Bill Gross: Investment Outlook (April 2011)

Wednesday, March 30th, 2011

Invest­ment Outlook

by William H. Gross, April 2011

Skunked

• Medicare, Med­ic­aid and Social Secu­rity now account for 44% of total fed­eral spend­ing and are steadily rising.
• Pre­vi­ous Con­gresses (and Admin­is­tra­tions) have relied on the assump­tion that we can grow our way out of this oner­ous debt burden.
• Unless enti­tle­ments are sub­stan­tially reformed, the U.S. will likely default on its debt; not in con­ven­tional ways, but via infla­tion, cur­rency deval­u­a­tion and low to neg­a­tive real inter­est rates.

That adorable skunk, Pepé Le Pew, is one of my wife Sue’s favorite car­toon char­ac­ters. There’s some­thing affa­ble, even roman­tic about him as he seeks to woo his female com­pan­ions with a French accent and promises of a skunk bun­ga­low and bed­rooms full of lit­tle Pepés in future years. It’s easy to love a skunk – but only on the sil­ver screen, and if in real life – at a con­sid­er­able dis­tance. I think of Con­gress that way. Every two or six years, they dress up in full makeup, pre­tend­ing to be the change, vow­ing to cor­rect what hasn’t been cor­rected, promis­ing dis­ci­pline as opposed to prof­li­gate over­spend­ing and under­tax­a­tion, and striv­ing to bal­ance the bud­get when all oth­ers have failed. Oooh Pepé – Mon Chéri! But don’t believe them – hold your nose instead! Oh, I kid the Con­gress. Per­haps they don’t have black and white stripes with bushy tails. Per­haps there’s just a stink bomb that the Con­gres­sional sergeant-at-arms sets off every time they con­vene and the gavel falls to sig­nify the begin­ning of the “people’s busi­ness.” Per­haps. But, in all cases, cit­i­zens of Amer­ica – hold your noses. You ain’t smelled nothin’ yet.

I speak, of course, to the bud­get deficit and Washington’s inabil­ity to rec­og­nize the intractable: 75% of the bud­get is non-discretionary and enti­tle­ment based. With­out attack­ing enti­tle­ments – Medicare, Med­ic­aid and Social Secu­rity – we are smelling $1 tril­lion deficits as far as the nose can sniff. Once dom­i­nated by defense spend­ing, these three cat­e­gories now account for 44% of total Fed­eral spend­ing and are steadily ris­ing. As Chart 1 points out, after defense and inter­est pay­ments on the national debt are excluded, remain­ing dis­cre­tionary expenses for edu­ca­tion, infra­struc­ture, agri­cul­ture and hous­ing con­sti­tute at most 25% of the 2011 fis­cal year fed­eral spend­ing bud­get of $4 tril­lion. You could elim­i­nate it all and still wind up with a deficit of nearly $700 bil­lion! So come on you stinkers; enough of the Pepé Le Pew romance and promises. Enti­tle­ment spend­ing is where the money is and you need to reform it.

Even then, the sit­u­a­tion is almost beyond repair. Check out the Treasury’s and Health and Human Ser­vices’ own data for the net present value of enti­tle­ment lia­bil­i­ties shown in Chart 2.

Tags: Bill Gross, Budget Deficit, Bushy Tails, Cartoon Characters, Currency, Currency Devaluation, Debt Burden, Federal Spending, Female Companions, French Accent, Future Years, Gross Investment, Infrastructure, Investment Outlook, Medicare Medicaid, Overspending, Promising Discipline, Sergeant At Arms, Silver, Stink Bomb, Trillion Deficits, White Stripes, William H Gross
Posted in Infrastructure, Markets, Outlook, Silver | Comments Off

Gold Market Cheat Sheet (March 28, 2011)

Sunday, March 27th, 2011

Gold Mar­ket Cheat Sheet (March 28, 2011)

For the week, spot gold closed at $1,429.75, up $10.84 per ounce, or 0.76 per­cent for the week. Gold equi­ties, as mea­sured by the Philadel­phia Gold & Sil­ver Index, rose 5.07 per­cent. The U.S. Trade-Weighted Dol­lar Index moved slightly higher, up 0.62 per­cent for the week.

Strengths

• The gold price rose to a record $1,447 per ounce, as unrest in Libya and the Mid­dle East and Portugal’s pos­si­ble $100 bil­lion bailout spurred demand for the pre­cious metal.
• Last week, the Utah leg­is­la­ture passed a bill allow­ing gold and sil­ver coins to be used as legal ten­der in the state, accord­ing to the true value of the metal in the coins and not by the face value stated on the coin. Sim­i­lar pro­pos­als have been devel­oped in Col­orado, Geor­gia, Indi­ana, Iowa, Mis­souri, Mon­tana, New Hamp­shire, Okla­homa, South Car­olina, Ten­nessee, Ver­mont, and Washington.
• In India, stan­dard 24-carat gold coins have been sell­ing extremely well at more than 466 post offices through­out the coun­try. Despite the high price, Indian con­sumers have been buy­ing small quan­ti­ties of coins to give dur­ing the fes­ti­val season.

