“Algerians Are Investing In Property, Gold and Foreign Currencies”

Today’s AM fix was USD 1,311.00, EUR 965.11 and GBP 816.26 per ounce.
Friday’s AM fix was USD 1,316.00, EUR 967.01 and GBP 817.04 per ounce.

Gold fell $6.80 or 0.52% Friday, closing at $1,310.60/oz. Silver inched down $0.02 or .09% closing at $21.68. Platinum climbed $16.94 or 1.24% to $1,379.24/oz, while palladium climbed $4.22 or 0.61% to $701.22/oz. Gold and silver were off marginally for the week at 1.90% and 0.18% respectively.

Download Free Guide - How to Store Gold Bullion: The 7 Key Must Haves


Gold in USD, 1 Year with Support and Resistance - (Bloomberg)

Gold’s support is at $1,300/oz and a fall below that level could see gold test the next level of support  at the $1,180/oz to $1,200/oz mark. Resistance is at $1,400/oz to $1,434/oz level and a breach of resistance should see gold quickly test the $1,500/oz level (see chart above).

Gold is marginally lower in most major currencies despite the near week long U.S. government shutdown which is leading to genuine fears that Congress may struggle to raise the U.S. debt ceiling. 

This is burnishing bullion's safe-haven appeal but that has yet to be reflected in higher prices. 

U.S. politicians remain very far apart in ending the first government shutdown in 17 years stoking fears they will not be able to reach a deal to raise the U.S. borrowing limit by October 17 to avoid an unprecedented debt default.

Congress should limit Wall Street's controversial role in commodity markets, and rewrite a law that gives banks broad leeway to own oil, metals and other raw materials, a senior U.S. regulator said on Friday. 

The Federal Reserve, which is meant to be the top U.S. bank watchdog, is rethinking its policy of allowing banks to operate in commodity markets amid accusations they inflate the prices of aluminum, electricity and other essential commodities and deflate the prices of other commodities, such as gold and silver.

"I plan to urge that the law be amended by simply reversing the policies that allow for bank ownership," said Bart Chilton, a commissioner at the Commodity Futures Trading Commission (CFTC), the top U.S. derivatives regulator.

The law also gives some banks an advantage over others, Chilton said, in reference to Morgan Stanley and Goldman Sachs Group Inc, which only came under Fed supervision in 2008 at the height of the financial crisis.

Because the two changed their legal status at that time, the law treats them more leniently than their rivals, allowing them to hold any commodity businesses they had before Sept. 30, 1997, through a so-called grandfather clause.

"There are two banks that are using yet another exception to the law," Chilton said in his speech Friday.

India's customs department has cleared more than a tonne of gold bullion, part of which was owned by the Bank of Nova Scotia, at Mumbai airport after rule clarifications at a high level meeting held last month, industry and bank officials said on Saturday.

Platinum operations around the South African mining city of Rustenburg will face restrictions regarding water use because of a drought, hurting the world's three largest platinum producers which have developments there. 

No. 1 platinum producer Anglo American Platinum is already facing a strike at its South African operations that it said was cutting output by an average 3,100 ounces a day.

Currency Ranked Returns - Algerian Dinar Versus G10 and Gold In 5 Years Since Lehman (Bloomberg)

Across the street from the parliament, courthouse and main police station in central Algiers is the country’s biggest illegal market for foreign exchange.

“Currency, currency!” Nadir, 28, shouts out to passing cars from his spot on the curb of Port Said Square in the Algerian capital. “Come here for your currency!”

Algerian Dinar and Euro - 5 Years

He’s among dozens of money changers milling around the gardens of the sunbaked esplanade overlooking the Mediterranean, chatting on mobile phones and counting crisp dinar notes. Last week, their going rate was a record 150 dinars ($1.84) per euro, almost 40 percent more than the official price.

Underlying the increased demand for black-market money is the concern regional conflagration may spread. Revolts in nearby countries have left President Abdelaziz Bouteflika as North Africa’s longest-serving leader, while reviving memories of Algeria’s own civil war in the 1990s. 

Algerian Dinar and US Dollar - 5 Years

His government has ramped up spending to ward off unrest, helping drive inflation to a 15-year high last year, and pushing Algerians into the currency and real estate markets as they seek to shield savings.

“To protect themselves against inflation, and therefore the devaluation of the dinar, Algerians are investing in property, gold and foreign currencies,” Abderrahmane Mebtoul, a professor of economics at the University of Algiers, said in an interview. 

“It is a way of looking for security.”

The Bloomberg article on demand for property, foreign exchange and gold in Algeria can be read here.

Inflation and currency devaluations being seen in the developing world and emerging markets today are a warning sign and a small taste of what will be seen in western economies in the coming years as currency devaluations and debasement continue.

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