BRICs Bank To Rival World Bank And IMF And Challenge Dollar Dominance

BRICs Bank To Rival World Bank And IMF And Challenge Dollar Dominance

Gold’s London AM fix this morning was USD 1,664.00, EUR 1,246.16, and GBP 1,037.54 per ounce. Friday's AM fix was USD 1,655.75, EUR 1,245.86 and GBP 1,041.22 per ounce.

Silver is trading at $32.41/oz, €24.29/oz and £20.21/oz. Platinum is trading at $1,634.50/oz, palladium at $651.96/oz and rhodium at $1,350/oz.

Cross Currency Table – (Bloomberg)

Gold rose $8.10 or 0.49% in New York on Friday and closed at $1,668.20/oz. Gold traded volatile in Asia with quick gains seen at the open prior to determined selling which saw a drop to $1,663.77/oz in late Asian trading and European trading saw further weakness.

Gold climbed towards $1,700 last week after the U.S. Federal Reserve Chairman Ben Bernanke alluded to the possibility of more QE.

Gold continues to be guided by the currency markets. The dollar index hit near a 1 month low last Friday and this plus weakness in all major currencies is seeing gold supported close to the 200 day moving averages.

Gold 1 Year – (Bloomberg)

Gold's short term technicals remain poor after a lower monthly close in March (-6.4%) and the weekly close below the 200 day moving average.

However, the technicals are not uniformly bad as gold had a higher weekly close last week - rising 0.33% for the week.

The higher quarterly close of a 6.7% gain in Q1, 2012 and 11 consecutive years of annual gains mean that the long term technicals remain favourable.

Gold’s still strong long term supply demand fundamentals and the long term trend of rising gold prices remain a gold buyer’s friend.

Jewellers in India, plan to suspend the longest nationwide strike after the government said that it will delay the implementation of an increase in excise duty on non-branded ornaments.

India’s gold imports will drop near 59% to about 125 tonnes in the 3 months through March as the tax increases boost retail prices by more than 6%, Prithviraj Kothari, president of the Bombay Bullion Association, said. That compares with 306 tonnes imported a year earlier, according to data from the World Gold Council.

The lack of Indian demand has almost certainly contributed to recent weakness and the renewal of India demand in the coming days should provide further support to gold.

BRICs Bank To Rival World Bank and IMF and Challenge Dollar Dominance

Outgoing President of the World Bank, Robert Zoellick, after just three days ago dismissing the idea of a BRICs created, new global multi lateral bank, has come around and endorsed a BRICs bank in an interview with the FT.

Zoellick had initially said that a BRICs bank and potential rival to the western and U.S. dominated IMF and World Bank, would be difficult to implement given competing BRIC interests.

He acknowledged that a BRICs bank was being created and said that the World Bank supported such a bank. He said that not having Russia and China as part of "the World Bank system" would be a “mistake of historic proportions”.

Leaders of the BRICS nations meeting in India appear to have made much progress in creating a new global bank as the emerging economies seek to convert their growing economic might into collective diplomatic influence.

The five countries now account for nearly 28% of the global economy, a figure that is expected to continue to grow.

On Thursday morning, President Hu Jintao of China, President Dmitry Medvedev of Russia , President Dilma Rousseff of Brazil, President Jacob Zuma of South Africa and Prime Minister Manmohan Singh of India shook hands at the start of the one day meeting in New Delhi.

BRICS leaders, from left, Brazil’s President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh, Chinese President Hu Jintao and South African President Jacob Zuma.

Top of the agenda was the creation of the grouping's first institution, a so-called "BRICS Bank" that would fund development projects and infrastructure in developing nations.

The initiative would allow the countries to pool resources for infrastructure improvements, and could also be used in the longer term as a vehicle for lending during global financial crises such as the one in Europe, officials said.

Less noticed and commented upon is the aspirations of the BRIC nations to become less dependent on the global reserve currency, the dollar and to position their own currencies as internationally traded currencies.

The leaders of BRIC nations and other emerging market nations have adopted the idea of conducting trade between the five nations in their own currencies. Two agreements, signed among the development banks of Brazil, Russia, India, China and South Africa, say that local currency loans will be made available for trade between these countries.

