'Game Changer' For Gold In UK As New Regulation Favours Gold

Tyler Durden's picture

From GoldCore

'Game Changer' For Gold In UK As New Regulation Favours Gold

Today's AM fix was USD 1,579.50, EUR 1,288.65, and GBP 1,012.57 per ounce.
Yesterday’s AM fix was USD 1,595.00, EUR 1,296.85 and GBP 1,020.47 per ounce.

Silver is trading at $27.09/oz, €22.23/oz and £17.43/oz. Platinum is trading at $1,415.75/oz, palladium at $574.18/oz and rhodium at $1,190/oz.

Gold fell $7.80 or 0.49% in New York yesterday and closed at $1,581.70/oz. Gold dropped off in later trading in Asia and then recovered losses for the open in European trading prior to further weakness where it is trading just below $1,580/oz.

Cross Currency Table – (Bloomberg)

Gold hovered near $1,580/oz today after dropping marginally the previous session when U.S. Federal Reserve Chairman Ben Bernanke gave no clues of any monetary stimulus measures.

However the trading action was positive with gold falling sharply prior to seeing a v shaped bounce back to go positive on the day prior to weakness at the close.

Bernanke reiterated once again the stance that the Fed is prepared to take further action should the economic conditions worsen, but offered no clue on the timing of such action.

We have long said that the conditions would worsen and QE3 was inevitable.

Market participants and traders will wait for Bernanke’s testimony at 1400 today for more clues but those with a more long term horizon will again diversify on the dip.

Bullish for gold was the Fed chairman’s admission that policy makers are studying options for further easing that could be deployed. Tools available include further purchases of assets, reducing the interest rate on bank reserves kept at the Fed and altering its communications on the outlook for rates.

The Dollar Index, a gauge against six counterparts, fell for a fourth day.

Gold may also receive safe haven buying from the LIBOR scandal and crisis which deepened yesterday when Bernanke’s testimony conflicted with the Bank of England’s King and Bernanke appeared to admit that Fed employees were involved in the manipulation of Libor.

Bernanke said yesterday that “[In 2008] there was active effort to report to all relevant policy makers.” While King had said that “the first I knew of alleged wrongdoing ... was two weeks ago”.

Citi, Bank Of America, and JPMorgan appear to be set to be dragged into ‘Lieborgate’ as Congress is expanding the Libor probe to the big three U.S. domestic banks.

Also extremely bullish for gold was Bernanke’s admission that Libor is “structurally flawed” and an international effort would be needed to restore the rate’s credibility as the leading benchmark for mortgages, derivatives and corporate lending around the world.

The Libor scandal is further eroding confidence in the global financial system and will lead to safe haven gold demand.

While official inflation statistics continue to show inflation as benign, inflationary pressures continue to build – especially with regard to the essential that is food.

Global Commodity Prices & Data – (Bloomberg)

Year to date, food staples such as corn have risen by 18%. Soybeans have surged 32%.

Bread is set to get even more expensive in the coming months as wheat prices have surged 34% year to date. It is worth remembering that soaring food and especially food prices led to the ‘Arab spring’ and the various popular revolutions in the Middle East and North Africa.

Hungry people do not stay hungry for long. People suffering from inflation and receiving very low yields on deposits in unsound banks will continue to turn to gold as a store of value.

'Game Changer' For Gold In UK As New Regulation Favours Gold

Gold as an investment or savings mechanism has been frowned upon by the financial services industry in the UK and internationally for many years.

This was due to the bursting of the gold bubble in 1980 (when Volker increased interest rates to nearly 20%), the poor performance of gold in the 1980’s and 1990’s and the superior performance of cash, bonds and equities in that 20 year period.

XAU/USD Rate – (Bloomberg)

It was also due to the fact that gold bullion was not lucrative for financial advisers and financial institutions such as stockbrokers and banks. Gold bullion is bought as a long term investment or store of value and as financial insurance. It is normally bought and kept and owned by the owner for a long time – even passing it onto children.

This means that financial institutions do not make continuing commissions which is their stock and trade. Gold bullion is also a very low margin business when compared to structured products and the many investment products with non transparent and often very high charges and fees.

However, the poor performance of the financial services industry with a series of misspelling and other scandals and the abject failure of much of the industry to have the fiduciary interest of their clients at heart means that the UK’s FSA is set to bring in legislation that will protect the retail investment public.

The Financial Services Authority (FSA) primary role is to make retail markets for financial products and services work more effectively, and so help retail consumers to get a fair deal.

