Dubai’s DMCC alleges LBMA norms on gold sourcing targeted to undermine its success in bullion trade

DMCC Executive Chairman and Chief Executive Officer (CEO) Ahmed Bin Sulayem, in a Linkedin posting, said the London body was trying to undermine UAE’s success.

The London Bullion Market Association (LBMA) recent move to check laundering and “conflict” gold by fixing some norms is being strongly opposed by at least three gold marketing centres, including India.

The strongest criticism of the move has come from the United Arab Emirates (UAE) government-owned DMCC (Dubai Multi Commodities Centre), one of the primary hubs of gold trade in the world.

DMCC Executive Chairman and Chief Executive Officer (CEO) Ahmed Bin Sulayem, in a Linkedin posting, said the London body was trying to undermine UAE’s success.

He questioned LBMA’s motive to blacklist entire nations rather than target independent industry stakeholders on a case-by-case basis and termed the London body’s move as “authoritarian approach to maintain its majority control through conjecture and double standards”.

DMCC was not surprised by the LBMA move since a “weakened party” would employ a variety of tactics to retain its control by “any means necessary”, he said.

Sulayem said that LBMA had been stung by the success of DMCC, which has become a major centre to deal in slew commodities such as gold, diamonds, coffee, tea and aluminium. He was responding to reports that Dubai was the focus of LBMA norms, though it had not mentioned it overtly.

“Should LBMA make good on its proposed strategy, it will be the first time a market or state authority has raised the possibility of cutting off the bullion industry in a major financial centre, a ploy akin to changing the rules of Monopoly on a discretionary basis in order to keep other players off the board,” Sulayem said.

LBMA, one of the most influential gold market authorities, had in a letter earlier this month to various countries with large gold markets, said that it would stop gold from these countries if they don’t meet the regulatory standards.

The association has sent letters to India, United Arab Emirates (UAE), China, Hong Kong, Singapore, Russia, South Africa, Switzerland, Turkey, the UK and US.

The LBMA has said that if these countries do not meet the standards, they would be blacklisted. The association is, perhaps, acting on an advisory issued this month by The Sentry, a US-based investigative and policy body that tracks dirty money connected to African war criminals and trans-national war profiteers.

In its advisory, the Sentry said that the destination for 95 percent of the gold from East and Central Africa is Dubai, where criminal networks, armed groups and the corrupt use it for money laundering with these “conflict” gold.

The Sentry terms it “conflict” gold in view of armed conflict and corruption in countries such as Congo, Sudan, South Sudan, and Central African Republic.

The DMCC CEO has raised a few issues with regard to LBMA. First is the cartel-like control it wields over the industry imposing its discretionary brand of blacklisting without being a democratically-elected trade body.

The association could be either dragged to the World Trade Organisation or UK Courts, he said, adding that there are several ethical problems with the directive when it affects the trade flow of foreign sovereign nations.

Second, Sulayem wondered if LBMA would apply the same ethical standards to its existing members and stakeholders including JP Morgan Chase, which had admitted to manipulating precious metals futures. JP Morgan Chase had to make a record USD 920 million settlement.

“Is the precedent to allow convicted criminal activity a free pass in return for cash?” the DMCC CEO asked.

He also sought to know if LBMA would scrutinise any blatant conflicts of interest, of its own board members, including senior board members of major precious metal refiners and fabricators such as MKS PAMP Group.

Pointing to the targeting of countries than individuals, Sulayem wondered why when two of LBMA didn’t consider stopping gold imports from the US when two of its previously certified Good Delivery List members, Republic Metals Corporation and NTR Metals, declared for bankruptcy.

Both the firms declared for bankruptcy after being unable to account for large amounts of precious metal or be charged by federal prosecutors in Miami for buying USD 3.6 billion illegal gold from criminal groups in Latin America respectively.

The DMCC CEO said LBMA letter seemed to be an agenda to disrupt any centre that threatened its market share. He called for a policy of inclusion rather than subjugation on the issue.

He said it has also resulted in the rest of the world increasingly beginning to believe that “it is time for a transparent regulator, composed of an international coalition that is equipped to authorise or blacklist stakeholders based on meritocracy and not self-serving interests”.

The Indian bullion sector is also questioning the LBMA letter on the ground that the London association is trying to implement “monopolistic policies”. The industry is now discussion on formulating its own policy, though the problem is that banks, which lend to the industry, have to accept it.

Those irked with LBMA’s letter point out that DMCC’s Dubai good delivery (DGD) is better than LBMA’s system.

