London Gold Market Report
from Ben Traynor, BullionVault
Thursday 18 April 2013, 08:00 EST
Asia “Buys the Dip” in Gold, Western Physical Demand Also Jumps But ETF Outflows Continue
WHOLESALE prices for buying gold climbed briefly above $1400
an ounce Thursday morning, having bounced from a $50-an-ounce drop
overnight, with dealers reporting strong demand for physical bullion in
Asia.
In Hong Kong and Macau, the number of customers visiting stores run
by the world’s biggest jewelry chain, Chow Tai Fook, jumped by a quarter
in the period between Saturday and Tuesday, Bloomberg reports.
“I think if prices fail to break through $1300, people will buy back,” says one gold dealer in Hong Kong.
“Asia is a good buyer of gold this year. Stocks at refiners have
suddenly disappeared after prices dropped more than $200 [an ounce], and
it takes time to manufacture gold bars. Supply is a bit tight. Premiums
will move higher next week.”
“The culture in Asia is such that they will absorb the physical metal
when the price drops,” adds Dick Poon, Hong Kong-based general manager
at refiner Heraeus.
“Jewelry demand is improving and industrial customers are also buying on the dip.”
India, traditionally the world’s biggest gold buying nation, has this
week seen its strongest demand so far this year, according to the All
India Gems & Jewellery Federation. Thailand and Japan have also seen
a strong rise in gold sales, according to local press reports.
Western investors have also shown signs of renewed appetite for bullion since gold’s price drop. Users of BullionVault,
the world’s largest gold and silver provider to private investors
online, were net buyers of gold for the first time in a week on
Wednesday, with inflows of cash outpacing withdrawals by a wide margin.
The US Mint meantime sold 77,000 ounces of American Eagle gold coins
during Tuesday and Wednesday, compared to just 62,000 ounces for the
whole of March.
“Gold was set up for having a proper correction,” says well-known investor Jim Rogers.
“This may be the proper correction and, if so, then it will make a bottom and we can all buy gold again because it is going to be much higher over the decade.”
The world’s biggest gold exchange traded fund meantime continued to see outflows Wednesday.
The total volume of gold backing shares in the SPDR Gold Trust
(ticker: GLD), fell to 1134.8 tonnes, down from 1221.3 tonnes at the
start of this month. Holdings of all gold ETFs tracked by Bloomberg are down 3.5% to 2364.9 tonnes this month.
Like gold, silver bounced off an overnight low to end Thursday
morning in London back above $23.50 an ounce, while stocks and
commodities regained some ground after this week’s losses and US
Treasuries dipped.
Japan’s exports to the US in the year to end March were up 10% from a
year earlier, while exports to China dropped 9%, making the US the
number one destination for Japanese exports for the first time since
2009, figures published by the country’s finance ministry Thursday show.
“This weakness [of exports to China] is more structural than cyclical,” Kyohei Morita, chief economist at Barclays in Tokyo.
China’s annualized economic growth rate slowed to 7.7% in the first
quarter, according to figures released by Beijing earlier this week,
down from 7.9% in the previous quarter. Ratings agency Moody’s lowered
its outlook on China from ‘positive’ to ‘stable’ this week, noting
concerns over local government debt levels.
In Washington, leaders meeting for the G20 meeting that begins today
are expected to commit their countries not to weaken their currencies
with a view to gaining a trade advantage, Bloomberg reports. A similar pledge was made in aG7 statement earlier this year.
A month before that statement, Bank of England governor Mervyn King told an audience in Belfast that
“between late 2007 and the beginning of 2009…an adjustment of
Sterling…was certainly necessary for a full rebalancing of our economy”.
Italy’s parliament began voting on a new president Thursday, with the
bloc led by Pier Luigi Bersani’s Democratic Party – which won the most
votes of any alliance in February’s general election but not enough to
form a government – nominating former Senate speaker Franco Marini, who
was rejected in this morning’s first round of voting.
Once a president is elected their first task will be to preside over
the forming of a government, which will involve either a coalition of
rival parties, fresh elections, or the appointment of another technocrat
prime minister.
