In a recent report, Canadian precious metals bank ScotiaMocatta hints that a strong upside surprise for the price of gold may be coming.
Analysts at the bank note that investors are bored with gold at the moment but could suddenly take notice of it when other assets they love now unexpectedly turn south. “We are still of the view that the most bullish aspect of the gold market is that other assets are already expensive – notably the dollar, treasuries, and equities,” ScotiaMocatta said.
“When these correct, as indeed may be starting to happen, then investors may look for a cheap safe haven and gold looks well-placed to fill that role. With the financial system still suffering many stresses including uncertainty over Greece, competitive currency devaluation and unmanageable amounts of government debt, we feel investment demand for gold could pick up at relatively short notice,” said the bank’s analysts.
As if to prove the point made by ScotiaMocatta that gold is the favorite safe haven for investors when things get murky and bumpy, German buyers set off a mini-gold-rush in the first quarter. German investors piled into gold coins and bars as a hedge against questionable European Central Bank policy and the threat of a major default by Greece resulting in the dreaded “Grexit” departure that could domino through the entire eurozone structure.
The World Gold Council’s latest figures show that Germans boosted their gold buying of gold coins and bars by 20% to 32.2 tonnes in the first quarter, the highest rate of buying seen in the country in a year.
“This was the strongest start in Europe for gold coins and bars that we have seen since 2011,” said Alistair Hewitt, head of market intelligence at the World Gold Council. “German investors are fretting over the ECB, Greece, and Ukraine.”
Overall global demand slipped slightly by 1% to 1,079 tonnes compared to the same period in 2014, according to WGC data. Weaker gold jewelry demand in China and Turkey were offset by net central bank purchases and positive investor inflows to gold-backed exchange traded funds, basically making it a wash for the period.
THE GROWING WAR AGAINST CASH (AND GOLD) IN U.S. BANKS
Gold and silver are alternative forms of cash, in addition to their numismatic and historic value. This role for gold and silver became more important recently when we saw reported that the U.S. Justice Department is ordering bank employees to consider calling the police if customers withdraw $5,000 dollars or more in cash. Of course, there are many legitimate reasons for drawing out this much cash such as – doing business at a trade convention – but our credit card/check-based society is increasingly suspicious of big cash transactions.
Assistant U.S. Attorney General Leslie Caldwell gave a speech in which he urged banks to “alert law enforcement authorities about the problem” so that police can “seize the funds” or at least “initiate an investigation” over transactions of $5,000 or more.
In addition, it is reported that some customers of Chase – the largest U.S. bank, and a subsidiary of JP Morgan Chase – have received letters informing them that Chase will no longer allow them to store cash in their safety deposit boxes. In a customer letter dated April 1, 2015, one part of their new lease agreement says, “You agree not to store any cash or coins other than those found to have a collectible value.” This seems to say that bullion coins, even those which are legal tender, possibly cannot be stored in safety deposit boxes at Chase. I encourage using safety deposit boxes for safe storage but also encourage you to consider this information when deciding where to rent a safety deposit box.