In June 2006, the FSA created its Retail Distribution Review (RDR) programme which they are enacting in order to enhance consumer confidence in the retail investment market. The RDR has a target for full-implementation of 31 December 2012.

The RDR is expected to have a significant impact on the way in which financial services are delivered to retail investors in the UK. The primary delivery mechanism of financial services to retail customers is via approximately 30,000 Independent Financial Advisers (IFAs) who are authorised and regulated by the FSA. They are expected to bear the brunt of the force of the RDR.

Gold bullion is set to benefit from the axing of commission for IFAs and the implementation of the RDR “should be regarded as a game changer” for gold as an investment in the UK, according to the World Gold Council.

In its latest report ‘Gold as a strategic asset for UK investors’, the World Gold Council rightly points out that the current commission structure in the UK narrowed the range of products recommended “which has been suboptimal for clients’ risk preferences and diversification prospects”.

The World Gold Council backs the new regulation, arguing that it will lead to a broader range of assets including gold being recommended by advisers.

“Re-focusing the advisory community and the clients it serves on the importance of asset allocation decisions, not just product selection, sits at the heart of wealth protection” it correctly says.

“Encouraging a broader approach to investing across a wider range of asset classes, based on an understanding of the long-term increase in cross correlations within global investment assets, will be a positive development.”

Much financial academic literature has shown how gold can serve as a portfolio diversifier, preserver of wealth and a risk management vehicle.

“During most market crises over the last 25 years, gold has consistently increased portfolio gains or reduced its losses,” according to the report.

Managing director of investment Marcus Grubb, says: “These extremely challenging times mean it’s impossible to quantify the risks for UK investors. They are facing an unprecedented combination of threats to their assets including extreme and unexpected market shocks that can trigger widespread value destruction.”

“As UK investors reduce allocations to traditional investments such as equities and bonds and increasingly dash to cash, they face a double whammy, with the potential for stagnation of capital due to the lack of returns from cash and the increased possibility of inflation as a result of ongoing monetary stimulation.”

“In this context, an urgent reappraisal of how to protect and create wealth is required and our latest research reinforces gold’s credentials as a core portfolio asset which reduces losses and preserves wealth.”

The RDR regulation is another step in gold slowly going from the fringe - with a small minority of people having any allocation to gold - to the mainstream.

The developments in the UK are likely to be seen in other countries with similar financial regulations and will further help position gold as a primary asset – alongside equities, bonds and cash.


(Bloomberg) -- Malaysia Plans Mercantile Exchange for Gold, Precious Metals
Prime Minister Najib Razak announces plan in speech in Kuala Lumpur.

(Bloomberg) -- RBS Says Platinum Will Average $1,650 an Ounce in Fourth Quarter
Platinum will average $1,650 an ounce in the fourth quarter, Royal Bank of Scotland Group Plc said today in an e-mailed report.

“Importantly, costs have continued to increase in 2012,” the bank said. “A simple cost-price comparison would suggest that as much as 500,000 ounces of production capacity is uneconomical at current prices and, as such, has the potential to be suspended. In reality though, producers take a number of other factors into consideration before they take such drastic measures.”


For breaking news and commentary on financial markets and gold, follow us on Twitter.

Gold steady above $1,580 on Fed stimulus uncertainty - Reuters

Gold retreats amid China house price gain - MarketWatch

Bernanke offers gloomy view but few new hints on easing - Reuters

Gold Recovers as Bernanke is Mum on Fed Actions - Bloomberg

The “Central Banks’ Central Bank” Slams the Federal Reserve – The Big Picture

Santelli On 'The Smoking Gun' – Zero Hedge

The biggest misconception in gold and other factors driving the metal - Mineweb

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Thomas's picture

What's bullish for gold is that these cretins are going to lose total control. Inflation has a lag and spreads unevenly. When it hits us in earnest, the Fed is going to be without a clue what to do. Bunch of pedophiles. 

I think I should buy some long-duration treasuries. That will work well. (That will cheer me up.) 

Harlequin001's picture

I don't think so. The product that will be sold will be the gold ETF, and what better tool than that to provide all the funding needed to the banks to short the gold price?

BaBaBouy's picture

You Believe in Ben Shalom or You Believe In GOLD ???


GOLD to $50K, Bitchies ...

BaBaBouy's picture

Zombies Can chase the Virtual Fiats Contained on the HARD-DRIVES of our "VERY SAFE" Banks.


Myself, I'll keep Chasing the Physical GOLD...

Pladizow's picture

Of all the positive forces driving gold, UK financial regulation will play an insignificant role.

