Posts Tagged ‘Bullion Prices’

Gold Market Radar (June 11, 2012)

Sunday, June 10th, 2012

Gold Market Radar (June 11, 2012)

For the week, spot gold closed at $1,593.45 down $30.65 per ounce, or 1.89 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, beat bullion with a slight loss of 0.59 percent. The U.S. Trade-Weighted Dollar Index fell 0.54 percent for the week.

Strengths

  • The U.S. Mint reported that sales of American Eagle gold bullion coins in May rose 158 percent over the total number purchased in April. Sales of American Eagle silver bullion coins rose 89 percent in the same period. However, sales in May 2012 were down from levels attained in May 2011 for both gold and silver bullion coins. On a positive note, recent SEC filings showed George Soros has been buying gold again.
  • While the gold stocks were the star performers in the prior week, silver stocks on average turned in positive gains despite a flat silver price. Lately mining stocks have been outperforming the bullion prices.
  • Gold maintained its recent gains most of the week until Fed Chairman Ben Bernanke spoke before Congress on Thursday and did not affirm that the Fed was compelled to immediately start QE3, particularly in response to recent weak job numbers. Short-term traders immediately started shorting gold. Speculative interests have declined significantly over the past year with the Comex speculative open interest recently at 13.6 million ounces net long, down from 28 million ounces, so there is plenty of room for this number to grow, once the Fed or Congress is forced to scream “Uncle!”

Weaknesses

  • From recent Fed statements, some of the Federal Open Market Committee (FOMC) members appear to have warmed up to another round of QE, as some economic data has been downright disturbing as of late. When Bernanke refrained from outlining steps that the central bank may take to bolster the economy amid risk from Europe’s debt crisis, gold futures tumbled the most in two months. Instead the Fed indicated it is going to assess more data before acting.
  • Barrick Gold’s Board of Directors announced this week that it had replaced Aaron Regent, President and Chief Executive Officer, with Chief Financial Officer Jamie Sokalky. Barrick’s vision is to be the world’s best gold company by finding, acquiring, developing and producing quality reserves in a safe, profitable, and socially responsible manner. Analysts worry that the company may lower guidance.
  • A Court of Appeals ruling orders the U.S. Forest Service to consult with wildlife agencies prior to granting Notices of Intent to weekend hobbyists using suction dredges to mine for gold in the Coho Salmon critical habitat in northern California. This could be bad news for all U.S. small miners and explorations working on Forest Service lands with critical wildlife habitat. This decision sets a major precedent across the western states and may render the Forest Service impotent to meaningfully address low impact mining without deferring to other agencies such as the EPA.

Opportunities

  • Morgan Stanley conducted a survey of 2,019 urban and rural gold buyers across 16 Indian cities and eight Indian states. The survey report notes that Indians own 20,000 tons of gold worth $1 trillion. Respondents from several households said they expect gold prices to rise by 8 percent in 2012. The survey notes that gold is not the first asset that Indian households liquidate during bad times; it is equities. Gold remains an important asset class for investment, having outperformed most other asset classes over the past five years.
  • In a recent address to the Committee for Monetary Research and Education, Bob Hoye noted policymakers are now getting margin calls on their massive experiment in government intrusion and it is likely coming to an end. In studying history, Bob sees a pattern in which the state spends, borrows, inflates and raises taxes until all of the wealth is consumed. Consequent hardship becomes widespread and forces folks to tighten their belts, who in turn, force local and federal governments to tighten theirs. Policymakers have an economic interest in maintaining the bubble but ultimately running the money printing presses cannot keep a mania going.
  • Bob points out that typically in the year a bubble maxed out, gold’s real price set a significant low and then increased for some twenty years thereafter. If Congress does not reach agreement on several important tax and budget policy issues before the end of this year, the impending fiscal cliff could be a big hit to GDP growth and could be sufficient enough to push the economy into recession in 2013.

