Gold demand to wane in second half
Gold demand to wane in second half
She notes that physical demand exploded in April after a particularly nasty price fall, with gold shedding over $240 or almost 16 percent in three trading days in mid-month. This particular fall was not, unlike much of the rest of the market’s bear trend in the period, overtly informed by the prospect of tapering in the United States and financial stability elsewhere, but by the European Commission’s suggestion that the Bank of Cyprus should sell gold to the value of 400 million euros (ten tons, at that point) in order to help the domestic situation, but thus potentially undermining the independence of European national banks.
The market was again turbulent in June as short selling and fresh professional liquidation developed on heightened expectations of an end to QE3. The physical market was up to the task, however, and massive buying across all the traditional gold investing countries saw bar hoarding reach an all-time high for the half-year. Jewelry fabrication reached the highest in six years, with a number of countries seeing consumers revert to higher caratage. In America this is the first time this has happened in over a decade, while there has also been a shift away from alternative materials and back towards gold.
China was particularly vibrant, with jewelry fabrication surging by 41 percent to a record 345 tons. Consumers were presented with a rare buying opportunity after more than a decade of rising prices and middle-aged women, commonly dubbed Chinese Aunties, in charge of domestic budgets, were swift to respond, building stocks for gifts later in the year. This was typical of the patterns elsewhere in the market. India is the exception, where changes in import and distribution rules have meant that inventories generally are low, while smuggling is on the increase.
Meanwhile, on the mining side, a trend of production growth remained in place, rising by 3 percent in the first half, with a broad geographic base of increases, buoyed by mining projects ramping up production. Growth was especially pronounced in China, the Dominican Republic, Canada and Russia. With the trend in costs remaining upward, rising 7 percent year-on-year, the slide in gold price in the second quarter of the year led to further margin compression.
O’Connell said: “To date, we have only seen a modest number of producers elect to cease operations and with the recent price recovery we expect this to remain the case in the short to medium term, limited to smaller, cash-strapped producers at the top end of the cost curve.”
Producers remained net de-hedgers of gold in the first half of the year. Although there has been an increase of interest in establishing fresh hedge positions, such activity was overwhelmed by several producers taking the fall in price as an opportunity to close out hedging contracts more cheaply and in some cases for profit.
Generally heightened consumer inventories among the traditional buying regions strongly suggest that gold’s massive trading volumes in mid-year will now dwindle. Thomson Reuter GFMS is also looking for a tangible contraction in both jewelry fabrication in the second half as against the first, while bar hoarding could well contract by almost 50 percent.
Even so, there have been geopolitical tensions and the resumption of the tussle in Washington over the debt ceiling point to further unwinding of the bearish price action of the first half of 2013, with a possible test of $1,500 in early 2014, with an average of $1,350 in 2014 after $1,446 in 2013.
US unveils new veto threat against WTO rulings
- US tells WTO appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days
- Trump, who has railed against the WTO judges in the past, threatens to levy a 20 percent import tax on European Union cars
GENEVA: The United States ramped up its challenge to the global trading system on Friday, telling the World Trade Organization that appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days.
The statement by US Ambassador Dennis Shea threatened to erode a key element of trade enforcement at the 23-year-old WTO: binding dispute settlement, which is widely seen as a major bulwark against protectionism.
It came as US President Donald Trump, who has railed against the WTO judges in the past, threatened to levy a 20 percent import tax on European Union cars, the latest in an unprecedented campaign of threats and tariffs to punish US trading partners.
Shea told the WTO’s dispute settlement body that rulings by the WTO’s Appellate Body, effectively the supreme court of world trade, were invalid if they took too long. Rulings would no longer be governed by “reverse consensus,” whereby they are blocked only if all WTO members oppose them.
“The consequence of the Appellate Body choosing to breach (WTO dispute) rules and issue a report after the 90-day deadline would be that this report no longer qualifies as an Appellate Body report for purposes of the exceptional negative consensus adoption procedure,” Shea said, according to a copy of his remarks provided to Reuters.
An official who attended the meeting said other WTO members agreed that the Appellate Body should stick to the rules, but none supported Shea’s view that late rulings could be vetoed, and many expressed concern about his remarks.
Rulings are routinely late because, the WTO says, disputes are abundant and complex. Things have slowed further because Trump is blocking new judicial appointments, increasing the remaining judges’ already bulging workload.
At Friday’s meeting the United States maintained its opposition to the appointment of judges, effectively signalling a veto of one judge hoping for reappointment to the seven-seat bench in September.
Without him, the Appellate Body will only have three judges, the minimum required for every dispute, putting the system at severe risk of breakdown if any of the three judges cannot work on a case for legal or other reasons.
“Left unaddressed, these challenges can cripple, paralyze, or even extinguish the system,” chief judge Ujal Singh Bhatia said.
Sixty-six WTO member states are backing a petition that asks the United States to allow appointments to go ahead. On Friday, US ally Japan endorsed the petition for the first time, meaning that all the major users of the dispute system were united in opposition to Trump.