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Expand your grandchildren's waistlines or financial security?

Mon, 03/30/2015 - 05:04
In most countries at this time of year, the shops are stacked ith chocolate Easter eggs or cute bunny and chick toys, but what if you want to give your grandchildren something they can really remember you for?

Most children nowadays get a month's worth of chocolate in one hit, and it's gone in a flash. With the new pension changes coming into effect in the UK just in time for Easter, research suggests that many grandparents are thinking about taking some cash out of their pension, investing it elsewhere and helping children and grandchildren.

Anyone who had a private pension linked to the stock market in 2008 watched in horror as approximately £150billion was wiped off money-purchase pension schemes; those who were just about to retire were worst hit. It became clear that the most important financial decision you can make with regard to your pension portfolio, is to make sure it is balanced and invested broadly.

Fast forward a few decades and the young people of today are predicted to be in a far worse position when they are grandparents. The high cost of housing means many cannot even dream of owning their own home, and then of course there is the double edged sword of us generally living longer and the resulting costs.

You could just give your grandchildren some cash, but with interest rates still at record lows it is unlikely they will make enough interest on it to keep up with inflation. Gold, however, has been used as an inflation protector for centuries. It has the lowest correlation to the global business cycle, so that means if the stock exchange suddenly takes a dive, historically gold goes up. It is also an excellent preserver of purchasing power. It is not the kind of investment you would make to score a quick profit, it is there to provide a financial safety net in a volatile world.

We are of course talking about the physical metal itself and not exchange traded funds (ETFs), and it must be investment grade bullion, which is best kept in a secure, independent and audited storage facility. Of course past trends are not a guarantee of what will happen in the future, but it is important to realise that in 500-600 years BC, 350 loaves of bread cost one ounce of gold. You would still get roughly the same number of loaves today for your ounce; meanwhile national currencies have come and gone.

Over the past few years the world's biggest gold purchasers have been in China and the India – the two most populous nations, and rising industrial powers. Gold has been flowing out of western vaults into the East at a fast rate, this is a global asset, not a national one.

It is easier than you think to own gold. You can buy online at goldmoney.com and choose where around the world you would like your gold stored. All the vaults are outside of the banking system and run by global security experts.

So, whether you want to diversify your pension and put some of it into an asset known for its long term wealth protection (gold is included in the list of approved assets for a Self-Invested Personal Pension SIPP), or give your grandchildren that nest egg which will help protect their financial future, gold could be a good choice. After all, going back to school after the Easter holidays and being able to say, 'My grandparents bought me a real gold bar for Easter', is going to be a much better story to tell than, 'I got another chocolate egg'!

ENDS

GoldMoney nor its representatives provide financial, legal, tax, investment, or other advice. Advice should be sought from an independent regulated person who is qualified to do so. Any information provided is solely as general market commentary and is not advice.

Central banks paralysed at the zero bound

Fri, 03/27/2015 - 08:07
Though the Fed would deny it, it is clear from the minutes of the last Federal Open Market Committee (FOMC) meeting that a rise in interest rates has been put off indefinitely.

The subsequent rally in the price of gold and the sudden fall in the dollar tend to confirm this conclusion.

The Fed Funds Rate, which is the interest rate the Fed targets to set all other rates, has now been less than 0.25% for six and a quarter years, gradually declining from roughly 0.15% to about 0.10% today. It was set at a target range of between zero and 0.25% in December 2008.

According to the Policy Normalisation Principles and Plans issued last September, the FOMC will raise its target range for the Fed Funds Rate "primarily by adjusting the interest rate it pays on excess reserve balances" when the Fed normalises interest rates, "using reverse repurchase agreements to take money out of circulation to the degree necessary". The Fed also intends to reduce its holdings of securities and contract its balance sheet in the longer run.

If normalisation is the result of economic recovery we will be familiar with the playbook. Demand for money in the economy picks up, and instead of pyramiding bank credit on reserves held at the Fed, the Fed feeds back the excess reserves to the banks by selling government securities into the markets. The bear market in government bonds should be manageable because of underlying pension and insurance company demand coupled with a diminishing budget deficit. This is the long-understood theory behind withdrawing from deficit financing.

The reality has been very different as we all know. The Fed has to face the possibility that, for whatever reason, highly suppressed interest rates are not working, and an escape from the zero interest rate bound without economic recovery may have to be contemplated.

However, if the Fed raises the Fed Funds Rate in the absence of genuine economic recovery, there will be little or no expansion of bank credit to offset, and commercial banks will want to dump their Treasuries, not buy more from the Fed. There would be no offsets to cushion the unwinding of long bond positions. In other words the effect of even a small rise in the Fed Funds Rate could develop into a self-feeding rise in bond yields and substantial losses for the banks.

This is the context within which we should consider the Fed's decision to back off from raising the Fed Funds Rate mid-year. It leads to the conclusion that if zero interest rates haven't worked for six and a quarter years, monetary policy itself is in a cul-de-sac with no space to turn. And when we look at Japan and the Eurozone we see similar disappointments over the effectiveness of monetary policy.

Markets are unlikely to wait until the escape from the zero bound is put to the test. Before the investing public becomes aware of the full ramifications of the problem, more prescient bankers and fund managers will reposition their bond holdings, which brings us to gold.

Those of us that follow this market closely know that for the last three years at least Asian demand has led to large shifts of bullion from western capital markets towards Asia. The behaviour of the markets in London and New York already indicate that shortages of physical bullion are a delicate problem, and this is before markets wake up to the growing likelihood that the Fed cannot afford to see interest rates rise.

If interest rates cannot rise, then the dollar itself is ultimately exposed to loss of confidence in the foreign exchanges. The dawning realisation that after recent strength, the dollar is vulnerable after all can be expected to be reflected in a positive sentiment towards gold, which once under way could drive the price up dramatically due to the lack of available bullion.


The views and opinions expressed in the article are those of the author and do not necessarily reflect those of GoldMoney, unless expressly stated. Please note that neither GoldMoney nor any of its representatives provide financial, legal, tax, investment or other advice. Such advice should be sought form an independent regulated person or body who is suitably qualified to do so. Any information provided in this article is provided solely as general market commentary and does not constitute advice. GoldMoney will not accept liability for any loss or damage, which may arise directly or indirectly from your use of or reliance on such information.

Market Report: FOMC minutes turned the tide

Fri, 03/27/2015 - 07:51
Following the release of the Federal Open Market Committee (FOMC) minutes last week, gold and silver have come alive, the gold price rising from a low of $1147 on 18th March to $1200 this morning and silver from $15.46 to $17.00, 4% and 10% increases respectively.

The Commodity Futures trading Commission's (CFTC) Commitment of Traders Report released last Friday conveniently shows the positions of trading categories the night before the FOMC minutes were released. In gold, the Managed Money category sold down their positions to the lowest net long position since December 2013. This is shown in the chart below, with the dotted line representing the average net long position since 2006.

This represents a dramatic turnaround in positions, and it has permitted the Swaps (mostly bullion banks) category to reduce its net short position substantially, shown in the next chart.

This confirms that the Managed Money category, consisting mostly of hedge funds, was badly wrong-footed ahead of the FOMC release, being very short indeed. In other words, there has been a significant bear squeeze subsequently which has driven the gold price sharply higher.

A simple bear squeeze should be accompanied by a decline in Open Interest, because a bear squeeze forces wrong-footed traders to close their loss-making positions. However, Open Interest has been increasing, which it turns out is entirely due to an increase in spreads1. Since Wednesday, Open Interest has declined sharply, which suggests that spread positions have been closed as the April contract runs off the board. This is shown in the next chart.