DGD scrutinises reports of the management of its members, which has audit details, unlike the LBMA which seeks only a compliance report and assurance statement from its members, critics point out.

According to those backing DMCC, its closer scrutiny is one reason why some of its members have been removed from DGD.

Russia has also questioned LBMA’s letter, according to trade sources.

The issue of “conflict” gold has cropped up particularly in view of gold prices gaining in recent months, leading to a rush in gold mining and refining in these “conflict” areas and nearly all the gold from these centres reach Dubai.

These gold find their way into Dubai after being exported or smuggled to neighbouring nations such as Uganda, Rwanda, Cameroon, Kenya, Chad and Burundi.

The Sentry’s, in its advisory, said that UAE should plug the regulatory loopholes and gold industry actors such as LBMA should engage UAE authorities to press for third party audits and cap gold cash transactions above a certain limit.

As gold prices have gained in recent years, there has been a rush in gold mining and refining in these “conflict” areas and nearly all the gold from these centres reach Dubai. These gold find their way into Dubai after being exported or smuggled to neighbouring nations such as Uganda, Rwanda, Cameroon, Kenya, Chad and Burundi.

The Sentry’s advisory said that UAE should plug the regulatory loopholes and gold industry actors such as LBMA should engage UAE authorities to press for third party audits and cap gold cash transactions above a certain limit.

The LBMA’s move could undo all that the UAE had done in the last two decades in making Dubai a gold trading hub.

The bullion sector points out that the Organization for Economic and Development Cooperation, a group of 37 nations, has come up with responsible sourcing guidelines for gold and thus, the LBMA directive was not required.

The Indian bullion industry feels LBMA has acted arbitrarily and it should join hands with Dubai to formulate their own standards that will be widely accepted.

The LBMA move has come at a time when gold has gained over 26 percent this year with prices hitting a record USD 2,063.20 an ounce on August 6. Prices have since moderated to USD 1,868.10 currently.

Domestically, gold had climbed to as high as Rs 56,000 per 10 gram on August 7. On November 20, gold for jewellery was quoted at Rs 48,700.

On MCX, gold December contracts were trading at Rs 50,520 per 10 gm against the previous close of Rs 49,992.

By Subramani Mancombu

Source: MoneyControl

Goldman Sachs bullish for commodities in 2021

Goldman Sachs is bullish on commodities in 2021 — why?

The basis for Goldman Sachs’ bullish view comes down to three price drivers. The extent to which investors weight those outcomes will determine the pace of price rises and markets’ supply-demand expectations by anything from 3-30 months.

There has been stock market pullback this week in the face of rising anxiety over the spread of the COVID-19 pandemic. However, Goldman see this as a temporary setback that will likely wane as the year draws to a close.

The first driver, BusinessInsider noted, is investors pivoting from older polluting areas of the economy towards tech. The huge outperformance of technology stocks over traditional businesses this year illustrates that trend.

This is and will continue to build up cumulative under-investment in what BusinessInsider terms the “old economy” sectors. As a result, businesses in those sector will have too much debt, too much capacity and high emissions.

A focus on rectifying these issues will lead to structural under-investment in new facilities and degradation in the new supply pipeline going forward.

Presidential scenarios

A Trump victory would see a renewed focus on tax reduction and stimulus. Meanwhile, a Biden victory is expected by Goldman to produce a “blue wave” stimulus package. Of course, such a wave assumes he can carry both houses of Congress.

Goldman estimates U.S. industrial production would grow under that scenario by 4-5% by 2024. That type of growth implies strong increases in the consumption of natural gas, crude oil, gasoline and bulk commodities.

Yet the prospects for fossil fuel price rises are potentially higher under a Biden win. Stimulus would go hand in hand with increased oversight of shale drilling, likely inhibiting investment and/or raising break-even costs.

Rising demand would therefore hit a more constrained supply and result in rising prices. Even without a landslide Biden win, increased consumer-focused stimulus in the U.S., Europe, and China is forecast to reach $1 trillion over 2021-25.

At the same time, the U.S. Federal Reserve’s commitment to keeping interest rates close to zero for the next couple of years is likely to result in prolonged weakness in the dollar, which tends to favor commodity prices.

A sustained increase in input prices will eventually lead to a pickup in inflation, the bank believes. Investors in precious metals do, too, with gold up 26% already this year. Furthermore, in Goldman’s opinion it has further to go.

In fact, rising anxiety over inflation will lead to a rotation into commodities, the report suggests.

