Gold & Silver Digest: 7/9/13
The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.
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7/9/13 6:03 PM EST US close metals price quotes from Finviz
The cost of borrowing gold climbed to a 4 1/2-year high in London at a time when record sales by investors mean prices are poised for the biggest annual decline in more than three decades.
The one-month lease rate rose to 0.2988 percent, the highest since Dec. 18, 2008, from 0.2578 percent yesterday, according to data compiled by Bloomberg. The rate is derived by subtracting the gold forward offered rate, which turned negative yesterday for the first time since November 2008, from the London Interbank Offered Rate.
There is some speculation in this interview excerpted below, but I think it raises important issues that need to be addressed more fully and frankly to eliminate the need for speculation.
The leasing of gold, and the disposition of it by the central banks, including of course the Fed and the Treasury, is remarkably opaque considering that they do not own this gold, but merely hold it in custody for other parties, primarily the people of the nation that claims ownership.
As you know I have wondered if it was the realization that the German gold was not readily obtainable that triggered the heavy handed market operation, a stealth confiscation if you will, to free up gold from the ETFs, from the beginning of the year, when the Bundesbank presented a formal request for repatriation on behalf of, and furthermore at the insistence of, the German people.
Yesterday we described the historic inversion in the Gold Forward Offered Rate, where the 1 and 3 Month GOFO rates sliding into negative territory for the first time since 2008 and 1999 respectively. Today, using the latest LBMA rate update, we observe that the gold backwardation is accelerating, and now the 6 Month GOFO has also joined the complex into sub-zero territory.
Monday produced a lot of gold chatter.
One of the standouts came from Deutsche Bank, which said the gold correction may just about be over.
Gold GCQ3 +0.29% has tumbled more than 30% from a September 2011 peak above $1,900 to under $1,300 presently. Gold was up about $20 on Monday, rebounding from a selloff late last week. A short-covering bounce and some safe-haven demand on Egypt unrest helped, says Kitco’s Jim Wyckoff.
The price of spot gold rose to its highest level in seven days Tuesday, to $1,260 an ounce, but that doesn’t mean much to Yoni Jacobs, chief investment strategist at Chart Prophet Capital.
Jacobs said the reasons for gold’s being considered a safe haven—emerging markets, gold mining stocks, the dollar and inflation—are long gone.
That summed up a few Twitter reactions to news that billionaire hedge-fund manager John Paulson’s gold fund has lost 65% year-to-date, after tumbling 23% last month. Losses for his PFR Gold Fund came on the heels of the Fed’s effort to prepare the markets last month for the eventuality of a paring-back on stimulus. Gold sank 23%-plus in the second quarter, the steepest quarterly loss since the start of modern trading in the 1970s.
With the Fed beginning to dial down its quantitative easing programs and economy finally moving in somewhat of a positive direction, gold prices have been on a one way ticket downwards. The precious metal experienced a 23% decline over last quarter to fall to just below $1200 an ounce. That was the worst quarterly decline since 1975. Funds like the physically-backed SPDR Gold Shares (NYSE:GLD) now sit at new 52-week lows.
Perhaps fairing worse than the metal itself has been those firms that dig it out of the ground.
Figures for net Chinese gold imports through Hong Kong in May have now been released, and, while they did not quite come up to the record level seen in March at 136 tonnes, at 108.8 tonnes they were still the second highest total on record, and comfortably in advance of April’s 80 tonnes.
In April, it is thought that the level of net imports could have been far higher but traders were taken by surprise following the exceedingly high March import figures which had used up their quotas and a subsequent rundown of stocks that month which had not been fully replaced by the time of the big April 12 gold price fall which had appeared to stimulate huge physical demand.
Silver’s year-to-date performance has been the worst among all commodities, falling 35% from January to June 30th this year. It’s been a rough ride for those who have held on, but recent news should give silver investors a reason for some renewed optimism.
We face something that has not been visited upon the human race since the fall of the Roman Empire. That fall caused 1,000 years of darkness. It's taken 500 years to dig ourselves out of that morass and here we are, committing the same sins and behaviors that brought the Romans to their fall.
The Romans tried to grow their empire with the loot taken from conquered territories. They eventually tried to finance this expansion with debasement of their precious metal currencies. In this they failed utterly despite the most heavy handed attempts to retain the Empire on the backs of their people, slaves and those of the conquered territories with taxes, impounds and thievery. A short look at history shows that we are trying the same thing. We will get the same results.
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