China Debuts of International Gold Market Early

The launch of the international gold market in the Shanghai Free Trade Zone has been moved up 11 days to Thursday, September 18th.

This is Beijing’s next step in moving the “center of gravity” of gold price discovery from London to Asia. Contracts in this new yuan-denominated gold market can settled in cash (yuan,) or physical delivery can be taken at three different locations within the Free Trade Zone. Contracts will range in size from 100 gram to “Good Delivery” 400 troy oz (12.5kg) sizes, with the 1 kilogram contract expected to be the most popular. Most of the major players in the Western gold market have already signed on with the Shanghai Exchange.

This new bourse, run by the Shanghai Gold Exchange, gives foreign investors a chance to use “offshore yuan” to participate in China’s gold market. China is not only the world’s #1 gold-producing nation, it is also the world’s #1 gold importer. Practically no gold is exported from China, and between 2100 and 2500 metric tons was imported last year. Exact figures are hard to determine, as China keeps any gold purchases by the central bank a state secret.

gold investorIn related news, the CME Group, who runs the COMEX, Nymex, and the new silver fix, is planning to launch a 1 kg gold futures contract in Hong Kong before the end of the year, with physical delivery available. The gold association in Hong Kong has been granted a license to build a gold vault in mainland China — the first non-Chinese entity allowed to do so. The 1,000 metric ton vault will be located in the free trade zone in mainland China just opposite of Hong Kong.

In Singapore, the international 25kg gold contract that was supposed to launch this month has been pushed back to October, due to technical issues.

CPI Drop Eases Fed Fears: Morning Market Update Sept 17

Falling gasoline prices helped counteract spiraling food costs, as consumer prices in the US fell 0.2%. This is the first decline in consumer inflation in 16 months.

Precious metals are near-steady ahead of the 2pm policy statement from the Federal Reserve, and a 3pm press conference by Chairman Janet Yellen.

The dollar, which had been flat, dropped on the CPI report, but soon recovered to unchanged. European stocks are up on news of China’s new stimulus program, with the exception of the FTSC in the UK, which is flat ahead of tomorrow’s independence vote in Scotland. Indices in Shanghai and Hong Kong were up on the new stimulus plan, while the Nikkei closed slightly down on Fed policy worries.

Yesterday in the Markets

Spot gold closed up $2.20 at $1,234.90 yesterday. Silver was up three cents to $18.69, Platinum gained $3 to $1,361, and palladium grabbed $8 to close at $840.

high-interest-ratesStocks got a late boost yesterday when the Fed’s “official leaker,” Jon Hilsenwrath, reported that the phrase “considerable time” will appear once again in today’s FOMC statement regarding the timing of the first interest rate hike. The news/rumor led to the Dow hitting an all-time intraday high before closing up 100 points. The S&P 500 was up nearly 15 points, and the NASDAQ was up nearly 34 points.  The 10-year Treasury note closed flat, with yields remaining at 2.59%.

European stocks closed down over Scotland worries, before the Fed rumor was released. Brent crude was up 1.1% and West Texas Intermediate was up 2%, on rumors that OPEC was planning to cut production to support oil prices. Saudi Arabia has already cut production by 408,000 barrels a day, but Iran, Iraq, and Nigeria increased production.

Economic News Affecting Gold

The big news is the rumor that the Fed will include the phrase “considerable time” when mentioning the timetable for an interest rate increase. Wall St. has become fixated on those two words in the last week, desperate for hints on when zero interest rate policies will end. The rumor was started by Jon Hilsenrath of the Wall St. Journal, who is considered by many to be the “official leaker” of Fed policy when the Fed wants to give markets advance notice.

Stand by this afternoon to see what else the Fed says, and if Yellen says something she shouldn’t in her 3pm press conference.

China announced yesterday that it was extending 500 billion CNY ($81.5 billion) in loans to the nation’s five largest banks, to boost investment. Commodities, especially base metal like copper and iron, were lifted by the news.

This morning, the U.S. consumer price index for August was reported to have fallen by 0.2%. This is the first decline in 16 months, and is because of falling gasoline prices. Energy prices as a whole fell 2.6%, while food prices increased 0.2%. Beef prices jumped 4.2% in August, with no sign of abating. U.S. cattle herds are at their lowest levels since the 1950s, due to droughts in the West and feed prices.

Geopolitical News Affecting Gold

Scotland-voteThe geopolitical front is mostly quiet today, with the exception of the anticipation over the Scottish independence vote tomorrow. A “Yes” vote will mean very turbulent times for the UK and European markets as a whole, with France, Spain, and Belgium bracing for possible rises in calls for independence in troublesome regions of their own.

Looking Ahead

Tomorrow, we have retail sales and industrial trends in the UK (likely to be lost in the brouhaha over the Scottish vote,) and first-time jobless claims and housing starts in the U.S.

The big news of course is the Scottish independence vote.


by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News

Metals, Dollar Flat Ahead of Fed: Market Update Sept 16

UPDATE: China announces economic stimulus; stocks, oil, gold jump, dollar drops.

The Peoples Bank of China has extended a 500 billion 元 ($81 billion) standing loan pool to the nation’s five largest banks. Direct investment in the Chinese economy has dropped to four-year lows, and this loan pool is intended to spark more investment.

