January Gold News 2014

Gold dropped 2% yesterday, it's largest one day decline for over a month following the Federal Reserve’s decision to taper its monthly asset program by a further $10bn per month and the release of positive economic data from the U.S.

The S&P closed 1% higher after better than expected U.S. household spending and export data resulted in the U.S. economy expanding by 3.2% in the fourth quarter of 2013.

Silver, Platinum and Palladium all traded lower yesterday.

Well respected Jeffrey Christian, Managing Partner of New York based research organisation CPM, has predicted that gold could rise to $1,320 per ounce in quarter one before catapulting to $1,900 per ounce over the longer term.

Christian has forecasted that gold will trade between $1,240 and $1,500 over the next few years, which is extremely bullish when compared to recent forecasts from most mainstream bank analysts.

Chinese demand for physical gold is expected to diminish over the next two weeks as the Chinese celebrate the Lunar New Year Holiday which starts today.

According to ANZ analyst, "Near-term, gold fundamentals look bearish, as Chinese demand is sidelined for the next few weeks with the New Year holiday. Absent a further escalation in emerging-market jitters, we expect prices to retest recent lows, potentially falling below $1,230 an ounce."

The Russian Central Bank was warned both banks and non-banking financial companies to avoid using crytocurrencies. The bank added that any financial institutions using such “money surrogates” will be considered “suspicious”.

The Central Bank also cited money laundering and terrorist activity as further reasons for individuals to avoid the use of such currencies. In effect by making these announcements the Russian Central Bank has placed a ban on crytocurrencies.

Following the Federal Reserve’s decision to taper their monthly asset purchase program known as quantitative easing from $75bn to $65bn, gold held firm as global stockmarkets slumped.

The Dow Jones fell 1.19%, Japans Nikkei 225 closed 2.45% down and European markets are currently negative. In contrast gold futures finished yesterday $11.40 higher at $1,262 per ounce.

After gold’s positive start to the year, Credit Suisse is warning that gold will face considerable headwinds in 2014, with bank analysts forecasting gold could fall to $1,000 per ounce.

The bank believes economic recovery in North America and Europe has reduced investor appetite for gold’s status as the “the ultimate safe haven.” The bank also suggests rising interest rates will make gold less attractive when compared to interest bearing assets.

The amount of gold sold forward by mining companies fell to an 11 year low in the third quarter of 2013. According to Societe Generale and Thomson Reuters the total amount of hedged gold fell by 6 tonnes to 92 tonnes.

By selling their production forward, miners have certainly over future revenues and can protect themselves from future price declines. Generally investors view hedging negatively as they lose exposure to future price increases.

27kg of gold worth $1.5 Million has been found concealed inside mobile phones on a cargo plane at Chennai airport reports say. The plane arrived from Hong Kong and it is unclear who the sender and attended recipient are.

Gold smuggling into India has significantly increased since the Indian government introduced the gold import tax in an attempt to reduce the country’s current account deficit. According to India’s central bank, gold imports declined to $3.9bn from $16.4bn in the last quarter of 2013.

The latest Federal Open Market Committee (FOMC) meeting concludes today, with most analysts expecting the Federal Reserve to continue to taper its monthly asset program known as quantitative easing.

Continued tapering is not expected to impact the gold price as most analysts believe this has already been factored into the price. On the flip side if the Fed chooses to halt tapering the news may catapult the gold price higher.

Gold imports from Hong Kong to China reached record levels in 2013 as investors took advantage of gold’s 28% price decline. Imports rose by 33% to 1,108.8 metric tonnes according to figures released by Bloomberg News. According to Song Heping assistant general manager at Xiamen City Commercial Bank Co. “Increasing disposable income guaranteed healthy demand for gold in China last year,”

Indian Revenue Secretary, Sumit Bose confirmed on Monday that the government will review its policy on gold imports by the end of March. Gold imports have dropped significantly since the import tax was introduced with only 21 tonnes imported in November, although Bose confirmed import figures picked up in December.

The U.S. states of New York and California are preparing to draft rules regarding the virtual currency Bitcoin. Since its launch Bitcoins legal status has been uncertain and in March the US Treasury Department indicated that virtual currencies may be regulated as money transmitters.

Deutsche bank is in negotiations to sell its seat on the global gold and silver price setting process, commonly known as the fix. The news comes weeks after Deutsche Bank announced they are withdrawing from the fix after German regulator Bafin’s investigation into the bank over potential manipulation in the precious metals markets. Earlier this week Deutsche bank also announced its decision to scale back its commodity business.

Outflows from Gold Exchange Traded Funds (ETFs) have slowed following a dismal year for the yellow metal. Since the peak in quarter two when $19.6 billion was withdrawn, the outflows have slowed. According to Nick Brookes, head of global research and investment strategy at ETF Securities “The bulk of shorter-term tactical money that went into gold over 2011 and 2012 has now been cleared and gold ETP holdings are back to 2010 levels.”

