This Month in Gold – January 2015

German Central Bank Continues Gold Repatriation
Bundesbank – Germany’s central bank, the Bundesbank, increased its transfer of foreign gold reserves back into Germany in 2014, bringing 120 metric tons to Frankfurt. 85 of those tons came from the New York Federal Reserve. This repatriation process began in January 2013, when the Bundesbank announced a plan to store half of its gold reserves at home by 2020. To achieve this goal, Germany will have to repatriate 300 tons from New York and 374 tons from Paris. It has now transferred 23% of that total 674 tons.
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CME Opens Physical Gold Futures in Hong Kong
Bloomberg – CME Group Inc., owner of the world’s largest futures exchange, listed a new physically delivered gold futures contract in Hong Kong this month. Comex trading on the contract may begin in late 2014. This is the latest of several gold exchanges opening in Hong Kong, including offerings from the Shanghai Gold Exchange and Singapore Exchange Ltd. last fall. This is part of an ongoing trend of the international gold trade competing for Asian business. Asia consumed about two-thirds of the world’s gold bars and coins in 2013. Intercontinental Exchange Inc., whose Benchmark Administration will replace the London gold fix, has plans to begin trading gold futures in Singapore in March.
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Chinese Yuan Joins Top 5 Global Currencies
Reuters – China’s yuan currency became the fifth largest world payment currency in November. According to the global transaction service company SWIFT, the yuan overtook both the Australian and Canadian dollars. With a 2.17% share of global payments, yuan is not far behind the Japanese yen, which holds fourth place with 2.69%. The top three are the US dollar, euro, and British pound. The yuan’s rise is attributed to a growing number of foreign yuan clearing centers as the People’s Bank of China strives to internationalize the currency. China will likely seek to get the yuan included in the International Monetary Fund’s in-house currency basket in 2015.
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Switzerland Abandons Euro & ECB Begins QE
Wall Street Journal & Reuters – The Swiss National Bank (SNB) removed the Swiss franc’s peg to the euro just one week before the European Central Bank (ECB) announced a €1.1 trillion quantitative easing (QE) program. The SNB had maintained a 1.20 francs per euro cap for more than three years, and analysts suspect it removed the peg to be prepared for a larger-than-expected QE announcement. The franc rose almost 30% against the euro on the news, causing huge volatility in the foreign exchange markets. ECB President Mario Draghi did announce a larger QE program than expected. The ECB and European central banks will purchase sovereign debt at the rate of €60 billion a month from March 2015 to September 2016. Many criticized the plan, suggesting it would further damage the economies of countries with high debts. Former ECB policy maker Athanasios Orphandies said, “This path towards Balkanisation of monetary policy would signal that the ECB is preparing for a break-up of the euro.”
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US Mint January Silver Sales Stronger Than Last Year
Bloomberg – The US Mint’s sales of silver American Eagle coins surged in January, totaling 5.4 million ounces as of January 29th. This is almost 13% above the 4.78 million ounces sold in January of 2014, which turned out to be a record year for US Mint silver sales. Silver futures also rose for three straight weeks in January, which is the longest rally since July. The surge in investor interest in physical and paper silver is attributed to worries over a weak European economy and the ECB’s announcement of QE.
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Russia Buys Gold for Ninth Straight Month
Bloomberg – Russia’s gold reserves grew by about 18.7 metric tons in December, marking the ninth month in a row it bought gold. Russia is the world’s fifth largest gold holder, and it has tripled its gold reserves since 2005. Some analysts are surprised by the ongoing purchases, given falling oil prices and a 50% drop in the value of the ruble in the last year. Precious metals compose 11% of Russia’s total foreign reserves.
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