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Sun, 04th December 2016

Anirudh Sethi Report

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Archives of “GOLD” Tag

Putin “Buys The Dip” – Russia’s Gold Buying In October Largest This Millenium

Russia gold buying accelerated in October with the Russian central bank buying a very large 48 metric tonnes or 1.3 million ounces of gold bullion.

 

This is the largest addition of gold to the Russian monetary reserves since 1998 and could be seen as a parting ‘gift’ by Putin to his rival ex-President Obama.

The Russian central bank gold purchase is the biggest monthly gold purchase of this millennium.

Concerns about systemic risk, currency wars and the devaluation of the dollar, euro and other major currencies has led to ongoing diversification into gold bullion purchases by large creditor nation central banks such as Russia and China.

Commerzbank went with the simple explanation: 

“Clearly the central bank was taking advantage of the stronger ruble – which has made gold cheaper in local currency – to buy more gold.”

“By contrast, the Chinese central bank bought only around four tons of gold last month – the second-lowest gold purchases since China began publishing monthly figures back in June 2015. The currency is likely to have played a role here, too – the yuan has been depreciating noticeably since the end of September.”

However, the Russian Central Bank has quietly been buying huge volumes of gold over the last 10 years. This diversification into gold accelerated since the financial crisis and since relations with the U.S. deteriorated in recent years. Russia bought gold systematically both when the ruble was strong and when it was weak.

In 2015, Russia added a record 208 tons of gold to her reserves compared with 172 tons for 2014.

According to the World Gold Council, only the central banks of the U.S., Germany, Italy, France and China currently hold larger gold reserves than Russia.

SNB forex reserves end-Oct CHF 630.343bln vs 628.091bln prev

Latest SNB forex reserves report 7 Nov

Increase in FX reserves, decline in gold reserves all supporting the SNB intervention plays

USDCHF 0.9781 near session highs as USD demand and risk-on returns. EURCHF found support at 1.0780 but has run into sellers around 1.0830

 

Russia’s Most Potent Weapon: Rapidly “Hoarding Gold” As Global Currency War Is Upon Us

“He who holds the gold makes the rules?” notes SHTFPlan.com’s Mac Slavo… 

Fresh attempts at containing Russia and continuing the empire have been met with countermoves. Russia appears to be building strength in every way. Putin and his country have no intention of being under the American thumb, and are developing rapid resistance as the U.S. petrodollar loses its grip and China, Russia and the East shift into new currencies and shifting world order.

What lies ahead? It will be a strong hand for the countries that have the most significant backing in gold and hard assets; and China and Russia have positioned themselves very well. Prepare for a changing economic landscape, and one in which self-reliance might be all we have.

As The Free Thought Project’s Jay Syrmopoulos warns, Russia is Hoarding Gold at an Alarming Rate — The Next World War Will Be Fought with Currencies

With all eyes on Russia’s unveiling their latest nuclear intercontinental ballistic missile (ICBM), which NATO has dubbed the “SATAN” missile, as tensions with the U.S. increase, Moscow’s most potent “weapon” may be something drastically different.

The rapidly evolving geopolitical “weapon” brandished by Russia is an ever increasing stockpile of gold, as well as Russia’s native currency, the ruble.

Take a look at the symbol below, as it could soon come to change the entire hierarchy of the international order – potentially ushering in a complete international paradigm shift – and much sooner than you might think.

The symbol is the new designation of the Russian ruble, Russia’s national currency.

India : Forex reserves dip by $1.5 billion to $366.13 billion

India’s foreign exchange reserves declined by USD 1.506 billion to USD 366.139 billion in the week to October 14, due to fall in foreign currency assets, the Reserve Bank said today.

In the previous week, the reserves had decreased by USD 4.343 billion to USD 367.646 billion.

It had touched a life-time high of USD 371.99 billion in the week to September 30, 2016.

Foreign currency assets (FCAs), a major component of the overall reserves, dipped by USD 1.486  .. 

FCAs, expressed in US dollar terms, include the effect of appreciation/depreciation of non-US currencies such as the euro, pound and the yen held in the reserves.

