No Significant Capital Flows Into Gold From So Called ‘PIIGS’ Yet

  on March 28 2013 11:17 AM
Canadian $ 1,000.000 Maple Leaf with a weight of 100 kilos and a diameter of 53cm is on display at Dorotheum auction house in Vienna June 16, 2010.
Canadian $ 1,000.000 Maple Leaf with a weight of 100 kilos and a diameter of 53cm is on display at Dorotheum auction house in Vienna June 16, 2010. Reuters

GoldCore offices are closed this Friday and Monday, March 29th and April 1st, for the Irish national holidays of Easter.  

Today’s AM fix was USD 1,602.50, EUR 1,253.13 and GBP 1,057.41 per ounce. Yesterday’s AM fix was USD 1,591.00, EUR 1,243.75 and GBP 1,052.39 per ounce. Silver is trading at $28.60/oz, €22.44/oz and £18.97/oz. Platinum is trading at $1,583.00/oz, palladium at $768.00/oz and rhodium at $1,200/oz. Spot gold and silver closed at $1,606.40/oz and $28.79/oz.

Precious Metals and Currencies Table – (Bloomberg)
Gold continues to consolidate above $1,600 an ounce today supported by widespread concerns that the expropriation of Cyprus deposits could become a blueprint for solving banking crises in the Eurozone. This is increasing gold's safe haven appeal and will continue to do so in the coming months. As will the real risk of deepening financial instability in the euro zone stoked by the crisis in Cyprus where hundreds of anxious depositors are withdrawing as much of their savings as they can after their banks reopened. Depositors in Luxembourg, Slovenia, Spain, Italy, Portugal and Ireland will be made more nervous by the scenes of queues outside banks in Cyprus today. Gold is on track for a 1.6% gain in March, its first monthly rise in six.  For the quarter, gold is 4.3% lower in dollar terms and 1.4% lower in euros. However, signalling that the demise of gold is greatly exaggerated, gold is 3.7% higher in Japanese yen and 2.6% higher in sterling.

Gold in USD, YTD – (Bloomberg)

The quarter or year to date charts suggest that gold is consolidating and given that the major fiscal, financial and monetary challenges that continue to face the EU and all major economies, we continue to be believe gold remains in a secular bull market.  Currency debasement is set to continue and this allied to the risk of wealth confiscation makes physical bullion a vital asset to own.

Gold in Sterling, YTD – (Bloomberg)

GoldCore have been very busy on the sell side in recent weeks which suggests we are close to a bottom. This week was the first week in three where there were more buyers than sellers. There were a lot of new account openings after the Cyprus crisis began and in recent days, particularly from Spain and Italy, but there have been no huge flows into gold and nothing on the scale of the Lehman panic.  There are real and growing concerns out there among the European public but as of yet the mass of retail and savers and investors are not concerned enough or more likely not aware enough to diversify into gold.

Gold in Euros, YTD – (Bloomberg)

Whoever thought we'd see the issue of safety of deposits come into question? We did. Since the Lehman Brothers debacle and near collapse of the world’s financial system, we said that there was a possibility that what happened in Argentina and Russia - capital controls including deposit withdrawal restrictions  and other draconian measures-  would likely be seen in massively indebted periphery nations. However, we thought such regressive moves would come from misguided and desperate national governments - not from supranational organisations such as the EU and the IMF and from the ECB. We believe that growing awareness of the risk for individuals and businesses of keeping all their savings and capital in deposit accounts and a gradual realisation of the importance of diversification will lead to significant capital flows into gold. As one astute financial journalist said to me “ ‘cash in the bank’ doesn’t have quite the same ring to it anymore.” In most European countries, except for Germany, Austria and Switzerland, cash has been ‘king’ for some time, but that has now changed. This is especially the case as the expropriation was not the doings of the Cypriot government rather it was that of the Troika - the EU, the ECB and the IMF.  Gold is financial insurance which protects against inflation and expropriation of financial assets - such as pensions and now deposits. Recent events show the wisdom of the old Wall Street adage to always keep 10% of one's wealth in gold and hope it does not work. 

NEWS   Gold holds above $1,600 as Cyprus fallout supports - ReutersCyprus Banks to Reopen: container trucks loaded with cash arrive - ReutersRussia to ban cash transactions over $10,000 - ForbesCentral Banks Bought Just $3 Billion Of Gold In 2013: UBS - Forbes

COMMENTARYHow Safe Are Your Savings? – The Tuam HeraldRussia, South Africa plan OPEC-type cartel for platinum and palladium – Market WatchFaber: Deposits At Risk Everywhere Including US As Seen With MF Global - BloombergCyprus Shows Your Savings Will be Stolen! UK Theft is by Means of High Inflation – Market OracleKeiser Report: ‘Yes, No, Maybe’ World Order – Max Keiser US National Debt - Nearly $17 Trillion – U.S. Debt ClockGold Price Isn't Irrelevant But Financial Journalism Is - GATA For breaking news and commentary on financial markets and gold, follow us on Twitter.

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