Austria’s Muenze Oesterreich AG mint is now operating 24 hours a day to keep up with consumer demand. The mint has hired new works and added a third 8 hour shift. Mints around the world are manufacturing as fast as they can to keep up with demand as consumers take advantage of last year’s 28% price drop.

JP Morgan experienced its largest one-day withdrawal of gold from its eligible inventories on Friday with the amount held dropping from 1,459,027 ounces to 1,1357,527 ounces. Scotia Mocatta also saw a significant reduction in their investories with 32,150 ounces withdrawn. At present there are only 357,139 ounces of gold in the Registered inventories at the Comex.

Vietnam imported 110 tons gold last year, which is higher than amounts imported in previous years according to the Saigon Times. Vietnamese consumer demand was actually lower in 2013, however, investment demand from large commercial banks significantly increased.

Analysis undertaken by Thomson Reuters shows that global gold production increased in 2013 by 4%, despite the price of gold falling by 28%. According to mineweb.com this is not surprising as many new gold mining projects came on stream and the industry shifted to reducing operating costs and improving the efficiency of existing mines.

Japans ruling Liberal Democratic Party is planning to submit a new bill which will allow the government to raid bank accounts which have been dormant for over 10 years. The money will be transferred to government run Deposit Insurance Corporation of Japan and the funds will be used for both welfare and education projects. Although the government will be utilising the funds customers can request their money back at any time.

The Central Bank of Russia has announced it added a further 700,000 troy ounces to its gold reserves in December. In 2013 Russia increased their gold holdings by 2.5 million troy ounces to 79.5 metric tonnes. Russia is estimated to have mined 240 metric tonnes in 2013, which would indicate only a third of what they mined last year went into their reported reserves.

According to Indian Finance Minister P. Chidambaram India has no plans to reduce the current import tax on gold. Speaking to CNBC TV18 in Davos the minister added, “Until we have a firm grip on the current account deficit I do not contemplate any roll back in any measure. We will have a full idea of the current account deficit only when the budget is presented and when the year comes to an end,"

Cumbria University has become the first public University to allow students to pay tuition fees with Bitcoin. The University has already established a payment process, and the concept has been welcomed by Professor Jem Bendell. "We believe in learning by doing, and so to help inform our courses on complementary currencies, we are trialling the acceptance of them.

Japans largest bullion supplier Tanaka Kikinzoku Kogyo has seen its sales increase by 65% to a 5 year high as local investors seek a safe haven from Prime Minister ShinzoAbe’s policy to weaken the yen. Bars sold to local investors increased to 37.3 metric tonnes in 2013 up from 22.9 tonnes in 2012. Since Abe came into power the Yen has lost 18% against the dollar.

Gold retreated for the second consecutive day and settled 0.21% lower at $1,239.10 per ounce amid concerns the Federal Reserve will once again reduce their monthly asset program known as quantitative easing. The speculation has been fuelled by better than expected employment data and recent comments made by both the San Francisco and Philadelphia Fed presidents.

Dr Paul Craig Roberts former Assistant Treasury to Ronald Regan has made some extraordinary claims on US Watchdog regarding the US gold holdings. They don’t have any more gold. That’s why they can only give Germany 5 tons of the 1,500 tons it’s holding. In fact, when Germany asked for this delivery last year, the Fed said no. But it said we will give you back 300 tons . . . . So, they said we will give you back 20% of what you trusted us to keep for you over the next seven years, but they are not even ...

Even though gold dropped by 28% in 2013 gold and emerging markets have been the best performing assets since the start of the millennium. In contrast the worst performing asset classes have been commodities, the S&P and market-neutral hedge funds.

US based company Valaurum has designed a new technology which infuses gold within a traditional looking bank note. Valaurum vision is to democratize ownership of gold by converting it into a form which is affordable. Using proprietary process very thin and precise quantities of gold are accumulated between layers of polyester film.

The five banks which set the century old gold and silver fix have formed a steering committee to investigate ways in which the process can be improved. The latest news comes days after Deutsche Bank announced they are withdrawing from the fix after German regulator Bafin’s investigation into the bank over potential manipulation in the precious metals markets.

Morgan Stanley has reduced its 2014 gold forecast by 12% to $1,160 per ounce. Bank analyst Peter Richardson believes gold will remain in a downward trend as the global economy continues to recover increasing the probability of interest rates rising. The forecast follows yesterday’s release of the London Bullion Market Survey of traders who are collectively forecasting an average price off $1,219 per ounce in 2014.

