Russia upping the ante in its gold reserve increases

The Russian central bank has announced adding another 900,000 ounces (29 tonnes) to its gold reserves in November,  This makes 2017 the highest ever year in Russian central bank gold reserve rises and there’s still a month to go.

Have covered and commented on this in ny latest article on the shapspixley.com website.  To read the article please click on:

Russia upping the ante in its gold reserve increases

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Strong Russian gold reserve increases back

In its latest announcement, the Russian Central Bank has stated that its gold reserves rose from 48.4 million ounces to 49.1 million ounces during August. This increase of 700,000 ounces – 21.77 tonnes – is the largest monthly increase this year and brings Russia’s total gold reserve increase so far this year to end August to 113 tonnes according to this latest announcement and World Gold council figures for the prior seven months.  Over the same period of 2015 the Russian central bank added 109.15 tonnes, after a hiatus at the start of the year, so it has been adding to its reserves at a broadly similar overall rate in 2016 so far.  Last year it should be noted that it upped its gold reserve additions quite substantially in the final four months of the year to an average of 24.2 tonnes a month, compared with an average of 13.64 tonnes a month over the first eight months of the year.

We had been suggesting in previous articles that the pace of central bank gold buying might be slowing down, given the low purchase levels by Russia in May and July, and a big reduction in announced Chinese purchases too, given that these two nations are about the only two whose central banks have been adding to their gold reserves in a significant manner.  Relative to its own gold reserves, Kazakhstan has also been increasing its gold holdings at an important rate, but at only around 3 tonnes a month.  But the latest Russian figure suggests we may have been premature in this assessment, at least as far as that country is concerned.  We shall have to wait another week or two to find out whether China too is reverting to earlier gold reserve increase levels, or is continuing at the slower pace seen in recent months.

On the other side of the equation – central bank gold sales – the principal seller has been Venezuela which has seen its gold reserves reduce by around 100 tonnes since the beginning of December last year.  However it does not appear to have sold any gold in July and August this year according to Swiss gold import statistics given the country’s gold sales so far appear to have been routed through the BIS in Basel, although one cannot rule out further sales during the remainder of the year.

Depending on China’s announced official purchases in the final few months of the year, perhaps our estimate of net central bank gold purchases for the full year of around 350 tonnes could prove to be an underestimate, but only if Russia continues to add at the higher rate, Chinese purchases start to pick up again and Venezuela manages to hold on to most of its gold despite its dire economic situation and global debt position.

Article first published by me on sharpspixley.com website

Greater Chance of Rate Cut Boosts Gold’s Appeal – The Holmes Gold SWOT

By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors

Strengths

  • The best performing precious metal for the week was silver.  Silver trades at a much more volatile spread than gold, thus its over 10-percent price reaction this week, its biggest weekly gain in 15 months (due to the fallout in Europe over Britain voting to leave the EU), is refreshing to see.
  • Market turmoil following the U.K.’s decision to leave the EU is causing more investors to turn to gold and Treasuries, reports Bloomberg. The yellow metal rallied more in the first half of the year than in any other year since 1974, with prices pushed up 24 percent. In addition, traders are now pricing in greater chances of a rate cut than a rate hike in September, pushing Treasury yields lower and boosting the appeal of gold.

 

  • Imports of gold to mainland China from Hong Kong were up 68 percent month-on-month in May, reports S&P Global Platts, totaling 115 mt and reaching the highest level since December. This figure was up 63 percent year-on-year from 70.7 mt in May of 2015.

Weaknesses

  • The worst performing precious metal for the week ironically was gold, still up around 1.99 percent.  Perhaps not too surprising since this was a page-one story.  As central bankers assured the markets that they were ready to act, if needed, equities climbed higher and this became a headwind for further momentum in gold prices.
  • Elvira Nabiullina, chair of the Russian central bank, commented on gold reserves during an interview with a local newspaper this week, according to one Reuters headline. Nabiullina said she sees no possibility of increasing Russia’s gold and FX reserves in the near future.
  • A surge in gold prices could cut Indian demand for the precious metal to the lowest in seven years, reports Bloomberg. “Price is a very important factor for Indians and if it remains at these levels then I don’t see much recovery in demand,” said Bachhraj Bamalwa, a director at the All India Gems & Jewelry Trade Federation. Weak demand since the start of 2016 has forced dealers to sell gold at a discount to clear inventories.