Threats

  • Bernanke’s remarks pointed that action is required by Congress to set the right policies to lead the country forward. Congress cannot wait to see if a third quantitative easing sets the ship right. It seems the major central bankers have agreed to a common script, pointing to the failings of fiscal policymakers (i.e., politicians). Mario Draghi of the ECB commented, “Some of these problems in the Euro area have nothing to do with monetary policy. That is what we have to be aware of and I do not think it would be right for monetary policy to compensate for other institutions’ lack of action.” Central bankers are trying to put pressure on their political leaders to address the root causes of the crisis which are beyond the scope of monetary policy.
  • With this being an election year, we may be at an impasse with little room to compromise where brinkmanship and stand your ground may be more important than doing the right thing. Gold prices have been highly sensitive to what monetary policymakers have done for much of the past year and with low visibility towards a resolution, it could be a trader’s market for the next couple of quarters with the potential for some large price moves if the stresses become acute.
  • If the Fed wants to do something, it really has to be June 19-20 because the window will start to close once the election campaign moves into high gear.

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Gold Market Radar (April 9, 2012)

Sunday, April 8th, 2012

Gold Market Radar (April 9, 2012)

For the week, spot gold closed at $1,631.23 down $37.12 per ounce, or 2.2 percent. Gold stocks, as measured by the NYSE Arca Gold BUGS Index, fell 6.8 percent. The U.S. Trade-Weighted Dollar Index jumped 1.3 percent for the week.

Strengths

  • Following the release of Fed minutes that indicated sentiment towards renewed stimulus programs was not immediately pressing, the pullback in bullion prices stimulated strong physical demand from India on Wednesday. Dealers reported that buying demand was the strongest since March 14. Historically, Indian buyers have been fairly price-sensitive to buying when they perceive pricing is at bargain levels.
  • Randgold Resources, Mali’s largest investor, and AngloGold Ashanti, Africa’s largest gold producer, said on Wednesday they had enough supplies of fuel to sit out any immediate changes in the way they do business with respect to the coup d’état in Mali.
  • Mark Bristow of Randgold Resources said the company, which sources two-thirds of its gold from Mali, had no problem bringing in fuel and shipping gold despite border closures by the 15-state Economic Community of West African States designed to squeeze Mali’s economy. Gold companies with mines in Mali are playing down the risk of border closures and fallout from sanctions imposed on the West African nation after a coup last month.

Weaknesses

  • Gold’s recent decline has also been based on India’s nationwide jeweler’s strike to protest a tax on non-branded ornaments. The strike is in its 19th day today. The country was the world’s second-largest bullion consumer in the fourth quarter.
  • Gold imports into India tumbled more than 55 percent in March. The president of the Bombay Bullion Association notes that the country imported just 15 to 20 tonnes of gold in March as compared to the 45 to 55 tonnes that is usually imported on a monthly basis. He added that the high price of the precious metal also deterred fresh purchases in the first quarter.
  • The combined jewelers strike in India plus the comments that the Federal Reserve was unlikely to provide more stimuli for the economy, sent many gold stocks to 52-week lows this week. In addition, this situation was exacerbated by a large fund complex in Canada that had a change in ownership, with the new management instituting wholesale changes for many of the firm’s portfolios, dumping millions of shares of gold-mining and oil stocks.

Opportunities

  • An upcoming Hindu festival, Akshaya Tritiya, held on April 24, may be the catalyst that brings the jeweler’s strike in India to an end and moves gold prices higher in April. In terms of important festivals, the Akshaya Tritiya festival and Dhanteras are the two biggest gold-buying events in the Hindu calendar. These are essential buying occasions that jewelers won’t want to miss, especially after the strike-inflicted drop in revenues in March.
  • According to an analysis of the Chinese gold market, growth in aggregate demand from jewelry buyers, private investors, and the People’s Bank of China will continue to outpace growth in total supply from mine production and secondary sources. Furthermore, it suggests that the country’s gold production and consumption are both far higher than figures suggest, but also that this gold will not find its way back on to the global marketplace.
  • With both domestic supply and demand relatively price inelastic, the market will require a growing stream of imports, which will be available only at higher prices. Despite bullion prices having moved up from $300 to more than $1,600 over the last decade, world gold mine production is essentially unchanged.