However, the main beneficiaries are likely to be precious metals rather than base metals.

Metals impacts

Goldman estimates a Biden win would increase U.S. copper demand by 2% over the next five years. In addition, it predicted copper prices, which have fallen back to $6,800 on a general metals pullback this week, to be at $7,000 in three months. Furthermore, it predicts copper to hit $7,250 in six months and $7,500 by this time next year.

Precious metals are one of the biggest beneficiaries, the bank suggests. Gold is used as both a hedge against the loss of purchasing power of a weaker dollar and for pullbacks in equity portfolios, the note said. The note continues, adding with gold currently in the low $1,900s per ounce, it could be at $2,300 per ounce next year.

Silver, too, might benefit both from inflation anxiety and a rebound in industrial demand. The precious metal could hit $30 per ounce next year from a current level of around $25 now.

Potentially the largest beneficiary is the one that has fallen the furthest and whose prospects looked so bleak earlier this year. Predicated on a rebound in gasoline demand and constrained shale supply, U.S. oil prices could rise to $65 per barrel late next year, the bank’s report predicts. Such a rise would impact logistics costs for those budgeting for 2021.

Not all analysts are as anxious about inflation. Goldman’s analysis of supply fundamentals and probable demand appears to be broadly accepted. However, views are mixed about when our decadelong low-inflation environment will end.

Of the many moving pieces on the board, the trajectory and velocity of inflation seem the most uncertain.

By Stuart Burns

Source: Agmetalminer

Discounts narrow in top hubs as gold price dip attracts some interest

Physical gold demand limped higher in top Asian hubs this week, with dealers in India easing discounts to the lowest level in six weeks, as a drop in prices saw a little interest return in the precious metal.

Indian dealers offered discounts of up to $5 an ounce this week over official domestic prices, inclusive of 12.5 per cent import and 3 per cent sales levies, down from last week's $23. 

The correction just before the festival season could encourage jewellers to build up inventory, said a Mumbai-based dealer with a bullion importing bank. 

In China, the biggest consumer of bullion, discounts narrowed to $40-$45 an ounce from last week's $44-$48. 

"We saw a little bit of buying interest when prices dipped to around $1,850-$1,860, but mostly on the investment side. The retail side is a bit better but still quiet," said Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong. 

Spot gold prices hit an over two-month low of $1,847.57 an ounce on Thursday and are down about 4.7 per cent on a weekly basis.

In India, the second-largest gold consumer, discounts narrowed after local prices fell to an over two-month low. 

"As prices are falling, retail buyers are postponing purchases anticipating an even bigger correction," said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji. 

Singapore premiums remained around $0.80-$1.50 an ounce over the benchmark prices. 

"On the retail side, we are seeing a lot more clients coming in and buying gold because they are still bullish on gold, so every time there is correction or pullback many clients are buying," said Brian Lan, managing director at dealer GoldSilver Central in Singapore. 

In Japan, premiums rose to $0.50-$0.75 compared with $0.30-$0.50 last week. 

In Bangladesh, domestic rates were slashed with the best quality gold priced at 74,008 taka ($874.49) per Bhori, or 11.664 grams, tracking global prices amid weak demand. ($1 = 84.6300 taka)

By Brijesh Patel and Rajendra Jadhav

Source: The Economic Times

Gold Is Bigger Bubble Than Tech, Says $63 Billion Asset Manager

Carillon Tower Advisers Inc. portfolio specialist Matt Orton is a rare critic when it comes to gold’s meteoric rise this year. He says excitement around the metal has made it a bigger bubble than tech stocks.

Orton, who is “quite bullish” on tech stocks, thinks the price of gold has gotten disconnected from fundamentals. The flow of funds into gold “shows how much enthusiasm and/or speculation has been going into the gold complex,” Orton said in an interview. His firm has more than $63 billion under management and is based in St. Petersburg, Florida.

“Everyone talks about the bubble in technology stocks,” but the tech sector is “rising because a lot of these companies have been able to increase their market shares during Covid,” Orton said. The tech firms also had strong earnings, providing higher visibility to their growth profile, Orton said. Gold’s rally, on the other hand, could “completely derail” once risk factors driving investors to safe havens ease, including lower rates and the weaker U.S. dollar.

Here are other details from the interview:

• Orton recommends investors hedge their portfolio by diversifying, rather than allocating money into gold. He also thinks investors should keep some cash in “some form of low-duration assets,” which they can redeploy when needed.

