Today’s AM fix was USD 1,311.25, EUR 971.30 and GBP 817.08 per ounce.
Yesterday’s AM fix was USD 1,314.25, EUR 972.94 and GBP 823.47 per ounce.
Gold inched down $0.60 or 0.05% yesterday, closing at $1,314.20/oz. Silver slid $0.22 or 1.01% closing at $21.62. Platinum climbed $6.55 or 0.5% to $1,450.25/oz, while palladium rose $7.46 or 1% to $745.25/oz.
Gold has had five consecutive days of weakness as a stronger greenback has led to traders selling gold on the COMEX. Even though the U.S. Fed maintained their ultra loose monetary policies last week, maintaining $85 billion a month in bond purchases, gold has lost its shine with momentum driven and computer driven traders and hedge funds.
The sharp rise in the gold mining shares yesterday, the XAU was up 2.5% and the HUI was up 2.9%, was encouraging for gold.
Declines are likely to be limited as lower prices is leading to physical buying globally. While much of the focus continues to be on ETF selling and Indian and more recently Chinese demand, some market participants fail to realize the extent of global demand which remains broad based. This is seen in the recent gold data out of Dubai and Turkey.
Turkey’s gold imports jumped more than threefold in October to 15.98 metric tons, from 4.8 tons in September, according to the Istanbul Gold Exchange’s website. That’s the highest since July, the data shows.
Turkey has already imported 251.4 metric tonnes in 2013, year to date, meaning that it will come very close to or surpass the record import year in 2005 when 269.5 metric tonnes of gold were imported (see table below).
Turkey’s gold sales to neighboring Iran declined to $1.5 billion so far this year from a record $6.5 billion for all of last year. This may indicate a fall in demand from Iran or that Iran is now importing the yellow metal from other countries such as Dubai in the UAE.
Unlike India which has embarked on a campaign of repression against gold, the Turks are being far more enlightened. They are allowing the considerable and growing gold holdings of the population to be remonetised in order stimulate demand and grow the economy.
The country’s central bank last year allowed commercial banks to hold a portion of their lira reserves in gold and banks are making it easier to buy gold in Turkey..
Some Turkish banks are now offering customers the ability to use their gold based deposits for collateral on gold backed loans and using gold as access to Turkish Lira or for access to credit cards.
Isbank and Turkiye Garanti Bankasi AS, the country’s biggest lender by market value, offer gold-backed loans, where customers can bring jewellery or coins to the bank and take out loans against their value. Garanti also has a credit card linked to gold deposit accounts.
Government efforts to help ease the nation’s current account deficit are encouraging householders to bring their gold coins which it is estimated that there are $302 billion of hidden gold stashed in homes in Turkey.
This hidden gold is second only to the U.S., and Turkish gold based deposit accounts have grew 15% this year calculated until the end of July, which is a 3 fold increase in standard savings accounts according to the Turkish Central Bank.
The gold accounts give customers an amount in Turkish lira equivalent to the weight of the precious metal they deposit in the bank. Bank customers can then withdraw cash or take out loans, while the bank is able to sell or hold onto the gold.
Turkiye Is Bankasi AS (ISCTR), Turkey’s largest bank by assets, said gold deposits increased 10 times in the two years through June.
The campaign by Turkey’s banks, featuring ads for “golden age” accounts and products such as gold gift checks, is targeted at Turks who traditionally give gold coins or jewellery as presents at weddings, births and circumcision ceremonies. The custom gained popularity a decade ago as Turkey’s inflation rate topped 70%, making gold an attractive store of wealth.
The World Gold Council estimates that by bringing 5,000 metric tons (5,512 tons) of gold bullion into the banking system — an amount greater in value than Ireland’s GDP, Turkey aims to reduce gold imports and external borrowing.
Government statistics cite Turkey’s current-account deficit, has narrowed its gap 23% from $77 billion (2011) to $59 billion (ending August). Record gold sales from Turkish companies to the United Arab Emirates and Iran increased its exports. Exports of precious metals to the UAE and Iran, climbed to $9.2 billion (ending August 2012) from $645 million last year driven by western sanctions on Iran.
Many of the yellow metal exported is coming from the population that are shifting their gold stash from their homes to the banks since Turkish gold production is only 25 metric tons.
The Turkish Government endeavours include the August 16th central bank decision to raise the proportion of reserves lenders can keep in gold to 30% from 25%, having increased its efforts to get more bullion out of the homes and into the monetary system.
Turkey’s regulators have been discussing planned legislation to enable customers to buy or sell the yellow metal at bank branches or transfer gold into other accounts, according to an Aug. 29 report in Milliyet, a daily newspaper. Bank Asya has said it will soon start purchasing and selling bullion at its branches.
Jewellers in Istanbul’s Grand Bazaar, one of the world’s largest covered markets, have opposed the move. They say banks buying and selling gold would cut their revenue and push them into underground trading, according to Bloomberg.
The 6th century-old Grand Bazaar houses 4,000 jewellers, and about 1.5 metric tons of scrap gold is processed into bullion there every day, according to Istanbul Gold Exchange data. Transaction volume totaled 8.5 billion liras ($4.7 billion) last year.
The move by the Turkish banks may soon be followed by desperate banks in other emerging and developed markets.
Turkey has been aggressively adding to its gold reserves in recent years and now has the world’s 11th-largest gold reserves. Its holdings rose to 15.762 million ounces or over 490 tonnes at the end of September (see chart above).
Gold is gradually being remonetised again in Turkey and this trend will soon be seen globally.
With the yellow metal soon to become a Tier 1 asset, banks will attempt to get a significant amount of investment grade gold bullion onto their balance sheets in order to buttress them.
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