Threats

  • The Mozambican government is seeking to guarantee that the sale of shares in mining companies whose assets are in the country should bring financial benefits to the country. A team of officials from the Ministries of Mineral Resources and of Finance has been set up to work on how to tax these sales. The new law, which is expected to be submitted to the country’s parliament, will stipulate that the transmission of mining rights and titles must obligatorily take place in Mozambique and any public offer of shares must be announced in the Mozambican press.
  • Ongoing conflicts in Eritrea and the threat of additional sanctions pose significant risks to the country’s mining sector and those companies operating within the borders. The country is currently the target of U.N. sanctions, its hostilities with neighboring Ethiopia have reignited in recent months, it faces serious infrastructure issues (particularly with regards to water), and its authoritarian government’s military and geopolitical ambitions are unsustainable. So while Eritrea’s mineral deposits are attractive, it will remain one of the riskier mining jurisdictions in Africa for the foreseeable future.
  • A Romanian court annulled a zoning plan that further delayed the development of Gabriel Resources’ Rosia Montana project. The project has been a favorite for a number of non-governmental organizations to rally around to prevent the development of the mine. Reacting to the news today, Gabriel’s share price plunged 23 percent.

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What’s Really Driving Gold?

Friday, November 18th, 2011

Nov. 14, 2011 – I was in New York to participate on a panel at Terrapin’s Commodities Week 2011 Conference. This is one of the most important gatherings of commodities investors and traders in the world.

I had the opportunity to stop by the InvestmentNews offices to speak with Mark Bruno regarding higher gold prices. One of several key factors influencing gold’s recent price action is negative real interest rates.

Whenever a country has negative real rates, meaning the inflationary rate (CPI) is greater than the current interest rate, gold tends to rise in that country’s currency. Right now, investors are losing money on Treasury bills and money market accounts because interest rates are near zero and inflation sits just under 4 percent.

I also discuss what I think could derail higher bullion prices and discuss how emerging economies are enjoying a rising GDP per capita and how this could influence gold.

Also, read about how gold is currently in season.

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Gold Market Cheat Sheet (October 17, 2011)

Saturday, October 15th, 2011


Bank of England vault

Gold Market Cheat Sheet (October 17, 2011)

For the week, spot gold closed at $1,680.73, up $42.88 per ounce, or 2.62 percent.  Gold stocks, as measured by the NYSE Arca Golds BUGS Index, jumped 5.47 percent lower. The U.S. Trade-Weighted Dollar Index slumped 2.69 percent for the week.

Strengths

  • Gold and the whole suite of precious metals had a meaningful rebound this week with the significant drop in the U.S. dollar. Not only was gold up strongly but silver rose 3.88 percent and copper, which is a byproduct of for a number of the gold miners, rose 4.65 percent.
  • More significantly, the gold and silver mining stocks rose even more than the bullion prices as investors took advantage of the oversold conditions in equities.
  • Considering some of the forced liquidations in the prior week or two, due to some hedge funds losing a third to half their value in September alone, the selling pressure has certainly waned as we saw a handful of companies’ share prices rise as much as 50 percent over the past five days.

Weaknesses

  • The only drawback to the sharp rebound in some of the gold stock prices was the return of the investment bankers with a number of bought deal financings this week.
  • While it is positive that some of the investment firms have the courage to risk their capital on an equity raise, perhaps signaling they don’t see any distressed clients on the sidelines; it is a bit worrisome that several companies were willing to issue equity with only a minor rebound in their share price.
  • Perhaps their management was as shell shocked as some investors were with the precipitous decline in valuations and the hauntingly painful memory of 2008 still lingering.

Opportunities

  • The opportunity before us is the potential for a significant rebound in gold and gold equities.  For our gold-oriented funds we have now marked three quarters in a row of negative performance.  This has only happened one other time in the last ten years and that was during the 2008 credit crises.  In the ensuing two years after that era, there was only one quarter out of the following eight quarters which had a negative return.
  • What is also significant over the two year window post the 2008 collapse was that gold stocks were one of the few assets to appreciate beyond the high marks which were established prior to the credit crisis.
  • As we are all aware, the problems of 2008 have not gone away, however, much of the counterparty risks now reside within the governments that suggested lending standards should be relaxed so everybody could buy a house or borrow money in perpetuity.  Perhaps you don’t want to own a company that sells a product or service to government, unless they sell inks and dyes, but precious metals and mining stocks were one of the strongest performers coming out of this period.

