Posts tagged 'Gold'

The gold producer wild card

BNP Paribas thinks gold is getting closer to the precipice.

How quickly it’s likely to be pushed over will be determined by the rate at which producers accelerate their hedging activity.

From BNP’s commodity markets strategy group on Monday: Read more

The paradox of gold commentary

Compare and contrast the following from a note by GoldMoney’s head of research Alasdair Macleod that landed in the collective hands of FT Alphaville on Friday.

Here’s the original version: Read more

Pawned out

Remember when it was all the rage to be a pawnbroker?

This was when the gold price was either soaring or stable. When there were more people happy to buy gold than lend against it, and when anyone prepared to lend against gold could generate a good yield.

Not so much anymore. Read more

Government shutdown: the Heisenberg uncertainty principle

Gold apparently did not get the memo about the government shutdown. Gold prices have consequently been falling all day. Awkward.

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A gold surplus + no more Indian buying = ?

From a SocGen note earlier last week:

ETF disinvestment more than accounted for the net change in jewellery+investment demand. When all the elements of supply and demand are taken together, the gold market registered a surplus of 217 tonnes in H1 2013 against a small surplus of just 37 tonnes in H1 2012. Read more

The growing scarcity of scarce markets

As we’ve reported, a classic car bubble is potentially in the making — something which has got us thinking (over three posts) about what really goes into determining the value of rare objects more generally.

From our vantage point — and it certainly is a lay vantage point when it comes to classic cars — there seem to be three core attributes associated with vintage automobiles.

The first is uniqueness.

Value related to uniqueness is understandable since it relates to how easily an object or item can be sourced, replicated or mass produced. For now, there is little chance that a classic Bentley will be perfectly replicated. Value applied on these grounds seems rational enough. Read more

Collateral scarcity, India edition

FT Alphaville readers are well versed on the potential downsides of collateral scarcity in western markets.

But consider how a collateral scarcity problem might unfold in an emerging market in which the most valued form of collateral isn’t national debt denominated in your own debt but rather a commodity like gold, whose supply is dictated by externalities outside of a government’s control? Read more

The golden rupee

The Indian rupee’s plunge continues.

As the FT reported on Wednesday, consensus opinion is that the weakness is connected to India’s growing current account deficit and unimpressive attempts thus far to bring it back to reasonable levels.

But Bloomberg on Wednesday alluded to another interesting connection: India’s attempts to suppress gold consumption. Read more

No, the Comex is not going to default

There’s a stupid rumour going around in the gold community that the Comex is “bleeding” inventory (especially from the JP Morgan vault) and that this will in some way compromise delivery that causes a default.

Kid Dynamite has already done the bulk of the heavy lifting in trying to debunk this story, as has Miguel Perez-Santalla at BullionVault, but we wanted to emphasise some points that go beyond the mechanics and which might be helpful. Read more

China’s GDP and the investment factor

Kate’s already noted some of the oddities in China’s latest GDP data.

But it’s worth re-emphasising the ongoing contribution of investment to the figures. Read more

The hand of GOFO strikes again

The gold market is abuzz with the news that gold forwards (GOFO), otherwise known as the gold lending rate, have returned to negativity this week. It’s significant because the last time this happened was in 2008 (click to enlarge):

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China slowdown predictions, metals and oil edition

Now that the possibility of a sharp slowdown in Chinese growth, or even an outright contraction, is getting some serious airplay, we can expect a ramp up in forecasts about what this will mean.

Here’s one from Barclays commodities analysts, Sudakshina Unnikrishnan and Jian Chang. They note that their China economics colleagues, having gifted us with the awkward ‘Likonomics‘ neologism, are also canvassing the possibility of a big drop in the country’s GDP growth rates. Read more

How low can gold go?

Gold descended through the key psychological level of $1,200 on Thursday:

This has now led a whole bunch of people getting excited about an upcoming bottom in gold, as well its prospective speedy revival.  Read more

The US yield move and the China premium

What’s really responsible for higher US yields? Falling demand from domestic and western investors? Or Chinese and Japanese official flows?

Earlier in June, TIC data sent us a very important message. Abenomics was somehow prompting the repatriation and redistribution of money held in long-term USTs by Japanese investors, as this chart from Nomura shows:

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Gold, the China connection

In the last few years China has become the single largest producer of gold.

It is also, by some measures, the second largest global consumer of the precious metal outright.

Given this, some goldbugs are befuddled as to why, despite all this Chinese buying and scenes like this…

….gold prices are still falling like this: Read more

A gold margin call

From Ben Traynor’s commentary at BullionVault on Friday:

CME Group, which operates the New York Comex exchange on which gold futures are traded, announced yesterday it is increasing margin requirements on gold trading by 25% to $8800 per 100-ounce contract. The new initial margin requirement will come into effect after close of trading today. “That is definitely affecting gold,” says Joyce Liu, investment analyst at Phillip Futures in Singapore. “For those who cannot put out margin calls on time, they will be squeezed out even when they don’t want to get out.”