Opportunities

  • Turnover in China’s top exchange-traded fund backed by bullion, the Huaan Yifu Gold ETF, jumped to a record $191 million last Friday following Britain’s vote. Outstanding shares of the fund also jumped five-fold from the start of the year to 1.6 billion, according to David Xu, managing director at Huaan Asset Management. Similarly, a decline of the Chinese real estate market moved billions into the country’s stock market. If Chinese investors sour on stocks and decide gold’s historic value looks tempting, this could mean the next boom for the metal, reports Bloomberg Intelligence analyst Kenneth Hoffman.  Currently the ETF only holds 16 tonnes of metal, but the creators of the fund expect it to grow to 500 tonnes in the next three to five years.
  • According to consensus data from June 28, economists are raising the probability of U.S. interest rate cuts, rather than hikes, over the next 18 months, reports Bloomberg. A hike is seen only from February 2017. Overseas, initial shock following Brexit is easing. Economists are expecting the Bank of England to add more stimulus and Japan’s central bank chief Haruhiko Kuroda said this week that more funds could be injected into markets should they be required, reports Bloomberg.
  • Citing updated commodity forecasts, Credit Suisse analysts Anita Soni and Ralph Profiti believe the price of gold could hit $1,500 an ounce by early 2017. Goldman and Morgan Stanley are among other banks increasing their price outlooks. On Thursday, Australia & New Zealand Banking Group Ltd. reported that it sees bullion rallying to as much as $1,400 an ounce over the next 12 months. If the Brexit vote spurs the world’s central banks to step up easing, currencies will be hurt and gold could be favored even further.

Threats

  • Temp jobs are the first to go in a downturn and serve as a predictor of general job trends, according to a report from BMO Private Bank. And since December, this sector has shed 27,400 jobs, reversing a five-year trend that saw it grow five times faster than overall employment, the bank writes. Compounding the trend, there has been a pickup in initial jobless claims.
  • According to a new poll by Marketplace and Edison Research, 71 percent of Americans believe the U.S. economic system is “rigged in favor of certain groups,” reports CNN Money. On this note, JPMorgan Chase & Co won the dismissal of three private antitrust lawsuits on Wednesday, reports Reuters, accusing the bank of rigging a market for silver futures contracts traded on COMEX. U.S. District Judge Paul Engelmayer said the plaintiffs did not show JPMorgan made “uneconomic” bids, or intended to rig the market at counterparties’ expense, the article continues. Engelmayer’s dismissal was with prejudice, meaning the lawsuits cannot be brought again.  This follows a 2014 court victory by JPMorgan where plaintiffs nationwide accused the bank of trying to drive down the silver price.
  • Gold miner Asanko Gold Inc. has come under attack from a Toronto-based hedge fund, reports the Financial Post, claiming the company’s stock price could plummet 90 percent. K2 Associates Investment Management alleges that Asanko’s gold resources “don’t add up” and appears to be over-inflated by a factor of two. Asanko rejected all allegations by K2.

Russia ups gold reserves by 500,000 ounces in April

Latest figures out of Russia’s central bank state that it has increased its gold reserves in April by 500,000 ounces (15.6 tonnes), which is exactly the same amount the bank reported as its reserve increase in March as well.  While February’s reserve increase was reported at 300,000 ounces, January’s was 700,000 ounces.  This means that the average month on month increase this year has been 500,000 ounces suggesting that the bank may be planning to increase reserves by this amount on a regular monthly basis throughout the year.  This would put a projected annual reserve increase of 6 million ounces – or around 187 tonnes.

Some see this increase in gold as reserves – as they do for China which has also increased reserves by around 46 tonnes so far this year – as an ongoing move to diversify reserves away from the U.S. dollar related bonds.  This could be because they see the dollar as likely to depreciate over time, or it could be a political move in Russia’s case in particular given that relations between it and the U.S. are somewhat strained.

Enormous Gold ETF Purchases and Russian Gold Reserves

Two new articles published yesterday and today on Sharpspixley.com look at the underestimating of Russia’s latest increase in its gold reserves which come out at 700,000 ounces (almost 22 tonnes) added in January – a month when the Russian central bank has increased its reserves minimally in the previous two years, and what that means in terms of continuing central bank gold buying:

See: Russia’s January gold reserve increase much higher than previously reported

The second article comments on the almost totally-ignored-by-the-media enormous gold purchases into the USA’s biggest gold ETFs – GLD and IAU – on Friday which totalled over 23 tonnes in a single day.

See: Enormous purchases into US gold ETFs go virtually unnoticed

Russia buying more gold than China. 21.8 tonnes in Dec.

The Russian central bank added 21.8 tonnes of gold to its reserves in December.  It is thus adding gold to reserves even faster than China, while the two nations between them account for around 90% of all reported central bank gold reserve increases.  To read more on this click here to access my latest article on sharpspixley.com 

Scary 2016 ahead, Russia adds gold, SGE withdrawals etc. – and Season’s Greetings

Firstly my compliments of the season to all reader’s of lawrieongold.com, which I have now been publishing for almost exactly one year – and which has achieved just short of 100,000 page views over the period.  Thanks for following.

Here are some pointers to articles I have published on Sharpspixley.com – one of the best aggregators of precious metals news and comment available – in the past few days:

Scary year ahead. Should we be buying gold and silver:  Portents for 2016, according to a number of well-respected observers – are beginning to look decidedly scary. Will this turn the investment sector back into buying gold and silver?

Russia adds another 21.8 t gold and 46t more drawn out of China’s SGEThe Russian central bank has been continuing its gold buying spree increasing its holdings by around 22 tonnes, while China’s SGE sees physical gold continuing to be withdrawn at a strong level

And one you may not have seen, published on Seekingalpha.com pointing to the potential of an investment in the GDXJ if gold and silver do make something of a recovery in 2016: GDXJ- Limited Downside And Great Upside Potential In A Rising Gold And Silver Price Scenario

 

Dearth of gold articles!

Apologies for the apparent dearth of gold and precious metals articles from me published here this week.  Its not that I haven’t been writing – I have – but most of my work in the past week has been going direct to Mineweb – my main source of income –  so you can still read my thoughts and comments on what’s happening in gold and silver – and sometimes in other metals too – (notably platinum in the past week) so you can always read them there.

Here follow links to some of my recent Mineweb articles.  I’d hate to deprive you of my thoughts however obscure they may be!  Apologies if you have already read all or any of them

China gold demand up 17% ytd

Russia cools gold reserve additions in January

Platinum price puzzles

Can platinum regain its premium over gold in Q2-Q3?

Have the big banks been manipulating gold and silver prices?
 African mineral development risk: The best and worst nations

And my latest – published today:

HK January gold exports to China confirm strong demand

Russian Central Bank continues to build its gold reserves

Russia’s Central Bank has reported it has further expanded its national gold holdings in December, contrary to speculation that it may have had to sell gold to protect the ruble.  to read this and other key mining and metals articles on Mineweb.com click here

Lawrie Williams

It had been suggested last month that Russia would have to sell some of its gold reserves – the World’s fifth largest national central bank holding (ignoring the IMF’s holding) – to help prop up the ruble.  The Russian currency has been being driven down, almost in freefall for a time, by the unholy alliance of drastically falling oil and gas prices coupled with U.S. and European sanctions over the Crimea annexation and possible Russian involvement in the continuing uprising by pro-Russian rebels in Eastern Ukraine.

But, the opposite has been the case.  The Russian Central bank announced yesterday that its gold reserves grew by a further 600,000 ounces (18.7 tonnes) in December – the ninth successive month of gold reserve increases.  Clearly President Putin is a believer in the ultimate economic benefits of a strong national gold holding – particularly if some kind of global reserve currency realignment lies ahead in the relatively near future.

