainder 

of 2011. 

A customer tries on a gold necklace at a gold shop in Hanoi August 23, 2011. REUTERS/Kham 

19


* "Gold is a widely traded, universally accepted hard asset and a proven safe haven instrument," it said. "Investors have traditionally 

turned to it when faith in government policies - as reflected in a government's credit rating, the value of its currency 

and demand for its bonds, and even in levels of social unrest - deteriorates." 

* The bank reiterated its decision on Aug. 8 to lift its 2011 gold price forecast to $1,590 an ounce from $1,525, raise its price 

view for 2012 to $1,625 from $1,500, and increase its 2013 gold forecast to $1,550 from $1,450. 

BANK OF AMERICA-MERRILL LYNCH (AUG 9) 

* Bank of America-Merrill Lynch said in a research note it was revising its 12-month gold target to $2,000 an ounce. 

* "Physical gold is the ultimate collateral because it has no credit risk, so emerging market central banks have been diversifying 

their foreign exchange reserves into gold and other non-dollar, non-euro assets in recent quarters," it said. 

* "Looking ahead, the deterioration in credit quality in Europe and the U.S. coupled with an increased probability of QE3 

means these pressures will continue," it added. 

JPMORGAN (AUG 8) 

* JPMorgan said rising expectations that the financial crisis would flare up once more following Standard & Poor's downgrade 

of the United States' credit rating last week had caused it to lift its price view on gold this year. 

* "Before the downgrade, our view was that cash gold could average $1,800 per ounce by year end," the bank said in a note. 

"This view will likely now prove to be too conservative: spot gold could drive to $2,500 per ounce or higher, albeit on very high 

volatility." 

GOLDMAN SACHS (AUG 7) 

* Goldman Sachs said it was raising its gold price forecasts to $1,645 an ounce, $1,730 an ounce, and $1,860 an ounce on a 

three, six, and 12-month horizon respectively. "With our U.S. economics team now lowering their outlook for U.S. economic 

growth to 1.7 percent in 2011 and 2.1 percent in 2012, we now expect real interest rates will remain lower for longer, and we are 

now raising our gold price forecasts," it said. 

* "The recent escalation of sovereign debt concerns suggests that the near-term risk to our new forecast is skewed to the upside, 

and we continue to recommend long trading positions in gold," it added. 

UBS (AUG 3) 

* UBS said it was lifting its one-month gold forecast to $1,725 from $1,575 previously, and its three-month price view to $1,850 

from $1,600. "With U.S. growth strait-jacketed and as expectations for some form of Fed easing grow, the macro climate remains 

gold-supportive," it said in a note on Aug. 3. "There are still valid concerns about global growth, neither European nor 

U.S. debt issues have been comprehensively dealt with and European peripheral bond spreads reached record levels yesterday." 

* "From the potential for quantitative easing in the UK, to the reality that U.S. rate hikes are more than 12 months away, to 

continuing central bank diversification towards gold, there's no shortage of positives in the months ahead." 

Vietnam to allow gold imports to cool local prices 

By Tran Thuy 

HANOI, Aug 23 (Reuters) - 

V ietnam's 

central bank has authorised at least one domestic firm to import more gold to help cool soaring prices and 

state-run newspapers said it may open the market to unlimited imports to narrow the gap between local and world 

quotes. 

Central bank officials, including Governor Nguyen Van Binh, could not be reached for an immediate comment, but 

sources with knowledge of a meeting between Binh and senior editors on Tuesday morning to discuss gold-related policies 

said the issue of allowing unlimited imports did not come up. 

However, the State Bank of Vietnam has agreed to allow Saigon Jewelry Co (SJC), one of the country's biggest gold trading 

companies, to import gold based on its demand, said Nguyen Cong Tuong, deputy director of sales at SJC. 

The move would help narrow the difference between domestic and international prices, which on Tuesday was around $45 an 

ounce. Analysts say the gap fuels gold smuggling and speculation. 

"State Bank's permission to import has effectively cut the domestic price from up to $100 higher than international price per 

tael to a few hundred thousand dong," SJC's Tuong said. 

Early this month, the State Bank of Vietnam approved 5 tonnes of gold imports and said it could double the quantity soon as 

surging prices sparked a frenzy at gold dealers and jewellers. 

The State Bank said in a statement on Tuesday three tonnes of gold had been imported by far. 

The measures come as gold prices in Vietnam rose to fresh record highs in recent days as world prices surged to all-time 

highs above $1,910 on Tuesday, due to gold's safe-haven allure amid nagging fears about the world economy. 

20


Vietnam's move to allow more gold imports adds to the picture of rising Asian demand after recent purchases by central 

banks in Thailand and South Korea. 

SJC offered to sell gold at a record of 48.87 million dong ($2,347) per tael in Hanoi on Tuesday, SJC data showed. The latest 

price indicates a rise of more than 9 percent from a week ago. 

One tael is equivalent to 37.5 grams or 1.21 troy ounce. 

In a detailed measure to help cool gold markets published on Tuesday, the State Bank of Vietnam said it would monitor production 

and trading of gold bullion more strictly by issuing permits to a number of its selected trading firms. 

This would allow the central bank "to intervene effectively in the gold market to fight against gold price speculation", the central 

bank said in a statement on its website. ($1=20,805 dong) 

India gold imports likely to fall on limited spends-Scotia 

By Siddesh Mayenkar 

KOVALAM, India Aug 20 (Reuters) - 

G old 

buyers in India, the world's largest consumer of the yellow metal, are investing in it on expectations prices may 

rise, but imports are likely to fall as limited budgets buy less gold, the head of India's biggest importing bank told 

Reuters on Saturday. 

"They are buying, we talk to jewellers, and they are saying demand is very high. People are planning their wedding 

purchases in advance because they feel that prices may go to 30,000 (rupees) they are using that to buy," said Sunil Kashyap, 

head of Asia, Scotia Mocatta. 

Gold prices have gained more than 25 percent so far in the year to peak at 27,989 rupees per 10 grams on Saturday, continuing 

its rising trend for eight years in a row. 

India's wedding and festival demand will gain pace and peak in October before tapering off in December. 

"People are spending the same, but the amount of gold that they are getting is less," said Kashyap, adding there could a 20 

percent decline in imports this year. 

India imported 958 tonnes of the yellow metal in 2010. 

Scotia is market leader, cornering about 35 percent of India's imports and operates in collaboration with wholesalers across 

the country. 

"The perception right now is gold prices are going higher and because of that people are buying. If price keeps on going and 

filling that expectation you are going to see continuous demand," said Kashyap in the southern state of Kerala. 

Gold bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner 

21


However, the risk to continued demand, Scotia said, was "If there is a correction, people may just step aside." 

Jewellery demand is likely to witness a revival after a slow pace of growth in the quarter to June. Investment demand grew by a 

whopping 78 percent to 108.5 tonnes, while jewellery demand slowed by 17 percent to 139.5 tonnes in the second quarter. 