ParkAveFlasher's picture

I agree with this as far as direct impact, however it is a de facto admission of a massive nut up.

engineertheeconomy's picture

End the Fed, take all their Gold and Silver, and distribute it amongst the people by the people for the people. End the Government, and take all their land and distribute it amongst the people by the people for the people. End the Corporations, distribute their assets. End the Military, distribute their assets. Once all the wealth is distributed equally, let people live without taxes and off the grid, independant and free. Just like in 1776

francis_sawyer's picture

How should we distribute the Fed's porn collection?

philosophers bone's picture

midgettrannyporn should get the midget tranny porn?

El Oregonian's picture

An honest man's labor is his to choose what price someone else is willing to pay for it. After that, the rest is eventually susceptible to fraud.

bigdumbnugly's picture

i must commend you on your restraint, thomas.

a gold positive article without the first comment containing the words "gold bitchez" anywhere.

maybe robot trader will see fit to chime in with it later down the thread...



Thomas's picture

It was so tempting. I have to restrain my "potty mouth". This is a family site.

localpacific's picture

gold will obviously have an impact today as we whipsaw most likely .. Whipsaw Wednesday, Expect the Unexpected http://www.traddr.com/video/whipsaw-wednesday-expect-the-unexpected

Cognitive Dissonance's picture

Oh look. Gold is being beaten down again beginning just about when the London "fix" opens and accelerating when the US markets begin to trade.

What a strange coincidence.


Acet's picture

And China, Russia and Iran thank all the suckers selling physical at artificially depressed paper market prices.

malikai's picture

No coincidence to me. I love that trade. It's helped me get physical for years. One day, we'll miss this.

Doubleguns's picture

I think I hear the gold bug conversation starting. Bwaaaaaaahaaaahahahahahahaha....and something about all the way to the bank. Yep thats it.

LawsofPhysics's picture

Bullish for all physical assets of real value.  Fucking bring it.  In the meantime BofA reporting 56% of their pre-tax income as a loss and this is considered "winning".  Fuck me.

Hmm...'s picture

In my opinion this is most interesting:

Year to date, food staples such as corn have risen by 18%. Soybeans have surged 32%.

There have been analysts in the past that describe gold as an insurance product, or as an uncertainty product, as opposed to an inflation hedge.  Gold prices in dollars can go up or down or sideways during times of significant inflation.  But it really shiines when there is massive political or economic uncertainty (such as we see now).

But the prices of other commodities such as food really respond to inflation. (as well as other factors such as weather, crop yields, etc).

There is no question that the Central Banks are monitoring the price of gold as they decide To QE or Not To QE.  But they're looking a lot closer at food and energy price appreciation. (even though they pretend to ignore food/energy prices when they strip out food/energy from "core" CPI).

Rapid rise in gold price gets people nervous.  Rapid rise in food/energy leads to revolution.  The Arab spring was triggered by more than just twitter.  It was people not being able to buy the staples of life.

LawsofPhysics's picture

You are correct sir, but this is why the banking cartel via the American Military conducts a little something called "black ops".

Thisson's picture

Gold is sensitive to real interest rates.  It's only a hedge against inflation to the same extent as any other "real" asset.

Acet's picture

I'm afraid the level of personal savings in the UK is so miniscule that this will have little or no effect on Gold.

It's part of the problem of this country and the reason why it might be seriously screwed far harder and for far longer than most other countries in this Depression is that the behaviour of most people here is consume on impulse and pay for it with debt.

(The other part is that this country doesn't actually make anything anymore: there is simply not enough production of base wealth to fuel the circular services economy here).

DosZap's picture

It's part of the problem of this country and the reason why it might be seriously screwed far harder and for far longer than most other countries in this Depression is that the behaviour of most people here is consume on impulse and pay for it with debt.

I think most people here consume because they either have money and or a job, or they have no choice but to use debt.Its obvious that looking at the retail sales figures that people are buying way less, and the foljs using 401k/IRA funds sure are not blowing it on things they cannot use.

Its an Either / Or proposition.

terryfuckwit's picture

and there is not one honest IFA in the uk..and this nonense wont make a bit of difference.... it is just noise ... tickling the sheeps bellies before taking them for a good fleecing...

Inthemix96's picture

Well then,

Someone should have a word with that one eyed scotch cunt brown then.  The daft fucker sold half of our gold and told the fuckers before hand that the inbred imbecile would see them square.

The fat haggis eating shit head should be shot at dawn to the utter destruction he brought on this country.  Cunt of the highest order, mind, he cannot outdo the odious grinning twat which is GWB underpants.

