Thursday, May 16, 2013

Andrew Maguire: Gold Propaganda Expert

Speaking of sensationalist Gold market commentary, there is surely no better contender for Gold propagandist of the year than Andrew Maguire who in February claimed that Central Banks had bought 225 tonnes over the 3-4 weeks prior during the Gold "smash" (little did he know that an even larger Gold smash was just around the corner):
Eric King:  “Andrew, I know you were talking about just this week alone on the smash and what kind of gold central banks were taking out of the gold market, but what about when we expand that into the last 3 or 4 weeks? What are we looking at there?”
Maguire:  “There’s at least 225 tons that have been drawn down. That is a huge amount of physical (gold).  That’s gold which has to be found (in order to be delivered), that’s probably got (existing) claims on it. But as I said to you before, there was a crisis situation, and I think they were damned if they did and damned if they didn’t. They were forced to take this price down simply because the price was about to break out.” King World News
I had been waiting on the statistics from World Gold Council to see if Andrew Maguire's figures aligned with official reporting, the below released today from their 'Gold Demand Trends Q1 2013' report:
Central banks added 109.2t of gold to their reserves in Q1 2013, the ninth consecutive quarter of net purchases. The sector accounted for 11% of demand in the first quarter,worth US$5.7bn in value terms. The level of purchasing was 5% lower than year-earlier levels, but remained within the broad parameters of quarterly demand – between 70 and 160t – from the sector over the last two years.
The steady level of buying confirmed that central banks and institutions continue to favour gold’s diversification benefits, as they reduce their portfolio allocations to US dollars and euro. This shift, and an analysis of the role that gold can play as a portfolio diversifier, is discussed in a recent World Gold Council research paper, Central bank diversification strategies: Rebalancing from the dollar and euro.
Again during the first quarter, the central banks adding to their gold reserves were distributed widely around the globe, with volumes concentrated in emerging markets.
Among the regular participants, Russia maintained as its welldocumented programme of buying domestically produced gold, increasing its reserves by around 24t. Elsewhere, Ukraine and Kazakhstan continued to make modest incremental additions to reserves.
Towards the end of the quarter, the Bank of Korea reported that it had added another 20t to its gold holdings during the month of February. The increase takes the bank’s total gold reserves to over 104t, placing it 34th in the world rankings table. Azerbaijan joined the ranks of countries whose central banks have increased their gold reserves. The central bank reported that it had purchased 3.0t during the quarter, via the stateowned Oil Fund, SOFAZ. SOFAZ, which is permitted to hold up to 5%4 of its portfolio in gold, has reported that it now owns around 18t.
Indonesia was another newcomer to the group of central banks expanding their gold reserves. Bank Indonesia reported an addition of almost 3t of gold, as a result of two small purchases in December and January. This is the first time the Indonesian central bank has altered its gold holdings since making two significant sales totalling 23t in the second half of 2006. Sales of gold by the signatories to the Central Bank Gold Agreement (CBGA) were non-existent during the first quarter of the year. Cumulative sales under the third  agreement are currently running at just under 200t, a fraction of the 1,600t that would have been permissible to date under the terms of the agreement. Disposals by non-CBGA signatories were also notable by their absence in the first quarter, with Mexico reporting a series of very marginal declines relating to trading activity.
And of those 109 tonnes purchased by Central Banks during the quarter, I highly doubt that all was purchased in the 3-4 weeks leading up to February 22nd (which accounts for only 1/3 of the reporting period).

Someone trying to defend Andrew Maguire's numbers might argue that China (or another Central Bank not regularly reporting their Gold reserve additions) could have purchased the difference, but that's a stretch! Those who have been taking Andrew Maguire's Gold commentary seriously might like to question him on the reasoning for discrepancy between his claims and official sector reporting.

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