Gold’s London AM fix this morning was USD 1,559.00, EUR 1,213.61 and GBP 969.95 per ounce.
Yesterday’s AM fix was USD 1,563.00, EUR 1,213.79 and GBP 972.62 per ounce.
Gold fell $22.70 to close at $1,558.60/oz in New York yesterday. Gold edged up in early Asian trading to $1,560/oz prior to renewed selling that saw the price fall and gold briefly pierced below support at $1,550/oz prior to a slight bounce higher in early European trading.
Cross Currency Table – (Bloomberg)
Support remains at $1,550/oz and below that level could see gold test strong support at $1,523/oz and $1,533/oz – the lows in December and September 2011 respectively.
Lower bullion prices triggered a “flurry of activity in the physical market” according to Reuters, with purchases from jewellers in the world’s largest buyer India and also Southeast Asia keeping premiums for gold bars steady at $1.20 to London prices in Singapore.
A physical dealer in Singapore told Reuters that "jewellers have been buying a lot. At the moment supply is a bit tight for immediate delivery. Refiners can’t deliver immediate gold because there’s a sudden surge in demand. We’re seeing demand from India, Thailand and Indonesia.”
However, the dealer told Reuters that the market is not “short of physical gold bars right now.”
Sharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, the World Gold Council said yesterday. Mining costs have increased significantly in recent years and cost of production alone suggests that gold will have to rise to much higher levels in the coming years. Otherwise, many mining companies will go bankrupt creating an even bigger supply crunch.
Bundesbank Confirms German Gold Held By FED, BOE and Banque De France
Germany’s Bundesbank confirmed yesterday that the German gold reserves are held overseas by the Federal Reserve, the Bank of England and the Banque de France.
There has been a lack of clarity and transparency regarding the German gold reserves, as there are with many other nations gold reserves, and this had led politicians and journalists seeking transparency.
The Bundesbank has previously resisted calls for a more transparent accounting of the German gold reserves.
Some Germans are concerned about the risk of contagion in the eurozone and the risk that the single currency could fall apart. They wish to know that the German gold reserves are secure and can be relied upon in the event of a currency crisis.
The Bundesbank said it has complete confidence in valuations and the security of its gold holdings at other central banks and said that "there is no doubt about the integrity and the reputation of these foreign central banks where the gold is held."
Gold in USD – Daily (1 Year)
Germany’s central bank has the world’s second largest holdings of gold after the United States, about 3,400 tonnes of gold valued at nearly 140 billion euros, according to the Bundesbank.
The German parliament, the Bundestag, has been examining the accounting of German gold reserves at the Bundesbank. The parliament’s Budget Committee, one of the most powerful committees in the German parliament, had requested a critical report by the Federal Audit Office.
"The decision has been unanimous," the paper quoted the Christian Social Union budget expert Herbert Frankenhauser. The newspaper report alleged "account cheating" regarding the German gold reserves.
According to a Bild report, the federal auditing office complained of "inadequate diligence of the accounting of the gold reserves, which are stored in some foreign countries. Repatriation of the gold reserves is encouraged.”
The Bundesbank confirmed that it, like many central banks, keeps part of its reserves in vaults at foreign central banks and said some of its gold is held at the Federal Reserve Bank of New York, the Banque de France and the Bank of England.
It declined to say how much gold in total is held overseas or how much gold is stored with the Federal Reserve, Bank of England and Banque de France.
The Bundesbank statement said it had complete confidence in the integrity of the central banks where the gold is held.
"From these central banks, the German Bundesbank annually gets confirmation of the gold holdings in troy ounces as a basis for its accounting," the Bundesbank’s statement said.
Central banks, particularly smaller ones with inadequate security or military resources to protect gold reserves, have traditionally kept some or all of their gold at foreign central banks, particularly the Federal Reserve, for security reasons.
However, the risk of contagion and a global financial crash has led to anxieties about leaving gold reserves with foreign powers and concerns that in the event of a currency crisis or international monetary crisis, emergency measures could lead to gold reserves being nationalised or expropriated in order to support currencies such as the dollar.
For breaking news and commentary on financial markets and gold, follow us on Twitter.
(Bloomberg) — Platinum ETP Holdings Drop 1.1%, Biggest Decline This Year
Holdings in exchange-traded products backed by platinum fell 1.1 percent to 41.83 metric tons, data compiled by Bloomberg show. That’s the biggest drop since Dec. 2.
(Bloomberg) — Platinum Used in ‘Non-Road’ Applications May Rise ‘Sharply’
Platinum used in “non-road” applications may rise “quite sharply,” said Peter Duncan, general manager of market research at Johnson Matthey Plc.
About 50,000 ounces of platinum was used in non-road autocatalysts last year, according to Johnson Matthey. That may double this year, he said. Off-road machinery includes lawnmowers.
