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Daily Nugget: The Strength Of Singapore

Analysts from many of the large banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co, have begun to release their estimates for US interest rates. They now believe the Federal Reserve will raise the US interest rate earlier than expected. This could lead to a fall in demand for precious metals. A rise in interest rates could lead to a short-term depreciation in the gold price but in the long-term, gold demand should climb, as evidence of inflation in the economy ought to be more prevalent.

The belief that rates will raise earlier than previously thought meant gold ticked lower when markets opened in Singapore on Tuesday, where previously gold had climbed for five straight weeks. Central bank policy makers had said that rates would stay low for a “considerable time.” Minutes from the FOMC meeting will be published tomorrow revealing the exact figures. Often the gold price seems to trade sideways ahead of an FOMC minutes release.

Mint sales

Gold sales from Australia’s Perth Mint climbed to over 1117kg in June, a four-month high. Sales of American Eagle gold coins by the U.S. Mint totaled 1374.95kg in June, up 37% from May and the most since January. This high demand for coins suggests that investors and savers are still concerned that the economy is not improving and they are using the low gold and silver price to stock up on the safe haven assets.

PGMs making waves

Platinum and palladium continue to impress precious metal investors. Supply shortages are said to be at there highest in more than three decades, which has driven their prices up to a thirteen-year high.

European stock markets were weaker at the beginning of this week. This was mainly due to Germany’s industrial production dropping 1.8%. As a result, economists now expect Germany’s gross domestic product to have expanded just 0.1% on last quarter. This means an annualized growth of around 0.4%, which is a significant weakening from the first quarter’s 3.3%.

WGC wading into fixing gold

Following on from yesterdays gold fix news, WGC central banks and public policy MD Natalie Dempster commented, “There was strong support for the World Gold Council’s key principles for reform. We believe it should be based on executed trades and a tradable price, it should have highly transparent input data, should be calculated from a deep and liquid market, and represent a physically deliverable price.”

Steps to modernise the London gold fix follow the planned launch of the kilo-bar gold contract in Singapore, which is set to begin before the end of the year. The London Bullion Market Association’s bullion market forum was held for the first time in Singapore last month, where Mr Lim Hng Kiang, Minister for Trade and Industry, announced the new exchange-traded Singapore kilo-bar contract. They will introduce the physical gold contract while Shanghai starts international bullion trading. This follows from a marked rise in demand within the region to establish new price benchmarks as demand shifts east. Asia accounted for 63% of total consumption of gold jewelry, bars and coins last year, up from 57% in 2010.

About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles