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Russia Sells Gold

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#1 Thu, Mar 29, 2012 - 4:10pm
Paladex
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Russia Sells Gold

Apparently, Mother Russia - which, along with many other countries has been buying gold for a while now - sold almost 4 tons of gold in February. Analysts don't think it's a change in strategy as much as it is Russia being "more opportunistic."

So, what do they know that we don't know? Is a dip coming that they want to capitalize on? Is the short-term bottom NOT in?

Original story here: https://www.businessinsider.com/russia-sells-gold-2012-3

Edited by: Paladex on Nov 8, 2014 - 5:30am
Sun, Apr 15, 2012 - 2:31am
Strongsidejedi
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BRICs are impacting CME Gold price

https://www.kitco.com/reports/KitcoNews20120413DC_interview.html

“I guess in retrospect it does appear that it was the Russians who were selling about a month and a half ago,” said Gartman about the catalyst for his realization. “Having been great buyers of gold for two and half years now, the Russian central bank has turned into a seller. That may well be the seminal or the tectonic plate shifting circumstance. One of the great buyers is no longer a buyer,” he told Kitco News in a phone interview.

In February, Russian central bank reduced gold holdings by 3.8 tons worth about $200m as per data released by the International Monetary Fund. This was the country's first gold sale in five years. Russia holds the world's fourth-largest gold and foreign-exchange reserves, after China, Japan and Saudi Arabia.

_____________________________________________

The interpretation of the Gartman letter may be out of touch with the international situation.

Russia attended the BRIC summit in India just a few weeks ago.

India is buying Iranian crude oil in exchange for Indian rupees, but also for Gold.

India just upped the price of gold on the Indian jewelers by implementing taxes.

Now, think about this ... why would India tax gold and put the brakes on gold consumption by Indian jewelers?

See: https://www.gata.org/node/11218

"Indian gold prices have been quoting at a discount of around $20 a troy ounce, due to a lack of demand from wholesalers and retailers. Gold for June delivery ended at $1,630.10 a troy ounce Thursday on Comex."

"The government has said the tax changes are aimed at discouraging purchases of the precious metal to contain the country's current-account deficit, as gold is the second-largest import item by value after crude oil. India's central bank recently directed local banks to submit monthly statements on the quantity of gold held, over and above previous declarations of the value of their imports, in a bid to tighten monitoring of the metal's inflow. Until this week, only designated banks and state-run trading agencies were permitted to import gold, which mostly ended up in the retail jewelry market."

__________
Recall this story?

https://www.bloomberg.com/news/2012-01-22/iran-said-to-seek-yen-oil-paym...

and now I locate this one:

https://articles.economictimes.indiatimes.com/2012-02-17/news/31071438_1...

quote:

OIL NEEDS: Boycotting Iran is not easy as India imports 80% of petroleum needs. It buys $12 billion worth Iranian oil per year. Iran counts on India for three-quarters of the rice it imports. Indian rice exporters send half the shipments to Iran. Also, as a matter of principle, India only abides by UN embargoes.

ROUTE TO AFGHANISTAN: Again, India has strategic interests in the region. India eyes iron reserves in Afghanistan worth $3 trillion. Afghanistan also has copper, gold, rare earth, oil and gas. Given India's ties with Pakistan, the nearest port for transporting these minerals is Iran's Chabahar, which can be connected to Afghanistan through a 900-km railway line.

IMPORT HITCHES: RBI has been forced to stop the use of a clearing house to route payments for oil imports. It now depends on a Turkish bank. Tighter sanctions can make even this difficult.

BARTER OPTION: Officials have considered payment in rupees, gold and barter if possible. India and Iran have already discussed prospects of rupee trade but some tax issues remain.

OPTION FOR OIL: Biggest exporter Saudi Arabia is ready to step up production. Indian refiners have also approached other oil exporters in the Gulf, Africa and South America for crude. Indian refiners also like to test new grades of crude to diversify purchases.

SPIKE IN PRICES: Crude already costs $15 more than expected. If oil cargoes are blocked, Brent may touch $200 a barrel. Oil price touched $120 a barrel, on Wednesday, after Iran flaunted a breakthrough in nuclear technology.

IMPACT ON ECONOMY: If India depends on Iranian crude, a US-Iran conflict could lead to a severe price hike. High inflation and mounting losses of state-run oil companies will follow.