"People are buying jewellery as investment, there was a lot of new buyers who were not buying jewellery but buying gold bars 

and coins, but just in the south people are buying jewellery, so this year we may see some revival in jewellery demand," he said. 

India's gold imports: ( http://link.reuters.com/xaf72s ) 

Gold seen rising to $1,940 by year end ( http://link.reuters.com/rab72s ) 

CORRECTION KILLS INTEREST IN SILVER 

Kashyap said silver imports had shrunk after spectacular sales in the first-half to June, adding prices were likely to fall by 18.5 

percent from current levels to $35 an ounce, driven by a slowdown in industrial demand. 

"There is a definite resistance to silver. Once it crossed 50,000 rupees and then went to 60,000 rupees, a lot of people got 

stuck with positions, and the correction from 60,000 rupees killed many people's interest, so there is now less interest as it is 

considered as a two-way metal," said Kashyap. "Gold has just moved in one direction." 

Silver prices have corrected 32 percent after peaking to 73,600 rupees in late April. 

"We had a very strong spurt (in imports) in the first half itself. I would suspect 3,500-4,000 tonnes (of imports in 2011) on low 

base effect," said Kashyap. India imported about 2,800 tonnes of the white metal last year. 

"The fact silver demand is inelastic to price, but here demand itself will not be coming down due to slowdown," he said. 

Kashyap feels there is lack of a clear laid out policy in India to boost avenues available to retail gold investors. Conversely, 

China has allowed a plethora of retail investment products to boost investments such as in the form of gold deposits, certificates 

and gold accumulation plans. 

"The banks here in India have already made representations to the regulator but they have not received any response," he said. 

POLL-India gold trade sees 2011 imports easing from record 


KOVALAM, India Aug 20(Reuters) - 

G old 

imports from India, the world's largest consumer of bullion, are likely to ease to 825 tonnes in 2011, down 12 percent 

from last year's record of 958 tonnes, a Reuters poll of 12 importing banks, and traders showed. 

At a conference in Kovalam in southern state of Kerala, gold market participants gathered to assess the impact of 

record high prices on gold imports. 

The lowest imports was estimated at 500 tonnes by a private importing bank in Mumbai and the highest was estimated at 

1,000 tonnes by the Bombay Bullion Association and Kolkalta-based wholesaler JJ Gold House. 

Following are forecasts of industry members on India's gold imports in 2011 in metric tonnes: 

Company Business Forecast 

Corporation Bank, Mumbai Importer 900 

IndusInd Bank, Mumbai Importer 700 

Private Bank, Mumbai Importer 500 

Parker Agrochem, Ahmedabad Wholesaler 600 

Quant Commodities, Mumbai Wholesaler 700-800 

MNC Bullion, Chennai Wholesaler 900 

Khemka International, New De lhi Wholesaler 700-750 

JJ Gold House, Kolkata Wholesaler 1,000 

Bharghav Vaidya, Mumbai Trader 950 

Surana Corporation, Chennai Wholesaler 950 

Bombay Bullion Association Trade body 950-1000 

State Trading Corp, New Delh i Importer 700 

MEDIAN 825 

22


India plans to encourage gold refining-govt official 


KOVALAM, India Aug 20 (Reuters) - 

I ndia 

plans to encourage refining of locally made coins and bars for traders and investors of precious metals, a government 

official said, a move that could reduce shipments from overseas sellers. 

Domestic refining capacity is very minimal in India and the country mostly depends on supply of scrap and gold ores and 

dores from overseas mines. Overseas manufacturers such as South Africa's Rand Refinery, Switzerland's PAMP, and Australia's 

Perth Mint export gold bars and coins to India. 

"We want to encourage refining in India... government is with the industry to make it more transparent, efficient and professional," 

S.K. Goel, special secretary and member of Central Board of Excise and Customs of department of revenue, said late 

on Friday. "We are open to any suggestion from industry players, refiners and importers. Government will try to examine and 

try to implement," Goel added. 

India's gold imports: ( http://link.reuters.com/xaf72s ) 

The government in its 2010/11 budget has reduced the custom duty on gold ore and concentrate to a flat duty of 140 rupees 

($3) per 10 grams from 2 percent on value earlier. 

"Let us see how it works... We will have to see its results, how much refining is impacted... Policy is always dynamic and not 

static," said Goel, when asked if government is considering a cut in duty on gold ores, a raw material used for making of bars 

and coins. 

India imports majority of its 800-900 tonnes of gold requirement from refiners in Switzerland, Australia and South Africa. 

"Unless the procedures are set in place for speedy clearance of dore gold imported by refineries at customs stations and at the 

factory, the cost will be counterproductive for such refinery," said Daman Prakash Rathod, director with MNC Bullion, a wholesaler 

in southern city of Chennai. 

The customs department undertakes tests to verify that the gold content is not more than 80 percent purity, before it is delivered 

to a refiner. Rathod said it takes three weeks on average to clear the consignment from customs. 

The excise duty on refined gold made from imported ore or concentrate was reduced to a specific duty of 280 rupees per 10 

grams from earlier 8 percent on value in 2010/11. India's government has increased the import duty on gold to 300 rupees 

per 10 grams in its 2010/11 budget from 200 rupees earlier. 

A worker walks in front of a truck at Agnico-Eagle's Meadowbank gold mine near Baker Lake, Nunavut August 24, 2011. REUTERS/Chris Wattie 

23


India STC sees gold imports up 25% in yr to March 2012 

KOVALAM, India, Aug 19 (Reuters) - 

I ndia's 

government-run gold importer State Trading Corporation (STC) expects a 25 percent jump in its imports to 125 

tonnes in the year to March 2012 due to surging investment demand, its top official said on Friday. 

"There might be a temporary dip in demand due to high prices, but again people may start buying because of investment," 

N.K. Mathur, chairman and managing director with STC, told reporters on the sidelines of a conference in the southern 

state of Kerala. Local gold prices have gained more than 25 percent so far this year to peak at 27,962 rupees per 10 grams on 

Friday evening. 

Imports in India, the world's largest consumer of the metal, rose 34.9 percent in the first half of the year to 553 tonnes after a 

surge of 72 percent in 2010 to 959 tonnes and a 38 percent rise in investment demand. STC hopes to restart its imported coins 

sales division to cash in on rising investment demand, its chairman said. 

Mathur, asked if it would buy coins manufactured by MMTC PAMP, which expects to start its refinery in October, said this was 

possible. "We are not averse to buy from MMTC, it is business at the end of the day. If they want to market and we want to do 

it, it can work," said 

Mathur said it was not keen on selling silver coins as these are bulky, adding that silver imports formed "a small portion of its 

business." Mathur expects gold prices to trend upwards in the short-term. 

"In the short time it will rise, it will cross the $2,000 (an ounce) mark," said Mathur, adding there was an absence of alternatives 

for investment. "The dollar is uncertain and even equity markets are uncertain, the only safe place is gold," he said. 

Spot gold on international markets was set for its biggest one-week rise since late 2008 on Friday after a raft of soft economic 

data battered stock markets, though prices eased from record highs as equity markets and the euro edged off lows in afternoon 

trade. Spot gold was up 1.7 percent at $1,853.89 an ounce. It is on track for its biggest one-month rise in nearly 12 years 

in August and is up 31 percent so far this year. 

Gold seen peaking at $1,900/oz in next 6 months -GFMS 



G 

old could hit $1,900 an ounce in the next six months, driven by buyers seeking an investment safe from global economic 

problems, but a further rise to $2,000 looks unlikely, metals consultancy GFMS said on Thursday. 

"Gold will be muddling through to peak at $1,900 (an ounce)as U.S. data points have been ambiguous, the action on 

the fiscal and monetary front is also ambiguous," said Paul Walker, global head of precious metals at GFMS, which 

has been acquired by Thomson Reuters. 

Gold extended record highs above $1,825 an ounce on Thursday after poorly received U.S. jobs data hurt assets seen as 

higher risk, such as stocks, while boosting interest in nominal safe havens such as gold. 

So far in August, the price has risen by more than 12 percent, putting it on track for its biggest monthly gain since November 

2009. "In the time frame, we really need exceptionally dramatic news to push gold above $2,000 and this is not our base 

case," said Walker. "This is highly unlikely." 

Although gold remains off its inflation-adjusted peak above $2,000 struck in 1980, it is one of the top performing assets this 

year, up by over 28 percent versus a 15-percent loss in U.S. blue-chip stocks or a 7.7-percent decline in the price of copper . 

He said there was a high probability of India's gold imports crossing 1,000 tonnes this year -- up four percent on 2010 -- as 

expectations were for prices to gain further. 

The World Gold Council in a report on Thursday said Indian gold jewellery buying was up 17 percent in the second quarter and 

that signs of strength in the market remained. 

Gold imports by MMTC, India's second biggest importer of the metal, have tumbled to 5 tonnes so far in August as buyers preferred 

a 'wait-and-watch' approach. Walker said consumers would wait for price stability before jumping in. 

"People are getting accustomed to this kind of a benchmark (price) even though it is at incredibly elevated levels. Everybody 

who is involved in the value chain in the Indian gold market thinks prices will go up," said Walker, ahead of a conference in the 

southern state of Kerala. Silver prices could extend gains to $50 an ounce in the next months from around $40.60 an ounce 

now, he added. 

"It will follow gold up ... It will move towards $50, but it is going to be a hell of a lot more volatile," said Walker. 

Silver prices have more than trebled since 2008 to peak at $49.51 an ounce this year. "Silver will benefit from the same factors 

as that of gold from rising investment drivers. Until the global macro situation gets clearer, prices will go higher," he said. 

24


India gold seen powering to another high in Sept quarter 


MUMBAI, July 27 (Reuters) - 

I 

ndia gold, which hit a record on Monday, are likely to extend gains for a second straight quarter to its peak as investors 

seek refuge from U.S. debt crisis and surging inflation, though physical demand cringing as a result could keep a lid on 

gains, a Reuters poll revealed. 

Gold had recorded its earlier all-time high on April 30. 

"Major factors in the coming quarters could see gold rising as high as $1,650 (an ounce) by 2011 end. Euro zone debt fears and 

U.S. economy troubles are positive for gold," said Gnanasekar Thiagarajan, director with Mumbai-based Commtrendz Research. 

The most-traded August gold on the Multi Commodity Exchange (MCX) struck a record high of 23,358 rupees per 10 grams 

on July 25, before easing to 23,179 rupees on Wednesday. Gold may test 23,500 rupees by the end of September quarter and 

could extend gains to 23,950 rupees in December quarter and 24,400 by the end of March quarter in 2012, the poll estimated. 

"Decrease in purchasing power due to rising inflation may force more traders to convert assets into bullion," said Sugandha 

Sachdeva, in-charge of metals and energy research with Religare Commodities. 

The U.S. House of Representatives decided to postpone a vote on a plan to raise the debt ceiling until Thursday at the earliest, 

narrowing the chances for a deal to avert a debt default, which has supported the yellow metal so far. 

"Long-term view on precious metals continues to remain bullish taking into consideration the ongoing European debt crisis," 

said Reena Walia Nair, senior research analyst with Angel Broking. 

"High oil prices and a slowdown in economic growth on the back of monetary tightening will also support demand for gold." 

India's gold imports ( http://link.reuters.com/xaf72s ) 

PHYSICAL BUYERS CAUTIOUS 

Physical buyers, however, are likely to turn cautious of getting stuck with high-priced inventory ahead of the festival season 

next month, limiting gold gains. 

India, world's No. 1 gold importer, bought 286 tonnes of gold overseas in the first quarter, up nearly 10 percent from a year 

ago, World Gold Council data show. The country imported 959 tonnes of gold in 2010, or an annual increase of 72 percent. 

"We expect buyers to return from first week of August as compulsive buyers for marriage would reappear, but how high prices 

would make them react is a million dollar question," said Daman Prakash Rathod, former convener of Tamil Nadu Bullion Forum. 

"As of now while western world is busy buying due to financial woes at their door, Indians have taken an extended holiday." 

Prices, investment products in focus at India gold meet 



A s 

gold rallies to consecutive record highs, price, imports and investment demand for bullion will top the agenda at a 

conference in India, the metal's biggest consumer, this week. 

Attendees will not have far to look for evidence of India's long-standing worship of gold, as the conference takes 

place in Kovalam, just an hour away from a $22 billion treasure hoard found last month under a temple in Kerala's 

state capital. 

Gold prices in India , which relies on imports for almost all its supplies, have climbed about 25 percent so far this year to peak 

at 26,575 rupees ($583) per 10 grams on Thursday, around $1,810 an ounce. 

Spot gold is at $1,790 an ounce, near record highs above $1,813, spurred higher by investors looking for a safe haven as concerns 

over the health of economies in Europe and the United States hit currencies, stocks and bonds. 

The 8th India International Gold Conference, organised by the Bombay Bullion Association, will look at global gold scrap supplies, 

bullion-based investment products, an outlook on the bullion market and industrial uses of silver, as well as detailed 

discussion of the domestic gold market. 

"People will be looking at the kind of investment that could come in at record prices and new avenues that people might have 

to cover their risk in other markets," said Gnanasekar Thiagarajan, director at Commtrendz Research, a commodity broker 

based in Mumbai. 

Conference attendees and participants, spanning state-run MMTC to Bank of Nova Scotia, will weigh the impact of record 

prices on imports to India. Imports in India rose 34.9 percent in the first half of the year to 553 tonnes after a surge of 72 percent 

in 2010 to 959 tonnes and a whopping 38 percent rise in investment demand, as high prices curbed buying this year. 

25


Local prices are up more than 41 percent on a year ago. "People are thinking of almost double prices compared to last year," 

said Daman Prakash Rathod, director with Chennai-based gold wholesaler MNC Bullion. 