• In terms of “tactical asset allocation,” Orton recommends overweighting equities with appropriate diversifications.

• Within equities, his preferred sectors are tech and health care. He thinks tech stocks with IT services look interesting as they have underperformed peers and have leverage to the U.S. economy.

• In health care, stocks in the equipment business are “particularly interesting” as they have exposure to “durable themes” such as chronic disease treatments.

• Orton’s least-favorite sector is mid- to small-cap financial stocks because they will struggle in the low interest rate environment. He also doesn’t recommend investor exposure to the energy sector.

By Aoyon Ashraf

Source: Bloomberg News

Gold prices to lose luster near $2,000

Gold surged to a record high on Monday, but the precious metal’s ferocious rally will likely run out of steam near $2,000, according to strategists at J.P. Morgan Chase & Co.

Futures for the active August contract on Monday gained as much as 2.34 percent to $1,941.90 an ounce. The precious metal has climbed 26 percent this year.

“After maintaining a bullish view on gold prices for over two and a half years, we believe bullion will likely see on last hurrah before prices turn lower into year end,” wrote a group of J.P. Morgan commodities analysts led by Natasha Kaneva.

The analysts see the precious metal reaching a high of about $2,000 an ounce amid a move that is not supported by fundamentals.

In order for gold to hold above $2,000, on a “sustained basis” the real yield, or the nominal yield minus the rate of inflation, would need to fall another 75 basis points from -90 bps to -165 bps, they said.

“While this is not improbable, it looks unlikely given our current U.S. macroeconomic forecast and policies,” they wrote, noting that real yields will likely rise slightly to -75 bps and that gold will average $1,880 an ounce in the fourth quarter of 2020.

J.P. Morgan isn’t the only Wall Street firm expecting gold to top out near $2,000.

Earlier this month, analysts at Goldman Sachs predicted rising inflation expectations would be the “key to pushing gold higher” to their $2,000 target.

However, not everyone on Wall Street is on board with the idea that gold is nearing its peak. Paul Ciana, a technical strategist at Bank of America, wrote last week that gold is going higher from here.

“A dip may come and we’re still dip buyers,” he wrote, reiterating his belief that the precious metal could rally to as high as $2,296.

By Jonathan Garber

Source: Yahoo Finance

PICC, several other insurers tied up in Chinese fake gold scam

Major Chinese insurer PICC Property and Casualty Co. and several smaller insurers are reportedly involved in a controversial set of loans worth RMB20 billion (US$2.8 billion), after it was found that at least some of the gold bars used as collateral were fake.

Wuhan Kingold Jewelry Inc. was able to loan the amount over the past five years using collateral of 83 tons of gold bars and RMB30 billion (US$4.2 billion) in property insurance policies issued by the insurers, according to a report by Caixin. Nasdaq-listed Kingold is led by former military man Jia Zhihong, who is the company’s chairman and controlling shareholder.

For context, 83 tons of gold is equivalent to 22% of China’s annual gold production and 4.2% of the state gold reserve as of 2019, the report said.

The fakes were discovered in February after Dongguan Trust Co. sought to liquidate the collateral after Kingold defaulted on some debts in late 2019. This led to the gold bars being outed as just gold-plated copper.

China Minsheng Trust Co., another one of Kingold’s major creditors, discovered in May that the bars from Kingold it had been holding were also fakes. According to the report, two more creditors have found fake gold bars from Kingold in their possession.

Jia, however, denied any wrongdoing by Kingold.

“How could it be fake if insurance companies agreed to cover it?” Jia told Caixin, and refused to comment further.

The report said that, as of early June, creditors Minsheng Trust, Dongguan Trust and Chang’An Trust had filed lawsuits against Kingold. The creditors have also demanded that PICC cover their losses.

Caixin said that PICC P&C declined to comment officially, saying that the case is being heard by the courts. The financial publication cited a source from within PICC P&C, who said that the claim should be initiated by Kingold as the insured party, rather than the creditors. Kingold has yet to make a claim, the source said.

According to the report, PICC P&C dismissed its Hubei branch party head and general manager Liu Fangming, as well as several staff members, earlier this year. The policies covering the Kingold loans were issued by PICC P&C’s Hubei branch. The insurer said that Liu’s firing was due to “internal management issues” and did not respond to the query as to whether Liu was involved in the Kingold scandal.

By Gabriel Olano

Source: Insurance Business

Gold climbs as U.S. riots spark safe-haven rush

Gold prices rose on Monday as riots in major U.S. cities rattled investors already reeling from strained Sino-U.S. ties and boosted the demand for the safe-haven metal, with a weaker dollar lending further support.

