India is reporting a massive increase in her physical gold imports – an increase of 53% is being reported by MMTC-PAMP India President (Marketing) Vipin Raina. One would think this would drive the benchmark price of gold higher, but alias it is the paper derivatives market operated at the LBMA and COMEX “markets” that influence the benchmark more than anything. As Craig Hemke has pointed out the inverse dollar/yen trade is probably the number one influence of the gold benchmark. You can actually watch the dollar/yen and gold charts move in almost perfect harmony with one another.
Still India is running close to record setting amounts of gold imports. One day this will actually matter and have a tremendous influence on the gold benchmark price.
India’s gold imports rose 53 per cent to 846 tonnes last year on strong domestic demand and lower global prices, according to MMTC-PAMP India.
The world’s second largest gold consumer had imported 550 tonnes of the metal in 2016.
“There has been a significant jump in the gold imports in 2017. Imports touched 846 tonnes,” MMTC-PAMP India President (Marketing) Vipin Raina told PTI.
In December 2017 alone, gold imports rose to 70 tonnes from 49 tonnes in the year-ago period, he said.
Raina said a strong festival and wedding season demand coupled with attractive global price situation led to increase in the volume of yellow metal imports. Source
Silver is also moving higher as the increase in demand for industrial uses never sleeps. The Silver Institute recognizes that China has been working on the Belt and Road Initiative and the demand for silver is going to explode over the next few years. The Silver Institute is only looking at 2018 but anyone that knows what is happening with the Belt and Road Initiative understands this project will be going on for at least the next decade.
Silver investment experienced a mixed bag of ups and downs in demand. Coins and bars were way down, as we have reported throughout all of 2017 but silver jewelry rose by 1% – probably a reflection of the economic downturn. Also, the paper silver market, EFT’s, supposedly had a record setting year in silver demand. Once again, these facts did not influence the price as if they were any type of influence silver would risen a lot more than in 2017 and we would be discussing silver in $20’s possibly even in the mid to high $20’s.
Silver demand from industrial applications, the largest component of silver offtake representing 60% in 2017, is expected to continue to grow this year. Due to silver’s unrivaled electrical conductivity, it will continue to play a vital role in major industry sectors that are moving towards increased electrification, such as automotive. Although silver is used in small quantities in some applications, the diversity is large, and the continued rising volumes of applications are expected to again have a positive impact on silver consumption from industrial products this year.
The strong increase in demand for small and large scale solar panels across the globe has boosted the demand for silver in photovoltaic applications in recent years, reaching an estimated 92 Moz (million ounces) in 2017. We expect the growth to continue this year and set another record for silver demand, driven by large scale solar capacity additions and continued strong demand uptake from individual households, particularly in China.
Jewelry demand is expected to continue its steady increase in 2018, expanding consumption by another 4%, following a rise of 1% in 2017. Silver demand from the jewelry sector accounts for approximately one-fifth of total silver demand.
Coin demand almost halved to 73 Moz in 2017. Much of the weakness was concentrated in the United States where a buoyant stock market and parabolic increases in cryptocurrencies diverted some capital away from physical precious metals.
Silver exchange-traded-products (ETP) holdings achieved a record high at 670 Moz at the end of 2017. Since their introduction in 2002, silver ETPs have recorded a small decline in total annual holdings only twice, indicating the stickiness of their nature among investors (this is in part since a relatively high proportion of silver ETP investors are individuals rather than institutions). Source
The two statements that I have highlighted above should be enough to drive the silver benchmark higher. One would think silver pricing would be headed north at a rapid clip but it just sits around the $17 mark month after month. The price rigging in the precious metals market is on full display in the silver market. By the words of one of the worlds silver authorities silver demand is increasing and the supplies are shrinking.
Global mine supply fell 1% in 2016, the first annual decline following 14 years of consecutive growth. In 2017 that trend continued with mine output expected to contract by a further 2% to 870 Moz. Production disruptions out of South America, along with a decline in capital expenditure among the primary producers in the past five years, is expected to constrain output again this year. Source
I’m not an economist but I do understand economics 101 and the law of supply and demand. Gold and silver both have sustained, increasing demand that began around the time of the economic implosion in 2008. The investment demand for both gold and silver has increased each year with the exception of 2017 but even with the lack luster demand in 2017 it was still higher than before the economic implosion. With 2018 just getting started it will be interesting to see how this year plays out. We are calling for silver to have a great run in 2018 and from the data above we should be on target.
