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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This Month in Gold – June 2013

Asian Gold Demand to Hit Second Quarter Record
Reuters – According to the latest report from the World Gold Council, Asian gold demand is on its way to breaking a second quarter record in 2013. Gold’s April price drop triggered huge liquidations of ETF positions in the West, while Asian consumers took advantage of the low prices to buy physical gold. Q2 Indian gold imports are expected to be 200% higher than last year, reaching almost half of last year’s total imports. China’s gold imports may also beat previous forecasts, with a record amount of imports in the first quarter. WGC Managing Director Marcus Grubb said, “Even if ETF outflows continue in the United States, it is quite likely that the gold previously held in ETFs will find a ready market among Indian, Chinese, and Middle Eastern consumers.”
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Regulations Might Push London Metal Exchange to Hong Kong
Reuters – New EU financial market regulations have London Metal Exchange members talking about moving the LME to Hong Kong. The regulations will increase costs for clients by restricting the amount of credit brokers can extend, which translates to reduced volume and liquidity. While LME Chief Executive Martin Abbott made it clear there were no plans to relocate, other exchange members say the move is a possibility within the next decade. The Hong Kong Exchange bought the LME last year and China consumes about 50% of global metals.
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Platinum Supplies Hit 12-Year Low in 2012
MarketWatch – Platinum supplies dropped 13% last year, reaching a 12-year low, reported metals refiner Johnson Matthey. Labor disputes that halted production in South Africa are the main culprit for the supply deficit, because South Africa is the largest platinum source in the world. Palladium also saw a deficit in 2012 after a 2011 surplus. Palladium supplies were drained by increased investment demand, record high demand for auto catalysts, and a 2/3 reduction in sales of Russian stock. Both platinum and palladium are likely to have deficits again this year.
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Used Gold Supplies at Five-Year Low
Bloomberg – Consumers will sell 4% less old jewelry and metals in 2013 compared to last year, the lowest amount since 2008. Gold’s sudden April price drop has forced buyers of used jewelry to hold onto their stock until prices rebound significantly. Jewelry shops and refiners are struggling to deal with the drop in scrap inventory and are turning to alternative sources, such as new jewelry and by-products from copper smelting. Used gold usually accounts for about one-third of total global gold supply every year.
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Asian Gold Bar Premiums at Record Highs
Reuters – Hong Kong and Singapore gold bar premiums saw all-time highs in May, reaching $5-6 over London spot prices in Hong Kong and $3.50 in Singapore. In Tokyo, premiums are tracking Hong Kong’s rates and are now the highest since 2011. The spike in premiums was driven by a supply shortage due to huge physical demand after April’s price drop. China, the world’s second-largest gold consumer after India, is responsible for the majority of the new Asian demand, with record-high gold imports in Q1.
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