Gold and silver are lower this morning as the recent bout of weakness continues. Equities in Asia were lower on economic growth and inflation concerns and European indices are also lower as Greek debt talks are in disarray after the weekend arrest IMF’s Dominique Strauss-Kahn.
Cross Currency Rates
There are concerns that the IMF’s chiefs’ arrest may delay resolution of Europe’s deepening debt crisis and Greek bonds have fallen again seeing the 10 year yield rise to 15.58% – close to the record highs seen last week.
Greek Government Bond – 10 year (Daily)
Oil prices are lower again on growth concerns despite a significant increase in tensions in the Middle East with clashes on Israel’s borders with Syria, the Lebanon and Egypt.
Gold is likely to find support from geopolitical risk emanating from the tinderbox that is the Middle East.
NYMEX Crude Oil – 5 Year (Daily)
Gold and silver’s fundamentals remain very sound and yet the majority of the western public remain unaware of the fundamentals and unaware of the significant macroeconomic, monetary and geopolitical risk facing them today.
Tensions in the Middle East and North Africa, concerns that Japan is on the verge of a severe recession (due to its earthquake, tsunami and its worsening nuclear catastrophe), risk of sovereign debt contagion in Europe and the U.S. (the U.S. is set to reach its $14.3 trillion ‘debt ceiling’ this week) and ultra loose monetary policies, currency debasement and inflation are contributing to continuing safe haven demand.
This is especially the case in China and India where strong demand has continued after the recent sell off and where demand continues to surprise analysts and market participants.
The Financial Times reported on Saturday that “the sharp drop in gold and silver prices has stimulated a surge in buying from India in a sign that consumers in the world’s largest gold-buying country retain faith in the decade-long bull story for precious metals.”
Chhabil Jain, a Mumbai silver trader told the Financial Times that “demand for silver bars was going through the roof” and that “many vendors were starting to run low on stocks”.
“People are booking incredible amounts of silver as they see the current drop in prices as a great opportunity to buy more … most are buying for pure investment,” he added.
Bloomberg reports this morning that silver was the most traded commodity in April.
Incredibly, the value of trading in silver futures in India was four-times greater than gold. Trading of silver futures on the Multi Commodity Exchange gained more than sevenfold to 4.1 trillion rupees in the April 16-30 period from a year earlier, regulator’s data showed.
Indians unlike their western counterparts still silver as an important store of value to protect against the declining purchasing power of paper currencies.
U.S. Debt Ceiling of $14.3 Trillion To Be Reached
While the media focuses on the weekend arrest IMF’s Dominique Strauss-Kahn, a more fundamental and important story is that of America’s debt ceiling of $14.3 trillion which is likely to be reached, possibly today or tomorrow. America’s budget deficit this year alone is set to be a record breaking $1.5 trillion.
These figures and America’s appalling fiscal state means that gold and silver remain important diversifications.
Should the US Congress fail to vote to increase the debt limit today or this week, the White House has warned that the country would default on its debt and spark a new financial crisis.
The US Treasury has threatened to implement "extraordinary measures" so America can keep paying its bills until August.
Federal Reserve Chairman Ben Bernanke told Congress last week that any delay in increasing the debt limit would result in higher interest rates and could have "extremely dire consequences for the US economy".
The reality is that the continuing imprudent and profligate fiscal and monetary policies in the U.S. are likely to lead to higher interest rates and have "extremely dire consequences for the US economy".
Recent and continuing unsustainable fiscal and monetary policy have led to safe haven demand for gold and silver and the continuation of the bull markets in the precious metals.
Until, fiscal and monetary discipline and sanity returns to America and the world, gold and silver will continue to be bought in order to hedge the continuing debasement of fiat currencies.
Gold is trading at $1,491.30/oz, €1,056.98/oz and £921.69oz.
Silver is trading at 34.09/oz, €24.16/oz and £21.07/oz.
Platinum Group Metals
Platinum is trading at $1,755.50oz, palladium at 703/oz and rhodium at $2,025/oz.
(Bloomberg) — Commodity Futures Turnover in India Jumps on Silver Trade
Turnover on commodity futures exchanges in India, the biggest consumer of gold, surged 73 percent in April as silver’s rally to a record and price volatility spurred trading in the metal.
Turnover on the Multi Commodity Exchange of India Ltd., the nation’s biggest bourse and rivals, jumped to 12.9 trillion rupees ($286 billion) last month from 7.5 trillion a year ago, the Forward Markets Commission said today on its website. Turnover gained to 7.02 trillion rupees in the fortnight ended April 30, from 4.4 trillion rupees, the regulator said.
Bullion trade, comprising silver and gold, almost tripled in April, the commission said. Silver futures rallied to a record 73,600 rupees per kilogram in India on April 25, before slumping 28 percent through today. The value of trading in silver futures in India, the most traded commodity in April, was four-times greater than gold, data from the regulator showed.
“The large swings have resulted in large trading volumes,” Kishore Narne, head of research at Anand Rathi Commodities Ltd., said from Mumbai. “Speculators, especially the intra-day traders, have shifted from gold to silver because it appeared to them it’s a good way to make a quick buck.”
Trading of silver futures on the Multi Commodity Exchange gained more than sevenfold to 4.1 trillion rupees in the April 16-30 period from a year earlier, regulator’s data showed.
Silver futures for July-delivery on the exchange fell 1.6 percent to 52,860 rupees per kilogram at 12:21 p.m. in Mumbai. The metal has added 80 percent in the past year.
Trade in metals other than bullion dropped 38 percent in April, the regulator said. Trade in agricultural commodities rose 23 percent in the period and energy gained 14 percent.
(Bloomberg) — Shanghai Gold Exchange May Cut Silver Daily Trading Limit to 10%
The Shanghai Gold Exchange may cut the trading band for silver contracts to 10 percent from 13 percent, the bourse said on its website.
The band will be reduced if the metal doesn’t rise or fall by the current 13 percent limit today, according to the statement. If reduced, the new 10 percent limit will be effective from tomorrow, it said.
The exchange will also reduce the margin requirement for silver contracts by 3 percentage points to 15 percent if the metal doesn’t rise or fall by the daily limit today, it said. The change in margin requirements would be effective from today, according to the statement.
(US Mint) — 2011 American Buffalo Gold Proof Coin Available May 19
WASHINGTON – The United States Mint will begin accepting orders for the 2011 American Buffalo Gold Proof Coin on May 19 at noon Eastern Time (ET). There is no mintage or household order limit for this product.
The designs on the obverse (heads side) and reverse (tails side) of the 24-karat one-ounce gold coin are based on the original 1913 Type I Buffalo nickel by James Earle Fraser. The obverse features the profile of a Native American and the inscriptions LIBERTY, 2011, the initial F for Fraser and the W mint mark for the United States Mint at West Point. The coin’s reverse features the revered American Buffalo-also known as the bison-along with the inscriptions UNITED STATES OF AMERICA, E PLURIBUS UNUM, IN GOD WE TRUST, $50, 1OZ. and .9999 FINE GOLD.
Each American Buffalo Gold Proof Coin is presented in an elegant hardwood box with a matte finish and a faux leather inset. The coin is exhibited on a platform which can stand at an angle for display when the box is open. A Certificate of Authenticity is also included.