Gold
is down 0.32% against the US dollar which is higher against all major currencies
today. Gold is marginally higher in euros, Swiss francs, and Aussie and Kiwi
dollars. Silver is down 1% in US dollars and lower in all currencies.
Silver Lease Rate – 1 Year (Daily)
Asian equities were lower (except for 2% gain in the CSI 300) after the
slight falls seen on Wall Street yesterday . European indices have followed
their counterparts with the Spanish IBEX 35 particularly weak and the Euro
Stoxx 50 is down 1.1%.
Portuguese 10 Year Government Bond – 5 Years (Daily)
German
bunds (10 year) are down slightly from yesterday’s highest price this
year and Portuguese bonds have come under pressure again with yields risen up
to record highs of 7.62%. Ireland’s 10 year yield has also risen back
above 9% after news of further massive losses in the banking sector and
increasing talk of default in advance of the coming election.
Most
commodities are lower today and NYMEX crude oil is down 0.77% to $86.02 and
Brent down 0.23% to $101.55 a barrel. New York futures’ discount to
London’s Brent widened to a record and is now some $15; very unusually,
WTI crude is down 6.66% year to date while Brent is up 7.26%. The Saudi
Arabian “peak oil” Wikileak revelations are still being digested
by the market.
Gold
and Silver Lease Rates Rise from Multi Year Lows
Gold,
and particularly silver, lease rates (see chart) have been rising recently.
The rate is found by subtracting the silver forward offered rate from the
London Interbank Offered Rate (LIBOR). This likely signals increasing
tightness and illiquidity in the bullion markets (as recently said by Sprott
Asset Management, and UBS yesterday).
The
rise in silver has been very sharp, having gone from 4.29 basis points
(0.0429%) to 77.65 basis points (0.7765%) since the start of the year (31
December 2010).
While
the rise is very sharp, it is important to put it in context, and silver
lease rates remain well below the levels reached after the Lehman Brothers
systemic crisis in late 2008 when silver lease rates surged to 2.5%.
At the
same time, the very small silver bullion market is clearly under strain as
seen in the continuing backwardation. This clearly shows that demand for
physical is robust, evident from retail demand in the US where there were
record US Mint silver eagle sales last month. There are delays (3 to 4 weeks)
to get branded LBMA silver bars (100 oz) in volume.
Strong
demand is also seen in the import figures in Asia – particularly from
China and India. This Asian demand is both for silver for industrial
purposes, but also retail demand from Asians buying silver to protect
themselves from surging inflation.
Gold Lease Rate - 12 Year (Monthly)
Gold lease rates have seen a more gradual rise so far in 2011. Similarly to
silver, gold lease rates remain near historic lows, suggesting there are no
major liquidity issues in the gold bullion market (London Good Delivery bars)
market at this time.
The
lease rates are important indicators and bear watching.
European
Sovereign Debt Crisis Leading to Continued Safe Haven Demand
With
the European sovereign debt crisis yet to be resolved and likely to
deteriorate in the months ahead, safe haven demand for gold is likely to
remain robust for the foreseeable future.
Key
euro interbank lending rates jumped to 18 month highs yesterday afternoon.
Excess money market liquidity is expected to drop to around 40 billion euros
this week, down from 100 billion.
London
interbank-offered rates for three-month euros rose to 1.049 percent: their
highest since July 7, 2009.
The
equivalent Euribor rate - traditionally the main gauge of unsecured interbank
euro lending, which is fixed by a larger panel of European banks than Libor
– rose to 1.089 percent, up from 1.079 percent.
The
overnight EONIA rate jumped to 0.677 percent on Tuesday, up from a five-month
low of 0.347 percent.
Dennis
Gartman, the economist and the editor of the Gartman Letter, advised clients
today to buy gold and sell yen. “We were especially impressed with
gold’s strength relative to foreign currencies, rising far more smartly
in terms of sterling or yen than in terms of the dollar,” Gartman
said.
He is
also bearish on the euro and questions whether it can survive the current
crisis.
Gold
Gold
is trading at $1,357.40/oz, €995.67/oz and £845.89/oz.
Silver
Silver
is trading at $29.74/oz, €21.81/oz and £18.53/oz.
Platinum
Group Metals
Platinum
is trading at $1,826.00/oz, palladium at $815.50/oz and rhodium at $2,450/oz.
News
(Bloomberg)
-- Gold-Borrowing Cost Near 5-Month High; Silver Rates Jump in 2011
The cost of
borrowing gold in London is near the highest level in five months. Silver
borrowing costs advanced this year.
