Archive for the ‘Gold’ Category:
Call This Financial Repression? Really?
By: Adrian Ash, BullionVault
Financial repression this ain’t. Not unless you like playing victim…
ALL OF a sudden, everyone’s talking about financial repression – the capture and torture of domestic savers with below-inflation rates of interest, so that banking and government debt shrinks in real terms.
“Such policies,” explains economic historian and author Carmen Reinhart for Bloomberg, “usually involve a strong connection between the government, the central bank and the financial sector.” Check.
Given the post-war size of our debts, she goes on, “financial repression…with its dual aims of keeping interest rates low and creating or maintaining captive domestic audiences… will likely be with us for a long time.” Check.
“[It's] equivalent to a tax on bondholders and, more generally, savers.” Check.
Now if, like me, you already gave, then you might want to look for the exits – and you really don’t need to look very far. Yet to date, this sudden burst of comment on financial repression can only counsel despair, despite the greatest liberty of capital movement in 100 years. More oddly still, the classic escape-route of buying gold – an escape-route blocked worldwide when governments wore down their 20th century wartime debts – has scarcely been mentioned.
Take the Financial Times; it’s published 15 stories on financial repression in the last month alone, yet only two mention gold. Google News counts 103 stories in English from the last 2 weeks globally, yet barely 1-in-4 dares mention gold, and half of those only because they mention the high classical Gold Standard ending 1914. Before then bondholders also got very low (but not negative) real rates of interest. They also got the full return of principal value on maturity.
“In [our] age of free capital movement, financial repression is still possible,” reckons another historian (and a member of GMO’s asset allocation team) Edward Chancellor in the FT, “because it is being simultaneously practised in the world’s leading financial centres. Negative real interest rates are to be found not only in the US, but also in China, Europe, Canada and the UK.”
But so what? No one’s yet forcing US citizens to keep their money inside the States, and no one’s forcing them to choose a Euro, Canadian or Sterling savings account if they go elsewhere either. Which is lucky, with rates at 1%, 2% and 3% below inflation respectively. Yes, the finance industry is paying the price of getting bailed out, with the world’s $30 trillion in pension funds forced to hold ever-greater quantities of sub-zero-yielding debt. But outside the still-repressed East, private savings today enjoy unheard of freedom to go where they wish and do as they please. And even there, in India and China most notably, the freedom to buy gold – the universal financial escape – is similarly at a 100-year peak.
Witness the British experience with investment gold, for instance. Suspending the Gold Standard when war broke out in 1914, London banned domestic gold trading by private individuals throughout both world wars, pretty much all the time inbetween, and for more than three decades after Hitler put a hole in his head.
The cost to cash savers and gilt-holders? One hundred pounds lent to the British state in 1945 was worth £91 in real terms by 1980. Whereas £100 held in gold would have become £304 of inflation-adjusted real value. But unlike today, gold wouldn’t have done you much good in the meantime, because it was nailed to currency values (not vice versa) by the false peg known as the Dollar Exchange Standard. And also unlike today, you would have been breaking the law for much of that time, simply by owning coins or gold bars.
A brief window opened in 1971, but it was closed four years later because savers used it too freely, sparking a foreign currency drain that brought down the shutters on foreign inflows of metal again. It took another four years for the UK’s gold controls to be lifted entirely. By which point gold had already begun its big move. Real rates turned strongly positive 12 months later, and the urgency of buying gold to escape repression was gone.
Financial repression this ain’t, in short, but nor would it be new if it was. Our current freedom to buy gold is very new, in contrast, along with the wealth of alternatives – both domestic and foreign – open to anyone daring to take control of their money instead of lending it to government or paying a pension-fund manager to do the same.
Take note: Nothing is certain to repair the losses you suffer on other, captive investments today. US citizens, for example, suffering real interest rates 4.6% below inflation in Jan. 1975 were allowed to buy gold for the first time in three decades. Bullion promptly dropped half its Dollar price, shaking out all but the most pig-headed investors over the next 18 months before rising 8-fold by the start of 1980.
“In [our] mildly reflating world” however, advises Bill Gross of Pimco, “unless you want to earn an inflation-adjusted return of minus 2%-3% as offered by Treasury bills, then you must take risk in some form.” And buying gold is just such a risk – a uniquely simple and obvious one, offering a stateless escape to a borderless market. But make no mistake: Swapping the credit and inflation risk of cash and bonds for physical gold means exposing yourself to price risk.
Volatility is certain as retained wealth worldwide thrashes free from the imaginary manacles of the financial press, and the traps laid for the unwary by the packaged financial industry.
Adrian Ash
Adrian Ash is head of research at BullionVault – the secure, low-cost gold and silver market for private investors online, where you can buy physical gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Don’t Catch Recovery Fever
By Peter Schiff, CEO of Euro Pacific Precious Metals
Gold has been holding steady in the the $1,600-$1,800 band since early October. This could be attributed to consolidation after last summer’s historic run up to $1,895, but I think this wait-and-see attitude reflects current market sentiment toward the US dollar.
In fact, the first few days of April have seen a sharp dollar rally and decline in gold. This is rooted in deflated expectations of a third round of Quantitative Easing (QE3) after the most recent Fed Open Market Committee (FOMC) meeting. Once again, the markets are responding to the headlines while losing sight of the fundamentals.
This is especially peculiar because the Fed did not explicitly take QE3 off the table. In fact, according to the minutes, if the recovery falters or if inflation is too low, the Fed is already prepared to launch QE3. While there is not much chance of low inflation, I’ll explain below why the recovery is not only going to falter – it’s going to evaporate like the mirage that it is!
Trade Deficits
The Obama Administration is touting recent job growth, and while this is a pleasant story to hear in an era of massive unemployment, it disintegrates when put in context. The 227,000 jobs gained – which merely kept the unemployment rate steady at 8.3% – were counterbalanced by a much worse trade deficit tally: $52.4 billion, the highest level since just before ’08 crash.
