Where finance and media intersect with reality


Spot Markets Live Transcript: 09/01/2023

Screenshot 2023-01-09 at 10.51.06
Izabella Kaminska10:58

Happy New Year and welcome back to Spot Markets Live.

With you as usual every Monday at 11am UK time.

(Hopefully gearing up to more days a week if and when we get a sponsor.)

Since we don’t yet, I will merely share with readers that I am currently enjoying a delightful Nespresso coffee.

Today I’m joined as usual by Anjuli Davies. Hello Anjuli, did you have a good break?

Anjuli Davies10:59

HNY everyone. Yes, can’t really complain.

Izabella Kaminska 11:00

The Blind Spot has been a bit quiet the past week because our school didn’t go back until today.

Also, we tried to go skiing.

But the weather in France (and throughout the Alps) was utterly abysmal.

No snow in the valleys at all. What’s good for NATO, heating bills and sanctions turns out to be bad for middle-class skiing enthusiasts.

Of course, trust it to snow as soon as we leave.  Live webcam shot from Chamonix this morning 😡:

Anjuli Davies11:00

I’ve already seen some articles on the “end of skiing”. It seems like Verbier had a good snow dump over the weekend as well

Izabella Kaminska11:01

Verbier being the premier location for the world’s IB community.

And the royals

Although I think Prince Andrew is now selling his chalet, or has already sold it?

But let’s crack on with markets and what’s been going on so far in 2023. And no, we won’t be talking about that interview that occurred last night at 9pm.

What I can tell you is that John Reade, chief market strategist at the World Gold Council will be joining us in about 10 minutes to discuss what’s been happening in the gold markets.

European markets are all positive this morning.  The FTSE has some modest gains – and it’s hit a more than three-year high in early trading.

The pound has had a bad time of late again. Not so much against the dollar as the euro this time (just to annoy the British skiing contingent again)

Top Gainers (at SML preparation time) were the miners, Antofagasta and Glencore, plus the insurers, Prudential and L&G. Airtel Africa and BAE Systems leading the loser board.

That’s on news that Airtel Africa has bought additional spectrum to support the growth of its 4G services and 5G rollout in Nigeria for $316m.

WPP and Ocado on the move now too.

Anjuli what’s caught your eye this morning?

Anjuli Davies11:03

Roll on Rolls Royce. Seems like the super-rich are still buying luxury cars. And bespoke commissions were also at a record high.

Rolls-Royce has exceeded annual sales of more than 6,000 cars for the first time in its 118-year history, the company announced.

It said it achieved “particularly strong year-on-year growth” in the Middle East, Asia-Pacific, the USA and Europe.

Chief executive Torsten Muller-Otvos said:

Not only did we reveal Rolls-Royce Spectre, our marque’s first ever fully-electric series model to the world, it was also the first year we ever delivered more than 6,000 cars in a single 12-month period, with strong demand across our entire product portfolio.

But as a true house of luxury, sales are not our sole measure of success: we are not and never will be a volume manufacturer.

Bespoke is Rolls-Royce, and commissions were also at record levels last year, with our clients’ requests becoming ever more imaginative and technically demanding – a challenge we enthusiastically embrace.

Izabella Kaminska11:04

But let’s move onto more macro stuff for a moment, including some big central bank news.

What I always find funny is how markets become fixated very suddenly on certain issues that for the most part have been common knowledge to specialists.

 One such example was the sudden realisation by “the market” a few months back that central banks can and probably will make losses when they try to tighten their way out of our inflationary state.

This idea of central bank negative equity thus became a huge talking point.

But of course, anyone who has been watching the QE story from the very beginning would be aware that it was always the handling of the QE exit point that worried central bankers most.

And that they’ve been preparing for this eventuality and the repercussions for years.

Anjuli Davies11:06

What are you talking about?

Izabella Kaminska11:07

What I’m talking about is that central bank negative equity has finally struck in a big way because the Swiss National Bank has announced the biggest loss in its history this morning (at least according to Bloomberg data)

From the press release:

According to provisional calculations, the Swiss National Bank will report a loss in the order of CHF 132 billion for the 2022 financial year. The loss on foreign currency positions amounted to around CHF 131 billion and the loss on Swiss franc positions was around CHF 1 billion. A valuation gain of CHF 0.4 billion was recorded on gold holdings.

