· Gold Drops from Seven-Week High as Investors Weigh Fed Comments
Gold dropped from the highest level in seven weeks as investors weighed the probable timing of the first U.S. interest rate increase since 2006, with one Federal Reserve policy maker saying that move before year-end was justified while others differed.
Bullion for immediate delivery lost as much as 0.5 percent to $1,157.70 an ounce and was at $1,158.13 at 9:21 a.m.in Singapore, according to Bloomberg generic pricing. Prices rose for a second day on Monday, gaining to $1,169.09, the highest since Aug. 24.
Bullion investors are tracking comments from U.S. central bankers to figure out when the Fed will start tightening, with prices rebounding from a five-year low in July amid speculation the onset of higher borrowing costs will be pushed back. Atlanta Fed chief Dennis Lockhart argued Mondaythe improving economy justified a move in 2015. Still, Fed Governor Lael Brainard cautioned against raising rates prematurely and Chicago Fed President Charles Evans repeated that he favored a delay to mid-2016.
Silver, platinum and palladium prices also retreated as the dollar stabilized after dropping for three days. The chances of a rate liftoff in December are below 40 percent, futures data show.
Platinum extended its slump to the lowest in more than six years amid concerns demand from auto makers will slow as investigations into the Volkswagen AG scandal deepen. Gold was little changed.
Volkswagen cars with diesel engines rigged to cheat on diesel emissions tests are being pulled from markets in Spain, Switzerland, Italy, the Netherlands and Belgium, while prosecutors in Sweden consider opening an investigation on potential corruption. About 42 percent of platinum demand comes from its use in pollution-control devices in diesel engines, according to Morgan Stanley.
The widening investigation is reducing the appeal of the vehicle type at a time when the Federal Reserve is expected to raise borrowing costs, limiting American consumers’ capacity to get car loans. Platinum prices are heading for a fifth straight quarterly loss, the longest streak since 1991.
“With the situation with Volkswagen, a lot of analysts are looking for weaker automative sales,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview. “If interest rates rise, demand for cars will wane, and there will be less demand for platinum.”
Platinum futures for January delivery fell 0.5 percent to $917.90 an ounce on the New York Mercantile Exchange, after touching $899.60, the lowest for a most-active contract since December 2008. Palladium traded steady.
Gold futures for December delivery slipped less than 0.1 percent to $1,131.20 an ounce on the Comex in New York. Prices are set for a fifth straight quarterly loss, the longest losing streak since 1997. Silver gained.
Platinum is trading at a discount of about $213 to gold, the biggest since August 2012.
Some investors who had been betting on platinum outperforming gold are now exiting that trade, David Govett, head of precious metals at broker Marex Spectron Group in London, said by telephone.
Gold Holds Biggest Decline in a Month as Fed Rate Increase Looms
Goldheld the biggest drop in a month and headed for a fifth quarterly loss on expectations the Federal Reserve will raise U.S. interest rates before the year is over, countering demand for a haven amid a commodity and equity slump.
Bullion for immediate deliverytraded at $1,132.82 an ounce at 9:48 a.m. in Singapore from $1,131.95 on Monday, when it dropped 1.2 percent, the most sinceAug. 26, according to Bloomberg generic pricing. A fifth quarterly decline would be the worst run since 1997.
The Fed will probably increase interest rates later this year and tighten policy gradually thereafter, New York Fed President William C. Dudleysaid Monday, echoing the sentiment of Chair Janet Yellen that an uncertain global outlook won’t postpone liftoff into 2016. Gold fell on Monday even as a selloff deepened in global equities and commodities markets.
“Gold is no longer exactly a safe haven,” Bernard Aw, a strategist at IG Asia Pte in Singapore, said in an interview on Tuesday. “Yesterday we didn’t really see a big jump in risk aversion despite all the selloff in U.S., European equity markets.”
Gold declined from the highest level in a month after Federal Reserve Chair Janet Yellen said that the U.S. central bank is on track to raise interest rates this year, boosting the dollar.
Bullion for immediate delivery dropped as much as 0.7 percent to $1,146.38 an ounce and was at $1,146.88 at 11:45 a.m.in Singapore, according to Bloomberg generic pricing. The metal climbed 2.1 percent to $1,153.97 on Thursday, the highest close Aug. 24, and remains up for the week.