The trade deficit is a real measure of whether our jobs are producing enough wealth to pay for our consumption. If we were adding productive jobs, I would expect the deficit to be shrinking. A look at the data shows that employment increased by only 16% in the primary and secondary sectors, where we need them the most. The majority of new jobs are still inflated sectors like healthcare (26%), temp work (20%), hospitality (19%), and consulting (16%), which will disappear as fast as they appeared when the bubble collapses. This is what we saw in finance and real estate when the housing bubble burst in ’08.
Imagine the trade deficit is like a corporate balance sheet. You hire a bunch of new employees for your company, but instead of making bigger profits, you find yourself losing even more money than when you started. Are you going to hold on to those people?
Stress Tests
While President Obama is focused on jobs, the Fed has been promoting a recent round of “stress tests” that show the financial system to be in good shape. Unfortunately, yet again, the headlines are not what they seem.
The recent tests were designed to measure big banks’ ability to survive another significant drop in housing and stock prices; but those bubbles have already largely popped. What the tests failed to account for is what I consider the most likely scenario: rapidly rising interest rates amidst a dollar crisis.
Interest rates are the real risk. I think the Fed knew the banks would fail this test, so they simply ignored it. It wouldn’t be the first time the Fed has turned a blind eye to a bubble market. For years, Chairman Bernanke and other Fed officials denied the housing bubble existed; and as late as 2008, well after it popped, they assured us the damage would be contained.
Supporters say the Fed knowingly didn’t account for interest rates because the central bank has complete control over them. Many in Washington and on Wall Street honestly believe that the Fed can continue to print money to buy Treasuries without increasing inflation. A scenario in which the Fed is forced to choose between US government bankruptcy and US dollar collapse seems impossible.
In fact, higher interest rates are not only possible, but probable. The stress tests assume long-term Treasury note yields stay under 1.8%; but that figure is the current six-month low on the 10-year, which is already dragging along its historical floor. As I write, yields are already up to 2.2%. The post-war average is about 5.2% – high enough to crater today’s banking system.
Remember, the rate needed to break the back of inflation in 1981 was a whopping 20%. At that level, there wouldn’t be federal tax money left for the military, Medicare, Social Security, or even law enforcement – it would all be going to interest payments.
Even now, interest rates are a complete farce. In 2011, the Fed purchased 61% of new Treasury debt, compared to virtually none before the financial crisis started. This shows that at current rates, demand for US debt is already drying up.
Extended Interest Rates Pledge
It should be no surprise, then, that the Fed has paradoxically celebrated economic recovery while pledging to keep interest rates near zero through 2014.
First, even with an economic recovery, these low rates will continue to drive precious metals higher. Anyone who says this “recovery” will sink the gold market is misunderstanding what drives the gold prices – inflation.
Second, the Fed wouldn’t be keeping rates so low if the recovery were genuine. If I say to you, “Yes, you can now ride a bike,” but I refuse to take off the training wheels, would you believe me?
The truth is that Bernanke knows the recovery is phony and is using inflation to mask it. This bodes doubly well for gold.
CPI
Another fever notion is that inflation isn’t really a threat, no matter what the Fed does. This is borne of the belief that “deflationary forces” are so strong that no amount of printing will overcome them. Core CPI figures are cited as proof.
Last quarter, Core CPI was up only .01% in February (the latest figure). This sounds low until you add in food and fuel – then it jumps to .04%, yielding an annualized figure of over 5%. This is well above the Fed’s self-proclaimed target of 2% per annum, yet we hear no explanation or apology.
The reality is even worse, as the true rate of inflation as calculated by independent observers is closer to 10%. This means you can expect gold to rise 10% per year just to maintain your purchasing power.
Consider the price of gas which is almost $4 a gallon. President Obama is pledging to release oil from the strategic reserves to keep the price down – but it’s not a supply problem. Those reserves are for a short-term crisis that disrupts the oil supply, but there is no disruption – oil is flowing. Oil production in the US is the highest it has been since 1993 and consumption is down below ’97 levels due to the recession. After all, there’s no reason to buy gas to commute if you’re unemployed. The problem is inflation making the money we use to buy gas worthless.
Proof? A couple of pre-’65 silver dimes can still buy you a gallon of gas, while a couple of post-’65 base metal dimes won’t even buy you a pack of gum in the convenience store.
The dollar has lost so much value that the government actually loses money on every penny it creates. Not because they’re made of copper, that became too expensive long ago. They’re actually made of zinc – a metal so cheap it’s priced by the metric ton – and they’re still too expensive.
So, where’s the inflation? Everywhere!
Recovery Fever Will Be Broken
It’s becoming very easy for a skeptical observer to poke through the veil of recovery. Unfortunately, most market participants still seem to hang on Uncle Sam’s every word. This is a great danger for our economy and a great opportunity for the wise investor.
When an asset like gold moves sideways for a while, even those with good instincts get complacent. They start to view this as the “price level” rather than an extended dip below true valuation.
Recovery fever will wear off as Washington is forced to release propaganda that is more and more incongruous with facts on the ground. And gold will resume its climb in earnest.
Peter Schiff is CEO of Euro Pacific Precious Metals, a gold and silver dealer selling reputable, well-known bullion coins and bars at competitive prices
Gold “Struggling for Momentum” But “Still Respecting Long Term Uptrend”, Investment Demand Insufficient to Compensate for Current Slow Physical Market
SPOT MARKET gold prices jumped to $1669 per ounce ahead of Monday’s US trading, broadly in line with where they ended last week, though they remained below the Asian session peak touched briefly following the release of positive Chinese manufacturing data.
“Gold [is] still respecting the long-term uptrend,” says the latest technical analysis note from bullion bank Scotia Mocatta.
Silver bullion prices hovered around $32.50 per ounce – 0.5% up on Friday’s close – while stocks failed to hold onto early gains.
Commodities were broadly flat and US Treasuries ticked higher.
Physical precious metals markets reported quiet activity Monday morning, with Chinese markets closed until Thursday for the Qingming Festival and Indian jewelry dealers still on strike.
