- Armstrong and blogosphere on shortage of gold coins in Europe- No
shortage of gold whatsoever at retail level in Europe- Gold demand in most of
Europe quite mixed despite significant risks- Germany, Switzerland, Greece
seeing strong demand but no shortages - Alarmist warning that governments to
make gold “illegal”- Poor data and research or disinformation?
A rumour has been making its way around the blogosphere suggesting that
gold coins are not available for purchase from retail outlets across Europe.
As one of Europe’s larger gold brokerage and storage providers, GoldCore can can confirm
that this information is misleading and incorrect.
Martin
Armstrong, who is well resourced and whose historical perspectives we
sometimes find interesting, wrote about this supposed development recently
and it has been taken up by other blogs.
Armstrong wrote:
“There is a very curious new development with respect to gold. In
many European countries, people can no longer buy retail gold coins for
bullion. Shops will buy but no one is selling. Banks that previously offered
gold to the public have shut down in Spain. If someone leaves Spain wearing a
lot of jewelry, authorities will pull them aside to weigh whatever jewelry
they may have.”
The piece is entitled “Is gold becoming
illegal?” and strikes us as being rather alarmist. We have seen no
shortage of gold on a retail level whatsoever. Armstrong suggests that
governments are “shutting down retail sales” and may confiscate gold and make
it “illegal to even own.”
“Little by little, this hunt for money by desperate government is
turning toward gold. Shutting down retail sales is quite alarming, for what
typically follows is some decree of forcing the public to turn over bullion
by a certain date, or thereafter it can be confiscated and illegal to even
own.”
This is not true and there is no example of any European government
“shutting down retail sales.”
Why these European governments would confiscate the tiny amounts of
gold that their citizens have and not simply buy gold on the open market as
is being done by the central
banks of Russia, China and many other nations is ignored.
Also, the logistics of a government in this day and age confiscating
gold and the enforcement of that confiscation is not considered.
It also ignores the fact that the gold bullion market is now a mature,
sophisticated market that has become internationalized in recent years –
arguably making the bullion market today more liquid than at any time in
history.
If a prospective European buyer in one European country, such as Spain,
cannot access gold from a local or national dealer there is absolutely
nothing stopping them going online and buying from any of the scores of
reputable bullion dealers in other EU countries or indeed from refineries and
mints internationally.
Nor, is there anything to stop them from wiring funds to a bullion
dealer or storage provider and storing gold in vaults in
Zurich, Singapore or Hong Kong.
Demand for gold has actually been quite mixed across Europe in recent
months. Refineries and mints we work with will attest to that fact.
This despite the unprecedented monetary experiment that is the ECB’s
version of QE, the threats to the European project posed by a “Grexit” or
“Brexit” and simmering tensions in the Middle East and between the EU and
Russia.
At the same time Germany, Switzerland and Greece have seen robust
demand for gold coins. Degussa, one of the larger refiners and wholesalers of
gold in Europe reported a 30% surge in German demand in the first five months
of this year.
“We expect demand to remain very buoyant as the uncertainty is still
very high about Greece’s exit and concerns about other countries,” Bloomberg
report the company’s CEO, Wolfgang Wrzesniok-Rossbach, as saying at the
International Precious Metals Institute (IPMI) event on Monday in San
Antonio, Texas.
He gave no indication of any shortages or inability to supply clients
in Europe.
Indeed, even in Greece which looks set to default in the coming days
and where we have seen some demand for gold sovereigns, including from Greek
bullion dealers, there are no shortages of gold.
The suggestion that gold coin dealers across Europe are being hampered
from selling to the public by national governments is incorrect. And when one
poses the question “Is gold becoming illegal?” it begs the question – who
benefits from the dissemination of this kind of negative information about
gold?
Such information would likely discourage retail investors who are
considering whether they should have an allocation of gold. Why would the
typical retail investor buy something that the government may confiscate?
Of course, some governments may decide to confiscate gold but, unlike
the experience in the U.S. in 1933 when the medium of exchange and currency
was gold, as already indicated the amount of gold owned by the public today
is minuscule.
This makes confiscation of gold bullion at an individual level highly
unlikely. The risk is that governments may look to confiscate large pools of
gold – with unallocated
and ETF holdings held in banks being a prime target. There is also the
risk that companies that control large pools of client gold could be
nationalised by their national government.