The Bundesbank plans to repatriate a total of 674 tons of gold held in vaults in New York and Paris in an attempt to hold 50% of their gold reserves in Germany by 2020. In 2013 Paris transferred 32 tones and New York 5 tons back to the Germany, in 2014 the Bundesbank are expecting between 30-50 tons to be repatriated form New York alone.

Gold is trading just below its six week high as investors become concerned that the recent increase could choke off physical demand ahead of next week’s Federal Open Market Committee meeting. Following December’s meeting gold fell dramatically as the Fed cut its monthly asset purchase program known as quantitative easing by $10 Billion to $75 billion.

Gold for immediate delivery advanced to a six week high of $1,260.07 per ounce, as demand for the largest exchange-traded product increased at its fastest pace since 2011. Assets in the SPDR Gold Trust increased by 7.49 tonnes or 0.9% the largest one day rise since November 2011. Silver, platinum and palladium all traded higher on Friday.

Deutsche Bank has announced that they will withdraw from gold and silver fixing amid an investigation by German regulators into suspected manipulation of precious metal prices by banks. Bafin the German regulator added “accusations of manipulation are very serious.” The probe comes days after Deutsche bank suspended traders for potential rigging of the world’s currency benchmarks.

According to industry expert Jeffery Nichols, “China may soon announce an increase in its official gold reserve from 1,054 tons to 2,710 tons.” The Peoples Bank of China (PBOC) have not reported on their gold reserves since 2009. The PBOC bought 654 tons between 2009 and 2011, 388 tons in 2012 and a further 622 tons in 2013.

Sun Zhaoxue president of the China’s gold mining association is reported to have accused the US government of gold price suppression in an attempt to maintain the prominence of the US dollar. GATA consultant and gold analyst Koos Jansen reported the details on the 2nd of January after finding a translation from a financial conference held in Shanghai in June 2012.

As the price of gold declined in 2013 some of the world’s central banks took advantage and increased their gold reserves. Turkey imported 302.3 tonnes in 2013 up from 120.78 tonnes in 2012 a staggering 150% increase. In 2013 central banks became net buyers of gold and consumer demand for gold accelerated.

Gold advanced yesterday to a one month high of $1,255.30 per ounce as the latest government report showed U.S consumer price inflation rose at its fastest rate in six months. According to Phil Steible commodity broker at R.J. O’Brien, gold’s appeal as a safe haven asset and hedge against inflation is back. In 2013 gold lost 28% as inflation fears remained subdued.

Gold retreated 28% in 2013 but gold shares faired even worse, with some of the world’s largest producers falling 60% from their peak. Gold shares are relatively cheap when compared to bullion and some producers are trading at only 15 times trailing earnings.

According to Haresh Soni Chairman of the All India Gem & Jewellery Trade Federation, India’s demand for gold jewellery has declined despite a drop in the gold price and the upcoming wedding season. “Compared to last January the market is down. Volatility in gold is also affecting the market. Consumers are very cautious on purchasing gold. Inflationary pressure is also keeping consumers away from purchasing gold.”

Zhang Bingman vice president of the China Gold association is forecasting that by 2020 China’s gold reserves will range between 5,787 and 6,750 tonnes. He remains positive on the gold price and believes recent media attention is causing the rest of the world to want to hold physical gold.

Gold futures dropped yesterday as equities rose to near 12 month highs, boosted by better than expected U.S. manufacturing data. According to market analyst Jason Rotman a further reduction in the Fed’s monthly asset program known as quantitative easing could potentially drive gold below $1,200. Positive economic data coming out of the US is currently weighing heavy on the gold market.

A women’s group in the Indian state of Kerala is calling for a limit to be placed on the amount of gold which can be gifted at wedding to 80 grams. The group believes the limit will reduce the financial burden placed on families and help reduce India’s trade deficit. Currently the average amount of gold gifted per wedding in the state is 400 grams or 80 tonnes per year, which equates to 10% of India’s total annual demand.

In an aim to open China’s physical gold market, the Chinese government has grant gold import licences to two foreign banks ANZ and HSBC. By issuing two further licenses the supply of gold could increase and reduce local prices, which are higher than other Asian countries. China is currently the world’s largest buyer of gold and in the first 11 months of 2013 imported over a 1,000 tonnes via Hong Kong.

Gold retreated yesterday after the release of better than expected US retail sales data and the metal appears sensitive to any economic data. Following last week’s disappointing jobs data gold rallied only to be pegged back by the latest retail figures. Gold spot eased 0.3% to $1,241.46 an ounce after reaching a month high on Tuesday off $1,255 per ounce.

Toby Lewis, investment strategist at Citibank is predicting that continued strong demand by Chinese buyers will support the gold price in 2013 as investment demand declines. “We expect support for the gold price to be driven by Chinese physical demand increasing later in the year,” Mr Lewis said. “Investor demand is likely to remain subdued throughout the year as demand for a safe haven from financial crises and demands for inflation protection are likely to be much lower.”