“There is no business in gold and silver,” Kumar Jain, vice president of the Mumbai Jewellers’ Association, which covers ten thousand jewelers, told Reuters.
“The whole value chain has shut.”
Imports of gold bullion by India, the world’s largest gold consumer last year, fell by 55% last month, according to Bombay Bullion Association president Prithviraj Kothari, as jewelers shut their shops following an announcement by India’s government that they were doubling the duty on gold imports and taxing gold jewelry sales.
“Sales have dipped drastically as almost 80 to 90 per cent of the jewelers have joined the protest against duty hike,” says Kothari.
In New York meantime, the net long position of so-called speculative gold futures and options traders on the Comex – measured as the difference between bullish and bearish contracts – rose 15% in the week ended last Tuesday, according to data released at the end of last week’s trading by the Commodity Futures Trading Commission.
Open interest however hit its lowest level this year on a Tuesday – the day of the week for which the CFTC publishes its Commitments of Traders reports. Data from CME Group show it fell further towards the end of last week.
“Gold [lacks] sufficient investment enthusiasm to be able to sideline the physical market as it did earlier in the year,” says a note from Barclays.
“Prices are struggling to gain momentum.”
“Recently prices have been driven strongly by speculative sentiment and it is not surprising to see those pullbacks,” adds Eugen Weinberg, head of commodities research at Commerzbank.
“But in the longer term, we still stay very confident that the upward trend in gold is still very constructive…I think in the longer term, gold will perform even more like a currency, and be less dependent on the jewelry sector.”
Here in Europe, Eurozone finance ministers agreed Friday to allow the roughly €300 billion already committed from the temporary bailout fund, the European Financial Stability Facility, to run alongside the €500 billion European Stability Mechanism, the permanent bailout vehicle due to become operational in July.
However, uncommitted funds from the €440 billion EFSF will not be available once the ESM comes in, capping the amount available for new rescues at €500 billion.
European leaders were told at February’s G20 meeting that they needed to do more to solve the Eurozone crisis before they asked for extra money from the International Monetary Fund.
“Europe has done its part,” said French finance minister Francois Baroin after Friday’s talks. The IMF is due to meet on April 20.
Some European banks meantime are planning to repay loans from the European Central Bank’s longer term refinancing operations two years early to avoid needing to raise money at the same time as many other banks, the Financial Times reports.
Banks borrowed over €1 trillion at the two LTROs in December and February.
Elsewhere in Europe, Eurozone manufacturing activity continued to fall last month – and at a faster rate than February – according to purchasing managers index figures released Monday.
Eurozone manufacturing PMI fell from 49.0 in February to 47.7 in March, with a figure below 50.0 indicating sector contraction. The unemployment rate in the Eurozone meantime rose to 10.8% last month, up from 10.7% in January, official data showed Monday.
In Germany, manufacturing PMI fell from 50.2 in February to 48.4 last month
By contrast, the latest data show the UK’s manufacturing sector continued to grow last month, with March’s PMI reported as 52.1, up from 51.5 in February.
China also reported accelerating growth in its manufacturing sector, with March’s official PMI reading 53.1, up from 51.0 the previous month.
“Keep in mind that in March the official PMI always rises 3 percentage points from its February level,” says Zhang Zhiwei, chief China economist at Nomura.
“Compared to the past, the official average PMI is about 56, whereas this month, it`s only 53. It’s still very much lower.”
Economists at Societe Generale however counter that even adjusting for seasonality, China’s PMI remain above 50, while “the ‘seasonality’ this March was not especially large relative to the same month in previous years,” adds SocGen interest rate strategist Christian Carrillo.
Over in the US, the first three months of 2012 saw the US Mint record its lowest first quarter sales figures for gold coins in four years.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Silver Avoids 4th Straight Quarterly Loss, Gold Heads for Gains, India’s Imports “Overstate Trade Deficit”
U.S. DOLLAR gold bullion prices hit $1669 an ounce ahead of US trading, more or less in line with where they started the week.
Stocks and commodities edged higher and US Treasuries dipped, while the Euro gained ahead of today’s Eurozone finance ministers’ meeting in Copenhagen.
Silver bullion meantime rose to $32.61 – a gain of 1% from the start of the week.
Heading towards the end of the first quarter of the year, gold bullion prices looked set to record their highest ever quarter-end London Fix of in Dollars, Euros and Sterling.
Silver meantime avoided a fourth straight losing quarter, positing gains of 15% in Dollars, 11% in Sterling and 11.6% in Euros.
However, most of the net gains in gold and silver for Q1 came in the first week of January, with gold having fallen sharply since gold failed to break $1800 last month.
“The physical market has stopped playing an important supportive role,” one Singapore dealer told news agency Reuters this morning.
“There is so much physical material, yet we don’t see any good offtake, as people are worried that it’s not the right time to invest in gold now…we don’t expect to see real physical demand until prices drop below $1600.”
Many Indian gold dealers remained on strike Friday, having closed their stores for the past fortnight following the Union Budget on March 16 which doubled the import duty on gold bullion and introduced a 1% tax on gold jewelry sales.
India’s government has said it is reviewing the gold sales tax, but finance minister Pranab Mukherjee says the import duty hike will not be reversed.
India imported an estimated 969 tonnes of gold bullion in 2011, according to World Gold Council data.
Including gold bullion imports in its trade figures may be “overestimating” India’s current account deficit problem, according to Rajeev Malik, senior economist at Asia-Pacific investment group CLSA.
“Although it is technically correct to include gold imports and exports in the current account balance as per IMF guidelines,” Malik says, “we peg the ‘overestimation’ of the current account deficit due to net gold imports to be around 20 to 30%.”
“The close to $200 billion in imported gold over the past decade does not represent a drain on India’s resources,” adds Taimur Baig, chief economist India, Indonesia and Philippines at Deutsche Bank.
“Rather [it is] a diversification of India’s wealth into precious metals.”
