Gold Held In NY Fed Vault Drops To Lowest In 21st Century After Biggest Monthly Withdrawal Since 2001

Exactly one month ago we observed that, as expected in the aftermath of the Netherlands' shocking and still not fully-explained gold repatriation from the NY Fed, the amount of foreign earmarked gold on deposit with the Fed had just experienced a 42 ton withdrawal: the single largest outflow of gold held at the NY Fed in over a decade, going back all the way to 2001. This had brought the total amount of YTD gold withdrawals from the NY Fed to a whopping 119 tons: the most since the Lehman collapse.

However, because this total was insufficient to cover just the Dutch repatriation of gold from the NY Fed (which amounted to 122 tons), we knew there would be more activity when the November data hit. Sure enough, earlier today the Fed reported the total amount of earmarked gold (or gold "held in foreign and international accounts and valued at $42.22 per fine troy ounce; not included in the gold stock of the United States") for the month of November: at $8.184 billion, this was a $60 million drop from the previous month (or it would be at the $42.22/ounce "price"; at market prices the value of the withdrawn gold is about $1.7 billion).

In actual tonnage terms, this means that in November some 47.1 tons of gold were withdrawn from the NY Fed, bringing the Fed's total earmarked gold to just 6,029 tonnes: the biggest single monthly outflow going back to the turn of the century. This is also the lowest amount of gold held at the NY Fed vault located at 33 Liberty street (and just across from the even bigger vault located at 1 Chase Manhattan Plaza) in the 21st century.

But even more notable is that with the November data, we now know that all of the Dutch repatriated gold is fully accounted for.

Which brings up a far more important question: net of the Netherlands withdrawals, there is some 44 tons of extra gold that has been also quietly redeemed (by another entity). The question is who: is it now the turn of Austria to reveal in a few weeks that it too, secretly, withdrew some 40+ tons of gold from "safe keeping" in the US? Or was it Belgium? Or did the Dutch simply decide to haul back some more. Or did Germany finally get over its "logistical complications" which prevented it from transporting more than just a laughable 5 tons in 2013? And most importantly, did Germany finally grow a pair and decide not to let "diplomatic difficulties" stand between it and its gold?

We should have the official answer shortly, but we know one thing: it sure wasn't Ukraine.

Source:zerohedge

What Are Major Factors to Affect Copper Prices in 2015?

Copper prices posted sharp declines in 2015, with Shanghai Futures Exchange (SHFE) copper falling by 12.92% as of December 26, and copper London Metal Exchange (LME) down by 14.58%. What will be the main factors to affect 2015’s copper prices?

Growing Copper Supply
Most of Chinese futures analysts interviewed by SMM still consider market fundamentals the key factor to impact copper price trends in 2015.

“The oversupply pressure in copper concentrate market will pass on to refined copper market with copper smelters expanding capacity, so we expect a more than 4% increase in copper supply in 2015,” analyst from BOC International Futures told SMM, “while copper consumption growth is expected at only 3.3%.”

Analyst from Minmetals Futures agreed and noted that global copper supply will grow faster than 2014 next year, and the increase in demand will slow down, boding ill for copper price outlook.

Monetary Policies
“On the macroeconomic front, monetary policies in the US and China will garner much attention,” said an analyst from the CIFCO. “Although the timing of the Fed’s first interest rate since QE was not decided yet, market prediction is for the Fed to raise interest rate in mid-2015, and the rate hike is bound to bolster the US dollar index, affecting commodity market,” the analyst added.

“China’s central bank may employ relatively loose monetary policies and pro-growth measures to help with its housing market which experienced a downturn in 2015,” analyst from Jinrui Futures told SMM. The analyst considers it a positive factor for copper market.

Crude Oil
“Copper prices have been largely hit by slumping crude oil prices in late 2014 and any rebound in copper in 2015 will be subject to a bottom-out in crude oil,” said an analyst from Dayou Futures.

China’s Copper Stockpiling
“We expect a 370,000-tonne surplus in global copper market in 2015, but China’s potential copper stockpiling will help ease the glut,” analyst from Galaxy Futures said in an SMM interview lately. An analyst from BOC International Futures expressed his agreement, explaining that the possible copper purchases by China’s State Reserve Bureau will be a wild card.

