Argentina Turns To Gold As Inflation Tops 26%

Today’s AM fix was USD 1,611.50, EUR 1,247.10 and GBP 1,064.12 per ounce.
Yesterday’s AM fix was USD 1,602.50, EUR 1,238.41 and GBP 1,059.78 per ounce.

Silver is trading at $28.95/oz, €22.52/oz and £19.23/oz. Platinum is trading at $1,558.50/oz, palladium at $737.00/oz and rhodium at $1,250/oz.

Gold rose $7.30 or 0.45% and closed yesterday at $1,612.60/oz. Silver rose to $29.10, and then finished down 0.03%.


Cross Currency Table – (Bloomberg)

Despite an increase in risk appetite in recent months, systemic risk remains. As Reuters’ Pedro da Costa noted the "global impact of events in Cyprus casts doubt on the notion that the financial system has gotten a lot stronger since the crisis." The Cypriot deposit levy is creating jitters among some investors who are increasing their gold positions. 

Argentines are buying more gold than ever to protect their savings from the Western Hemisphere’s fastest inflation reported Bloomberg.

Banco de la Ciudad de Buenos Aires, Argentina’s only bank offering gold bullion coins and bars to investors and savers is negotiating with mining companies to purchase gold direct as surging demand depletes the scrap supply. 

The bank began marketing gold to clients after Argentina tightened currency controls in October 2011, selling 280 kilos in year one for 102.6 million pesos ($20 million).


Gold, 5 Years – (Bloomberg)

Argentines are utilizing gold to hedge their savings as economists forecast the peso will lose more value than any currency in the world, and President Cristina Fernandez de Kirchner forbids dollar purchases. 

The nation’s inflation rate of 26% is also eroding Argentina’s peso- denominated bonds to fall 5.5% ytd. 

“I’m buying gold every chance I get,” Guillermo Acosta, a 27-year-old security guard, said inside a branch of Banco Ciudad in downtown Buenos Aires. “With this inflation, I feel like my savings will evaporate if I keep them in pesos.”

Acosta’s initial investment of 10 grams of gold in February last year has returned 47% as the price per gram rose to 381.5 pesos from 260 pesos.


Gold in Argentine Pesos – 5 Years – (Bloomberg)

With Argentina printing pesos to finance itself, the growth of pesos in the economy has rose 38% in the past year, leading analysts to predict that the currency will depreciate 12.9% through year-end, the highest of currencies tracked by Bloomberg.

Banco Ciudad is the only bank left that trades in gold after Fernandez  banned the purchase of certified 99.99% pure gold for savings in July. The bank sells it at 99.96% purity, according to Carlos Leiza, who oversees the lender’s gold trading.

There is a 35% gap in the prices to buy and sell physical gold at Banco Ciudad, while there’s no premium to sell the country’s benchmark 2017 dollar bond in the local market, according to the Buenos Aires-based Open Electronic Market, known as MAE.

Gold sold by Banco Ciudad also isn’t recognized internationally, making it more difficult to determine its value, he said.

The cost of 100 grams of gold in Argentina as of last week was 36,646 pesos. In New York, the same amount based on the benchmark troy ounce (31 grams) sold for about $5,126.

The bank multiplies that price by 0.95 to account for the lower quality of the gold to get a dollar price of $4,870.

 “Historically, gold has been seen as a store of value, so as long as options for doing that in Argentina are limited, people are going to keep buying it,” Banco Ciudad’s Leiza told Bloomberg.

Bloomberg’s Alix Steel covered the story and a short video about record gold demand in Argentina can be watched here http://www.bloomberg.com/video/argentina-desperate-for-gold-to-fight-inflation-rKV6PNKXSAGkYzA2GaeNfg.html.

NEWS
Cyprus fears, FOMC hopes support gold prices – Market Watch

Gold holds near 3-week high on Cyprus crisis
– Reuters

Gold Trades Near This Month’s High Before Fed Policy Statement – Bloomberg

India central bank may ban Gold coin sales by banks – Bullion Street

COMMENTARY
Video: Cyprus Contagion? HSBC Says Gold To Average $1,700 – Bloomberg

Eagle Sales Soar Even as Metal Prices Fall – Numismaster

"Get Your Money Out While You Can" – Zero Hedge

Video: COT for Gold Very Bullish – Got Gold Report

Mark O'Byrne

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