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Gold’s London AM fix this morning was USD
1,558.50, EUR 1,239.27, and GBP 993.62 per ounce. Yesterday's AM fix this
morning was USD 1,555.00, EUR 1,229.44, and GBP 989.56 per ounce.
Silver is trading at $28.12/oz,
€22.46/oz and £18.01/oz. Platinum is
trading at $1,430.25/oz, palladium at $591.80/oz and rhodium at $1,275/oz.
Gold fell $5.60 or 0.36% in New York yesterday and
closed at $1,561.20/oz. Gold has been trading sideways in Asia and was
slightly lower in Europe prior to buying which saw gold rise to about the
close in New York yesterday.
Fears about Greece and the EU after the EU summit came
up short on delivering a grand solution to solve the debt crisis are
supporting gold at these levels and leading to some safe haven buying.
EU leaders once again failed to agree to plans with
regards to the increasing possibility that Greece exits the euro. Instead,
Greece was again urged to continue to meet targets and continue the austerity
to complete the ‘bailout’ schedule.
Meanwhile, the crisis is being compounded by the
increasing insolvency of Spanish banks and indeed Spain itself.
Spain announced a 9 billion euro ($11 billion) bailout
of Bankia on Wednesday, and endeavoured
to find new ways to meet its demanding financing needs which may pull the
country deeper into the eurozone crisis. The Irish
NAMA style solution of creative accounting and kicking the can down the road
is being looked at rather than the more prudent, but short term painful,
winding down of all the ‘bad’ insolvent Spanish banks.
Gold may struggle to make gains over the coming trading
session ahead of the expiry of monthly US options. However, sharp gains could
be seen after option expiration – as has often been the case in recent
years.
Reuters report that traders said that because the
underlying June futures price was trading roughly between $1,550 and $1,600,
where most at-the-money open interest was clustered, it was not clear which
would exert a greater “gravitational pull” on the gold price.
Most open interest, which reflects investor
positioning, is located at $1,550 and $1,600, with a firm bias towards the
$1,550 level where gold may be guided towards.
Puts, options that give the holder the right, but not
the obligation to sell a predetermined amount of an asset at a set price by a
certain date, outnumber calls, or buy options, by nearly 2:1.
Gold 1 Year – (Bloomberg)
The massive reversal higher in the gold mining shares
yesterday which saw an outside day reversal to the upside and over 4% gains
in the XAU and HUI is another sign that we may be close to a bottom.
Central Banks Still Significant Buyers On Gold Dip
Central banks internationally continue to diversify their foreign exchange
reserves into gold bullion due to concerns about fiat currencies –
including the dollar and especially the euro.
IMF data shows that central banks were again net buyers
in April with Turkey and Philippines being the largest buyers of gold.
The Philippines increased their gold holdings
significantly by 32.13 tonnes to 194.241 tonnes in March – a 17% increase in their gold
reserves in the month.
It was the single largest addition Philippines has made
since September 2008. They have been pretty consistent buyers of gold over
the last few years, but the 17% increase in April was another big rise.
Turkey expanded its gold reserves by 29.7 metric tons
in April. Turkey’s bullion reserves climbed to 239.3 tons last month
meaning that Turkey increased their gold reserves by 14% in April.
The central bank on March 27 doubled the share of lira
reserves banks can hold in gold to 20%, saying it would provide 6.1 billion
liras ($3.3 billion) of extra liquidity.
Mexico increased gold holdings by 2.92 tonnes to 125.5 tonnes in
April.
Kazakhstan raised gold holdings by 2.02 tonnes to 98.19 tonnes in
April.
Ukraine upped gold reserves by 1.4 tonnes
to 30.607 tonnes in April.
Sri Lanka raised gold reserves by 2.177 tonnes to 7.807 tonnes in
January. There is a delay in Sri Lanakan gold
reserve reporting to the IMF.
Central banks added 456.4 tons last year, the most in
almost five decades, and will buy as much as 400 tons this year, the
London-based World Gold Council estimates.
Cross Currency Table – (Bloomberg)
While the gold tonnage demand from central banks in
recent months has been significant, gold remains a tiny fraction of most
central banks, especially emerging market creditor nations such as China,
foreign exchange reserves and therefore the trend is sustainable and indeed
may accelerate.
Central bank reserve diversification into gold may
increase given the Eurozone debt crisis and the risk of debt crisis spreading
to Japan, the UK and the U.S.
Indeed, there is the increasing possibility that some
G8 debtor nations, such as the UK and Japan, may decide to once again add to
their gold reserves in order to protect their currencies and guard against
the risk of devaluations of the euro, dollar, yen, pound and a wider
international monetary crisis.