Threats

  • Earnings season is upon us and gold mining companies are beginning to report production metrics for the quarter.  For the ten or so companies that have reported so far, only one company actually exceeded guidance for the quarter.
  • In addition, most gold mining companies continue the practice of reporting “cash cost” metrics for gold production which artificially makes the company look very profitable.  For instance a company’s press release may show gold production costs at $450 but in actuality, the total cost of production is closer to range of $1,000 to $1,500 per ounce of production.  It’s no wonder that resource rents and windfall profit taxes have skyrocketed over the last five years of this ten year run in gold.
  • Zambia is only the latest country to suggest that it now wants to increase state ownership in mining companies operating within its borders to 35 percent.

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Gold Market Cheat Sheet (August 15, 2011)

Monday, August 15th, 2011

Gold Market Cheat Sheet (August 15, 2011)

For the week, spot gold closed at $1,746.95, up $83.15 per ounce, or 5.0 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, rose 5.4 percent. The U.S. Trade-Weighted Dollar Index was essentially unchanged for the week.

Strengths

  • As reported on Mineweb, precious metals analyst David Morgan anticipates that silver could reach $65 to $75 an ounce. He attributes the main demand for silver coming from the East, where silver demand is growing for both industry and as an investment.
  • Year-to-date, demand for silver in China and India is up 30 percent. Silver demand in China and India has increased sharply in recent years as more investors use silver as a store of value. About 70 percent of China’s silver demand comes from the industrial sectors. Albanian Minerals President and CEO Sahit Muja said, “Silver demand in China and India is set to rise 40 percent in 2012.”
  • Reuters reported that gold available in exchange for cash has been drying up as prices are rising even higher. In Mexico City, it has been noted that fewer customers have been coming into the shops that buy bullion from local residents. The success of the cash-for-gold industry over the past three years has left fewer and fewer people with any “old gold.” For those who did cash out in 2008, they missed a three-year bullion boom in which prices doubled.

Weaknesses

  • On Thursday, exchange operator CME Group raised margin requirements on gold futures by 22 percent, to $5,500 per contract from $4,500 per contract, which is the first time gold margins have been raised since November 15, 2010. Following this announcement, we saw gold settle to $1,764 per ounce.
  • Rising margin requirements put a damper on gold prices on Friday, too, with prices slipping another $17.
  • Overall, the gold stocks held up pretty well with the pullback in bullion prices.

Opportunities

  • Eric Sprott believes gold has been the metal of the past decade, while silver is the metal of the decade to come. He says there is a large imbalance between demand and supply and that the metal is set for a major re-rating which will, in turn, bring the gold-to-silver ratio down to much lower levels.
  • BlackRock’s investment strategist, James Holt, has said that the group will use profits from gold and bond investments to shop for bargains among the falling global equity markets. He stated that the firm will be seeking to put its resources into asset classes that are getting cheaper and cheaper, namely equities. BlackRock, one of the world’s largest money managers, holds 5 percent of its $83 billion global allocation fund in gold equities and gold exchange traded funds (ETFs). This could have a substantial positive effect on the gold equity market.
  • Goldman Sachs and JP Morgan raised their gold price forecasts for the year, expecting the commodity to continue its surge as the sovereign debt issues in the U.S. and Europe intensify. JP Morgan now expects spot gold to soar to $2,500 an ounce by year end.
  • Investors have been flocking to seek refuge in bullion amid economic concerns triggered by a downgrade of the U.S. debt.

