Indian Gold Imports At Highest In 15 Months

September 10, 2018

Strengths

·         The best performing metal this week was palladium, down 0.31 percent. Gold traders and analysts are bullish on the yellow metal for a third week in a row, according to a weekly Bloomberg survey. Although silver has fallen 16 percent so far this year, its continued losses have spurred physical demand. The U.S. Mint reported its strongest silver sales so far this year with 1.53 million one ounce American Eagle Silver coins sold, a 72 percent increase from July. Annually, silver sales were up almost 50 percent from August 2017, reports Kitco News. The Perth Mint also reported strong numbers with sales of gold coins and minted bars surging 30 percent to 38.904 ounces in August. Silver sales rose nearly 7 percent from July and about 33 percent from a year earlier.

·         Gold imports to India, the world’s second largest consumer of the yellow metal, more than doubled in August to their highest level in 15 months. Demand has been weak in India so far this year with imports falling 12.9 percent from a year earlier to 532.1 tonnes in the first eight months, according to data compiled by GFMS. The World Gold Council said that demand is expected to improve throughout the rest of the year as the government takes steps to boost farmers’ incomes, which would boost rural buying power.

·         The Bank of Mongolia reported on Thursday that is has purchased 12.2 tons of gold in the first 8 months of this year, with a target of buying a total of 22 tons of gold by the end of 2018. Most of the gold purchased is locally mined, with gold miners submitting just over 20 tons to the central bank last year and total Mongolian production remaining below 21 tons. Central banks purchasing gold demonstrates continued support for gold as a strong reserve currency.

Weaknesses

·         The worst performing metal this week was silver, down 2.54 percent. Although the U.S. Mint reported positive news for silver sales, they also announced subdued gold sales. Physical demand for gold coins fell to a four-month low in August. 21,500 ounces of gold in various denominations was sold, which is a 38 percent decline from July. According to the World Gold Council, holdings in gold-backed ETFs fell by 40 tonnes in August, or down 3 percent relative to July, for the third consecutive month of declining assets under management. Global outflows were led by North American funds, which lost $1.65 billion.

·         On Monday, the highest court in Guatemala confirmed the suspension of Tahoe Resources’ mining licenses at its San Rafael unit, reports Kitco News. “The Constitutional Court upheld the suspension of licenses at Tahoe’s Escobal mine, one of the world’s biggest silver mines, and at the company’s smaller Juan Bosco mine,” the article reads. The initial suspension was in July 2017 when an anti-mining group alleged that the energy and mining ministry did not consult with the Xinca indigenous people prior to awarding the license to Tahoe, Kitco continues.

·         According to the World Platinum Investment Council’s latest quarterly report, global platinum demand contracted by 8 percent from a year earlier in the second quarter of this year. Automotive demand fell 5 percent, while jewelry demand was unchanged. However, with demand weaker and supply little changed at 1 percent growth, the platinum market had a surplus of 340 koz. Overall forecasts for the year estimate both supply and demand for the precious metal will fall by 2 percent each.

Opportunities

·         The Reserve Bank of India (RBI) has made its first gold purchase in nine years, reports Bloomberg. The bank purchased 8.46 tonnes of gold in financial year 2017-2018. According to its latest annual report, RBI held 566.23 tonnes of gold as of June 30, 2018, compared with 557.77 tonnes as of June 30, 2017, the article continues. A primary reason for this purchase was the depreciation of the rupee against the dollar, the report notes.

·         A survey of 174 private banks, family offices, wealth management advisers and other market experts in Asia reveal the latest recommendation by advisers to Asia’s super rich clients. “Most advisers in the survey – 62 percent – said their clients should or maybe should increase their weighting in gold, versus 38 percent who said they should not,” reports The South China Morning Post. According to the survey, the advisers think their clients should be taking advantage of price declines to buy gold amid volatile global markets and U.S.-China trade tensions.

·         Coeur Mining has declared commercial production at its silver-zinc-lead mine in British Colombia, which it gained after purchasing Silvertip in October. The company has updated company-wide output guidance as a result and projects 36.1 to 39.5 million silver-equivalent ounces, reports Kitco News. Randgold Resources has resumed operations at the Tongon gold mine after management lifted a lockout due to a protracted legal strike. Negotiations resulted in an agreement in which workers are being re-employed in phases as various sections of the mine start back up. Goldcorp said this week that it has achieved “significant progress” on key permitting and project milestones that are a part of the company’s five year plan to increase gold production and reserves by 20 percent. President and CEO David Garofalo said that Goldcorp has moving projects forward “on time and on budget through the permitting and development process.”

Threats

·         A stronger U.S. dollar, paired with rising U.S. interest rates, has curbed the appeal of “non-interest bearing assets such as precious metals,” reports Bloomberg. In addition, worries over industrial demand because of trade disputes and emerging market turmoil have added to pressure on silver, the article continues. Silver has experienced a 16 percent decline this year, with the ratio of gold to silver price hitting its highest level since October 2008.

·         The Argentinian government has enacted a temporary export tax that could likely negatively impact precious metals. BMO writes that while details are still emerging, it is known that precious metals bars will be subject to a 4 peso tax on every U.S. dollar of revenue. This tax has been implemented in an effort to balance the budget in the face the Argentina peso falling more than 50 percent so far this year. Mining companies are still assessing the potential impact on profits. BMO estimates that earnings-per-share will decline on average 7 percent for seven of the precious metals miners in the country.

·         The Bureau of Labor Statistics released August numbers showing that the U.S. economy added 201,000 jobs and average hourly wages increased by 0.4 percent. The data was better than expected and a growing economy continues to support a stronger U.S. dollar. George Gero, managing director with RBC Wealth Management commented on the jobs numbers calling them “strong economic numbers that support the dollar and weaken gold temporarily”. Gold historically performs well during the month of September, however it might continue to struggle this month. In its monthly commodity outlook, ITNL FCStone writes that they believe “September likely will be another messy month for gold as in addition to the unresolved trade issues that threaten to push the dollar higher, the market will have to contend with yet another Fed rate increase.”

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Frank Holmes is the CEO and Chief Investment Officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm’s chief investment officer in 1999. Under his guidance, the company’s funds have received numerous awards and honors including more than two dozen Lipper Fund Awards and certificates. In 2006, Mr. Holmes was selected mining fund manager of the year by the Mining Journal. He is also the co-author of “The Goldwatcher: Demystifying Gold Investing.” Mr. Holmes is engaged in a number of international philanthropies. He is a member of the President’s Circle and on the investment committee of the International Crisis Group, which works to resolve conflict around the world. He is also an advisor to the William J. Clinton Foundation on sustainable development in countries with resource-based economies. Mr. Holmes is a native of Toronto and is a graduate of the University of Western Ontario with a bachelor’s degree in economics. He is a former president and chairman of the Toronto Society of the Investment Dealers Association. Mr. Holmes is a much-sought-after keynote speaker at national and international investment conferences. He is also a regular commentator on the financial television networks CNBC, Bloomberg and Fox Business, and has been profiled by Fortune, Barron’s, The Financial Times and other publications.  Visit the U.S. Global Investors website at http://www.usfunds.com.  You can contact Frank at: editor@usfunds.com.

China has only 2% of its Total Foreign Reserves in gold.