(Bloomberg) — Palladium Returning to Shortage After Biggest Glut in Four Years
Lower palladium sales from Russian state stockpiles and more demand from carmakers will mean a shortage of the metal this year after the biggest surplus in four years in 2011, according to Johnson Matthey Plc.
Investors sold 565,000 ounces and recycling rose 27 percent last year to a record 2.35 million ounces, producing a 1.26 million-ounce glut, London-based Johnson Matthey said today in a report. Demand from automakers climbed 8.1 percent to a record 6.03 million ounces. Platinum moved into a surplus of 430,000 ounces as South African inventory sales boosted supply and there will be a similar oversupply this year, Johnson Matthey said.
Both metals are mostly used in vehicle pollution-control devices and jewelry, with palladium favored mainly for gasoline- burning engines in the U.S. and Asia and platinum for diesels in Europe. The global economy will expand 3.5 percent this year even as the euro area contracts 0.3 percent, according to the International Monetary Fund. Palladium sales from Russian government inventories, a state secret, will drop 68 percent to about 250,000 ounces this year, the researcher and trader said.
Silver in USD – Daily (1 Year)
“The biggest influence in terms of the market balance is the lack of Russian stock sales,” Jonathan Butler, publications manager at Johnson Matthey, said in an interview in London. “Primary mine supply will remain pretty much flat. Autocatalyst demand is increasing due to higher vehicle output worldwide.”
Palladium for immediate delivery fell 9.2 percent this year to $595 an ounce by 9:05 a.m. in London today, after averaging a record $733.13 last year. It will average $715 in the next six months, Johnson Matthey said. Platinum, up 4 percent to $1,457 an ounce this year, averaged an all-time high of $1,721.24 in 2011 and will average $1,600 in the next six months, it said.
Palladium supply was little changed at a four-year high of 7.36 million ounces, Johnson Matthey said. Metal released from Russian inventories totaled 775,000 ounces last year and the bulk of remaining stockpiles will be sold this year, Butler said. Vehicles accounted for most of the increase in recycling.
Electrical use fell 2.1 percent to 1.38 million ounces and jewelry purchases slipped 15 percent to 505,000 ounces, the lowest level since 2003. Jewelry demand will probably decline again this year, Butler said. Palladium had a 530,000-ounce shortfall in 2010 and this year’s shortage will be “hundreds of thousands” of ounces, Butler said.
Platinum’s surplus last year followed a 25,000-ounce shortfall in 2010, the report showed. Supply jumped 7.1 percent to a four-year high of 6.48 million ounces as inventory releases in South Africa, the biggest producer, increased output in the country by 4.7 percent to 4.86 million ounces. Recycling rose 12 percent to a record 2.05 million ounces.
Auto Demand Climbs
Autocatalyst usage gained 1 percent to a three-year high of 3.11 million ounces and demand for the devices will remain “flat” this year, Johnson Matthey said. Investment slipped 30 percent last year to 460,000 ounces. Jewelry consumption rose 2.5 percent to 2.48 million ounces in 2011 and will be “slightly” higher this year, Butler said.
“We think platinum demand in jewelry should be pretty firm this year,” Lucy Bloxham, a senior market analyst at Johnson Matthey, said in London. “The year started quite well and it looks as though the consumer pull is there. In China, when the price dipped in the second half, and gold rose above platinum, we definitely saw an increase in purchasing by manufacturers.”
Rhodium’s surplus widened 58 percent to 139,000 ounces last year as supply and recycling rose faster than demand, Johnson Matthey said. A glut will probably persist this year even as consumption gains, it said. The commodity is mainly used in autocatalysts and also in the chemical and glass industries. It’s down 2.9 percent this year at $1,360 an ounce, according to Johnson Matthey prices on Bloomberg.
Ruthenium consumption slipped 14 percent to 809,000 ounces in 2011 on lower demand from the electrical industry. It’s mostly used for coating computer hard disks. Demand for iridium, used in spark plugs and for growing metal oxide crystals, declined 11 percent to 301,000 ounces, the researcher said.
“The conditions for further investment, whether platinum or palladium, are pretty strong,” Butler said. “There’s a very low chance of significant interest-rate rises this year, so the opportunity cost should remain low. Investment will remain positive for both platinum and palladium.”
Gold miners need $3,000 price in five years – World Gold Council
Gold Erases Year’s Gains – The Brisbane Times
Palladium and platinum surge predicted – The Financial Times
IMF stresses need to increase reserves due to rising credit risk – Commodity Online
Greece Exit, Euro-Zone Collapse, Spain and Portugal Will Follow Within 6 Months – The Market Oracle
Meet The Latest Converted Gold Bug: The IMF – Zero Hedge
A shift in Indian gold buying patterns? – MineWeb
Charlie Munger Versus Gold, History And Himself – Business Insider