This morning the gold price has fallen back slightly from its two-month high, silver has also tipped from its three-month peak of $21.14/oz.
Yesterday the price of gold touched $1,325.90, its highest since April this year. Geopolitical tensions appear to be cooling somewhat, or at least the media are bored of covering them, but this combined with unsteady equity markets means that gold could go either way. The gold price will, however, find a floor thanks to the situation in Iraq.
Given the situation in Iraq as well as US dollar weakness, gold may well be in line for its first back-to-back quarterly rise since 2011. Some may ask why we are yet to see a significant rally in the gold price given the civil war in Iraq. As we have explained previously, war is only a good short-term driver for the gold price. History shows that the price will return to levels seen previous to military action.
East ramps up gold market domination
Earlier this morning the Chairman of the Shanghai Gold Exchange told conference attendees that China must carry greater weight in the international gold market. According to the Economic Times, Xu Luode said “We should have gold fixing, pricing done in China itself…We need to use SGE’s international board to implement opening up of the gold market. We need to build China’s influence in the global gold market.”
Singapore Exchange has announced plans to launch a physically deliverable 25kg gold contract. This is the first globally offered 25kg gold contract. In statement issued in association with the World Gold Council and the Singapore Bullion Market Association, the Singapore Exchange said the contract will be available in September.
The new product comes in order to meet demand in Asia, however just how many individuals will buy such a large amount of gold remains to be seen. Considering how high demand on the SGE for 1kg contracts, it is perhaps going to be a challenge to replicate similar levels of demand.
According to the chairman of the Singapore Bullion Market Association around 30 to 40 per cent of new demand comes from the ‘kilo-bar’ market.
Burkina Faso production at 40 tonnes
Last week we had a couple of stories on gold mining. This morning the mines and energy minister of Burkina Faso has told Bloomberg that gold output is expected to climb by 25% between now and 2016, to 40 tonnes. Gold accounts for 20% of the country’s GDP and is its largest export. “Burkina Faso is positioning itself as a mining destination. We are on track to keep on producing gold for the next two decades and in five years we will have 15 mines in operation,” the minister told Bloomberg.