Anjuli Davies11:08

Looks like gold proved a good bet for the SNB.

Izabella Kaminska11:09

There are loads of people saying none of this matters because a) central banks can’t really go bust in the usual way and b) in the case of the SNB all those loss-making holdings were the result of assets bought as part of its FX intervention policy. They are losses because the CHF has been gaining.

Letting the Swiss franc strengthen in this way was part of the SNB’s policy to fight inflation — so none of this is unexpected.

The move undid decades-worth of policy to keep the Choof (as I like to call it) weak.

(Even tho the SNB officially dropped its 1.20 swiss floor against the euro in 2015, it did continue to intervene.)

Anjuli Davies11:11

Some say the issue is that the SNB has been operating more like a hedge fund than a central bank with respect to how it’s reinvested the FX it accumulated through its interventions.

Izabella Kaminska11:11

In its last annual report the share of equities in its foreign exchange reserves specifically stood at about 23%.

At the end of 2021, the equity portfolios comprised mostly shares of mid-cap

and large-cap companies in advanced economies. Shares of small-cap

companies in advanced economies and shares of companies in emerging

economies were also held. This resulted in a globally well-diversified equity

portfolio of 7,000 individual shares (over 1,300 shares of mid-cap and

large-cap companies and 4,500 shares of small-cap companies in advanced

economies, as well as just under 1,200 shares of companies in emerging

economies). With its broad market coverage based on market capitalisation,

the SNB’s ownership share of individual mid-cap and large-cap companies

in all advanced economies is roughly the same. For reasons of liquidity and

risk, the corresponding proportions of small-cap companies and companies

in emerging economies are somewhat lower; with respect to the individual

companies, the proportions held by the SNB are also roughly the same.

@darren – isn’t that just because of the index weighting of apple?

Anyway, since the SNB’s gold holdings have been doing okay, what a great opportunity to bring in John Reade, chief market strategist at the World Gold Council.

He has been tweeting furiously this morning about all matters gold.

But what does it all mean?

Hello John, and thanks for joining us and our little community of market nerds.

John Reade11:14

Thanks, Izzy. Thanks for inviting me, it’s great to be here. I spent a lot of time in a prior life on Markets Live and being back is giving me a great deal of nostalgia / deja vu

Izabella Kaminska11:14

Yay! you made it

John Reade11:15

(first time here so apologies as I get used to the tech)

Izabella Kaminska11:15

So where to start, because there’s been a lot of news flow since I saw you at the annual LBMA meeting in October.

Seems the central banks have made a big move into gold.  Can you explain what’s driving all this?

John Reade11:15

Central banks have been net buyers of gold since the Global Financial Crisis, but this buying has accelerated this year, particularly in the third quarter.

It’s almost certain that 2023 will mark a post-Bretton Woods record year for CB purchases, and we only have full data for the first three quarters of the year so far.

This chart shows net purchases & sales each year from 1970, based on the best available data we have.

Izabella Kaminska11:16

That definitely seems like the makings of a new trend.

John Reade11:17

Unusually, the large purchases we reported in the Q3-22 edition of our quarterly Gold Demand Trends publication were mostly from ‘undisclosed sources’.

Most central banks disclose their gold holdings each month to the IMF, but some update less regularly.

Some institutions which are included in the ‘Central Bank’ category, i.e. some Sovereign Wealth Funds, never disclose their holdings, so there are always some estimates made for the quarterly data.

 But the level of unreported purchases in Q3 was unprecedented.

Izabella Kaminska11:18

That’s so interesting. Why do you think they were so shy and slow to reveal this move?

John Reade11:18

Part of the issue, I suspect, is down to Russia, which stopped revealing its FX and gold holdings post the invasion of Ukraine

Izabella Kaminska11:18


John Reade11:19

and Russia is a large gold producer – about 9% of global total – but consumes much less domestically.

but there are other buyers in this category – we don’t know the details as our data provider is sensitive about sharing this information.

Izabella Kaminska11:19

Can you tell us anything about the breakdown regarding what types of cbanks are buying? Is it mostly emerging market ones or developed ones?

John Reade11:19

The buying since 2010 has been almost exclusively emerging market central bank buying – a sharp contrast to the selling by DM central banks pre GFC

Emerging market CBs had little gold and fx reserves at the end of Bretton Woods, but have seen enormous FX accumulation over the past few decades.

