Despite the gold price breaking its five-week winning streak last Friday, thanks to the US payroll data, it is back in safe-haven mode due to an escalation of the Ukraine crisis and concerns over the Chinese economy.
Whilst gold climbed 0.7% overnight, the silver price took off by more than 1%, having touched $20.61, its lowest since Valentine’s Day.
Gold ETF holdings climb by most in a month
Yesterday the SPDR Gold Trust, the largest gold ETF in the world, saw its largest inflow in a month of 7.5 tonnes taking total holdings to 812.70 tonnes. Total holdings in gold backed ETFs are now at 1,762.5 tonnes, having fallen to their lowest since October 2009.
China gold price below London spot
Last year we frequently commented on the high premiums in China, the opposite is now the case as gold trades at a discount to the spot gold price. Overnight prices in Shanghai were trading $3 below London prices, significantly low when compared to premiums of $20 earlier this year. Analysts believe buyers are in a cooling off mode following Chinese New Year and are waiting to see if the price will fall back.
China sees ‘explosion’ in gold, silver futures contracts
Speaking of China, the Futures Industry Association (FIA) said yesterday that the largest growth in gold futures trading activity, in the last five years, has come from China. There was a 416% increase in the number of gold futures contracts traded on the Shanghai Futures Exchange between 2008 and 2013, from 4.39 million contracts to 20.09 million.
The growth seen on the SHFE was in stark contrast to the gold contracts on COMEX where gold options traded came sixth place in volume growth between 2008 and 2013 with 10.69 million contracts traded in last year, an increase of 141% from 2008 when there were 4.39 million contracts.
Silver, which is often ignored in the China story, as the gold numbers are always considered more headline-worthy, deserves a special mention here when it comes to futures contracts on the SHFE. In 2012, the 15 kg silver contract apparently ‘exploded’ in popularity. Launched in 2012, the 15kg silver contracts saw 21.26 million contracts traded in the first year. In 2013, 173.22 million were traded.
Future is golden for PGMs prices
The PGMs will continue to do well as thanks to a public spat breaking out between the parties involved in the wage negotiations. The talks surrounding the labour and mines dispute have been ongoing for seven weeks now. This latest development is likely to put further pressure on the price of both platinum and palladium.
Why Jim Rogers isn’t buying gold
In a great interview with IB Times, legendary investor Jim Rogers explains why he is still not buying gold, despite the huge correction seen last year:
I still am not buying gold in any big way yet, because there are still too many mystics, too many people who think that gold is holy. I don’t see how the markets can make a bottom until a lot of those mystics get shaken out of the market. Once they throw in the towel, then gold will make a significant bottom, and I hope I’ll be buying a lot more at that time.