Ben Traynor
BullionVault
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter,
the UK’s longest-running investment letter. A Cambridge economics
graduate, he is a professional writer and editor with a specialist
interest in monetary economics. Ben can be found on Google+
(c) BullionVault 2013
Please Note: This article is to inform your thinking, not lead
it. Only you can decide the best place for your money, and any decision
you make will put your money at risk. Information or data included here
may have already been overtaken by events – and must be verified
elsewhere – should you choose to act on it.
Friday, April 19, 2013
Has Exxon Mobil Tried to Cover Up the Truth at Arkansas Oil Spill?
It was two weeks ago that Exxon Mobil’s (NYSE: XOM) Pegasus
pipeline ruptured, spilling hundreds of thousands of gallons of oil into
the town of Mayflower, Arkansas, and I think it is about time that
someone called it what it is … a grade A f**k-up!
Contaminated water has leaked into Lake Conway, local residents have fallen ill from the toxic fumes, lawsuits have been filed, a severe thunderstorm in the area caused complications with the clean-up efforts, and to top this off, in an attempt to keep all of this quiet Exxon Mobil has tried to intimidate the local media and block coverage.
The latest detail that has intrigued the media is the revelation that the break in the pipe was 22 feet long, not a small, innocent, rupture then. A 22 foot rupture suggests a huge amount of pressure within the pipe, which then raises new questions about the cause of the spill.
Related article: Exxon Oil Spill in Arkansas, Keystone Spoiler?
Attorney General McDaniel told Rachel Maddow of MSNBC; “I think when people found out that there was a rupture and there was a 65-year-old pipeline, I think that almost everybody assumed that there was some small crack due to age. The rupture was 22 feet long. Twenty-two feet is not something one would think would happen gradually. So now we’re starting to ask all new questions.”
Contaminated water has leaked into Lake Conway, local residents have fallen ill from the toxic fumes, lawsuits have been filed, a severe thunderstorm in the area caused complications with the clean-up efforts, and to top this off, in an attempt to keep all of this quiet Exxon Mobil has tried to intimidate the local media and block coverage.
The latest detail that has intrigued the media is the revelation that the break in the pipe was 22 feet long, not a small, innocent, rupture then. A 22 foot rupture suggests a huge amount of pressure within the pipe, which then raises new questions about the cause of the spill.
Related article: Exxon Oil Spill in Arkansas, Keystone Spoiler?
Attorney General McDaniel told Rachel Maddow of MSNBC; “I think when people found out that there was a rupture and there was a 65-year-old pipeline, I think that almost everybody assumed that there was some small crack due to age. The rupture was 22 feet long. Twenty-two feet is not something one would think would happen gradually. So now we’re starting to ask all new questions.”
Poverty in America: More than 46 Million below the Official Poverty Level, More than 10 Million “Working Poor”
The statistics revealed by the BLS report are a stunning indictment of the current state of the US economy and demonstrate how the so-called recovery is playing out in the everyday lives of workers and their families. Corporations, backed by the policies of the Obama administration and both big business parties, have seized on the jobs crisis in the wake of the recession to drive down workers’ wages and boost productivity.
Despite being employed for at least 27 weeks out of the year, individual and household earnings still placed large numbers of US working families below the poverty line in 2011. The overall rate of working poor has climbed significantly since before the recession, rising from 5.1 percent in 2006 to 7 percent in 2011.
The 2013 federal poverty guideline (FPG) is already set absurdly low: $11,490 annually for an individual and $23,550 for a family of four. A worker as the sole earner in a four-member family would need to earn $11.32 an hour and work 40 hours a week to top the FPG. Many of the jobs created in the wake of the recession barely reach this hourly rate, and occupations expected to see the most growth in the coming period will pay even less.
More than 14 percent of the estimated 25 million part-time workers currently in the labor force are classified as working poor, according to the BLS, compared to 4.2 percent of full-time workers. Working women, African Americans and Hispanics, as well as young workers and those with lower levels of education, were also more likely to be poor. Families with children under age 18 were about four times more likely to live in poverty than those without children.