Spot gold gained 0.9% to $1,741.61 per ounce by 0509 GMT. U.S. gold futures was up 0.3% to $1,757.50.

“Concerns about the unrest in the United States at the moment appear to be weighing on market sentiment,” said Michael McCarthy, chief strategist at CMC Markets, adding that rising tensions between the world’s top two economies further supported gold.

Protesters have flooded the streets in the United States over the death of George Floyd in police custody, in a wave of outrage sweeping a politically and racially divided nation.

The closely packed crowds and demonstrators not wearing masks have sparked fears of a resurgence of COVID-19, which has killed more than 101,000 Americans.

Meanwhile, in Asia, China’s state media and the Hong Kong government lashed out on Sunday at U.S. President Donald Trump’s pledge to end Hong Kong’s special status if Beijing imposes new national security laws on the city.

Gold is often used as a safe store of value during times of political and financial uncertainty.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.3% to 1,123.14 tonnes on Friday, a fresh seven-year high.

Further supporting gold’s appeal, the dollar index .DXY fell 0.3% against its rivals.

Elsewhere, silver rose 2.5% to $18.29 per ounce, its highest since Feb. 25.

Speculators cut their bullish positions in COMEX gold and increased them in silver contracts in the week to May 26, the U.S. Commodity Futures Trading Commission said on Friday.

Palladium rose 0.9% to $1,961.50 per ounce, and platinum increased 0.4% to $841.37.

By Harshith Aranya

Source: Reuters

Gold’s Performance This Century Offers Guide to The Future

Over 20 years I have strongly advocated that investors must have a stake in gold. But I am not, and never have been, what Wall Streeters call a “gold bug.” Gold bugs believe in gold as a doomsday investment. They are fervently pro-gold at all times because they fervently believe at all times that apocalyptic disaster lies just around the corner.

Gold bugs do have one part of the picture right: Gold is the best investment during times of turmoil and contracting economies. That explains why it has been so strong in the past couple of months as the Covid-19 pandemic has wreaked havoc. But gold also is the best investment during very different sorts of economies, during times of rapid growth when commodities like oil are rapidly rising in price and threatening to become scarce.

Why should gold flourish under such seemingly opposite conditions? The mantra I’ve coined to explain it is “gold or Goldilocks.”

Goldilocks, you recall, was the little girl in the story who stumbled upon the home of the three bears while they were out for a walk. Sampling their wares, she rejected the porridge of the Mama Bear as too cold; the porridge of the Papa Bear as too hot; but declared that the porridge of the Baby Bear as “just right.” For economists, Goldilocks economies are those that are neither too hot (inflationary) or too cold (deflationary) but just right. More precisely, they are periods of sustainable growth.

Goldilocks economies are terrible for gold. When economic growth is sustainable, investors focus on buying stocks, because the conditions make it possible for companies to keep profit growth rising. The 1990s were a notable example of a largely Goldilocks economy.

But when Goldilocks is nowhere to be found, that’s when gold shines, outperforming stocks and other assets as well. That’s true over both short and long time periods, and it applies to two very different kinds of non-Goldilocks economies. One is deflationary times, when economic growth is negative. The other is when there is growth – when GDP is rising – but there is reason to think it isn’t unsustainable, that growth will short-circuit.

What are the signs that growth won’t be sustainable? You need to look at commodity prices. If they are rising faster than GDP is growing, it implies big problems for the economy lie ahead. That’s because rapid rises in commodities undercut growth. The rising prices – and most notably rising oil prices, which not only mean higher prices at the pump but raise the costs of producing pretty much anything – take money out of consumers’ pockets and put pressure on profit margins of companies.

Gold’s performance this century reflects these relationships and offers a guide to the future. In the past few months, in the turmoil engendered by Covid-19, gold’s performance has stood out as stocks have crashed. From the start of February through mid-April, gold is up more than 9% compared to the S&P 500’s drop of 14.25% – a differential of nearly 25 percentage points in gold’s favor.

That recent strength in the face of a plunging stock market has gotten attention. But gold’s longer-term out-performance in the past two decades has passed largely under most investors’ radar. For most people, all the focus was on the surging Dow and S&P 500. And it’s true that stock markets were reaching giddy heights. But were they doing better than gold? Not by a long shot.

