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Renewed
fears over eurozone debt have seen the euro fall against most currencies and
precious metals today. The yield on Greek 10-year bonds is approaching an
alarming 13% after jumping to a new record high of 12.89% today (see bond
charts below). The Portuguese 10-year rose to a new record high of 7.7% ahead
of today’s auction where they borrowed 1 billion euros in order to
avoid a “bailout”.
 
The
risk of contagion in the eurozone has clearly not gone away and this is
another primary factor supporting gold above the $1,400/oz and the
€1,000/oz level. The charts contradict those who simplistically call
gold a bubble with gold having seen a period of correction and consolidation
since November last year and looking like it is ready to break out and
challenge new highs above $1,500/oz and EUR1,100/oz in the coming weeks.
Gold
in Japanese yen has continued its gradual rise and has reached multi-year
nominal highs at 119,000 yen per ounce. Gold in yen remains a long way from
the nominal high of 160,000 yen per ounce seen in February 1980. This is
likely a leading indicator that Japan’s deflation may be morphing into
stagflation and the yen’s safe haven status is likely to be as
questioned as the dollar’s in the months ahead.
While
oil prices came off somewhat they remain near recent highs and uncertainty in
Libya and in Saudi Arabia (where there are concerns about the coming
‘Day of Rage’ on Friday) will likely see oil remain robust with
sell offs being shallow and short.
The
likelihood that the People’s Bank of China is increasing and will
continue to increase its gold reserves and the percentage of foreign exchange
reserves held in gold, was seen in comments by Li Yining, an influential
Chinese economic adviser, yesterday.
He
said that China should use some of its close to $3 trillion foreign exchange
reserves to buy more gold, and should use the precious metal to hedge against
risks of foreign currency devaluations. Reuters reported the story this
morning (Reuters Africa) and Bloomberg had a very brief news story yesterday.
"China
should increase its gold reserves appropriately, and China must take every
chance to buy, especially when gold prices fall," Li was quoted by the
official Xinhua news agency as saying.
China
does not disclose its gold reserves figures (neither on a monthly, quarterly
or annual basis) but is likely quietly accumulating and will announce in the
coming years that its reserves have risen from 1,054 tonnes, which is very
low when compared to the Federal Reserve’s, to over 8,100 tonnes.
Gold’s
recent and continuing robustness indicates that the ‘Beijing put’
is supporting the market on all sell offs and will likely continue to do so
for the foreseeable future.
The
Chinese are too shrewd to ‘telegraph’ their intentions to
accumulate much larger gold reserves and will announce the ‘news’
when they are ready.
Gold
Gold
is trading at $1,429.69/oz, €1,027.45/oz and £882.52/oz.
Silver
Silver
is trading at $36.14/oz, €25.97/oz and £22.31/oz.
Platinum
Group Metals
Platinum
is trading at $1,811.00/oz, palladium at $794.00/oz and rhodium at $2,350/oz.
News
(Reuters)
-- China adviser says Beijing should buy more gold
China should use some of its $2.85 trillion foreign exchange reserves to buy
more gold XAU=, a government adviser was quoted as saying by local media
reports on Wednesday.
Li
Yining, a senior economist at Peking University and member of the Chinese
People's Political Consultative Committee, an advisory body to the national
parliament, said that China should use the precious metal to hedge against
risks of foreign currency devaluations.
"China
should increase its gold reserves appropriately, and China must take every
chance to buy, especially when gold prices fall," Li was quoted by the
official Xinhua news agency as saying.
His
view that Beijing should diversify its foreign exchange reserves, the world's
largest, into commodities is nothing new. Many other academics have publicly
called on Beijing to do so.
But
Li's views may carry more weight than most. Many of his former students are
now high-ranking officials, including Chinese Vice Premier Li Keqiang, who is
seen as Premier Wen Jiabao's likely successor in 2013.