One senior gold industry figure, Rajan Venkatesh of bullion bank Scotia Mocatta, suggested this week that the Indian government could encourage gold certificates and other measures to encourage people to deposit gold with the banking sector.
Turkey meantime, which like India has a current account deficit and satisfies much of its gold consumption via imports, is also considering proposals designed to encourage the growth of gold deposit accounts in its banking sector.
“Turkey has historically been affected by repeated currency crises and resultant inflationary pressures, hence households traditionally hold substantial amounts of gold,” says the latest precious metals note from French bank Natixis.
This week, Turkey raised the proportion of Turkish Lira reserves banks can hold as gold from 10% to 20% – while cutting the proportion of foreign exchange reserves that can be held as gold from 10% to zero.
Combined with the move to encourage gold deposits with banks, the moves represents “an easing of monetary conditions, as well as enabling the Turkish banks to bolster their balance sheets through the use of a cheap source of capital,” says Natixis.
Back to Friday, and “focus is firmly on the Eurozone,” says a note from Marc Ground, commodities strategist at Standard Bank.
“We expect precious metals to follow the gyrations of the Euro/Dollar as markets react to speculations and/or announcements on this front.”
Eurozone finance ministers were today expected to approve combining the €440 billion temporary European Financial Stability Facility with the €500 billion permanent European Stability Mechanism when the latter becomes operational in July.
The move is aimed at raising Europe’s so-called ‘firewall’ against sovereign debt contagion, which was identified at last month’s G20 meeting as a prerequisite for additional International Monetary Fund aid.
“If the investors deem the plan as sufficient in reducing near-term Eurozone liquidity issues, we believe risk assets including gold may benefit,” says a note from HSBC today.
Since many Eurozone policy announcements have already been leaked, however, any moves in gold and silver prices are likely to be “knee-jerk reactions, rather than signal a new longer-term trend” says Standard Bank’s Ground.
Spain, which was hit by a general strike yesterday, was due to unveil a so-called austerity budget Friday.
Norway’s $610 billion sovereign wealth fund meantime – which owns 2% of all European stocks – is to cut its exposure to Europe from 60% of its assets to 40%, the Financial Times reports.
Iran has been helping Syria to ship oil to China in defiance of Western sanctions, Reuters reported today.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold Climbs Above 200-day Average, Bernanke “Dovish Again” while Eurozone “Still Insolvent”
London Gold Market Report
THE SPOT MARKET gold price traded just below $1700 an ounce for most of Tuesday morning in London – over 4% up on its low last week – before heading lower just ahead of the US markets open as the US Dollar regained some of the ground it lost on Monday following comments by Federal Reserve chairman Ben Bernanke.
The silver price rose to $33.25 per ounce – a 6.8% gain since its week’s low last Thursday – before it too eased.
The US Dollar Index, which measures the Dollar’s strength against other major currencies, hit its lowest level since the start of the month Tuesday. Longer-dated US Treasuries dipped, while European government bonds gained despite warnings that the sovereign debt crisis has not been resolved.
European stock market gains were relatively muted Tuesday morning, compared to those of the preceding Asian and US sessions, while commodities were broadly flat.
Yesterday saw the gold price move back above its 200-day moving average – which by PM London Fix prices stood at $1682 per ounce Monday afternoon in London – after Bernanke spoke of the need for “continued accommodative policies” and said that the labor market “remains far from normal” despite recent signs of improvement.
“Bernanke was back on solidly dovish ground again,” say Standard Bank currency analysts Steve Barrow and Jeremy Stevens.
“Rightly, or wrongly, the market seems to think that his comments could imply another loosening of [policy] via some form of QE3,” they added, referring to the possibility of a third round of quantitative easing.
“Fed likely to hint at QE3 in April meeting,” said Bill Gross, managing director of world’s largest bond fund Pimco, via the fund’s Twitter account.
Physical gold demand meantime “has shot higher as demand from South-East Asia in particular increased with gold below $1,650 over the past few days, no doubt providing support to the gold price when investor sentiment turned bearish,” says Walter de Wet, commodities strategist at Standard Bank, citing the bank’s Gold Physical Flows Index.
Over in New York, the world’s largest gold ETF, the SPDR Gold Trust (GLD), added 6 tonnes to its gold holdings yesterday.
Also in New York, today sees the expiry of April options on Comex gold futures contracts, with a lot of open interest – both bullish and bearish – clustering around the $1700 an ounce mark. The last options expiry date on 23 February saw gold prices jump to a then 3-month high.
Economic growth meantime “is stalling” in Europe, according to Angel Gurria, secretary-general of the Paris-based Organisation for Economic Co-operation and Development.
“Market confidence in the Euro area is fragile,” says the OECD’s ‘Economic Survey of the Euro Area 2012, published today.
“The outlook for growth is unusually uncertain and depends critically on the resolution of the sovereign debt crisis.”
Eurozone finance ministers are due to meet this Friday where they are expected to agree an increase in the size of the single currency’s so-called ‘firewall’ by combining the existing temporary bailout fund with the new permanent one that launches in July, after Germany dropped its opposition to such a move.
“Everybody knows [the combined fund] is not going to be big enough,” says Robert Crossley, head of European rates strategy at Citi.
“But less inadequate is a good thing.”
“The Eurozone remains insolvent,” adds Jim Leaviss, head of retail fixed income at M&G Investments.
“Growth is still a problem.”
Germany’s Deutsche Bank meantime has overtaken France’s BNP Paribas to become Europe’s largest bank, as a result of adding to its assets while other banks have been shrinking their balance sheets, according to newswire Bloomberg.
The likelihood that the German government would support its largest bank in the event of a crisis was cited by Fitch in December when the ratings agency gave Deutsche a stable outlook.
“We haven’t solved the too-big- to-fail challenge in this country,” says Ralph Brinkhaus, a member of Germany’s finance committee as well as chancellor Angela Merkel’s CDU party.
“That problem becomes all the more a matter of concern the bigger the bank is…and in the case of Deutsche Bank, is becoming.”
