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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