Turkey, Russia, Ukraine And Kazakhstan Further Diversify Into Gold

Today's AM fix was USD 1,583.25, EUR 1,267.41, and GBP 1,013.73 per ounce.

Yesterday’s AM fix was USD 1,569.00, EUR 1,256.41, and GBP 1,009.00 per ounce.

Gold’s safe haven credentials were burnished again yesterday when despite falls in stock indices globally, gold rose $15.10 or 0.99% and closed at $1,586.30/oz. Gold traded sideways in Asia and continues in a narrow range in European trading holding above $1,580/oz.

Gold is hovering above $1,580/oz and consolidating on yesterday’s gains on the realisation that the EU summit this week will not solve the area’s intractable debt crisis. Incredibly, this will be the 20th time EU leaders have met. While gold has not surged in value as many expected, gold has performed well during the period having again preserved wealth.

July options expiry later this afternoon could lead to volatile trading and there has been a pattern in recent years of price rises soon after option expiration. Nomura Securities cut its gold price target this year to $1,754/oz from $1,791/oz, but lifted its targets for 2014 & 2015. Nomura said that central-bank buying, continuing strong Chinese demand, persistently negative real interest rates, and a growing bunker mentality for those investors who see dark scenarios on the horizon, were all positive for gold.

“The further deterioration of the economic recovery, enhanced potential for quantitative easing and continued structural problems in the eurozone lead us to believe that gold prices will stay stronger into 2014 and 2015,” Nomura analysts said in a research brief Monday. The physical market noted bargain hunting from consumers. Premiums for gold bars were little changed at between 50 and 80 cents to the spot London prices in Singapore.

Turkey raised its reported gold holdings by another 2% in the month of May. Turkey’s gold holding rose by 5.7 tonnes in May to total 245 tonnes, International Monetary Fund data showed, making it the latest in a string of countries to increase gold bullion reserves this year.

Russia expanded its gold reserves by 15.5 metric tons in May as Ukraine and Kazakhstan increased their holdings of the metal, International Monetary Fund data shows according to Bloomberg. Russia’s bullion reserves climbed to 911.3 tons last month when gold averaged $1,587.68 an ounce, data on the IMF’s website showed. Ukraine’s climbed 2.1 tons to 32.7 tons and Kazakhstan boosted reserves by 1.8 tons to 100 tons, the data show.

Central banks are expanding reserves due to the eurozone debt crisis and concerns about fiat currency debasement. Central banks are on course to buy more bullion this year than the purchases of about 456 tons in 2011 as countries diversify their reserves.

Turkey has allowed banks to hold more of their reserves in gold to provide extra liquidity. The central bank this month raised the proportion of reserve requirements that can be held in foreign exchange to 50 percent from 45 percent, while the limit for gold was increased to 25 percent from 20 percent. The changes will add as much as $2.2 billion to gold reserves.

Gold accounts for about 9.1 percent of Russia’s total reserves, 5.1 percent of Ukraine’s and 15 percent of Kazakhstan’s, according to the World Gold Council. That compares with more than 70 percent for the U.S. and Germany, the biggest bullion holders, according to Bloomberg figures.

Kazakhstan plans to raise the amount of gold it holds as part of its reserves to 20 percent, Bisengaly Tadzhiyakov, deputy chairman of the country’s central bank, said earlier this month.

Central bank demand and Chinese demand alone should be enough to put a floor under prices near these levels and gold looks well positioned for another summer rally akin to the one seen last July and August (see chart above).

Other News

(Reuters Global Gold Forum) -- Turkey raised its reported gold holdings by 5.692 tonnes in May to a total 244.986 tonnes, International Monetary Fund data showed, making it the latest in a string of countries to increase bullion reserves this year.

(Bloomberg) -- IShares Silver Trust Holdings Unchanged at 9,876 Metric Tons

Silver holdings in the IShares Silver Trust, the biggest exchange-traded fund backed by silver, were unchanged at 9,875.75 metric tons as of June 25, according to figures on the company’s website.

(Reuters Global Gold Forum) --  Nomura has cut its gold price forecast by 2 percent for 2012 to $1,754/oz and by 4 percent for 2013 to $1,981. A note says: "2H 2012 is expected to be stronger for gold, with 3Q traditionally a strong seasonal period for Indian demand."