Worth pondering is how all of this now affects the “cash-for-gold” trade. Read more

Pump up, debase

Despite all the talk of rampant physical precious metals buying, in dollar terms it’s only getting worse for the “gold HAS INTRINSIC value” brigade.

Another way of looking at it, of course, is that the dollar’s value is being rebased. Read more

Man walks into a gold bar. Au!

FT Alphaville participated in a “Gold Bulls vs Bears” event hosted by the Association of Mining Analysts (AMA) on Wednesday.

The motion being discussed was:

Is gold’s role as a safe haven asset in the global financial system outdated and redundant and if the ubiquitous QE programs have been successful and the global economic upturn is confirmed, the price of gold will continue to struggle?

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Gold, backwardation and the ‘time cost of money’

The gold market has always been partial to “carry trades”. But in the post 2008 world the nature of the carry-trade has changed.

In collateral terms, whereas gold mostly traded on “special” terms before 2008 — because you had to pay to borrow it — meaning it was privy to more of a “stock lending” profile, post 2008 it went fully into “collateral” mode. Read more

Cash-for-gold at negative rates

The conspiracy channels continue to make a big deal about the backwardation of gold — which is a situation in which gold prices for today are higher than for tomorrow. The thinking is that this must indicate rampant demand for physical gold.

In reality, since gold is a highly financialised commodity, the backwardation signal doesn’t actually indicate the bullishness they imply it does. Rather, it suggests something entirely different: that interest rates in conventional money markets are turning increasingly negative. Read more

Gold as collateral, not stock

There’s been a lot of speculation about what really drove the volatile gold price move this month. Some are still defiantly searching for conspiracies or under-handed activities by authorities.

But it’s probably Nouriel Roubini who has provided one of the best and most logical explanations. In his opinion every bit of the gold move can be explained by shifting inflation expectations. Read more

And Goldman closes its gold short recommendation

Following their absolutely stellar advice to short gold on April 10, Goldman Sachs announces on Tuesday it is now time to take profit on that position:

We have closed our recommendation to short COMEX Gold, as prices moved above the stop at $1,400/toz. We have exited the trade significantly below our original target of $1,450/toz, for a potential gain of 10.4%. The move since initiation was surprisingly rapid, likely exacerbated by the break of well-flagged technical support levels. Our bias is to expect further declines in gold prices on the combination of continued ETF outflows as conviction in holding gold continues to wane as well as our economists’ forecast for a reacceleration in US growth later this year.

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Have the inflation-paranoid capitulated?

Thursday’s 5-year US Treasury TIPS auction was something of a noteworthy one, according to Kit Juckes at Societe Generale. Click to enlarge…

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The interbank repo effect and gold

Here’s an interesting thought. Could the gold sell-off be related to a squeeze on collateral brought on by a series of very different bank crises in Europe, starting with the SNS Reaal nationalisation and Anglo Irish emergency assistance operation and culminating with the Cyprus crisis?

It’s a theory being considered by Jeffrey Snider, chief investment strategist, at Alhambra Investment Partners.

The basic point being, when you haven’t got anything to repo and funding becomes tight, gold is likely to sell-off in anticipation of further banking and asset problems. Read more

Chart du jour, the Gold Vix

By way of the CBOE:

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Goldman’s big think about the commodity sell-off

Some deep thoughts from Goldman Sachs, by way of Jeffrey Currie and team, on the drivers of the current commodity sell-off (and no, their short gold advice from last week isn’t listed as one of them):

The sharp sell-off in gold was triggered by growing fears that the central bank of Cyprus would sell its gold reserves, potentially reflecting a larger monetization of gold reserves across other European central banks. The decline in prices was exacerbated by the breach of key technical price support level at $1,530/toz and then at the $1,434/toz 200-week moving average, creating the largest one day decline. Spillover from gold and renewed European and EM macroeconomic concerns also created sharp sell-offs in crude oil and base metals, that were mostly front-end driven, crushing spreads (the carry), as longer-dated prices remained remarkably stable.

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Some (more) crushing news for goldbugs

No respite for gold producers in the southern hemisphere on Tuesday morning…

And no dead cat bounce splat for the gold price.

And to spell out why this is such an issue for the gold miners, we present the following thoughts from Citigroup. Read more

Bricks of gold, bits of code: the worship of things shiny and useless

If the meteoric rise and fall of the cyber crypto currency Bitcoin this month teaches us anything, it’s the degree to which a market can be influenced by internet hysteria, viral marketing and propaganda.

There is no intrinsic value to a Bitcoin. Read more

Spotted, the once in a 2 million year ‘Golden Swan’?

According to John Kemp at Reuters that puts us way past the six sigma mark at this point:

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Gold meltdown!

Gold is now officially in meltdown:

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