Gold Demand Falls

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The gold price is down 1.4 percent so far this year after posting its biggest quarterly drop since 2008 in the last three months of 2012. Credit Suisse, Goldman Sachs and GFMS have all forecast a turn in gold’s bull cycle this year.
Unless something major changes in the macro landscape, this (report) does back up the idea that investors’ attention is much more focused elsewhere at the moment, Credit Suisse analyst Tom Kendall said.
Jewelry demand fell 3 percent last year to 1,908.1 tons, with the biggest absolute drop noted in India, the largest gold consumer, where a weak rupee led to record-high local prices.
In the fourth quarter it rose 11 percent, however, helped by a 35 percent rebound in Indian jewelry demand. Jewelry could have a good year in 2013, Grubb said. Western demand might at last improve as the US economy and others improve.
China, the second-biggest gold buyer behind India, saw a 1 percent drop in jewelry demand to 510.6 tons, its first annual decline since 2002.
Overall demand was flat in China in the full year and fell 12 percent in India, although buying rose in the final quarter as buyers scrambled to avoid a widely anticipated rise in import duty that was announced in January.
“Provided we see no more increases in import duty, we still think we will see India continue to recover from what was a difficult year in 2012 overall,” Grubb said.
He said a higher number of auspicious gold-buying occasions in the first quarter of 2013 would probably favor the metal.
“When you look at the full year, we’re anticipating that we’ll see 865-965 tons of demand,” he said.

Jury Out on China
In China, demand is expected to recover to between 780 and 880 tons this year, against 776.1 tons last year.
“The jury’s out on a major re-acceleration of growth in Chinese gold demand,” Grubb said. “Last year we saw the first significant slowdown in the Chinese economy in years. That did affect these numbers. What you’re seeing in January and February is a re-acceleration in the Chinese economy.”
Buying by various central banks continued its upward trend to hit a 48-year high at 534.6 tons.
Grubb said he expected the official sector to match last year’s buying in 2013, partly because monetary easing by developed countries was undermining confidence in the value of currencies.
Emerging country central banks regard quantitative easing policies as divisive and (believe they) affect the value of the assets that they hold - the dollar and euro, for example, he told the Reuters Global Gold Forum. They are diversifying away from traditional currencies and buying gold as a hedge.
Bar and coin investment fell sharply in the United States and Europe last year, with US off take dropping by more than a third and European buying down 29 percent. Overall investment demand last year fell 10 percent to 1,534.6 tons.
Investment via gold-backed exchange-traded funds rose, however, with ETF demand up by more than half at 279 tons.
Overall for the year (coin and bar demand) was weak, and it reflects the fact that in Europe the announcements by the European Central Bank took away tail risk in the mind of the investor, Grubb said.
The announcement of (bond-buying) in Europe and quantitative easing in the United States also mitigated fears of a near-term crisis, and I think that’s why bar and coin demand fell. Institutional investors and private wealth took a different view--you see the ETF tonnages went up 51 percent and over-the-counter (demand) had a strong year.
Grubb said while more optimism over the outlook for the global economy was likely to encourage investment in other assets like stocks, the fact that much of that was driven by extremely loose monetary policy meant gold investment was unlikely to fall.
Investors are trying to call a turn in the asset cycle, Grubb said. The jury’s still out on whether this will be the year when it actually happens. Even if you do start to look at the world more optimistically in 2013, it doesn’t mean there isn’t a role for gold in your portfolio.

Thailand Economic Recovery Picks Pace

Thailand’s economic growth exceeded expectations in the last three months of 2012, as it continued to recover from the previous year’s devastating floods.
Gross domestic product surged 18.9 percent in the October-December period, from a year earlier. Most analysts had forecast a figure close to 15 percent.
Compared with the previous quarter, the economy grew by 3.6 percent, BBC reported.
Analysts said the data may lessen the pressure on the central bank to ease its monetary policies to spur growth.
“Overall, the Thailand economy is in a pretty good shape right now,” said Rahul Bajoria, an economist with Barclays Capital.
It is unlikely that the central bank will cut rates anytime soon. The numbers clearly indicate that there is no urgent need to do that.
The floods in Thailand had an impact on some of the biggest industrial areas and resulted in many factories being shut. That hurt Thailand’s exports, one of the biggest drivers of its economic growth.
To make matters worse, a slowdown in demand from key global markets also hurt the export sector.
As a result, Thailand’s government implemented various steps to help stoke domestic demand in an attempt to offset the decline in exports and sustain growth in the economy.
It raised minimum wages in various parts of the country, in some areas by as much as 40 percent.
The government also announced plans to spend 2 trillion Thai baht ($65 billion/£40 billion) on infrastructure projects after the devastating floods.
For its part, Thailand’s central bank, the Bank of Thailand, cut interest rates in October last year, bringing down its key rate to 2.75 percent from 3 percent.
Analysts said that given the strong domestic demand and increased government spending, a rise in consumer prices remained a concern and may prompt the central bank to keep rates on hold in the short term.
Domestic demand momentum is certainly picking up and this will spill over into 2013, said Eugene Leow of DBS Bank.
The focus will likely turn towards inflation, especially considering the robust growth numbers.

