Category Archives: Gold

(Nikkei) China builds up gold reserves in shift away from dollar


China, Russia and Turkey have been buying gold to replace U.S. Treasury bonds as they look to reduce their reliance on the dollar.   © Reuters

BEIJING/MOSCOW — China added gold to its foreign reserves last month for the first time in more than two years even as it continued paring its U.S. Treasury holdings, part of a broader trend toward reducing dependence on the dollar amid fraying ties with Washington.

China’s gold holdings totaled 1,852 tons at the end of 2018, worth roughly $76 billion, according to central bank data. That marks an increase of about 10 tons from the previous month and the first rise since October 2016. Beijing had sharply boosted its gold reserves to 1,658 tons from 1,054 tons in June 2015 and gradually added more until the fall of 2016, after which the total had remained flat.

Meanwhile, China’s holdings of U.S. Treasury securities fell for a fifth straight month to $1.14 trillion at the end of October, down 5% from the most recent peak in August 2017, U.S. government data shows. As the country’s economic turbulence put downward pressure on the yuan, Beijing likely sold dollar-denominated assets to shore up the currency, contributing to the decline.

China has kept its total foreign-currency reserves steady at just over $3 trillion for the past two years, buying a more diverse array of assets to replace the U.S. government debt it sold. The uptick in its gold holdings was likely part of this shift.

Given the ongoing trade tensions, the country “probably wants to reduce its dependence on dollar-denominated securities in its foreign-currency reserves,” said Yusuke Miura, senior economist at Japan’s Mizuho Research Institute.

China’s State Council said this month it had designated the Guangxi Zhuang Autonomous Region, which borders Vietnam, as a special zone to link China and the Association of Southeast Asian Nations. In addition to promoting cross-border financial investment, the move aims to encourage use of the yuan in trade with ASEAN.

By raising the prospect of a broad bloc moving away from the greenback, Beijing likely hoped to gain an edge in trade negotiations with the U.S. China’s latest foreign reserve data was released Jan. 7, the same day that the last round of working-level talks began.

Sanctions are likely a concern as well. President Xi Jinping warned on Monday that China faces a slippery international situation and must be on guard against “black swans” — a term from the financial world referring to unforeseen events with catastrophic consequences.

“The chances are not low” that Washington will impose financial sanctions on China, warned a researcher at a think tank affiliated with the Chinese government.

In 2017, the U.S. cut off Chinese regional lender Bank of Dandong from the American financial system for allegedly facilitating illegal transactions involving North Korea. Should Washington do something similar to a major Chinese state-owned bank, financial markets may swoon. Beijing’s efforts to disentangle itself from the dollar appear intended to defend against this risk.

Other countries with deteriorating relationships with Washington seem to be thinking along similar lines. Russian holdings of U.S. Treasury bonds plunged by $87.5 billion from the end of 2017 to $14.6 billion at the end of October 2018, with much of the drop-off coming after Washington imposed new sanctions on the country in April. The share of Russian trade conducted in dollars has fallen to less than 70% in the first half of 2018, from 80% in 2013.

Turkey’s Treasury holdings totaled just $10.2 billion at the end of October, falling by $42.3 billion from the end of 2017 as tensions ratcheted up over Ankara’s detention of an American pastor on charges related to an attempted coup in 2016. Turkish authorities are believed to have pared dollar-based holdings out of concern that the U.S. could take steps such as freezing assets.

The share of foreign-currency reserves worldwide denominated in dollars reached a five-year low of 61.9% at the end of September, according to the International Monetary Fund. Yuan-based assets’ share rose to 1.8%, on a par with the Canadian dollar. The rise was likely thanks in part to Russia, which reinvested the proceeds from its Treasury sales into gold and yuan- and euro-denominated securities.

But a clean break from the greenback would be difficult for either China or Russia. Beijing would likely find it impossible to buy enough alternative assets to replace its enormous Treasury holdings. For Russia, the dollar is all but inescapable in the oil and natural gas industries, which are central to the country’s economy.

(BBG) Gold Is on Track for the Worst Month of 2017

(BBG) Gold traded near the lowest since August and headed for the biggest monthly loss this year as traders raise bets that the Federal Reserve will boost U.S. rates by the end of December.

