Daily Market Update

LIBOR Manipulation Leads To Questions Regarding Gold Manipulation

Today’s AM fix was USD 1576.50, EUR 1284 and GBP 1012.91 per ounce.
Yesterday’s AM fix was USD 1594.50, EUR 1293.29 and GBP 1026 per ounce.

Gold fell by $19.40 in New York yesterday and closed down 1.2% at $1,568.40/oz. Silver fell 1.8% or 50 cents to $26.84/oz.

Gold gradually ticked higher in Asian trading and has kept those gains and seen slight further gains in European trading.

Cross Currency Table – (Bloomberg)

This latest price weakness is confusing many market participants and causing further jitters to some owners of gold.

Our conversations with people in the industry and our own experience makes us confident that this is another paper driven sell off drive primarily by speculative, leverage interests on the COMEX.

Bullion dealers and banks have not changed their long term outlook for gold and are ignoring the considerable “noise” of recent days suggesting that further falls are likely.

Further falls are indeed possible especially if those players with concentrated short positions continue to press their advantage and squeeze nervous hand longs.

However, the fundamentals remain very sound with broad based global demand coming from store of wealth buyers in European countries, in the Middle East and in Asia and particularly China.

There is also increasing demand from hedge funds (Soros, Einhorn etc) and institutions such as PIMCO and the Teacher Retirement System of Texas.

David Einhorn warned of inflation yesterday and was asked on CNBC “what we would do since it is going to be bad, how do we play that?”

Einhorn told CNBC that he “owns a lot of gold”.

Central banks are just one facet of this central bank demand and their demand remains very small when juxtaposed with the increase in global money supply in recent years and when compared to their foreign exchange reserves.

The notion that central bank demand is propping up the gold price is simplistic and misleading.

Similar theories were proposed in recent years – with some claiming when gold was at $1,000/oz that ETF demand or Indian demand was propping up the gold price.

Such analysis failed to appreciate the broad global based nature of demand for gold then and fails to appreciate the broad global based nature of demand today.

It also fails to appreciate that while gold demand has increased – it has increased from an extremely low base and remains tiny vis-à-vis the size of other capital (equities, bonds etc) and currency markets and remains infinitesimal vis-à-vis the multi trillion dollar derivative markets.

GoldCore like other bullion dealers internationally has seen a noted increase in demand for physical bullion coins and bars in recent days.

The ‘Liebor’ scandal is the latest scandal to befall Wall Street and City of London banks and official regulators and central banks. It is creating further mistrust of our already wounded financial and monetary system.

The Libor fixing scandal is amusing as everybody- all the talking heads and ‘experts’ are “shocked, shocked” to discover that this benchmark interest rate underlying trillions of dollars worth of financial transactions worldwide was being manipulated

This is despite more astute analysts such as Gillian Tett and others warning that rigging was taking place and LIBOR was a fiction as far back as in 2007.

A lack of transparency, a lack of enforcement of law and a compliant media which failed to ask the hard questions and do basic investigative journalism led to the price fixing continuing and the manipulation continuing unchecked on such a wide scale for so long – until it was exposed recently.

Similarly, the gold market has the appearance of a market that is a victim of “financial repression”.

Given the degree of risk in the world – it is arguable that gold prices should have surged in recent months and should be at much higher levels today.

The gold market has all the hallmarks of Libor manipulation but as usual all evidence is ignored until official sources acknowlege the truth.

However, like LIBOR the gold manipulation ‘conspiracy theory’ is likely to soon become conspiracy fact.

It will then – belatedly – become accepted wisdom among ‘experts.’ Experts who had never acknowledged it, failed to research and comment on it or had simply dismissed it as a “goldbug accusation.”

Financial repression means that most markets are manipulated today – especially bond and foreign exchange markets.

Many astute analysts are asking today (see Commentary) – why would the gold market be completely immune to such intervention and manipulation?

The last thing insolvent banks and governments want is a surging gold price.

Perverted and ‘unfree’ markets create profound risks financial systems and economies and for all investors and savers. They also present opportunities.

As ever, it is prudent to be on opposite side of official manipulation as ultimately the free market forces of supply and demand will always win out.

Smart money internationally remains short fiat currencies and long gold.


(Bloomberg) — Turkey’s Gold Exports to Iran Not Oil, Gas Payments, Yildiz Says
The increase in Turkey’s gold exports to Iran is not due to payment for oil or natural gas, Turkish Energy Minister Taner Yildiz said.

Turkey pays Iran for its oil and gas purchases in liras, Yildiz said in an interview on the sidelines of a meeting in Ankara today.

Turkey has exported $3.09 billion worth of gold, precious metals and jewelry to Iran in the year through May, up from $13.3 million worth in the same period last year, according to data on the state statistics agency’s website.

(Bloomberg) — Iranians in Turkey Collecting Gold for Central Bank, Zaman Says
Wealthy Iranians in Turkey are collecting gold on behalf of the Iranian central bank and exporting it to Iran, Turkey’s Zaman newspaper reported.