Threats

  • The last time we saw increased margin requirements for silver, just over three months ago, we saw silver fall from close to $50 an ounce back to below $34. Depending on market response, this scenario could be a possibility for gold as well, although there was much more leverage in the silver space compared to gold.
  • The Ecuadorian President Rafael Correa has said that his government is demanding that mineral companies pay an 8 percent in mining royalties before “starting to extract the mineral.” His main driver behind this new policy is to assure that mining operations are “environmentally friendly and socially responsible,” with residents of the cities, parishes and communities near mining projects being the primary beneficiaries. Royalties to the extent of 8 percent have never been seen before and can make a project potentially uneconomic.
  • Resource nationalism is one of Ernst & Young’s main concerns in its list of top ten risks facing the mining sector. As many governments struggle with budget deficits, the continuing boom in commodity prices has made the mining and metals sector an easy target as a source for increased revenue.

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Eric Sprott: “Paper Markets Are A Joke: Prepare For Bullion Prices To Go Supernova”

Tuesday, July 5th, 2011

Exclusive Interview by Chris Martenson

Eric Sprott – Paper Markets Are A Joke: Prepare for Bullion Prices to Go Supernova

“I think that the prices will continue higher. I mean the amount of money printing is unbelievable. I just think you have to take that initial stand in terms of buying it. I use the James Turk analogy: just keep dollar averaging. We have gone up eleven years in a row, this year it looks like it will be no exception; I would certainly think next year will be no exception. If we ever have QE3 announced, I think gold and silver will just go absolutely bonkers here. And so I just think you have got to step in there and own it; we’ve had these fears all the way along. You know, $400, and $500 and $700 and $800 dollar gold, everyone was afraid it was a one-time thing. I don’t think it is a one-time thing, I think it is a secular thing. It’s going to carry on for quite a while here until we find some resolution of these problems. And the resolution probably will be some form of default where people just have to expunge debts that cannot be repaid. So, you have got to be in some asset which will not be affected by that.”

So predicts Eric Sprott, founder of Sprott Asset Management and famed investor. In this wide-ranging interview, he shares his insights on the precious metals markets – specifically what investors need to be aware of in terms of the way the markets are currently managed (manipulated), the macro outlook for the economy (grim) and the true value of gold and silver (very underpriced; particularly silver).

Eric sees the current “extend and pretend” intervention by world governments and central banks to prop of a fundamentally flawed baking system, particularly the vast money printing efforts of the past few years, as a ruse that is losing it’s influence. Once enough people ask “Why have your money in a bank earning nothing? Why not have it in something that might at least maintain it’s purchasing power?”, the capital flows into the precious metals will dwarf current levels, sending bullion prices much higher.

Those interested in hearing Eric’s insights on:

  • why we’re in a global secular bear market for most assets classes
  • what the safest investment options are
  • how much precious metals exposure investors should have
  • the key factors that will drive PM prices much higher
  • the mindboggling supply shortage and manipulation within the silver market
  • why there may eventually be two prices for bullion: one for paper and (a much higher one) for physical & how high Eric thinks prices could go should press play on the red/blue player (immediately below) to listen to Chris’ interview with Eric Sprott (runtime 38m:01s):

click here

Or start reading the transcript below:

Chris Martenson: Welcome Eric, it’s a real pleasure to have you today.

Eric Sprott: Chris, good to be here and thank you for all the work you are doing in apprising your investors of what’s really going on in the world.

Chris Martenson: Oh thank you. We’ve been at it many years and unfortunately much of what I think both you and I saw coming – though unfortunately not enough others along the way – is really coming to pass. If I could, let’s start with your views. You have been advocating and creating investment vehicles for people to own gold and silver for a long time. How did you get to that position and what are your views on owning gold and silver at this point?

Eric Sprott: Sure. Well it all started, Chris, with our studies back in 2001 where we were entering into a secular bear market and wondering how you deal with that. And a typical response would be to own gold and silver, which is what we decided to do. I think the one thing that really tipped us into it was an analysis of the physical supply and demand for gold and some work by Frank Veneroso that suggested things would have to change dramatically in the physical gold market because the central banks were selling four to five hundred tons a year. And as you know, here we are eleven years later and now they are buying four hundred tons a year on balance, and this is in a market where the mines supply only twenty-six hundred tons a year. So that is a huge change that had to take place that Frank identified back then. He also identified that the gold companies would stop hedging. We’ve had the ETF’s come along. So we have had a lot of dramatic changes in the physical balance between supply and demand in gold. And that is really what took us there in 2000; to get actively involved in that particular market.