Bullion was up 0.1 percent to $1,284.64 an ounce at 11:38 a.m. in New York after slipping as much as 0.4 percent to the lowest since Aug. 25. Prices are down 2.8 percent this month. An index of gold producers is on track for the biggest loss since November.

Gold prices have fallen for the past three weeks as the Fed prepares to tighten monetary policy amid optimism over the health of the U.S. economy. That’s pared gains for the non-interest-bearing metal to about 12 percent this year. A rebound in the dollar this month and record-high stock markets have also sapped the appeal of bullion.

Prices have been “unable to stand the specter of higher U.S. interest rates and a stronger dollar,” Ed Meir, an analyst at INTL FCStone Inc. in New York, said by email. “The political focus in Washington has now shifted from the ill-fated health-care legislation to more growth-friendly issues like tax cuts and reforms.”

Odds of a Fed rate hike by December are at about 67 percent, up from less than 30 percent a month ago.

The greenback has risen in September after dropping almost every month this year, curbing demand for gold as an alternative asset. A gauge of the dollar was down 0.3 percent on Thursday.

“We expect the dollar to continue to recover, which will probably weigh on gold, silver and platinum prices,” ABN Amro Bank NV analyst Georgette Boele said in a note to clients.

Spot silver rose 0.3 percent to $16.8144 an ounce. Palladium advanced and platinum was little changed.

Gold closed below its 50-day moving average for the first time since July on Wednesday. That could be considered a bearish sign by traders who study charts. When gold fell below that level in June, prices dropped almost 4 percent in three weeks.

(ZH) Bundesbank Has Completed Gold Repatriation From New York Fed, Three Years Ahead Of Schedule

(ZH) In January of 2016, the Bundesbank announced that three years after commencing the transfer of some of its offshore-held gold from vaults located at the Banque de France in Paris and the NY Fed in New York, it had repatriated a total of 366.3 tonnes, bringing the German central bank’s gold reserves held in Frankfurt to 1,402 tonnes, or 41.5% of Germany’s total gold of 3,381 tonnes, for the first time greater than the 1.347 thousand tonnes located at the New York Fed, which as of January 27, 2016 held 39.9% of Germany’s official gold.

“With approximately 1,403 tonnes of gold, Frankfurt has been our largest storage location, ahead of New York, since the end of last year,” said Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank. “The transfers are proceeding smoothly. We have succeeded in once again significantly increasing the transport volume compared with 2014. This means that operations are running very much according to schedule,” added Thiele last January.

As a reminder, according to its gold storage plan, unveiled in January 2013, the Bundesbank would store half of Germany’s gold reserves in its own vaults in Frankfurt am Main by 2020 which would  necessitate a transfer to Frankfurt of 300 tonnes of gold from New York and all 374 tonnes of gold from Paris. It also meant that as of January, another 111 tonnes of gold from the NY Fed and 196.4 tonnes of gold from Paris remained to be transfered.

The “politically correct” motives for the transfer, as well as the logistics and the mechanics behind it were explained in a March 2015 video released by the Bundesbank…

… the real reasons, however, is that following several reports on this website which cast doubts on Germany’s gold holdings, in late 2012 the German Court of Auditors demanded that the Bundesbank undertake an audit of its gold reserves. Specifically, the court wanted to ensure that the nearly 3400 tons of gold, of which more than 2,000 tonnes held offshore, is in fact in existence – ‘because stocks have never been checked for authenticity and weight’.  The move to repatriate was only accelerate following rumors that much of the offshore-held gold might have been “rehypothecated”, and not be there anymore, that it might have been melted down, leased, or sold.

Ironically, at the time, Bundesbank Board member Carl-Ludwig Thiele told the Handelsblatt that these moves were a “trust-building” measure, and he tried vigorously to put the rumors about the missing gold to rest. Of course, repatriating your gold from foreign central banks is precisely the opposite of a “demonstration of confidence.”

