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Daily Nugget: Golds Move From West to East and Increased Holdings

Silver outperformed gold last week, which has taken the silver:gold ratio to its lowest since late February. Now, 62.25oz of silver will buy you 1oz of gold.

New Gold Exchanges and Continued Safe Heaven Demand

As gold moves East, Western institutions are gradually losing their grip on the precious metals markets. This is because, new gold exchanges are popping up all over the East, with physical gold settlements in Dubai, Shanghai and of course Singapore. This makes the West’s hold over gold price discovery weaken over the coming years as the market becomes more efficient.

We have seen a large increase in safe heaven demand from a number of factors. These include, the probable implementation of tougher sanctions on Russia, as the Pentagon said they have escalated the violence in Ukraine and may be set to provide more sophisticated weapons to pro-Russian militants.

Further to the above, geopolitical tensions in the Middle East threaten oil supplies from key oil producing regions, which should also support gold, as will Israel’s invasion and continued bombing of Gaza.

Singapore’s Move Towards Becoming a Global Gold Hub

Singapore’s plans to become a gold and precious metals hub took a step forward on Thursday with the announcement of Metalor Singapore. Its newly created refinery is part of the Metalor Group, and it has been added to the London Bullion Market Association’s (LBMA) Good Delivery list.

The refiner is located in Singapore City and its refined gold output is in the form of large gold bars for industry and institutional buyers.

This follows from the creation of the Singapore Kilo-bar contract, which we have previously spoken about. The World Gold Council and Singapore Bullion Market Association support the contract on the Singapore Exchange. Also supporting the contract are four major banks that include JP Morgan and Asia-focused bank Standard Chartered.

The contract could provide a price benchmark for gold trading in Asia, rather than relying on Western price benchmarks such as the London gold fix.

Russian and Turkish Gold Holdings

Data released by the IMF showed that both countries increased their gold bullion holdings last month. This was the third consecutive month this had happened.

This may have been caused by gold’s four month low in early June, which lead many central banks around the world to increase their holdings as a hedge against currency and credit risks.

Gold Futures

Data from the Commodities Futures Trading Commission, released last Friday, showed that hedge funds and money managers increased their bullish bets in gold futures last week. Net longs were up 3.1% from figures the week before.

Also on the Comex, silver for September delivery climbed 1.08%, on Friday to settle the week at $20.63/oz.