Gold was up over nearly $10 an ounce on the news, before easing slightly, and Wall St. pulled into positive territory.

Traders are moving to neutral positions ahead of the conclusion of the Federal Reserve Open Market Committee (FOMC) meeting tomorrow.

Gold saw increased physical demand in Asia last night due to the price dip, but both silver and gold eased to unchanged in morning trading in New York.

The dollar is trending just under yesterday’s close, while the Russian ruble hit a fresh all-time low against the greenback. The dollar is flat against the euro, but gained slightly on the yen and yuan, with the dollar buying 107 yen in Tokyo. European stocks are down over Fed trepidation and worries over the Scottish vote on Thursday. U.S. stocks opened lower, but rose to unchanged, The Dow and NASDAQ have both sunk back into negative territory, while the S&P 500 is up less than 2 points.

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China Data, Fed Weigh on Markets: Morning Market Update Sept 15

Gold was up modestly this morning as as Asian buyers stepped in to buy the recent multi-month low. It held steady in London trading, into the COMEX open.

Silver has shown a lot of volatility within a very tight range, signalling low volumes on the market. It was basically unchanged into the New York trading session. Platinum is just above unchanged, while palladium is slightly higher.

At 10am in New York, spot gold was up $6.20 to $1,234.50, silver was down two cents to $18.59, platinum was down a dollar to $1,362, and palladium was up $3 to $834. Crude oil futures hit a two-year low in early trading. a bearish sign for gold.

Chinese stocks are down as manufacturing output for the Middle Kingdom fell to the lowest level since the 2008 financial crisis. August output grew 6.9%, compared to 9.0% in July and an expected 8.8%. Japanese markets were closed for holiday today. European stocks had gained slightly on merger talk between the parent companies of Miller Beer and Budweiser, but fell after the release of factory data in the U.S.

factoryU.S. factory output for August was reported at -0.4%, after rising 0.7% in July, due to plummeting car production. Automobile production was -7.6% after a 9.3% increase in July. This is the first decline in U.S. factory output since the “polar vortex” of January. Wall St. opened down, with the NASDAQ rapidly plunging over .8% as tech shares also fell. The report also dropped the morning dollar rally like a mallard during duck season, from 84.4 to under 84.2 on the DXY index.

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Markets Brace for Heavy Week Ahead: Morning Market Update Sept 12

Correction: The Shanghai Gold Exchange international contract will begin September 29th, not September 18th.

Markets are bracing for a heavy week ahead, as the Scottish independence vote and FOMC policy meeting are on tap.

Precious metals eased again in Asia, despite gold hitting a 7-1/2 month low. Speculation is growing that Chinese institutional buyers are being encouraged to delay purchases until next Thursday, when the international bourse at the Shanghai Gold Exchange opens. The Chinese government will want this momentous occasion to go well, as it seeks to have more say over the international gold price. One indication of the market power of China is that the new silver fix is determined in trades of lakh (100,000 oz,) instead of in the former 1000 oz Good Delivery bars.

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1989 1oz Gold Eagle NGC MS70 Goes for $22,550

This 1989 MS70 American Gold Eagle sold for $22,550 at the Sept 7 Great Collections auction (CoinWorld)

CoinWorld reports that the first 1989 American Gold Eagle 1oz coin graded MS70 to appear at auction has been sold for $22,550. There are only eight examples of this coin graded a “perfect” MS 70 by Numismatic Guaranty Corporation, and this is the first one to change hands on the open market.

Bidding on the coin started at $1.

The final price is almost twenty times the price for a MS69 grade coin of the same type and year. Oh what a difference that last point makes!

Jobless Numbers Break Dollar Rally, Gold Retests Lows: Market Update Sept 11

First time jobless claims in the U.S. unexpectedly rose to a two-month high. 11,000 more people filed initial claims for unemployment last week than in the previous week, for a total of 315,000 people shown the door. This snapped the dollar rally, and also sent U.S. and European stocks lower.

The Nikkei closed at an 8-month high, as the weak yen helped exporters, but a decline in Shanghai stocks pulled the Hang Seng in Hong Kong down to a one-month low.

Gold and silver both broke down through support lines and June lows, and are declining despite the weaker dollar. Gold is down .75% and silver is down 1.5% in midday trading.

The PGMs are also solidly lower, with platinum down .5% and palladium down 1.5%.

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Fed Fears Roil Markets Again: Morning Market Update Sept 10

Wall St opened in positive territory this morning, but immediately dropped into the red. Global stocks (with the exception of the Nikkei) are also in negative territory, with the Hang Seng losing 485 points, almost 2%.

The dollar is trying to get into positive territory this morning, but hasn’t managed to do so yet.

The markets are all in a tizzy over the San Francisco Fed’s report that investors do not realize how quickly the Fed is going to raise interest rates.

Precious metals are down this morning by about a half percent from Tuesday’s New York close, also feeling the fear of interest rate hikes. Higher rates actually having a negative effect on gold will depend on if the Fed rate hikes keep up with inflation (something many analysts think will not happen.) As long as interest rates are below inflation, gold does not incur an opportunity cost to hold.

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