Post GFC they have seen the merits of holding gold in their reserves.

Izabella Kaminska11:20

What’s this about the PBOC this morning? Is that a confirmation of what you expected?

John Reade11:21

The PBoC has been adding gold over the past decade too, but despite large volumes of purchases, still has a small component of its giant FX reserves in gold – at last estimates only about 3.4%.

(Snippet from our CB section on our (free) website, gold.org/goldhub)

In November the PBOC announced that it had added 32t to its gold holdings and, over the weekend, announced a further 30t of purchases.

Izabella Kaminska11:22

How much of this is linked to geopolitics and continuing speculation that the dollar will be dethroned from its global reserve standing?

John Reade11:22

That’s a really good question.

I think the majority of the purchases by EM CBs over the past decade have been related to diversification and the demonstrated safe haven characteristics of gold.

But the step up on purchases may be partly related to the moves to sanction the Central Bank of Russia.

Suddenly, governments are realising that FX reserves are, in extreme cases, vulnerable to sanctions.

Non-Western currencies are less attractive due to liquidity, capital controls, under-developed capital markets, etc. So gold may be gaining some market share – but only at the margin.

We expect further EM gold purchases over the coming years, but I don’t expect central banks to replace their USD with XAU (ie gold)

Izabella Kaminska11:23

But surely a key international reserve asset should be this:


John Reade11:23

I suspect that’s quite offered at the moment 🙂

Izabella Kaminska11:24

Thank you for that overview

what else can you share with us that is maybe being missed by everyone else?

John Reade11:24

Well loads, to be honest.

Izabella Kaminska11:24

Also, if any of you in the rabble have questions for John do put them in the comments.

John Reade11:25

Gold watchers obsess about ETF holdings and Comex futures market positioning – and gold has been out of favour in these areas in 2022

but physical coin and (small) bar demand is much bigger and more important to the gold market than these financialised gold vehicles

also a Retail vs. Institutional angle there too – retail investors are the only buyers of bar and coin – whereas Institutions buy gold via ETFs, OTC holdings and get price exposure via futures.

so Main Street was interested in gold last year, while Wall Street much less so

Izabella Kaminska11:28

Noelle is curious to know where the EMs are now keeping their gold?

John Reade11:29

@Noelle, generally central banks either hold their gold at one of a few central banks – BoE, Fed, Banque de France, BIS. But increasingly we have seen them ship it back to their own vaults.

Izabella Kaminska11:29

The issue of access denial is becoming more important these days I take it?

John Reade11:29

If you are worried about getting locked out of financial markets – even if its a slim chance – better to hold it where you and you alone control it

Izabella Kaminska11:30

The idea of gold flying around is hard to square in my mind with baggage weight restrictions.

John Reade11:31

It’s hard, but not that hard. Gold flies around the world very easily and there is a ready market in non-western jurisdictions like UAE, China, India.

Izabella Kaminska11:31

I wonder if a new BRICS “trusted” custodian will emerge? Who would it be? China?

John Reade11:31

@ Darren, no. It’s been roughly 7-8% for years. Increasing use as more chips are used everywhere. But miniaturization offsets this.

5t per plane on commercial flights is the insurance limit, normally. If you have flown London to Zurich a lot you’ve probably sat on a lot of gold.

Izabella Kaminska11:32

Who knew!?

John Reade11:32

If you are operating a government-chartered flight, you can ship a lot more

@John Kingston, Chinese jewellery market is very large – hit by COVID in 2020 but recovered well in 2021 and not too badly hit last year

largest jewellery market (India 2nd) in the world

@Darren – also industrial demand – as it almost all goes into electronics – is very cyclical. Its been slowing sharply in the past couple of quarters, as it was in late 2019. My own leading economic indicator:-)

Izabella Kaminska11:35

What do you think about Zoltan Pozsar’s prediction that in retaliation for the G7 countries instituting a $60 price cap on Russian oil, Russia may be tempted to sell oil at a rate of two barrels to one gram of gold?

John Reade11:36


Izabella Kaminska11:36

So you i take it you are sceptical.

John Reade11:37

@Chris – based on our CB contacts and the surveys we conduct of them, we know some participate in ETFs. But I’ve not heard of tri-partite pre-paygold deals as you ask.

