Wt Physica Gold Discussion Threads

[alun rm] 20/1/2009 15:21

I think it is pretty straight forward.

PHAU is priced in US$. If you buy it here in the UK you are paying for it in £ sterling. Your deal will be priced in sterling according to the exchange rate at that moment.

Having bought the ETF you then have physical gold bought 'for you' and this is valued in US$. The day you want to sell, the gold's value in sterling will depend upon the exchange rate at that time.

If the pound has weakened (the dollar strengthened) then you will find that you get more pounds for your gold at that moment. This reflects the reduction in purchasing power of a weakening currency.

Clearly, it costs more £ to buy gold valued in $ now than it did a year ago. Say you bought $1000 worth of gold last year for £500 ($2 = £1) and the price of gold stayed the same, then you could sell your $1000 worth of gold for £750 ($1.5 = £1) now or £1000 in a few months time (if $1 = £1).

I'm no expert on gold, but you can always buy the PHGP if you want a more straight forward valuation.

One small point of interest. The purchasing power of an Icelandic person wishing to buy gold was reducing by 95% last year. If you think that the UK is a big Iceland and the run on sterling is only just beginning, then you will find it much more expensive to buy gold in a year's time - no matter what happens to the price of gold in $!

[bluebelle] 20/1/2009 12:18

Can anyone explain - or recommend an article - on how changes in the £/$ rate affect the price of this fund ?

[spob] 26/12/2008 19:33

new high in sterling

595

[spob] 21/11/2008 16:50

new gold high in sterling

[spob] 16/10/2008 00:51

from FT Aplhaville

14 Oct 08

regarding Gold and a Thundering Poodle note.


BE: But there is also a very bullish note out from Merrill Lynch.

PM: Oh do share, I think we have loads of secret gold bugs amongst the readers.

PM: Well they are not even that secret. Just gold bugs

BE: Metals face the end of the global construction boom

In our view, the ongoing financial turmoil arises from a gross misallocation of
capital on a global scale. As the global energy sector is not a free market open to
investment, the financial sector pushed too much of the world's excess capital into
real estate rather than energy in recent years. The global economy is now stuck
with high oil prices and falling real estate, and bank asset, values. With a looming
global housing surplus on the horizon, industrial metals prices will likely suffer.
BE: Base metals demand will likely continue to trend down
Contagion from the financial sector to the real economy is occurring at full speed.
With the likelihood of a global recession rising, industrial metals prices will face
further downward pressure. As global industrial and construction activity slows
even more, copper and aluminium demand could take a hit. Our new LME 3-
month forecasts for copper, aluminium, zinc, nickel and lead in 2009 are now
$4,375, $2,025, $1,275, $15,125, and $1,400 per ton, respectively.
BE: Marginal cost pressures will dissipate in the near-term
Other fundamental support factors for base metals are also weakening. With
energy and freight prices coming off sharply in the past weeks, we believe that
marginal cost pressures will soften in the short-term, particularly in the case of
aluminium, reducing the chance of capacity closures and project deferrals. That is
not to say that supply is not an issue anymore. But with a looming global real
estate surplus in the years ahead, metals will have to rely on energy prices to
head higher.
BE: Long-term, bailouts could create metals price inflation
In the long-run, base metals prices could pick up again. Supply capacity in many
commodities remains constrained as the sector has not received the much
needed capital investment. Thus, while the bailout may help keep banks afloat by
printing more money, it will not lead to an expansion in metals supplies and could
bring about a second round of metals price inflation as energy prices recover.


BE: Gold could continue to move higher in three stages
As the ultimate store of value, we believe three variables can explain changes in
the price of gold: risk, currency and commodity prices.