Other Uncertainties 
Analysts interviewed by SMM also listed a number of uncertain factors, such as volatile yuan’s spot exchange rate arising from any change in China’s foreign exchange policies, possible strikes at copper mines, and the potential El Nino conditions.

Japan Q1 aluminium talks to drag on as buyers refuse higher premiums

 Quarterly pricing negotiations between Japanese aluminium buyers and global miners are set to continue next month as buyers are refusing to pay higher premiums for January-March shipments, five sources said on Friday.

It is unusual for the two sides not to reach agreement before the beginning of the quarter, but the sources said there remains a gap between producers' offers and buyers' bids.

Japan is Asia's biggest importer of the metal, and the premiums for primary metal shipments that it agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.

For October-December, Japanese buyers mostly agreed to pay a record premium of $420 per tonne , up 3-5 percent from the previous quarter. This year, Major Japan Port (MJP) premiums have risen 64 percent. 

Earlier this month, three top producers asked Japanese buyers to pay record premiums of $435-$440 per tonne for January-March deliveries, up as much as 4.8 percent from the previous quarter, citing higher U.S. spot premiums triggered by solid demand and smelter shutdowns that have squeezed metal supplies, the sources said.

One producer has lowered its offer to $430 while another one had come down to $425 by Friday, five buyer sources said.

"But we still can't make a compromise as spot premiums are lower here and inventories at Japanese ports have built up as suppliers had brought the metal to Japan amid weak demand elsewhere in Asia," a Tokyo-based source at one end-user said.

Aluminium stocks at three major Japanese ports hit a record high at the end of November on rising imports and softer demand.

"We don't mind continuing negotiations until late January," one buyer source said.

Two other buyer sources, however, said they were getting closer to settling at around $425 while another source at a trading house said he heard some deals had been done at $425.

Most Japanese buyers are expected to take next week off for New Year holiday and return to work on Jan 5.

The quarterly pricing negotiations have been carried out between Japanese buyers and miners including Rio Tinto , BHP Billiton and Alcoa .

Global aluminium premiums are expected to reach record highs by mid-2015 on a supply deficit in the United States and Europe, according to a Reuters survey.

$ 1,200 gold price the new normal ?

After closing 2013 at $1,205 an ounce the price of gold jumped out of the starting gate, rising consistently to reach a high of $1,380 in March.

But the metal failed to consolidate gains during the summer doldrums, falling to a near four-year low November 6 at $1,143.

The recovery from there was swift and gold is heading into the final week of 2014 basically where it started the year.

Gold 2014's highs and lows were 20% or $237 apart, making it the quietest year since 2008. Last year it was 40% or $488 – gold's most volatile 12 months since crazy 1980.

Gold miners' problems are only exacerbated by falling by-product credits

The subdued trading in gold came despite potential market shocks including the slide in oil, the rampant dollar and a variety of geopolitical shocks during 2014.

The gold price is the most sentiment-driven of all commodities, but fundamentals still do matter.

And cost of supply may now be providing that elusive price floor gold bulls have been looking for since 2011's record high above $1,900.

As this chart by metals consultancy GFMS and Thomson Reuters shows towards the $1,100 mark, 60% of the industry would be loss-making on an all-in basis.

Gold miners' problems are only exacerbated say the authors by falling by-product credits, such as silver and copper which are down roughly one third and 10% respectively from the 2013 average.

Average costs in the industry sits around $1,200 and is falling as miners shelve projects, reduce exploration expenditure, defer or cut back on sustaining capital and a strong dollar helps to contain costs outside the US.

While the price may well fall to $1,100 in the year ahead, multiple quarters of prices at these levels would force loss-making miners out of business and reduce supply, helping prices to recover.

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China To Launch Yuan Swap Trading With Russian Rubles On Monday

The world was slow to wake up to the new reality in which China is now the de facto IMF sovereign backstop, as Zero Hedge described two weeks ago in "China Prepares To Bailout Russia" when we noted that a PBOC swap-line was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze, something we first noted over two months ago in "China, Russia Sign CNY150 Billion Local-Currency Swap As Plunging Oil Prices Sting Putin."

