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Silver – COT, Gold : Silver Ratio  EDR, SSRI, PAAS, SIL, SLW / Platinum.  

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Index:

1-2. Market Forecasts / Short-term forecasts across the Board!

2-3. Comex Update

3-12. Gold Markets synthesize / Central Bank gold Sales in 2006 / Central Bank purchases/India – Gold prices highest ever amid gold tax battles / Future gold production / South African Mining Royalties due in May/ The Oil crisis / The U.S. $ prospects / Gold: Oil Ratio / Dow Jones / Technical Analysis of the Gold Price: Long / Gold price drivers 2006 / Short term in the U.S. $ / Treasury Notes / CRB Index

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2005 saw the transition of the gold market from a metal market through to a market behaving as a currency.   2006 will see it evolve further and alone reflect the state of the monetary world.   As a Long-term Thermometer, what happens to global confidence and ability of the major structures of the monetary world to measure true financial values, affects Gold.   Not only the U.S. $ will come to center stage, but the paper currency world will, itself be questioned!  In this section we discuss present features of the global economy that will affect the gold price as well as different global gold markets.  

Gold Markets Synthesize

From the inception of our publications over three years ago, we have stressed that global factors come together and synthesize to finally make the gold price.   As the saying goes, “he who sows the wind reaps the whirlwind”.   This is what we are beginning to see in the gold market right now!  

The positive factors taking gold up, such as the unwillingness of people to sell and the growing number of new gold market players, [The Exchange traded funds have the potential to take up the amount of supply made available as the price rises] chasing the small supply [not growing at nearly the pace of demand] to the market and we will see perhaps a more vigorous gold market than we saw in the seventies in the next few years.   Yes, some believe there should be a surplus in the gold market now, but that is provided new investment demand doesn’t take it up.  We believe that the potential surplus of gold over demand will be absorbed by Investors of many shapes. 

Like a dinner party host serving 10 people, what does he do when 20 come to eat?   Such is the state of the global economy now.   As uncertainty grows in the global money world the impact on gold is greater, because new buyers of gold now includes increased buying by present holders, creating a ‘shunt-effect’ on demand as it hits supply.

We go as far now as to say that what we began to see three years ago is coming to be.   Please read the heading just above this piece again.   We left it there unchanged to help all keep a clear direction in this gold market.   We can confirm by the present market action that we remain on course!

Consequently expect greater momentum, greater volatility, higher highs and higher lows!   Where will it go?   The first target is $690, before it takes stock.   It does have more work to do still before it sprints forward, but not for long!

What we wish to emphasize is that this gold market is gaining the momentum to feed on itself and accelerate.   Please bear this prospect in mind when looking forward.

India – Gold Prices highest ever amid Gold Tax battles

In Rupee terms, Gold is now at an ALL TIME HIGH! Even when gold traded at U.S.$850 in 1980 Indian prices were far below today's price.

 Gold Rupee price in 1980:      =  (850 x 32.1507 x 7.91) + 10200 + 1.05%  = Rs, 237684 per Kg or Rs. 2377 per 10 gram.  

Gold Price as closed to day = (589 X 32.1507 x 44.71) + 10200 + 1.05% = Rs. 865860 per kg or Rs. 8658 per 10 gram or 186.66%

Note:

 32.1507 Oz = 1Kg Gold of 9999 fineness Rs.10220 is custom duty per kg and 1% is sales tax.   Further, Gold was smuggled in to India in 1980 and enjoyed risk premium of Rs. 500 to 1000 per 10 gram.

Thus the actual market price of Gold was approx Rs. 3000 per 10 gram of pure gold in 1980 whereas it is Rs. 8600 today.

This explains why the gold jewellery market is down 40% this year to date and has been for over six months.   Indeed it is 186.66% higher than when gold was $850 an ounce.   This gives us a better perspective in their prices.

Tax Battles

The battles between the Indian States as to what Tax they will levy on gold sales has been channelling gold to the cheapest State, from where they sell it to the dealers.   The battle came to a head in this last week, when the government of Gujarat raised the tax on bullion to 1% from 0.25% previously effective the 1^st April.   Why, you may well ask?   After all the gold trade bodies are up in arms over the loss of trade that surely has to follow.

Not only Gujarat province, but Rajasthan and UP were collecting lower taxes, as they are permitted to do.   So the losing province and neighbour Delhi countered with a proposed scheme to reduce tax to 0.1%.   Needless to say if this happened, all three of these states would do zero business because lately most of bullion bought there in their provinces ended up at Delhi and other states in the country.  

Delhi is the transport hub, well connected by all types of transport.   If Delhi imposed this 0.1% tax they would suck up all the country’s bullion business.   This threat has clearly worked and in the last three days two of the states Gujarat and Rajasthan have raised their tax on Bullion to 1%.   If UP also raises the sales tax to 1% then Delhi are unlikely to implement their decision.   Nothing like restating the pecking order is there!   All eyes are on UP to see if they follow suit because our sources have a gut feeling that Delhi will not go ahead with its lower tax if UP follows suit in the next day or two.

But if UP province doesn't do what it should do, Delhi will implement the lower tax scheme and will certainly become the hub of India's bullion imports too.

After that there would be rampant inter-state smuggling from that state to all  27 provinces of India’s Union.

Yes, Government revenue for Delhi would be far less.  With Delhi importing Rs.40,000 million worth of the total of Rs.60,000 million worth of gold imports earning revenue of Rs.400 million @ 1% but at 0.1% they would end up earning just Rs.400 million even if ALL imports of the country came through Delhi.

Daman comments, “Politicians are not economists.   Businessmen have the knack of making them utter fools.”

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This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.   Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness.  Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.    Gold-Authentic Money / Julian D. W. Phillips assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

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-- Posted Sunday, 9 April 2006 | Digg This Article