What made matters worse is that at the end of 2013, the Bundesbank announced it had managed to repatriate only 37 tonnes of the total 700 scheduled for redemption, further spooking the local population and suggesting that conspiracy theories that the gold was missing were in fact accurate.

As a result, following blowback from both the media and the public, the Bundesbank accelerated its activity, and repatriated 120 tonnes in 2014 and another 210 in 2015, implying that the Bundesbank’s faith in its foreign central bank peers had declined in inverse proportion to the following accelerated redemption schedule as of January 2016.

* * *

Then, in an update last December, Germany’s Bild reported that in 2016 the Bundesbank has repatriated “more of its gold than planned”, as it moves toward relocating half of the world’s second-largest reserve at home. “We brought back significantly more gold to Germany in 2016 again than initially planned. By now, almost half of the gold reserves are in Germany,” Buba president Jens Weidmann told the German publication. According to Bild, around 1,600 tonnes of Germany’s gold reserves are now in the country, a figure set to rise to 1,700 tonnes by 2020. This, according to our recent calculations, meant that the Bundesbank repatriated roughly 200 tonnes of gold in 2016, comparable to the 210 tonnes its brought back to Frankfurt in 2015, and the total held domestically  amounts to 1,600 tonnes at the end of 2016.

Fast forward to today, in a press release, the Bundesbank provided an official update of its gold holdings, and our analysis was accurate: the German central bank said it had “successfully continued its transfers of gold last year”, andin 2016, more than 216 tonnes of gold were transferred to Frankfurt am Main from storage locations abroad: 111 tonnes from New York and 105 tonnes from Paris.

This would make 2016 the year of fastest gold repatriation, with the 216 tons of gold transfered, higher than the previous record of 210 in 2015. Altogether, the Bundesbank, has now transfered a total of 583 tonnes, or 86% of the 674 tonnes planned in total.

Most importantly, as of December 31, the Bundesbank has now completed all of its scheduled gold withdrawals from the NY Fed, having repatriated a total of 300 tonnes, some 3 years ahead of schedule.

“The transfer of gold from New York was completed successfully last year,” said Carl-Ludwig Thiele, Member of the Bundesbank’s Executive Board. “The transfers were carried out without any disruptions or irregularities. The gold storage plan for New York, which envisaged the transfer of 300 tonnes of gold from New York to Frankfurt, was fully realised in 2016,” Mr Thiele stated.

The Bundesbank also said the repatriation of gold reserves back home was “considerably ahead of the origianal schedule” and as Thiele added “We will be able to complete the transfer of gold from Paris this year too.” Which considering there is only 91t of gold left in Paris, or less than Germany withdrew in 2015 and 2016, should be relatively easy.

In summary, as of the end of 2016, the Bundesbank had 47.9% of its gold in Frankfurt – just 2.1% shy of the the planned 50% – 36.6% at the Federal Reserve Bank of New York, 12.8% at the Bank of England in London, and 2.7% at the Banque de France in Paris.

Why this unexpected scramble to repatraite so much gold 3 years ahead of the 2020 stated schedule, remains a mystery.

(Newsmax) Major Investment Banks Are Becoming More Bullish on Gold


Image: Major Investment Banks Are Becoming More Bullish on Gold
Over the July 4 weekend, the precious metals rose dramatically higher.  Even though the U.S. markets were closed, the London pm settings were $1,350.75 for gold, $20.36 for silver and $1,066 for platinum. That’s the highest London gold fix since March 14, 2014 and the highest silver price since July 31, 2014.  Despite this dramatic price increase over the weekend, the media is strangely quiet about this latest surge.

Gold’s rapid rise in the aftermath of the surprise Brexit vote caused more major investment banks to raise their target for gold for the second half of 2016. Here are a few samples of their “late conversion” to gold.

