The price of gold continues to benefit from the ongoing political tensions over Russia’s involvement in Ukraine. Overnight Sunday, the price of gold rose to its highest since October 2013.
February was quite a month for the silver price, which benefitted from gold’s performance. Climbing 11% last month, the precious metal outperformed gold’s 7% monthly rise.
Last month, safe-haven demand was spurred and gold backed ETFs saw their first monthly increase in holdings since December 2012.
In contrasting news, volumes on the Shanghai Gold Exchange fell last week to levels seen two weeks before. The yellow metal was trading at a discount to the London Gold Fix.
Ongoing Scrutiny Over London Gold Fix
A draft-paper written by New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, is the latest in a line of developments that suggests the five-banks involved in the Fix are doing something underhand.
Bloomberg reports, “The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.”
Coin Sales Dampened
The US Mint’s coin sales continued to disappoint last month, continuing January’s year-on-year fall in sales. According to analysts, the US Mint’s decision to mix new 2014 coins with 2013 coins, has dampened demand. Sales in February were down by over 50% year-on-year, thanks to ‘a surge in secondary sales by institutional investors,’ reports Reuters.
Gold Supply Facing Strain
The gold supply is set to come under some pressure this year as output for 2014 will fall below expectations, so warn Barrick Gold Corporation, (ABX), Goldcorp Inc, (GG) and Newmont Mining Corporation, (NEM).
The three mining companies are the largest producers, by market value, according to Bloomberg. Thanks to gold’s major correction last year, miners were ‘forced’ to take ‘at least $30 billion of write-downs,’ reports Bloomberg.
Whilst the fall in fresh gold supply will be good for the gold price, given the insatiable demand for physical at present, there is no consensus amongst miners as to when production will begin to suffer.
India Carries Out Gold Checks
A further ligature has been tied around gold supply in India, a country where it is already feeling significantly restricted. This week the Indian government has announced that they will be carrying out checks on wholesalers’ gold. In an effort to clamp-down on smuggling, the authorities will be checking that wholesalers’ gold stocks match amounts imported by the banks and state-run traders.
The process will no doubt aggravate current gold supply shortages in India, as authorities seize any yellow metal that has a questionable provenance. The World Gold Council estimated last month that around 200 tonnes was smuggled into the country in 2013.
Demand for gold, in the restricted market, has seen premiums jump to as high as $160/oz at the end of 2013. They are currently around $80/oz.
Bitcoin Stands Strong Under Scrutiny
Mt Gox has purportedly filed for bankruptcy in Japan. The ill-fated bitcoin exchange halted all withdrawals from its platform at the beginning of February and has since admitted it has ‘lost’ $473 million worth of bitcoin, or 6% of total bitcoin supply.
Interestingly the bitcoin market has shown some impressive resilience. Whilst many in the mainstream are keen to declare the death of the crypto-currency, the recent events have shown what an established eco-system surrounds bitcoin.