Numerous developments are taking place behind the scenes of the gold industry What would otherwise have had a bearish effect on the market is now seemingly shrugged off by investors. The push to $2.000 per ounce is still in full effect.
The Roman Abaramovich Sell-off
A lot of people were surprised by the recent news involving Russian billionaire Roman Abramovich. The current owner of Premier League side Chelsea FC has a vast portfolio of different investments. One such investment venture is linked to Highland Gold, a Russia-focused mining outfit. Selling the shares at the current XAU price makes sense, as company stocks had also appreciated significantly throughout 2020.
Abramovich and other investors owning 40.06% of Highland Gold’s shares agreed to sell to Fortiana Holdings Limited. This deal helps prop up the value of Highland Gold to $1.4 billion. Fortiana Holdings, registered in Cyprus, will attempt to purchase the remainder of the shares from other investors. Rumors indicate the company will offer a price of $3.94 per share.
This new deal comes on the heels of Fortiana selling a 5% stake in Petropavlovsk. Doing so allowed the company to free up the necessary cash to pursue this new investment opportunity. Both of these deals confirm the Russian gold industry is still going strong. It also highlights the potential of investing in mining company stocks, rather than the precious metals themselves.
China Maintains Gold Discount Prices
The overall gold situation in China isn’t improving much lately. Demand for the precious metal remains very weak, allowing prices to fall further. In fact, the price to buy bullion in China is significantly lower compared to doing so in London. Exploring this price gap prove to be rather lucrative, assuming one has the right connections.
In China, the mindset appears to be that gold is valued “too high” internationally. With no one looking to buy significant quantities, sellers have to absorb the loss. This marks the 19th week during which Chinese gold prices traded below London quotes. A remarkable trend, but one that doesn’t appear to impact the price of bullion all that much.
India Turns to Gold for Loans
For centuries, Indians and gold have been two peas in the same pod. Households and wealthy individuals in the country have been hoarding gold for as long as people can remember. India is home to the largest gold reserves across households. It is estimated a total of 25,000 tonnes of bullion was held by Indian households at the end of 2019.
Following a banking crisis and liquidity crunch, gold has become the most prominent investment and collateral once again. So much even that bullion reserves are used to obtain loans. Obtaining extra funding through banks has become virtually impossible in the country over the past few months. More importantly, gold loans have lower interest rates compared to personal loans.