The BLS report shows that 3.3 million service workers fell below the official poverty level in 2011, accounting for nearly one-third of all those classified as working poor. More than 15 percent of all women in service occupations, as well as 24.8 percent of black women in service jobs, were among this group. In construction-related occupations, 10.6 percent were employed but poor; 17 percent of those working in fishing, farming and forestry were living below the poverty guidelines.
Workers aged 20 to 24 who worked 27 weeks or more saw the highest rate of poverty of any age group: 14 percent. Nearly one third of African American women this age were classified as working poor. The poverty rate for 16- to 19-year-old workers stood at 11.3 percent.
A recent study from the Economic Policy Institute finds that high school graduates in 2013 face a 29.9 percent jobless rate, compared to 17.5 percent in 2007. The underemployment rate among this group—which includes the jobless, those who want a job but have given up looking, and those involuntarily working part-time—stands at a staggering 51.6 percent, compared to 29.4 percent in 2007.
The direct intervention of the Obama administration in the bailout of the auto industry has led to workers’ wages plummeting to levels barely keeping large numbers of them out of the ranks of the working poor. In the last year alone, according to the BLS, the average auto worker’s wage has fallen by 57 cents an hour, to $20.82. However, it is important to note that this is only an average.
Under two-tier wage systems at the former Big Three automakers, newly hired workers are paid $15.00 and temporary workers even less. As the sole worker in a four-person household, working 40 hours a week, a second tier worker earns only $31,200 a year, barely enough to keep his or her family out of poverty.
With the complicity of the United Auto Workers union, auto companies are also working to put an end to the 40-hour week, which was won in bitter struggles by workers. At Chrysler and Ford, the Alternative Work Schedule establishes regular 10-hour work days with no overtime pay at the carmaker’s stamping, assembly and parts plants throughout the country.
Millions of US workers are employed in occupations where their wages classify them as the working poor. According to BLS data for 2010, retail sales workers earned an average of $10.99/hour, with a median annual income of $20,990, while the average wage for janitors and building cleaners was $10.68 an hour, or a median of $22,210 annually. Food service workers’ wages average just $8.72 an hour, with a median annual income of $18,130. Agricultural workers earned $9.12/hour, or a median of $18,870 annually.
Of the job classifications expected to see the biggest growth in the coming period, many will pay poverty wages. A large proportion of them will be for unskilled workers in the health care sector. Positions for home health aides, expected to increase by 48.7 percent by 2016, will pay an average of only $9.70 an hour, or $20,100 annually. Personal and home care aide jobs, which are projected to see a 50 percent jump, will pay an average wage of just $8.75 an hour, or $18,180 annually by 2016.
While jobs in information technology—such as systems analysts, software engineers and database administrators—are expected to increase in demand, these positions require skills and education out of reach for many under conditions where job training programs are being scaled back or eliminated and tuition costs for higher education are skyrocketing.
The US federal minimum wage stands at an abysmal $7.25 an hour, unchanged since 2009. The Obama administration has proposed raising it to only $9.00. At this wage, a worker working 27 weeks out of the year—what the Bureau of Labor Statistics counts as “full-time”—would earn only $9,720 a year, well below the threshold for an individual to be classified among the working poor.
Pentagon Requests More Funding for Israel’s ‘Iron Dome’
‘The Pentagon has requested $220.3 million in 2014 to bolster
Israel’s “Iron Dome” missile defense system despite broader cuts to US
military spending, according to budget documents.
The US Missile Defense Agency also is asking for an additional $175.9 million in fiscal year 2015 for Israel’s homegrown missile defense network, according to the agency’s budget proposal posted online.
The Pentagon already invested $204 million on the system in 2011 and $70 million in 2012.’
The US Missile Defense Agency also is asking for an additional $175.9 million in fiscal year 2015 for Israel’s homegrown missile defense network, according to the agency’s budget proposal posted online.
The Pentagon already invested $204 million on the system in 2011 and $70 million in 2012.’
CFTC Probe Gold Plunge – “No Visible Central Bank Activity” Say Blackrock
by GoldCore
Today’s AM fix was USD 1,397.00, EUR 1,070.17 and GBP 917.09 per ounce.