The expatriates are strengthening the resources of the Islamic republic’s central bank amid concern over tougher sanctions against Iran, the Istanbul-based newspaper reported, citing a Turkish economy administration official it didn’t name.

Iranians in Dubai and India are also collecting gold and sending it to the Iranian central bank, Zaman said, citing the official. Some gold is being imported into Turkey from Europe, refined or re-shaped and then exported to Iran, Zaman said.

Turkey exported $1.4 billion of gold and precious metals to Iran in May and has shipped $3.1 billion worth in the first five months of the year, up from $13.3 million a year earlier, according to data on the state statistics institute’s website.

(Bloomberg) — China’s Gold Demand Seen Rising 13% as Council Pares Target
Gold demand in China, the second- largest user after India last year, may expand 13 percent to 870 metric tons in 2012, the World Gold Council said, dropping a forecast for consumption to reach as much as 1,000 tons.

Jewelry demand may expand 7.7 percent to 550 tons, slower than the 13 percent growth last year, Albert Cheng, Far East managing director at the producer-funded group, said in an interview. Demand for bars and coins may gain 24 percent to 320 tons, lower than the 38 percent climb last year, he said.

Cash gold slumped for a fourth month in May in the worst run in 13 years as Europe’s debt crisis drove investors to seek the dollar as a haven over the precious metal. Gold sales in China in the second quarter were slower-than-expected as local consumers usually refrain from buying when a rally stalls, Cheng said yesterday in Beijing. He made the 1,000 ton forecast in May.

“We expect China’s gold demand to be close to 900 tons this year,” Philip Klapwijk, global head of metal analytics at Thomson Reuters GFMS Ltd., said in an interview today. “We see quite a strong support in place for gold around $1,550,” Klapwijk said in Beijing, forecasting a fourth-quarter rally.

Spot gold gained 0.4 percent to $1,594.50 an ounce at 5:34 p.m. in Singapore. The metal, which reached a record $1,921.15 last September, has rallied for 11 straight years as investors sought protection from weaker currencies and inflation, and demand in emerging markets increased.

Jewelry Sales

“From our talk to the industry people, we gathered that the Europe’s debt crisis has led to a firmer U.S. dollar, which in turn suppressed the investors’ willingness to buy gold,” Cheng said in Beijing yesterday. “Gold jewelry is also discretionary consumption, so consumers feel they can wait.”

China remains the “most important player on the global gold market,” Commerzbank AG said in a report yesterday, citing increased demand from an expanding middle class and purchases by the country’s central bank. Demand in China totaled a record 255.2 tons in the first three months, compared with 232.5 tons a year earlier, the World Gold Council said in a report in May.

The second-quarter is usually a quiet season in terms of gold sales in China, Cheng said, adding that an estimate of demand will be released in August. Demand should be lower in the three-months to June 30 compared with “an exceptionally good” first quarter, he said.

“We are still optimistic on China’s gold-investment demand as investors here don’t have much choice in terms of investing their wealth,” Cheng said. “The stock market’s performance is poor and the property market’s rally has stalled.”

China’s benchmark stock index in Shanghai has lost 1.6 percent this year. Premier Wen Jiabao pledged on July 8 to continue property controls and prevent prices from rebounding, according to an official Xinhua News Agency report.

(Bloomberg) — UBS Recommends Buying Gold and Selling Copper on 3-6 Month View
UBS AG said investors should buy gold and sell copper on a three to six month view. It recommends buying oil and selling copper on a three-year view, according to an e-mailed report from the bank dated yesterday.

(Bloomberg) — JPMorgan Cuts Precious-Metals Price Forecasts for 2012, 2013
JPMorgan Chase & Co. cut its estimates for precious-metals prices for 2012 and 2013.

Gold-price forecast was lowered by 6.7 percent to $1,671 an ounce for 2012 and by 3.1 percent to $1,775 an ounce in 2013, analysts led by Colin Fenton wrote in a report dated yesterday.

JPMorgan cut its 2012 forecast for palladium by 7.9 percent to $641 an ounce and platinum estimate by 5.8 percent to $1,528 an ounce. This year’s silver forecast was reduced by 6.9 percent to $30.53 an ounce, according to the report.

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Gold gains, off 1-1/2 week low; dollar weighs – Reuters

Gold climbs as slowing growth spurs demand – Sydney Morning Herald

Barclays hit by website problems – BBC News


China Imports More Gold From Hong Kong In Five Months Than All Of UK’s Combined Gold Holdings – Zero Hedge

What’s Iran doing with Turkish gold? – FT Blogs

Revealed: Why Gordon Brown sold Britain’s gold at a knock-down price – Telegraph Blogs

Kaminska: Propping up the gold price – FT Alphavile

Gold May Have Been Manipulated Like Libor: Expert – CNBC

Williams: If they can rig LIBOR, they can rig gold and silver – Casey Research

Mark OByrne


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