hree days ago, when Wall Street was virtually certain that the Brexit vote would comfortably go in favor of the Remain camp, the best tell about the true sentiment on the ground had nothing to with polls, or manipulated bookies’ odds, and much more to do with our report that worried British savers are scrambling to buy gold bars and “stuffing them in safes at home, data suggests, as fears mount that a Brexit-induced financial meltdown could be just around the corner.”
To all those who did convert their soon to be far less valuable pounds sterling into physical gold, and in the process avoided a record devaluation in just one day, congratulations.
However, it turns out that many more did not. And as gold soared overnight, having its best day in years while cable was tanking, suddenly everyone else also had the epiphany that the only true money that preserves its value regardless of the stupidity of politicians or idiocy of central bankers, is gold.
As the Telegraph reports, by 11am London time, BullionVault users had traded £23.5m of vaulted gold and silver since midnight – more than two weeks’ worth of average trading in 2015. And, showing the scramble by the public to buy gold, new account openings by 11am were already twice this year’s daily average.
But it was about to get much worse, or perhaps, batter.
According to Google, the number of internet searches for the phrase “buy gold” spiked by 500% after the Brexit results trickled through around 5am. Investors flocked to the safe haven asset during Asian trading while the pound plummeted to a 31-year low.
Something very interesting took place in the COMEX Registered silver inventories last week. There were two very large transfers of silver from the Registered to the Eligible category. What makes these two large withdrawals so interesting is that the Registered silver inventories are now at a record low.
The first large transfer of silver was reported on June 1st, in which 2.5 million oz (Moz) were taken out of the CNT Depository and another 410,000 oz from HSBC. Nearly 3 Moz of silver were transferred out of the Registered inventories in one day:
Shares of gold miners have more than doubled this year, crushing the 20 per cent gain in the precious metal and prompting investors such as billionaire George Soros to increase their bets on the sector.
Soros Fund Management bought a 1.7 per cent stake in miner Barrick Gold in the first quarter, worth $263.7m, according to a filing on Monday. Shares in the Canadian-listed company have surged 139 per cent so far in 2016.
As gold does not pay a yield like bonds or offer a divided like some equities, the precious metal has benefited from the current low and negative interest rate environment. A weaker tone for the US dollar after peaking in late January has also spurred a solid rebound in commodity prices.
Gold miners have also spent the last four years writing down billions of dollars in assets and cutting costs to reduce their debts after gold prices tumbled from their 2011 peak. Barrick Gold has cut its debt by nearly a third over the past 15 months.
“They’ve gone through a bad few years (the gold mining companies) but they seem to come out the other side,” said David Govett, head of precious metals at broker Marex Spectron. “They’re easier to trade and you don’t get the ridiculous fluctuations we see in the commodity price sometimes.”
India’s gold imports could hit a record high this year amid widespread smuggling to sidestep government levies on overseas shipments, Australia and New Zealand Bank, Asia’s biggest shipper of physical gold, said on Wednesday.
The forecast by the bank’s head of precious metals, John Levin, runs counter to tallies that show gold imports in decline in the world’s second-biggest gold market after China.
Mr Levin said he expects 15 per cent of India’s gold this year to be “smuggled in” or arrive via “other unofficial channels” to beat a 10 per cent levy imposed by the government.
Mr Levin also said more semi-refined gold, known as gold dore, was being imported from overseas mining companies because of a lower government levy. The import duty on gold dore is 8.5 per cent.
“You could see a record amount of gold going into India this year,” Mr Levin said, “A lot through unofficial channels and a lot of it going in as semi-refined gold.”
The desperation is obvious, palpable, incredible, fascinating, and unmistakable. History is being made, as the last ditch is overrun.The banker cabal wishes to defend an indefensible $1300 gold price and to defend an indefensible $18 silver price. The Gold price will find its true value and price over $10,000 per ounce. The Silver price will find its true value and price over $300 per ounce. Silver will be part of the new asset backed global currency system. NEXT COMES A GLOBAL LEHMAN MOMENT WITH BANK FAILURES AND A THREAT TO THE ENTIRE WESTERN BANKING SYSTEM…
Currently, there are signs in the global market that in the near future silver will be more lucrative asset than gold, experts said.
Since the beginning of the year, Pro Aurum, one of the leading precious metal dealers in the world, has faced growing demand for silver. Currently, gold and silver prices are rising.
Pro Aurum director Robert Hartmann underscored that one of the key reasons behind the growing demand for silver is a “high pricing ratio between gold and silver.”
“In comparison with gold and other precious metals, silver is highly undervalued,” he was quoted as saying by Manager Magazin.
Many analysts agree with Hartmann, the article read. Currently, the ratio between gold and silver prices is at a point which has usually been followed by significant historical changes.
The gold to silver ratio can be calculated by simply dividing the gold price by the price of silver. Now, gold is $1,257 an ounce after a rally in prices. Silver is nearly $16 an ounce. Thus, the ratio is 1 to 78.6.
Until recently, the gold to silver ratio had reached over 80, which earlier already happened in 1995, 2003 and 2008. However, each time it dropped below 80, as it is happening today.
It’s not just gold that has been in great demand. As Bloomberg notes, investors own the most silver in exchange-traded products in seven months, boosting holdings from a three-year low. The rebound comes as hedge funds and other money managers hold a near-record bet on further price gains.
The precious metal, which also has wide industrial uses, is up 11% this year.
China has been an unofficial price-setter for most metals over the past decade. And this week, the country became an official participant in setting prices for one of the world’s most important precious metals markets.
That’s the London Bullion Market silver price. Where one of China’s largest banks just became a member of an elite group of players that controls fluctuations in this key metal.
CME Group, which runs the process for price setting of silver in London, said Sunday that China Construction Bank will officially join as a member of the silver price process. Putting it alongside existing participants HSBC, JPMorgan Chase, The Bank of Nova Scotia, Toronto Dominion Bank, and UBS.
These groups will now participate in price bids that go into setting the official London silver price. The first time that China will have direct influence on this process.
The expansion into China in itself is significant. And the entry of China Construction Bank into the market could also have some other important consequences for precious metals.
One month ago, when looking at the latest Canadian official international reserves, we noticed something strange: Canada had sold nearly half of its gold reserves in one month. According to the February data, total Canadian gold reserves stood at 1.7 tonnes. That was just 0.1 per cent of the country’s total reserves, which also include foreign currency deposits and bonds.
As we noted, the decision to sell came from Finance Minister Bill Morneau’s office.
“Canada’s gold reserves belong to the Government of Canada, and are held under the name of the Minister of Finance,” explained a spokesperson for the Bank of Canada on Wednesday. “Decisions relative to gold holdings are taken by the Minister of Finance.” Reached by Global News on Wednesday evening, a spokesperson for the finance department said the sale “was done in the normal course of business for the government. The decision to sell the gold was not tied to a specific gold price, and sales are being conducted over a long period and in a controlled manner.”
This latest sell-off is indeed part of a much longer-term pattern of moving away from gold as a government-held asset. According to economist Ian Lee of the Sprott School of Business at Carleton University, Ottawa has no real reason to keep its gold reserves other than adhering to tradition.
“Under the old system, (gold) backed up currencies,” Lee explained. “The U.S. dollar was tied to gold. One ounce was worth US$35. Then in 1971, for lots of reasons I won’t get into, Richard Nixon took the United States off the gold standard.”