The presence of spreads, which are neither bullish nor bearish, negates the hope that the recent increase in Open Interest is due to genuine demand. Instead, we must conclude that dollar weakness after a period of significant strength has much to do with the rise. Oil prices have rallied strongly as well, having been oversold, confirming that markets so far appear to be only correcting the moves of the last eight weeks.

However, there are fundamental reasons for a more bullish stance for gold, not least the dawning realisation that the FOMC minutes from last week effectively put off interest rate increases indefinitely. Whatever else is a threat to the world's financial credibility, and you could make a very long list of those, the Fed's admission that for the foreseeable future there is no exit from continuing monetary inflation fully justifies a more positive trend for precious metal prices.

The Shanghai Gold Exchange delivered 53.47 tonnes into public hands last week, making a total of 561 tonnes so far this year, a slight increase on last year.

1 Spreads are matching long and short positions designed to profit from price differentials after financing between different maturities

Next week

Monday

UK: BoE Mortgage Approvals, Net Consumer Credit, Secured Lending, M4 Money Supply.
Eurozone: Business Climate Index, Economic Sentiment, Consumer Sentiment, Industrial Sentiment.
US: Core PCE Price Index, Personal Income, Personal Spending, Pending Home Sales.

Tuesday

Japan: Construction Orders, Housing Starts.
UK: Current Account, GDP (3rd Est.), Index of Services.
Eurozone: Flash HCIP, Unemployment.
US: S&P Case-Shiller Home Price, Chicago PMI, Consumer Confidence.
Japan: Tankan Survey.

Wednesday

Eurozone: Manufacturing PMI.
US: ADP Employment Survey, Manufacturing PMI, Construction Spending, ISM Manufacturing.

Thursday

UK: CIPS/Market Construction Survey.
US: Initial Claims, Trade Balance, Factory Orders.

Friday

US: Non-farm Payrolls, Unemployment.

The views and opinions expressed in the article are those of the author and do not necessarily reflect those of GoldMoney, unless expressly stated. Please note that neither GoldMoney nor any of its representatives provide financial, legal, tax, investment or other advice. Such advice should be sought form an independent regulated person or body who is suitably qualified to do so. Any information provided in this article is provided solely as general market commentary and does not constitute advice. GoldMoney will not accept liability for any loss or damage, which may arise directly or indirectly from your use of or reliance on such information. 

Dealing Desk: Precious metal prices up – GoldMoney customers cash in

Thu, 03/26/2015 - 12:56
Gold prices reached a three and a half week peak this morning, rising above the critical $1200 resistance level, but while more GoldMoney customers have been buying along with the rest of the market, there have also been some big value sales resulting in net value selling.

The chart below shows net sell orders this week, compared to buying last week for gold among GoldMoney customers.

Gold fortunes up
Kelly-Ann Kearsey, Dealing Manager, said: 'There has actually been limited trading this week among our customers, with the most notable activity prior to last week's Federal Open Market comments. Since then we've seen gold's price gradually rise while the dollar has headed south as the prospect of an imminent rate rise receded.

Geopolitical = Safe haven
'Prices peaked this morning on geopolitical tension following news about the increased military action in Yemen.' Says Kelly-Ann, 'There was a resulting decline in global stocks markets coupled with rising oil prices and gold is still above the $1200 resistance level despite slipping back slightly, no doubt helped by the US jobless claims figures giving some support to the dollar. '

Silver Shines
However, it's silver which has seen the biggest price jump of the week, rising over 6% to above its $17 resistance level. 'German data strengthened the Euro against the dollar which has helped, but that still failed to interest our GoldMoney customers. As you can see from the graph below, they have been selling silver on most days this week.'

What's next?
There is US economic data out next week, not least the US GDP, which could give further indicators, and next Thursday Federal Reserve head, Janet Yellen is speaking, which might give some volatility to the market. Longer term, the World Gold Council has said China should increase its gold holdings to help diversify currency risks. It's suggesting 5%, and as China is only currently holding around 1.6%, that could translate into a big rise in demand from China should they choose to follow the advice.'

Week on week price performances
26/03/15 16:00. Gold up 2.9% to $1,204.16, Silver up 6.1% to $17.09, Platinum up 2.7% to $1,149.49 and Palladium unchanged at $767.03.

NOTES TO EDITOR

For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney
GoldMoney is one of the world's leading providers of physical gold, silver, platinum and palladium for private and corporate customers, allowing users to buy precious metals online. The easy to use website makes investing in gold and other precious metals accessible 24/7.

Through GoldMoney's non-bank vault operators, physical precious metals can be stored worldwide, outside of the banking system in the UK, Switzerland, Hong Kong, Singapore and Canada. GoldMoney partners with Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics. Storage fees are highly competitive and there is also the option of having metal delivered.

GoldMoney currently has over 20,000 customers worldwide and holds over $1billion of precious metals in its partner vaults.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every 3 months by two leading audit firms.

Visit: Goldmoney.com or view our video online

Bunnies hop for joy

Thu, 03/26/2015 - 12:43

26th March, 2015

Bunnies hop for joy with charity bonanza

There was lots of hopping, skipping and chocolate eating this week as the third annual Grace Crocker Bunny run got underway. Teams of bunnies, supported by GoldMoney staff, visited nurseries and schools across the island with an estimated £2,500 raised for the charity.

The event is sponsored by GoldMoney and organised by the company's Chief Financial Officer, Pete Wright, and his wife Rachel. 16 schools and nurseries signed up for a visit from the bunnies with entertainment support from registered sports coaching and playcare club, Sports Bug Jersey.

Pete Wright says it was hard work but a lot of fun, 'We were really lucky with the weather, and to see the smiles on all the children's faces was a joy. We had five teams of bunnies, plus support staff, and we were fortunate to have the Sports Bug Jersey team helping us out with Easter fun games. Most importantly, we have raised money for the Grace Crocker Foundation'.

Grace Crocker was born in Jersey with hypo-plastic left heart syndrome and had open heart surgery at just five days old. Grace's family had to move to Southampton for three months to be with her, but sadly Grace died aged just 11 weeks. The charity aims to help other families who have to go off island when a child is seriously ill, and gives financial and emotional assistance.

Geoff Turk, Chief Executive Officer, GoldMoney commented: 'As a company we thoroughly enjoyed helping Pete and the Grace Crocker Foundation, not only through sponsorship, but Pete's colleagues got into the spirit of it all and dressed up as bunnies or helped in the support crew. This fantastic initiative has raised well over £9,000 over the three years so well done to Pete and his crew.'

Nurseries and schools which took part on Wednesday 25th March:
Silverstar
Rainbow Tots
St Peter School
Samares Nursery
Charlie Farleys
Samares Reception
Little Oaks
Charlie Farleys too
Leeward
Trinity School
Rainbow Tots Beaumont
Little Oaks
Nestlings
D'Auvergne
Petit Ecole Fort
St Lawrence School

Further information and photos from the day are available on The Grace Crocker Bunny Run Facebook page.

Further information about the charity and donations can be made through their website: www.gracecrocker.org

Ends

NOTES TO EDITOR
For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney

GoldMoney is one of the world's leading providers of physical gold, silver, platinum and palladium for private and corporate customers, allowing users to buy precious metals online. The easy to use website makes investing in gold and other precious metals accessible 24/7.