Fucking war criminals, every last one of the cunts

LawsofPhysics's picture

Well said mate.  The time for "electing" has past.  The time for "executing" is upon us.

engineertheeconomy's picture

You bring the boards, I will supply the steel. We should be able to build a stout guillotine in about twenty minutes

Its_the_economy_stupid's picture

Tell us what you really think. Don't hold back.

TrillionDollarBoner's picture

Not sure I would rank "misspelling" as one of the major scandals hitting banks. 

punxsutawney phil's picture

Well damn with all this gold hype, get in there and buy Mortimer....

YC2's picture

Damn it putting goldcore on the main article stream tricks me into reading it thinking it is something balanced and thoughtful to read and not a one-dimensional news feed.

Jlmadyson's picture

Breaking CNBC: Bank of America being probed on Libor. How deep will the rabbit hole go? Only Timmy G knows.

DosZap's picture

Breaking CNBC: Bank of America being probed on Libor. How deep will the rabbit hole go? Only Timmy G knows.

Like their buddies at HSBC, wonder how the loaning money to Iran deal after the sanctions is gonna work for them?.Slap on the wrist?

Bartanist's picture

Wake me when gold gets to a fair value (compared to other commodities) of about $800/oz.

stepman's picture

Yea, treasuries sound like "tresure" but are IOU's!  Continue to stack Gold and $ilver to come out on the long end of this coming debacle.  The "MoneyChangers" are loosing the grip they have on the world financial markets.  They will resort to had goods.  Convert now while it is on sale!

engineertheeconomy's picture

The "moneychangers" are innocent nuns relative to the "moneyprinters" which are purely satanic in nature. Buy Gold and Silver, yes, of course. But the real solutiuon is to use the Metals as a means of exchange, and render their paper absolutely worthless.

 That is, if the sheeple were to wake up

fuu's picture

Gold BiTcHeZ!




JustObserving's picture

The Fed controls all markets in this Ponzi economy.  The higher the price of gold, the more people will believe that it is a Ponzi economy and distrust the dollar.  So to engender confidence in the economy and the dollar, gold and silver must be restrained. While Europe is ditering, it is very easy for the Fed to control gold and silver prices, not to mention equity prices.  So do not expect any big moves in gold or silver anytime soon.

Just look at the VIX.  It is at 2 month lows.  There is no risk in Ponzi markets.

eddiebe's picture

Gold will bring massive monetary rewards when the banksters say it brings massive rewards. Meanwhile banksters are manipulating and loading up on physical being sold to them by the idiots. Public and private. Don't be surprised if your gold bug patience continues to be tested and even devastated to the downside.

The miners are mostly run by morons and or government and bankster shills looking out for personal gain. Don't expect any salve for your wounds from them any time soon.

Bastiat009's picture

Bullish news, bearish markets ... gold, stocks, bonds ... it would be fun if it was not impacting real people.

caimen garou's picture

bernake has an arsenal of tools he can use, a shovel to bury all the shit he is feeding the American about all his tools he has! he is at the end of his rope,all that is needed now is for the chair to get kicked from under him! HARD ASSETS BITCHES AND BASTARDS!

eddiebe's picture

Wish it were so, but sorry to say, you are fooling yourself.

engineertheeconomy's picture

Actually, I think Caimen has a good point. Personally, I don't see that it's about Gold price going up or down, or even about accumulation. I think the idea is to NOT use their paper. Using their paper gives them power to "steal the people blind by printing press". The people by the people do not need the governments permission to go back to the Gold Standard. It's simply a question of whether or not the people wake the fuck up. Considering that your average person sits in front of the TV 5 hours a day, it doesn't seem like theirs a very high probability of that happening

FranSix's picture

The Bank Of England is in desperate straights attempting to fix 3mo treasury bill rates above zero.  If there's any place you should have negative nominal rates, its' the UK. Bank runs, bailouts, nationalizations, QE, more QE, a thoroughly corrupt London banking sector. 

So you get surreptitious selling of gold bullion leases during London market hours regardless of price, mostly because maintaining treasury bill rates above zero is very dependant on gold lease rates remaining negative.  Normally gold lease rates would rise in a sell-off, but this time around lease rates have remained planted in the negative, with no movement.

That would indicate that despite the heavy physical off-take and demand for bullion, the amount of gold leased has increased exponentially.

Floodmaster's picture

Central bank balance sheet expansion for decades to come.Deflation Sets In, Hyperinflation To Follow