As a Reuters report points out, Russia has now more than tripled its gold reserves in the past 10 years, even as it recently has presumably had to use some of its its international currency reserves to defend the ruble with the national economy having been driven to the brink of recession. The ruble slid almost 50 percent in the past 12 months which makes the nation’s gold reserves ever more important to its global economic status.

Table 1.  World Central Bank Gold Reserves as reported to IMF

Rank Country/Organization Gold holdings
(tonnes)
1  USA 8,133.5
2  Germany 3,384.2
3  IMF 2,814.0
4  Italy 2,451.8
5  France 2,435.4
6  Russia 1,206.8
7  China* 1,054.1
8   Switzerland 1,040.0
9  Japan 765.2
10  Netherlands 612.5

Source: World Gold Council, Mineweb

*China is widely believed to hold substantially higher gold reserves than those reported to the IMF as shown above.

Russia does not need to go out into the open market to buy this amount of gold.  It was the world’s third largest gold miner in 2013, the most recent full year for which figures are currently available.  The nation’s mines thus currently produce perhaps a little more than the 18.7 tonnes which have been moved into reserves, so that suggests that the country, like China, is not exporting its gold production, but accumulating it.

Table 2. Top 10 World Gold Producing Countries

 

Rank Country 2013 output (tonnes)
1 China 439
2 Australia 265
3 Russian Fed 249
4 USA 231
5 South Africa 182
6 Peru 179
7 Canada 125
8 Mexico 104
9 Ghana 102
10 Indonesia 96
Global 3009

Source: Metals Focus, Mineweb

2014 figures are not likely to have changed significantly from those shown in the table above.  Russia is estimated to have raised gold output during 2014 – first quarter figures were particularly strong – perhaps sufficiently to challenge Australia for the No. 2 slot, although Australian production may also have risen by enough to hold off the challenge.

 

Russia bought yet more gold in November

Latest figures from Russia’s central bank show that it purchased a further $720 million dollars worth of gold in November – which equates to around 18 tonnes at the prices prevailing that month.

As we noted in a previous article here – Is Russia really on the ropes: Could it sell its gold? – there has been speculation that Russia could liquidate some of its gold reserves – currently sitting at a little under 1,200 tonnes, worth approximately $45 billion at the current gold price.  However this is probably unlikely given President Putin’s strong positive feelings about the place of gold in any future currency realignment.  Indeed such a realignment may, perhaps through the ‘law’ of uninteneded consequences, be being brought ever nearer through what looks like a concerted effort by the West to destabilise Russia’s economy as punishment for its actions in Crimea and south eastern Ukraine.  What this has done is force Russia to set up bilateral trade deals with more friendly nations, notably China and former Soviet union satellites, bypassing the dollar, and also setting up its own version of the SWIFT international payments system in case the U.S. tries to freeze it out from using it.  Anything which reduces the use of the dollar in global trade will likely bring the day when a new reserve currency (or perhaps group of currencies) will come about.

Koos Jansen, now writing for http://www.bullionstar.com, has been great in picking up material from non English language statements by key figures which somehow seem to be completely missed by most mainstream Western media.  In his latest post on the bullionstar site he publishes an exchange of questions and answers between President Putin at his annual press conference only yesterday, and Russian journalist Vyacheslav Terekhov of Interfax, at which the Russian President stated categorically that the Russian Central Bank “should not hand out our gold and foreign currency reserves or burn them on the market, but provide lending resources”  For the full article click here.

Again as we pointed out in yesterday’s article on the Russian economic situation, 50 years of sanctions against Cuba have still not brought that country to its knees.  Yes its people may lack the wealth and ‘stuff’ that most Western countries’ citizens take for granted, but they are still happy to support their leader’s policies when they have the continuing perception that it is the wicked USA which causes the problems.  This has served to unite the people behind the government rather than rise up against it.  So it is with Russia, which has an enormously more self-contained economic system than Cuba had when U.S. sanctions were first imposed, and it also has a people who have lived through many years of economic deprivation before and come through them, perhaps not happily, but stoically.  Support for President Putin and his strong-man policies seems to be overwhelming as long as the American bete noire is out there to be blamed for any deprivations suffered.