Buying Gold | As Russia Dumps A Record Amount Of US Treasurys, Here Is What ... | News2Gold

As Russia Dumps A Record Amount Of US Treasurys, Here Is What ...
Who Is Buying Gold At $1,290 And Why? | Seeking Alpha
After Dumping UST Bonds, Russia Buys 900,000 Ounces Of Gold ...
Peter Schiff Blog: Buying Gold With Bitcoins

As Russia Dumps A Record Amount Of US Treasurys, Here Is What ...

Posted: 21 May 2014 05:57 AM PDT

Last week we commented that based on TIC data, while "Belgium's" unprecedented Treasury buying spree continues, one country has been dumping US bonds at an unprecedented rate, and in March alone Russia sold a record $26 billion, or 20% of its holdings.

So as Russia is selling record amount of US paper, what is it buying? For the answer we go to Goldcore which tells us that...

Russia Buys 900,000 Ounces Of Gold Worth $1.17 Billion In April

The Russian central bank has again increased its gold reserves by another 900,000 ounces worth $1.17 billion in April.

Russia's gold reserves rose to 34.4 million troy ounces in April, from 33.5 million troy ounces in March, the Russian central bank announced on its website yesterday. The value of its gold holdings rose to $44.30 billion as of May 1, compared with $43.36 billion a month earlier, it added.

The following is a summary from Bloomberg of the April data template on international reserves and foreign currency liquidity from the Central Bank of Russia in Moscow:

Russia's gold & foreign exchange reserves remained virtually unchanged at USD 471.1billion in the week ending May 9. Russia's reserves have fallen since the crisis began but remain very sizeable. The reserves include monetary gold, special drawing rights, reserve position at the IMF and foreign exchange.

The 900,000 ounce purchase is a lot of physical gold in ounce or tonnage terms but as a percentage of Russian foreign exchange reserves it is a very small 0.24%.

Gold as a percentage of the overall Russian reserves is now nearly 10%. This remains well below the average gold holding as a percentage of foreign exchange reserves of major central banks such as the Bundesbank, Bank of France and the Federal Reserve which is over 65%.

The Russian central bank has been gradually increasing the Russian reserves since 2006 (see chart above). On average they have been accumulating 0.5 million troy ounces every month. Therefore, the near 1 million ounce purchase in April is a definite increase in demand.

This was to be expected given the very pronounced geopolitical tension with the U.S. and west over Ukraine. Indeed the TIC data shows that Russia has been aggressively divesting themselves of U.S. Treasuries.

Russian holdings of U.S. Treasuries fell very sharp, by nearly $50 billion, between October and March 2014 or nearly a third of Russia's total holdings. Over half of the plunge came in March, when $26 billion was liquidated as western sanctions were imposed. TIC Data for April won't be available until June and will make for very interesting reading.

Especially given the mysterious huge U.S. Treasury buying that is being done by little Belgium. This has analysts scratching their heads and has aroused suspicions that the Fed and or the ECB may be behind the huge Belgian purchases.

Russian Gold Reserves in Million Fine Troy Ounces - 1995-2014 - Monthly Chart (Bloomberg)

Russia has already made their intentions regarding gold very clear. Numerous high ranking officials have affirmed how they view gold as an important monetary asset and Putin himself has had many publicised photos in which he very enthusiastically holds large gold bars.

On May 25th 2012, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold in order to diversify their foreign exchange reserves.

"Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters at the time.

The World Gold Council reported yesterday that central bank purchases were 70% above their 5-year quarterly average, led by Iraq and Russia. The Eurozone actually became a net buyer thanks to Latvia joining the single currency union, adding its gold to the Eurozone reserves as part of the Euro treaty.

Russia may be planning to give the ruble some form of gold backing in order to protect the ruble from devaluations and protect Russia from an international monetary crisis and the soon to return currency wars.

Russian central bank demand and indeed global central banks demand is set to continue as macroeconomic, monetary and geopolitical uncertainty is unlikely to abate any time soon. Indeed, it may escalate substantially in the coming months as we move into the next phase of the global debt crisis.

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Who Is Buying Gold At $1,290 And Why? | Seeking Alpha

Posted: 21 May 2014 04:14 PM PDT

Summary

Long consolidation period for gold.
Multiple lows above and below $1,290.
Who is supporting gold at this level?
Strategies to participate if gold rallies.

During the last seven trading sessions (including Wednesday), gold futures have one familiar theme: A buyer or group of buyers around the $1,290.00 level.

It is not difficult to identify that buyers have targeted the area to either bring in shorts or to build a large long position.

Of course, for every buyer there is a seller, so investors could easily take the converse side of the argument that short-sellers are defending the psychologically important $1,300.00 resistance level, limiting the bullion to only one close over that level during the last 10 trading sessions.

However, for the sake of argument, this article will approach the issue from the bullish side and attempt to determine who the mystery buyers are and why.

Is it Warren Buffett?

No. The "Oracle of Omaha" despises gold as an investment vehicle and is not afraid to share this opinion. Being that Buffett is one of the world's richest investors, it is hard to ignore his opinion. Buffett's premise is that gold is a non-productive asset because it does not produce anything of value.

Simply stated, Buffett prefers productive assets like farmland or companies that create wealth for shareholders. For example, Exxon Mobil (XOM) or Coca-Cola (KO) produces goods that people want or need and have profits to prove it. "People will forever exchange what they produce for what others produce," says Buffett.

Is it the "little guy"?

No. Most investors do not dabble in the commodities markets. In fact, many investors' exposure to commodities comes from the movie "Trading Places" (starring Eddie Murphy and Dan Aykroyd), who team up to seek revenge on the Duke brothers for their attempt to alter the course of their lives.

