This Month in Gold – May 2014

Huge Gold Refinery Under Construction in Dubai
Reuters – One of the world’s largest gold refineries is being built by Kaloti Precious Metals in Dubai and is scheduled to be completed next year. The refinery will be three times the size of any other refinery in the United Arab Emirates, with a production capacity of 1,400 metric tons of gold and 600 tonnes of silver per year. The $60 million project is part of an effort to turn Dubai into a world leader in the physical gold trade, which is also why the Dubai Gold and Commodities Exchange is planning to start a spot gold contract in June. Almost 40% of the global physical gold trade passed through Dubai in 2013, and it has already handled $75 billion in gold imports and exports this year. The new spot contract will be structured to appeal to smaller, foreign investors, like Indian jewelers and will have faster delivery times than New York gold trades. Read Full Article>>

London Silver Fix Will Close in August
Reuters – On August 14th, the London silver fix will stop operating. For 117 years, the silver fix has been composed of five member banks that communicated daily to set a benchmark price for silver, much like the London gold fix. The decision to close is likely due to increased international regulatory scrutiny of global benchmarks, beginning with the LIBOR scandal two years ago. US antitrust lawsuits currently filed against London gold fix banks are being blamed both for the decision to close the silver fix and Deutsche Bank’s inability to sell its seat on the London gold fix. The London Bullion Market Association is exploring alternatives to the silver fix, from transparent electronic auctions to using large exchanges like the CME and London Metal Exchange to set a market price for silver. Read Full Article>>

European Central Banks Won’t Sell Gold
Financial Times – European central banks renewed the Central Bank Gold Agreement, a 5-year accord to not sell “significant” amounts of gold. Sweden, Switzerland, and all eurozone countries agreed to sell no more than 400 metric tons of gold each year from their combined holdings, a lower quota than previously agreed. The coordination of gold selling is intended to reduce gold market disturbances and indicates the banks are committed to gold as a monetary reserve. In the last 5 years, European central banks sold only 23.5 tonnes of the gold, making the quota mostly symbolic. Natalie Dempster, managing director for central banks at the World Gold Council said, “For the foreseeable future, the message is very clear: European gold sales are over.” Read Full Article>>

First US Economic Contraction Since 2011
Bloomberg – US gross domestic product fell at an annualized rate of 1% in the first quarter of the year – the first contraction since 2011. The Commerce Department had estimated a 0.1% increase in GDP. The decline is being blamed on a lack on inventory buildup and poor weather. Economists point to improved employment numbers as an indication of a recovery, but other metrics also dropped in Q1. Non-residential construction dropped 7.5%, compared to an estimated 0.2% increase. Housing construction and exports fell 5% and 6% respectively. Since 2009, the US economy has officially grown at a sluggish average rate of 2%. Read Full Article>>

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