A saleswoman displays a gold necklace inside a jewellery showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Kolkata, India, May 7, 2019. REUTERS/Rupak De ChowdhuriRegister now for FREE unlimited access to Reuters.com
- India sees discount of up to $10/oz vs $9 last week
- Indian buyers will wait for a hefty correction- dealer
- Buyers in China cautious, conserving their expenditure – analyst
June 10 (Reuters) – Gold discounts in India this week were stretched to their highest level in seven weeks as higher prices repelled demand, while fresh concerns over the spread of COVID in top-consumer China left buyers reluctant to make purchases.This week, dealers in India were offering a discount of up to $10 an ounce over official domestic prices — inclusive of the 10.75% import and 3% sales levies, up from the last week’s discount of $9.Retail buying in India will remain weak, especially from rural areas as farmers focus on planting of summer-sown crops, said a Mumbai-based dealer with a private bullion importing bank.Register now for FREE unlimited access to Reuters.com“In May, prices were attractive. Retail consumers were buying for weddings. Now buyers will wait for a hefty correction,” the dealer said.Weddings are one of the biggest drivers of gold purchases in India.In China, gold was being sold at a discount of $1.5 to a premium of $0.5 an ounce versus global benchmark spot rates .Physical gold demand in China is pretty sluggish, StoneX analyst Rhona O’Connell said, adding that people haven’t been coming back into the market yet after lockdowns were eased, as they are cautious about the outlook and are conserving their expenditure for now.China’s commercial hub of Shanghai faces an unexpected round of mass COVID-19 testing for most residents this weekend – just 10 days after a city-wide lockdown was lifted. read more COVID-related restrictions weighed on demand in China in May and “the average trading volumes of Au9999 – a proxy of Chinese wholesale gold demand – witnessed the weakest May since 2013,” the World Gold Council said in a monthly note.In Hong Kong, gold continued to be sold at a discount of about $1.8 an ounce to a $1 premium, while in Japan, gold was sold between a premium of 50 cents and at par with the benchmark.Register now for FREE unlimited access to Reuters.comReporting by Eileen Soreng, Bharat Govind Gautam in Bengaluru, Rajendra Jhadav in Mumbai; Editing by Shailesh KuberOur Standards: The Thomson Reuters Trust Principles. .
Global aluminium production by power source 2020FROM LOW CARBON…Coal is still the globally dominant source of power for smelting aluminium, reflecting the market dominance of China, which last year accounted for around 58% of world primary output.Within China there has been a rush to swap coal-fired capacity for new plants in hydro-rich Yunnan province but spaces are fast running out and most of the country’s smelters continue to run on captive coal plants or draw energy from coal-based grids.Changing the source of power from fossil fuel to renewables is the fastest way of lowering primary aluminium’s carbon footprint.Outside of China, the rush to go green has been led by those producers with large captive hydro generation capacity.The LMEpassport for ESG accreditation now lists several aluminium producers, including Russia’s Rusal, U.S. operator Century Aluminum (CENX.O), Indonesian producer Asahan Aluminium and smelters in France (Dunkerque) and the United Kingdom (Lochaber).All have disclosed carbon equivalent footprints of 0-4 tonnes per tonne of aluminium, referencing research house CRU’s Emissions Analysis Tool.No-one yet can make it to zero on a commercial basis.The new green aluminium coalition accepts that its 10% purchase commitments for near-zero metal will be dependent on “advanced technologies not yet commercially available”….TO NO CARBONThe collective race to get to zero or near-zero aluminium is already underway, led by ELYSIS, a joint venture between Alcoa and Rio Tinto.It requires the replacement of the carbon anode in the electrolytic smelting process. The anode accounts for 1.9 tonnes of carbon per tonne of aluminium, the largest remaining carbon problem for a renewables-powered smelter, according to Tim Murray, chief executive of Cardinal Virtues Consulting, also presenting at the CRU conference.The anode being trialled in the ELYSIS process results in zero direct emissions, a much longer anode life and 15% lower costs, Alcoa chief operations officer John Slaven told delegates.If the smelter is fed with “green” alumina, the carbon impact falls below 1 tonne per tonne of metal, freight accounting for most of the residue.A processing path to near-zero primary aluminium is starting to take tangible shape.NO GREEN SANCTIONSThere has been concern that aluminium’s race to go green would be abruptly halted by Russia’s invasion of Ukraine and the possible sanctioning of Rusal metal.Rusal is already