Through GoldMoney's non-bank vault operators, physical precious metals can be stored worldwide, outside of the banking system in the UK, Switzerland, Hong Kong, Singapore and Canada. GoldMoney partners with Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics. Storage fees are highly competitive and there is also the option of having metal delivered.

GoldMoney currently has over 20,000 customers worldwide and holds over $1billion of precious metals in its partner vaults.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every 3 months by two leading audit firms.

Further information: Visit: www.Goldmoney.com

STEP – Annual Jersey Conference

Tue, 03/24/2015 - 05:59
GoldMoney are delighted to be exhibiting at the 2015 Annual Jersey Conference taking place at the Royal Yacht Hotel on 24th April 2015.

The Jersey Branch of STEP, which was established in 1993, is one of the largest and most active in the world. The Conference is the perfect platform for GoldMoney to engage with Jersey based institutions to provide an insight on how precious metals can be included within an investment portfolio.

Meryl Le Feuvre, Marketing Manager at GoldMoney commented: 'GoldMoney is delighted to support STEP for the second year running. I look forward to representing GoldMoney at this prestigious event and meeting up with our clients and partners.'

For more information about the Conference click here.

The new order emerges

Fri, 03/20/2015 - 08:08
China and Russia have taken the lead in establishing the Asian Infrastructure Investment Bank (AIIB), seen as a rival organisation to the World Bank and the Asian Development Bank, which are dominated by the United States with Europe and Japan.

These banks do business at the behest of the old Bretton Woods* order. The AIIB will dance to China and Russia's tune instead.

The geopolitical importance was immediately evident from the US's negative reaction to the UK's announcement this week that it would join the AIIB. And very shortly afterwards France, Germany and Italy also defied the US and announced they might join. In the Pacific region, one of America's closest allies, Australia, says she is considering joining too along with New Zealand. The list of US allies seeking to join is growing. From a geopolitical point of view China and Russia have completely outmanoeuvred the US, splitting both NATO and America's Pacific alliances right down the middle.

This is much more important than political commentators generally realise. We must appreciate that anything China does is planned well in advance. Here is the relevant sequence of events:

• In 2002 China and Russia formally adopted the founding charter for the Shanghai Cooperation Organisation, an economic bloc that today contains about 35% of the world's population, which will become more than 50% when India, Pakistan, Iran, Afghanistan and Mongolia join, which is their stated intention. Russia has the resources and China the manufacturing power to develop the largest internal market ever seen.

• In October 2013 George Osborne was effectively summoned to Beijing because China wanted London to be the base to develop renminbi-denominated financial instruments. London has served China well, with the UK Government even issuing the first renminbi-denominated foreign (to China) government bond. The renminbi is now on the way to being a fully-fledged international currency.

• The establishment of an infrastructure bank, the AIIB, will ensure the lead funding is available for the rapid development of road, rail, electric and electronic communications throughout the SCO, ensuring equally rapid economic development of the whole of the Asian continent. It could amount to the equivalent of several trillion dollars over time.

The countries that are applying to join the AIIB realise that they have to be members to access what will eventually become the largest single market in the world. America is being frozen out, the consequence of her belligerence over Ukraine and the exercise of her hegemonic power through the dollar. America's allies in South East Asia are going with or will go with the new AIIB, and in Europe commercial interests are driving America's NATO partners away from her, turning the Ukraine from a common cause into a festering liability.

The more one thinks about it, the creation of the AIIB is a masterstroke of tactical genius. The outstanding issue now is China and Russia will need to come up with a credible plan to make their currencies a slam-dunk replacement for the dollar. We know that gold may be involved because the SCO members have been accumulating bullion; but before we get there China must manage a deliberate deflation of her credit bubble, which will be a delicate and dangerous task.

Unlike the welfare-driven economies in the west, China has sufficient political authority and internal control to survive a rapid deflation of bank credit. When this inevitably happens the economic consequences for the west will be very serious. Japan and the Eurozone are already facing economic dislocation, and despite over-optimistic employment numbers, the US economy is faltering as well. The last thing America and the dollar needs is a deflationary shock from China.

The silver lining for us all is a peace dividend: it is becoming less likely that America will persist with a call to arms, because support from her allies is melting away leaving her on her own.

 

*The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid-20th century.

-Disclaimer- The views and opinions in this article are those of the author, do not reflect the views and opinions of GoldMoney, and are not advice.

Market Report: FOMC is boxed in

Fri, 03/20/2015 - 06:38
The Federal Open Market Committee (FOMC) statement released on Wednesday was notable for deferring interest rate rises to some unspecified time in the future.

This was realistic, given the continuing strength of the dollar, downward revisions to the inflation outlook, and economic weakness in virtually all industry surveys. The Fed's obvious problem in deferring a rise in interest rates is the continuing improvement in the unemployment statistics. However these are seriously flawed: for example in February housing starts fell sharply due to the bad weather, yet seasonally adjusted non-farm payrolls for residential construction jobs were said to rise by 17,200.

It appears the Fed is boxed in, and raising the Fed funds rate would probably only serve to increase excess reserves. If so, the Fed would have to shell out interest payments to the banks at a rate it really cannot afford, given its own balance sheet is geared over 70 times. Markets seem to be slow to understand this problem: if the Fed is unable to raise interest rates (i.e. the Fed funds rate) the dollar itself is at risk.

The immediate effect on precious metal prices was to turn them sharply higher, and Open Interest on Comex has continued to climb. Gold was up a net $16 on the week and silver $0.55. Oversold currencies bounced strongly, but gave back most of their gains yesterday. The set-up is now for a bear squeeze in gold and silver, with the Managed Money category on Comex somewhat short. The chart for gold and its Open Interest is shown below.

Silver has continued to resist moves to the downside, and here the Open Interest has continued its climb as well. Silver has outperformed gold, illustrated in the chart at the head of this report.

Normally falling prices are accompanied by lower Open Interest. The current divergence is therefore indicative of increased buying support, which may be enough to reverse the bear trend of the last three years.

It has been a momentous week, and rarely do so many important events occur. As well as the Fed showing they dare not or cannot raise interest rates, Greece's negotiations with the other Eurozone members are stranded on the rocks of reality. This was the week when markets suddenly realised the UK faces a general election with considerable political risk so sterling was sold heavily. The UK, Germany, France, Italy, Luxembourg and Switzerland are queuing up with probably Australia and New Zealand to become members of the Chinese and Russian led Asian Infrastructure Investment Bank, compromising NATO and Pacific alliances. Unfortunately for American hegemony, the political line-up is following an economic interest, and this is a party to which America does not have an invitation.

If all that is not enough, the London gold fix changes this morning after ninety-six years from a committee to a platform run by the International Commodity Exchange. Participants (the approximate equivalent of market makers) announced so far are Barclays, HSBC, Scotiabank, Société Generale and UBS. It is interesting that the American and Chinese houses are holding back.

GoldMoney's customers sat on their hands ahead of the FOMC announcement, turning buyers after the event, according to our dealing desk.

Wholesale gold bullion deliveries from the Shanghai Gold Exchange amounted to 51.456 tonnes last week, totalling 507.71 tonnes since 1st January.

Next week

Monday

UK: CBI Distributive trades, Industrial Trends.
Eurozone: Flash Consumer Sentiment.
US: Existing Home Sales.

Tuesday

Eurozone: Flash Composite PMI.
UK: CPI, Input Prices, Output Prices, ONS House Prices.
US: CPI, FHFA House Price Index, Flash Manufacturing PMI, New Home Sales.
Japan: CSPI.