Departing from this analytic
framework, we believe gold could surge to $1500/oz in three steps. First, with the
outburst of the credit crisis in August 2007, a rising risk premium has pushed gold
up. The second stage will primarily be about USD weakness. Finally, as currency
markets stabilize, the third stage in the appreciation of gold could be driven by an
energy price recovery. The main risk to this view would be a very broad and longlasting
global recession, as a deflationary spiral could reduce gold's allure.
PM: WOT? $1500 per ounce?????BE: Possibly. (Just like Goldman's $200 oil.)PM: Got any more on that. As I say, readers LOVE gold stuff.BE: Hmm – should maybe do as separate post, but here's some extracts.BE: The first stage is about gold reflecting the right risk premia

Gold was trading at merely $652.01/oz when the first signs of a credit crunch
started to show in August 2007. As the financial situation continued to deteriorate,
gold prices started to push higher, reaching a peak of $1002.95/oz at the time the
Federal Reserve announced the bailout of Bear Stearns (Chart 42). Since then,
gold prices have traded side ways despite the increase in risk premia.
Nonetheless, it is important to highlight that gold prices have held up well in the
face of a rapidly appreciating dollar and falling oil prices.BE: Gold's risk premia is linked to credit markets
As credit risks increased, investors started to hoard gold which is a real asset and
completely free of credit risk. The opportunity cost of holding gold also decreased
after central banks attempted to rebuild investor confidence by cutting interest
rates. With the FEDs fund rate at 150 bps and 3M T-bill rates at 46bps, implied
gold forward rates (the difference between the spot and forward price of gold
expressed as a percentage per annum) running above 500bps are looking rather
attractive at the moment (Chart 43).

According to our estimates, the risk premia of gold can be linked to fixed-income
markets, including credit spreads and real interest rates. For instance, the
relationship between gold and asset swaps, the corporate bond spread to
government bond yields, is very significant on weekly data. Asset swaps are a
measure of risk aversion in the fixed income markets and we find that an average
gold price increase of about 9% in response to a 100bps increase in US
corporate asset swaps levels.BE: Central banks are no longer lending gold
A side effect of the credit crisis is that central banks have recently stopped
lending gold, a common practice in the market, as they fear some borrowers may
not be able to repay back their loans. In turn, this situation has contributed to
send long-dated gold prices up very rapidly. This is a very rare occurrence, but it
reflects the current state of panic for many market participants. The end result
has been a rapid increase in gold lease rates beyond what their arbitrage relation
to LIBOR rates suggests (Chart 44).
BE: Gold will rise until the cost of money stabilizes
Despite the recent coordinate measures across the globe to cal the markets, the
liquidity crises is nowhere near its end. Banks remain hungry for cash and US 3M
Libor rates are now trading at 4.75% while EUR 3M Libor is at 5.38% and GBP
Libor is at 6.28%. Volatility is trading at extremely high levels across asset
classes. In particular, gold volatility is at unprecedented high levels having traded
above 40 vol points on several occasions in the past few weeks (Chart 45). This
all suggests that flight-to-safety will still be the main driver of gold prices for some
months to come and gold could revert back to $1000/oz in the process.

The second stage is primarily about USD weakness...
In our view, gold will develop a stronger trading link to the currency world as risk
premia on money stabilize. Then, as the United States has taken on too much
debt relative to its output, the USD will likely weaken to reflect the excess level of
consumption relative to domestic output. In particular, if the US fails to keep
foreign capital interested in financing its twin deficits, the USD could spiral down,
providing strong support to commodity prices. The weaker dollar could then help
gold break through $1200/oz (Chart 46).BE: ...but gold could well strengthen against all crosses
However, gold could strengthen against all currency crosses once the immediate
liquidity crisis subsides. Simply, the United States has taken on too much debt.
The USD could thus loose its reserve currency status, forcing gold to rally along.
A weaker USD should help support gold prices as the two markets have been
closely linked in the past year (Chart 47). The second stage is primarily about
USD weakness but gold could well strengthen against all crosses in the short run.