Zoltan is a good read for broadening your mind, I think, but on this it seems very speculative / unlikely / &^%$

Izabella Kaminska11:38

Yeah, I too think the ratio thing would be a stretch too.

Anjuli Davies11:39

Any implications John for the goldminers?

John Reade11:39

At the World Gold Council we focus on gold, not the gold miners (our owners).

Gold miners, obviously, benefit from higher prices, but are exposed to many other risks and opportunities.

Our role is to explain gold and the merits of ownership and investment in gold

Izabella Kaminska11:40

Apparently John L. Thornton, the former co-CEO of Goldman Sachs and a close friend of Steve Bannon’s, is now executive chairman of Barrick Gold, the second-largest producer of gold in the world.

John Reade 11:41

Yes, I’ve exchanged emails with John Thornton but haven’t met him. I know Mark Bristow, CEO of Barrick, very well (since the 1990s)

(yes I’m really old, sorry)

Izabella Kaminska11:42

Well, unless anyone else has any other questions,

Thank you so much John for giving us that insight, and please do join us again if there’s anything moving the market that you would like to share with us 🙂

I feel the gold market is only going to get more and more interesting

John Reade11:43

Thanks, Izzy, and for the questions from the audience (rabble?).

Happy to contribute here when gold is topical

Izabella Kaminska11:43

Yeah, rabble is a hangover from the old ML days 🙂

Alright on that note..,Anjuli, what else have you been looking at?


Anjuli Davies11:45

Izzy did you see Giles Coren’s excoriating article in The Times on electric cars?

I was planning on getting one this year but now not so sure… and I’m not a Coren fan

Izabella Kaminska11:46

no i did not. I have a hybrid. What’s the TLDR?

Anjuli Davies11:46

The EV car was a pile of S***. But not only did it always break down and never do the mileage it said it would do, but the charging infrastructure in this country was a mess. So many points were either not working, or had massive queues. Incidentally, there is also some backlash against electric charging stations implementing surge pricing.

Izabella Kaminska11:47

Well, if you fancy a second hand EV, you could ask my brother about it – full disclosure, he happens to be an EV car dealer.

Anjuli Davies11:47


Izabella Kaminska11:47

Second hand car market is totally distorted at the moment in the UK and the US.

that’s all that I know.

I offered my brother free sponsorship on SML and/or Blind Spot, but he declined! He said that I was unlikely to drive any traffic to him. Sibling rivalry eh? I should scuffle with him until he breaks his necklace 🙂

Anjuli Davies11:48

Mind the dog bowl Izzy

I have a charger in my own incidentally. That’s what i’m hearing, if you have an EV get a backup car for real journeys

Izabella Kaminska11:48

Speaking of EVs….

Elon just tweeted this:

Anjuli Davies11:50

All roads lead back to Elon….

Izabella Kaminska11:50

We could talk about Tesla and its delivery upset last week, but really everyone has done that story to death already.

Including FTAV this morning, which is calling the death of the Elon cult

11:51So let’s move on to some IB news instead

Things looking a bit ropey at Goldman?

Anjuli Davies11:52

Yep. It’s going to be a tough week at Goldman Sachs according to the latest reports, they will begin one of their “biggest rounds of redundancies in its history”

“Goldman Sachs is expected to cut 3,200 jobs this week

The financial services giant is expected to begin the process mid-week and the total number of people affected will reportedly not exceed 3,200.

More than a third of those will likely be from within its core trading and banking units, it was first reported by Bloomberg.


So Izzy, do we reckon there’s going to be an industry-wide bloodbath in Investment banking this year?

Izabella Kaminska11:53
Not sure. Depends on what’s behind all these layoffs? You would think in higher interest rate markets, banks could skim more margin, but I guess this is about deal flow?
Anjuli Davies11:53

Yes, investment banking has had a bad year

but following a bumper one of course..

People have said Solomon has gone “all Elon”

Izabella Kaminska11:55

Though worth noting the IB hurt seems to be being offset by record profits at market-making specialists like Citadel.

Did you see Ken Griffen’s shop announced a record profit last week. Here’s the story from the WSJ:

Citadel’s winning streak continued in 2022, with Kenneth Griffin’s hedge-fund and electronic-trading businesses both posting record revenues even as markets swooned, people familiar with the matter said.