Wednesday

UK: BBA Mortgage Approvals.
US: Durable Goods orders.

Thursday

Eurozone: M3 Money Supply.
UK: Retail Sales.
US: Initial Claims.
Japan: CPI, Real Household Spending, Unemployment, Retail Sales.

Friday

US: Core PCE Price Index (3rd Est.), GDP (3rd Est.), GDP Price Index (3rd Est.).

Dealing Desk: Gold back in favour, but silver out-shines

Thu, 03/19/2015 - 13:39
After a hesitant week ahead of the Federal Reserve Open Market Committee minutes being released, gold saw a flurry of interest today.

Gold in Favour
Gold prices edged lower Tuesday ahead of Janet Yellen's much anticipated comments, says Kelly-Ann Kearsey, Dealing Manager at GoldMoney. 'Our customers were definitely sitting on the sidelines with customer activity at a real low just ahead of the release. The message was that the Federal Open Market Committee (FOMC) still wants to prime the markets for a hike, but it is taking a more dovish stance which has been enough to send our customers back to gold buying, as both gold and oil prices saw a quick rebound and the dollar dipped.'

Gross Orders (Buy + Sell) : Volume per day (in USD)

But... Silver outshines
It has not been a clear cut preference though, Kelly-Ann says, 'While there have been more buyers of gold, there have been larger orders for silver which has been reflected in a slight improvement in silver's ratio against the yellow metal. Nevertheless, silver still remains relatively cheap compared to gold. It will be interesting to see if this week's return to silver will be maintained.'

Platinum plummet
Meanwhile, platinum has fallen 8% since the start of the year and still remains below the gold price. 'We have seen more buying across all our metals, including some interest in platinum.' Says Kelly-Ann, 'However the demand fundamentals for platinum, with a reduction in diesel car manufacturing in Europe, seem to be against it from the industrial point of view, and it will remain to be seen where the metal heads longer term.'

Eastern promise
The two Singapore vaults have seen the most buying interest again this week, with Canada coming in third. The Canadian vault has seen more buying going into it in the last few weeks. 'The shift of precious metals to the eastern vaults has been ongoing for some time, and we are unlikely to see this changing.' Says Kelly-Ann.

What next?
Today is the final day of the London Gold Fix, with tomorrow (Friday) the start of the electronic London Bullion Market Association Gold Price. 'While this is unlikely to affect customer activity,' says Kelly-Ann, 'It will provide market commentators with some interest. Meanwhile, for our customers, there is more US data out next week which will give further direction to the market and indication of when those US rates might rise. The chart below gives an interesting indication of how our GoldMoney customers react compared to market prices.'

Net USD Gold Orders per day vs Gold Daily Performance

Week on week price performances
19/03/15 16:00. Gold up 1.7% to $1,170.52, Silver up 3.8% to $16.10, Platinum up 0.5% to $1,119.15 and Palladium down 2.3% to $767.25.

NOTES TO EDITOR

For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney
GoldMoney is one of the world's leading providers of physical gold, silver, platinum and palladium for private and corporate customers, allowing users to buy precious metals online. The easy to use website makes investing in gold and other precious metals accessible 24/7.

Through GoldMoney's non-bank vault operators, physical precious metals can be stored worldwide, outside of the banking system in the UK, Switzerland, Hong Kong, Singapore and Canada. GoldMoney partners with Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics. Storage fees are highly competitive and there is also the option of having metal delivered.

GoldMoney currently has over 20,000 customers worldwide and holds over $1billion of precious metals in its partner vaults.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every 3 months by two leading audit firms.

Visit: Goldmoney.com or view our video online

An Austrian take on inflation

Fri, 03/13/2015 - 06:43
We know that today’s macroeconomists are very confused about inflation, if only because despite all experience they think they can print money and increase bank credit with a view to generating price inflation at a controlled 2% rate.

Admittedly, most of them will acknowledge there is more hope than reality about the controlled bit. Economic policy should be based on more than just hope.

It is timely therefore to see what the Austrian School had to say on the matter, but first we should define inflation: to the Austrians it is an increase in the quantity of money and credit. Inflation is not defined as rising prices; this is the long-run result of inflation in the quantity of money and bank credit. Common jargon confuses the effect for the cause.

The economist who best defined the inflation relationship was Ludwig Von Mises. Von Mises lived in Vienna during the Austrian hyperinflation of 1921-23, so he saw the problem at first hand both as a resident and as a practising economist. The Austrian government eventually succeeded in taming its hyperinflation beast, approximately ten months before the German papiermark finally collapsed. What is interesting and rarely commented on is that German economists saw the collapse of their currency being played out in advance in Austria, and therefore knew with high certainty what was ahead of them, yet they were still powerless to stop German’s currency collapse.

Plus ҫa change. Von Mises described the effect on prices from monetary inflation as undergoing two distinct phases, between which I insert an extra interim phase[i]:

The beginning of the inflow of additional money makes the prices of some commodities and services rise; other prices rise later. Generally, people do not expect most prices to rise and even think they might fall. This describes the situation today with economists more worried about deflation and people conserving cash and deposits. However, there is already high inflation in some assets excluded from inflation statistics, but driven by the expansion of money and bank credit nonetheless.

This is followed by an interim period when price rises become more widespread and people begin to shift their preferences from holding money towards buying goods whose prices they no longer expect to fall. Popular opinion fails to link rising prices to an earlier increase in the quantity of money. It is thought to be a temporary phenomenon, the result of other factors such as economic recovery and supply bottlenecks. As price rises gather pace governments blame speculation and profiteering, and they introduce price controls which inevitably leads to shortages of many basic goods.

Finally we enter Von Mises’s second phase when the population realises that money is losing purchasing power, and they increasingly dump it for goods as rapidly as possible. This is the flight out of money and into goods, the katastrophenhausse, or crack-up boom. Once the currency enters this phase the currency is doomed.

The currency-price relationship in most countries today is in the first phase, which can last for many years. So far more than seven years have elapsed since the Lehman crisis led to the initial burst of exceptionally high monetary inflation, more than the five years from November 1918 to November 1923 in Germany. The next two phases can be very short in duration. The second phase may be skipped altogether in a major banking and currency crisis if it is catastrophic enough to collapse the currency as well as the banks. The duration of the third phase is mostly a function of how quickly a population adjusts to the reality that paper currency is becoming worthless, despite all attempts by its government to maintain the contrary as the truth. The electronic money of today can collapse more rapidly than a currency that is physically printed into oblivion such as Germany’s papiermark; so a modern flight to goods faces no physical impediment from the currency side.

The American economist, Murray Rothbard, who continued the Austrian economic tradition in the United States, concluded that if a central bank funds the government directly the consequences would be wildly inflationary[ii]. This is more or less what quantitative easing (QE) does by funding government debt indirectly by buying it from the banks.

Meanwhile, major central banks have set 2% price inflation as a sort of Rubicon. When it is exceeded, which it will be given the enormous scale of global QE, we will enter the second phase. Preferences will then shift from owning pumped-up quantities of money and inflated bank deposits towards owning relatively scarce goods stocked on a just-in-time basis. The rise in interest rates required to prevent and control too much money chasing too few goods will have to be both anticipatory and large; rises likely to bankrupt governments and wipe out swathes of private sector businesses. Unless this nettle is grasped very firmly and quickly the purchasing power of affected currencies will rapidly collapse as they enter Von Mises’s third phase.