A Morgan Stanley co-authored report has suggested that banks worldwide will look to reduce the size of their balance sheets by $1 trillion over the next two years.
Here in the UK, Abu Dhabi’s ruling family is in talks with the British government about buying a stake in the 83%-taxpayer-owned Royal Bank of Scotland, news agency Reuters reports.
The gold price could “peak at well over $2000″ an ounce, Mark Cutifani, chief executive of gold mining firm AngloGold Ashanti said Tuesday.
Turkey’s central bank today raised the proportion of domestic currency reserves Turkish banks can hold as gold from 10% to 20%, while simultaneously lowering the proportion for foreign exchange reserves from 10% to zero.
Turkey is one of a number of countries facing current account deficits and exchange rate problems that have recently turned their attention to gold.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold “Remains Vulnerable” while “Silver Support Threatened” by Downtrend, UK Deficit “Surprises” Ahead of Budget
London Gold Market Report
WHOLESALE MARKET gold prices rose to $1660 an ounce Wednesday morning London time – more or less where they ended last week – before easing ahead of US markets open, while stock, commodity and government bond prices held broadly steady following news that the UK government deficit rose sharply last year.
Silver prices meantime dipped below $32 per ounce around lunchtime – a 1.8% drop on the week so far.
“Silver is in a short-term downtrend and is likely to breach support…at $31.81,” says the latest technical analysis note from bullion bank Scotia Mocatta, who add that the next target would be $30.48.
Over in India, the strike by Gold Dealers in protest at last week’s gold import duty hike entered its fifth day Wednesday.
“We harbor little doubt that gold remains vulnerable,” says a note from UBS precious metals analyst Edel Tully.
“Upside drivers are lacking and physical markets have yet to show a convincing response to lower prices.”
Here in the UK, the latest Bank of England Monetary Policy Committee minutes published on Wednesday show that two of the nine MPC members voted in favor of expanding the Bank’s quantitative easing program by £25 billion when the MPC met earlier this month. The majority voted to maintain the size of the program at £325 billion.
The decision to leave interest rates at 0.5%, where they have been since March 2009, was unanimous.
The MPC minutes noted significant risks to economic activity that might result in inflation falling materially below the [MPC's 2%] target in the medium term”.
MPC member Spencer Dale however, who voted to six times for a rate increase in 2011 – said in a speech Tuesday that in his view “inflation is just as likely to be above as below the inflation target in the medium term”.
The UK government deficit meantime rose to £12.9 billion last month – more than double consensus estimates – figures published hours before Wednesday’s Budget show.
Lower tax receipts contributed to the deficit growth, the Financial Times reports, with HM Revenue & Customs data showing an 8% fall in self-assessment tax revenues compared to February last year.
The news “provides a very uncomfortable background for the budget,” says Investec economist Philip Shaw.
“The fact there has been a worsening on this scale is a big surprise.”
Britain is expected to issue the second largest amount of government debt – known as gilts – on record this coming fiscal year, according to a Bloomberg survey of primary bond dealers.
“The government has a tough balancing act,” says John Wraith, London-based fixed-income strategist at Bank of America Merrill Lynch.
“Growth is going to be at best anemic, and it’s going to take a long time to reduce gilt issuance. They need to reduce debt, but if they stick rigidly to their fiscal consolidation plan, they risk killing growth.”
The FT argued this week that UK policymakers are engaged in financial repression, holding interest rates below inflation and creating a captive market for government bonds in an effort to lower the real value of national debt.
Federal Reserve chairman Ben Bernanke will warn of the US financial system’s exposure to Europe when he appears before the House Oversight Committee today.
“US financial firms and money market funds have had time to adjust their exposures and hedge their risks to some degree as the European situation has evolved, but the risks of contagion remain a concern for both these institutions and their supervisors and regulators,” Bernanke will say, in prepared remarks published ahead of the testimony.
On Tuesday, Bernanke gave the first in a series of four college lectures on the Fed’s role in the economy, in which he described a gold standard as a “waste of resources” and a “far from perfect monetary system”.
“Since the gold standard determines the money supply, there is not much scope for the central bank to use monetary policy to stabilize the economy…Under a gold standard, typically the money supply goes up and interest rates go down in a period of strong economic activity—so that’s the reverse of what a central bank would normally do today.”
Congressman Ron Paul last year asked Bernanke if he though gold was money, to which the Fed chairman replied ‘No’. Last month, Paul held up a silver coin while questioning Bernanke, saying that it “is what the market has always said should be money”.
Russia’s central bank gold holdings 3.1 tonnes of gold last month, equivalent to 0.35% of its official reserves, data published Tuesday show.
Over in the US meantime, holdings in the world’s largest gold ETF, the SPDR Gold Trust (GLD), fell 3 tonnes to 1290.2 tonnes yesterday, having held steady for one week. Silver bullion holdings in the iShares Silver Trust (SLV), the world’s biggest silver ETF, remained steady at 9752.7 tonnes.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Physical Activity “Brisk” as Gold Falls to 6-Week Low, Spain Makes “Sovereign Decision” to Ignore EU, “Large Spending” Russia Warned by Fitch Ratings
London Gold Market Report
from Ben Traynor
Tuesday 6 March 2012, 08:45 EST
Physical Activity “Brisk” as Gold Falls to 6-Week Low, Spain Makes “Sovereign Decision” to Ignore EU, “Large Spending” Russia Warned by Fitch Ratings
SPOT MARKET prices for gold bullion hit a six-week low of $1682 an ounce Tuesday lunchtime in London – a fall of 1.8% from last week’s close – as stocks, commodities and the Euro continued their recent slide and uncertainty hung over recent European agreements.
Silver bullion dropped to $33.14 per ounce this morning – a 4.8% loss since the start of the week.
“We remain bearish so long as we remain below…the breached uptrend, currently at $1768,” says the latest note from technical analysts at gold bullion dealing bank Scotia Mocatta.
“A lot of gold investors are still affected by the large sell-off last week,” says Lynette Tan, analyst at Phillip Futures in Singapore, though she adds that gold is “very strongly supported at the 200-day moving average.”