  • HSBC sees $1,400 gold ahead: James Steel, chief precious metals analyst with Britain’s giant HSBC Bank, said “We anticipate a sizable ‘safe-haven’ inspired trade in gold following the U.K.’s vote to leave the EU and gold prices to rally significantly to reach $1,400 per ounce… In periods of uncertainty, gold is often one of the few perceived ‘safe-haven’ assets with liquidity. It is also historically negatively correlated with risk-on assets.” Steel added that “the drive higher may be more than 10% in the longer term if there were to be broader concerns about the future direction of the EU after the vote.”
  • Credit Suisse says gold could touch $1,500 by 2017.  In a report released last week, Credit Suisse said that “we think this recent fear trade leads to something more enduring as the surprise Brexit vote has solidified and intensified macro and political uncertainty and extended the time frame for a negative real rate environment in the U.S. and potentially abroad.” The bank projects gold averaging $1,475 in the fourth quarter and $1,500 in the first quarter of 2017.  They also “expect mine supply to decline over the next three years,” amidst rising demand from exchange traded funds and hoarding of gold bars and coins.
  • Societe Generale raises its Target to $1,330 in the third quarter and $1,350 for the fourth quarter, targets that have already been met by July 4th! Looking ahead, they say, “it seems that gold will remain one of the major beneficiaries in the current backdrop, as heightened volatility and lingering uncertainty will keep investors’ risk appetite in check.”
  • Saxo Bank: Gold ready for “next leg higher.” Saxo Group gold trader Serge Berger says the Brexit bump for gold could be just the start of a longer-term bullish run for the yellow metal, noting that “safe-haven assets like gold are getting a boost and barring any dramatic reversal of this initial reaction to the referendum, gold may now be ready for its next leg higher.” Berger points to technical indicators of a breakout from the multi-month trading range suggesting that gold has overcome resistance.
  • Australia & New Zealand Banking Group expects $1,400 gold – ANZ figures gold bullion could rally to $1,400 over the next 12 months, since “the ensuing political crisis in the U.K. and concern about the very future of the EU should keep investors on edge.”
  • Overseas Chinese Bank Corp sees $1,400 gold.  OCBC economist Barnabas Gan said “With U.K.’s exit from the European Union, we expect the risk-off sentiment to persist into the months ahead. OCBC targets gold at $1,350 with a single US rate hike, $1,400 if there is no rate hike this year.
  • Even Goldman Sachs raises its gold forecast – And finally, even the most bearish-on-gold big bank, Goldman Sachs, has been forced to raise its outlook for gold by $100.  Goldman’s new three-, six- and 12-month targets are $1,300, $1,280, and $1,250.  It looks they’ll be chasing the gold price all year long.

U.S. Mint Bullion Coin Sales Rise Sharply in the First Half of 2016

Sales of the American Eagle silver and gold coins rose strongly in the first half of 2016 vs. the same six months in 2015.  Silver American Eagle coin sales rose by 20.5%, from 21,786,000 ounces in the first six months of 2015 to 26,250,000 ounces in the first half of 2016.  Gold Eagle sales were up 83.5% for the same six months, rising from 273,000 ounces in the first half of 2015 to 501,000 oz. in 2016’s first half.

(FT) Can the gold price continue to shine?

(FT) After spending the past few years disappointing investors, gold is regaining some shine. The precious metal is the best-performing non-agricultural commodities of 2016, thanks to a number of trends aligning in its favour.

Gold has bounced up many times temporarily during its long-term downward trend that began after the price peaked in 2011. Still, it is undeniable that the gold bugs are gathering. In the five days to January 14, according to a Bloomberg data analysis, investors bought 26.8 metric tonnes of gold via exchanged traded funds that are physically backed by the metal, the biggest increase in a year. Amid depressed commodities markets, gold is doing relatively well, with the price, measured in US dollars, having risen 3.1 per cent so far this year.

The main reason gold did so well between 2009 and 2011 was the US government’s “quantitative easing” programme, which involved the Federal Reserve printing extra dollars to boost financial markets in the world’s largest economy after the credit crisis. That weakened the US currency and gold was purchased as insurance against this, because a commodity whose supply is relatively scarce cannot have its valued eroded in the same way. “Think of gold as the anti-currency,” says Hunter Hillcoat, who follows gold mining stocks at broker Investec.

Gold and the dollar tend to move inversely, as this chart shows:

The Federal Reserve, in a long-anticipated move, raised interest rates last month for the first time in nearly a decade, offically calling an end to monetary expansion. That would theoretically be bad for the gold price. But because Fed chair Janet Yellen also signalled that any further rate rises would be gradual, investors took the historic event in their stride.