Gold reserves remained steady at USD 21.406 billion, the apex bank said. 

The special drawing rights with the International Monetary Fund declined by USD 8 million to USD 1.468 billion, while India’s reserve position with the Fund dipped by USD 12.8 million to USD 2.356 billion, RBI said. 

India : Gold imports’ decline by 59 per cent during January-September

India’s gold imports declined by 58.96 per cent to 270 tonnes from January to September from 658 tonnes that were shipped-in during the corresponding period of last year, a research report said on Tuesday.

According to the report by the industry body Assocham, gold imports declined due to a prolonged strike by jewellers and continuation of 10 per cent custom duty on imports.

The report stated that smuggling of gold has been on the rise due to high custom duty, even as the industry demands a lower levy structure to encourage official imports.

India has been among the two biggest gold consumers in the world with average imports of more than 1,000 tonnes per annum reported in the recent past.

Further, the industry body pointed-out that it expects gold prices to stay firm in the range of Rs 30,500-Rs 33,500 per 10 grams.

The report said that gold prices are expected to remain firm in the backdrop of continuous global political and financial risks coupled with revival in demand in the domestic market. The prices have appreciated by about 25 per cent since January this year.

“The moot question among the buyers and analysts is whether scope for any further run is left when gold has seen so much of a rally, the best among all the assets classes – including quantitative easing led stock markets,” the research paper by Assocham said.

“Revival in Indian consumption, financial risks in the Chinese economy, tapering tantrums of the US Federal Reserve as also close American Presidential elections are all seen as the push factors for the gold to remain as a safe haven.”

Emerging Markets: An Update

China reported lower than expected September reserve figures.
Polish central bank Governor Glapinski adjusted the forward guidance.
Brazil will open up development of its so-called pre-salt oil fields to foreign companies.
Colombia’s referendum on the FARC peace agreement failed by a razor-thin 50.2% to 49.8% margin.

In the EM equity space as measured by MSCI, Brazil (+5.3%), Czech Republic (+4.4%), and Hungary (+3.0%) have outperformed this week, while Peru (-3.3%), UAE (-2.2%), and South Africa (-1.4%) have underperformed.  To put this in better context, MSCI EM rose 1.4% this week while MSCI DM fell -0.7%.

In the EM local currency bond space, Brazil (10-year yield -23 bp), India (-8 bp), and Turkey (-4 bp) have outperformed this week, while the Philippines (10-year yield +38 bp), Colombia (+19 bp), and Poland (+11 bp) have underperformed.  To put this in better context, the 10-year UST yield rose 14 bp this week to 1.73%.

In the EM FX space, BRL (+1.7% vs. USD), HUF (+1.4% vs. EUR), and RUB (+1.3% vs. USD) have outperformed this week, while TRY (-1.5% vs. USD), KRW (-1.3% vs. USD), and CLP (-1.3% vs. USD) have underperformed.

Although Chinese markets are still closed for the national holiday, lower than expected September reserve figures were reported.  They fell to $3.166 trillion from $3.185 trillion.  This is a new five-year low.  This was also a somewhat larger drawdown than surveys anticipated, which when coupled with the softening yuan suggests that capital outflows from China may be picking up again.

Polish central bank Governor Glapinski said he expects the next move to be a hike, but adjusted the forward guidance.  He now sees the likely start of the tightening cycle in early 2018 instead of late 2017.  Deflation appears to be easing, while the economy rebounded in August after a weak July.

Emerging Markets: An Update

  • The Hungarian central bank capped the amount commercial banks can keep at its 3-month deposit facility.
  • S&P upgraded Hungary from BB+ to BBB- with stable outlook.
  • Bank of Israel will move to 8 meetings per year starting in 2017, down from 12 currently.
  • S&P raise the outlook on Russia’s BB+ rating from negative to stable.
  • The South African Reserve Bank signaled a potential end of the tightening cycle.

In the EM equity space as measured by MSCI, Brazil (+5.5%), Turkey (+5.0%), and Peru (+4.9%) have outperformed this week, while Qatar (-0.6%), Hungary (flat), and South Africa (+0.3%) have underperformed.  To put this in better context, MSCI EM rose 3.6% this week while MSCI DM rose 2.1%. 