Price is not a determining factor in central bank
buying rather they are more likely being guided to secure an allocation of a
percentage of their overall foreign exchange reserves into gold bullion.
Sovereign government buying of gold is likely to
support gold at these levels and indeed could be the driver to higher prices
in the coming weeks and months.
OTHER NEWS
(Bloomberg) -- Gold Is ‘Good Value’ Below $1,600, Outlook
Positive
Important hedge against several trends, incl. inflation risk, devaluation and
depreciation of major currencies, Coutts investment officers Alan Higgins and
Norman Villamin write in client note dated
yesterday.
● See elevated risks of sovereign default
● Short- and long-term outlook underpinned by
buying from central banks, emerging-market investors, most notably in China.
(Bloomberg) -- Coffee, Cotton Plunge on Demand
Concerns: Commodities at Close
The Standard & Poor’s GSCI gauge of 24
commodities fell 1.9 percent to settle at 616.29 at 3:43 p.m. in New York,
led by coffee and cotton, sliding on demand concerns.
The UBS Bloomberg CMCI index of 26 raw materials declined
1.6 percent to 1,464.29.
(Bloomberg) -- World’s Largest Platinum Mine
Halted as Workers Stay Away
Impala
Platinum Holdings Ltd. said miners stayed away from work at the world’s
largest platinum mine, its Rustenburg operation in South Africa, for a third
day as two rival labor unions clash for dominance.
“What’s clear is that there won’t be
any work today,” Johan Theron, a group
executive for personnel at Johannesburg- based Impala, said by mobile phone.
Groups of people blocked entrance roads to the mine, preventing some who
wanted to work from accessing the site, northwest of the city, he said.
Impala is applying for a court order to force employees to return to work,
the company said in a statement.
Union rivalry and a pay dispute prompted an illegal
strike in January and February, costing more than 120,000 ounces of lost
platinum production, according to Bloomberg calculations. The mine produces
about 3,000 ounces of platinum a day. The National Union of Mineworkers, the
country’s largest miners’ union, has been dominant at Rustenburg
for more than a decade.
Miners refused to go underground on May 21 after
hearing some of their colleagues had been arrested, Impala said yesterday.
Two workers were arrested on charges of attempted murder after one person was
shot and wounded at the mine on May 17, according to the South African Police
Service website.
“Prolonged production disruption or delays in the
ramp-up could increase the production loss and reduce earnings,” Edward
Sterck, an analyst at BMO Capital Markets, said in
a note.
The Association of Mineworkers and Construction Union,
in a legal notice to Impala, stated it recruited more than 10,000 members at
the mine, giving it the necessary representation to demand organizational
rights under South African labor laws, Theron said
yesterday. Impala, which employs about 30,000 people at Rustenburg, is trying
to verify the figures, he said. About two-thirds of the workers belong to
unions, he said.
Impala fell 3.9 percent to 135.25 rand in Johannesburg
by the 5 p.m. close, bringing its losses for the year to 19 percent.
The mine produced 941,200 ounces of platinum in the
year to June 30, or more than 10 percent of world supply. While mining has
stopped, processing of ore continues, Theron said.
“Grasping for positives, supply shortfalls should
ease the expected industry surplus of about 300,000 to 400,000 ounces in
2012,” Liberum Capital wrote in a research
report. Platinum declined 19 percent to $1,428 an ounce in the past year.
Labor is “going through a sea change,” Lonmin Plc, the third-largest
producer, said May 14. “Rivalry for membership between the unions could
be a feature for the foreseeable future with a corresponding increase in the
risk of escalation of costs and disruptions to production.” The AMCU
has limited organizational rights at the Karee mining division, it said.
(Bloomberg) -- Deutsche Bank Signs Johnson Matthey Deal
on Platinum, Palladium
Deutsche Bank AG said it signed an agreement with Johnson Matthey Plc for custody and storage of physical platinum and
palladium ingots and plates for the bank and its clients.
The agreement will provide “a platform for
further commercial cooperation,” the bank said in an e-mailed statement
today.
For breaking news and commentary on financial markets
and gold, follow us on Twitter.
NEWS
Gold hovers about $1,560/oz;
Greece fear persists - Reuters
Gold Extends Drop as China May Slow Amid Worsening
Europe Crisis – Business Week
EU urges Greece to stay in euro, plans for possible
exit - Reuters
EU Chiefs Clash On Euro Bonds As Crisis Summit Bogs
Down - Bloomberg
COMMENTARY
Printing money is the only thing keeping the UK and
US afloat - MoneyWeek
Papademos, Grexit and Catastrophe
Blackmail – The Telegraph
US T Bond - Tower of Babel Teeters - GoldSeek
Dollar Backwardation - Inflation and Deflation at
the Same Time? - Zero Hedge
Mark
O’Byrne
Goldcore
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