|
The
paper-driven sell off in the gold market seen in January has been trumped by
continuing robust physical demand in January and February. This has resulted
in gold rising nearly 6% in February and silver’s strong industrial and
investment demand leading to a 19% rise to new nominal 30-year highs.
 
Gold in USD – 6-Month (Daily) and 150-Day Moving Average
Political, and more importantly socioeconomic, revolutions in the Middle East
and North Africa are leading to a degree of geopolitical instability and risk
not seen in many years. This is leading to concerns about oil supplies from
the region and hence the 14% jump in US crude oil just last week and
deepening inflation concerns.
Hopes
that the feudal Saudi regime will contain the situation by increasing
production and exporting more oil are misplaced as the Saudis are already
producing oil at maximum capacity and indeed are likely to have been
overstating their oil reserves for some years, possibly considerably.
Ireland Government Bonds 10-Year – 1 Year (Daily)
With all eyes on the Middle East and North Africa, there has been less focus
on the continuing European sovereign debt crisis. However, the crisis
continues and recent days and weeks have seen government bonds in Greece and
Ireland again come under pressure.
The
yield on Greek bonds (10-year) have risen to over 11.6% in recent days and
the yield on Ireland’s 10-year reached a new record high of 9.40% this
morning after the Irish electorate “liquidated” the Fianna
Fail/Green government over the weekend. While the new government is likely to
be a centrist Fine Gael and Labour one, there has been a swing to the left
with Sinn Fein, the Workers Party and many left leaning independents elected.
The
majority of Irish people are seeking that the massive debts of the Irish and
European banking systems, incurred against them, be restructured or
defaulted. Therefore, the new government will be under pressure to negotiate
a fairer, more equitable settlement with the European Commission and the ECB
with possible ramifications for the many European banks who lent
irresponsibly to Irish banks.
US Dollar Index – 10-Year (Weekly)
Political and economic instability in Europe is set to continue and while the
Irish used the ballot box, citizens in some EU countries may not be as
peaceful or passive. While the euro has bounced against the beleaguered US
dollar recently (the dollar looks very vulnerable to breaking down
technically (see chart above), gold above EUR 1,000/oz (€1,020/oz this
morning) is a sign that the euro’s troubles are far from over and
further euro weakness in the coming months will see gold rise above the EUR
1,072/oz high seen at the end of 2010 (December 28th).
The
move by the popular Egyptian Front for Reclaiming the People’s Wealth
to ban the export of gold in order to preserve the wealth of the impoverished
Egyptian people is a prudent one. The move may be emulated in other countries
in the coming months leading to a further decline in scrap supply from
emerging markets.
Conversely,
mooted proposals by the Vietnamese Central Bank to ban “gold bullion
trading” (see news below) are somewhat bizarre. If true this would be a
very important development as the Vietnamese are some of the largest buyers
of gold bullion in the world. It is unclear whether the proposed ban is
simply to prevent “trading” or speculative short term buying and
selling, or actually a move to ban the buying of gold bullion ingots and
jewellery by Vietnamese households. If it is the latter, it will be unworkable
as buying will simply move to the black market or Vietnamese will buy from
overseas from bullion dealers.
Gold
Gold
is trading at $1,410.50/oz, €1,020.11/oz and £868.59/oz.
Silver
Silver
is trading at $33.43/oz, €24.18/oz and £20.59/oz.
Platinum
Group Metals
Platinum
is trading at $1,803.50/oz, palladium at $787.00/oz and rhodium at $2,350/oz.
News
(Al-Masry
Al-Youm) -- Egypt bans exporting gold in effort to curb illegal wealth
transfers
The Minister
of Trade and Industry Samir Sayyad banned the export of gold in all its forms
from Sunday evening.
The
minister said in a press statement that the ban will remain in effect from 27
February to 30 June, explaining that it comes during a time of
“exceptional circumstances” and is necessary “to preserve
the wealth of the country until the current situation stabilizes.”
Since
the start of the 25 January uprising, fears have risen that individuals
suspected of corruption or wanted for investigation have been smuggling money
abroad in the form of gold.