Based on PM London Fix prices, gold’s 200 day moving average on Monday stood at $1672.57 per ounce.
“In the gold physical market, activity is brisk,” says Standard Bank commodities strategist Marc Ground.
“Customers are happy to buy at the current level,” adds one physical dealer in Singapore.
“Although things have slowed down a bit. I guess they could buy more if prices fall further.”
Major holders of Greek bonds came out in support of the Greek bond swap on Monday. Private sector bondholders have until Thursday evening to state whether they will take part in the arrangement, which involves losses estimated at some 70%.
“Whoever thinks that they will hold out and be paid in full, is mistaken,” Greek finance minister Evangelos Venizelos said Monday, adding that Greece is prepared to activate collective action clauses – inserted into contracts retroactively – that would force reluctant bondholders to take part in the deal.
A disorderly Greek default would have “some very important and damaging ramifications”, according to a memo circulated last month to staff at the Institute of International Finance, the body which negotiated with Greece on behalf of private sector creditors.
“It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed €1 trillion.”
The Dutch Freedom Party has called for the Netherlands to leave the Euro and return to the Guilder.
“The Euro is not in the interests of the Dutch people,” says the party’s leader Geert Wilders.
“We want to be the master of our own house and our own country, so we say yes to the Guilder. Bring it on.”
Wilders’s party is not a member of the Dutch governing coalition. The minority government does however depend on its support to pass legislation.
European Council president Herman van Rompuy urged the Dutch government on Sunday to cut its budget deficit from a projected 4.5% of gross domestic product next year to the 3% limit agreed by European leaders last Friday.
Spain’s prime minister meantime has said he will ignore the European Union’s deficit target of 4.4% of GDP this year. Mariano Rajoy has set his own target of 5.8% in what he called a “sovereign decision”. Last year Spain’s deficit was 8.5% of GDP, Britain’s Telegraph newspaper reports.
Overall Eurozone GDP meantime contracted in the fourth quarter of last year, recording a 0.3% quarter-on-quarter fall, according to official data published this morning.
Ratings agency Fitch has responded to Vladimir Putin’s election as Russia’s president by issuing a statement reminding investors that it cut the country’s outlook from ‘positive’ to ‘stable’ in January.
“Fitch Ratings is closely monitoring how quickly the new government will act to reform the Russian economy and hasten fiscal consolidation,” said a Fitch report Monday.
“Putin made large spending commitments prior to and during his election campaign, while members of the government’s economic team recommended fiscal consolidation.”
Ten US states are holding ballots in the contest to win the Republican presidential nomination in today’s so-called Super Tuesday elections. Mitt Romney and Rick Santorum appear favorites.
Former House of Representatives speaker Newt Gingrich, who has suggested the United States could consider tying the Dollar’s value to gold bullion, has fallen behind in the race.
Long standing gold advocate Ron Paul, who last week held up a silver coin during Federal Reserve chairman Ben Bernanke’s appearance before the House Financial Services Committee, is hoping to win Alaska, Reuters reports.
Following Bernanke’s testimony last week, gold bullion has fallen to levels not seen since January 25 – the day it spiked higher after Fed policymakers revealed they expect interest rates to stay near zero until at least late 2014.
Ben Traynor
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
China’s “Mystery” Gold Buyer
Was the People’s Bank of China really buying gold at the rate of 1 ounce in every 8 sold worldwide last quarter…?
SO THOSE MILITANT crazies known to the mainstream media as “gold bugs” – and to the FBI as subversives – got the headline they’ve been longing for, apparently, last week.
“China central bank in gold-buying push,” declared the Financial Times. “It does appear the People’s Bank of China has been a significant buyer,” agreed a Reuters columnist.
At last, rapture is upon us! Beijing is buying gold in the open market! The FT picks up the story…
“China’s imports from Hong Kong, which account for the majority of its overseas buying, soared to 227 tonnes in the last three months of 2011, according to data published by Hong Kong. Mine production in the country, the largest gold producer, stood at about 100 tonnes in the quarter, implying total supply of at least 330 tonnes.
“That compares to demand of 191 tonnes for gold jewellery, bars and coins – which account for the vast majority of Chinese demand – reported by the World Gold Council on Thursday.”
With gold exports banned, you can see the gap right there…all 139 tonnes of it. The FT‘s conclusion? Courtesy of an “inference” and a “could be” from two leading analysts, that excess of supply over demand must have gone to the People’s Bank of China. Must have, right?
Well…
- The data came from 3 different sources, one of which is an official agency, another is the mining industry, and the third is trying to cover end-user sales in the world’s second-heaviest gold market and most populous nation;
- Those demand figures in particular are likely to be revised – upwards – by Thomson Reuters GFMS (who supply the WGC). The best data available, they were certainly revised – upwards – quarter-on-quarter over recent years. And even on first release, China’s retail jewelry and investment sales show average compound growth of 36% per year since 2001. That’s one hell of a trend to keep count of in real time;
- No, a revision to end-demand of 139 tonnes will not happen. But would a 75% hike be any less likely than the People’s Bank of China growing its stated reserves (officially 1054 tonnes) by more than 13% inside 3 months? And inside 3 months that saw the gold price average $1684 per ounce, its highest level in history outside the $1702 record of July-Oct. last year?
Somehow, we doubt that China’s central bank snapped up 1 ounce in every 8 sold worldwide between October and Christmas. Most especially because, if Beijing’s policymakers were the “mystery” buyer, why would they then go and make importing gold a little bit harder for China’s bullion brokers?
Starting this month, China’s wholesalers now need to seek permission, reports our friend Bruce Ikemizu at Standard Bank in Tokyo, for each inbound shipment of gold from not only the People’s Bank of China, but also from the bureaucrats of the State Administration of Foreign Exchange (SAFE). “So it takes longer to import gold,” notes Bruce.
Weirdly, SAFE was the agency which hoarded the 600-tonne addition of 2003-2009, officially switched to and reported by the PBoC three years ago in its last public update. So again, why would anyone buying gold – and already paying very nearly the highest prices in history – want to temper supply?
