Daily Market Update

Central Banks ‘Vote For Gold’ Due To Sovereign And Currency Concerns

Today’s AM fix was USD 1,327.75, EUR 998.76 and GBP 861.73 per ounce. 
Yesterday’s AM fix was USD 1,312.00, EUR 994.92 and GBP 857.63 per ounce.

Gold climbed $11.60 or 0.88% yesterday and closed at $1,331.50/oz.

Silver rose $0.04 or 0.2% and closed at $20.20.

Gold is 8.4% higher in July and set for the best month since January 2012 as lower prices lead to increased demand.

Gold Prices/ Fixes / Rates /Vols

Gold is on course for its third week of gains, buoyed by a weak dollar, no definite end to quantitative easing and continuing ultra loose monetary policies.  Central bank gold buying is also supporting gold.

Premiums in India are $20 per ounce over London prices as demand outstrips government restricted supply before the festival season on the subcontinent. 

Premiums in China have come down but remain robust at $12 per ounce and gold forward rates (GOFO) remain negative in the near term – 1, 2 and 3 months (see table above and chart below).

Central banks remained net buyers of gold last month as seen in the IMF data released overnight. 

Many emerging-market countries with considerable foreign exchange reserves continue to diversify their fx reserves, most of which are in dollars and euros, and increase their gold reserves. 

Emerging market central banks have increased their holdings of the monetary asset over the past few years as the sovereign debt crises in the EU, U.S. and Japan put pressure on reserve currencies such as the Japanese yen, U.S. dollar and the euro.

Falling gold prices to their lowest levels in almost three years made gold more attractive to many central banks.

LBMA 1 Month Gold Forward Offered Rate (GOFO)

Russia, Greece, Ukraine, Kazakhstan, Kyrgyzstan, Belarus and Azerbaijan increased their gold holdings in June according to the IMF data.

Mozambique, Serbia and Tajikistan increased holdings in May, which updates as countries report according to Bloomberg.

Russia which now has the seventh-largest gold holdings in the world,added just 9,000 ounces to its holdings, which now stand at 32.0 million ounces. 

Russia, which has purchased significant volumes of gold in recent years, has increased its reserves by almost 10% over the past year alone. 

Kazakhstan, another regular bullion buyer in recent months, also increased its holdings in June. The country’s central bank bought more than 45,000 ounces, taking its reserves to 4.2 million ounces.

Russia and Kazakhstan increased their gold reserves for a ninth straight month in June.

Greece added 1,000 ounces to its 3.6-million-ounce reserve, while Kyrgyzstan and Belarus also added a small amount of gold to their holdings.

Ukraine returned for the second month running in June, adding another large 80,000 troy ounces of gold to its official reserves, which now stand at nearly 1.3 million ounces.

Azerbaijan bought nearly 65,000 ounces, lifting its reserves to more than 250,000 ounces. It is the sixth consecutive month the country has added to its official holdings, which in December stood at nearly nothing.

Central banks were overwhelmingly buyers and were net buyers again last month but there were some gold reserve sales too.

Guatemala, which last sold gold in July 2012 cut its holdings by 7,300 ounces. The Central American country’s reserves now stand at 214,300 ounces. Neighboring Mexico and the South American nation Suriname made small cuts to their official reserves too.

Germany sold a very small amount of their gold reserves in June and it is believed this was done in order to mint commemorative gold coins. Germany lowered its gold holdings by 25,000 ounces. The reduction is, however, small compared with the overall size of the country’s reserves, which stand at more than 109.0 million ounces. 

Germany has the second-largest reserves of gold, behind the U.S. and is attempting to repatriate to Germany its gold reserves that have been stored in the New York Federal Reserve since after World War II. 

The Bundesbank wasn’t immediately available for comment according to Marketwatch. It has previously said it sporadically sells gold to the nation’s Ministry of Finance to mint commemorative coins.

Turkey’s gold reserves also declined by just over 120,000 ounces to 14.2 million ounces. Their gold reserves have nearly quadrupled over the past two years after its central bank began accepting gold as collateral from commercial banks. It is believed that rather than on-market purchases, this is the main reason for the recent increases.

China does not report to the IMF and there are strong grounds for believing that China continues to accumulate gold quietly and without declaring … for now.

When China does announce its expected increase in holdings it could be of a significant amount that could reignite gold’s secular bull market.

‘Vote For Gold’
"You have to choose, as a voter, between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."

The above quotation from GB Shaw who was born on this day July 26, in 1856, is ringing true during these uncertain political and economic  times.

Shaw’s witty but pointed quotation was featured in a letter printed in the Financial Times today and it is featured on our Facebook page today.

Given the high level of financial and economic uncertainty facing us, it is wise to step back and take a long term historical perspective of the current crisis. 

Throughout history, gold has been used as the safest form of money – a form of money that cannot be debased or printed into oblivion by bankers, politicians and reckless governments. When experiments with paper money and massive creation of debt go wrong as unfortunately they inevitably have done throughout history, economic hardship has been the result.

This is why wise people throughout history have always appreciated the finite currency that is gold. 

From Aristotle to G. B. Shaw to Kyle Bass to Voltaire their thoughts help enlighten why one should save or invest in precious metals.

Kyle Bass, the respected hedge fund manager recently said:

"Buying gold is just buying a put against the idiocy of the political cycle.  It’s that simple."

Aristotle, the Greek philosopher and genius (384-322BC) wrote: 

"In effect, there is nothing inherently wrong with fiat money, provided we get perfect authority and god-like intelligence for kings."

Lord Rees Mogg, economist & former editor of The Times & assistant editor of The Sunday Times said: 

"Governments lie; bankers lie; even auditors sometimes lie: gold tells the truth."

More recently Hans Sennholz, author & economist of Austrian school wrote:

"For more than two thousand years gold’s natural qualities made it man’s universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper. No other commodity enjoys as much universal acceptability and marketability as gold."

In the same vein, Voltaire, the French poet, historian & philosopher ( 1694 – 1778) wrote: 

"Paper money goes down to its intrinsic value – zero."

Gold Up 3% – Set for Best Weekly Run Since March – Bloomberg

Chinese gold demand could hit 1,000 Tonne this year – WGC – Reuters

Asians stick with their gold funds even as others flee – Reuters

Gold smuggling is taking off in India as the government tries to rein in imports – Wall Street Journal

Why Detroit is good for Gold: Ron Paul – CNBC

Gold – I Never Have Been More Bullish! – GoldSeek

Long term upside for gold could be immense. Short term still uncertain – Mineweb

Gold Standard Too High For Politicians – The Financial Times


Mark O'Byrne
Executive Director


No posts available