Also, the "public" tends to get invested at the end of moves and since gold it still way off its September 2011 high ($1,949.90), the average investor pays little or no attention to it.

Finally, the margin requirements and volatility of the contract are a strong deterrent to many investors.

Commercial Investors?

Yes. Investopeida describes the term as a classification used by the Commodity Futures Trading Commission (CFTC) to describe traders that use the futures markets primarily to hedge their business activities.

It goes on to explain that this includes futures commission merchants, foreign brokers, clearing members or investment banks that buy futures to speculate or as a hedging vehicle. An increase in commercial traders' long positions in a particular commodity may mean these traders believe the price of the commodity will increase, in which case they would not want to be adversely affected by missing out on a price increase.

Steve Briese's Commitment of Traders newsletter is by far the most followed source and often predicts big moves in the commodities well in advance. Traders anxiously await the next report to observe whether or not there has been a significant increase in the open interest by the "big boys."

So now we have speculated who may be buying, what are the potential catalysts they have identified that will ignite a rally?

At the top of the list has to be the Ukraine-Russia predicament. Although Russia has not revealed how far it is willing to go to defend its stance, the US has clearly stated that it will not tolerate Russian aggression in the region.

An extended decline in the U.S. stock market?

Many investors have been anticipating this for quite some time and the market has ratcheted higher. If the market has a "Black Swan" occurrence, there could be a flight to quality in assets such as gold.

Finally, Tyler Durden of Zero Hedge has taken note of the deal between the Bank of China and Russia's largest bank, VTB, that will mandate payments in each other currencies. Durden added, this agreement "bypasses the need for US Dollars for investment banking, inter-bank lending, trade finance and capital-markets transactions."

As tensions between US and Russia escalate on the economic front ahead of any military confrontation, Russian-Chinese relations are moving in the other direction.

Gold did not immediately react on Tuesday, but caught a bid within an hour of the article being published and did not revisit the $1290.00 area until Wednesday. Despite a dip to $1,282.90, once again gold has returned to the crucial area and closed above it.

So how can an investor participate with the "big boys," if it does explode to the upside?

Since it is likely the move will take place during pre-market or after-hours trading, investors will need to be properly positioned over night in order to capitalize.

Investors may want to stay away from the miners, since all the charts appear unattractive. Instead, an investor can purchase shares of SPDR Gold Trust (NYSE:GLD). A similar technical pattern is taking place in the ETF and the corresponding level of support resides at $124.00.

Of course, gold could just as easily gap down as well, so options on the GLD may allow investors to participate on the upside with defined risk on the downside. Keep in mind, timing is a component in options trading and it may take a few attempts to finally catch the move if it comes to fruition.

Finally, gold is in the midst of its longest consolidation period since the beginning of the year. In January, gold meandered between $1,212.00 and $1,255.00 before resolving itself to the upside.

Over the last twenty-four trading sessions, gold has been range bound between $1,268.40 and $1,315.80, recently holding up in the upper-end of the range.

If trying to pick a bottom is not your cup of tea and break-out trading is, a clean break out over $1,315.80 could indicate a rally back to the high of the year at $1,392.60.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. (More...)

After Dumping UST Bonds, Russia Buys 900,000 Ounces Of Gold ...

Posted: 21 May 2014 06:12 AM PDT

For anyone who wondered what Russia was doing with the $21 billion in US Treasury bonds it dumped in March alone, we now have the definitive answer.

From Goldcore:

Today's AM fix was USD 1,292.00, EUR 942.65 and GBP 764.81 per ounce.
Yesterday's AM fix was USD 1,291.50, EUR 943.46 and GBP 767.56 per ounce.

Gold climbed $1.10 or 0.08% yesterday to $1,294.70/oz. Silver rose $0.03 or 0.15% to $19.42/oz.

Gold is marginally lower today at $1,293.50/oz and remains in lock down in an unusually tight range between $1,287/oz and $1,306/oz this week. Gold in Singapore, which often sets the price trend in Asia, traded at $1,292.23/oz prior to a bounce to just over $1,295/oz.

President Putin holds a London Gold Delivery Bar

Gold has been in a very narrow range between $1,283/oz and $1,310/oz for a month now. There are a lot of things going on underneath the surface of the calm gold market this month. That superficial calm is likely to give way in the coming days as we appear on the verge of a sharp move to the upside or downside once gold breaks out of the recent range.

A break below $1,283/oz is possible and this could see gold quickly fall to test longer term support at $1,200/oz. This is likely if the technical traders and computer manipulations continue to dominate. However, should physical demand pick up on rising geopolitical tensions and the return of Indian demand with the easing of import duties, gold should quickly challenge resistance at $1,385/oz and $1,418/oz.

Russia Buys 900,000 Ounces Of Gold Worth $1.17 Billion In April
The Russian central bank has again increased its gold reserves by another 900,000 ounces worth $1.17 billion in April.

The following is a summary from Bloomberg of the April data template on international reserves and foreign currency liquidity from the Central Bank of Russia in Moscow:

The 900,000 ounce purchase is a lot of physical gold in ounce or tonnage terms but as a percentage of Russian foreign exchange reserves it is a very small 0.24%.

Russian Gold Reserves in Million Fine Troy Ounces – 1995-2014 – Monthly Chart (Bloomberg)

On May 25th 2012, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold in order to diversify their foreign exchange reserves.

"Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters at the time.

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Peter Schiff Blog: Buying Gold With Bitcoins

Posted: 21 May 2014 01:47 PM PDT

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