Therefore, the success of monetary policy in achieving its inflation target will itself trigger a crisis. The dynamics of the situation suggest that as soon as the consensus view moves away from expectations of deflation, the progression to the collapse of affected currencies could be very rapid. When this happens don’t be surprised if macroeconomists are taken wholly by surprise, even though the Austrians have already explained it.

Gold prices
Today the price of gold continues to weaken, consistent with the major economies being in the first of Von Mises’s phases. If prices measured in dollars are expected to fall, that includes gold. However, the first warning that the phases two and three are in sight will be a persistent and unexpected rise in the price of gold, even as interest rates are raised by the central banks. The media will doubtless ascribe this development to mine closures, technical positions in the market, or Asian demand. All of these may be valid contributory factors, but they miss the point that the price of gold primarily discounts its future purchasing power relative to the currencies by which it is measured. And if the swing from price deflation to price inflation is as rapid as Austrian economic theory suggests, the rise in the currency price of gold will itself be remarkably sudden and spectacular.

[i] Human Action Chapter 17 Section 8

[ii] The Mystery of Banking Chapter 11 “The process of bank credit expansion”.

Market Report: Currency chaos

Fri, 03/13/2015 - 06:21
This week has been all about currencies, with a weak euro grabbing the headlines.

At one point yesterday morning, the euro was 3% down from last Friday's close, hitting a 12-year low against the US dollar. The yen was also weak, challenging its multi-year low point established last December. However, there are signs that gold and silver are being accumulated in the futures markets, and at GoldMoney we have seen a pick-up in demand for physical gold this week.

Gold fell heavily last Friday by over $35 after overnight prices failed to hold, reflecting a developing bout of dollar strength. Since then gold has drifted sideways to slightly lower by the close last night, a pattern followed by silver. This month, so far, gold is down 4.5% and silver 6.2%.

Since silver tends to move twice as much as gold up or down, this represents a good relative performance for the former.

Given the drubbing precious metals have received recently it is a surprise that Open Interest on Comex for both metals is increasing. The next chart is for gold, where this can be clearly seen.

The only Comex category which appears to be adding to its longs is "Other Reportables", which includes dealers that don't fit into the other defined categories. Otherwise, Money Managers are adding to their shorts and Producers and Merchants are reducing theirs, which is normal for gold in falling markets.

The rise in Open Interest in silver has been more dramatic, which is shown in our next chart.

Open Interest is heading back to new highs. Here again, it is the "Other Reported" category that is going long, together with the "Non-reported" category. It looks like undefinable parties are accumulating long positions.

So what is going on?
When Open Interest accompanies a rising price, it indicates healthy buying is present. Conversely, a falling price, which most of the time is through lack of bids, is usually accompanied by falling Open Interest. The relationship between Open Interest and the price is different at turning points, and it looks like that is what's happening.

Rising Open Interest on a falling price, which is the condition we have here, indicates increased buying support on falling prices, telling us that the price trend is likely to be on the turn. The bullish implication of this new demand is confirmed by silver showing resistance to further price falls relative to gold: silver should have fallen by about 9%.

In other news this morning, deliveries from the Shanghai Gold Exchange rose to 44.52 tonnes for the week ending 6th March. This is more than for the comparable week following New Year in 2014.

Next week

Monday

UK: Rightmove House Price Index.
US: Empire State Survey, Capacity Utilisation, Industrial Production, NAHB House-builders Survey, Net Long-Term TICS Flows.

Tuesday

Japan: Leading Indicator, Customs Cleared Trade.
Eurozone: HICP, ZEW (Economic Sentiment).
US: Building Permits, Housing Starts.

Wednesday

Japan: BoJ MPC Overnight Rate.
UK: Average Earnings, Claimant Count Change, Claimant Count Rate, ILO Unemployment Rate, Budget Day.
Eurozone: Trade Balance.
US: FOMC Fed Funds Rate.

Thursday

Japan: All Industry Activity Index.
Eurozone: Labour Cost Index.
UK: CBI Industrial Trends.
US: Leading Indicator, Philadelphia Fed Survey.

Friday

Eurozone: Current Account.

Dealing Desk: Buying orders increase after price drops below $1,200 mark

Thu, 03/12/2015 - 13:04
GoldMoney has seen net buying of gold since the price dropped below the psychologically-significant $1,200 mark in the last seven days.

Investors have also shown more interest in platinum and palladium in the last week, but there has been less interest in silver. GoldMoney has also seen significant activity in vaults in Canada and Switzerland, bucking the recent trends that have seen most buying and selling orders involving Asian vaults.

Gold Sales
There was a surge in interest last Friday after better-than-expected US employment figures drove investors back in the direction of gold. That data has also heightened interest about the key meeting by the US Federal Open Market Committee (FOMC) next Wednesday. Once again it has led to speculation about the question of whether an interest rate rise is due and when it is going to happen.

Outlook
GoldMoney dealing manager Kelly-Ann Kearsey said, 'Again, all eyes are on the US. The dollar is at its highest level since April 2003 against a basket of six major currencies, which supports a strengthening picture in the US.

'There has been speculation that higher US rates could dent demand for safe haven assets such as gold which are not interest-paying. However, with the FOMC coming up, if they do decide to hike interest rates, we could start to see gold used as a safe haven against inflation.

Week on week price performances
12/03/15 16:00. Gold down 4.5% at $1,151.06, Silver down 4.7% to $15.51, Platinum down 6.2% to $1,113.93 and Palladium down 4.8% to $785.

NOTES TO EDITOR

For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney
GoldMoney is one of the world's leading providers of physical gold, silver, platinum and palladium for private and corporate customers, allowing users to buy precious metals online. The easy to use website makes investing in gold and other precious metals accessible 24/7.

Through GoldMoney's non-bank vault operators, physical precious metals can be stored worldwide, outside of the banking system in the UK, Switzerland, Hong Kong, Singapore and Canada. GoldMoney partners with Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics. Storage fees are highly competitive and there is also the option of having metal delivered.

GoldMoney currently has over 20,000 customers worldwide and holds over $1billion of precious metals in its partner vaults.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every 3 months by two leading audit firms.

Visit: Goldmoney.com or view our video online

London Vault Closures?

Wed, 03/11/2015 - 06:27
Profit margins for banks providing vault services for storage of precious metals have fallen dramatically for two reasons: firstly, there is burden of compliance paperwork, and secondly, retail customers have reduced their holdings discouraged by a seemingly entrenched bear market in gold and silver. Put another way, costs have risen and income has fallen.

The latest bank speculated by the media to withdraw from this market is HSBC, which has given sixty days' notice to its retail customers that it will cease offering vault storage facilities. Given that all banks face the same squeeze between rising costs and falling income, it may prove difficult for these customers to make alternative arrangements within the banking system.

This is where GoldMoney can help. GoldMoney is one of the world's leading providers of physical gold, silver, platinum and palladium for private and corporate customers, allowing users to buy precious metals online. The easy to use website makes investing in gold and other precious metals accessible 24/7.

Through GoldMoney's non-bank vault operators, physical precious metals can be stored worldwide, outside of the banking system in the UK, Switzerland, Hong Kong, Singapore and Canada. GoldMoney partners with Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics. Storage fees are highly competitive and there is also the option of having metal delivered.

GoldMoney currently has over 20,000 customers worldwide and holds over $1 billion of precious metals in its partner vaults.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every three months by two leading audit firms.

ENDS

GoldMoney nor its representatives provide financial, legal, tax, investment, or other advice. Advice should be sought from an independent regulated person who is qualified to do so. Any information provided is solely as general market commentary and is not advice.

