Weaker Metals Blamed on French Results

On the physical front in gold, the only encouraging news to hit the wires of late has been the removal by the Indian government of the excise tax of 0.6% on non-branded jewellery that had gone into effect on March 16 and which caused a massive strike among that country’s bauble sellers. Finance Minister Mukherjee however left a proposal to double the import tax on gold to 4% on the table.

Would-be Indian buyers have to already cope with record (near-30,000 rupees per 10 grams) local gold prices. Consider the metric that reveals that gold demand in Mumbai is currently running at around 250 kilograms per day as opposed to as much as the one metric tonne per day that was apparently being consumed one year ago. This “love trade” has, indeed, been jilted.

Finally, on the analytical and valuation front for gold, we heard from former Kitco commentator and veteran market observer Paul van Eeden. One of the most dispassionate and cogent gold market analysts to date, the President of his own private holding firm, Mr. van Eeden has recently tendered that the real (as opposed to nominal) value of gold lies somewhere in the vicinity of $890 an ounce.

That figure is eerily close to the “fair value” number of $878 currently being tracked by another veteran gold market analyst, Mr. Ned Schmidt. Having correctly predicted the rise in gold to the four-digit spectrum as well as the correction to the high $600s that followed in 2008, Mr. Van Eeden’s perspectives are not to be dismissed out of (perma-bullish) hand. 

Analysis:

It could just turn out to be the case that this Sunday marked a pivotal point in the growing danger of an eventual dissolution of the common currency. Certain voters in certain countries have indicated that they are less than amenable to accepting what they see as the terms of a new, this time, German “diktat” on matters economic, and they have sent a clear signal to Berlin as to where they stand.

We do not hold out hope for the reaction of the financial markets to be very positive about such body language, to say the least. The rise of the “marshmallow man” and the ouster of the “president of bling-bling” could have ramifications which have not yet been pondered. One such potential fallout involves bankers and the wealthy in France.

However, France was not the only place where euro-unfriendly news issued forth from. Greek voters flexed their own political muscles over the weekend and the result was a categorical rejection of austerity measures and an overwhelming approval of anti-bailout ones. The bottom line is that in the wake of the financial crisis that shook the continent, the continent appears to have taken a turn into a direction that is undeniably classifiable as “the left.”

The barricades have been erected. All that remains to be seen is whether the equivalents of Messrs. Robespierre and/or Karaiskakis  in the incarnation of Messrs. Hollande and/or Tsipras will make a name for themselves in these modern-day upheavals.

Until Wednesday, 

 

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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