In the EM local currency bond space, Brazil (10-year yield -36 bp), Turkey (-26 bp), and Hungary (-17 bp) have outperformed this week, while Ukraine (10-year yield +9 bp), Mexico (+2 bp), and China (flat) have underperformed.  To put this in better context, the 10-year UST yield fell 7 bp this week to 1.62%. 

In the EM FX space, ZAR (+3.5% vs. USD), RUB (+2.3% vs. USD), and CLP (+2.1% vs. USD) have outperformed this week, while MXN (-0.6% vs. USD), PHP (-0.4% vs. USD), and CNH (-0.4% vs. USD) have underperformed. 

The Hungarian central bank capped the amount commercial banks can keep at its 3-month deposit facility.  Those deposits stand at HUF1.6 trln today, and the central bank said it would lower that amount to HUF900 bln by year-end.  This unconventional policy is akin to monetary easing, as it pushes funds out of its deposit facility and into government bonds and the interbank market.  The end result should be lower government borrowing cost, lower lending rates, and a weaker forint.

Tokyo Olympic medals to be made from e-waste

Organizers of the 2020 Tokyo Olympics are hoping to source the gold, silver and bronze needed to make medals for the games by tapping the country’s “urban mine” — made up of millions of discarded smartphones and other small consumer electronics.

Such electronic waste contains enough precious metals to produce all the medals for the Olympic and Paralympic Games to be held in Japan’s capital four years from now, according to a group of Olympic organizers, government officials and company executives that discussed the proposal in June.

 For the 2012 London Olympics, 9.6kg of gold, 1,210kg of silver and 700kg of copper — the primary component of bronze — were used to produce medals. In comparison, the amount of precious metals recovered from discarded small consumer electronics in Japan in 2014 included 143kg of gold, 1,566kg of silver and 1,112 tons of copper.

India -Forex reserves hit all time high at $365.49 billion (Jumped by 43 billion last week )

Country’s foreign exchange reserves rose by $ 2.81 billion to reach a all time high of $ 365.49 billion in the week to July 29, helped by rise in foreign currency assets, the Reserve Bank has said.

In the previous week, the reserves had dropped by $ 664 million to $ 362.69 billion.

Foreign currency assets (FCAs), a major component of the overall reserves, rose $ 2.79 billion to $ 341.04 billion in the reporting week, as per RBI data.

FCAs, expressed in dollar terms, include the effect of appreciation/depreciation of non-US currencies such as euro, pound and yen held in the reserves.

Gold reserves remained unchanged at $ 20.58 billion.

The country’s special drawing rights with International Monetary Fund increased by USD 8.5 million to USD 1.48 billion while the reserve position rose by $ 13.6 million to USD 2.39 billion, RBI said.

Emerging Markets:An Update

EM ended last week on a soft note, due in large part to the attempted coup in Turkey.  Weakness in the lira spilled over into wider EM weakness in thin Friday afternoon market conditions.  The situation in Turkey has calmed, and so EM may gain some limited traction this week.  However, that calm will likely be very fragile and so we retain a defensive posture with regards to EM.
Central Bank of Turkey meets Tuesday and is expected to keep the benchmark rate steady at 7.5%.  However, it is expected to deliver another 50 bp cut to the overnight lending rate from 9% currently.  Inflation moved back above the 3-7% target range in June, and so the bank will have to play it cautiously, especially in light of the current political uncertainty. 
Poland reports June industrial and construction output, retail sales, and PPI Tuesday.  Central bankers appear mixed on the policy outlook right now.  If the economy continues to soften, we expect the MPC to tilt more dovish in H2.  Next policy meeting is September 7, and the decision will depend on how the economy looks over the next couple of months.
Malaysia reports June CPI Wednesday, which is expected to rise 1.8% y/y vs. 2.0% in May.  After last week’s surprise 25 bp cut, this data point doesn’t have much relevance.  However, if the inflation trajectory remains benign, further rate cuts are likely in H2.  The next policy meeting is September 7, and another cut then is possible.