Here are some numbers. On December 31, 1999, gold traded at around $288 an ounce. On January 31, 2020, it was about $1,600 an ounce – some 5.6 times higher.

During that time, the S&P 500 rose 2.1 times – underperforming gold by more than 60%. With dividends reinvested, total returns from the S&P 500 were more than 50% above the nominal gains but still 40% below the gains from holding gold.

If gold handily outperformed the S&P 500, how did it do against other assets – real estate, for example? The mostly widely followed real estate indexes were developed by Karl Case and Robert Shiller and track resale prices of single-family homes. The most recent value of the broadest Case-Shiller index is 212.43 compared to 99.58 at the beginning of the century. That’s a rise of 2.13 times, about the same as for the S&P 500 excluding dividends and more than 60% below the gain in gold.

Cash and bonds also sharply underperformed gold. The most widely followed benchmark for bonds is the Bloomberg Barclays U.S. Aggregate Bond Index. It measures total returns from a full spectrum of corporate and government investment-grade bonds. The index rose from 833.75 at the century’s start to 2,314 at the end of January 2020. That ratio of 2.7 is a little lower than the gains in total returns of the S&P 500 and more than 50% lower than gold’s gains.

In sum, gold has been this century’s unrivaled star. It marks the longest period in modern history in which the metal has outperformed all other major assets including stocks. (The second-longest was the period between the beginning of 1929 and the end of 1945. Gold also outperformed in the period between 1970 and the early 1980s.)

Gold’s performance this century, both overall and in shorter-term periods, matches up essentially flawlessly with my “gold or Goldilocks” mantra. During the first 11 years of this century, commodity prices sharply outpaced economic growth and gold sharply outpaced the stock market. Between 2011 and the end of 2015, stocks rose while commodities faltered and gold corrected. Between 2016 and 2019, gold was strong during those relatively brief stretches when commodities were rising faster than GDP; at other stretches within those four years, the reverse was true. Overall this century through January 2020, commodities outperformed growth by 45% – an annualized rate of 2.9% vs. 2%. And clearly our mantra applies so far this year as negative growth has marched hand in hand with rising gold.

I have consistently urged subscribers to my investment letter The Complete Investor and in other writings to own gold, both as a hedge against any outbreak of deflationary turmoil and as an asset that will soar during periods of commodity-driven inflation. (When I say own gold, I don’t necessarily mean buying the physical stuff, though that’s a fine option for anyone who wants to take on the added complications of buying physical gold, storing it, insuring it, and so on. Instead I’ve been recommending a few ETFs that track gold and gold miners, plus a handful of selected gold miners.)

But the sad news is that even as gold has been the big winner this century, most Americans haven’t participated (or likely even are aware of it). Only a minuscule portion of Americans own gold. Each quarter the Federal Reserve publishes estimates of the balance sheets of American households. The two most important assets are stocks and real estate (mostly homes). Bonds and bank deposits are also important. There is no separate entry for gold. Possibly it is lumped in with durable goods, a category that is small relative to stocks and real estate; within this small category, gold would be a relatively minor constituent, with autos far more important. Most estimates are that between 1% and 5% of Americans own gold as an investment.

I hope that changes, because I see almost no possibility that we’ll see another Goldilocks economy anytime soon. Over the more immediate time frame, it seems a good bet that it will take time for growth in the U.S. and globally to get back on track. That makes gold essential as a deflationary hedge, the role it has played so well in recent months.

Once economies start to recover, commodities may remain under pressure initially and gold may pull back for a time. But given all the massive economic stimulus, which will almost certainly have an effect on the commodity-hungry developing world, I think that the likeliest outlook is that ultimately strong gains in commodities will follow, propelling gold far higher over the longer term. The almost certain non-appearance of Goldilocks in coming years makes gold an essential investment for investors of all stripes.

By Stephen Leeb

Source: The Published Reporter

Russia Will Stop Buying Gold But Will Sell It Internationally, Report Says

After years of purchasing significant quantities of gold, the Central Bank of Russia will seize buying more as of April 1st. The country announced it yesterday without explaining the move.

Local analysts, however, claimed that the nation already has a lot of gold stashed in reserves and might start selling to international investors because of the high demand.



Russia Stops Buying Gold

The precious metal is often regarded as the preferable safe-haven investment instrument by many. Individual or institutional investors, businesses, and even central banks and governments choose to rely on it. Russia, for example, has been especially eager to buy substantial quantities in the past five years to increase its bullion.

A recent Bloomberg report informed that after building a considerable amount worth over $120B, the world’s largest country by landmass will halt purchasing more from April 1st.