Mohamed
Mahsoub, secretary-general of the popular Egyptian Front for Reclaiming the
People’s Wealth, said early last week that the group has documents in
its possession proving that certain former officials had transferred large
amounts of money to foreign banks, where they had also deposited quantities
of gold and platinum ingots.
He
also said that one former Egyptian official had transferred some US$620
million from Barclay's bank in England to UBS bank in Switzerland and that
the Egyptian Attorney General had asked Egypt's foreign ministry to monitor
foreign bank accounts belonging to ousted president Hosni Mubarak and his
immediate family.
Egypt's
Illicit Gains Authority previously requested that the relevant legal bodies
investigate wealth accumulated by former government ministers, National
Democratic Party officials, and former chief editors of state-run newspapers.
(Al-Masry
Al-Youm) -- Former Egypt officials transferred Gold and Platinum Bars to
Western Banks
Mohamed
Mahsoub, secretary-general of the popular "Egyptian Front for Reclaiming
the People’s Wealth," said the group had documents in its
possession proving that certain former Egyptian officials had transferred
large amounts of money to foreign banks, where they had also deposited large
numbers of gold and platinum ingots.
“We
plan to submit these documents to the attorney-general and the prime
minister,” Mahsoub said.
He
also said that one former Egyptian official had transferred some US$620
million from Barclay's Bank in England to UBS Bank in Switzerland.
(Bloomberg)
-- Bullish Gold Bets Rebound in February as Mideast Tensions Mount
Hedge funds
boosted their bullish bets on gold to the highest since December, when the
precious metal was headed to a record price, as tensions in the Middle East
spurred investor demand for a haven.
Managed-money
funds held net-long positions, or wagers on rising prices, totaling 182,739
futures and options contracts on the Comex as of Feb. 22, up 14 percent from
a week earlier, U.S. Commodity Futures Trading Commission data showed last
week. Holdings rose for a third straight week and are the highest since Dec.
7, the day gold reached a record $1,432.50 an ounce.
The
price has rallied for five straight weeks as pro- democracy uprisings spread
from the Middle East to North Africa. Gold is rebounding after a plunge in
January that was the biggest in more than a year. Before then, the precious
metal had rallied every year for the past decade.
“Gold
has found support and buyers have been coming in in the past few
weeks,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.
“All the factors driving the price of gold higher are still there --
political instability, currency volatility and inflation. People are
following through with their intentions after the dip in January.”
Gold
has climbed 5.6 percent this month, after a 6.1 percent decline in January
prompted by an investor shift into equities. Prices are up 27 percent in the
past year.
Managed-money
positions include hedge funds, commodity- trading advisers and commodity
pools. Analysts and investors follow changes in speculator positions because
such transactions may reflect an expectation of a shift in prices.
(Bloomberg)
-- Rising Gold Output Keeps Australia in No. 2 Spot, Surbiton Says
Australia kept
its position as the world’s second-largest producer of gold with a 17
percent increase in output of the precious metal last year, a research group
said.
Production
rose 38 metric tons to 266 tons in 2010 from a year earlier, Sandra Close, a
director of Melbourne-based Surbiton Associates Pty, said in an e-mailed
statement.
Gold
is trading near record highs as investors seek to protect their wealth
against accelerating inflation and intensifying violence in the Middle East.
Prices have risen for 10 straight years to reach a record $1,432.50 an ounce
on Dec. 7 on the Comex in New York. Gold’s role as an inflation hedge
will grow as consumer prices increase worldwide, Credit Suisse AG analyst
Stefan Graber said Feb. 22.
China
was No. 1 with reported production of 341 tons and the U.S. would rank No. 3
with an output of about 240 tons, Close said.
Australian
output gained 12 percent to 70 tons in the fourth quarter, Surbiton said.
Newmont
Mining Corp.’s Boddington mine, southeast of Perth, was
Australia’s largest single producer during the quarter with 206,000
ounces. The Superpit, 550 kilometers (342 miles) east of Perth and a joint
venture of Newmont and Barrick Gold Corp., remained Australia’s largest
producer for the year with 788,000 ounces, Surbiton said.
(Bloomberg)
-- Goldman ‘Neutral’ on Commodities in the Near Term on Unrest
Goldman Sachs
Group Inc. is staying “neutral” on commodities in the near term
as the unrest in the Middle East and Africa has raised concerns that global
growth may slow.