Jersey Finance Annual Funds Conference

Tue, 03/10/2015 - 05:47
GoldMoney are pleased to be attending the Jersey Finance Annual Funds Conference in London on 19th March 2015.

The conference will provide compelling and in-depth insights into the global funds landscape provided by funds experts and is set to attract numerous practitioners including lawyers, fund managers and other finance professionals.

Natasha Le Dain-Cyples, Director at GoldMoney commented: 'I am delighted to be representing GoldMoney at this prestigious event. The Jersey Finance Annual Funds Conference is a perfect platform and opportunity to engage with industry.'

For more information about the Conference click here.

The new London gold fix and China

Fri, 03/06/2015 - 06:51
This month the physical gold market will undergo radical change when the four London fixing banks hand over the twice-daily fix to the International Commodity Exchange's trading platform on 20th March.

From 1st April the Financial Conduct Authority will extend its powers from regulating the participants to regulating the fix as well. This will transfer price control away from the bullion banks allowing direct access to the fixing process for all direct participants and sponsored clients.

From this flow two important consequences. Firstly, the London market is changing from an unregulated to a partially regulated market, reducing room for price manipulation. And secondly, the major Chinese state-owned banks, assuming they register as direct participants, have the opportunity to dominate the London physical market without having to deal through one of the current fixing banks. No announcement has been made yet as to who the direct participants will be, but it is a racing certainty China will be represented.

Implications of becoming a regulated market

Under the current regime a buyer or seller on the fix has to deal through one of the four fixing bullion banks. The information gained by them from seeing this business is crucial, giving them a quasi-monopolistic trading advantage over all the other dealers. Instead, buyers and sellers will be anonymous during the auction process.

The new platform should, therefore, ensure equal opportunity, eliminating the advantage enjoyed by the fixing banks. Crucially, it will change market domination from the privileged fixing members in favour of the deepest pockets. These are almost certain to be China's through the state-owned banks which already control the largest physical market in Asia, the Shanghai Gold Exchange (SGE).

China's gold strategy

China actually took its first deliberate step towards eventual domination of the gold market as long ago as June 1983, when regulations on the control of gold and silver were passed by the State Council. The following Articles extracted from the English translation set out the objectives very clearly:

  • Article 1. These Regulations are formulated to strengthen control over gold and silver, to guarantee the State's gold and silver requirements for its economic development and to outlaw gold and silver smuggling and speculation and profiteering activities.
  • Article 3. The State shall pursue a policy of unified control, monopoly purchase and distribution of gold and silver. The total income and expenditure of gold and silver of State organs, the armed forces, organizations, schools, State enterprises, institutions and collective urban and rural economic organizations (hereinafter referred to as domestic units) shall be incorporated into the State plan for the receipt and expenditure of gold and silver.
  • Article 4. The People's Bank of China shall be the State organ responsible for the control of gold and silver in the People's Republic of China.
  • Article 5. All gold and silver held by domestic units, with the exception of raw materials, equipment, household utensils and mementos which the People's Bank of China has permitted to be kept, must be sold to the People's Bank of China. No gold and silver may be personally disposed of or kept without authorisation.
  • Article 6. All gold and silver legally gained by individuals shall come under the protection of the State.
  • Article 8. All gold and silver purchases shall be transacted through the People's Bank of China. No unit or individual shall purchase gold and silver unless authorised or entrusted to do so by the People's Bank of China.
  • Article 12. All gold and silver sold by individuals must be sold to the People's Bank of China.
  • Article 25. No restriction shall be imposed on the amount of gold and silver brought into the People's Republic of China, but declaration and registration must be made to the Customs authorities of the People's Republic of China upon entry.
  • Article 26. Inspection and clearance by the People's Republic of China Customs of gold and silver taken or retaken abroad shall be made in accordance with the amount shown on the certificate issued by the People's Bank of China or the original declaration and registration form made on entry. All gold and silver without a covering certificate or in excess of the amount declared and registered upon entry shall not be allowed to be taken out of the country.

Additionally, China has deliberately developed her gold production regardless of cost so that she is now the largest producer by far in the world today. State-owned refineries process this gold along with doré imported from elsewhere. None of this gold leaves China.

The regulations quoted above formalise the State's monopoly over all gold and silver which is exercised through the People's Bank, and they allow the free importation of gold and silver but keep exports under very tight control. On the basis of these regulations and as subsequently amended the People's Bank established the SGE, which remains under its total control. The intent behind the regulations is not to establish or permit the free trade of gold and silver, but to control these commodities in the interest of the state.

This being the case, the growth of Chinese gold imports recorded as deliveries to the public since 2002 is only the most recent evidence of a deliberate act of policy embarked upon thirty-two years ago. China had been accumulating gold for nineteen years before she allowed her own nationals to buy any when private ownership was finally permitted. Furthermore, the bullion was freely available, because in seventeen of those years gold was in a severe bear market fuelled by a combination of supply from central bank disposals, leasing, scrap, rapidly-increasing mine production and investor selling, all of which I estimate totalled about 76,000 tonnes in all. The two largest buyers for all this gold for much of the time were the Middle East and China. The breakdown from these sources and the likely demand are identified in the table below taken from my article for GoldMoney on the subject published last October, where a more detailed discussion of global bullion distribution during those years can be found.

Put in another context the cost of China's 25,000 tonnes of gold equates to roughly 10% of her exports over the period, and the eighties and early nineties in particular, also saw huge capital inflows when multinational corporations were building factories in China. However, the figure for China's gold accumulation is at best informed speculation, but given the determination expressed in the 1983 regulations and subsequent events it is clear she had deliberately accumulated a significant undeclared stockpile by 2002.

So far China's long-term plans for the acquisition of gold appear to have achieved some important objectives. Deliveries to the public through the SGE since only 2008 totalled 8,459 tonnes, gross of returned scrap, probably more than 9,500 tonnes since 2002 given estimated domestic mine production of 1,352 tonnes between2002-2007.

With such a large commitment to this market, we must now anticipate the next stage for China's gold policy, which is why the changes in London may be important.

China now has the opportunity to take a dominant role in London, without having to direct its order flows through the fixing banks. Therefore, it is no exaggeration to say that from 20th March, China will be able to control the global physical gold market, which will permit her to manage the price. She has the deepest pockets, backed by the largest single stockpile.

China's motives

China's motives for taking control of the gold bullion market have almost certainly evolved. The regulations of 1983 make sense as part of a forward-looking plan to ensure that some of the benefits of industrialisation would be accumulated as a counterparty risk free national asset. This reasoning is similar to that of the Arab nations capitalising on the oil-price bonanza only ten years earlier, which led them to accumulate their hoard for the benefit of future generations. However, as time passed the world has changed both economically and politically.

2002 was a significant year for China, when geopolitical considerations entered the picture. Not only did the People's Bank establish the SGE to facilitate deliveries to private investors, but this was the year the Shanghai Cooperation Organisation (SCO) formally adopted its charter. This merger of security and economic interests with Russia has bound Russia and China together with a number of resource-rich Asian states into an economic bloc. When India, Iran, Mongolia, Afghanistan and Pakistan join (as they are committed to do), the SCO will cover more than half the world's population. And inevitably the SCO's members are looking for an alternative trade settlement system to using the US dollar.

