The Daily Nugget – Bernanke Comes Clean To Oprah

Gold rebounded this morning as support was provided by those bargain hunting in Asia after yesterday’s two-week lows. Both the US and Asian stock markets hit recent highs yesterday prompting some gold selling.

Yesterday platinum fell by 1.9% to a two week low, thanks to Amplats announcing a delay on its restructuring plans. This morning it has recovered by 0.9%.

Today the FOMC meeting begins. As we said yesterday we still expect the committee to refer to the benefits of loose monetary policy, rather than begin to show concern for its unlimited printing plan. However, should there be a further reduction in the interest rate, or further prompts of QE we do not expect gold to react too significantly.

Palladium continues to outperform the other precious metals, seeing its best performance in 16 months, due to concerns over Russian stock levels and increasing car-demand in both the US and China.

Here in the UK, markets are beginning to feel slightly less secure about the ‘safe-haven’ offered by our sovereign currency. The pound dived to a 13-month low against the Euro, and a five-month low against the dollar. Analysts believe that this is in part down to Mark Carney’s comments that monetary policy was not yet ‘maxed out.’ In contrast, the FTSE 100 index traded at a 56-month high, breaking through the 6,300 barrier.

Gold currencies

Yesterday there were three interesting developments in the fight to use gold as money:

The first was news that Ghana has become the most recent country to trade with Iran using gold. Analysts believe $1.5 billion of investment gold bullion has been passed to the Iranians in exchange for ‘a large crude purchase’.

The Ghanaians join Turkey as a country who circumvents the US’ sanction on Iran in exchange for goods. Trade between Turkey and Iran is reported to have reached £11 billion last year.

The second piece of interesting news was that Nepal has joined its neighbour, India, in increasing customs duty on gold. The Nepalese government say this is in support for India as it will prevent gold smuggling. There is currently a supply-shortage of gold in Nepal, where 40 kg a day are demanded but only 15kg is supplied by banks to dealers. Gold smuggling in Nepal is an increasing problem due to an Indian currency shortage in Nepalese bordering towns. Gold is now being illegally trafficked from China, through Nepal and into India.

And finally the Malaysian states of Perak and Kelantan have received ‘overwhelming demand’ for their gold and silver dinars. Whilst both state governments had hoped to see the coins being used as currency, they are currently mainly purchased for investment purposes. They have been so successful that other Malaysian states are now looking into issuing their own coins.