a major supplier of low-carbon aluminium from its hydro-powered smelters in Siberia and is itself working on inert anode technology.Fortunately for carbon-conscious buyers, the company was already put through the U.S. sanctions process in 2018, resulting in owner Oleg Deripaska (still sanctioned) giving up control of the company.That shields Rusal this time around. So too do memories of the sanctions supply-chain disruption which stretched from Guinean bauxite mines to European automakers.Rusal’s significance as a supplier, particularly to Europe, will only increase as buyers look for low-carbon metal.NO GREEN PREMIUM…YETThe First Movers Coalition is intended to create a decarbonisation tipping-point for individual sectors centred on future purchase commitments.The incentive for suppliers will be a premium for their low-carbon aluminium, according to Trafigura chief executive Jeremy Weir.Such a green premium remains conspicuous by its absence at the primary metal stage of aluminium’s process chain.And it might not appear for long at all, Colin Hamilton, commodities analyst at BMO Capital Markets, told the CRU conference.Rather, a green premium would simply be a “stepping-stone to low-carbon becoming the prime market and anything else sub-prime.”We may not have to wait much longer to find out because the drive to zero-carbon aluminium has just accelerated.The opinions expressed here are those of the author, a columnist for Reuters.Register now for FREE unlimited access to Reuters.com
US ‘term premium’ stays negative
Fed contrast between Yield Curve and Near Term Forward SpreadBUMP IN THE NIGHTSo what’s the beef with the term premium?In effect, the Treasury term premium is meant to measure the additional yield demanded by investors for buying and holding a 10-year bond to maturity as opposed to buying a one year bond and rolling it over for 10 years with a new coupon.In theory it covers all the things that might go bump in the night over a decade hence – including the outside chance of credit or even political risk – but it mostly reflects uncertainty about future Fed rates and inflation expectations.At zero, you’d assume investors are indifferent to holding the 10-year today as opposed to rolling 10 one-year notes.But the New York Fed’s measure of the 10-year term premium remains deeply negative to the tune of -32 basis points – ostensibly suggesting investors actually prefer holding the longer-duration asset.Although the premium popped back positive in the first half of last year, it’s been stuck around zero or below since 2017 – oddly in the face of the Fed’s last attempt to unwind its balance sheet.And the persistent and puzzling erosion of the term premium to zero and below brings it back to the 1960s, not the much-vaunted inflation-ravaged 1970s that everyone seems to think we’re back in.It matters a lot now as the debate about the inversion of the 2-10 yield curve heats up and many argue that the signal sent by that inversion is less clear about a coming recession as it’s distorted by the disappearance of the term premium.In the absence of a term premium, the long-term yield curve is just a reflection of long-run policy rate expectations that will inevitably see some retreat if the Fed is successful in taming inflation over the next two years.Fed Board economists Eric Engstrom and Steven Sharpe late last week also dismissed the market’s obsession with a 2-10 year yield inversion signalling recession.In a blog called ‘(Don’t Fear) The Yield Curve’ they said near term forward rate spreads out to 18 months were much more informative about the chance of a looming recession, just as accurate over time and – significantly – heading in the opposite direction right now.The main reason they pushed back on the 2-10s was it contained a whole host of information about the world beyond two years that’s simply less reliable as an economic signal and “buffeted by other significant factors such as risk premiums on long-term bonds.”But what could see the term premium return?Presumably the Fed’s planned balance sheet rundown, or quantitative tightening (QT), would be a prime candidate if indeed its long-term bond buying has distorted term premia.But the last Fed attempt at QT in 2017-19 didn’t do that and Morgan Stanley thinks it will be some time yet before just allowing short-term bonds on its balance sheet to roll off and mature gets replaced by outright sales of longer-term bonds.”QT is not the opposite of QE; asset sales are.”Of course, maybe the world just hasn’t changed that much – in terms of ageing demographics, excess savings and pension fund demand, falling potential growth and negative real interest rates. Once this current storm has passed, investors seem to think that will dominate once more. read more 
Fed balance sheet and maturitiesThe author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his ownRegister now for FREE unlimited access to Reuters.com