But, he added, "in the coming months, strong seasonal impact will not allow any let up on the import front." 

India's obsession with gold is nowhere more evident than in its wedding season, which runs from September to December, 

when jewellery and gilded gifts abound as brides traditionally carry their wealth while sons inherit land and fixed assets. 

Rural consumers -- many of whom invest in gold as they live far from the facilities of a bank -- will be looking to monsoon 

rains expected to be only slightly below normal to give a good crop and so boost incomes and saving capacity. 

INVESTMENT SPUR? 

Traders say rising awareness among India's 1.2 billion population of the investment avenues in gold due to the large presence 

of commodity, stock brokers and mutual fund houses in smaller towns has supported buying to save. 

"Globalisation of media and better reach to every nook and corner of India through mobile (phones), cable TV have made a 

dramatic difference to customer preference," said MNC's Rathod. 

Investment in gold bars and coins rose eight percent in the quarter to March to 85.6 tonnes, with investment in exchange 

traded funds jumping 57 percent to 15.077 tonnes in February on a year ago -- small amounts but a significant shift. Still, with 

foreign players not allowed in commodities markets in India, there are limits to liquidity, crimping participation from hedge 

players and others who want nimble trading. 

The conference could see price forecasts from Scotia Mocatta, a unit of Canada-based Bank of Nova Scotia, State Bank of India, 

Religare Commodities, and GFMS, which was recently acquired by Thomson Reuters. 

Industry participants will also be hoping the Reserve Bank of India (RBI), the country's central bank , will give approval for forward 

contracts in silver and loans for traders, along with an exchange traded fund for the metal. 

"This facility should be there for flexibility in business operations. We are depriving (silver traders) of benefits and cashing in 

on lower prices. If we have these facilities for gold traders, then why not for silver?" said Mayank Khemka, managing director 

with Khemka Group of Companies, one of the speakers at the conference. 

A forward contract is a non-standardized agreement between two parties to buy or sell an asset at a specified future time at a 

price agreed today. Khemka said they intend to take up the issue with the RBI in September. 

Participants will be also watching how India's regional rival and neighbour China, which the World Gold Council says will overtake 

India this year in terms of gold consumption in the short-term, is coping with regulatory changes that allow more companies 

to deal in precious metal and what lessons traders back home can draw from them. 

Gold a 'bubble that could deflate,' says analyst 

KOVALAM, India, Aug 20 (Reuters) - 

R ecord 

gold prices may be heading for a correction of about 8 percent next month, but the safe-haven metal may also 

rally to $2,400 an ounce next year as investors seek refuge amid global economic turmoil, a global head at INTL 

FCStone on Saturday. 

"Trees don't grow till heaven. I think buyers need to be beware we are in a 'caveat emptor' market," said Jeffrey Rhodes, 

global head of precious metals at the brokerage and an industry expert, told reporters at a conference on gold in the 

southern Indian state of Kerala. 

International gold struck a record of $1,877 an ounce on Friday, still on track for its biggest one-month rise in nearly 12 years in 

August and its biggest one-week gain since early 2009. 

Rhodes said gold may retrace to $1,725 by next month, and then race ahead. "My problem is that people are buying gold and 

they don't understand why they are buying gold and that's a big problem and that is a classic symptom of a bubble," said Rhodes. 

Rhodes said there is an absence of "real motivation" for investors to cash in their gold holdings to cover losses from the equity 

markets. 

On Friday, global equity markets slid anew and gold set a second-straight record high as fears of a possible U.S. slide into 

recession and concerns related to Europe's debt crisis kept investors on edge. 

26

COMMODITIES GOLD GOLD: REBOUNDS WILL RISK BATTERED SHIVER AVERSION ON JAPAN AFTER BY BANISH DEBT SHARPEST U.S. CREDIT DOWNGRADE CORRECTION LOSS DOWNGRADE SINCE DESPITE FEARS? MAY CORRECTION FEARS AUGUST AUGUST 2011 

2011 

Gold exchange-traded funds mushroom in India 


G old 

exchange-traded funds (ETFs) may be new for India, but are gaining in popularity as investors become aware of 

the benefits of investing in gold paper as opposed to holding it as jewellery. 

ETFs are instruments that trade like shares and are backed by physical holdings of the commodity. 

India is the world's top consumer of gold, accounting for 20 percent of global demand. In a country where many of 

the 1.2 billion population live far from a bank, Indians traditionally invest in gold jewellery. 

Here are some key facts and figures on India's gold ETFs: 

- India has eight gold ETFs currently listed with a total collection of more than 15 tonnes, up 57 percent on a year ago. 

- India's gold ETF collection is small compared to its approximately 700 tonnes of annual gold consumption. But industry 

players suggest it could rise by at least 50 percent year-on-year. 

- Mumbai-based Benchmark Mutual Fund, owned by Goldman Sachs Asset Management, was the first to start a gold ETF in 

2007 and has the largest collection of more than eight tonnes. 

- The ETFs are listed on India's National Stock Exchange and Bombay Stock Exchange and most of them have a minimum 

individual share size of one gram. 

- HDFC Mutual Fund is the latest to offer a gold ETF, which started trading last week. ICICI Prudential, which has already collected 

funds, will list its ETF soon. 

- Gold funds have been witnessing explosive growth due to the convenience of buying paper gold, which can be acquired 

online, and the guarantee of quality, that is absent in jewellery, officials managing the ETFs say. 

Key facts about India's gold industry 


I ndia's 

centuries-old gold industry is the world's biggest market for the metal, with imports meeting almost all the country's 

800-900 tonnes per year requirements for jewellery and investment. 

The market was only freed up in 1997, when the government allowed banks and other state-run trading firms to import the 

sensitive commodity directly. 

Here are facts on the industry and changes taking place: 

- India's gold imports rose 34.9 percent to 553 tonnes in the first half of 2011, according to the World Gold Council (WGC). Imports 

jumped 72 percent in 2010 to 959 tonnes. 

- Imports are high but with a population of 1.2 billion, per capita consumption is relatively low. Per capita gold consumption is 

only 0.7 grams, half that of the United States and one-third of the Middle East, according to World Gold Council estimates. 

- India's gold market is estimated to have more than 300,000 jewellers, mostly small, family-run businesses, a WGC study 

showed. Many jewellers are one-room shops with long-standing ties with customers, and items are often sold by weight. 

- Only 31 state-run and private banks along with government trading agencies have licences to import gold because of its implications 

for foreign exchange flows. 

- India's 2010/11 budget raised the import duty on gold and platinum to 300 rupees ($6.65) per 10 grams from 200 rupees 

previously, with the duty on silver raised to 1,500 rupees per kg from 1,000 rupees earlier. 

- Investment purchases of gold have been rising faster than jewellery purchases. The WGC's latest data shows the investment 

to jewellery ratio was about 17:83 in the first half of 2011. 

- Gold buying in the form of exchange-traded funds is rising. Launched in 2007, the total collection among seven fund houses 

is over 15 tonnes, nearly double the level a year ago. 