Yesterday’s AM fix was USD 1,379.00, EUR 1,046.12 and GBP 903.14 per ounce.
Cross Currency Table – (Bloomberg)
Gold lost $0.20 or 0.01% yesterday to $1,373.20/oz and silver also finished with a slight loss of 0.9%.
Gold in USD, Daily – (Bloomberg)
Lower gold prices have led to a rush to buy gold coins and bars globally. Value investors and store of wealth buyers are more than happy to exchange devaluing paper currencies for physical gold at these much cheaper prices.
It is ironic that manipulative selling by a large hedge fund or bullion bank may have ignited a mini gold rush globally.
US Mint data shows that a record 63,500 ounces, or a massive 2 tons, of gold were sold on Wednesday (April 17th) alone. This means that total sales for the month of April have surged to a significant 147,000 ounces. This is more than the previous two months combined with just half of April gone.
Gold Ounces Sold By Mint – Zero Hedge
Similar strong demand is being seen throughout Asia and in western markets. We saw more buying than selling again yesterday and most of the selling was of small orders, less than fifty ounces, while buy orders were lumpier and from high net worth clients.
Demand is again particularly strong in India as Indian consumers are buying gold jewelry, coins and bars in record numbers which will boost gold imports this quarter as traders and banks run out of gold bullion inventories.
Overseas purchases may jump 36% to 305 metric tons in the three months ending June from 225 tons a year earlier, Mohit Kamboj, president of the Bombay Bullion Association Ltd., said in a phone interview with Bloomberg.
Imports may climb as much as 20% this month from year earlier, he said.
Buyers are flocking to jewelry stores and bank outlets to buy ornaments, coins and bars ahead of India’s main wedding and festival seasons after gold slumped to a two-year low.
The Commodity Futures Trading Commission (CFTC) is looking at the role of market speculators, CFTC Commissioner Bart Chilton told Bloomberg TV overnight after gold futures on Monday suffered their biggest one-day decline since at least 1983. Some have said that it was the largest decline ever.
The CFTC may take a deeper look into the price of gold following Monday’s price plunge. Democratic CFTC Commissioner Bart Chilton told Bloomberg TV today that the drop doesn’t necessarily mean “anything nefarious” happened but whenever something like this happens “we got to look at it.”
“When you see such sharp move that is obviously something that raises our concern and we look at the trades and see what is going on,” he said.
Regulators must look out for end-users first and ensure markets perform “properly”.
XAU/GBP, Daily – (Bloomberg)
The CFTC is already scrutinizing whether gold prices are being manipulated in London by a handful of banks who meet two times a day to set the spot price for a troy ounce of physical gold. The CFTC said in March that it is looking at issues including whether the setting of prices for gold—and the smaller silver market — is transparent and if it is fixed.
The $20 billion gold futures sale and concentrated selling of gold futures on the COMEX on Friday and Monday is far more likely to be “nefarious” than the gold fixings in London.
The CFTC’s track record to date has not been great and regulatory capture remains a real risk with the CFTC seeming to be reluctant to hold Wall Street banks who may be involved in price manipulation in the futures market to account.
After the Libor revelations, it is surprising that there is not more scrutiny and hard questions asked of banks and regulators in this regard.
Separately, large institutional fund manager Blackrock said that there was “no visible central bank activity” as the gold price plunged.
They said that gold’s fundamentals remain strong and that the fall in price was driven by an outflow of “hot money” and that gold prices are now near the marginal cost of new supply which should provide strong support at these levels and lead to higher prices again.
Today’s AM fix was USD 1,397.00, EUR 1,070.17 and GBP 917.09 per ounce.
Yesterday’s AM fix was USD 1,379.00, EUR 1,046.12 and GBP 903.14 per ounce.
Cross Currency Table – (Bloomberg)
Gold lost $0.20 or 0.01% yesterday to $1,373.20/oz and silver also finished with a slight loss of 0.9%.
Gold in USD, Daily – (Bloomberg)
Lower gold prices have led to a rush to buy gold coins and bars globally. Value investors and store of wealth buyers are more than happy to exchange devaluing paper currencies for physical gold at these much cheaper prices.