Nine out of the 10 worst performing funds in the UK last year invested in gold equities. Leading the pack according to Morningstar was Junior Gold which lost 66% of their clients’ money closely followed by WAY Charteris Gold which saw a 54% decline. Junior Gold fund manager Angelos Damaskos is changing strategy in 2014 by investing primarily in companies with an all in cost of a $1,000 per ounce.

Jeffery Currie, Goldman Sachs research analyst is predicting gold will finish 2014 at $1,050 per ounce, which is 16% down from its current price level. Currie expects gold to lose favour as inflationary expectations in the US ease and as the economy reaches escape velocity. Currie is also bearish on copper and expects ongoing tension in the Middle East to continue to affect the oil markets.

After 16 years of exploration a 30 mile gold trend has been found on the Irish border. Fergus O’ Dowd Irelands Minister for Energy is excited about the prospects and is keen to attract investment and sell off exploration licences. Not all the gold can be mined, however, initial estimates value the find in current licenced areas at £11bn.

Gold reached $1,254.05 per ounce its highest level for a month, as Jobs data out of the US disappointed markets. Many analysts believe low than expected jobs growth may prompt the Federal Reserve to slow their reduction in quantitative easing. In December the Federal Reserve reduced their monthly asset program known as quantitative easing from $85 billion to $75 billion.

As the first week in January came to a close, the Comex gold inventories hit a new all-time low. The Comex exchange provides clients with storage and Warehousing facilities and can be used for institutions and private clients to settle future contracts. Significant depletion of the inventories may indicate possible strains in the gold market.

According to a Bloomberg Industries report China has over taken France and Italy to become the world’s third largest holder of gold. With 8,133.5 tonnes the US still has the World’s largest gold reserves. China’s holding have increased to 2,710 metric tonnes up from 1,054 tonnes in 2009, according to the World Gold Council. Last year china is reported to have added 622 tonnes.

Evy Hambro, fund manager of the world’s largest precious metals fund Blackrock & General has stated, “Very few gold companies are making any profit.” In television interview with Bloomberg the fund manager indicated that world gold supply may decline as producers start to close expensive mines as their focus shifts to cutting costs and existing profitable mines.

The Shanghai Gold Exchange intends to lunch an international board in 2014, which will be located in the City’s free trade zone. All contracts on the international board will be priced in exclusively in Chinese Yuan with the purpose of attracting foreign investment in China’s gold market. All buying and selling off spot bullion in China is currently conducted via the exchange.

Bank of America Merrill Lynch has cut its 2014 gold forecast to $1,150 per ounce, and has warned that the price could drop even further. The Bank also has a negative outlook for silver with a 2014 price prediction of $18.38 per ounce. Bank strategist Michael Widmer has warned that even strong physical buying from India and China will not be enough to halt the price decline.

Goldcorp are predicting their gold production will increase by 13-18% this year and by over 50% over the next two years. In yesterday’s statement the company also confirmed that production cost per ounce will decrease to between $950 and $1,000, compared with the company’s 2013 cost of $1,065. In 2013 Goldcorp produced 2.67 million ounces of gold, 11% higher than 2012.

The Perth Mints record breaking 1,012 Kilogram gold coin is currently on display in the Hang Seng Bank headquarters. The 2012 coin has a kangaroo on one side and an image of Queen Elizabeth II on the other. The coin is 4.7 inches thick with a 31 inch diameter and took the Perth Mint 18 months to manufacturer. The purpose of the display was to further develop the relationship between the bank, the Mint and Chinese consumers.

City Financial Mark Harris, is urging investors to once again look at gold miners and gold bullion as a potential hedge against an equity sell off. Mark is anticipating a correction in the equity markets and increased volatility. Mark is buying gold for hedging purposes rather than believing the price of gold will dramatically increase in 2014. Last year gold bullion and gold equities where two of the worst performing asset classes.

Better than expected jobs data out of the US, has once again raised expectations that Federal Reserve may further reduce their asset purchasing program known as Quantitative easing. Gold dropped by over 1% following the release of the ADP National Employment latest report which showed the private sector in the US added a better than expected 238,00 jobs in December.

As gold prices approach their six month low, the UK’s Royal Mint has already sold out of their 2014 Sovereign gold coins. The Mint fully expect the coins to be available again by the end of January and have stressed they are still supplying their popular 2014 gold and silver Britannia coins.

2013 was a terrible year for gold exchange-traded funds, with Assets Under Management (AUM) dropping by almost 50%. The 28% drop in the gold price partially attributed to the decline in AUM, but 54% of the declines has been attributed to investor outflows. Outflows peaked in quarter two of last year as the US Dollar strengthen, interest rates climbed and the demand for gold declined.