Bitcoin, gold and silver: Bail-ins and capital controls loom

  • Today’s AM fix was USD 1,293.75, EUR 943.17 and GBP 769.72 per ounce.
  • Yesterday’s AM fix was USD 1,303.75, EUR 953.73 and GBP 777.85 per ounce.
  • Gold fell $10.50 or 0.8% yesterday to $1,295.60/oz. Silver slipped $0.29 or 1.47% to $19.48/oz. 

 

 

Gold consolidated just below $1,300 an ounce today after mixed economic data. U.S. inflation ticked higher as seen in the  U.S. producer prices which recorded their largest increase in 1-1/2 years in April as food prices surged, in a potential sign inflation pressures may be creeping up.

 

 

Gold in U.S. Dollars - 5 Minutes, 5 Day (Thomson Reuters)

 

Consumer prices recorded their largest increase in 10 months in April. Jobs and factory data was more positive but still suggest that the U.S. economic recovery is feeble.

Spot gold in Singapore traded as low as $1,292/oz prior to eking out very gradual gains in London trading. Gold is up 0.6% for the week on earlier gains from political uncertainty in Ukraine, which has increased tensions between Russia and the West. Gold is a proven safe haven asset, both historically and now academically, compared with riskier assets such as equities and bonds.

Platinum was headed for its best weekly gain in three months after a 3% surge on supply worries from prolonged strikes in top producer South Africa, while palladium was also poised for a weekly jump of 2% due to Russian supply worries.

Investor demand rose with SPDR Gold Trust, the exchange-traded fund, showing a modest increase in flows. Holdings in the fund rose 1.79 tonnes to 782.25 tonnes on Thursday - the first inflow in a month.

SEC data also showed that hedge fund Paulson & Co in Q1 maintained its stake in the SPDR and George Soros added to his long positions in the gold mining sector suggesting he is positive on the gold price.

Gold is stuck in a range between $1,280/oz and $1,310/oz. Given heightened geopolitical risk between Russia and the West and now China and Vietnam we believe gold is more likely to break out to the upside of this range. A further bout of risk off sentiment and stock market weakness could see gold fall initially and test support at $1,280/oz, prior to breaking to the upside.

 
 

Gold in U.S. Dollars - Daily, 1 Year (Thomson Reuters)


More speculative buyers who bought gold near the top at gold's peak in August 2011 at $1,915/oz in the hope of making a quick buck have suffered losses with gold trading at just $1,300/oz today.

Investors who bought gold at the top as part of a diversified portfolio should keep their allocations to gold as it remains a proven hedging instrument and safe haven asset.

Those who bought gold as part of a diversified investment or pension portfolio with a 5% to 10% allocation are sitting pretty as while their gold investment may have fallen in value in the very short term - they should have made capital gains with the stock, bond and property components of their investment or pension portfolio.

Those who bought gold prior to late 2010 are still sitting on gains again showing the importance of avoiding short term speculation and focusing on diversification and owning a diversified portfolio for the long term.

The safest way to invest in gold is to own physical gold. There is a significant and growing consensus among academics, independent researchers and asset allocation experts that gold is a hedging instrument and a safe haven asset.

 

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