This Month in Gold – November 2013

Dubai Plans Spot Gold Contract for 2014
Wall Street Journal – The Dubai Gold & Commodities Exchange (DGCX) is planning to launch the first Middle East spot gold contract in 2014. The new platform will simplify the process for trading smaller quantities of physical gold and, according to Chief Executive Gary Anderson, will “eliminate that need for offshore credit and collateral.” Regional refineries are expanding their output to prepare for the additional business the new spot contract will create. About a quarter of all globally traded physical gold already passes through Dubai, and it is estimated that at least 10 metric tons of gold are available for trade at any time in the UAE’s traditional marketplaces. The new contract is seen as part of a larger trend of moving the gold trade from West to East.
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European Central Banks Gold Sales at Record Low
Bloomberg – European central banks’ annual gold sales were the lowest on record since they agreed to limit total sales in 1999. Only 5.1 metric tons of gold were sold in the year through September 26, according to the World Gold Council. WGC spokesman James Murray said, “Central banks have lost their appetite for selling gold.” The world’s central banks purchased the most gold in 2012 of any year since 1964, and the WGC estimates they will buy about 350 tons this year. Global central banks own about 18% of all the gold ever mined.
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China Heading for Record Gold Consumption
Wall Street Journal – The World Gold Council estimated that 2013 Chinese gold imports will surpass 1,000 tons, a new record. In the first eight months of the year, China imported more than twice as much gold as the same period in 2012, according to the Hong Kong Census and Statistics Department. While most of this demand comes from consumers taking advantage of gold’s April price drop, analysts suspect the Chinese government might also be using the purchasing opportunity to increase its reserves. The People’s Bank of China last reported its official gold reserves in 2009, claiming to hold 1,054 tons.
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China Calls for “De-Americanized World”
LA Times – When the federal government shutdown sparked fears of a US debt default, China’s state-run news agency suggested it is time to “start considering building a de-Americanized world.” A US default would hurt dollar-denominated investments, which are the predominant collateral used around the world. With more than 60% of reserves in dollars, global central banks are also vulnerable to any fluctuations in the dollar. Due to this dependence, global finance ministers meeting with the IMF and World Bank shared China’s worries that a US default could trigger another worldwide recession. China is the largest foreign owner of US debt and has been advocating replacing the dollar as the world’s reserve currency since 2009.
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This Month in Gold – October 2013

Gold Posts Biggest Quarterly Gain in a Year
Reuters – Gold ended the third quarter up 8%, the largest quarterly gain since Q3 2012. It’s expected to recover further if Fed stimulus continues, which analysts consider a possibility given a US government shutdown and weak dollar. “It seems to us that the central bank will likely stand pat again, perhaps not wanting to take two completely different directional views on rate policy in the span of just 30 days,” said INTL FCStone analyst Edward Meir. 
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Central Banks Keep Buying Gold
Reuters – Eight central banks added to their gold holdings in August. Turkey made the biggest addition to its reserves in five months, while Russia made its biggest gold purchase since December. For 11 consecutive months Russia has increased its reserves, while Turkey has grown its gold holdings 13 of the past 14 months. Ukraine, Azerbaijan, and Kazakhstan also added significant amounts of gold to their reserves. Central bank gold purchases are seen as a good support of the gold price going forward. “Central banks continue to view gold as good value on a long-term basis,” said Victor Thianpiriya of the Australia and New Zealand Banking Group.
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US Mint Silver Coin Sales Beat 2012
Bloomberg – By the end of August, the US Mint had sold 33.75 million ounces of silver coins YTD, compared with 33.74 million ounces in all of 2012. Record high demand for silver has been driven by its safe-haven appeal and expanding industrial demand in countries like China, the second biggest silver importer in the world. Chinese imports increased every month from May to June. Demand has been so strong that the US Mint suspended sales temporarily in January due to lack of stock, and dealer premiums were as high as 25% in April.
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China to Increase Gold Trade
Reuters – China’s central bank has proposed new rules allowing more banking firms and gold producers to apply for gold import and export licenses. Currently only 9 out of 25 Shanghai Gold Exchange member banks are allowed to trade gold. The change would also reduce restrictions on individual gold buyers, allowing them to import up to 7 ounces of overseas gold without reporting or taxes. The new policy may increase China’s gold imports and ease local premiums, which surged last spring on supply shortages. China will likely surpass India as the biggest global gold consumer this year.
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Enhancing Energy and Water Technology with Gold
Bloomberg – Growing global demand for energy and clean water has industries turning to gold as a way to improve efficiency and lower costs. Gold’s high electrical conductivity and corrosion resistance make it useful in the catalytic converters of cars, and nanoparticles of gold can remove pesticides and heavy metals from water. Gold could also be used to improve the efficiency of solar-cell technology and the performance of fuel cells.
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This Month in Gold – September 2013

