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SWOT Analysis: Investors Buying, Selling and Storing Bullion via the Perth Mint’s App

 -- Published: Monday, 8 October 2018 | Print  | Disqus 

By Frank Holmes


·         The best performing metal this week was gold, up 0.90 percent. Gold traders and analysts maintained their bullish outlooks this week amid bets that the gold selloff has passed, according to the weekly Bloomberg survey. In a big surprise, the yellow metal is headed for a weekly gain and so is the U.S. dollar. While the assets historically move in opposite directions, they are both headed up. Gold is performing well despite the dollar’s gains and as U.S. Treasury yields climb. Bloomberg’s Ranjeetha Pakiam writes that investors might now be mindful of warnings from prominent money managers, such as Ray Dalio, that soaring debt levels could trigger the next financial crisis.

·         Poland added nine metric tons of gold to its reserves in July and August, marking the country’s largest purchase since 1998. This is also the largest addition to gold reserves of a European Union nation in 20 years. The Perth Mint released strong September data on gold coin and bar sales. Last month they sold 62,552 ounces of gold, which is far greater than August sales of 38,904 ounces, and is the largest sales jump since January 2017. Sales of silver products more than doubled from August to 1.3 million announces in September, reports Bloomberg.

·         More positive news continues from the Perth Mint. The precious metal seller has introduced a mobile app enabling investors to buy, sell and store bullion via digital certificates. CEO Richard Hayes says that the app “will certainly be aimed toward the younger investor, be they millennials or perhaps a little bit older.” The app will allow transfers of gold to other users and digital certificates for physical gold or cash can be redeemed.


·         The worst performing metal this week was silver, down 0.39 percent. According to Bloomberg, BullionVault’s gold index that measures the balance of buyers against sellers decreased to 55 in September, down slightly from an August reading of 50. A reading above 50 indicates more buyers than sellers among clients. However, their silver index rose to a seven-month high of 54.3, up from 53.9 in August, as the metal rose in September. Turkey’s central bank continues to sell off gold reserves in an effort to support the struggling lira. Reserves fell $166 million from the previous week, marking a decline of 14 percent year over year.

·         The Bank of Nova Scotia has been ordered to pay a fine of $800,000 by the Commodity Futures Trading Commission after self-reporting that traders were found to have placed fake orders for gold and silver futures contracts, commonly known as “spoofing”. Bloomberg writes that spoofing is a practice where a trader attempts to push the price of contracts up or down and the incidents of this at the bank occurred from at least June 2013 through June 2016. By self-reporting the misconduct, the bank received a significantly reduced fine.

·         Although Centamin PLC had strong gold production in the past quarter, a 27 percent increase, the company lowered overall 2018 guidance for a second time this year and the stock fell 12 percent on Friday.


·         Goldman Sachs economists released three reasons to buy gold right now after this year’s selloff. Firstly, they forecast emerging market growth stabilization and maintain a constructive outlook on emerging market currencies. Secondly, they view the recent gold ETF and CFTC net specs liquidation as a one-off cleaning up on speculative positions. Thirdly, they view the rising interest rate environment as not necessarily bearish for gold, as many believe. Others are bullish on gold too as Tai Wong, head of base and precious metals trading at BMO Capital Markets, said this week that “there’s no appetite to sell gold from current levels” as gold heads for a gain amid a stronger dollar.

·         Budget turmoil in Italy this week led to boosted gold and silver demand with volumes spiking on Tuesday. Bloomberg writes that in a span of 10 minutes, December gold contracts equaled almost 1.57 million ounces traded on the Comex, which is almost 12 times the 100-day average volume. This demonstrates renewed interest in gold during times of geopolitical uncertainty and marks gold’s biggest one-day climb in more than five weeks. Stephen Innes, head of Asia Pacific trading at Oanda Corp, said in a note that “shorts are being caught out on this one.” Russia disappeared from the list of major foreign holders of U.S. Treasuries earlier this year and might now be buying more Chinese yuan, according to the latest foreign reserve data from the IMF.

·         Shandong Gold Mining could be setting up to buy some of Barrick’s assets as it has hired several banks to arrange a $300 million denominated bond issuance, according to Bloomberg. Shandong recently completed a $1 billion initial public offering (IPO) in Hong Kong. Americas Silver Corporation and Pershing Gold announced this week that they will be combining their businesses to create a low-cost precious metal growth company in the Americas. Another Nevada asset picked off before the North American senior miners awake from their slumber, yawning at the gold price. Deutsche Bank upgraded their recommendation on St. Barbara Ltd. to buy from hold.


·         Bill Gross, prominent bond fund manager, tweeted on Wednesday that “Euroland, Japanese previous buyers of 10yr Treasuries have been priced out of market due to changes in hedge costs.” Bloomberg writes that Gross is referring to the falling cross-currency basis, which has driven U.S. 10-year yields to minus 0.06 percent for European investors and 0.09 percent for Japanese buyers who hedge against currency fluctuations. Gross said that a lack of foreign buying at these levels could likely lead to higher Treasury yields.  A buyer of put options risked $2.5 million for a hedge against a rise in the 10-year yield to 3.6 percent expiring two days after the Fed’s December meeting.

·         The whole world uses the U.S. dollar, but it could be falling out of favor and lose its dominance. Peter Coy of Bloomberg writes that there is a paradox at the heart of global finance whereby the U.S. share of the world economy has drifted lower for many decades, yet the dollar remains strong even in times of growing isolationism from President Donald Trump. There are signs of dollar pushback, such as president of the European Commission Jean-Claude Juncker saying that it is “absurd” that European companies buy planes in the dollar, versus their own currencies. Coy continues to write that “a slippage in the dollar could also be viewed as a symptom of U.S. isolationism.”

·         Company executives have been guiding down earnings forecasts in a sign that peak earnings might be slowing. Bloomberg’s Lu Wang writes that “ever since Caterpillar Inc. mentioned a ‘high water mark’ in growth, Wall Street has been on alert.” Data shows that the number of S&P 500 companies saying that profits will trail analyst estimates outnumbered those saying they’ll beat them by a ratio of 8 to 1 in the third quarter, the most in Bloomberg data going back to 2010. Rising costs and weakening overseas demand could threaten to dampen the strong growth experienced for a time now. The brutal sell-off in technology stocks this week has pushed the front month VIX futures contract to a premium relative to the second-month contract. The backwardation of the VIX curve indicates that traders are concerned with the near-term outlook for equities.


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 -- Published: Monday, 8 October 2018 | E-Mail  | Print  | Source:

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