Bullion is on course for a fifth quarterly loss amid prospects for the first rise in U.S. borrowing costs in almost a decade. Yellen spoke a week after the Fed left its benchmark federal funds target near zero, saying on Thursdaythat she and most of her colleagues expected to tighten policy this year. Higher rates curb gold’s appeal as the metal doesn’t pay interest or give returns like competing assets such as bonds and equities.
“It’s not surprising to see gold give back a couple of dollars after what Yellen said,” Jordan Eliseo, chief economist at trader Australian Bullion Co. in Sydney, said by phone. “There’s every chance this entire tightening cycle might only have two or three hikes, maybe four hikes completely, so I don’t think anyone should kid themselves that the era of easy money is over.”
Fed fund futures show traders now see a 49 percent chance of a rate increase in December from 64 percent on Sept. 16, the day before the Fed announced its decision.
Assets in exchange-traded products rose 4.35 tons to 1,522.34 tons as of Thursday, data compiled by Bloomberg showed. The holdings, little changed since early September, dropped to a six-year low last month.
Bullion of 99.99 percent purity climbed 0.9 percent to 235.90 yuan a gram ($1,150.52 an ounce) on the Shanghai Gold Exchange. Platinum for immediate delivery lost 0.8 percent to $947.30 an ounce and tumbled Wednesdayto the lowest since January 2009. Palladium is up 7.6 percent this week, headed for the biggest weekly gain since March 2013.
Thegold market has gone quiet before the Federal Reserve meeting.
Volume was about 47 percent below the 100-day average for this time of day, and Tuesdaysaw the lightesttrading all year, according to Comex data compiled by Bloomberg. Gold futures for December delivery slipped 0.5 percent to settle at $1,102.60 an ounce at 1:44 p.m. on the Comex in New York.
While traders see only a 28 percentchance that the Fed will raise interest rates after a two-day meeting that begins on Wednesday, investors may get an indication of the schedule for future increases. The probability of an increase climbs to 62 percent for December, based on futures data compiled by Bloomberg. Higher rates curb the allure of gold by making it less competitive to assets that pay a yield, like bonds.
“Traders and market participants seem to be frozen in some strange cryogenic world, while they wait for the Fed to bring them back to life,”David Govett, head of precious metals at broker Marex Spectron Group in London, said by e-mail. “I really don’t think we are going to see any major moves before the announcement.”
Market swings are also diminishing before the Fed’s meeting, with a measure of 15-day volatility falling to the lowest in almost a month on Tuesday. On Monday, spot prices traded within a range of $6.90, the smallest since July 14.
“Most of the markets are waiting for the Fed decision on interest rates,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said in a telephone interview. “That uncertainty is keeping investors away from most of these markets, especially gold.”
Aggregate volume for Comex gold futures was estimated at 68,115 contracts on Tuesday, the smallest since Dec. 24 and less than half the average this year. Prices have fallen 6.9 percent in 2015. MitonOptimal Group, said by phone from Cape Town. “It’s been a tough few weeks for commodities traders, and I think there are a lot of guys out there with red paint all over their numbers, so it’s no surprise they prefer to err on the side of caution.”
Silver futures slipped on the Comex, while platinum, and palladium gained on the New York Mercantile Exchange
There are a variety of brands available for both silver and gold, so the question on everyone’s mind is:-
Does brand matters?
There are refinery that cast or mint their own brands, selling it as close to spot prices as possible, there are private mints and are government / public mints, there are financial institutes that forge their own brands on gold / silver that is refined by other 3rd parties. There are European brands, Australia brands, Chinese brands etc etc.
Do they matter?
It actually depends on investors’ preferences. Some brands like RCM (Royal Canadian Mint) is reputed with very pure silver at the lowest premium in the market. Certain other brands, would demand a higher brand premium over the metal value of the bar / coin.
Bar / Coin = Metal Value + Premium
As the metal value depends on the spot prices of the gold and silver, you are essentially paying the premium of the brand. RCM has low premium. Certain brands like Panda series from China Mint has a much higher premium for its coins.
Whether it is worth it, it depends on the investor prospector. For example, CML (Canadian Maple Leaf) and ASE (American Silver Eagle) has very low premium over their coins, while Chinese Panda has a high premiums. This premium may not be fixed.
