Daily Nugget: Gold Controls Increase Unemployment And Crime

Yesterday the spot gold price hit a three-week low, ending the day solidly lower and below $1,300. This was thanks to yet another Fed President wading in with his speculative comments on what the Fed may or may not do. The drop was gold’s sixth consecutive decline.

Atlanta Fed President Fred Lockhart said the FOMC may decide to start tapering at some point this year. Meanwhile Chicago Fed President Charles Evans said this was ‘quite likely’ and would happen “starting later this year.” A reduction in the US’s trade deficit is also likely to have put pressure on the gold price as markets view the result as signs of an economic recovery.

Lockhart’s comments are the latest in a series from both Fed and FOMC members who continue to talk up both sides of the QE tapering debate. Last week the Fed confirmed that it would maintain bond purchases whilst inflation remained so low, but this week’s comments from both Dallas and Atlanta Fed Presidents suggests that all hints should be taken with a pinch of salt.

Given gold’s short to medium term reaction to Fed data and announcements it is clear why gold futures have been unable to gain any significant momentum since April or maintain there run towards $1,400 as it attempted in early July.

Gold supply is ‘balanced’

The gold bullion market is apparently in surplus, according to Marcus Grubb, MD of the World Gold Council. But fear not, the shortage of recycled gold supply is likely to help rebalance this. The relationship between the spot gold price and the availability of gold for recycling is positively correlated, “In a bull market recycling rises as the price goes up, on the downside when the price drops, like we saw this year, you see recycling fall because people do not think they will get a good price for their gold,” he said.

According to the mining lobby group, the supply of recycled gold had already fallen by about 4% before April’s gold price drop, however it accelerated dramatically after April 12th and 15th.

Germans continue to buy gold bullion

Germany, the envy of all others in the Eurozone, is not quite as stable as it would like it savers to think.

German bullion dealer Degussa Goldhandel has seen such an increase in demand for bars, coins and vault capacity that it has bought regional precious metals dealer SilviOr GmbH.

Buy gold online

In its attempts to regulate the gold market, the Vietnamese government have made it more accessible.

The launch of mobile sites which allow customers to buy gold online and then pick up in a bank branch. Whilst the service is currently only offered by the State Bank, other banks are encouraged to offer a similar service.

India controls gold but not the people

Whilst the Indian government may be getting their way with a reduction in the current account deficit, it seems state gold controls are just leading some citizens into criminal activity and unemployment. Yesterday a local newspaper estimated that as many has 500,000 individuals had lost their jobs as a result of jewellery manufacturers and shops going out of business. Stories of smuggling also continue, with several stories reported by papers as almost victory tales of police tracking smugglers on trains deep into the night as they attempt to bring gold across borders. The latest tale is of a wealthy woman who was caught attempting to bring in $400,000 worth of jewellery from Singapore. It is thought she was trying to bring stock for a relative’s Indian store.

Fall in Hong Kong’s gold exports

Gold exports from Hong Kong to China fell by 4.8% last month. This is blamed on the gold price fall and the clamp down on the use of bullion in financing deals. Net imports fell from 106 to 101 tonnes. However June’s imports were double that of June 2012, suggesting price didn’t play a major factor but instead was seasonal.

Deliveries on the SGE for the first half of 2013 were double that of China’s entire gold mining output in one year.