We believe that there is possibility of debtor governments
nationalising large gold deposits in large brokers, financial institutions
and banks in their jurisdictions in the event of a systemic or monetary
crisis.
This is why we advise clients to directly own physical gold and silver
coins and bars en bailment (allocated, segregated, outright legal ownership
and with the ability to take delivery) with secure, reputable vaulting
companies in safe jurisdictions such as Singapore and Switzerland.
Armstrong also suggests that Chinese demand and indeed global demand
for gold has fallen sharply and that this may result in the gold price
falling further:
“Meanwhile, April saw the biggest decline in gold shipment to China
that traditionally goes through Switzerland. In April, they fell 67%. As the
economy has been turning down in Asia, the demand for gold has fallen by
about 36%.
With governments in Europe cutting off the ability to buy gold,
which is already declining in demand, mixed with the rising dollar,
everything warns that the final low for gold may be on the horizon. …”
This is simplistic analysis as it focusses on Chinese mainland imports
of gold from just Switzerland and ignores the huge supplied of gold flowing
into China from all over the world into a variety of mainland Chinese cities
and indeed Hong Kong.
Shanghai is obviously increasingly important in this regard and the
best benchmark of total global Chinese demand remains withdrawals from the
Shanghai Gold Exchange (SGE) and these remain robust (32.695 tonnes for the
week ending June 5th) as indeed do premiums on gold bars in China.
Premiums on the Shanghai Gold Exchange were about $1-$2 an ounce
overnight.
We have heard speculation regarding falling Chinese and Indian demand
in recent years.
In fact, this has been the ebb and flow of the market and demand has fallen
from record highs and then risen again. Indeed, when you fade out the daily,
weekly and indeed monthly noise and focus on the quarterly and indeed the
annual demand trends, it is clear that
gold bullion demand in China, India has remained very robust and
supportive of the gold market.
It is dangerous to use such simplistic analysis in order to make price
predictions. Further lows and a “final low” in the gold market are possible
but not due to European governments shutting down retail gold demand or
alleged falling demand in China and Asia.
To conclude, there is no shortage of gold in Europe. If there were, it would
be very much be in our interest and it would indeed be important to highlight
that fact.
Given the very small size of the entire physical gold market and the
even smaller size of the entire physical silver market, we believe shortages
will likely develop when the next global financial crisis erupts.
This is a question of when rather than if as it is only a matter of
time before this happens. Be assured – when shortages of gold coins and bars
in Europe and internationally materialise you will hear about it.
For most, it will be then be too late to secure their coins and bars.
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MARKET UPDATE
Today’s AM LBMA Gold Price was USD 1,181.70, EUR 1,045.65 and GBP
748.92 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,186.20, EUR 1,050.06 and GBP
759.36 per ounce.
Gold slid $4.50 or 0.38 percent yesterday to $1,181.70 an ounce. Silver
fell $0.09 or 0.56 percent to $16.02 an ounce.
Gold in Singapore for immediate delivery fell 0.2 percent to
$1,179.01 an ounce an ounce near the end of the day, while gold
in Switzerland was flat again.
Gold continued losses overnight and stayed near $1,180 an ounce this
morning despite the real and deepening risk of a Greek default. Jitters in
the bond market and the risk of contagion are likely supporting gold and
should see gains once the current period of lockdown below $1,200 comes to an
end.
It appears Prime Minister Alexis Tsipras has no intention of making a
last minute effort to meet the austerity demanded by the IMF and European
lenders. Tsipras accused Greece’s creditors yesterday of trying to
“humiliate” Greeks with more cuts. Europe appears to be preparing for Greece
to leave the euro.
Some investors await the U.S. Federal Reserve policy statement at 1830
GMT. Janet Yellen’s wording will be listened to for any hints as to the
timing of the Fed’s interest rate hike. As ever, best to phase out the Fed’s
words and focus on their actions and the reality that ultra low interest
rates are set to continue for a few more months and likely for a few more
years.
In late morning European trading gold is down 0.26 percent at $1,179.00
an ounce. Silver is off 0.25 percent at $15.96 an ounce and platinum is down
0.48 percent at $1,075.36 an ounce.
Silver continues to be accumulated. Smart money is taking the view that
the supply and demand fundamentals are sound and the silver price is very
undervalued versus increasingly frothy stock and bond markets and indeed even
the depressed gold market (see Gold Silver ratio chart).