The
12-month lease rate fell to 0.291 percent from 0.3033 percent yesterday, the
highest level since Sept. 8, according to data compiled by Bloomberg. The rate
has almost tripled this year, and is derived by subtracting the gold forward
offered rate from the London Interbank Offered Rate.
“Scarcity
of metal liquidity in leasing leads to high lease rates,” according to
the London Bullion Market Association’s over-the-counter guide
published on its website. “Heavy forward selling activity or a decrease
in the supply of liquidity will push down forward swap rates and lead to
upward pressure on lease rates.”
Gold
for immediate delivery traded at $1,363.60 an ounce at 5:13 p.m. in London.
The metal yesterday reached a two-week high of $1,368.18.
The
12-month lease rate for silver was at 0.7765 today. The rate reached 0.8023
on Jan. 20, the highest level since August 2009. That compares with 0.0429 on
Dec. 31. Silver traded at $30.21 an ounce in London today and reached a
30-year high of $31.2375 on Jan. 3.
(Bloomberg)
-- Gold Is ‘Ideal’ Form of Collateral, World Gold Council
Says
Gold is an
“ideal” asset to use as collateral for trading, said Natalie
Dempster, director of government affairs at the London-based World Gold
Council.
JPMorgan
Chase & Co. on Feb. 7 said it will allow the metal to be used as
collateral for trading, following similar moves by CME Group Inc. and
Intercontinental Exchange Inc. Dempster commented yesterday in an
e-mail.
“In
many ways, gold is the ideal form of collateral as it does not bear
counterparty risk.
‘‘The
credit risks associated with many other assets that are widely regarded as
highly liquid and have traditionally been used as collateral have sharply
increased over the past year, most notably those of peripheral euro area
government bonds.
‘‘Gold
provides an excellent alternative.’’
(Bloomberg)
-- Scotiabank Plans to Sell Gold to Consumers in Mexico, Dubai
Bank of Nova
Scotia, which sells gold coins and bars to clients in Canada through an
online store, plans to establish similar programs in countries such as Mexico
and Dubai, Vice Chairman Barry Wainstein said.
“We’re
looking at a number of different countries simultaneously,” Wainstein
said in an interview. “In 2011, we may be up and running in one or two
countries.”
Canada’s
third-largest bank by assets has been expanding its ScotiaMocatta business,
which trades and distributes metals such as gold and has roots that date back
to 1671. The bank’s total revenue from precious-metals trading was
C$245 million ($246 million) in the fiscal year that ended Oct. 31, a 53
percent increase from C$160 million two years earlier. ScotiaMocatta
doesn’t disclose its financial results.
“We
think we can roll out our retail product suite to a number of other
countries,” said Wainstein, who is also the global head of foreign
exchange and precious metals for the lender’s Scotia Capital
investment-banking unit.
ScotiaMocatta
opened its so-called eStore in September 2009, allowing Canadians to purchase
physical gold valued at up to C$10,000 by ordering online. Clients outside of
Canada, or those buying larger amounts, typically do so through wholesalers,
Wainstein said.
About
60 percent of eStore users aren’t Scotiabank clients, said Wainstein,
who declined to say how many customers have used the site.
The
Toronto-based lender, which has operations in about 50 countries, may expand
in Mexico because of ties to its Scotiabank Inverlat consumer bank.
‘Global
League’
Dubai would be a good market for expansion because of demand for gold in the
Middle Eastern country, Wainstein said.
“We’re
not competing in the Canadian league; we’re competing in the global
league,” Wainstein said.
The
price of gold, which rose for 10 straight years, has declined about 4 percent
this year as signs of a strengthening economic recovery curbed demand for the
precious metal as a store of wealth. Gold fluctuated near a two-week high
yesterday in New York and reached a record of $1,432.50 an ounce in
December.
“I’m
not clear where the price of gold is going,” Wainstein said. “In
a market like gold, it could spike up in a couple of days.”
Scotiabank
has made two acquisitions in the bullion industry since 1998, including the
purchase of about $900 million in precious-metals loans from Bank of America
Corp. in 2006.
Wainstein,
whose bank owns gold vaults in Toronto and New York and leases space within
the Bank of England’s vault in London, declined to say how much of the
metal it stores.
Bank
of Nova Scotia fell C$1.11, or 1.9 percent, to C$58.06 yesterday in Toronto
Stock Exchange trading.