Since the start of this year, turmoil across global stock markets prompted by volatility in Chinese equities and a slowdown in economic growth in China has increased bets that the US central bank will now treat further interest rate rises with even more caution.

Gold also tends to do well when other financial markets are volatile, because many investors treat it as a “haven”, in the belief that its performance will be uncorrelated with other assets. This chart shows the gold price against the US S&P 500, over the past five years.

Investors who believe the global economic picture for 2016 is bleak may wish to buy some gold, but how can it be purchased?

There are two broad choices: exchange-traded funds (ETFs) backed by physical gold or gold mining shares.

The right ETF, selected following research into the various providers, is a good choice for the more cautious. This will track the market price of gold, which is enough for many people.

Those with a higher risk appetite often opt for gold mining shares. In theory, these present the prospect of faster appreciation, as a small rise in the gold price can greatly increase a miner’s profits.

For example, if a miner’s all-in sustainable cost [an industry measure] is $900 per ounce and the price it gets for selling its gold is $1,000 per ounce, the profit is $100, or 11 per cent.

If the gold price rises ten per cent to $1,100, the miners’ profit is $200, or 22 per cent. The fact a miner’s profit margin could double if the gold price rises ten per cent, means “mining shares can run a lot harder than underlying bullion,” says Investec’s Mr Hunter. This chart, comprising the share price of London-listed gold miner Centamin plc and the price of bullion, illustrates the trend.

The downside is that gold miners have a history of failing to keep their costs stable at times when the gold price is rising. During the last boom, many over-expanded and spent too much on staff in an era when the rocketing prices of other commodities created huge competition for mine workers.

In 2013, gold suffered its first “down” year in more than a decade. Many miners were unprepared, and ended up taking billions of dollars in asset writedowns and large annual losses because of urgent cost cutting.

UBS, the investment bank, is now advising investors to tiptoe back into these stocks, saying there is optimism that lessons had been learned. The bank’s analysts wrote on January 15: “Assuming the gold industry does not revert to pursuing growth over returns, maintains strong cost discipline and the gold price increases, we believe the sector could be in a strong position to offer what, arguably, it should have offered during the 2000s — expanding margins, increasing FCF [free cash-flow] and genuine leverage to gold price upside.”

They add, however, that it will take a stronger rise in the gold price than the 3 per cent we have seen so far this year to boost the miners’ shares further. Whether this will happen is anyone’s guess.Can-the-gold-price-continue-to-shine_-FT

(FT) Gold miners say output has peaked as losses reshape the industry


Stacks of 40 Troy ounce high fine gold bars are seen in a subcompartment of the vault inside the United States Mint in West Point, New York Tuesday, June 20, 2006. Photographer: Daniel Barry/Bloomberg News.©Bloomberg

Gold output has peaked in this commodities cycle, according to mining industry leaders and analysts who say few big projects will reach the point of production amid falling prices.

The lack of new assets and declining output at existing mines is expected to curb gold supply, a glimmer of hope for surviving producers of the precious metal in an industry coming to terms with a rush of investment when prices were far higher.

Kelvin Dushnisky, president of Barrick Gold, the world’s largest gold miner by annual output, said: “Falling grades and production levels, a lack of new discoveries, and extended project development timelines are bullish for the medium and long-term gold price outlook.”

Gold has been one of the commodities hit by the worst environment for mining in more than a decade. The price has declined more than 40 per cent from its 2011 peak, to a level where many gold miners struggle to recoup the costs of extraction.

This year some had expected gold to be under pressure from higher interest rates in the US, after the Federal Reserve began to tighten monetary policy last month.

However the gold price has risen 2.7 per cent so far in 2016, while stock markets around the world have tumbled. A controversial investment with a variety of competing theories for what determines the price, gold has provided comfort for investors who see the inert metal as a haven amid economic and political turmoil.

Miners hope limits to fresh gold supply will increase the chances of longer-term recovery.Gold-miners-say-output-has-peaked-as-losses-reshape-the-industry-FT