- Large jewellery companies, such as Titan Industries , Reliance Jewels, Rajesh Exports and the state-run MMTC Ltd , are targeting 

the retail market with plans for hundreds of branded shops. They are hoping to attract sales from customers looking for 

a well-known name as a guarantee of quality. 

- In 2009, India's gold market had its weakest year since trade was freed up in 1997. Record high prices and a failed monsoon 

meant imports fell 33 percent from the previous year to 480 tonnes, against an annual range between 600 and 800 tonnes in 

the previous five years. 

27

SINGAPORE GOLD COMMODITIES GOLD GOLD: REBOUNDS HITS WILL RECORD RISK INTERNATIONAL SHIVER BATTERED AVERSION ON HIGH JAPAN AFTER BY ABOVE BANISH DEBT SHARPEST ENERGY U.S. $1,622/OZ CREDIT DOWNGRADE CORRECTION WEEK—SPECIAL LOSS DOWNGRADE SINCE DESPITE FEARS? MAY PDF CORRECTION FEARS NOVEMBER AUGUST JULY 2010 2011 

2011 

Auspicious days for gold purchases in India in 2011 


T 

he following are some of the days considered auspicious, according to the Hindu calendar, for gold purchases in India: 

The biggest gold buying festivals are Akshaya Tritiya, which falls in the second quarter of the year, and Dhanteras. 

An inauspicious phase -- Shradh, a period for paying homage to ancestors -- is from Sept. 13 to Sept. 27. 

The Hindu calendar has regional variations, but the above dates are broadly followed across the country in the gold 

trade for planning inventories. 

Date Festival name Reason 

Sept.22 Gurupushyamrit Launching new ventures 

Oct. 6 Dussera Harvest-related 

Oct. 20 Gurupushyamrit Launching new ventures 

Oct. 24 Dhanteras Celebrating wealth 

Oct. 26 Deepavali Victory of good over evil 

Oct. 27 Balipratipada Final day of Deepavali 

Nov. 17 Gurupushyamrit Launching new ventures 

Silver trading in China and India 

July 14 (Reuters) - 

R obust 

demand from China and India helped ignite a record-setting rally in spot silver this year. Here are facts on duties 

and quotas on silver trade in the two countries, as well as silver's use in various industries. 

TRADE AND DUTIES IN CHINA AND INDIA 

China has been a net importer of silver, including silver plated with gold or platinum, unwrought or in semimanufactured 

or in powder form, since 2007. 

In the first five months of 2011, China imported 1,659 tonnes of silver, down 24 percent on the year. Silver exports dropped 21 

percent to 505 tonnes, official customs data showed. 

China does not impose an import duty on silver, except a 10.5 percent duty on base metals clad with silver. But a 17 percent 

value-added tax is levied on silver imports, in comparison to an exemption of VAT on gold imports. 

A goldsmith works on a gold bangle at a workshop in Kolkata August 1, 2011. REUTERS/Rupak De Chowdhuri 

28

SINGAPORE GOLD COMMODITIES ————————-- GOLD GOLD: REBOUNDS HITS WILL RECORD RISK INTERNATIONAL BATTERED AUGUST AVERSION ON HIGH JAPAN 2011 BY ABOVE BANISH DEBT SHARPEST ENERGY $1,622/OZ DOWNGRADE CORRECTION WEEK—SPECIAL LOSS SINCE DESPITE FEARS? MAY PDF CORRECTION FEARS NOVEMBER AUGUST JULY 2010 2011 

2011 

It does not impose an export duty on silver, but limits the amount of silver being exported. For 2011, Beijing handed out 5,670 

tonnes of quotas, up 11 percent from last year's. 

India charges 1,500 rupee per kilogram on its silver imports. There is no duty on silver exports. 

Indian imports in the past five years (in tonnes): 

Year Imports 

2010 3,029 

2009 1,285 

2008 5,048 

2007 2,488 

2006 532 

(Source:GFMS) 

USE: 

Silver is used both as a precious and industrial metal. 

Its electrical and thermal conductivity mean it is widely used in electronic applications, particularly in conductors, switches, contacts 

and fuses. Silver use in the photovoltaic industry has grown rapidly, while demand for consumer electronics such as televisions 

and monitors using Plasma Display Panels and CD-ROMs has added to demand. 

Silver is also used in photography, although demand in this sector has been declining due to the rise of digital photography. 

Jewellery and silverware are traditionally key consumers of the metal. 

Historically, silver was more widely used in coins than gold. 

Following are tables of breakdown of silver fabrication consumption in different sectors in 2010, as well as top ten consumers, 

based on numbers from GFMS and the Silver Institute. 

(mln oz) Top ten countries in silver fabrication (million ounces): 

Fabrication 878.8 United States 189.6 

Industrial applications 487.4 China 127.2 

Photography 72.7 India 94.1 

Jewelry 167.0 Germany 39.6 

Silverware 50.3 

Coins & Metals 101.3 

Italy 35.2 

Italy 35.2 

29


2011 

As gold prices surge, cash-for-gold frenzy fades 

By Frank Tang and Paula Rogo 

NEW YORK, Aug 12 (Reuters) - 

H anding 

out flyers at the corner of 47th Street and Fifth Avenue in New York City's Diamond District, Mariabi Peenya is 

having trouble finding passersby eager to sell their gold jewelry for cash. 

In Mexico City, Paulino Luna says fewer customers are coming to his small storefront in a colonial-era building, where 

he's been buying bullion for 25 years. And in Chennai, India, Daman Prakash Rathod finds the once-heaving crowd of 

local gold scrap sellers have all but disappeared. 

Across the globe, the latest surge in gold prices -- up as much as 20 percent since June as investors seek refuge from stock 

market turmoil and sovereign debt crises -- is failing to lure as many people into selling their gilt mementos, heirlooms and 

dusty family jewels as during the 2008 financial crisis. 

The success of massive cash-for-gold industry over the past three years, urging people to sell their gold, means there are fewer 

and fewer people with any "old gold" left. 

Anyone who cashed out when gold prices spiked in 2008 missed a three-year bullion boom in which prices doubled. Now with 

the U.S. Federal Reserve having pledged two years of near-zero interest rates, the rally in gold prices shows no sign of slowing. 

But it seems those people who still have gold may be holding out for even higher prices. 

"It's nothing like it was in 2008," says Peenya as he flagged passing New Yorkers, promising his price was best. "Either people 

are waiting till the price hits $2,000, or they are running out." 

The implications of a dwindling supply of "scrap" gold, that which isn't mined, may hit the global bullion market even harder 

than it hits local pawn shops. Worldwide, recycled gold usually meets 40 percent of demand. But that share is now declining 

just as demand for physical bullion surges anew from investors and central banks. That may be yet another reason to expect 

gold prices to rise even further. 