(Law360)
Silver class-action suits against Morgan, HSBC consolidated in New York
A judicial
panel on Tuesday consolidated class-action litigation alleging that JPMorgan
Chase & Co. and HSBC Holdings PLC violated antitrust laws by manipulating
the silver market and potentially reaped billions of dollars while keeping
the price of silver artificially low.
The
U.S. Judicial Panel on Multidistrict Litigation on Tuesday consolidated the
seven class-action lawsuits pending against the two banks in the U.S.
District Court for the Southern District of New York.
"A
majority of the domestic defendants are located in that district, and thus
many witnesses and discoverable documents are likely to be found there,"
the panel ruled. "In addition, a substantial majority of the constituent
and potential tag-along actions are pending in that district (including the
first-filed action)."
(Bloomberg)
-- Gold Funds in India to Top Equity Funds, Reliance Capital Says
Investments in
gold funds in India, the world’s largest consumer of bullion, will top
mutual fund equity investments in the next three to four years, according to
Reliance Capital Asset Management Ltd.
Reliance
Capital yesterday launched a gold fund-of-fund which allows investments as
small as 100 rupees ($2.19) a month. The money raised will be invested in
bullion through its gold- backed exchange-traded fund, Sundeep Sikka, chief
executive officer of Reliance Capital Asset Management, said in a phone
interview yesterday.
Demand
for gold as an investment in India surged 73 percent in the 12 months ended
Sept. 30, according to the World Gold Council. Indian mutual funds had $1.65
trillion rupees of equity investments as of Jan. 31, data on the Association
of Mutual Funds in India website shows.
“I
am very bullish, this gold category will beat that in the next 3 to 4
years’ time,” said Sikka, referring to mutual funds investments
in equities. “It’s a very simple thing - only 40 million
investors are in the mutual fund industry, compared to 500 million people are
investors of gold in India.”
The
gold fund is the first of its kind in India, Sikka said. Investors don’t
need to hold a so-called Demat account to invest in the fund, he said.
“We
are not selling gold to mutual fund investors, we are getting gold investors
to the mutual fund industry,” he said. “In the long term we see
the dollar weakening. With the overall global environment, gold will be a
good investment.”
(King
World News) Robin Griffiths - China’s Gold Reserves to Rise From 2% to
10%
With gold and
silver on the move today, King World News interviewed one of the top
strategists in the world, Robin Griffiths of Cazenove Capital. Griffiths had
this to say about clueless western journalist commentary on gold, “The
kind of western journalists that continually write down gold, two things,
they almost certainly don’t understand the Asian culture, and they were
educated as strict Keynesians and he (Keynes) made the remark it was a
barbarous relic. And when they are really desperate they say well, Mr.
Buffett said you have to store it and of course you don’t get a
dividend out of it. The thing they are choosing to forget is you’re
only going to buy it with a piece of paper, and the piece of paper is being
printed and thrown from a helicopter window, and they just choose to ignore
that fact.”
Griffiths
continues: “For as long as interest rates are super low, there’s
no negative cost of holding gold. There is a seasonality to gold and very
often it doesn’t start running until the end of February...Once we get
into March, I think we can expect it to start motoring higher
again.”
When
asked about the strong demand coming out of Asia Griffiths stated, “I
think we’re moving into a world where Chinese and Indian authorities
are going to be more dominant than they were in the past, and in their
culture of course gold is real money. On top of that, particularly China already
has more than enough dollars, it’s finding that a problem. It
doesn’t want to crack the dollar, but it doesn’t want to go long
of any more because of its trading activities. Their national reserves are
probably only just over 2% in gold at the moment and they could easily move
up to 10%. I think this buying power will continue and I think gold’s
secular trend will go a long way higher. So far it’s been a linear
trend from $250 to $1,400, and technicians always know these things end up going
exponential. I mean if we haven’t gone exponential by $1,400, the final
high is going to be way higher than current levels.” Robin Griffiths is
indicating that we should be looking for a staggering five-fold increase in
Chinese reserves in gold. This is a monster undertaking and this confirms
that Asian gold demand will be relentless well into the future. This means
that China is looking to add roughly 5,000 tons of gold to their reserves,
this is not good news for the gold bears.
(Bloomberg)
-- Gold Priced in Rand Advances to Highest Since March 2009
Gold for
immediate delivery rose as much as 0.8 percent to 9,916.423 rand an ounce,
the highest compared with intraday prices since March 2009
Mark O’Byrne
Goldcore
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