It is ironic that manipulative selling by a large hedge fund or bullion bank may have ignited a mini gold rush globally.
US Mint data shows that a record 63,500 ounces, or a massive 2 tons, of gold were sold on Wednesday (April 17th) alone. This means that total sales for the month of April have surged to a significant 147,000 ounces. This is more than the previous two months combined with just half of April gone.
Gold Ounces Sold By Mint – Zero Hedge
Similar strong demand is being seen throughout Asia and in western markets. We saw more buying than selling again yesterday and most of the selling was of small orders, less than fifty ounces, while buy orders were lumpier and from high net worth clients.
Demand is again particularly strong in India as Indian consumers are buying gold jewelry, coins and bars in record numbers which will boost gold imports this quarter as traders and banks run out of gold bullion inventories.
Overseas purchases may jump 36% to 305 metric tons in the three months ending June from 225 tons a year earlier, Mohit Kamboj, president of the Bombay Bullion Association Ltd., said in a phone interview with Bloomberg.
Imports may climb as much as 20% this month from year earlier, he said.
Buyers are flocking to jewelry stores and bank outlets to buy ornaments, coins and bars ahead of India’s main wedding and festival seasons after gold slumped to a two-year low.
The Commodity Futures Trading Commission (CFTC) is looking at the role of market speculators, CFTC Commissioner Bart Chilton told Bloomberg TV overnight after gold futures on Monday suffered their biggest one-day decline since at least 1983. Some have said that it was the largest decline ever.
The CFTC may take a deeper look into the price of gold following Monday’s price plunge. Democratic CFTC Commissioner Bart Chilton told Bloomberg TV today that the drop doesn’t necessarily mean “anything nefarious” happened but whenever something like this happens “we got to look at it.”
“When you see such sharp move that is obviously something that raises our concern and we look at the trades and see what is going on,” he said.
Regulators must look out for end-users first and ensure markets perform “properly”.
XAU/GBP, Daily – (Bloomberg)
The CFTC is already scrutinizing whether gold prices are being manipulated in London by a handful of banks who meet two times a day to set the spot price for a troy ounce of physical gold. The CFTC said in March that it is looking at issues including whether the setting of prices for gold—and the smaller silver market — is transparent and if it is fixed.
The $20 billion gold futures sale and concentrated selling of gold futures on the COMEX on Friday and Monday is far more likely to be “nefarious” than the gold fixings in London.
The CFTC’s track record to date has not been great and regulatory capture remains a real risk with the CFTC seeming to be reluctant to hold Wall Street banks who may be involved in price manipulation in the futures market to account.
After the Libor revelations, it is surprising that there is not more scrutiny and hard questions asked of banks and regulators in this regard.
Separately, large institutional fund manager Blackrock said that there was “no visible central bank activity” as the gold price plunged.
They said that gold’s fundamentals remain strong and that the fall in price was driven by an outflow of “hot money” and that gold prices are now near the marginal cost of new supply which should provide strong support at these levels and lead to higher prices again.
Global Gold Outlook Report – 2nd Quarter
This article is based on the Outlook Report from Global Gold in Switzerland,
written by managing director Claudio Grass. It provides a fundamental
view on gold, not a short term price forecast. However, it takes into
account the recent gold price decline and other major events.
The whopping outcry with the Cyprus bail-in plan made one thing clear: There is a deep misconception among wide parts of the population about how banks function and what deposits actually are. Global Gold’s outlook report is aimed at clarifying this issue and explaining where the differences lie between banking institutions in comparison to providers of physical and unencumbered ownership of physical metals. The topics discussed in the paper are highly relevant after and include:
Under our “status quo” scenario, governments will continue essentially as they have so far, delaying any real problem solving. They will continue to “moderately” inflate currencies, bailout banks etc. Furthermore real economic growth rates will stay low.
Probability (estimate): 80%. We think that this scenario is the most likely for the coming months and years. Governments can’t and won’t tackle any real problems, they will follow their “muddle through” policy as they have done so far. Measures of financial repression like the capital controls and the confiscation taken place in Cyprus are likely to increase.
