The reserve bank says this way the Vietnamese public can get world prices for their bars, coins and jewellery, something that has eluded them so far due to export restriction and various trading and import limitations in the communist country.

The bank wants to “exchange the bullion for foreign currencies” says the army newsletter, in other words, the world gold market could suddenly be forced to deal with vast new supplies. Only about 2,500 tonnes of gold are mined annually and a further 1,650 tonnes are recycled.

The People’s Army Newspaper Online reports according to the state bank’s calculations, the amount of gold  held by Vietnamese citizens is about 300 – 500 tonnes, valued at $16.59 – $27.65 billion.

“We believe that with these tools, we, on the one hand, can prevent gold speculation in the economy, stabilise gold market and adjust domestic gold prices in accordance with the world price,” he [Governor Nguyen Van Binh] said. “On the other hand, we can mobilise gold from citizens to help socio-economic development.”

The Vietnam state bank may be onto something.

Although on a completely different scale it has been argued that Indians’ love of gold is destroying their economy. The FT quotes research that households on the subcontinent are hoarding 18,000 metric tonnes of gold worth over $950 billion, representing 50% of the country’s GDP:

The vast amounts of gold widens the country’s current account deficit, weakens the rupee and generally keeps money that could flow into the economy locked up in cupboards and jewellery boxes.

Nevertheless, Vietnam would be acting contrary to the recent actions of central banks – after two decades of being net sellers of gold, central banks, particularly in Asia, are now buying gold at a record pace.

But given the situation in Euroland, a reversal of this trend is very much in the realm of possibility.

While Germany has stated that its gold reserves are untouchable, the IMF and other institutions selling gold has been bandied about as as solution for European leaders struggling to find ways to finance the bailout of countries such as Greece.

The IMF, which holds 2,800 tonnes of gold, said earlier this month it needs to raise $500 billion in lending resources and should it command gold sales for the purpose the impact on gold and silver could be devastating according to MarketWatch:

This is the type of fat tail event also known as black swan that can blind side gold and silver investors. Precious metal investors are well advised to pay close attention to deliberations within IMF. If there is an actual big sale of gold by IMF, gold can easily fall to $1200.

Another source of supply is legendary hedge fund guru John Paulson. The FT has gone so far as to call Paulson’s dominant role in the gold market a ‘curse’ and foresees a dash for cash:

Knowing that Paulson & Co holds more gold than many central banks, and that it is struggling, it only takes a short leap of imagination to worry that he might be forced to sell it. Indeed, in the third quarter of last year, Paulson & Co sold ETF shares equivalent to roughly 34 tonnes of gold – and in September the gold price fell 11 per cent.

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Vietnam wants decree to “mobilize” citizens’ gold, could sell 500 tonnes. And you were worried about IMF and Paulson dumping bullion

Gold is increasingly being considered an investment asset on its own and gold and silver bars sales are soaring along with jewellry sales.

The Chinese Spring Festival lasted from January 22 to January 28 and Chinese customers crowded the precious metals stores fact that indicates that the middle class is rapidly expanding.

In 2011, China produced 355 metric tones gold which ranked it the world’s top gold producer. During the same year it was estimated by WGC that it consumed 750 metric tones of gold.

Taking into account its gold consumption growth China would overtake India as the world’s top gold consumer in the near future.

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China Gold Rush – Not on Discovery Channel

Last year, Apple made headlines when its cash and marketable securities position of $73.8 billion surpassed the operating cash balance at the U.S. Treasury.  The news magnified calls for Apple to deploy some of its idling cash hoard.  At the time, analyst Katy Huberty from Morgan Stanley explained that Apple’s current and future cash flows “greatly exceed” its cash needs.  After Apple’s most recent earnings report, the calls for deploying cash are increasing in volume.

Don’t Miss: Apple is Now Worth More Than Greece

Late Tuesday, Apple reported its financial results for its fiscal 2012 first quarter, which ended December 31, 2011.  In addition to a blow-out earnings number, Apple’s cash position has grown to new earth-shattering records.  Apple generated a cash flow of $17.5 billion in the quarter, and finished 2011 with a whopping $97.6 billion in cash and equivalents.  According to Zero Hedge, “Looked at otherwise, if Apple were a country, and its cash was equivalent to GDP, it would rank as the world’s 58th largest economy, above such countries as Slovakia, Iraq, Luxembourg and Syria.”  In terms of market capitalization, Apple has now surpassed Exxon Mobil as the world’s most valuable company.  In fact, Apple’s current cash position of nearly $100 billion is greater than the market cap of 474 of the S&P 500 companies.

