Diamond News Archives

In this week's Economic Intelligence: What's really behind the recent surge in the price of gold - and what does it mean for investors? Subscribe here^[1] to get the full column direct to your inbox every Tuesday.

The gold fraternity was in ecstasy at Monday’s Mining Journal forum in London. The long frustrating grind for the bullion markets is over. Spot prices have sliced through five-year resistance^[2] at $1380 like a hot knife through butter.

There is nothing more beautiful for a gold mining executive than the spectacle of total capitulation by the US Federal Reserve. City bankers are already talking about emergency cuts of 50 basis points in July. Markets are pricing in three cuts this year. 

The start of a Fed loosening cycle is a rare event and invariably a catapult for gold^[3]. This time the effect is turbo-charged by the onset of negative real interest rates across the US maturity curve. It is happening against the backdrop of a disintegrating world trade system, a Sino-US superpower showdown, and the end of global Pax Americana. 

Hedge funds are loading the boat on the CFTC futures market. Ole Hansen from Saxo Bank says the last three weeks have seen the biggest jump in ‘spec long’ gold positions since records began. Net longs have reached 190,000 lots. The G4 central banks are moving together like a peloton.

The European Central bank has flagged a cut in rates to minus 0.5pc in a desperate effort to hold down the euro. “It is a race to the bottom,” said Mr Hansen.

Over $12 trillion of bonds are trading this week at negative yields, including Portuguese sovereign debt out to five years, or Spain out to...

As central banks like the US Federal Reserve try to counter a sagging global economy (and preserve asset bubbles), strange things begin to happen. Like the US 2-year swap spread going negative for the first time ever!

(Bloomberg) — The U.S. 2-year swap rate moved below the 2-year Treasury note’s yield for the first time ever Tuesday after 3-month dollar Libor’s latest drop, turning the 2-year swap spread negative. It was the last tenor on the swap spread curve to fall below zero.

Currently around -0.25bp, 2-year spreads dropped as low as -0.5bp, tighter on the day by 1bp; spread is tighter by ~12.5bp since the start of May

• 3-month dollar Libor fixed lower by 2.16bp at 2.31125 Tuesday, lowest since August 2018
• A combination of higher general collateral rates, overseas selling and hedging flows have weighed on front-end spreads over the past couple of months;

Here is the US Dollar Swap Curve and the Swap Spread curve.

Is this a Grim Fandango?^[1]

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References

1. ^{^} Is this a Grim Fandango?(www.youtube.com)

President Trump is threatening "obliteration" of Iran if the country carries out an attack on "anything American," after Iranian officials said the path to diplomacy between the two nations is permanently closed after Mr. Trump's new round of sanctions Monday. 

Mr. Trump announced the sanctions on Iran's supreme leader and the supreme leader's office in response to what the administration deemed multiple acts of aggression by the Iranian regime. 

"Iran's very ignorant and insulting statement, put out today, only shows that they do not understand reality," Mr. Trump wrote in a series of tweets Tuesday morning^[1]. "Any attack by Iran on anything American will be met with great and overwhelming force. In some areas, overwhelming will mean obliteration. No more John Kerry & Obama!"

"Iran leadership doesn't understand the words 'nice' or 'compassion,' they never have," the president also tweeted^[4]. "Sadly, the thing they do understand is Strength and Power, and the USA is by far the most powerful Military Force in the world, with 1.5 Trillion Dollars invested over the last two years alone."

Iranian President Hassan Rouhani, in a televised address, called the new sanctions "outrageous and idiotic," slamming the Trump administration for issuing the sanctions while also calling for negotiations. 

Tensions between the U.S. and Iran have long been escalating, reaching a breaking point last week after Iran shot down a U.S. drone. Mr. Trump had approved a strike on Iran, but backed off after -- according to Mr. Trump -- the president learned how many lives could be lost. Instead, the Pentagon went ahead with a cyber attack^[5]. 

The sanctions the...

Following the United States' decision - by means of a decree by President Donald Trump - to withdraw benefits under the Generalised System of Preference (GSP), the price of polished diamonds exported by India to the US will increase with seven to eight percent, according to rating agency CRISIL. 

Currently, the US accounts for about half of the India's diamond exports to the US, at an estimated value of $24 billion, according to the Gem and Jewellery Export Promotion Council (GJEPC).  

According to the online Indian publication The Tribune, the withdrawal of the GSP "adds to the woes of diamond exporters, who are reeling under reduced credit facilities from financial institutions following the frauds carried out by diamond merchants Mehul Choksi and Nirav Modi, according to those in the trade. Sources at the GJEPC say that the American government's decision to remove all distinction between natural and man-made diamonds has also affected the exports of cut and polished diamonds."

Also, according to the GJEPC, as the US continues to raise barriers and tariffs against Indian exports of gems and jewelry, India's competitive position in under siege.

The Tribune wrote that Indian diamond exporters were now "demanding that the Indian government grant them a four percent subsidy under the Merchandise Exports from India Scheme (MEIS) in the forthcoming budget in order to offset the higher tariffs following withdrawal of GSP benefits by the USA."...