has warned that 2015 is set to be very volatile, urged international diversification and owning “physical precious metals stored outside the U.S.”
The 117-year-old London silver fix, the global benchmark for the price of the precious metal, will be shut down on August 14
The move follows increased regulatory scrutiny into bullion market price-setting, which is controlled by a handful of banks.
Deutsche Bank last month resigned its seats on the silver and gold fixes, after failing to find buyers. That left just two banks on the silver fix, HSBC and Bank of Nova Scotia.
In a statement the London Silver Market Fixing Limited said:
The period to 14 August 2014 will provide an opportunity for market-led adjustment with consultation between clients and market participants.
The London Bullion Market Association has expressed its willingness to assist with discussions among market participants with a view to exploring whether the market wishes to develop an alternative to the London Silver Fixing.
A landmark increase in Japan’s sales tax has led to a rush for small gold bars as retail investors pile into the precious metal to avoid next week’s rate rise.
Tanaka Kikinzoku Jewelry, a precious metals specialist, reported that sales of gold ingots across seven of its shops are up more than 500 per cent this month, as customers rush to take advantage of the current 5 per cent rate of consumption tax before it rises to 8 per cent on 1 April.
At the company’s flagship store in Ginza on Thursday, people queued for up to three hours to buy 500g bars worth about Y2.3m ($22,500). March has been the busiest month in Tanaka’s 120-year history.
Prime Minister Shinzo Abe has embarked on a series of radical reforms dubbed Abenomics in an attempt to weaken the yen and boost the ailing Japanese economy, prompting investors to buy gold as a hedge against the spectre of higher inflation.
Investors are being drawn to the metal not just because of higher taxes, said Itsuo Toshima, an adviser to pension funds.“Slowly and steadily, people are preparing for the worst, which is the failure of Abenomics.” Read More
Gold is being mined by some of the world’s biggest producers at costs that are higher than the price of the precious metal, according to a new measure that may become a benchmark of industry efficiency for companies and investors.
Several miners reporting earnings in recent weeks have revealed “all-in sustaining costs” of production of more than $1,200 per troy ounce, the price to which gold dropped this year. Some have shown an AISC of more than $1,400. Gold ended last week at $1,314 per ounce, having fallen more than 5 per cent during the week.
The AISC measure intends to show more clearly the full costs of getting gold out of the ground. Its adoption comes as this year’s sharp fall in the price of the precious metal has put the industry under more pressure than it has known for almost a decade and heightened investors’ interest in miners’ true profitability. Read More
Gold jewellery exports nosedived 70 per cent year-on-year to $ 441.41 million in July on account of shortage of precious metal and limited inventory in domestic market.
In July last year, the exports stood at $ 1.5 billion, according to the data provided by the Gems and Jewellery Export Promotion Council (GJEPC). “The drastic fall in exports of gold jewellery is mainly due to shortage of raw-material for jewellery manufacturing. This was because the government had taken steps to curb gold imports,” said GJEPC Chairman Vipul Shah.
Gold medallions and coins exports have also witnessed a sharp decline of 63.3 per cent to $ 112.83 million in July 2013 compared to a year-ago period. However, silver jewellery exports saw a robust jump of 184 per cent to $ 109 million during the period under review. The country’s total gems and jewellery exports fell about 17 per cent to $2.49 billion, the council said.
India is the largest importer of gold, which is mainly utilised to meet demand of the jewellery industry. The major markets for the country’s jewellery exports are the US, Europe, Middle-East, Hong Kong and Japan. During April-July 2013, the gems and jewellery exports declined 14.3 per cent year-on-year to $11 billion. Read More
Companies are trying to adjust by cutting capex, exploration and corporate costs. But we also notice that most of the global gold cost curve is burning cash at spot levels. Further cuts are needed in the coming 12 months to make ends meet.
We view this as a return to normal for global gold equities. Given the ‘price taker’ nature of the industry, the next decade will see high-cost asset disposals, reduced capital budgets, lower exploration expenditure and balance sheet recapitalisation as companies try to survive in a lower gold price environment…
…as China seems to be showing the world, we will see supply reductions occurring at the same time as the rolling over of ‘peak suppression’ of the gold price and the precious metal will realize its real fiat-numeraire-based value.
The battered rupee will remain under pressure against the U.S. dollar over the next year as a wide current account deficit and policy inaction dissuades foreign investment into the country, a Reuters poll showed.
The rupee is expected to trade at 59.0 in a month and 58.0 in six months, before reaching 57.5 in a year from now. That would be just over 4 percent stronger than the 60.0 it was trading at earlier on Thursday.
Still, that would mark only a modest rebound for emerging Asia’s worst performing currency so far in 2013.
The rupee has lost over 8 percent so far this year and has practically been on a one-way street since mid-2011. It hit an all-time low of 60.76 last week.
The U.S. Federal Reserve’s signal that it plans to cut back on its latest stimulus spending has hurt risky assets widely across Asia but has hammered the rupee the most due to India’s fiscal imbalances.
“We’ve been pretty cautious on the Indian rupee for a while now,” said Dominic Bunning, foreign exchange strategist at HSBC.
“It is going to be difficult for Asian countries to attract foreign flows and especially for India where the current account deficit is wide which creates dollar demand.”
The rupee has mostly tracked the country’s current account deficit, which has ballooned to a record high of 4.8 percent of gross domestic product in the fiscal year ended in March, driving overseas investors out of the country.
In what could be a vicious cycle, a weaker rupee will only add to concerns over funding that current account deficit, as India is one of the largest importers of crude oil and the biggest consumer of gold from abroad.
Policymakers have introduced curbs on the precious metal such as raising taxes on imports and ruling out credit, in the hopes that it will help reduce India’s import bill.
The Reserve Bank of India, handicapped by meagre reserves of $290 billion, which is enough to cover only seven months of imports, has been reluctant to sell too many U.S. dollars. Read More
Adam Grimes, CIO at Waverly Advisors told Business Insider that market participants have stop orders beyond visible support points in the market.
“[The sell off in mid-April] was quite likely driven by a cluster of these orders, and we believe that more are probably lurking lower,” he said.
A stop order is an order to sell a position if price fall to a certain level.
Here’s more from our conversation with Grimes. Read More
India’s gold imports are likely to exceed last year’s level to around 900 tonnes in the current calendar year on higher demand despite government curbs on its shipments to rein in current account deficit, a top official of World Gold Council said on Monday.
Curious who the biggest casualty of last month’s forced precious metal take down is? It may very well be John Paulson, who has systematically been blown out of all his concentrated positions in the past few years, and who, according to Bloomberg, just lost a record 27% in one month in his gold fund, and down 47% so far in 2013. If anything, it may explain the ongoing collapse in GLD holdings as he (among others) is forced to continue liquidating. The good news is that one levered players such as Paulson are finally blown out, there is hope that only far more rational, “non-weak handed” players remain at the table.
And some more news on the ongoing physical stampede out of Reuters:
- India, the world’s biggest buyer of the metal, will celebrate Akshaya Tritiya next week, the second-biggest gold buying festival after Dhanteras. Weddings have also started and will continue until July.
- At 0934 GMT, the actively traded gold for June delivery on the Multi Commodity Exchange (MCX) was 0.54 percent lower at 26,950 Indian rupees per 10 grams, after gaining more than a percent in the previous two sessions.
- A stronger rupee kept the upside in prices limited. The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.
- Premiums charged on London prices were at $7-8 an ounce on Tuesday.
- The RBI could restrict the import of gold on consignment basis by banks only to meet the genuine needs of exporters of gold jewellery in late May, governor D. Subbarao said in the monetary policy statement on May 3.