first majestic silver

Japan Gold Sales Jump 249%

April 3, 2014

Recently the gold price hit a new seven-week low and hence posted its first monthly drop of 2014.

Bullion is out of favour at the moment thanks to riskier assets such as equities gaining popularity. A rally in equities markets, in both 2013 and into 2014 has seen demand for gold bullion fall. Gold has remained under pressure in the last month thanks to strong US data and comments from Janet Yellen, over the possibility of increasing interest rates in 2015.

Whilst China’s gold demand has been weak recently and Shanghai prices have been trading at a discount to global spot prices, there are signs that demand has been picking up over the last few days. For instance, last week gold for immediate delivery, in Shanghai was at a discount of £1 yesterday, compared to $8 just a week earlier.

Yesterday the world’s largest gold ETF, the SPDR gold trust, saw holdings fall 3.89 tonnes to 813.08 tonnes. This was the largest outflow in more than a month. 

Precious metals experts Edel Tully and Joni Teeves at UBS, believe the gradual fall in the gold price (around $100 in the last fortnight) is an encouraging sign. How can any fall in the gold price be encouraging? Whilst the gold market has become ‘increasingly vulnerable for a washout’ the analysts believe that the correction ‘has been relatively orderly’ thanks to ‘the hawkish tilt from the FOMC combined with easing safe haven demand.’

As the World Gold Council illustrated in a report last week; there is a gradual shift in the sentiment around gold and an acknowledgement that gold investment is a good way to have some portfolio diversification and to ‘insure against tail risks.’

Five-fold increase in gold demand for March

Yesterday we reported on a jump in gold sales, in Japan, thanks to an upcoming increase in sales tax. According to Bloomberg Japan’s biggest bullion retailer, Tanaka Kikinzoku has reported a fivefold increase in gold demand, in the first 27 days of March. Bloomberg reports, ‘sales for the quarter through March 27 were 249 percent higher than the same in three months in 2013.’ Not only has the impending tax rise spurred sales, but so has the decline in the gold price.

A mixed bag of precious metals

The silver price also finished March with its biggest single price drop, since November 2013. Last month it fell by 7%. This is disappointing given its near 16% climb earlier this year. With even the most active contracts down 6.5%, year-to-date and quarterly gains are just 2.5%.

The platinum price also suffered in March, however not to the extent seen by both gold and silver. The industrial precious metal fell by 1% last month, its first monthly loss since November 2013.

The palladium price, however, tells a completely different story to that of its contemporaries. Last month the metal gained 4.4% thanks to worries over upcoming sanctions on Russia and the strikes in South Africa; both of which are likely to see supply tighten.


Jan Skoyles

The world’s gold supply increases by 2,600 tons per year versus the U.S. steel production of 11,000 tons per hour.
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