At some stage China with her SCO partner, Russia, will force the price of gold higher as part of their currency strategy. You can argue this from an economic point of view on the basis that possession of properly priced gold will give her a financial dominance over global trade at a time when we are trashing our fiat currencies, or more simply that there's no point in owning an asset and suppressing its value for ever. From 2002 there evolved a geopolitical argument: both China and Russia having initially wanted to embrace American and Western European capitalism no longer sought to do so, seeing us as soft enemies instead. The Chinese public were then encouraged even by public service advertising to buy gold, helping to denude the west of her remaining bullion stocks and to provide market liquidity in China.

What is truly amazing is the western economic and political establishment have dismissed the importance of gold and ignored all the warning signals. They do not seem to realise the power they have given China and Russia to create financial chaos by simply hiking the gold price. If they do, which seems to be only a matter of time, then London's fractional reserve system of unallocated gold accounts would simply collapse, leaving Shanghai as the only major physical market.

Therefore the failure of the London bullion market to see strategically beyond its short-term interests has opened the door to China's powerful state-owned banking monopoly to control the gold bullion market. This is probably the final link in China's long-standing gold strategy, and through it a planned domination of the global economy in partnership with Russia and the other SCO nations.

Market Report: Strong dollar as deflation bites

Fri, 03/06/2015 - 06:27
Currency wars have intensified this week driving the US dollar sharply higher against the euro, yen and pound.

Minor currencies are also deliberately devaluing against the world's reserve currency. According to Zerohedge, 21 central banks have cut interest rates since 1st January. The signal this sends out is that people everywhere appear to be showing an increasing preference for money over goods, commonly associated with deflation.

Precious metals have been pinned down in the cross-fire. At the root of this currency war is a strong dollar, contributing to weak commodity prices, and since western analysts are generally uncertain of the role of precious metals in modern financial markets, they see no reason to recommend buying gold and silver. Over the week the gold price fell over 1% to $1196 by early-morning trading in London today, and silver by 2.5% to $16.12. However, the detail in market action suggests physical demand continues to be reasonably strong on falling dollar prices, and westerners are still emptying their vaults to supply it.

We shall have to wait until next week to find out how much of this buying was Chinese demand, but we do know now that it fell off a cliff over Chinese New Year, with Shanghai Gold Exchange deliveries down to 37.9 tonnes for the two weeks to 27th February (recently it has averaged about 60 tonnes a week). It will be interesting to find out in due course whether or not Russia's and other Asian central banks have taken advantage of this lull in Chinese demand to increase their monetary reserves.

The price of gold in US dollars has now been weak since mid-January when it peaked at $1307, having subsequently fallen over $110 in the following five weeks, retracing two-thirds of the rise from the first week of November and now testing support at the $1200 level. The severity of this fall measured in dollars means that the gold price has also fallen measured in the other major currencies; but it is worth noting that gold is still up a net 18.75% in euros and 12.3% in yen since that bear-market low. In sterling, gold is up a net 10% (similar to the USD) and gold in these three currencies is shown in the chart below, rebased to 31st October.

Yesterday Mario Draghi announced that the European Central Bank's (ECB) QE programme of monthly purchases of €60bn in public and private sector securities would start on Monday. If there are insufficient public sector securities available, substitute purchases will be made. Despite the stated intention for these purchases to be market neutral, they are bound to restrict liquidity and drive bond yields even lower than they are today. From an investment point of view the ECB's announcement should also be a positive factor for precious metals as Eurozone residents can expect the euro to weaken and find the interest cost of holding gold and silver diminishes still further.

Global monetary inflation is about to ratchet up another gear.

Next week

Monday

Eurozone: Sentix Indicator.
Japan: M2 Money Supply, Economy Watchers Survey.

Tuesday

US: Wholesale inventories.
Japan: Key machinery Orders.

Wednesday

UK: Industrial Production, Manufacturing Production, NIESR GDP Est. US: Budget deficit.
Japan: METI Tertiary Activity Index.

Thursday

Japan: Consumer Confidence.
UK: Trade Balance. Eurozone: Industrial Production.
US: Import Price Index, Initial Claims, Retail Sales, Business Inventories.

Friday

Japan: Capacity Utilisation, Industrial Production (Final).
UK: Construction Output. US: PPI.

Dealing Desk: Investors adopt wait-and-see approach after India decision

Thu, 03/05/2015 - 12:30
The decision by the Indian government to drop an expected reduction in gold import duties has left the market for the yellow metal static this week.

The government was widely expected to follow-up an election issue by dropping the high import duty – a move that would have had a significant impact on gold prices, given that India is the world's largest consumer of the metal. The last week or two have seen investors holding back in anticipation of a change in policy and an increase in demand, but following Monday's decision, eyes have turned instead to a raft of data expected from the US, China and Europe over the coming seven days.

Gold Sales
The mixed position of the last seven days is best reflected by results on gold – although there has been net selling overall in terms of monetary value, the majority of the orders has been on the side of buyers. The most popular vault has once again been the Brinks vault in Singapore. Today's European Central Bank (ECB) announcement about a fresh quantitative easing programme has done little to add clarity to the position.

Outlook
GoldMoney dealing manager Kelly-Ann Kearsey said, 'What we've seen over the last seven days is effectively a static position for gold, which has pushed investors to look at other opportunities –Palladium has been our best performer in terms of price, week-on-week.

'The decision in India about gold import duty has perhaps forced a rethink on the part of those investors who were holding back in anticipation of a demand jump.

'What we're seeing now is a more balanced picture – there has not been too much movement in the gold price week-on-week.

'There is a set of major figures coming out over the next seven days, including Euro Monetary Union GDP data and US international trade data both due tomorrow. Early next week we will also see Consumer Price Index and Producer Price Index data for China, as well as Industrial production stats for China on Wednesday.'

Week on week price performances
5/03/15 16:00. Gold down 0.2% at $1,205.90, Silver down 1.8% to $16.27, Platinum gained 0.9% to $1,187.10 and Palladium rose 2% to $824.65.

NOTES TO EDITOR

For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney
GoldMoney is one of the world's leading providers of physical gold, silver, platinum and palladium for private and corporate customers, allowing users to buy precious metals online. The easy to use website makes investing in gold and other precious metals accessible 24/7.

Through GoldMoney's non-bank vault operators, physical precious metals can be stored worldwide, outside of the banking system in the UK, Switzerland, Hong Kong, Singapore and Canada. GoldMoney partners with Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics. Storage fees are highly competitive and there is also the option of having metal delivered.

GoldMoney currently has over 20,000 customers worldwide and holds over $1billion of precious metals in its partner vaults.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every 3 months by two leading audit firms.

Visit: Goldmoney.com or view our video online

The euro may be riskier than you think

Fri, 02/27/2015 - 07:13
Finance ministers in the Eurozone appear to have had a free lesson in game theory from Professor Yanis Varoufakis, the Greek finance minister.

At the time of writing Greece's future in the Eurozone is far from secured, but it appears that Greece has achieved something.

He gave his fellow finance ministers a deal they dared not refuse, though it still has to be ratified by some parliaments, including Germany's today. Varoufakis almost certainly understands that the Eurozone is in a weaker position than the bureaucrats and finance ministers themselves believed. It was important for them to become aware of this reality, which was central to his approach. It appears that under the Lisbon Treaty, Eurozone states cannot expel Greece: she can only leave with everyone's unanimous agreement, including her own. And they probably didn't realise that playing hardball against Greece would force the ECB to write off debts approaching ten times her equity capital of only €10.8bn. This would require all member states to increase their capital subscriptions, including the other Eurozone states subject to austerity packages.

