Tag Archives: gold bullion

Is The South African Mint Short Of Gold?

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In what may be the strangest story I have seen in a while related to the gold market, it appears $982 million worth of gold has left JFK international airport in New York to some undisclosed location in South Africa.  While it remains unclear what purpose this gold serves, it seems the most likely explanation is to fulfill demand for Krugerrands (South Africa’s popular gold bullion coin) to meet elevated demand in the face of constricted mine production.  This story is timely coming on the heels of the article I posted yesterday about how Dubai’s gold demand is running at 10x normal levels.  This is a bizarre story, so if anyone has further color I’d love to hear it.

From Quartz:

Examining US trade data, we were surprised to see that South Africa’s $402 million trade surplus with the United States in January had turned into a $689 million deficit by March.

Why?

It turns out the $1.1 billion swing is entirely due to unusual shipments of gold from the US to South Africa in February and March. So far this year, 20,013 kg of unwrought gold, worth $982 million, has left John F. Kennedy International Airport (JFK), in New York, for somewhere in South Africa, according to the US Census Bureau’s foreign trade division. (Unwrought gold includes bars created from scrap as well as cast bars, but not bullion, jewelry, powder, or currency.)

The shipments from JFK were the only unwrought gold to leave the US for South Africa in 2013; another large shipment occurred in September 2012.

However, the strikes that rocked South Africa’s mining industry last year briefly caused gold output to fall sharply, around the same time as last autumn’s big gold shipment from JFK. Overall 2012 production declined by a relatively modest 6% (pdf) over the year before, according to a preliminary figure from the US Geological Survey; but those first estimates have sometimes proven wide of the mark. (In 2009 the USGS estimated South Africa’s 2008 production to be 250 tons; it subsequently revised the figure to 213 tons.) So it could be that the strikes dealt a more severe blow to the country’s gold industry than the data show.

Still, even if gold output did fall precipitously, it’s not clear why South Africa would need to start importing it. One possible destination for the gold is the South African Mint, which produces legal-to-own gold coins called Krugerrands; the gold used in them is first refined by the Rand refinery. Calls to the South African embassy in Washington, DC were not returned.

Meanwhile how about this chart, courtesy of the Quartz article.

GoldfromJFK

 Source: http://www.zerohedge.com/news/2013-05-14/south-african-mint-short-gold

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Hedge fund chief loses big on gold

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Hedge fund billionaire John Paulson is emerging as one of the biggest losers in this year’s gold rout, further tarnishing his once legendary status in the US$2 trillion (NZ$2.36t) hedge fund industry.

Paulson’s US$700 million (NZ$827m) gold fund lost a whopping 27 per cent in April, when the price of the metal plunged 17 per cent over a two-week stretch, according to performance figures provided by a person familiar with the fund.

The jarring one-month decline in the Paulson gold fund brings the year-to-date loss for the fund to about 47 per cent, the source said. The fund’s losses were magnified by the fact that its bullish bet on gold was enhanced with leverage, or borrowed money, and derivatives tied to the price of gold.

The majority of the money invested in the Paulson gold fund is believed to be the billionaire’s own.

Paulson rose to fame after he made US$15 billion for his firm in 2007 by betting against subprime mortgages before the housing collapse.Since then, however, he has struggled to duplicate that success, and several of his portfolios have lagged in recent years.

Assets under management at his Paulson & Co firm have dropped to US$18 billion, down from US$38 billion in early 2011, due to investor redemptions and poor performance.

To be fair, the April selloff in gold was particularly fierce and came as a surprise to many hedge fund managers who were long either gold bullion or the SPDR Gold Trust, the most popular gold exchange-traded fund.

Hedge fund manager David Einhorn said on a conference call on Tuesday, “We were somewhat surprised by the swift decline in the price of gold in April.”

Paulson disclosed the gold fund loss to investors on Monday along with results for his other funds, the source said.

Over two weeks in April, the price of gold plunged 17 per cent, from US$1603 (NZ$1895) per ounce to a low of US$1321 (NZ$1562) on April 16, before starting to rebound. As of Tuesday, the metal was trading near US$1446.