Gold at 3-Month High on Safe Haven Appeal
Reuters – In the last week of August, the gold spot price climbed to its highest since May and silver rose to its highest since April. The rise was attributed to the potential of a US military strike against Syria and gold’s safe haven appeal during times of geopolitical uncertainty. Gold and silver hit $1,433 and $25 respectively on August 28th, while US and Asian stock markets fell on the Syria news. IMF data showing that central banks are still growing their gold reserves may have also helped gold and silver to rise.
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East Absorbs West’s Abandoned Gold
The Telegraph – The latest report from the World Gold Council noted that physical gold is being bought by Asian investors at record rates, while western markets have been selling physical precious metals. Westerners sold positions in gold ETFs that triggered outflows of more than 400 metric tons of the physical metal in the second quarter of 2013. In that same period, bar and coin purchases rose 78% worldwide and global gold jewelry demand rose 37% year-over-year. China, India, and the Middle East accounted for the majority of the physical buying surge.
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Mint Sales Leap on Gold Price Drop
Bloomberg – Western mints reported huge sales growth after gold’s price drop. The Austrian mint, which creates the Philharmonic gold coin, saw sales increase 79% from January to July year-over-year. Sales of the US Mint’s American Eagle gold coin rose 82% over the same period. In April, the British Royal Mint tripled its gold coin sales, while the Australian Perth Mint’s monthly demand hit five-year highs. “We sell everything we produce and we think it will keep that way,” said the marketing and sales director of the Austrian mint.
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Record Foreign Selling of US Treasuries
Reuters – Foreigners sold a record $40.8 billion of US Treasuries in June, which is the largest outflow since 1977. That was part of a total $66.9 billion of foreign sales of long-term US securities, which is the largest since August 2007. China and Japan alone accounted for approximately $40 billion of the Treasury sales, which some blame on Ben Bernanke’s May statements about potentially tapering quantitative easing in September. June was the fifth consecutive month of foreign sales of long-term US securities. Short-term US assets and stocks also experienced large foreign sell-offs in June.
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Swiss Metals Trader’s Vault Demand Surges
Bloomberg – Pro Aurum, a Swiss company that trades over a billion francs of gold and silver each year, saw a dramatic rise in demand for its high-end vault services following Cyprus’ plans to levy bank deposits in March. Pro Aurum has also opened a vault in Hong Kong for geographic diversity, following the trend of metals traders opening vaults in Singapore. Beginning in 2014, Pro Aurum will follow the lead of transport company Via Mat and ask US clients to leave due to the burden of US compliance. Read Full Article>>

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This Month in Gold – August 2012