For example, if you have bought CML or ASE in 2011 or 2013 because it costs a lot less than the Chinese Panda series, the current value of CML and ASE in 2015 is still roughly the same as the metal value and the same low premium. Those collectors with the Panda series would be laughing their ways to the banks as the Panda’s premiums has rocketed. Of course this is not a sure thing, so collectors may have to judge their risk-reward ratios.
Another factor is the recognition of the brand. For example PAMP Suisse is highly recognised, especially by the elder generation. Hence PAMP Suisse is seen as a more luxurious brand.
Lastly, in Singapore, for investment silver and gold that investors can enjoy stacking up without paying the extra 7% GST, they have to patronise only certain brands that are considered IPM (Investment Precious Metals). These brands has to be under LBMA’s (London Bullion Market Association) Good Delivery lists. As such, it is important for stackers to buy silver or gold from these lists as you would be buying them a lot cheaper than if you were to buy a jewellery-branded gold bar that attracts 7% GST.
Except for numismatic bars and coins set, all the silver and gold in Gold Silver City are all classified under IPM, and hence has NO addition GST on them. It would be much more financial prudent to start investment without paying this extra 7% tax.
Many new stackers would ask, be it Gold or Silver,…
Do I stack in coins or do I stack in bars?
Coins generally are a favourite among collectors. They comes in different size, from 0.10, 0.25. 0.5, 1, 2 ounces for gold coins, and more common of 1, 2, 5 ounce for silver coins (silver has a wider range from 0.5 ounce to also 1kg or 10kg silver coin, but less commonly bought)
Coins are easy to stack, since you can stack a brunch of them in easily available tubes. And as we use coins in our everyday currency, coins gain legitimacy and recognition easily.
As most coins are in the common 1 oz size, it is also fairly standardised and easy to compare in value.
And there are many different designs and branding available on coins, such that certain coins’ design attracts a fatter premium. These wide range of designs available on coins allow collectors to diversify and beautify their collections, crossing their investment portfolio as an interesting hobby as well.
The biggest disadvantage of silver coins is that minted coins are prone to milkspots. These are white spots on silver bars or coins, even when you bought it fresh from the mint. Royal Canadian coins are notorious for milkspots on their coins, and generally, collectors have learnt to live with it. Do note that there are ways to remove milkspots, but most investors would not do that as it may reduce the value of the coin. Silver coins also may get “toning”, getting blackish and brown over the years due to discolouration from the oxidation.
Coins also have a bit more premium than bars. Generally you are paying for the melt-value of the metal (the spot price of the precious metals) and the brand / design of the coin. In this aspect, coins has a bit more premium that you have to pay for compared to bars.
On another note, precious metals in round shaped are only classified as “coins” if they are minted by public / government mints and declared as “legal tender”. If they are minted by private mint, they do not have legal tender, and the more correct name for them is “rounds”.
Gold bars and silver bars are common for investors to buy and stack, as they are easy to stack especially in larger volumes. The bars can come in as small as 5g or 1g for gold, and more commonly in larger sizes for stackers, such as 100g bars or 1 kilo bars for gold, or 100 oz, 1 kilo, 5 kilo etc for silver bars.
Silver bars of any size are an excellent way to invest in pure Silver while avoiding the premiums usually found on legal tender bullion coins. They are easily bought and sold, stored, stacked and counted..
Minted bars may still face milkspots, though cast bars are generally more robust and less likely to have milkspot problems. Cast bars also provide a more industrial and raw feel and appeals to some collectors.
Bars has less designs compared to coins, and heavier bars are harder to liquidate due to the weight and large monetary value.
More similar to day-to-day currencies, more standardised. Many designs available.
More premiums payable Some coins are more prone to milkspots
Less premiums, and more large size available for stacking
Less designs. Larger bars slightly more difficult to liquidate.
Gold DT Gold break out of inside day and Diff on Wed, closed off above 1,155 resistance and TL2. If Gold can hold above 1,155 and TL3 for next few days, it may test 1,224 Potential Resistance 1,224 and 1,293 Potential Support 1,155, 1,072 and 995
Silver DT Silver formed a Doji on weekly chart, resisted by TL2. Outside day is formed on daily and weekly chart, potential of a new trend Potential Resistance 15.60, 16.68 and 17.55 Potential Support 14.38, 14.22 and 12.70