“In the medium term we do know the Chinese central bank and other Asian central banks with large foreign exchange reserves have been increasing their holdings of gold,” as Marcus Grubb of the World Gold Council told the Financial Times. Plugging some of last quarter’s gap “is consistent with that.” But plugging the whole 139 tonnes as the FT‘s headline suggests?
Both the WGC and GFMS’s Phillip Klapwijk – also quoted in the FT‘s report – in fact added that bullion banks and other stock-pilers would be likely candidates, too. And that would make sense after the scramble to secure supplies in early 2011. Because gold imports through Hong Kong – well ahead of last month’s 2012 Lunar New Year holidays – actually peaked in November. They then fell hard in December as the festivities drew closer.
Indeed, as the London gold price dropped late last September, the Hong Kong premium tripled to jump above $3 per ounce. So calling your UK supplier and booking new shipments would have been a natural response. Cheap prices, plus a fat mark-up if the metal arrives in good time? What trader wouldn’t try to book that? October and November then saw record imports of gold through Hong Kong to China. But the premium had fallen quickly however (according to Reuters data), already back down to $1 per ounce in October.
That’s the trouble with a physical market – delivery needs brokers and shipping, and wholesalers need stockpiles to draw on. Not much of a headline though, is it?
Stock-piling is common in base metals and oil. Standard Bank’s commodities team now reckon silver stockpiles in China are equal to 15 months of fabrication demand. And if Beijing were really on the bid for imported metal, then why, immediately after January’s Chinese New Year celebrations – the single biggest event on China’s gold buying calendar – did it set China’s gold importers a new hurdle?
Our guess? No doubt China is buying gold direct from its miners. That metal is then lacking for retail consumption. So to ensure lots of supply for what proved another strong Chinese New Year, importers booked early and often. But following that trebling of gold imports in 2011, the timing of SAFE’s move, immediately after New Year – and only two weeks after India doubled its gold and silver import duties – suggests Beijing is live to the trade-balance risks posed by Chinese households’ soaring demand.
“IMF slashes forecast for China current account surplus,” announced the Wall Street Journal last week.
“China’s current account surplus for 2011 shrank to $201.1 billion ($187.37bn), from $305.4bn in 2010. More important, as a ratio of gross domestic product, the surplus fell to about 2.7%…close to a decade-low.”
Now, “as China’s trade surplus declines dramatically,” reports University of Peking professor Michael Pettis, “more and more people within the country are calling for interventionist steps to halt the decline, including depreciating the [Yuan], or at least halting its appreciation.”
Pettis’ comment should remind us that Beijing is a big bureaucracy, with lots of divergent views and voices. Devaluing the Yuan would look a highly aggressive decision to its would-be friends in Washington, especially those US politicians talking up China’s “violations” of international law. But trying to stem – or rather slow – the pace of import growth wouldn’t look quite so rude.
This new rule is already frustrating those banks importing gold, but it’s likely only to delay, rather than deter, the flow of bullion. Still, it’s a hat-tip to the potential drain on China’s foreign currency holdings which gold has become for India – still the world’s No.1 consumer, and importing twice as much as bullion as China in 2011 because it has no domestic mine output to help feed its consumption, whether central-bank or private.
India’s hunger for a metal it does not produce is plain to see in its trade balance. The only current-account deficit in the region as Morgan Stanley notes, this gold-heavy outflow of cash also weighed on the Rupee’s exchange rate in 2011, down 15% versus the Dollar as the currency markets tried to force an adjustment.
Because even then, and with Rupee gold prices pushed to fresh record highs despite a 20% drop for US investors after September’s top, India’s full-year 2011 gold demand still rose from 2010 in Dollar terms, setting a fresh record of $46 billion on the World Gold Council’s data, and equal to more than three-quarters of the country’s current account deficit.
“[We hope to] discourage imports so that the Rupee steadies against the Dollar,” admitted a senior, unnamed official quoted by India Today after New Delhi raised import duties and handed a tax advantage to the domestic recycling lobby in January. Beijing’s policy wonks are being equally coy about trying to dampen gold bullion imports just ever so slightly. But China’s feint should remind precious-metals bulls that Asia’s massive demand growth can pose a risk to itself.
First, high prices could dissuade new buyers, as shown all too clearly by Western jewelry demand since 2005. A slow-down in GDP growth, worsened by a shrinking trade surplus, would make that risk worse. But for Asia’s ravenous gold buying, state interference is perhaps the present threat, especially in a market averaging 36% compound growth by value each year since China began deregulating gold a decade ago.
China’s gold buyers have needed no help from over-excitable headlines. But they have needed Beijing’s blessing to date.
Adrian Ash
Adrian Ash is head of research at BullionVault – the secure, low-cost gold and silver market for private investors online, where you can buy physical gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Default Threat “Will Keep Coming Back” in Despite Greece Bailout Agreement, Gold Trading Volumes Rise in London But Imports by India May Decline
London Gold Market Report
U.S. DOLLAR gold bullion prices spiked to $1747 an ounce Tuesday lunchtime in London – a 1.3% gain on last week’s close – as US Markets re-opened to the news that European finance leaders have agreed to bail out Greece.
Silver bullion also spiked, hitting $33.97 per ounce – 1.9% up on the start of the week.
European stock markets by contrast drifted lower in Tuesday morning trading, while the Euro gave back most of the gains it made against the Dollar immediately after the Greek deal was announced. Commodities edged higher, while US Treasuries fell.
“Market reaction [to the Greek deal] has been remarkably muted so far,” one London gold bullion dealer noted this morning, before US markets opened.
Greece’s €130 billion second bailout was finally approved in the early hours of Tuesday morning, following a day of discussions among Eurozone finance ministers in Brussels.
The European Central Bank will pass on profits from its Greek debt holdings – bought below face value as part of its Securities Markets Programme aimed at supporting troubled sovereign debt markets – to the Greek government as a means of alleviating Greece’s debt burden.