Chris Martenson: And looking at it today, has anything changed in that analysis? You mentioned a secular bear market, are we still in one and also has anything changed in the fundamental supply/demand equation that has actually tipped it one way or the other, further or less, since the initial analysis you looked at?

Eric Sprott: Sure. Well I do think we are still in the secular bear market and basically what people describe with the phrase “extend and pretend”. And we had the zero interest rate policy, the housing boom, the lending boom, TARP and TALF and all those things which try to delay what naturally should happen. When I look at the headwinds for gold and silver, I really believe that we have been aided and abetted by a lot of these policies, particularly QE1 and QE2 and the various printing mechanisms of the ECB and the Japanese government and almost all governments in the world. So as much as I would not have anticipated those types of developments happening, they have happened and they provide an even stronger headwind for people realizing that currencies are not going to survive and to maintain your purchasing power you have to own precious metals.

Chris Martenson: You know, I too have been surprised by how long all of this has stretched out. If you had told me five years ago – Eric if you had said “Chris, the Federal Government in the U.S. is going to be running a $1.6 trillion dollar deficit and the Federal Reserve is going to monetizing 75% of that and the bond markets will be relatively tame and the dollar will still be roughly where it is at”; I would have said you’re nuts. But here we are. And my view on this is that what we are kicking the can down the road. We have bought some time, – which I am thankful for personally – however the risks are now increasing. And the risk that I have identified that concerns me a lot is that, sooner or later, much is happening in Greece right now where suddenly the world wakes up and says “Hey, wait a minute. They can’t possibly pay that back. And at 22% interest rates on 2-year paper, they really can’t pay that back.” So suddenly the illusion is lifted. We have collectively suddenly gone, “Greece is not solvent. Oh, that’s terrible.” And now we are grappling with that. But that same dynamic can be extended to, I think, any of the governments that you just mentioned. It varies across Europe somewhat, but in Japan and the U.S. there certainly are fundamental mismatches between current productive economic output and the levels of indebtedness. We are printing our way to that. Is there a way that you can see that this could actually be turned around where it all sort of pencils out? Is there a solution to this that does not have to pass through a fiscal crisis and possibly a currency crisis?

Eric Sprott: Well Chris, it is very hard to imagine that happening. And then I look at really what has happened over the last eleven years since we hit the high in that, we basically created a problem in the world of banking business and I always think of banks as being levered 20 to 1. And when your paper assets start to decline, of course it does not take much of a decline to get rid of all the capital. And we have seen that in so many instances whether it is Iceland or Ireland or now the Greek banks. And all the moves that have happened so far, really have been in response to the problems in the banking system. That is why you have TARP and TALF and all those things because the banks basically were losing deposits and somebody had to come in and support them. That is what happened in the UK, it happened in Iceland, it happened in Ireland, it’s happening in Greece as is transpiring right now. And I think the big fear is that you cannot let one banking system go down without an impact on all the other banking systems. So collectively everyone is trying to support the banking system and I think people see through the ruse. And the natural reaction is “Well, why have your money in a bank when you earn nothing, why not have it in something that might at least maintain it’s purchasing power?”

Click here to read the rest of the transcript.

Note: listeners interested in the conclusions expressed within this interview will also want to read Chris’ recent report on The Screaming Fundamentals For Owning Gold And Silver, which takes a deep dive into the data behind the supply and demand imbalances in the bullion markets.

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Gold Market Cheat Sheet (March 7, 2011)

Sunday, March 6th, 2011

Gold Market Cheat Sheet (March 7, 2011)

For the week, spot gold closed at $1,430.90 per ounce, up $20.30 per ounce, or 1.44 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, rose 1.72 percent. The U.S. Trade-Weighted Dollar Index fell 1.12 percent for the week.

