End-of-week top gold news
Friday, 01-May-2015
Lawrence Williams (MineWeb) What happens to gold when the yuan floats free of the dollar? “Once China has built its gold reserve to the required level it would have no interest in helping to maintain a depressed gold price level – indeed it may feel that it is better suited to command higher prices and could utilise its huge forex reserves to cement its global position in this respect.”
Note: Many are not anticipating a floating of the yuan, inclusion in the IMF SDR basket and an update on its gold reserves. If the latter shocks like the last announcement in 2009 shocked, the yellow metal could be off to the races.
Liz McCormick & Daniel Kruger (Bloomberg) Just the Idea of Inflation Is Spooking Bond Traders Again “Three months ago, bond traders were bracing for deflation in the U.S. Now, they’re starting to worry about inflation — and snapping up a record share of Treasuries that offer some protection.”
Note: If the inflation genie does indeed escape the bottle, it’s reasonable to expect an overshoot on the upside. After all, the central banks of the world have printed about $11 trillion worth of new currencies since 2007. Getting the genie back in the bottle may well prove exceedingly difficult as well.
Myra P. Saefong (MarketWatch) Gold up over $20 on Greece concerns, dovish market read on Fed meeting, big advance for silver “Gold futures climbed by more than $20 an ounce on Monday as talks between Greece and its international creditors dragged on and investors awaited the outcome of this week’s meeting of Federal Reserve policy makers.”
Note: Gold rebounded early last week, just as we suspected it might. While those gains could not be sustained, the yellow metal closed just a couple dollars lower this week and I wouldn’t be surprised if the pattern repeats.
Enda Curran, Takashi Hirokawa & Masaaki Iwamoto (Bloomberg, via JapanTimes) Abe adviser fears BOJ has den of conspirators opposing reflation “The Bank of Japan appears to be wavering in its commitment to unprecedented monetary easing, said Kozo Yamamoto, an adviser to Prime Minister Shinzo Abe and an advocate of reflationary policies.”
Note: This one made me laugh: For 20-years Japan has been ringing up the debt and printing yen with abandon, but rather than blaming the bad policy, let’s get paranoid and blame a ‘den of conspirators’. The commitment to ‘unprecedented monetary easing’ should have wavered long ago.
Chuin-Wei Yap (Wall Street Journal) The Chinese Are Going for Gold “Physical demand in China is still comfortably ahead of previous years, before an extraordinary bargain-driven consumption surge in 2013, said Philip Klapwijk, managing director of Precious Metals Insights Ltd., a consultancy.”
Note: Gold-centric China has been snapping up tonnage whenever and wherever it can. Speculation in recent weeks suggests an update on reserves may be forthcoming. Bloomberg Intelligence recently suggested China may have trebled reserves since 2009, to 3,510 metric tonnes!
(Bloomberg) Economy in U.S. Stalls on Slump in Business Spending, Exports “The economy in the U.S. barely grew in the first quarter, buffeted by slumps in business investment and exports after oil prices plunged and the dollar surged.”
Note: Inventory building added 0.74% to GDP, so real final sales were -0.5%. That’s bad news, which may have contributed to a slightly more dovish tone from the Fed that contributed to gold’s rise through midweek.
Zheng Yangpeng (ChinaDaily) PBOC ‘poised to pull QE trigger’ as economy stalls “Financial markets on the Chinese mainland are abuzz with speculation that the central bank will inject more liquidity into the economy by unconventional means that could amount to a version of “quantitative easing”.”
Note: It’s the go-to strategy for central banks the world over. When the economy slows, print and pump!