The five fast growing nations participating in local currency trade will allow participants to diversify their foreign exchange reserves, hedging against the growing risk of a euro or dollar crisis.

The BRICS want to have easy convertibility of currency to make it easier to use the real, ruble, rupee, renminbi and rand amongst themselves without having to always use the US dollar. Higher intra-Brics trade, conducted in their own currencies would shield their economies from economic dislocations in the west.

In the long run, if global dependence and exposure to the dollar is to be reduced, then the BRICs currencies will have to trade amongst themselves, creating an intra Brics currency market. This could lead to a special reserve BRICs currency that could rival the IMF's Special Drawing Rights (SDRs) and in time a regional currency could emerge. However, the EU's experience of a single currency may make this less likely.

Left unsaid so far is the possibility that one of the BRICs or the BRICs in unison might peg the value of their respective currencies to the ultimate store of value and money - gold.

Having a gold standard enforces a form of fiscal self or national control and does not allow any one nation to have an exorbitant privilege in terms of monetary affairs that can be used in order to further selfish national or national corporate or banking interests.

Having a new gold standard or even a quasi gold standard, as proposed by Zoellick himself some months ago, would lead to the end of the greenback as the sole global reserve currency.

This is likely an objective of some of the BRICs, especially China and Russia, and has obvious ramifications which should inform decisions regarding investments, savings and managing wealth in the coming years.

Global diversification and owning the hard monetary asset of gold has never been more important.

OTHER NEWS

(Bloomberg) -- U.S. Mint March Gold-Coin Sales Rise to Estimated 62,500 Ounces

Sales of gold coins by the U.S. Mint rose to an estimated 62,500 ounces this month from 21,000 ounces in February, data on the Mint’s website showed today.

Sales of silver coins climbed to 2.542 million ounce in March from 1.49 million in February.

(Bloomberg) -- Gold Imports by India Plunge in March After Industry Shutdown

Gold imports by India, the world’s biggest, plunged in March after jewelers closed stores for more than two weeks to protest against higher taxes, an industry group said.

Purchases may have been about 15 metric tons to 20 tons last month, compared with 75 tons to 80 tons a year ago, Prithviraj Kothari, president of the Bombay Bullion Association, said today by phone. Second-quarter imports may slide to 150 tons, from 250 tons a year earlier, he said.

India may buy about 700 tons to 800 tons of gold in 2012, Kothari said. That compares with record purchases last year of 969 tons, according to World Gold Council data.

(Bloomberg) -- India Raises Benchmark Import Price of Gold to $539/10 Grams

India raised the benchmark price for imports of gold to $539 per 10 grams from $530, according to a statement from the finance ministry.

The benchmark price for imports of silver was cut to $1,032 per kilogram, from $1,036, it said.

The benchmark prices are used to set the tax on precious metals imports.

(Financial Times) -- Rush to scrap household gold and silver is taking its toll on Birmingham jewellery

In a back room in Birmingham Nigel Blackburn is busy smashing up pieces of Georgian silver in preparation for a "melt".

(Bloomberg) -- Gold Traders Increase Bets on Price Rise, CFTC Data Shows

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended March 27, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 147,821 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 16,358 contracts, or 12 percent, from a week earlier.

Gold futures rose this week, gaining 0.4 percent to $1,671.90 a troy ounce at today's close.

Miners, producers, jewelers and other commercial users were net-short 185,076 contracts, an increase of 18,938 contracts, or 11 percent, from the previous week.

Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.

(Bloomberg) -- Silver Traders Trim Bets on Price Rise, CFTC Data Shows

Hedge-fund managers and other large speculators decreased their net-long position in New York silver futures in the week ended March 27, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 18,655 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 2,514 contracts, or 12 percent, from a week earlier.

Silver futures rose this week, gaining 0.7 percent to $32.48 a troy ounce at today's close.

Miners, producers, jewelers and other commercial users were net-short 29,678 contracts, down 2,448 contracts, or 8 percent, from the previous week.

Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.