"The fact that scrap is not reacting as strongly as one might have expected to the stimulus of higher prices suggests those 

higher prices are more sustainable and price growth is easier," says Philip Klapwijk, executive chairman of respected metals 

analytics firm GFMS Ltd, a unit of Thomson Reuters. 

An employee arranges gold jewellery at the counter of a gold shop in Hefei, Anhui province August 23, 2011. REUTERS/Stringer 

30


2011 

Gold prices breached $1,800 an ounce for the first time this week, having almost tripled from its 2008 lows of $680. 

"The easier-to-let-go stuff has been let go, so it gets progressively more difficult given the move in the price to stimulate the 

same growth in scrap," Klapwijk said. 

In 2009, scrap supply surged by 30 percent to a record as consumers rushed to sell anything they had, both to turn a fast buck 

on a booming market and to cushion the blow of recession. 

In the years since then, large amounts of recycled gold flooded the physical market. But growth has slowed sharply as people 

either run out of things to sell, or wait for higher prices. Klapwijk expects recycled gold to grow by only about 5 percent this 

year. 

Scrap supply, breakdown: ( http://r.reuters.com/xeq23s ) 

Americans spend less: ( http://r.reuters.com/nef92s ) 

CASH-FOR-GOLD PART OF U.S. CULTURE 

The trend is perhaps most notable in the United States, which contributes about 10 percent of global scrap supply. Last year 

scrap supply was 143 tonnes -- equivalent to more than 10 million wedding bands. Some of that recycled gold also comes from 

industrial sources such as computer motherboards. 

Unlike some nations such as Turkey and India, where recycling jewelry has been commonplace for decades, most Americans 

had been unaccustomed to the idea of selling off old jewelry. Then a network of cash-for-gold businesses popped up after 

2008, thanks to the almost constant television and radio advertisements by pioneers such as Cash4Gold.com. 

Now, "We Buy Gold" signs are commonplace in windows of American main street stores. 

Gold recycling in the United States reached its climax when a Cash4Gold ad featuring rapper MC Hammer aired during the 

2009 Super Bowl, said Michael Toback, a board member of the 47th Street Business Improvement District in New York, who 

also owns jewelry refiner Myron Toback. 

In Manhattan's bustling Diamond District, many jewelry vendors say Americans may sell their remaining gold if economic conditions 

worsen. But many interviewed by Reuters agree that business has slowed by as much as a third from past year. 

EMERGING ECONOMIES SLOW DOWN TOO 

The change in psychology is evident elsewhere too. 

"I think everybody is still bullish about the market. They don't want to sell for the time being," says Hong Kong-based Dick 

Poon, manager at Heraeus Precious Metals, a German company that is a leading global metals dealer and refiner. 

In the historic center of Mexico City, several streets are crowded with kiosks where people line up to sell gold chains, medallions, 

earrings or bracelets for cash. Vendors weigh it all on simple scales. But Luna says business is drying up. 

"People don't have their parents' or grandparents' gold anymore, they've sold it," said Luna. "We are not seeing the same 

amount of volume that we saw before, every day there is less, of both gold and silver." 

And in the country which consumes more gold than any other, India, where gold jewelry is a central part of the culture from 

weddings to holidays, reselling gold has become a rarity. 

"The selling crowd has disappeared," Daman Prakash Rathod of gold wholesaler MNC Bullion said by telephone from Chennai. 

Watching friends and neighbors rue their decisions to sell at $1,000 or $1,200 or even $1,500 an ounce, he reckons other Indians 

have learned a lesson. 

"The excessive scrap that used to come a few years ago has stopped, and people who have sold must be cursing themselves for 

doing so at lower prices." 

Investor frostiness to palladium will thaw 

By Amanda Cooper 


T 

he darkening economic outlook this month has sent investors out of the palladium market in droves, but the coming 

months of uncertainty are likely to be more of a cooling-off period than an end to their romance with last year's star 

performer. 

Palladium, which is mainly used in catalytic converters for gasoline-powered vehicle engines, has been one of the 

weakest commodities this year, falling about 5 percent to around $750 an ounce, after having virtually doubled in 2010. 

Last week marked the largest decline in speculative holdings of U.S. palladium futures on record , while exchange-traded funds 

lost more metal in that one week than in the preceding eight weeks together. 

The overarching concern among money managers and policymakers over the economic impact of vast U.S. and euro zone debts 

has sent speculators scurrying out of any assets that depend on growth. 

31


2011 

Palladium is one of the best gauges of investor sentiment towards the global economy, because the auto sector relies on demand 

from both the developed and emerging worlds. 

"It's all about industrial production, and at the moment it's not a happy story," said Sharps Pixley Chief Executive Ross Norman. 

"Fundamentally, I think it remains an attractive buy, but that depends on your view of how the economy plays out." 

Palladium will get hit further if the economic situation worsens significantly, he said, but "ultimately investors will seek to buy 

hard assets of all classes, and it will be a case of a rising tide lifting all boats in the commodities world". 

Societe Generale metals strategist David Wilson described the supply picture for palladium as "fairly positive" for prices. Without 

sales of Russian state stocks of the metal, the palladium market would have been in deficit since 2007. 

"Russian government stockpiles have dwindled, we think sales are going to be considerably lower than they have been in the 

past, and there is unlikely to be any expansion from (world number one producer) Norilsk (Nickel) over the next few years either," 

he said. 

"The fall-off in palladium might be a good buying point," Wilson said. 

HOLDINGS DOWN 

Speculative holdings of palladium, as reflected by open interest held by net non-commercial traders on NYMEX, have fallen by 

nearly 20 percent so far this year, or 286,300 ounces, their largest decline since a record 6.85 million ounce exodus in 2006. 

While it is possible to dismiss the rush for the exits on NYMEX as little more than an expression of frustration among short-term 

speculators, the bleed of metal from exchange-traded funds reflects a more worrying trend among players with longer-term 

investment horizons. 

ETFs backed by physical metal, which helped fuel the 73 percent rise in investment demand for palladium last year -- thanks to 

the U.S. listing of ETF Securities' palladium fund -- have seen unrelenting outflows this year. 

Global ETF holdings of palladium haven fallen by nearly 20 percent in 2011, mirroring the decline in speculative interest in palladium 

futures, which together equate to about 550,000 ounces, or 50 percent of last year's total of 1.085 million ounces of 

investment demand. 

One of the principal drivers for investment in palladium over the prior two years was the explosion in demand for cars in China, 

which last year overtook the United States as the world's largest auto market. 

The logo of a gold jewellery shop is seen in Bucharest August 19, 2011. Gold prices rallied more than 2.5 percent to a record high as investors sought refuge from a second 

day of hefty losses on the stock markets, hurt by deepening concerns over slowing economic growth and the outlook for euro zone banks. REUTERS/Bogdan Cristel 

32


2011 

But curbs on vehicle registrations and the end of a series of subsidies for new car purchases have slowed year-on-year sales 

growth in China to less than 6 percent in the first half of the year from 48 percent in the same period of 2010. 

