A precious metals note today, in honor of gold breaking $1,300/oz (briefly) this morning.
Some of the buying that’s propelled gold lately is from investors who want to hold metal as currency. Having something tangible in your pocket provides insurance if another financial catastrophe descends on the world.
JP Morgan recognizes this demand. On Wednesday, JPM announced it will open its first precious metals storage vault in Asia.
The facility will be located in Singapore, near Changi Airport (just in case you want to grab your gold and fly). The stated goal is to provide precious metals storage for “corporate, institutional and retail” clients.
Some of the people using this facility will be investors from outside Asia, looking to geographically diversify their gold holdings. Many investors are leery of keeping all their gold in one basket, just in case governments get confiscatory.
Perhaps more interestingly, the new facility will allow local Asian investors to get more involved in owning physical metal. Recently, the Singapore Mercantile Exchange announced the launch of a physically-settled gold contract that will be delivered at the JP Morgan vault.
But will gold be the number one choice in Singapore? Asia has always been a little different when it comes to precious metals. Many Asians prefer platinum as “catastrophe insurance”.
Look at Japan. On the Tokyo Commodity Exchange (TOCOM), open interest in gold amounts to 3.5 million ounces. Or about 5% of the 60 million ounces in open interest seen on the NYMEX exchange in New York.
With platinum, Japan’s percentage of global trade is much higher. Open platinum interest on TOCOM is 840,000 ounces. This is 45% of the NYMEX open interest in platinum, which currently stands at 1.9 million ounces.
As options like the new JP Morgan Singapore vault come available to Asian investors, it will be interesting to see what metal they choose. If they follow the Japanese example, this could become an important new source of demand for both platinum and gold.
Here’s to the other precious metal,
Dave Forest
dforest@piercepoints.com
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Bio: Dave Forest’s analysis on the natural resources sector has been featured on BNN, Kitco.com, Financial Sense and the Daily Reckoning. He has been a recent speaker at conferences in Calgary, Chicago, Las Vegas, Toronto and Vancouver. He is a professional geologist and formerly advised a worldwide client base on oil/gas, mining and renewable energy at Casey Research LLC. Dave currently serves as managing director of Notela Resource Advisors Ltd.
Note:
The information provided in this newsletter is based on the independent research of Dave Forest and Notela Resource Advisors Ltd. and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade any securities or commodities named herein. Information contained in this newsletter is obtained from sources believed to be reliable, but is in no way assured. All materials and related graphics provided in this newsletter and any other materials which are referenced herein are provided “as is” without warranty of any kind, either express or implied. No assurance of any kind is implied or possible where projections of future conditions are attempted. Readers using the information contained herein are solely responsible for verifying the accuracy thereof and for their own actions and investment decisions. Neither Dave Forest nor Notela Resource Advisors Ltd., make any representations about the suitability of the information delivered in this newsletter or any other materials that are referenced herein for any purpose whatsoever. The information contained in this newsletter does not constitute investment advice and neither Dave Forest nor Notela Resource Advisors Ltd. are registered with any securities regulatory authority to provide investment advice. Readers are cautioned to consult with a qualified registered securities adviser prior to making any investment decisions. The information contained in this newsletter has not been reviewed or authorized by any of the companies mentioned herein.