Impact on gold: As in recent years the current policies of governments positively impact gold prices. We think that the current “correction” is only a temporary phase in the long term upward trend.
Scenario 2: Back to “normal” (probability 10%)
In this scenario central banks worldwide abandon their current monetary policy and return to a more prudent approach. This is coupled with higher real economic growth in the world.
Probability (estimate): 10%. Due to the very high debt levels in western economies we hardly think that central banks can return to their normal monetary policy. The lack of any real growth impulses leads us to believe that this scenario is not a very realistic one for the foreseeable future. In the beginning of this year Japan decided to join in on the money printing “party” so it seems if anything that the central banks will intensify rather than stop their “efforts”.
Impact on gold: A “back to normal” scenario would probably impact gold prices negatively. Historically gold has tended to perform negatively when real short term interest rates have exceeded 3%.
Scenario 3: Crisis (probability 10%)
Crises can take on many different forms, such as a complete collapse of the financial and monetary system, a world war, civil unrest or many others.
Probability (estimate): 10%. Political developments in most parts of the western world are worrying (for example in Southern Europe). We think that our current financial and monetary system is not sustainable. We don’t, however, see the tipping point on the horizon quite yet. Although we are following the news from the Korean Peninsula, North Africa and the Middle East we do not see the risk of a wide scale war for the time being.
Impact on gold: In a crisis scenario the price of gold would likely dramatically increase nominally. In real terms, gold should be an ideal medium to store value over the long term.
The whopping outcry with the Cyprus bail-in plan made one thing clear: There is a deep misconception among wide parts of the population about how banks function and what deposits actually are. Global Gold’s outlook report is aimed at clarifying this issue and explaining where the differences lie between banking institutions in comparison to providers of physical and unencumbered ownership of physical metals. The topics discussed in the paper are highly relevant after and include:
- Debt vs. Ownership
- Interest vs. Cost
- Bank run vs. immediate delivery
- Securities accounts and real depositories
- Real vs. fake money
When depositing funds with a bank your deposits become the bank’s assets. What the banks do is lend out the deposits to earn interest (they are only required to hold a fraction of the deposits as a reserve). A part of the interest which the banks earn is paid to the depositors. With regard to interest we should however mention that after accounting for taxes and consumer price inflation (not to mention asset price inflation), deposits have in most cases a negative return in real terms. Although the numbers on the bank statement get larger every year the amount of goods you can purchase with your money decreases year by year. So even if you are earning interest, deposits are not the best instrument to save your assets in the long run. Real depositories however concentrate on keeping your assets safe and accessible by you at all times.About the recent decline in the gold price below the 1,400 level an ounce:
This chart by Sprott Asset Management clearly shows the correlation between gold and the balance sheet. The recent decrease in the gold price is fully explained by the minor contraction of the balance sheet of the world’s largest central banks.
Although the gold price can fluctuate in USD terms, in the long run it’s a good store of value. In this connection we would like to mention the ABCD rule, which is simply invest in “Anything Bernanke Can’t Destroy”. Through its operations the FED can in essence destroy the value of all nominal assets. But even if the alleged intervention of the FED in gold markets is accurate, in the long run the value of gold in contrast to paper currencies cannot be destroyed by governments or central banks.
Outlook – scenario analysis
Scenario 1: Status quo (probability 80%)Under our “status quo” scenario, governments will continue essentially as they have so far, delaying any real problem solving. They will continue to “moderately” inflate currencies, bailout banks etc. Furthermore real economic growth rates will stay low.
Probability (estimate): 80%. We think that this scenario is the most likely for the coming months and years. Governments can’t and won’t tackle any real problems, they will follow their “muddle through” policy as they have done so far. Measures of financial repression like the capital controls and the confiscation taken place in Cyprus are likely to increase.
Impact on gold: As in recent years the current policies of governments positively impact gold prices. We think that the current “correction” is only a temporary phase in the long term upward trend.
Scenario 2: Back to “normal” (probability 10%)
In this scenario central banks worldwide abandon their current monetary policy and return to a more prudent approach. This is coupled with higher real economic growth in the world.
