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August 2016 Market Review

Indian Gold Imports Drop for Sixth Month in July

Data from GFMS recorded a drop in India’s gold imports during July which represents the sixth month of its kind this year. India’s gold imports in July was reported to be around 20 tonnes, the lowest since March 2016 and a reduction of 79.3% year on year. This drop in import is in-line with the fall in demand in the country, as well as record high discounts offered by retailers following strike action earlier in the year. A lack of demand from the second largest consumer of gold in the world could have a far-reaching impact on global spot prices but could assist the country in reducing the current trade deficit.

Gold Drops as Fed Rate Outlook Lessens Appeal

During August, gold recorded the first monthly decline since May, as speculation that the US Federal Reserve will raise interest rates this year declined. Interestingly, this is the first time gold has dropped during August since 2009 as demand generally increases during this period ahead of the wedding festival in India. Prices slid 3.4 percent this month after surging 25 percent in the first half of the year as economic concerns fueled demand for the metal as a safe haven investment.  The decline follows comments by Fed officials that lifted the dollar and prompted traders to boost bets on higher rates, which make bullion less competitive against interest-bearing assets.

Mobile Phone Recycling and Gold

Earlier in the year, in its annual environmental report, Apple reported that it had recovered more than a tonne of gold from recycled iPhones, iPads and Macs in 2015 which at the time was recorded to be worth over $40 million. Of the 90 million pounds of electronic waste which was recovered through its recycling programs, Apple said 61 million was in reusable materials. Although gold made up a relatively trivial amount of the total, due to the value of the metal, it was among the most valuable materials recovered. However, although recovery of gold from discarded electronics can be cost effective, it relies on the use of dangerous chemicals, with potentially wide reaching environmental impact. Now, new techniques developed by researchers at the University of Edinburgh, mean that recovery of precious metals could be achieved without using these toxic chemicals.

The team believe that their method could help salvage some of the estimated 300 tonnes of gold used in electronic circuitry every year. Electrical waste is thought to contain as much as 7% of the world’s gold and the discovery of this new method could could help reduce the environmental impact of gold mining, as well as proving more cost effective than current methods.

Existing methods of extracting gold from circuit boards are inefficient and potentially hazardous as they involve toxic chemicals such as cyanide, the researchers said. By studying the chemistry underpinning the extraction, the team said they were able to develop a compound that could be used to recover gold more effectively and safely.


China Bullion Sales Decline as Prices Climbed After Brexit Vote

China, the world’s biggest producer and consumer of gold, cut bullion purchases in July as prices soared to the highest level since 2014 after the U.K. voted to leave the European Union.

The People’s Bank of China increased holdings by 170,000 ounces to 58.79 million ounces, or about 1,829 metric tons, according to the central bank. That was the smallest addition since it started to disclose monthly purchases about a year ago. The nation announced last year that its holdings has jumped 57 percent since 2009.

Gold advanced to $1,375.34 an ounce on July 11, the highest in more than two years, as investors grappled with the fallout from the U.K vote and lowered expectations for an interest-rate increase by the Federal Reserve. A stronger-than-expected U.S. jobs report also increased the speculation  of a rate increase this year. Whilst China has the fifth-biggest gold holding when measured by country, its reserves make up only 2.3 percent of the total, compared with 76 percent in the U.S. and 70 percent in Germany, according to data provided by the World Gold Council.

First Gold ‘Poured’ From Scottish Mine

A mine in Scotland has produced gold for the first time following the launch of an ore processing trial. Mining firm Scotgold Resources is crushing 2,400 tonnes of ore which has been stockpiled at Cononish near Tyndrum in central Scotland.

It is targeting “first pour” production of between 400 and 600 ounces of gold during the initial six-month trial. About 100 ounces (almost 3kg) of that will be sent to jewellers to test the market for Scottish gold. Much like the rarity and value often associated with Welsh gold, Australia-based company Scotgold is hopeful that the gold’s rarity may command a premium price.

A small-scale pilot plant has already started processing material at the site after permission was granted by the Loch Lomond and the Trossachs National Park Authority earlier this year. The company has estimated that several tonnes of gold could eventually be extracted from the site in Cononish.

Royal Mint Sees Surge in Demand for Gold Bars and Coins

The Royal Mint has said that it saw a “surge” in demand for the precious metal following the Bank of England’s cut in base rates to 0.25% on 4 August. During that week the Mint saw a 25% increase in transactions on its bullion website.

It also experienced a 50% increase in sales of gold bars and coins, compared with the previous week. It is thought investors are turning to gold as cash and bonds offer diminishing returns, exacerbated by lower interest rates.

So far this year, the price of gold has risen by 45% in sterling terms, and 25% in dollar terms. Earlier this week, the World Gold Council reported that global investment demand for gold hit a record level in the first six months of this year. However consumer demand in countries such as India and China, traditionally among the strongest buyers of gold, was lower.


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