In the United States, car sales are up modestly so far this year, yet economists are attaching ever-rising chances of the world's 

largest economy tipping back into recession, which would almost certainly bite into consumer spending power. 

Sharps Pixley's Norman noted the average age of a car today is 11 years, compared with 8.5 years in 1995, indicating that consumers 

invest in new vehicles less frequently. 

"Wherever you look, those macro issues that are very supportive for gold are obviously not supportive for palladium," said Societe 

Generale's Wilson said. In contrast to palladium, gold, perceived by many to be the safest of safe-havens has risen by over 

30 percent to record highs this year. 

"At times like these, palladium tends to suffer as the industrial tag has been out of vogue in the last month or so," said Saxo 

Bank senior manager Ole Hansen. "Cyclicals will have their day in the sun again, but just not now." 

Silver shines bright, to climb steadily in second half 

By Rujun Shen and Rajendra Jadhav 

SINGAPORE/MUMBAI, July 14 (Reuters) - 

S ilver 

prices, deeply dented but unbroken by a rout in May, will climb steadily through the second half of the year as investors 

buy the metal as an alternative to expensive gold. 

Despite a swoon following a 60 percent rally to a peak in April, silver continues to lead the precious metals complex 

with a gain of 24 percent so far this year, outstripping gold's rise of 11 percent, and retains allure for inflation-wary investors. 

Silver , notorious for its price volatility, stung many investors with a drop of 33 percent over six sessions in early May from a record 

of $49.51 an ounce on April 28. 

Silver prices have held above $32 since mid-May, and are set to move higher in the second half of the year, supported by low 

interest rates in the United States, a sovereign debt crisis in the euro zone and inflation concerns in key emerging economies 

such as India and China. 

"Lingering fears of a sovereign debt crisis, inflationary pressures and a slowdown in the recovery continue to drive investors to 

look for a safe haven and hedge against uncertainty," said Ong Yi Ling, an analyst at Phillip Futures. 

"When gold hits a record high, investors will once again search for a cheaper alternative to gold, and silver may be the best candidate." 

On Thursday, spot gold extended its winning streak to a ninth session, hitting a record top of $1,589.56 an ounce, while silver 

extended a rise of 5.6 percent from the previous session to $38.38. 

2011 metals performance: ( http://link.reuters.com/cad62s ) 

India's silver investment: ( http://link.reuters.com/gyr52s ) 

Gold-silver ratio: ( http://link.reuters.com/bum62s ) 

Global silver fabrication demand: ( http://link.reuters.com/ser29r ) 

Shanghai silver price and volume: ( http://link.reuters.com/zem62s ) 

NOT LOSING MOMENTUM ANYMORE 

Phillip Futures expects silver prices to reach $43 in the second half of the year, while Barclays Capital expects prices to reach 

$40.2 in the third quarter. 

"Silver is looking reasonably good in the second half, as prices have been basing around $35, and is not losing momentum any 

more," said Mark Pervan, Global Head of Commodity Research at ANZ. 

Trading volumes for silver on the Shanghai Gold Exchange, China's flagship precious metals bourse, shot up to 2.257 million kg 

on May 13. While they plunged to 475,056 kg on July 13, that is still more than three times the average daily volume of 151,966 

kg last year. 

"Obviously there is strong support at current levels from physical demand -- mainly investment demand," a Tokyo-based trader 

said. "Prices below $35 should be a comfortable level for people to buy." 

The silver growth story will be underlined by continued Asian preference for the physical metal and rising demand for exchange 

-traded funds, analysts and traders said. 

"Physical silver bar hoarding will continue to gain momentum, because Asian, in particular Chinese, investors have a preference 

for physical rather than futures-based holdings in precious markets," said Pervan of ANZ. 

The outflow from silver-backed exchange-traded funds is also likely to be coming to an end, and the possibility of rising ETF 

demand will further buoy silver in years to come, Pervan said. 

33


2011 

ETFs let investors profit from price rises without owning physical material and have become popular among Western investors. 

Growth of such funds has helped gold prices take off, as the increasing holdings add to the demand for bullion. "The ETF story 

that has driven gold in the past four or five years is a new dynamic in silver," said Pervan. 

"Further build-up in silver ETF demand may be slightly more than what you'll see in gold, a lot of which is driven by a lower entry 

point to precious metals provided by silver -- it's 1/40 of gold's price, which is always going to be a trigger for small investors." 

The gold-silver ratio, or the number of ounces of silver needed to buy one ounce of gold, dropped to a one-month low of 41.4, 

off its lows under 32 in late April when spot silver prices rallied to the record high. 

IShares Silver Trust, the world's largest silver ETF, rose more than 1 percent on the day to 9,633.95 tonnes by July 13, nearly 15 

times the fund's holdings at inception in April 2006. The world's biggest gold ETF, SPDR Gold Trust , reported holdings at 

1,225.41 tonnes, 151 times its holdings when the fund was launched in 2004. It would rank No.6 on the list of the world's top 

gold holders, right after France and ahead of China. 

Silver prices in the second half will also hinge on a pickup in demand from India, the world's largest bullion consumer and 

fourth biggest silver consumer in terms of fabrication demand. A number of gold ETFs have attracted increasing interest from 

investors in India this year, but silver ETFs are yet to launch due to regulatory uncertainties. 

GOOD MONSOON TO UNLOCK INDIA BUYS 

Retail investors in India rushed to buy silver bars and coins during the metal's meteoric rise early this year, only to rue their luck 

when the May rout shaved a third off the metal's value. But dealers say good monsoon rains and bulging farm incomes could 

bring back buyers. 

"If farmers get good crops, certainly demand would rise from rural households," said Harshad Ajmera, proprietor of wholesaler 

JJ Gold House in the eastern city of Kolkata. The monsoon has so far gone smoothly and bodes well for rural earnings. 

But silver imports will slow at least for the next month or two, coinciding with India's monsoon season, which typically sees a 

lull in gold and silver buys as farmers focus on sowing crops. Rural areas make up 70 percent of India's gold demand and more 

than 60 percent of its silver consumption. 

"I usually buy gold and silver jewellery at the time of the Diwali festival," said Vikram Patil, a 50-year-old cotton farmer from 

Jalgaon in India's western state of Maharashtra, referring to the Hindu festival of lights, which usually falls in October. "If my 

earnings improve, I will invest more in jewellery." 

A piece of raw emerald is displayed at the Emerald Museum in Bogota August 17, 2011. REUTERS/Fredy Builes 

34


2011 

Panners, big miners scramble to join Australia's gold rush 

By James Regan 

SYDNEY, Aug 25 (Reuters) - 

O 

n his days off, Cordell Kent drives with his family about an hour into the eastern Australian countryside, lays out a 

picnic blanket and then joins hundreds of other families panning for gold in hopes of striking it rich. 

Heavy rains last year in the Ballarat gold fields that rinsed more nuggets and gold dust through the river systems, 

coupled with a meteoric rise in bullion to record prices, are putting fresh polish on a practice dating back to the Roman 

Empire. 