Probability (estimate): 10%. Due to the very high debt levels in western economies we hardly think that central banks can return to their normal monetary policy. The lack of any real growth impulses leads us to believe that this scenario is not a very realistic one for the foreseeable future. In the beginning of this year Japan decided to join in on the money printing “party” so it seems if anything that the central banks will intensify rather than stop their “efforts”.
Impact on gold: A “back to normal” scenario would probably impact gold prices negatively. Historically gold has tended to perform negatively when real short term interest rates have exceeded 3%.
Scenario 3: Crisis (probability 10%)
Crises can take on many different forms, such as a complete collapse of the financial and monetary system, a world war, civil unrest or many others.
Probability (estimate): 10%. Political developments in most parts of the western world are worrying (for example in Southern Europe). We think that our current financial and monetary system is not sustainable. We don’t, however, see the tipping point on the horizon quite yet. Although we are following the news from the Korean Peninsula, North Africa and the Middle East we do not see the risk of a wide scale war for the time being.
Impact on gold: In a crisis scenario the price of gold would likely dramatically increase nominally. In real terms, gold should be an ideal medium to store value over the long term.
Hungary to pay EU fines via new tax on own citizens
Source: EU Observer
BRUSSELS - Hungarian authorities will pass on the cost of EU fines through a tax on its own citizens whenever it breaches EU law.
Giving details of the new Hungarian initiative, EU justice commissioner for justice Vivian Reding told euro-deputies at the Strasbourg plenary session on Wednesday (17 April) that: “in practice citizens would be penalised twice: once for not having had their rights under EU law upheld and a second time for having to pay for this.”
The so-called ad hoc tax was introduced into Hungary’s latest constitutional reform in March, its fourth in the past 15 months.
The latest changes are said to undermine the rule of law by limiting the power of the constitutional court.
Hungary denies the charge.
But the commission wants it to repeal rules that entitle the president of a judicial administrative body to decide where cases should be tried, to repeal the ad-hoc EU fine tax, and to scrap restrictions placed on political adverts during election cycles.
The Venice Commission – an expert body composed of former constitutional judges in the Strasbourg-based Council of Europe – and the European Parliament are also drafting separate reports on Hungary, both of which are due by the EU assembly’s June plenary
Hungarian Prime Minister Viktor Orban in a letter addressed to commission chief Jose Manuel Barroso on 12 April said they will review the two issues but did not comment on the ad-hoc tax.
For her part, Reding noted that she has drafted a bundle of infringement letters against Hungary but that she is waiting for Orban’s response on the ad-hoc tax issue – due by May – before sending them out as a single package.
“We will not wait until June before we come out with … infringement proceedings,” she said.
The constitutional changes, among others, were pushed through a parliament which is dominated by Orban’s centre-right Fidesz party.
The two-thirds Fidesz majority has made the Hungarian assembly dance to its tune since 2010, with civil liberty groups saying the Orban government is abusing its position of power to entrench its power and conservative values.
Outspoken critic, Belgian liberal leader Guy Verhofstadt, told fellow MEPs the commission should remove Hungary’s voting rights in the council under a never-before-used rule for countries said to breach EU values.
“The commission should launch the procedure without delay, or else we in the parliament should have the courage to do it ourselves,” he said.
Meanwhile, the threat of a commission fine on Hungary is looming as Budapest has yet to implement in practice a November decision by the EU court in Luxembourg to reinstate judges who were forced into early retirement.
The outstanding issue dates back to another set of two infringement procedures launched against Hungary last year.
Reding in late March asked Hungary’s justice minister to detail the number of judges who have been reinstated.
The Hungarian justice minister replied in April but gave only figures of how many judges and prosecutors have been affected, not reinstated.
Hungary had until 6 January to implement the court’s decision on the judges but missed the deadline by about three months.
While the rules have since been amended, a handful of Hungarian judges informed the commission last week they have yet to be reinstated.
“Here we can launch an infringement as well which could lead to immediate fines,” an EU official close to the issue told this website.
Under Hungary’s new law, the fine, if imposed, would be the first to be passed on to the Hungarian tax payer.
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