Gold's Gory Crash, One Year On
- Sitting between the world's clearing house of London vaults and the end-buyers in Asia, the refinery industry in Switzerland is well stocked today. Part of their core business is taking in large 400-ounce wholeale bars to produce more consumer-friendly kilobars (and at the more Asian-friendly purity of 0.999 rather than London's standard 0.995 as well). Today, Swiss refineries are asking lower premiums on those smaller units than 6 months ago;
- Spring 2014 sees China now over-supplied, with Shanghai prices offering a discount to the world's benchmark of London settlement. More usually a premium – and peaking at $50 per ounce above London spot prices to suck metal from West to East in mid-2013 – that discount has now lasted for 7 weeks and cut as deep as $9 per ounce, by far the biggest anomaly since at least January 2012. Demand is seasonally low this time of year anyway. But reports of slower imports to the world's No.1 buyer shouldn't surprise anyone over the next few months;
- There's also plainly more metal to hand in India than during the crash. Because again, the local premium to London prices has retreated. With 10% import duty to account for first, it's dropped from an insane $175 per ounce to a merely crazy $60. The reason? Smuggling has leapt, defying the government's effective ban on new imports with up to 200 tonnes sneaked past customs officials on one serious estimate;
- Because China has plenty of metal right now (it is the world's No.1 miner, after all), US depositories are gathering metal as well, reversing the outflows of July-December 2013. North American miners, notes consultancy Metals Focus, have come to rely on Chinese gold demand. But now they find their eastern buyers well served during the seasonal lull, they're having to stockpile gold – if only a few tonnes so far – closer to home.

- London, in contrast, the heart of the world's wholesale gold trade for 250 years, is showing signs of tightness. Because gold borrowing costs are ticking higher. Again, it's not dramatic just yet, a mere fraction of one percentage point. But contrary to standard practice, lenders of gold have asked borrowers to pay them for short-term loans on as many days as not so far in 2014. Usually they have to offer the gold borrower an incentive instead. First because gold borrowers need to pay storage fees and miss out on cash interest payments for the duration of the loan. Second because London is normally so well-stocked with gold that lenders have to join the line. But not today.