Bulgarians Protest Foreign Power Companies

Thousands of Bulgarians protested on Sunday against rising electricity and heating bills, and police clashed with demonstrators throwing eggs and tomatoes at government buildings.
The violence occurred in Sofia, the capital, when riot police struggled to keep demonstrators away from public buildings, but no injuries were immediately reported. Large parts of the city center remained blocked off for hours, AP reported.
Similar rallies occurred in other cities across the country, with some temporarily blocking traffic on major highways.
Earlier, the protesters in Sofia burned their utility bills in public, accusing the government of failing to improve their falling living standards and demanding the expulsion of the three foreign-controlled power distributors that control the local market: CEZ and Energo-Pro from the Czech Republic, and Austria’s EVN.
In January, Albania revoked the license of CEZ and announced that electricity distribution would return to government control, but experts in Bulgaria have expressed doubt the government can legally do that.
Bulgaria, which joined the European Union in 2007, is the bloc’s poorest member country, with an average monthly salary of €360 ($480) and an average pension of €150 ($200).
The ruling center-right party of Prime Minister Boiko Borisov, which won parliamentary elections in 2009, has been steadily losing public support in the wake of the country’s worst economic downturn in a decade.
Elections in July are expected to be a close race between the incumbents and the opposition Socialist party.

Rise in Singapore’s Exports Less Than Estimated

Singapore’s exports rose less than estimated in January, as manufacturers shipped fewer electronics and pharmaceutical goods.
Non-oil domestic exports gained 0.5 percent from a year earlier, after a 16.3 percent drop in December, the trade promotion agency said in a statement. The median of 11 estimates in a Bloomberg News survey was for a 3-percent increase.
It’s still looking a little bit subdued outside of China, Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said before the report.
“The US economy is still weak and Europe remains in a recession,” he said.
Singapore’s export-dependent economy has been constrained by faltering global demand, as US lawmakers wrangle over tax and spending programs and Europe struggles with a debt crisis.
The government forecasts exports will rise 2 to 4 percent in 2013, restrained by an uneven world recovery.
Data for overseas shipments and industrial production in Singapore for January and February may be distorted by the Chinese New Year holidays.
Asian nations celebrated the Lunar New Year in January in 2012 and observed it in February this year, and factories from China to Vietnam typically shut and reduce production during the holiday.
The Singapore dollar was little changed at S$1.2385 against the US currency as of 8:16 a.m. local time. It has dropped about 1.4 percent this year.
Singapore’s electronics shipments by companies such as Venture Corp. fell 5.6 percent in January from a year earlier, after slipping 19.1 percent the previous month.

Iran, Afghanistan Cooperate On Road Transportation

Economy Desk

Welfare complexes will be constructed along transit roads of Afghanistan by Iranian investors, said deputy minister of roads and urban construction.
Shahriar Afandizadeh told Mehr News Agency that the fourth seminar on road transportation between Iran and Afghanistan was recently held.
“Both sides discussed commodity and passenger transportation in an effort to raise international road transportation between the two neighboring nations,” he explained.
On promotion of ties between the two nations, he said the construction of welfare complexes along transit roads of Afghanistan by Iran’s private sector was proposed.
Referring to the mutual agreement on activity of entities located in joint border terminals round-the-clock, he said both sides have agreed to declare the conditions to ease transfer of commodities and passengers along the roads.
Afandizadeh mentioned that construction of the second border bridge over Hirmand River in Milak region, Sistan-Baluchestan province, has been taken into consideration.
“It was decided that both sides pursue the issue,” he added.
A proposal was made on joining Afghanistan to the agreement on international and transit transportation ties signed by Iran, Turkmenistan, Uzbekistan, Oman and Qatar.

Call for Tabriz-Khujand Direct Flights

A senior Iranian official called for the start of direct flights between Iran’s northwestern city of Tabriz and Tajikistan’s northern city of Khujand, given the two nations’ interest in making reciprocal visits.
Mayor of Tabriz Alireza Novin made the remark in a meeting with the head of Iran-Tajikistan Friendship Association, Sa’d Kheirollaev, in Tabriz city on Sunday.
Novin said that exchanging cultural and art groups, tourist visits and mutual investments will further strengthen bilateral cooperation, FNA wrote.
Iran and Tajikistan have recently accelerated expansion of ties and cooperation, and observers believe that the good achievements gained in mutual cooperation should be deemed as a result of the efforts made by the two countries’ officials.
Iranian President Mahmoud Ahmadinejad and his Tajik counterpart Emomali Rahmon, in a meeting in the Kuwaiti capital city late October, explored avenues for further expansion of bilateral relations.

Denmark Trade Ties Discussed

Iran’s exports to Denmark include carpet, handicrafts, nuts and agricultural products, minerals, construction materials and petrochemicals, said Khorasan Razavi governor general.
In a meeting with visiting Danish Ambassador to Iran, Mohammad Hussein Forouzanmehr, added that Khorasan Razavi province is ready to promote economic cooperation with Denmark regarding cement, petrochemical and food exports, IRNA reported.
In light of its geographical location, the province is considered a gateway to Central Asian states and it is located on the north-south and east-west corridors.
Forouzanmehr noted that it can prepare the ground for transit of goods.
The Danish ambassador voiced his country’s readiness for cultural exchanges and cooperation in the field of campaign against illicit drugs with Iran, especially Khorasan Razavi province.
According to Public Relations Department of the provincial Governorate, Anders Christian Hougaard said the Iranian Muslim nation is a great nation.
Forouzanmehr expressed the province’s readiness to help promote bilateral ties with all friendly countries based on mutual respect.

US Growth Slips

A measure of future US economic growth edged lower in the latest week, while the annualized growth rate also slowed.