However,
Yi Gang, head of the State Administration of Foreign Exchange, which is
responsible for managing most of the country's foreign currency holdings,
said recently that it was not possible for China to make big purchases in the
spot gold market.
"If
China gets into these markets and pushes up prices to extremely high levels,
the Chinese people will bear the cost at the end of the day as China is often
the key buyer in these markets," Yi said.
He
added that Chinese firms and households had purchased more than 300 tonnes of
gold last year, and that it would have been hard for the government to buy
any more with foreign reserve funds.
"The
gold price shot up last year, and surging gold prices have forced Chinese
people to pay more as there is strong demand for gold for those getting
married and other events," he said. [ID:nTOE71P00H]
According
to the central bank, China's state gold reserves have been held at 33.89
million ounces since April 2009.
Gold
prices have risen about 10 percent in the last six weeks, as clashes in Libya
and turbulence across the Arab world have encouraged investors to seek a safe
haven, while oil has gained about 17 percent in the same period, increasing
gold's inflation hedge appeal.
(Bloomberg)
-- Li Yining Says China Should Raise Gold Reserves, Radio Reports
China should boost gold reserves “appropriately,” to secure the
safety of the country’s foreign exchange reserves, Li Yining, an
economist, was quoted as saying by China National Radio today.
(Bloomberg)
-- Shanghai Gold Exchange to Extend Trading Time for Night Session
The Shanghai Gold Exchange plans to extend trading hours for the night
session from late April, the bourse said in a statement posted on its website
today.
The
closing time for the night session will be 3:30 a.m., the statement said.
(Bloomberg)
-- Merrill Lynch Says Brent May Break Through $140 in Three Months
North Sea Brent crude may trade at more than $140 a barrel in the next three
months amid rising global demand and halts to production in Libya, Bank of America
Merrill Lynch said.
“To
reflect a tighter market, we upgrade our average second quarter 2011 Brent
crude oil forecast to $122 a barrel from $86 a barrel,” the bank said
in a note today. “On average for 2011, we now project Brent crude oil
prices at $108 a barrel.” For West Texas Intermediate, the bank
forecasts an average of $101 a barrel for this year, up from $87.
(Bloomberg)
-- London Accounted for Two-Thirds of Global Gold Trading Last Year
More gold trading takes place in London than any other city, according to the
latest commodities report by the financial industry-sponsored TheCityUK.
The
U.K. capital captured 67 percent of the record $25.1 trillion in global gold
trading last year, compared with 74 percent in 2009, according to TheCityUK.
New York had 22 percent of the gold market, up from 16 percent in 2009,
followed by Mumbai with 6 percent and Tokyo at 5 percent.
London
kept its position as the center of the precious metals market that it
established with the daily gold fixing in 1919. HSBC Holdings Plc, based in
London, holds the gold on behalf of the SPDR Gold Trust, the biggest
exchange-traded fund for the metal.
“London
doesn’t have any competition when it comes to over-the-counter trading
in gold,” said Marko Maslakovic, senior manager of economic research at
TheCityUK in London. “OTC trading has been losing to exchange trading
over the past five or six years because we’re getting more and more
products traded on exchanges such as ETFs. It’s becoming easier to access
the market through exchanges.”
London
had 40 percent share of the $3.2 trillion silver market last year, down from
52 percent in 2009, according to the report. New York’s share climbed
to 31 percent from 19 percent followed by Mumbai at 27 percent, down from 29
percent in 2009, according to Maslakovic.
The
actual gold traded last year in London was 13.8 billion ounces of the global
total of 20.48 billion ounces, according to TheCityUK. The silver total in
London was 64.6 billion ounces, of a global 157.5 billion ounces, it said.
(Bloomberg)
-- Gold Rises to 118,620 Yen an Ounce, Most Since Feb. 15, 1983
Gold for immediate delivery rose 0.4 percent to 118,620 yen an ounce, the
highest price since Feb. 15, 1983
Mark O’Byrne
Goldcore
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