Daily Market Update

Strong Silver Coin and Bar Demand From India and U.S.

Today’s AM fix was USD 1,335.75, EUR 989.59 and GBP 827.30 per ounce.
Friday’s AM fix was USD 1,321.50, EUR 978.45 and GBP 822.03 per ounce.

Gold climbed$12.30 or 0.93% Friday, closing at $1,336/oz. Silver rose $0.02 or 0.05%, closing at $21.72. Gold rose 0.81% while silver slid 0.09% for the week.

Gold moved to its highest level in over a week, on investor jitters that the U.S. government may close down because of a budget stalemate that has increased the yellow metal’s safe haven demand. Today is the final day that the U.S. Congress has left to end the crisis which would be the first government shutdown in 17 years.

Gold is now on track for its first quarterly gain in a year, lifted by Fed Bank of Chicago President Charles Evans comments Friday that, “the pace of the Fed’s asset purchases could remain steady at $85 billion a month into January as policy makers wait for more signs of recovery”. 

Gold should be supported by the double risk of the budget deadline next Tuesday and the debt ceiling negotiations mid October.

It is worth remembering that gold surged to record highs over $1,900/oz during the last debt ceiling debacle.

While the debt ceiling will almost certainly be resolved before or soon after the deadline, the risk is that the politicians will again kick the can down the road and not address the fundamental fiscal challenges facing the U.S.

The bottom line is that the U.S. under President Obama continues to live beyond its means. Tax hikes and major cuts in government expenditure will be needed to turn the dreadful debt situation around.

U.S. Mint Silver Coin Sales Off to Strong Start in 2013

Silver continues to see strong store of value demand In India, the U.S. and elsewhere as buyers view the metal as cheap versus gold. 

U.S. Mint silver coin sales are  up 37% ytd, as store of value investors take advantage of the lowest prices since Q3-2010. The drop in silver prices since April has spurred more buyers to purchase  coins, contrary to trends for both U.S. Mint gold coin sales and the historical correlation with silver prices. 

The  divergence of silver coin sales and the metal price this year begs the question as to which one will follow the other as Q4 approaches.

The answer might come in emerging market demand for silver especially in India. Silver demand is surging due to the government in India’s capital controls and harsh tax treatment of gold and silver imports look set to reach a record in 2013. 

As reported by the Business Standard:
While the government has put a series of restrictions to curb gold imports, it is silver that is ruling the roost. During the April-June quarter, import of silver rose 311 per cent to $1.78 billion, compared with $433.8 million in the corresponding period of last year due to a surge in demand.

According to traders and economists, restrictions on gold have drifted the general sentiment towards silver as they feel it is the closest substitute for gold. "Ever since the government has started putting measures to curb gold imports, demand for silver has seen a sudden surge. Moreover, there is a general scare in the market that the government might soon start curbing silver imports also, as a result, traders are stocking up silver," said Monal Thakkar, president of Amrapali Industries, a leading Ahmedabad-based stock and commodity broking house.

Thakkar added such a staggering rise in silver import could also be attributed to a substantial rise in demand for silver jewellery as well silver crockery. "People are buying silver as a viable investment option," he added.

According to Sudheesh Nambiath, analyst at Thomson Reuters GFMS, India’s total silver imports have more than doubled from last year, crossing 4,000 tonnes in the first eight months of 2013 compared to 1,900 tonnes in the whole of 2012. "Because of the restrictions on gold, traders shifted towards silver," Nambiath said.

He added that even by mid of the year manufacturers already had full order books through to December, a clear indication of stocking and also higher demand expectation from fabricators. Indian imports had increased at a fast pace taking advantage of lower prices, however imports dropped to just over 300 tonnes in August. It suggests that investors and bullion traders were refraining from further imports after price crossed Rs 55,000 a kg. Also delivery of near 75 tonnes to the MCX together in the July and Sept contract, only reaffirms the strong participation from investors and traders this year.

This level of delivery on futures exchange is considered very good.

Anis Chakravarty, senior director, Deloitte India said silver import was basically offsetting the demand for gold as it was a safer option.

While  the CFTC has closed their silver investigation into the continuing allegations of market manipulation, this is a story that will not go away.

Bart Chilton made other comments after which are important to note. "For me, there’s not been a more frustrating nor disappointing non-policy-related matter at the CFTC," said Democrat commissioner Bart Chilton, who had championed the silver inquiry and had said in a 2010 CFTC meeting, referring to publicly available reports on the silver market, that there have been “fraudulent efforts to persuade and deviously control that price.”

Disgruntled investors who have been badly burnt by potential manipulative concentrated selling in futures markets will likely continue their campaign for transparency and free markets. Some are already calling for the CFTC report to be released.

The Gold Anti-Trust Committee (GATA) said that the decision was not surprising as the CFTC is an arm of government and therefore they were unlikely to find certain Wall Street banks, who are acting as proxies for the U.S. government, guilty of manipulating the gold market.

Despite the verdict, there remains a considerable degree of doubt and deep skepticism amongst many silver bullion owners that the silver price is not manipulated by the very large concentrated short positions of certain banks.

Gold Climbs as Prospect of U.S. Government Shutdown Spurs DemandBloomberg

China to ease gold trade restrictions – The People’s Bank of China  – Reuters

India’s temples guard their gold from Government -The Star Online

U.S. Uncertainty Spurs Safe-Haven Gold Demand – Wall Street Journal

Gold gains as U.S. shutdown looms, headed for best qtr in a year – Reuters

Marc Faber Warns "We Have Reached The Endgame Of Monetary Policy" – ZeroHedge

Mark O’Byrne  on Weekly Review of Gold & Silver MarketsAmerican Hard Assets

What Difference Does The New Fed Chairman Make? Less Than You ThinkForbes

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