"We're seeing a whole new gold rush now around Ballarat, one where people are cashing in and making real money at very little 

cost," says Kent, who sells do-it-yourself mining equipment when he's not panning. 

A 35 percent surge in gold to a record high above $1,900 an ounce this year, outpacing an 11 percent gain for a broader commodities 

index, has triggered the gold frenzy. 

The vast majority of the 268 tonnes of gold found last year in Australia was by mining companies with headquarters overseas or 

on the western coast in Perth. 

Next year's take from Australia could be even higher by as much as 10 tonnes, or 9.6 million ounces, according to the Australian 

Bureau of Agricultural and Resource Economics and Sciences . 

Even so, that falls short of the bumper 314 tonnes of gold mined in Australia in 1997. 

Asset returns in 2011: ( http://r.reuters.com/suz52s ) 

Gold correlation with dollar: ( http://r.reuters.com/ryx52s ) 


Bullion this week traded above $1,900 an ounce for the first time, and although it pulled back to $1,750 an ounce, is still heading 

for its eleventh consecutive year of gains. 

Kent doubts a price correction would deter prospecting. 

He says panners, including his 15-year-old son, can find hundreds, or even thousands of dollars worth of gold. Some, he claims, 

have found nuggets weighing up to four ounces. 

What many consider the largest nugget ever found, dubbed "The Welcome Stranger", was dug up in Ballarat in 1869 and 

weighed 2,283 ounces. 

35


2011 

Panners submerge their pans in moving water to capture sediment, sorting the gold from the gravel and other material. As 

gold is much denser than rock, it quickly settles to the bottom of the pan. 

MAKING HAY 

Australia is the world's second-largest gold producing nation behind China. Its western gold fields are home to more millionaires 

per capita then anywhere else in the Southern Hemisphere. 

Even a young Herbert Hoover tried his luck in Australia, working as a metallurgist for gold mines in the west before returning to 

America and being elected the 31st U.S. president. 

AngloGold Ashanti Ltd's Tropicana mine, under development at a cost of $700 million, is the top major Australian gold discovery 

of the past decade and is expected to produce about 480,000 ounces of gold a year. 

"Now is the time to make hay and the mining companies know it," says Keith Goode, director of Eagle Mining Research in Sydney. 

"These things go in cycles." 

Integra Mining expects to mine 100,000 ounces of gold this year from virtually nothing a year ago to maximise gold sales at 

higher prices. 

One of Australia's biggest gold producers, Melbourne-based Newcrest Mining , this week posted a 36 percent rise in underlying 

annual profit thanks to higher gold prices. This year, Newcrest Chief Executive Greg Robinson has vowed to dig deeper and produce 

up to 2.925 million ounces of gold, up from 2.53 million ounces in the 2011/12financial year. 

Even in Australia, regarded as an economy insulated from much of the economic and social turbulence occurring elsewhere, 

gold holds more appeal for investors over stocks. 

Since August 2006 the gold price in Australian dollars has outpaced the S&P/ASX All Ordinaries Gold index by more than 300 

percent. 

Investors in droves have sought a refuge in bullion 

from a stock market meltdown, fears about sovereign 

debts in Europe and the United States and worries 

about a recession. 

"The world economic and political issues are supporting 

a very strong gold price," says Newcrest's 

Robinson. 

MINERS CHOOSE GOLD 

Perth company Emergent Resources has put its 

plans to exploit iron ore deposits in the far west outback 

on hold to dig for gold. 

Another Perth-based company, Norton Gold Fields , 

made a A$13.1 million profit this year after losing 

A$32.8 million last year, thanks to strong gold prices, 

and now expects even better profits next year as it 

turns up production. 

"Our balance sheet is much stronger than a year ago 

and will continue to improve as we reduce our debt 

levels," Norton Managing Director Andre Labuschange 

said. 

The company still owes about A$65 million under a 

hedging arrangement with the now-defunct Lehman 

Brothers bank but plans to make a voluntary repayment 

next month, bringing the outstanding amount 

to about A$50 million, he said 

Hedging of gold -- selling ounces to be mined at a 

later date for a fixed forward price -- a relic of the 

1990's when gold sold for as little as $253 an ounce - 

- is now taboo for many mining companies, whose 

shareholders want as much exposure as they can get 

to any upside in bullion. 

Globally, only 5.1 million ounces of gold were hedged 

in the first quarter, according to a tally by ABN Amro, 

out of forecast production this year of around 76 million 

ounces. 

Signs for merchants who buy and sell gold, silver and coins hang outside their shops in Paris 

August 11, 2011. REUTERS/John Schults 

36


2011 

SELLING FAMILY JEWELS 

It's not just mining companies and people with pans and shovels targeting gold. 

Jerry Zheng, a mobile phone salesman in Sydney, said he recently paid A$38,000 for a machine to analyse the gold content of 

jewellery after setting up a retail gold buying business. 

Zheng said business is brisk and that enough people are willing to sell everything from family heirlooms to objects of desire 

from loves long lost at today's prices to warrant the small profit he makes on each transaction. 

"We don't have any problem selling what we buy to refineries to melt down and resell as pure gold," Zheng said. 

At $1,900 an ounce, Zheng said his profit on an ounce was around $38. 

Zheng will also pay a 10 percent commission to anyone who hosts a party where neighbours are encouraged to sell their gold 

jewellery to his company. 

"We haven't had too much success with gold parties yet, but we are trying," Zheng said. "People are slowly understanding they 

can make money from gold." 

A man displays a gold necklace decorated with precious stones at a jewellery shop in Lahore April 21, 2011. India gold recovered from its previous session's losses on 

Thursday to hit another record high nearing 22,000 rupees ($495) following firm overseas markets, triggering purchases from physical traders to stock for festivals. 

REUTERS/Mohsin Raza 

37

SINGAPORE GOLD COMMODITIES GOLD GOLD: REBOUNDS HITS HOVERS WILL RECORD RISK INTERNATIONAL SHIVER BATTERED NEAR AVERSION ON HIGH RECORDS JAPAN AFTER BY ABOVE BANISH DEBT SHARPEST ENERGY U.S. ON $1,622/OZ CREDIT DOWNGRADE U.S. CORRECTION WEEK—SPECIAL DEBT LOSS DOWNGRADE WOES SINCE DESPITE FEARS? MAY PDF CORRECTION FEARS NOVEMBER AUGUST JULY JULY 2010 2011 

2011 

EDITORIAL: 

Clarence Fernandez ( Senior Sub Editor, Commodities & Energy ) 

+65 6870 3861, clarence.fernandez@thomsonreuters.com 

Richard Mably (Global Editor, Commodities & Energy) 

+44-207-542-6280, richard.mably@thomsonreuters.com 

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+44-20-7542-8065, Veronica.brown@thomsonreuters.com 

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+1-646-223-6068, jonathan.leff@thomsonreuters.com 

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Asia), +65-6870-3084, sambit.mohanty@thomsonreuters.com 

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