Private sector creditors meantime will be asked to take bigger losses on their Greek debt holdings than previously agreed.
“From my point of view, this is a solid deal for investors, a fair deal for all parties involved,” said Charles Dallara, managing director of the Institute of International Finance, which negotiated with the Greek government on behalf of private bondholders.
“We’ve been able to avoid a disorderly default.”
Private sector losses will be equivalent to “more than 70%” of the net present value of the bonds, according to Jean Lemiere of BNP Paribas, who was involved in the negotiations.
The bailout means Greece should now be able to pay €14.5 billion of bonds that mature on March 20.
“Does this alleviate the risk of imminent default?” asks Callum Henderson, Singapore-based global head of foreign-exchange research at Standard Chartered.
“Yes, but not further out. Further out, the concerns of a default will keep coming back.”
“The risk,” adds a Hong Kong gold bullion dealer, “that we are going to have a sovereign default which leads to the collapse of the Euro still exists, but for that to happen in March, that risk is gone.”
The official statement released last night by Eurozone finance ministers calls for “further major efforts by the Greek society…to return the economy to a sustainable growth path”, as part of an effort to reduce the country’s debt-to-GDP ratio to 120.5% by 2020.
The statement also invites the European Commission “to significantly strengthen its Task Force for Greece…in order to bolster its capacity to provide and coordinate technical assistance”.
“Greece will find it difficult to shoulder even the reduced debt in the long-run if it does not implement far- reaching reforms,” says Commerzbank chief economist Joerg Kraemer.
“The probability will rise in the second half of the year that a frustrated EU stops payments to Greece.”
Gold imports to India meantime could fall in 2012 for the first time in three years, according to analysts polled by newswire Bloomberg.
India imported 969 tonnes of gold bullion in 2011, according to World Gold Council data, in a year that saw gold ETF demand double. The median estimate in Bloomberg’s poll was for 900 tonnes to be imported this year.
Silver bullion imports however could breach 5000 tonnes – up from 4800 tonnes last year – according to Bombay Bullion Association president Prithviraj Kothari.
“Silver demand is expected to rise on firm industrial and investment demand,” Kothari told reporters at a conference on Tuesday.
Here in London, the daily average volume of gold bullion transferred between parties by clearing members of the London Bullion Market Association was 690.5 tonnes in January – a 1.0% gain on the previous month, and a 15.3% year-on-year gain – LBMA clearing statistics published Monday show.
By contrast, the daily average volume of silver bullion transferred fell last month, dropping to 4641 tonnes – the lowest level since March last year. The daily average silver volume fell 24.3% from December – though year-on-year it posted a gain of 24.6%.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
“Quiet Session” Sees Gold and Silver Flat, ECB Could Create “Dangerous” Two Tier Debt Market
London Gold Market Report
SPOT MARKET prices for buying gold held just above $1730 an ounce during flat trading this morning in London, as speculation continued over whether a Greek bailout will be agreed next week.
Prices for buying silver were also very flat – hovering above $33.50 an ounce – as were those for commodities and stocks ahead of President’s Day in the US on Monday.
“A quiet session,” said one Hong Kong gold dealer this morning.
Heading into the weekend, the price of buying gold was up less than half of one percent on the week by Friday lunchtime, with silver also showing very little movement from last Friday’s close.
German finance minister Wolfgang Schaeuble has reportedly called for Greece to be allowed to default. Chancellor Angela Merkel is firmly against such a development, according to press reports.
“Schaeuble doesn’t think the Greeks can deliver any more [austerity measures],” an official from Merkel’s CDU party tells the Financial Times. Schaeuble has also this week suggested Greece should postpone general elections scheduled for April and install a technocrat government.
Eurozone finance ministers are due to meet Monday to discuss Greece’s second bailout, with Germany, the Netherlands, Luxembourg and Finland – all rated AAA by ratings agencies – calling for increased permanent supervision of Greece’s fiscal affairs.
“The one thing we should take away from Lehman Brothers,” former US Treasury secretary Henry Paulson said this week, “is you don’t want a big systemic institution to fail in a messy way, and you clearly don’t want that to happen with a [Euro] member state.”
“We expect [gold's sideways] trend to continue into the weekend, as participants remain wary of taking on new positions ahead of Monday’s Eurozone meeting,” says today’s note from Standard Bank commodities strategist Marc Ground.
The German parliament is expected to vote on any bailout deal on February 27. If enough members of Merkel’s coalition government oppose the measure, she may need to rely on opposition Social Democrat and Green votes.
Elsewhere in Germany, Merkel’s personal choice for the ceremonial role of German president resigned today amid allegations he misled parliament over a €500,000 loan to buy a house.
The European Central Bank meantime is expected to swap its existing Greek bonds for new ones that would not tie it to any collective action clauses to which private investors would be subject.
This means the ECB would be protected from taking losses on its holdings – an event that ECB president Mario Draghi has said would amount to monetization of government debt.
“In Europe, all bond holders are equal, but the ECB is more equal than others, apparently,” says Thomas Costerg, London-based economist at Standard Chartered bank.
“This could set a dangerous precedent, and, by creating a de-facto two-tier market, this could discourage investment in other peripheral debt markets.”
If private sector Greek bond losses are deemed to be involuntary, this could also trigger payments on credit default swaps, which act as a form of debt insurance.
“The probability of triggering CDS has increased because the ECB has protected itself,” says Padhraic Garvey, head of developed-market debt at Amsterdam-based ING Groep.
The United States meantime has no plans to give additional money to the International Monetary Fund, US Treasury undersecretary for international affairs Lael Brainard told the Senate banking Committee Thursday.
US consumer price inflation dropped to an annual rate of 2.9% last month, according to figures published Friday – down from 3.0% in December.
China’s central bank may have been buying gold in the fourth quarter of last year, according to a report in Friday’s FT.
Elsewhere in China, a huge stockpile of silver bullion has built up in the country, according to investment bank analysis this week.
Ben Traynor
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