The bank didn’t provide a valid explanation on the move. Tatiana Evdokimova, an analyst at Nordea Bank in Moscow, believes that gold accounts for about 20% of Russian international reserves. A historically high level, especially when compared to other central banks.

She added that the Central Bank of Russia “probably doesn’t want to increase gold’s share in reserves, while the size of reserves is falling.”


Sell Gold Internationally

According to Dmitry Dolgin, ING Bank’s chief economist in Russia, halting massive gold purchases is a clear sign for sellers to turn their attention to the international scene:

“The central bank is now signaling to gold sellers that they should redirect their supplies externally. Global demand seems to be high.”

Dolgin also added that large buyers from London, India, Turkey, and Singapore have already expressed interest in purchasing portions of Russia’s gold.

But the demand from investors is rising almost everywhere in the world today. A popular precious metal dealer recently noted that in March, the interest reached the previous highest level of early 2009 – during the last financial crisis.

However, the situation now seems considerably different, mostly because of the global chaos caused by the COVID-19 outbreak. As most economies are shut down, the physical gold supply has also been affected. Consequently, this led to extremely high levels of spread fluctuations and a shortage of actual gold for investors to purchase. Independent metals analyst, Ross Normal, explained:

“Because of the supply chain issues, it has been difficult to [deliver gold], and hence the premium went sky high.”

And as basic economic principles dictate, when the supply of an asset decreases, while the demand increases, its price should, in theory, rise.

Even though gold’s price plunged when investors were panic selling all their assets in mid-March, it has since recovered well and is currently trading at $1616 per ounce. In fact, it’s one of the best-performing assets during this time of uncertainty.

By Jordan Lyanchev

Source: CryptoPotato

Gold joins the virus selloff with biggest slide since 2013

It is an odd moment for gold to be tumbling. One of the oldest and most-trusted safe havens in times of crises, gold typically rallies amid nasty stock sell-offs like the one that has gripped the world this week.

So its plunge Friday -- it fell as much as 5 per cent, the most in almost seven years -- caught many traders flat-footed and scrambling for explanations as to what had just happened. The most often heard of them: Gold investors don’t want to sell but are forced to cover the losses in other asset classes.

“It’s bloodshed,” Commerzbank AG analyst Carsten Fritsch said by phone Friday. “It first started with forced selling from equity investors who also sold their gold positions to cover their losses in equities and also to cover margin calls. Gold investors don’t want to sell but are forced to cover the losses in other asset classes.”

The metal slid 3.6 per cent to settle at US$1,585.69 an ounce in New York on Friday. Other precious metals including silver and platinum also dropped, with palladium declining as much as 13 per cent, the most since 2008.

Fear over the economic fallout from the coronavirus has unnerved markets, sending the S&P 500 index to its worst week since 2008. The outbreak has further undercut investor demand for raw materials, which was already wavering because of increasing supplies and concerns over global trade wars. Returns from commodities have plunged on worries that the fast-spreading virus will crush demand for raw materials, fuel and food across the globe.

The rout is showing no signs of abating as the virus continues to spread quickly outside of China, where the outbreak began. Major commodity trading houses are keeping employees from going abroad and several events this week at the oil industry’s biggest gathering were canceled. Most exhibitors from China were forced to pull out of a big annual mining conference in Toronto next week because of international travel restrictions, a spokeswoman said on Thursday.

“The possibility that China may be using less is hurting commodity accounts and therefore you’re going to see margin calls,” George Gero, a managing director at RBC Wealth Management, said by phone Friday.

Still, barring near-term profit-taking, risks for gold prices remain to the upside amid expectations that the Federal Reserve will cut interest rates twice this year, some analysts said. The metal has still risen more than 4 per cent this year, and Goldman Sachs Group Inc. has said it may hit US$1,800 in 12 months.

“We think that there will be opportunities to continue to add to long exposure,” Suki Cooper, precious metals analyst at Standard Chartered Bank, said in a Bloomberg TV interview. “You might see a little bit of a sell-off, so there might be better entry levels. But beyond that, we think that upside risks still linger for gold.”

By Justina Vasquez and Ranjeetha Pakiam

Source: BNN Bloomberg

Gold Demand Trends Full year and Q4 2019

Annual gold demand dips to 4,355.7t

Gold demand fell 1% in 2019 as a huge rise in investment flows into ETFs and similar products was matched by the price-driven slump in consumer demand.