Strengths

  • The price of gold reached a new all-time high of $1,434.50 an ounce as crude oil prices rose and settled at their highest levels since September 2008 on investor fears of supply disruptions and possible international intervention in the Middle East.
  • China was the number one gold producer with reported production of 341 tonnes. Australia maintained its number two ranking with production of 266 tonnes and the United States ranked third with an output of around 240 tonnes as miners dug deeper to cash in on high bullion prices, according to Melbourne-based Surbiton Associates.
  • Canadian provinces occupied three of the top four rankings for mining exploration and investment in the latest version of the Fraser Institute’s Survey of Mining Companies 2010/2011. Alberta is the top-ranked place in which mining and exploration companies can do business, according to the latest edition of the Fraser Institute annual survey of international mining companies. While Canadian provinces occupied three of the top four rankings, Nevada came in second, followed by Saskatchewan and Quebec, which had previously been ranked first for three consecutive years.

Weaknesses

  • South Africa’s mining community has been rocked by the latest global mining rankings published by the Toronto-based Fraser Institute, which placed the country 67 out of 79 jurisdictions across the world. Over the past five years, South Africa has fallen precipitously from 37th place in the rankings. Zimbabwe is placed at 71, just behind South Africa, yet Botswana, a neighbor of both, ranked 14th, and the top spot for the African continent.
  • Egypt on Sunday banned the export of gold for the next four months, a measure bankers said seemed aimed at preventing business people and former government officials who acquired capital illegally from transferring it abroad. A decree banning the export of gold in all its forms, including jewelry and ornaments, was issued by newly appointed Trade Minister Samir el-Sayyad. It takes effect immediately and continues until June 30, the official news agency MENA reported. “This decision, which comes in light of the exceptional circumstances the country is passing through …, is to preserve the country’s wealth until the situation stabilises,” MENA said. The MENA statement made no mention of whether the ban included exports of gold from mining.
  • Holdings of the world’s largest gold-backed exchange traded fund, the SPDR Gold Trust, fell for the fifth consecutive month in February which is the longest run of outflows since the trust’s inception.

Opportunities

  • There were 52 initial public offerings (IPOs) in the mining sector across the TSX and TSX Venture exchange, which raised more than $1.3 billion, and the sector as a whole raised more than $17.7 billion in IPOs, public offerings and private placements, Ernst & Young said. “Strong commodity prices and the fundamental need to develop long-term reserves will continue to drive activity into 2011, particularly in the gold sector,” E&Y national mining and metals leader Tom Whelan said.
  • Chinese gold demand has exceeded 200 tonnes in the first two months of this year. Only a couple of months ago China reported its gold imports for the first ten months of 2010 totaled 209 tonnes. If the pace continues China would purchase close to half of world mine production in 2011.
  • The world’s biggest commodities trader, Glencore International, is bullish on the outlook for the asset class, expecting last year’s buoyant trends based on growth in emerging nations such as China to persist this year. “Their outlook is basically a continuation of the trend we’ve had this year. The mega-trend for the mining sector is still in place and will continue next year. We’ll continue to see recovery in developed markets,” said Henri Alexaline, a credit analyst at BNP Paribas.

Threats

  • Battle lines are once again being drawn between Australia’s minerals sector and the Federal Labor Government over taxation measures, this time over the introduction of a carbon tax as a so-called prelude to introducing an emissions trading scheme several years down the track. The industry already pays income tax to the Federal Government; a myriad of taxes and royalties to State and Territory governments; and some miners are faced with the Minerals Resource Rent Tax,” chief executive of the Association of Mining & Exploration Companies (AMEC), Simon Bennison said.” A carbon tax will have an inflationary impact on the Australian economy, detrimentally affect Australia’s international competitiveness and attractiveness as a safe place in which to invest.
  • Branded gold and silver jewellery items are set to get more expensive in India. India’s finance minister Pranab Mukherjee announced the government would levy a nominal 1 percent central excise duty on jewellery made of gold, silver and precious metals that are sold under a brand name. Of the 130 items that are to be covered by the new levy, gold and silver branded jewellery items have entered the tax net. The new levy is set to deal a body blow to precious metal and stone jewellers in India
  • Legislation before the Securities and Exchange Commission is designed to stop the trafficking of “conflict gold” among other metals from the Democratic Republic of Congo is implemented in its current form, it is going to be “Pretty problematic” for the gold industry at large, says World Gold Council CEO, Aram Shishmanian. Although the World Gold Council fully supports the intention of the legislation, it believes in its current form it will have “perverse and risky unintended consequences.”

