Daily Market Update

Gold Investments Market Update – U.S. and Russian Warships in Black Sea as Tensions Escalate

Gold

Gold finished trading in New York on Friday at $827.00, down $6.30 and silver was down 26 cents to $13.50 after a very strong week. Gold and silver fell in Asian and in early European trading this morning. Gold is trading at $821.30/821.70 per ounce (1030 GMT).

Gold has fallen this morning on flat oil prices, a stronger dollar (EUR/USD 1.4743) and profit taking after last week’s more than 5% gain. Equity markets internationally are mixed on continuing fears regarding the outlook for the global economy.

The geopolitical situation remains fraught and this should lead to gold remaining firm this week.

U.S. and Russian Warships in Black Sea as Tensions Escalate
The Russian parliament has voted to recognize South Ossetia and Abkhazia which will not do much for sharply deteriorating relations between Russia and NATO. Nor will the fact that US warships have docked in a strategic Black Sea port and are engaged in routine exercises. Washington says the guided missile destroyer that sailed into the port was carrying blankets and baby food. But Russia has denounced the presence of NATO vessels in the Black Sea, saying it will only further destabilise the region. And there was evidence of tensions elsewhere in the Black Sea when Russian ships returned from Georgia to the Ukrainian port of Sevastopol. Moscow leases its naval base there from Ukraine, which backed Georgia in the conflict.

Huge Physical Demand Versus a Lack of Coin Blanks
Physical demand remains very robust in the US, India, the Middle East and Asia. Reuters reports that dealers in Singapore and Hong Kong are also experiencing tight supply for gold bars. The large international refiner, Johnson Matthey has recently had an 8-10 week delay for 100 ounce silver bars and now they are no longer taking orders.

Clearly, this is about a lot more than blanks for coins and this is very important and should not be downplayed and underestimated.

Gold and Silver Investments Limited cannot buy or source American Eagles (1 ozt) from some of the largest wholesaler dealers in the US (we also cannot source Krugerrands (1ozt) from some of the largest wholesaler dealers in the US for the first time ever). These large wholesalers are supplied coins by the government mints and bars by refineries. These are not recent strikes or 2008 freshly minted coins rather we cannot source any year of these coins which have been minted for years (Krugerrands since 1967 and Eagles since 1986). A lack of blanks can only affect coins that are being minted now in 2008.

They also receive inventories when they make a market and buy back bullion from retailers. However, there has been minimal selling in recent weeks and months and very significant buying. Besides problems regarding bullion coins, there are issues securing silver bars (1 , 10 and 100 ozt) from wholesalers who are finding to difficult to secure adequate supply from refiners. While it should be acknowledged that there are blank issues with regard to some bullion coins especially the Silver Eagles and Silver Maples (1 ozt), this is clearly more to do with an unprecedented level of demand and a lack of supply rather than a lack of blanks.

The bottom line is that this lack of supply and huge demand will result in materially higher prices in the coming weeks – otherwise these supply/demand issues will become even sharper and the lack of availability of certain smaller bullion products will likely spread to other bullion products and may “move up the value chain” and affect the larger bar market as well.

Today’s Data and Influences

The data release calendar is light today with just US existing home sales for July due for release.

Gold and Silver

Gold is trading at $821.30/821.70 per ounce (1030 GMT).
Silver is trading at $13.31/13.37 per ounce (1030 GMT).

PGMs

Platinum is trading at $1408/1418 per ounce (1030 GMT).
Palladium is trading at $285/290 per ounce (1030 GMT).

Mark O'Byrne
Executive Director

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