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Gold Up as China Evergrande Concerns Continue

Published 09/26/2021, 11:41 PM
Updated 09/26/2021, 11:43 PM
© Reuters

By Gina Lee

Investing.com – Gold was up on Monday morning in Asia, with risk appetite decreasing as concerns over China Evergrande Group's (HK:3333) debt situation, and its potential economic impact, continue.

Gold futures were up 0.43% to $1,759.30 by 11:40 PM ET (3:40 AM GMT).

China’s Ministry of Housing and Urban-Rural Development tightened scrutiny of China Evergrande’s bank accounts to ensure funds are used to complete housing projects and not diverted to pay creditors. The developer missed a payment on offshore bonds during the previous week, with a second payment due later in the week.

Its electric-car unit, China Evergrande New Energy Vehicle Group, will also not proceed with a proposed issue of CNY-denominated shares.

Demand for physical gold in China, a top consumer, rose during the previous week as investors sought safety in the safe-haven yellow metal as they monitor the ongoing situation at China Evergrande.

However, benchmark 10-year U.S. Treasury yields climbed to their highest since early July 2021, which capped further gains for the yellow metal.

On the central bank front, European Central Bank (EBC) President Christine Lagarde will speak on Tuesday. Lagarde will be joined by Bank of England (BOE) Governor Andrew Bailey, Bank of Japan Governor Haruhiko Kuroda and U.S. Federal Reserve Chairman Jerome Powell at an ECB forum panel a day later.

Meanwhile, U.S. Treasury Secretary Janet Yellen will join Powell to testify at a Senate Banking Committee hearing on Tuesday. The House Financial Services Committee hearing will follow on Thursday.

SPDR Gold Trust (P:GLD) said its holdings increased 0.1% to 993.52 tons on Friday from 992.65 tons the day before.

In other precious metals, data from the U.S. Commodity Futures Trading Commission showed that speculators cut their net-long positions in COMEX silver by 13,178 contracts to 900 in the week to Sep. 21. Silver rose 0.9%, platinum jumped 1% and palladium inched up 0.1%.

Latest comments

"993.52 tons" Gina Lee, I've seen you make these gold holding claims many times before but I still have yet to see you provide any verifiable evidence to support these claims. How reliable are GLD's holding reports? GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund.  There was a highly publicized visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on any relevant bar lists. It was later discovered that this "GLD" bar was actually owned by ETF Securities.
Note that even on the subject of GLD's insurance, they are not at all straightforward about it. Their representative will not confirm nor deny the existence of GLD's insurance. I recommend anyone curious about this to confirm via calling GLD's publicly listed number for general inquiries at 866 320 4053 and ask about this clause from the GLD prospectus: "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." Exactly how much of the fund is insured? They will not give you a straight answer and might even throw in some bizarre excuse which I've experienced. Why hide this information from investors?
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