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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