Citadel, the hedge-fund operation with $54.5 billion under management as of Jan. 1, had about $28 billion in revenue, the people said. That far outstripped its prior record of $16.2 billion the year before. The separate Citadel Securities, one of the world’s biggest electronic-trading firms, had $7.5 billion in revenue, up from the prior record of $7 billion in 2021.

Also I see that Credit Suisse is nearing a deal to buy Michael Klein’s advisory. In case you don’t know the background:

Also this was a good piece by the FT’s Tom Braithwaite:

Anjuli Davies11:56

How predictable…but what are they buying exactly. M&A boutiques are all about the high profile dealmakers and they already have him. It’s basically an “acqui-hire”.

11:57I don’t want to sound morbid but shall we turn our attention to the funeral sector for a minute?

Dignity is one of the UK’s largest funeral providers and at the beginning of January received a takeover offer from a consortium of investors led by Sir Peter Wood the founder of insurer Direct Line.

Izabella Kaminska11:58

Yes, there seems to be a big story here.

From the FT on January 4:

The company said it would be “minded to recommend” a cash offer that values the company at £262mn, or 525p a share, and represents a 23 per cent premium to Tuesday’s closing share price. The consortium, which is also fronted by City fund manager and former Dignity executive Gary Channon, has already acquired 29 per cent of Dignity’s share capital.


Both parties said that discussions had begun in mid-October with an opening shot of 475p a share

Anjuli Davies11:59

So, as context, there’s been a few issues surrounding the sector. You would have thought it would be benefiting from higher death rates due to the pandemic but in fact a combination of smaller funerals as a result and higher operating costs especially on the energy front has meant profits have slumped. Added into the mix, a couple of regulatory probes into the cost of funerals and the proliferation of pre-paid funeral plans:

Pre-paid funeral plans work like insurance. You pay upfront and the provider can then use that money to invest. The FCA has now cracked down on what those funds are being used for as it used to be a bit like the Wild West according to sources.

According to one investor who contacted us, Dignity’s share price has been heavily impacted by its high debt load . Its share price reached a peak of over £20 in 2016 but was at £4.35 just before it began takeover talks.

But in Q4 it got permission following the FCA reforms to buy its own crematoria assets off themselves using the funds from pre-paid funerals, describing it as an investment in “private infrastructure assets” – but which are in fact their own crematoria. Apparently this was a barely disclosed fact on its website. But it did solve some of its debt issues priming it up for an offer from its majority shareholder who is also its ex-CEO.

Izabella Kaminska12:00

The consortium is also fronted by former Dignity executive Gary Channon. As the FT noted:

“Channon, the co-founder of Phoenix Asset Management, briefly served as executive chair and chief executive of Dignity. His involvement in the bid is the latest chapter in a storied recent history. He was installed as executive chair of Dignity at an extraordinary meeting of shareholders in April 2021 and later moved to the chief executive position before making way for Kate Davidson, the current chief executive, in June last year.”

Anjuli Davies12:01

So I guess, the issue for some investors is that they are receiving a complete lowball offer because the stock has been heavily impacted by its debt burden, which seems to have been partly eased by these “infrastructure investments”  (which hasn’t been arguably well explained to investors)

Izabella Kaminska12:01

If you are a shareholder and have any more intel on the situation do get in touch.

And just to finish off….

Anjuli Davies12:01

Theresa May is officially the highest-earning MP since the last general election according to new research, she’s earnt £2.5 million mostly from speeches. Izzy where’s that picture you put on the mugs?

Izabella Kaminska12:02

She’s such a dark horse. Who knew she was so commercially savvy?!

But of course she was once a cbanker. BoE.

Or at least worked in payments.

On that cheery note. It’s adieu from us today. We will be back with our usual session next Monday. But if you want to catch up on the madness of crypto, or at least filter the signal from the noise, you can join me here on the Coodash platform this Friday at 11am with nocoiner extraordinaire David Gerard, for a catch up on everything you should know about crytpo.

(As in we will try to summarise all the stuff you couldn’t be bothered to keep track of over the holidays :))

Until then, it’s goodbye from me!

Have a good week everyone.

Anjuli Davies 12:03

Indeed. Bye from me too.

If you would like to join the live sessions on the Coodash platform, sign-up here for an access code.

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