In fact, it was only this week that Bloomberg reported that "China Offers Russia Help With Currency Swap Suggestion." But in order to fully backstop Russia away from a SWIFT-world in which the dollar reigns supreme, one extra step was necessary: the launching of direct FX trade involving the Russian and Chinese currencies, either spot or forward - a move away from purely theoretical bilateral FX trade agreements - which would not only enable and make direct currency trading more efficient by sidestepping the dollar entirely, but also allow Russian companies to budget in Chinese Yuan terms. It is no surprise then that this is precisely the missing step that was announced overnight, and will be implemented starting Monday.

From Bloomberg:

China will allow trading in forwards and swaps between the yuan and three more currencies in a bid to reduce foreign-exchange risks amid increased volatility in emerging markets.

The China Foreign Exchange Trade System will begin such contracts with Malaysia’s ringgit, Russia’s ruble, and the New Zealand dollar from Dec. 29, it said in a statement on its website today. That will extend the yuan’s swaps trading to 11 currencies on the interbank foreign-exchange market.

A plunge in Russia’s ruble this month to a record low sparked a selloff in developing nations’ assets, leading to a surge in currency volatility. The new contracts come amid efforts by China to increase the international use of the yuan, as the world’s second-largest economy promotes it as an alternative to the U.S. dollar for global trade and finance. Malaysia and Russia are China’s eighth and ninth biggest trading partners, according to data compiled by Bloomberg.

“This will provide companies with better hedging tools, and at the same time, make currency trading more efficient,” said Ju Wang, a senior currency strategist at HSBC Holdings Plc in Hong Kong. “China won’t stop yuan globalization or capital-account opening because of the volatility in emerging market currencies.”

The CFETS is an agency under the People’s Bank of China.

So while the US continues to parade with "destroying" the Russian economy, even if it means crushing the shale industry, aka the only bright spot, and high-paying job-creating industry in the US economy over the past 5 years, Russia and China continue to be nudged by the west ever closer monetarily and strategically, until one day, as we have long predicted, China and Russia will announce a joint currency, one backed by both China's "surprising" gold reserves and Russia's commodity hoard. Then things will get interesting.

Renewed flight from gold ETFs

After a soft start to the week, the gold price jumped on Friday, coming close to retaking the psychologically important $1,200 an ounce level.

Gold's gains since hitting four-year lows early November are close to 5%, but the metal's resilience against a sliding oil price, a rampant dollar, record money flowing into equities and looming interest rate rises has not enticed investors to return to physical gold-backed ETFs.

Holdings in the bellwether exchange traded fund backed by physical gold, SPDR Gold Shares (NYSEARCA:GLD), fell by 11.6 tonnes on Monday, the worst performance in 18 months, and the sales continued in post-Christmas trade.

At the close on Friday holdings in GLD, which represents nearly 50% of the gold-backed ETF market, stood at 712.3 tonnes or 26.9 million ounces, the lowest since September 22, 2008.

Kitco quotes a research note from HSBC pointing to the risk to the gold price of continued ETF outflows:

"If ETF investors begin to liquidate more heavily, gold may be in for another round of declines," according to HSBC but the investment bank is not expecting further substantial selling during the holiday trading period.

After a positive start to December, this week's outflows have put GLD back in the red for the month with 5.3 tonnes of net redemptions.

The performance so far in 2014 is dismal with investors pulling just over 85 tonnes from the trust although outflows have slowed substantially from the 552 tonnes pulled from GLD in 2013.

Holdings in GLD peaked in December 2012 at 1,353 tonnes or 43.5 million ounces.

In November Barclays noted the risk to the early money invested in the dozens of listed gold-backed ETFs across the globe.

Almost 900 tonnes (700 tonnes on a net basis) were acquired between $900 – $1,000 an ounce.

If the gold price were to fall to $1,000/oz, an additional 100 tonnes would become cash negative according to the UK bank.