Sun, Apr 15, 2012 - 3:12am
Strongsidejedi
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Doing more math

From https://articles.economictimes.indiatimes.com/2012-02-17/news/31071438_1...

  • India imports 80% of petroleum needs
  • It buys $12 billion worth Iranian oil per year
  • Iran counts on India for three-quarters of the rice it imports
  • Indian rice exporters send half the shipments to Iran.

From https://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/03/23/bloomberg_a...

  • Iranian oil exports will drop by 300,000 barrels a day this month because of tighter sanctions.

From https://www.ft.com/cms/s/0/58f2a71a-79be-11e1-9900-00144feab49a.html#axz...

  • Russia sold gold in February for the first time in five years, according to data released by the International Monetary Fund.
  • "The sale, while relatively small at just 3.8 tonnes worth about $200m at current prices, was unexpected"

Doing math now:

At a daily price of $120 USD FRN's per barrel, India imports $1 billion USD FRN's of oil per month from Iran under normal circumstances.

$1,000,000,000 USD's of oil is about 10,000,000 barrels at an average price of $100 USD FRN's per barrel.

India can not trade with Iran for 10 M barrels of oil using USD's through Turkey.

Therefore, India is bartering for the crude oil in exchange for gold.

You can check the math in reverse using the data cited above!

My guess is that India bought the gold off Russia. Russia has to be shipping the gold to Iran via land/rail.

There are 35,275 ounces in a metric tonne. One metric tonne is about 58,000,000 USD's. If the Russians sold 3-4 metric tonnes of gold in the past few months, you'd be talking 240 million USD FRN's.

So, 240,000,000 USD's buys about 2.4 million barrels of oil and therefore, the liquidated Russian gold equates to about 2-3 million barrels of oil.

Now check the math a third way...

Calculating from the reported drop in Iranian crude oil exports of 300,000 barrels per day:

300,000 x 30 days = 9 million barrels per month.

The Russian gold sales would trade for about 2 weeks of Iranian export crude oil cut back.

If Indian gold reserves move down hard, then we will know if India was trading gold for oil.

They need 1 billion USD's in crude imports from Iran per month.

Therefore, they need about 10 million barrels per month.

Interestingly, that means about 1 month of Indian oil import (consumption) is offset by Russian gold sales.

We're about one month into the cap on the gold price in US dollars.

Sun, Apr 15, 2012 - 5:20am
S Roche
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Thank you

Great work, gold for oil...where have I heard that before?

Fascinating development...gold hoarders on the side of the nuculer terrists (sic) coming up.

Sun, Apr 15, 2012 - 3:46pm
Be Prepared
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@IRB - There is no Doubt...

IRB

India has no choice but to do the deal with Iran. If that means gold, they will certainly do it because, without the oil, their economy would come to a grinding halt. We all know that there is not a huge surplus of oil on the market..... where can India go to replace that quantity of oil... so they will make the deal. I don't know how Russia fits in.... maybe they are doing some sort of exchange with India and Iran... acting as an Intermediary in exchange for favored nation status.

The challenge, in my opinion, is that SWIFT was used as an economic weapon. I wonder if taking this course of action has accelerated the demise of the USD as the reserve currency.

Plan for Tomorrow, but Work your Plan Today
Sun, Apr 15, 2012 - 6:13pm (Reply to #5)
Strongsidejedi
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@ Be Prepared

Be Prepared said : SWIFT was used as an economic weapon. I wonder if taking this course of action has accelerated the demise of the USD as the reserve currency.

I agree.

That was the reason I decided to step through the Russian and Indian press reports in the last 90 days.

In the past 48 hours, we've had people on this board claim that Russian gold sales is responsible for pressure on gold. In addition, there's been significant reports of India attempting to replace Iranian crude oil supply.

The matching of these events is too coincidental to be dismissed.

Therefore, the math.

The math last night convinced me that Russian gold is moving in order to help India off set crude oil demand.

Sun, Apr 15, 2012 - 9:26pm
S Roche
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Jim Rickards on the case...

 Did Russia sell 3.8 tonnes of gold to India to help with oil from Iran? They read Currency Wars?

 Good question. They sold , unusual for Russia, but I don't know the buyer. My guess is an oligarch retirement fund in Austria

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