2019 was broadly a year of two distinct halves: resilience/growth across most sectors in the first half of the year contrasted with widespread y-o-y declines in the second. Global demand in H2 was down 10% on the same period of 2018 as y-o-y losses in Q4 compounded those from Q3, notably in jewellery demand and retail bar and coin investment. Central bank demand also slowed in the second half – down 38% in contrast with H1’s 65% increase. But this was partly due to the sheer scale of buying in the preceding few quarters and annual purchases nevertheless reached a remarkable 650.3t – the second highest level for 50 years. ETF investment inflows bucked the general trend. Investment in these products held up strongly throughout the first nine months of the year, reaching a crescendo of 256.3t in Q3. Momentum then subsided in Q4, with inflows slowing to 26.8t (-76% y-o-y). Technology saw modest declines throughout the year, although electronics demand staged a minor recovery in Q4. The annual supply of gold increased 2% to 4,776.1t. This growth came purely from recycling and hedging, as mine production slipped 1% to 3,436.7t.

Highlights

Total fourth quarter demand fell 19% y-o-y to 1,045.2t. Two main contributors to the y-o-y drop were jewellery and physical bar demand, both of which reacted to the elevated gold price. In US dollar value terms, the decline in Q4 demand was much shallower – down just 3% to US$49.7bn.

Inflows into global gold-backed ETFs and similar products pushed total holdings to a record year-end total of 2885.5t. Holdings grew by 401.1t over the year, with 26.8t added in Q4. Inflows were heavily concentrated in Q3 as the US dollar gold price rallied to a six-year high.

Central banks were net buyers for a 10th consecutive year: global reserves grew by 650.3t (-1% y-o-y), the second highest annual total for 50 years. Purchasing in Q4 of 109.6t was 34% lower y-o-y, although this was partly a reflection of the sheer scale of buying in 2018.

China and India held sway over global consumer demand. Together, the two gold consuming giants accounted for 80% of the y-o-y decline in Q4 jewellery and retail investment demand. High gold prices and a softer economic environment were the main culprits.

Total annual gold supply edged up 2% to 4,776.1t. An 11% jump in recycling was the main reason for the increase, as consumers capitalised on the sharp rise in the gold price in the second half of the year. Annual mine production was marginally lower at 3,463.7t – the first annual decline for more than 10 years.

The gold price averaged US$1,481/oz in Q4. This was the highest average price since Q1 2013. Although the price remained below the Q3 high, it was well supported. And gold priced in various currencies – including euros, Indian rupees and Turkish lira – hit their highest levels in history.

By World Gold Council

Source: World Gold Council

JPMorgan Expert Issues Warning to Investors as Gold Set for Best Year in Nearly a Decade

The price of gold has just climbed to its highest level since 25 September and many investors are looking to the bullion as a safe bet for their 2020 portfolios amid falling dollar prices.

Gold prices per ounce managed to climb to $1,524.23 on 31 December as the dollar deepened to a six-month low, signifying a 19% gain in the precious metal since the start of the year - its biggest annual rise since 2010, according to Bloomberg. JPMorgan Global Market Strategist Hannah Anderson has, nevertheless, warned investors who are now positioning their portfolios for 2020 that gold is not necessarily the best option for a sound portfolio protection.

“People are starting to question how much further they have to run after that stellar 2019”, Anderson told Bloomberg TV, while referring to equities gains. “Some investors are starting to wonder if gold is going to be the safety for their portfolio. Personally, I think investors probably want to rethink that consideration”.

“There are very few certain environments in which gold does well, and it’s not necessarily the case that 2020 won’t be any of those”, the expert added. “But if you look at the performance of gold in market downturns, it’s really a mixed bag, there’s no sure thing when it comes to gold”.

“In the next downturn, I do believe that bonds still could be defensive assets”, Anderson concluded.

The warning comes amid a potential easing in trade tensions between China and the US, as the White House’s leading trade adviser on China Peter Navarro recently announced to Fox News that a deal with Beijing had been completed and was “in the bag”. However, since the trade talks between the two states have not been finalised, investors are still turning to gold as the traditional “haven asset” despite global stocks currently being at all-time highs.

Meanwhile, the Bloomberg Dollar Spot Index has revealed that the US currency is still heading towards its biggest quarterly loss since the first months of 2018 when tracked against the performance of a basket of 10 leading global currencies. Such precious metals as silver and platinum also increased up to 17% and 22% respectively this year, a considerable gain in comparison to previous years.

By Sputniknews

Source: Sputniknews