This Month in Gold – October 2014

Asia Maneuvering to Become World Gold Hub
Wall Street Journal – Two major Asian economic centers have launched gold trading contracts, and a third is planned for later this year. The Shanghai Gold Exchange started offering yuan-denominated gold contracts in September. In October, Singapore began offering a contract. Later in 2014, CME Group Inc. will offer a contract denominated in US dollars out of Hong Kong. Although most of the world’s gold is bought by Asians, the majority of gold contracts are currently traded in the West, with prices fixed in London. China and other Asian economic interests hope these new gold contracts will begin to have a greater influence on the global gold price, while boosting Asian gold demand.
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Russian Gold Reserves Are Largest in Two Decades
Bloomberg – In September, Russia added 37.2 metric tons of gold to its reserves, the largest addition since November 1998. Russian official gold holdings surpassed those of Switzerland and China this year, making them the fifth largest in the world, with a total of 1,149.8 tons. US and European economic sanctions on Russia have weakened the ruble, spurring the large gold purchases. Brian Lucy, former economist for the Central Bank of Ireland said, “From the perspective of a sovereign which is concerned about aspects of geopolitical risk, it makes sense that they would have a bias toward physical gold.”
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Indian & Chinese September Gold Imports Surge
Bloomberg – India imported about 95 metric tons of gold in September, valued at $3.75 billion. This is 450% more than September 2013, according to the Indian Commerce Ministry. The drop in the gold price just as India entered its Diwali festival season are the main reasons for this growth. Indian gold consumption is second only to China, which imported more gold from Hong Kong in September than it has in the previous five months. Chinese jewelry sales grew 11.4% in September, year-over-year.
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Russia & China Begin Currency Swap Deal
Wall Street Journal – The central banks of Russia and China have opened a three year yuan-ruble swap agreement worth about $24.47 billion. The swap line will allow the two countries to exchange their currencies without using the international currency exchange markets. China is Moscow’s second largest trade partner, but Russia has had trouble using international markets to purchase Chinese yuan due to Western sanctions. Russian officials hope the new swap deal will lower the country’s reliance on the US dollar.
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