A private investor has bought £500,000-worth of gold bullion through an app on their smartphone in what is thought to be one of the largest transactions of its kind.
BullionVault, the online silver and gold exchange, said it had sold one individual 21kg of gold stored in its Zurich vaults for half a million pounds in August — the highest value deal conducted via its app.
Although just 8 per cent of the company’s clients use the app to purchase gold or silver, BullionVault said it regularly saw orders placed for “six-figure deals”.
August’s transaction beat the company’s previous record set in February 2013 when a customer bought £365,000-worth — or 10.7kg — of gold using an iPhone.
But while the method of purchase might have been innovative, the market remains as old fashioned — and beset by price movements — as ever. Adrian Ash, head of research at BullionVault, said the gold had been purchased for £727 an ounce. The price on September 16 stood at £722. “Well, these things happen,” he added.
“Gold’s father is dirt, yet it regards itself as noble” So goes a Yiddish proverb. Trouble is, it has not lived up to the proverb’s meaning: gold, like other commodities, has taken a beating over the past month.
Unlike many commodities, it has few industrial uses. A big chunk of demand is for investment. Gold held in exchange traded funds — a typical investment instrument — has fallen 40 per cent since a 2012 peak.
The recent gold price fall means more trouble ahead for gold miners. The all-inclusive cost to produce gold is about $1,100. If gold prices fall below $1,000, some gold reserves (assets) would be unprofitable to recover and need to be written down, putting pressure on the more indebted miners.
Gold cannot fall forever. Even so, listed gold miners should at some point be cheap. One early buy signal is when it costs less to buy mines on the stock market than to build them. Building a gold mine from scratch can be measured, crudely, by the cost of the investment (including debt) an ounce of gold produced. An average new mine would cost $2,500 an ounce of annual output, estimates RBC. Yet the larger listed gold miners still have an average enterprise value to production of $3,600.
More traditional valuation metrics tell a similar story. Despite the precious metal’s fall, the two largest miners by market value, Barrick Gold and Newmont Mining, still trade at double their forward price earnings multiples of two years ago.
Even if gold prices keep falling, it is far too early to sift the dirt for glitter.
India’s gold imports shot up by about 61% to 155 tonnes in the first two months of the current fiscal mainly due to weak prices globally and the easing of restrictions by the Reserve Bank of India.
In April-May of the last fiscal, gold imports had aggregated about 96 tonnes, an official said. In the international market, gold has been trading weak over the past few months. On Friday, it closed at $1,095.10 in New York market.
India is the largest importer of gold, which mainly caters to the demand of the jewellery industry. Large imports of gold impact the country’s current account deficit, which occurs when value of import of goods and services is more than its exports.
The CAD in 2014-15 shrank to 1.3% of GDP ($27.5 billion) from 1.7% ($ 32.4 billion) in 2013-14. The RBI and the government have maintained that the CAD level is comfortable.
In November last year, RBI had scrapped the controversial 80:20 scheme. Under the programme, which was put in place in August 2013 to keep a tight leash on gold inflows, at least 20% of imported gold had to be exported before bringing in new lots.
In 2014-15, India imported 915.54 tonnes of gold as against 661.71 tonnes in the previous financial year.
– Russia adds another 800,000 ounces or 25 tonnes to gold reserves in June – Russia’s has sixth largest gold reserves in the world – Allocates 13% of FX reserves to gold – Central bank buys all Russian gold production – Other Russian gold demand imported – If billionaire oligarchs diversify into gold, prices will rise sharply – Russia views gold bullion as “100% guarantee from legal and political risks”Read more ›
– Bloomberg Intelligence suggest gold-backed yuan see gold at $64,000 per ounce – “Chinese gold standard would need a rate 50 times bullion’s price” – As China-U.S. relations deteriorate, gold-backed yuan possible – Dollar and financial and monetary dominance of U.S. at risk – U.S. and China war of words continues to escalate – China rejects U.S. hegemony in Southeast Asia – Currency war to escalate
If China were to partially back its yuan with gold it would require a gold price of $64,000 per ounce, 50 times gold bullion’s price today, according to a recent article from respected Bloomberg Intelligence.
It seems like an outlandish forecast. However, as tensions between the U.S. and China continue to escalate such a scenario is not actually as implausible as it may first appear.
If China were to back its yuan with gold it would require a price of $64,000 per ounce according to a recent report from Bloomberg.