India Gold Rush Picking Up Pace
Forbes – Prithviraj Kothari, President of the Bombay Bullion Association, expects Indian gold imports to increase by 20% during the second half of 2012 as compared to the first half. Kothari sees India importing 300 tons from July to December, up from 250 tons from January to June. Currently, gold is selling for slightly more than 30,000 rupees per 10 grams. If the yellow metal again dips below this price point, Kothari says import demand could go even higher. India satisfies over 90% of its gold demand via imports. 
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New Bullion Vault in HK Signals Rising Asian Wealth
Bloomberg – Asian financial hub Hong Kong is about to get a new gold-storage facility, and it’s going to be a big one. In September, Malca-Amit Global Ltd. plans to open Hong Kong’s largest bullion vault, which will have the capacity to store 1,000 metric tons within the international airport compound. Malca-Amit says it is opening the vault to meet rising demand from banks and wealthy individuals looking to diversify into physical bullion. Meanwhile, in an effort to raise its share of the global gold trade, neighboring Singapore has announced that it will exempt investment-grade gold, silver, and platinum from the local Goods-and-Services Tax starting in October. 
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China Blows UK Gold Holdings Out of the Water in Five Months
ZeroHedge – According to World Gold Council-International Monetary Fund statistics, the UK now has a meager 310 tons of bullion in its official reserve holdings. From January to May of this year, China trounced this figure by importing 315 tons of the yellow metal through Hong Kong. Up next for a rapid-fire overtake? Portugal with 383 tons.
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Merrill Too Sees Gold at $2,000 by Year-End
CNBC – Francisco Blanch, Head of Global Commodity and Multi-Asset Strategy Research at investment banking giant Merrill Lynch, has come on board the gold bandwagon. According to Blanch, a third round of large-scale asset purchases by the US Federal Reserve in the second half of 2012 will send gold soaring to $2,000 an ounce. “We believe that ultimately the Fed will be forced to do quantitative easing,” Blanch opined on CNBC Asia’s Squawk Box.
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Turkey Pays for Iranian Oil in Gold
Financial Times– As Washington’s leverage erodes, its acquaintance with the ‘bump in a rug’ theory grows with each passing day. Impose dollar-based financial sanctions on Tehran, and Ankara, your fellow NATO ally, will simply find another way to buy much-needed oil from its eastern neighbor; pay for it in gold bullion, for example. In May, Turkey’s trade with Iran conspicuously jumped 513 percent and hit $1.7 billion. $1.4 billion of this total was yellow gold exchanged for black gold. Substituting bullion for greenbacks has also helped improve Turkey’s trade deficit, as Turkey can buy Iranian crude at about a $6 discount to Brent crude. 
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China Looks to Expand Domestic PM Trading
Reuters– According to a source familiar with the matter, Chinese authorities have proposed rules to expand the trading of precious metals from the Shanghai Gold Exchange and the Shanghai Futures Exchange to the country’s vast interbank market. The move aims to transform China into a major precious metals trading center and continue broader reforms to liberate domestic financial markets. With gold the first metal to begin expanded trading, Chinese authorities hope to gain greater pricing power and to boost liquidity in the chief non-fiat reserve asset. According to the Journal, the interbank precious metals trading will include spot, forward, and swap contracts. 
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This Month in Gold – August 2013