The
bank reiterated an “overweight” recommendation on commodities for
the longer term, analysts including Jeffrey Currie wrote in a report. Goldman
pared its 12-month forecast for returns on the S&P GSCI Enhanced
Commodity Index to 14.3 percent, from 18.6 percent previously.
Commodities
last week capped their best weekly performance in almost three months after
crude oil jumped 14 percent on concern that the turmoil, which began in Egypt
and has cut output in Libya, may spread to other parts of the Middle East.
The Enhanced Commodity Index gained 3.9 percent last week, the most since the
week to Dec. 3.
“Once
the current civil unrests settle down and the contagion risks subside, we
expect that higher confidence in global economic growth will once again pave
the way for cyclical commodities performance to resume,” the analysts
wrote in the Feb. 25 report.
(Bloomberg)
-- Vietnam Dong Strengthens at Gold Shops as Reserves Set to Rise
Vietnam’s
dong strengthened against the dollar at money changers on speculation
foreign-exchange reserves will rise after Prime Minister Nguyen Tan Dung
ordered state-owned companies not to “hoard” the greenback.
“Sentiment
improved on the foreign-exchange market on expectations reserves will
increase once companies sell their dollars to the state bank,” Marc
Djandji, the Ho Chi Minh City- based head of research at Viet Capital
Securities, wrote in a report today.
The
dong advanced in the unofficial market, trading between 21,900 and 21,960 as
of 3 p.m. at gold shops in Hanoi, compared with between 21,960 and 22,080 on
Feb. 25, according to an information service run by state-owned Vietnam Posts
& Telecommunications.
The
official rate for the currency dropped 0.04 percent to 20,878, taking losses
for the month to 6.6 percent, according to prices from banks compiled by
Bloomberg.
“How
can you hoard U.S. dollars when we are in this difficult situation?”
Dung said at a meeting with ministries in Hanoi on Feb. 24.
The
State Bank of Vietnam set the daily reference rate at 20,673, compared with
20,683 on Feb. 25, according to its website. The currency is allowed to trade
up to 1 percent on either side of that rate.
The
yield on the benchmark five-year bond fell four basis points to 11.55 percent,
according to a daily fixing from banks compiled by Bloomberg. A basis point
is 0.01 percentage point.
(Dow
Jones) -- Vietnam Central Bank Proposes Banning Gold Bullion Trading –
Report
Vietnam's
central bank is proposing that the government issue regulations to ban the
trade of gold bullion from the second quarter of this year, state media
reported Monday, citing the State Bank of Vietnam.
"The
State Bank of Vietnam in the second quarter will request the government issue
a decree on management of gold trading, aiming to control imports and exports
of gold and to ban the trading of gold bullion in the free market," the
state-run Vietnam News Agency said.
"Trading
of gold bullion is only seen in Vietnam but not in other countries," it
said.
"It
is bad for the economy because (the country) has to import gold, which causes
trade deficits."
The
elimination of gold bullion trading is "necessary and timely," as
the government is rolling out measures to tame inflation and stabilize
macroeconomic conditions, it said.
(Bloomberg)
-- China Gold Imports Topped 300 Tons Last Year, PBOC’s Yi Says
China imported
more than 300 metric tons of gold last year, People’s Bank of China
Vice Governor Yi Gang said today in Beijing.
(Financial
Times) -- Go for Gold: It is Far Ahead of Electronic Money
Mostly, when
you buy insurance, you hope it won’t ever turn out to be necessary.
You
pay annual premiums for your car insurance. But that doesn’t mean you
secretly hope someone will knock you off the M25. You pay a fortune to insure
your house. But that doesn’t mean you want it to be burnt to the ground
during your summer holidays (mostly).
The
same goes for gold. When I started buying it back in 2002 or so, I did so
largely because the supply and demand balance seemed out of whack. But as the
decade wore on, I began to see my holdings much more as an insurance –
against pretty much all the things that have always gone wrong in the past
and that will almost definitely do so at some point in the future. (For this
and other important articles see the Commentary section on our website
today).
Mark O’Byrne
Goldcore
|