Equally, Varoufakis would have known that he could not push his opposite numbers too far because the Brussels establishment also have their national parliaments to consider and the positions of Italy, Spain, Portugal and even Ireland. A revolt against previously-agreed austerity packages by any of these other states would have untold ramifications not only for the future of the Eurozone, but the euro itself.

In the wake of this episode the status of the euro as money is likely to be increasingly questioned, not just in the foreign exchanges, but by its users as well. This should be put into context by referring to Ludwig Von Mises's regression theorem. Put simply, the theorem states that the validity of any currency as money is based on its history and the basis of the value it had before it was accepted as money. This unfashionable view is demonstrably true of gold and silver, but is it true of paper currencies?

The US dollar and pound sterling have both survived more than one hundred years, having based their original value on extended periods of gold convertibility, and in the case of sterling long before that on silver. This in the minds of the users gives them a pedigree few would question. However, they are very much the exceptions in today's fiat currencies which are the motley survivors of some 57 hyperinflations, and there are plenty of examples of how a lack of regression coincides with a temporary character. Look no further than the Ukraine, which is suffering its second hyperinflation in 25 years. After Britain gave her African colonies independence in the 1960s, the value of all their currencies fell sharply in black-market dealings (the sole exception being Botswana which didn't introduce the pula until long after independence).

Logic, if not familiarity, suggests that there is something in the regression theorem, which brings us back to the euro. Like the Kenyan shilling, the Zambian kwacha or the Ukrainian hryvnia, the euro lacked any pedigree on its creation. There was no period when people had a choice of national currencies to aid the transition. While bonds and financial instruments were denominated in euros from January 1999 onwards, notes and coins replaced national notes and coins three years later overnight.

So, if Von Mises's regression theorem has any validity, holders of euros should be considering their options. It is also unfortunate timing that the ECB is about to embark on its most aggressive bout of monetary expansion to date, which could end up sealing the euro's fate. If so, the euro will turn out to be the Achilles heel of the global monetary system.

Market Report: PMs steady, but watch the euro

Fri, 02/27/2015 - 06:53
The US dollar eased this week when Janet Yellen of the Fed gave her semi-annual report on monetary policy to Congress.

It was no surprise that Ms Yellen hinted at caution over interest rates due to external events, such as the outlook for the Eurozone and uncertainty over China, but overall she was careful to be non-committal.

Following her testimony an easing dollar provided support for precious metals with gold having tested the $1190 level twice, last Friday and Tuesday, forming a short-term double bottom. This indicates good technical support in the short-term at least. Silver followed this same pattern finding similar support at $16.00. Precious metal prices improved yesterday as the dollar rallied on some bear-closing and notable weakness in the euro. The result is gold and silver rose marginally on the week by early London trading this morning.

The chart below shows gold and its Open Interest on Comex.

Open interest improved this week, giving advance warning that buyers are beginning to accumulate gold contracts on dips. We saw a repetitive pattern of physical buying overnight in Asia and on the London opening, followed by futures selling during US trading hours. What is interesting is that the passing of the Chinese New Year was expected to reduce physical demand. Instead, bullion demand appears to have picked up, probably reflecting Russian and other central bank buying. Russia withdrew from the market in January, apparently unprepared to chase higher prices, which suggests that their strategy is to accumulate on dips.

The stubbornly high level of Open Interest in silver has at last reduced somewhat as shown in our second chart.

Some of the shorts have managed to reduce their exposure. However, intraday trading this week was still consistent with remaining short positions being squeezed.

Our last chart shows the performance of platinum and palladium so far this year. Palladium has been the better performer thanks to a strong rally this week. Could this be an indictation of things to come for gold and silver as well?

There was no report from the Shanghai Gold Exchange this morning, due to the Chinese New Year.

The euro
The euro's future could become an important factor. In today's analysis I point out that the euro's inherent weaknesses may undermine its credibility in coming months. This will have two effects: firstly, and most obviously, it increases economic and systemic risks for the Eurozone and therefore the rest of the world; and secondly, it is likely to lead to a new source of demand for physical gold. It is easy to forget that Europeans have a long history of being avid gold hoarders in troubled times.

Next week

Monday

UK: Nationwide House Prices, BoE Mortgage Approvals, Net Consumer Credit, Secured Lending, M4 Money Supply.
Eurozone: Manufacturing PMI, Flash HICP, Unemployment.
US: Core PCE Price Index, Personal Income, Personal Spending, Manufacturing PMI, Construction Spending, ISM Manufacturing.

Tuesday

Eurozone: PPI. US: IBD Consumer Optimism, Vehicle Sales.

Wednesday

Eurozone: Composite PMI, Services PMI, Retail Trade.
US: ADP Employment Survey, ISM Non-Manufacturing

Thursday

UK: Halifax House Price Index, BoE Base Rate.
Eurozone: ECB Deposit Rate.
US: Initial Claims, Non-Farm Productivity, Unit Labour Costs, Factory Orders.

Friday

Japan: Leading Indicator (Preliminary).
Eurozone: GDP. US: Non-Farm Payrolls, Trade Balance, Unemployment, Consumer Credit.

Dealing Desk: Prices rise but bullion investors go tactical

Thu, 02/26/2015 - 12:46
Gold prices have risen this week before setting back to exactly the same price as they were this time last week.

At GoldMoney, customers have been selling in a week that has seen their trading volumes fall by 45% on last week.

Gold Sales
Chinese buyers coming back into the market after their week long Lunar holiday helped boost the yellow metal's prices. Dealing Manager Kelly-Ann Kearsey says they've seen net selling in terms of value, 'I think our customers are being pro-active in the market. The latest thought process coming out of the Federal Reserve in the USA is that although a rate rise isn't imminent, it is being considered on a month by month basis. It could happen sooner rather than later. A rate rise will give strength to the dollar and usually hits the gold prices. Some GoldMoney customers are selling while prices are above the critical $1200 level, in the anticipation that they can buy back more cheaply in a few months.'

Value not Quantity
However, Kelly-Ann said, 'Although we have seen net selling in terms of value, there are still more buyers than sellers for gold, showing that overall sentiment remains positive for bullion buying. We have also seen a continuation of the trend for the selling to be out of UK and Swiss vaults, into our eastern locations such as Singapore.'
The chart below shows how the ratio of buyers to sellers has changed over the week.

Platinum and Palladium
Platinum is still below the $1200 support level, despite rising car sales in Europe, while the Palladium price is seeing some support. 'Both platinum and palladium are still viewed as industrial metals,' says Kelly-Ann, 'With platinum being used mostly in diesel cars and the desire to cut air pollution meaning that diesels are falling out of favour, this could be hitting its price. Concurrently rising car sales in the US and China where petrol is the favourite fuel, could be supporting palladium.'

Week on week price performances
26/02/15 16:00. Gold no change at $1,208.50, Silver up 0.9% to $16.57, Platinum gained 0.9% to $1,176.99 and Palladium rose 3.6% to $808.20.

NOTES TO EDITOR

For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney
GoldMoney is one of the world's leading providers of physical gold, silver, platinum and palladium for private and corporate customers, allowing users to buy precious metals online. The easy to use website makes investing in gold and other precious metals accessible 24/7.

Through GoldMoney's non-bank vault operators, physical precious metals can be stored worldwide, outside of the banking system in the UK, Switzerland, Hong Kong, Singapore and Canada. GoldMoney partners with Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics. Storage fees are highly competitive and there is also the option of having metal delivered.

GoldMoney currently has over 20,000 customers worldwide and holds over $1billion of precious metals in its partner vaults.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every 3 months by two leading audit firms.

Visit: Goldmoney.com or view our video online

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