The USD could loose its reserve currency status
As the United States has taken on too much debt relative to its economic output,
it is also conceivable that the USD could loose its reserve currency status. In fact,
the recent strength of the USD has been largely based on the fact that safe haven
assets such US Treasuries are denominated in USD. While the recent measures
are largely meant to offset the private sector credit contraction, we expect them to
have severe fiscal consequences in the long run. Our US Economics team is
currently estimating a $500 billion deficit for fiscal year 2009, reaching 6.2% of the
GDP and surpassing the 1983 peak of 6.0%. On top of a large fiscal deficit, the
US also runs a large trade deficit, and foreign capital inflows into the US are likely
to play an important role in the aftermath of the crisis.BE: Negative real interest rate environments help gold thrive
The unintended consequence of the ongoing financial bailout will be a return of
inflationary pressures to the commodity markets. Ultimately, as lending returns to
normal and money supply goes back to previous levels, we should see a
renovated demand for real assets such as gold (Chart 48). And of course, if more
dollars continue to chase the same barrels and growth picks up, oil prices could
resume their upward spiral bringing gold up with it (Chart 49).BE: The third stage is a recovery in energy prices
The current global bank bailout is inflationary, and will likely result in more money
chasing the same barrels. In turn, the combination of higher cost of money and
higher input cost inflation could force oil back up to $150/bbl. As we expect gold
to maintain its long-run relationship with other commodities, gold prices could well
push higher to $1500/oz.

We believe the current global bank bailout is inflationary
In the medium term, if the energy and credit crises are indeed linked to the same
market failure, a massive government-led bank bailout may not help reignite the
global economy and could bring about a second round of commodity price
inflation. Whenever economic activity starts to recover, energy demand will likely
start to strengthen and put upward pressure again on prices, as the ongoing bank
bailouts will be inflationary in the long-term

More money chasing the same barrels will push oil higher
Four of the five largest holders of oil and gas reserves in the world have closed
their doors to investment since 2000, severely curbing global energy supply
growth prospects over the next ten years. Thus, whenever global economic
activity starts to recover, a lot more dollars chasing again the same barrels likely
will lead to higher oil prices. More importantly, with the ongoing upward shift in the
cost of money, oil investors could well require a much higher IRR than 10%.
Thus, a combination of higher inflation and higher cost of money could push oil
prices structurally above $150/bbl as economic activity recovers.BE: Gold should maintain its long-run link to other commodities
The lack of investment in supply infrastructure has been the major force behind
the current commodity super-cycle. As EM economies go back to their long-term
growth trends, they will do so in an environment with severe supply bottlenecks.
Gold prices have not increased by nearly as much as the nominal expansion of
EM economies such as Russia and India suggests (Chart 50). In fact, even
considering the recent sell-off in commodities, gold prices are still cheap relative
to oil prices. As we expect gold to maintain its long-run relationship with other
commodities, gold prices could appreciate strongly in order to keep their historical
relationship to other commodity prices (Chart 51).
BE: And, as if that were not enough, here are the escape shutes:BE: What could go wrong with our bullish gold view?
Contrary to developments in banking crises in other countries, the dollar has
appreciated in the recent period even as the crisis continued to unfold in the
United States. In part, this situation reflects a shortage of USD as market
participants reduce risk and push money into the safety of US Treasury securities
and FDIC-backed certificates of deposit. Should the financial stress turn out to be
more severe in other countries as a result of this "flight to quality", the dollar could
fail to depreciate in the medium term and in turn limit the upside on gold.
Similarly, should a deflationary spiral take over the global economy, a second
wave of commodity price inflation may simply not happen, again limiting the
upside on gold.

PM: that's brilliant Bryce. A number of readers will be v thankful for that.

You might even get invited back on here.PM: We should give name checks for the ML team on this.PM: That's Merrill Lynch, not markets liveBE: Francisco BlanchBE: Sabine SchelsBE: Gustavo SoaresBE: Michael Haase

PM: greatPM: PM: We are done

[spob] 08/10/2008 02:12

Gold priced in sterling is now hitting all time new highs

PHGP

[spob] 01/10/2008 05:44

Wealthy investors hoard bullion

By Javier Blas in Kyoto

FT

Published: September 30 2008 19:00 | Last updated: September 30 2008 19:00

Investors in gold are demanding "unprecedented" amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.

Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.

"There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career," said Jeremy Charles, chairman of the LBMA. "The gold refineries cannot produce enough bars."

The move comes as fears grow among investors over the losses at investment vehicles previously considered almost risk-free, such as money funds.

Philip Clewes-Garner, associate director of precious metals at HSBC, added that investors were not flying into gold simply because they saw it as a haven amid Wall Street's woes. "It is a flight into gold because it is a physical asset," he said.

"Vault staff are also doing overtime," another banker at the LBMA meeting said, adding that investors in some countries were paying premiums of up to $25 an ounce above the London spot price to secure scarce gold bars.

Spot gold prices in London on Tuesday traded at about $900 an ounce, more than 25 per cent above the level before Lehman Brothers' collapse. Although some traders said the rush into physical gold could boost prices, others cautioned that prices were depressing jewellery demand, capping any price gain. Industry executives said gold refineries and government mints were working at full throttle to keep up with investor demand, but acknowledged they were suffering from shortages, particularly on coins.

Johan Botha, a spokesman for the Rand Refinery in South Africa, which manufactures the Krugerrand, the world's most popular gold coin, said the plant was now running at full capacity seven days a week. "Even so, now and then we have shortages," he said.

The Austrian mint, which manufactures the Vienna Philharmonic, a popular gold coin in Europe, said it had extended work to the weekends to accommodate soaring demand.

Last week, the US mint suspended the sale of its American Buffalo coin after it ran out of stocks.

[hectorp] 11/9/2008 17:28

So much this year for gold 'safe haven' , quite the reverse. Well worth considering PHAU at the moment however.

[spob] 29/8/2008 13:33

Swiss clean out S Africa Krugerrand coin maker

Evening Standard
29 August 2008, 10:42am
Data

The sole maker of South African Krugerrands today ran out of the iconic bullion coin after an 'unusually large' order from a buyer in Switzerland.




Cleaned out: A Krugerrand gold coin

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An unnamed Swiss buyer ordered a massive 5000 ounces, cleaning out the Rand Refinery's gold stocks.
The Krugerrand is the world's best known gold coin and was introduced in 1967 to provide a convenient, easily tradeable form of bullion.

Rand Refinery has delivered more than 46m blank coins over the years.

Precious metal bullion is attracting investors as a haven against a sliding dollar and global conflict and has led to shortages.

The US Mint has suspended sales of one-ounce American eagle gold coins, and Johnson Matthey has stopped taking orders for 100-ounce silver bars at its Salt Lake City refinery. Heraeus holding has a delivery waiting list of as long as two weeks for orders of gold bars in Europe.

The gold price hit a two-week high of $844 an ounce this week and is 25% higher than this time last year but off the $1030.80 record achieved in March.

Krugerrand coins are produced as blanks by the Rand Refinery before being sent to the South African mint for stamping with its springbok markings on one side and the face of Paul Kruger, a Boer resistance leader against the British, on the other.

The success of the Krugerrand led to many other gold-producing nations minting their own bullion coins, such as Britain's Britannia issued from 1987, the Canadian Gold Maple Leaf, the Australian Nugget and the American Gold eagle.

[spob] 17/7/2008 23:31

Investors seek solace in gold

By Chris Flood

FT

Published: July 14 2008 22:04 | Last updated: July 14 2008 22:04

Gold's appeal as a safe haven for investors has again been rising amid widespread fears that the stability of the global financial system is exhibiting renewed strains.

Gold hit a four-month high of $970.70 a troy ounce on Monday after gaining 11.5 per cent over the past four weeks, making stealthy but steady progress as volatility in other asset classes has increased and risk appetite has withered.

On Friday there was a record one-day increase in holdings in gold exchange traded funds as Fannie Mae and Freddie Mac, linchpins of the US mortgage market, threatened to collapse and IndyMac Bank imploded – the third-largest financial institution to fail in the US.