Singapore Opens 200 Metric Ton Silver Vault
Bloomberg – Malca-Amit Global Ltd. added a 200 metric ton silver vault to its five existing gold vaults at the Singapore FreePort. The new silver vault will be an affordable storage alternative for the less expensive white metal, since the gold vaults are already fully reserved due to ongoing demand for physical precious metals from wealthy Asians. The number of Asia-Pacific high-net-worth individuals increased by 9.4% last year, and 43% of global economic growth from 2007-2012 is attributed to China. Singapore has been rebranding itself as a bullion-trading hub, with UBS, Deutsche Bank, and JPMorgan Chase also opening Singapore metals vaults over the past few years.
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China May Become World’s Biggest Gold Consumer
Reuters – Chinese gold demand could reach a record 1,000 metric tons this year, surpassing India as the largest global bullion consumer, according to the World Gold Council. India’s gold demand is expected to reach about 850 metric tons. The Shanghai Gold Exchange delivered more physical gold in the first half of 2013 than in all of last year, even in the face of huge premiums. While jewelry will be the larger Chinese demand segment, the fastest growing will be investment demand. “Jewelry demand is likely to increase globally this year as a proportion of overall gold demand for the first time in 12 years,” said Marcus Grubbs, managing director of investment for the WGC.
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New “Stretchy” Gold Developed for Medical Implants
Wired – Chemical engineers at the University of Michigan have invented a stretchy material made from gold and polyurethane that could be used for pacemakers or brain implants. Unlike traditional circuits, this new material can still conduct electricity when stretched. The stretchy gold could solve the engineering problem of implanting electronic systems into the curved and irregular surfaces of the human body. The research team plans to test prototype implants in rat brains.
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Detroit Files for Record-Breaking Bankruptcy
Toronto Star – Detroit has filed the largest municipal bankruptcy, both in terms of debt and city size, in the history of the Unites States. Since the 1950s, a mere 60 Chapter 9 municipal bankruptcies have been filed. The municipal bond market, public unions, and other struggling cities will carefully watch how Detroit structures its debt reduction and recovery plan. In particular, the restructuring of retirement benefits could set an important precedent in municipal bankruptcies. Detroit’s debt is estimated to be as high as $20 billion, and the bankruptcy process could take years to complete.
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Brazilians Protest Sky-High Consumer Prices
New York Times – Sparked by unusually high public transportation fees in Sao Paolo and Rio de Janeiro, Brazilian consumers have been protesting extremely high consumer prices. Some smart phones cost twice as much as in the US, Ikea-like furniture costs six times more, and a cheese pizza can run $30. The high prices are blamed on protectionist manufacturing policies, transportation bottlenecks, and a tax system that favors consumer taxes over income taxes.
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This Month in Gold – July 2013

Deutsche Bank Opens Asian Gold Vault
The Wall Street Journal – Deutsche Bank has opened a gold vault in Singapore with a 200 metric ton capacity in order to capitalize on rising Asian demand for the metal. The opening goes hand-in-hand with Singapore’s goal of becomeing a new center for bullion trading. Last year, Singapore dropped its goods-and-services tax on gold and now hopes to increase its share of world gold demand to 10-15% in the next decade. “Gold has traditionally been stored in London, Zurich, and New York, but there is a serious shift in dynamics going on as the global financial crisis continues to evolve,” said Mark Smallwood, head of Asian-Pacific wealth planning for Deutsche Asset & Wealth Management.
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Platinum Demand Likely to Increase in 2013
Forbes – CPM Group predicts that platinum demand will increase in 2013, outstripping supply once again and supporting an increase in the price. The rising demand is attributed to positive investor sentiment and increased industrial demand. Demand grew only 0.1% in 2012, but should increase about 0.9% this year. Platinum supply dropped 10.6% from 2011 to 2012, largely due to a 12% drop in South African production. In 2013, CPM Group expects South African production to rise again so long as no prolonged labor strikes occur.
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Moscow Exchange to Trade Physical Gold & Silver
Russia Today – The Moscow Exchange will begin trading physical gold and silver by the end of 2013 and plans to add platinum and palladium in 2014. Right now, the market only trades futures. The hope is that adding physical metals will increase liquidity and the number of participants in the exchange. “We are a gold-exporting country. We produce a large number of precious metals. However, the trade volume is still significantly lagging behind our peers. Our commodity market is not transparent,” said Mikhail Orlenko, director of the Moscow Exchange commodity market.
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IMF: Fed Has “No Clue” How to End QE
Reuters – The International Monetary Fund said that global markets overreacted to Ben Bernanke’s statement that the Federal Reserve will end its quantitative easing by mid-2014 if the US economy continues to improve. “The Fed has no clue what will happen when it starts selling assets,” said Olivier Blanchard, IMF’s Chief Economist. Contrary to Bernanke’s statements, other Fed officials backpedaled on the idea of ending QE any time soon. Nevertheless, equity, bond, and commodities markets around the world plunged on Bernanke’s comments. Blanchard noted that the dramatic reaction is largely due to the speed of the supposed halt to QE, which would inevitably provoke volatility if the Fed were to make good on its claims. The IMF has recommended the Fed maintain QE until at least the end of 2013.
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