40% Of Global Gold Trade Goes Through UAE

Gold's drop last month was, in part, thanks to comments from Yellen that the FOMC would look at raising interest rates by 2015, due to the economic recovery. The poor jobs data on Friday seemed to put this into question and sent gold for its biggest one day jump in more than three weeks, as it rose by 1.2%. This morning the gold price is holding onto these gains. Friday’s non-farm payroll data was expected to show an additional 200,000 jobs had been added in March. Instead the final reading was slightly below, at 192,000.

One of the under-lying factors driving the price of gold in recent years has been the record low interest rates. Low rates cuts the opportunity cost of holding physical bullion over other assets.

The rally in the gold price has been described as a relief rally, a much stronger jobs number would have put the current stimulus package into question and increased the chances that furthering tapering would happen in the near-future. Instead the weaker-than-expected means that little will change for a short-time.

However, it is not as though the non-farm payroll data was terrible. The additional 192,000 jobs in March, announced on Friday, as well as the private data released by Automatic Data Processing and two Institute for Supply Management reports suggest that there is an underlying economic recovery going on in the US.

Focus this week will be on the release of the minutes from the March FOMC meeting. They are expected to show discussions over the timing of raising interest rates. This will be dollar positive.

Any gains in the gold price this week may be short-lived as profit-taking occurs, many market speculators appear to be of the view that gold is still in a downtrend and so will sell into any rallies.

Be aware – weak Q2 performance

As we head into the second quarter it is worth considering how gold usually performs. In recent years this has been a quiet time for gold and silver, with monthly corrections in April, May and June. Even in the years when gold climbed. This year the weak gold price might be even more acute given the strong start to 2014, weak seasonal demand and a perceived recovery in both the US and Eurozone. Currently there is a lack of fundamentally bullish news to help support any gains in the gold price.

Netherlands say ‘no’ to gold repatriation

In a blow to the growing movement to repatriate gold that is either being held in the US or was stolen and sold on by the Nazis, the Netherlands has decided not to pursue repatriation of their gold. Dutchnews.nl reports that finance minister Jeroen Dijsselbloem has told MPs the government made a formal decision about the gold back in 2000 but had not informed parliament. The recent spate in interest to repatriate the country’s gold that was stolen by the Nazi’s and sold to Switzerland has come about after the release of a book by journalist Roel Janssen. Janssen’s book has prompted Christian Democrat MP Eddy Van Hijum to ask questions about the country’s gold.

Dubai, the heart of the gold market

At the opening of the Dubai Precious Metals Conference today executive chairman of the Dubai Multi Commodities Centre, Ahmed bin Sulayem, told attendees that over 40% of the world’s physical gold trade passed through the DMCC in 2013. Whilst the 2,250 tonnes is a staggering amount, it is also below target as the DMCC is driving for 50% of the global physical gold trade to pass through the country.

Dubai has India to thank for the success of its gold market. Reports suggest that the restrictions on gold imports have hugely benefited the UAE (United Arab Emirates)  where the difference between buying there or in India is up by 16% on a per gram basis.

This morning elections in India began. The lengthy process (the largest political election in the world) may well have an impact on the current gold import restrictions as voters look to those who have offered up some kind of relaxation on the current rules. Reports suggest the current government is favourable to listening to pleas from the gold industry.

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Jan Skoyles

http://therealasset.co.uk