Holdings in seven major gold ETFs tracked by the investment bank UBS jump- ed by a record 1.48m ounces on Friday, suggesting investors have become significantly more concerned about the health of the US financial system. "The moves in ETF holdings is evidence that investors have become much more worried about systemic risk and [they] will remain concerned until there is clear evidence that the situation is getting better," John Reade, head of metals strategy of UBS, said.

Mr Reade has revised his price forecasts higher and now expects gold to trade at about $1,000 an ounce in one month (from $900 previously) and $1,050 an ounce in three months' time (compared with $850 previously).

"If sustained, heavy in-flows into the ETFs occur, the move in gold [prices] could become self-fulfilling and much higher numbers could result," Mr Reade said.

Gold reached a record $1,030.80 a troy ounce in mid-March but then remained rangebound in the second quarter with $850, the previous long-term peak for bullion, providing a floor and the $950 mark proving a tough resistance level.

European gold sales set to plunge
European central banks are on track to record their lowest annual gold sales since the disposal of the metal's official reserves started in 1999, writes Javier Blas.

The reduced selling came as gold prices surged this year to an record above $1,000 a troy ounce.

The institutions bound by the Central Bank Gold Agreement – the banks of the eurozone plus Sweden and Switzerland – can sell each year – September to September – up to 500 tonnes of gold.

So far this year they have sold 297 tonnes, according to the latest statistics from the industry-backed World Gold Council.

Gold traders and analysts said central banks could sell as little as 350-375 tonnes, the lowest level since the CBGA pact was signed in 1999.

Jill Leyland, economic adviser for the World Gold Council, said: "It certainly looks as if they will be under 400 tonnes this year – unless a major new seller emerges."

Last year, the CBGA signatories sold 475.8 tonnes, boosted by heavy sales from the Spanish central bank.

The current CBGA
will expire in September 2009.
Holdings by the seven major gold ETFs fell from 30.1m ounces from April 21 to 28.01m ounces by mid-May. That selling has been replaced by renewed buying and since mid-May, holdings in the seven ETFs have risen by 4.7m ounces, or 16.7 per cent, to 32.71m ounces on Friday.

Hedge funds and speculators are betting aggressively that gold prices will rally. The latest data from the Commodity Futures Trading Commission show the speculative net long position for gold rose 1 per cent to 189,602 lots, so the bets on bullion prices moving higher remain close record levels. Gold enthusiasts fear a bail-out of Freddie Mac and Fannie May will cost US taxpayers billions of dollars andneed a huge increase in money supply comparable with that in the 1920s that led to hyperinflation in Germany.

James Steel, of HSBC notes, strong similarities between current market conditions and the situation in mid-March when Bear Stearns collapsed, credit spreads widened, oil prices surged and gold pushed to an all-time high.

"Fannie Mae and Freddie Mac are clearly not Bear Stearns as they have the implicit backing of the US government," Mr Steel said. "Nonetheless, the situation looks uncertain enough to encourage enough investor safe haven buying in bullion to support gold [prices]."

The move for gold comes in spite of increasing evidence that high prices are having a negative impact on the jewellery sector. On Monday, Turkey announced that gold jewellery exports fell by a quarter to 5.8m tonnes in June. Turkey is one of the world's largest gold jewellery producers and exports for the first half of 2008 were down by 13.7 per cent to 38.5 tonnes, compared with the same period last year.

The increasing shift into gold ETFs also suggests investors have lost some confidence in other assets normally considered havens in turbulent times.

"The Swiss franc is losing its safe haven properties," David Bloom of HSBC said. "The Swiss National Bank, the hard men of the inflation fighting world, have buckled, the Swiss equity market is not as defensive as it used to be and the Swiss banking sector is under sustained pressure.

"The positive image for the Swiss currency is starting to fray at the edges."

[bobp] 29/6/2008 22:33

Cassini,
I'm new to phau although heard of it before, are you suggesting staying clear?
I was going to have a punt tomorrow
Bob

[cassini] 29/6/2008 21:13

Yes, I've seen the pennant ( others call it a triangle ) mentioned elsewhere. Technically it has broken out upwards now, though I suppose it'll have to stay clear for a few days to be sure.

[abundance99] 24/6/2008 08:54

Is if forming another pennant? When this last happened (Nov 07 - Jan 08) it had a big jump afterwards.

[spob] 27/4/2008 16:53

I'm looking to add more possibly next week.

America with 2% of the worlds population consumes 25% of the worlds oil production. The dollar is doomed.

Buy the dips don't sell them

[abundance99] 23/4/2008 12:34

I am out for the moment. The chart is going nowhere and it looks like it is going down before it goes back up.

[ludwik] 22/3/2008 07:05

Time to short gold!

[spob] 13/3/2008 18:00

Gold reaches record high 1,000 dollars

6 hours ago

LONDON (AFP) - Gold prices breached 1,000 dollars for the first time on Thursday as the precious metal benefited from a plunging dollar and its safe-haven status amid fears of rising inflation.

Investors are funnelling their cash into commodities like gold as they seek refuge from volatile world stock markets, the collapse of the dollar and growing fears about a US-led economic slowdown, traders said.

After reaching the milestone of 1,000.45 dollars, gold stood at 994.05 dollars per ounce on the London Bullion Market, up from 975.50 dollars late on Wednesday.

"Ongoing inflationary pressure from rising oil prices and continued concerns about the US economy and credit liquidity have led sentiment to turn more positive," said James Moore, analyst at TheBullionDesk.com.

Demand for the precious metal, which is used in jewellery, dentistry and electronics, is spearheaded by Asian economic giants China and India.

Gold, which is priced in dollars, becomes cheaper for buyers using other currencies when the US unit falls in value. The dollar slumped on Thursday against both the European single currency and the yen as fresh credit jitters swept across global markets, dealers said.

Many analysts expect the US Federal Reserve to slash its key lending rate at a scheduled meeting next week in a bid to ward off a potential US recession. Investors generally prefer the currencies of countries that have higher interest rates as they can reap better yields.

On the foreign exchange market on Thursday, the euro jumped as high as 1.5625 dollars amid mounting concerns over the US economy, dealers said.

The dollar also plunged below the key 100 yen level for the first time in 12 years, falling as low as 99.78 yen.

"The gold-favourable environment continues to evolve positively for the metal, with expectations of further Fed rate cuts and inflationary concerns boosting safe-haven buying," said analysts at Barclays Capital.

Gold has risen by about 17 percent so far this year, underscored also by supply problems in South Africa -- the world's largest producer.

Stoppages by miners protesting unsafe working conditions and ongoing power cuts in South Africa have hampered supplies.

At the start of January, gold jumped above 850 dollars per ounce, smashing a 28-year-old record, and has been on an upward trend ever since.

There are widespread fears that the US economy is lurching into recession and record oil prices of almost 111 dollars have stoked inflationary pressures.

Global demand for gold is also surging owing to increased jewellery purchases in China and India, according to the World Gold Council.

Demand was additionally being fuelled by higher purchases of the metal by industry and wealthy individuals, it added.

The 1,000-dollar threshold was likely to remain largely symbolic, according to BaseMetals.com analyst Perrine Faye.

"It's a symbolic threshold that many people wanted to see crossed, similar to 100 dollars for oil, 20 dollars for silver and 1.50 dollars for the euro," Faye said.

"Investors like to see a clear finish line in round numbers but this figure is simply part of a trend that sees a rush to commodities in a period of economic uncertainty," she added.

[hodginsjkp] 29/2/2008 00:44

1010 target but top of channel. Then decent pullback?

[spob] 28/2/2008 18:52

1000 bucks just beyond the horizon

[spob] 24/2/2008 08:36

They have 66 "short etfs" aswell, so that you can short various commodities and sectors within an isa if you so wish.

[arf dysg] 22/2/2008 17:10

Thanks.

This looks like a company called ETFsecurities who have their own range of ETFs.

As it happens, I know of at least one other, "iShares" run by Barclays.