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Technology Goes for Gold (Andrews)

Monday, September 20th, 2010

Mostly favorable economic and regulatory news helped stocks to another consecutive weekly gain. Technology stocks and the rising price of gold pushed North American stock markets to the top end of their recent trading ranges. Oracle posted strong quarterly earnings and Cisco surprised the market by announcing their first ever dividend will be paid sometime in 2011. The S&P500 had its third consecutive weekly gain rising 1 .4% helped by Info Tech (up 4.4% this week). Financials slipped in sympathy with Irish debt concerns.

In Canada, it was Gold that glittered helping to push the S&P/TSX up 0.6%. Bullion prices set all time record highs (US$1276 per ounce) as economic uncertainty and currency market intervention by Japan pushed investors in search of an alternative currency. Gold represents 11% of the S&P/TSX and propelled the index to its 5th consecutive weekly increase. Natural gas prices held steady around US$4/mmBtu, however crude slipped below US$75/bbl as the most recent Enbridge pipeline leak looked to be contained. Crude futures initially spiked as this is the pipeline that delivers Canadian crude to the important oil price settlement hub in Cushing, OK. The TSX energy sector fell 1 .0%.

The economic data this week was mostly indicative of an economy that is recovering very slowly. August retail sales were the best they have been in five months suggesting the death knell of U.S. consumer may be premature. Weekly jobless claims also fell this week to 450K; 1 0K lower than expected. On the softer side, the U.S. industrial production data for August and Canada’s July factory sales were below expectations due to slack auto export activity. The University of Michigan survey showed that consumer confidence slipped again at the beginning of September.

Speaking of death knells, Research in Motion has been hearing theirs of late. Weak product innovation, security concerns, and stiff competition from Apple and Google have turned analysts very negative on the Blackberry maker. RIM beat expectations on all fronts (sales, net income, cash flow, and guidance) with the exception of new subscriber additions. New subscribers were 10% lighter than expected. To fix that, RIM said new subscriber data would be on a need to know basis going forward. Apparently investors simply don’t need to know… RIM shares rose 4.6% this week.

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Roubini: Oil and Gold Look Overpriced

Tuesday, June 16th, 2009

Nouriel Roubini, of RGE Economics, declared at a Reuters Summit Tuesday that Oil and Gold are not reflecting their fundamentals and have come too far too soon.

Reuters: Oil and gold are overvalued at current prices, which do not reflecting their market fundamentals, economist Nouriel Roubini said at the Reuters Investment Outlook Summit on Tuesday.

Roubini, who is known for having predicted the financial crisis that rocked the global economy in the past two years, painted an economic backdrop of deflationary risks and warned that if oil keeps climbing toward the $100 level it would deal an “economic shock” similar to the one last seen in 2008.

The recent rally in oil, which sent prices to an eight-month high above $73 per barrel, was “too high too soon,” Roubini told the Reuters Investment Outlook Summit in New York.

U.S. crude oil reached a record high near $150 per barrel in July 2008 based on overly bullish global demand expectations, but prices have since more than halved with the global economic slowdown.

Roubini, who is chairman of economics research firm RGE Monitor, said the current price of gold looks overextended as deflation is likely to outweigh any risks of inflation in the near term.

“For the next two years, deflationary pressure is going to be dominant, and it is going to become a time bomb down the line if and when we keep monetizing large deficits. It may be too soon to hedge with gold,” he said.

“Unless we have high inflation, or…other risks like depression, gold looks toppy,” he said.

Gold could spike again whenever there is rising risk aversion, he said, though noting that bullion prices had declined after the Lehman Brothers debacle in September last year.

Source: Reuters, June 16, 2009

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