The question then becomes, what should Apple do with its massive cash hoard?  Conventional recommendations range from paying a dividend or buying back stock, to acquiring suppliers.  While these are certainly worthy recommendations, it is hardly the unconventional thinking that has propelled Apple to the top of the podium.  In addition to these recommendations, Apple should also consider purchasing gold.  A relatively small gold position in Apple’s portfolio could help the company further offset currency and monetary policy risks to its $97.6 billion stockpile.  In November, Apple started accepting Chinese yuan for App Store downloads, but could benefit even more by diversifying into gold.  A report by Oxford Economics last year recommends holding at least 5 percent of assets in gold.  The report concludes that gold is a good hedge against inflation, as well as deflation.

Companies investing in precious metals such as gold is not completely unthinkable.  In 2009, life insurer Northwestern Mutual announced it purchased $400 million in gold.  It was the first time in the company’s 152-year history.  Chief Executive Officer Edward Zore explained, “Gold just seems to make sense; it’s a store of value.  The downside risk is limited, but the upside is large.”  Since his comments in June 2009, gold prices have increased from $950 per ounce to nearly $1,700.

Investor Insight: Currency Wars Are Driving Gold and Silver Higher

Aside from gold’s monetary value to investors, gold also has a minor industrial value.  According to the most recent data from the World Gold Council, technology gold demand in the third quarter of 2011 was 120.2 tonnes.  The WGC explains, “According to the Semiconductor Industry Association, worldwide sales of semi-conductors (the major consumer of gold in tech) were $25.8 billion for the month of September, an increase of 2.7 percent from sales of $25 billion the prior month.  Over the year to end-August, sales grew 2.2 percent year-on-year, partly as a result of rising demand in netbook and tablet segments.  Industry analysts iSuppli estimates that worldwide tablet shipments will exceed 60 million units in 2011, with Apple accounting for 73.6 percent of those.”  Keep in mind, this estimate was before Apple’s record breaking sale of 15.43 million iPads in the December quarter.

While some may think it would be out-of-the-question for Apple to purchase gold, the precious metal would provide a hedge for the company and its shareholders.  At the very least, Apple could use the gold in its technology products.  If Apple deploys just 5 percent of its $97.6 billion cash hoard to purchase gold, it would only have to part with $5 billion.  This amount of cash flow was earned in just one month in the previous quarter.  Although Apple has not announced new plans for its cash supply, it may be nearing a decision.  The company’s Chief Financial Officer Peter Oppenheimer said, “We’re actively discussing uses of our cash balance, and have no specifics to share.  In the meantime, we continue to be disciplined with cash, and are not letting it burn a hole in our pockets.”

By Eric McWhinnie

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Should Apple buy gold?

The move comes after Ivanhoe scrapped a controversial “poison pill” shareholder provision clearing the way for Rio, which already owned 49% of the Vancouver-based company, to do a complete takeover.

Rio paid $20/share for the additional 2%. By 2:30pm EST on Tuesday Ivanhoe Mines (TSE:IVN) was changing hands at $17.40 down 4.9%, bringing its market value to some $13 billion. The counter is now negative for 2012 and is down from a peak above $28/share reached in February last year. Rio ADRs lost 1.3% at $57.52 in New York.

In August Ivanhoe executive chairman Robert Friedland told a group of investors that Ivanhoe is worth at least $30 billion, but with the probability of a delisting should Rio take full control, that prospect now seems very distant.

According to a statement released on Tuesday by London-based Rio it has no “current intention” of buying additional securities, but added:

However, Rio Tinto reserves its right to seek opportunities to purchase additional securities of Ivanhoe depending upon its assessment of Ivanhoe’s business, prospects and financial condition, the market for Ivanhoe’s securities, general economic and tax conditions, and other factors.

Rio Tinto also reserves its right to take any permitted action as the majority shareholder of Ivanhoe.

In October Ivanhoe and Rio dodged a bullet when the Mongolian government said it was rethinking a 2009 deal that gave Ivanhoe Mines and Rio Tinto a 66% stake in Oyu Tolgoi and that it wanted half of the $6 billion gold and copper project, now 70% built. Ivanhoe shares plunged on the news, but the firm took a tough stance and after some desperate negotiations Mongolia backed off.

Oyu Tolgoi is one of the biggest mining projects in the world and will help turn Mongolia into the world’s fastest-growing economy with staggering GDP growth of 35%. The mine is on track to produce more than 1.2 billion pounds of copper and 650,000 ounces of gold each year by the first half of 2013.

Stamp circa 1979 shows the Soviet Rapidity experimental train from the series “Locomotives.” Image by AlexanderZam / Shutterstock.com

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Rio Tinto takes control of Ivanhoe, punters feel deflated

Statistics South Africa released its Mining: Production and sales report on Tuesday.

The poor performance by PGMs caused overall mine production to fall two percent. Over the same period, gold production was up 2.9%.

According to 2009 estimates, South Africa produces 80% of the world platinum, followed by Russia at 11%.

Implats announced in November 2011 that production dropped during Q1 due to planned operational outages.

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South African PGM production down 2.7 percent