Regulatory filings show that at the end of last year Paulson’s firm was the largest holder of the SPDR Gold ETF, with 21.8 million shares. Paulson has not yet disclosed its latest position in the gold ETF. Since the beginning of the year, the gold ETF has fallen about 14 percent.

Paulson’s hedge funds also are large investors in shares of gold mining companies, which similarly have sold off this year.

Until this year, gold had been a solid investment. In the wake of the financial crisis, a number of hedge funds began buying gold as a hedge against inflation. But inflation has yet to materialise, despite the Federal Reserve’s aggressive purchases of Treasuries and mortgage bonds to stoke the economy.

Paulson’s more widely held Advantage fund declined 0.8 percent in April, largely because of its gold positions, the source said, and is up 2.5 per cent for the year through April.

The Advantage fund and a leveraged version of it were once two of Paulson’s most popular funds but now have less than US$5 billion in assets.

The average hedge fund is up a little over 3 percent this year, while the Standard & Poor’s 500 is up about 13 per cent.

It’s not been all bad news for Paulson. Two other funds managed by him are performing well this year and far outpacing the returns of the average hedge fund.

His credit-focused fund, which invests in mortgage securities and bank debt, is up 11.9 per cent for the year. The Paulson Recovery fund, which invests in some insurers and asset management firms, is up 21.8 per cent. And a merger-focused fund is up 7.1 per cent.

Paulson will be one of the featured speakers at this week’s SALT Conference in Las Vegas, a popular event with wealthy investors. The conference, sponsored by Skybridge Capital, begins Tuesday night.

Source: http://www.stuff.co.nz/business/money/8646057/Hedge-fund-chief-loses-big-on-gold

Gold ends lower, copper jumps 7% on U.S. jobs data

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Gold futures finished with a modest loss on Friday as better-than-expected U.S. employment figures dulled the precious metal’s safe-haven appeal.

For the week, however, gold found support from the European Central Bank’s decision to cut interest rates and from strength in physical demand to end the week 0.7% higher.

Copper futures rallied nearly 7% for their biggest one-day percent gain in over two and a half years, as the jobs data brightened demand prospects for the industrial metal.

Gold for June delivery GCM3 +0.73% fell $3.40, or 0.2%, to settle at $1,464.20 an ounce on the Comex division of the New York Mercantile Exchange.

The July silver contract SIN3 +0.65% climbed 18 cents, or 0.8%, to end at $24.01 an ounce, up 1% from a week ago.

The U.S. economy created a net 165,000 jobs in April, the Labor Department said Friday. The number surpassed the 135,000 forecast of economists polled by MarketWatch. The acceleration in hiring nudged the unemployment rate down to 7.5%, the lowest level since December 2008.

Right before the data’s release, gold prices were trading around $13 an ounce higher than Thursday’s close, then after the data they fell to trade around $10 lower.

If hiring continues to rise at the current pace for the next two to three months, that would be “bearish for safe havens like gold and silver,” said Chintan Karnani, an independent bullion analyst based in New Delhi.

U.S. jobs picture picks up steam

The U.S. unemployment rate dropped to 7.5% in April, as the jobs picture continued to improve. Rolfe Winkler, Phil Izzo and Sudeep Reddy look at the numbers and the economic outlook.

Only the interest-rate cut by the European Central Bank and firm physical gold demand in Asia are supporting gold prices, he said.

Bullion dealers reported impressive jumps in April gold bullion sales.

Will Rhind, managing director of ETF Securities, a provider of physically backed precious-metal ETFs including the ETFS Gold Trust SGOL +0.16% , said “demand is mainly being seen by coin/bar merchants and gold dealers (bullion banks) that act on behalf of central banks and other large institutional physical players.”

Copper rally

Copper for delivery in July HGN3 -0.38% jumped 21 cents, or 6.8%, to a three-week high of $3.315 a pound. It rose roughly 4% for the week.

Friday’s percentage gain was the largest since at least October 2011, according to FactSet data.

Source: http://www.marketwatch.com/story/gold-futures-higher-ahead-of-us-jobs-data-2013-05-03