Weak­nesses

• The Asso­ci­a­tion of Min­ing & Explo­ration Com­pa­nies (AMEC) reit­er­ated its oppo­si­tion of Australia’s Min­er­als Resource Rent Tax. AMEC’s chief exec­u­tive said it was extremely dis­ap­point­ing that con­cerns of mem­ber com­pa­nies have not been con­sid­ered by the fed­eral gov­ern­ment. “Sug­ges­tions by Trea­surer Swan that the indus­try has agreed with the Min­er­als Resource Rent Tax are incor­rect, as agree­ment was only reached with three large multi-national multi-commodity con­glom­er­ates and not other junior-tiered min­ing com­pa­nies that will be affected by this addi­tional tax.”
• The Las Vegas Review-Journal reported that Assem­bly­woman Peggy Pierce will intro­duce a bill that will cap the value of legally deductible expenses at 40 per­cent, which could cost the state’s min­ing indus­try more than $2 bil­lion in tax deductions.
• Nevada State Sen­ate Major­ity Leader Steve Hors­ford asked the Nevada Tax Com­mis­sion to embark on an emer­gency rule-making pro­ceed­ing that he hopes will fix the “incon­sis­ten­cies” and “loop­holes” that exist in Nevada’s net pro­ceeds of mines tax law. Rather than chang­ing Nevada’s Con­sti­tu­tion or remov­ing the cap on net pro­ceeds tax lim­its, Hors­ford seeks amend­ments to cur­rent allow­able deduc­tions for oper­at­ing costs, salaries, employee recruit­ment costs, mar­ket­ing, and con­vert­ing min­er­als into money. The Nevada law­maker would also elim­i­nate deduc­tions for con­sult­ing ser­vices, and, iron­i­cally, mine recla­ma­tion costs, which Hors­ford says should not be deducted because Nevada tax law did not pro­vide for mine recla­ma­tion deductions.

Oppor­tu­ni­ties

• Texas Rep­re­sen­ta­tive Ron Paul has sched­uled an April 1 hear­ing of the U.S. House Sub­com­mit­tee on Domes­tic Mon­e­tary Pol­icy to exam­ine the bul­lion pro­grams at the U.S. Mint. Last week Paul intro­duced H.R. 1098, the Free Com­pe­ti­tion in Cur­rency Act of 2011 that would repeal legal ten­der laws in order to pro­hibit tax­a­tion on gold, sil­ver, plat­inum, pal­la­dium and rhodium bul­lion. The Coin Mod­ern­iza­tion, Over­sight and Con­ti­nu­ity Act of 2010 gives the U.S. Mint greater flex­i­bil­ity in meet­ing the demand for bul­lion coins as well as meet­ing the demand for gold and sil­ver which Paul’s bill would change.
• Gold­man Sachs said it fore­cast gold prices ral­ly­ing to a record $1,480 an ounce in three months on declin­ing U.S. real inter­est rates. The bank said it still expects gold prices to reach a peak in 2012 as U.S. inter­est rates are set to rise as the econ­omy con­tin­ues to recover. Gold­man has a six-month gold view at $1,565 an ounce, and a 12-month fore­cast of $1,690 an ounce.
• In a bub­ble, mar­ket play­ers seek to sup­ply the mar­ket with as much as they can pos­si­bly sell at inflated prices. The price of gold has quadru­pled in the past ten years and the gold indus­try strug­gles to sus­tain new mine pro­duc­tion of bul­lion at the same level it was in 2001.

Threats

• Even as gold min­ers report stronger cash flows and good prof­its, costs are increas­ingly becom­ing an area of con­cern and some worry about the impact costs will have on cap­i­tal expen­di­ture. Min­ers are wor­ried that cap­i­tal spend­ing on new projects will become unman­age­able as labor, steel and energy costs keep push­ing higher.
• On top of that, gold min­ers have suf­fered as the Cana­dian dol­lar, Aus­tralian dol­lar, Chilean peso and Mex­i­can peso strength­ened against the U.S. dol­lar (sales of most min­ers are typ­i­cally denom­i­nated in U.S. dol­lars, while costs are often based in local “com­mod­ity” currencies).
• Min­ing exec­u­tives at the Reuters Global Min­ing and Steel Sum­mit noted that coun­tries threat­en­ing to seize a big­ger share of min­ing returns risk alien­at­ing investors and adding another layer of expense to an already increas­ing cost line.

Tags: 24 Carat Gold, Canadian, Canadian Market, Currency, Deductible Expenses, Dollar Index, energy, Exploration Companies, Georgia Indiana, Gold, Gold And Silver, Gold Coins, Gold Equities, Gold Market, Gold Price, India, Indian Consumers, Las Vegas Review Journal, Legal Tender, Philadelphia Gold, Silver, Silver Coins, Silver Index, Small Quantities, Spot Gold, Utah Legislature, Vegas Review Journal
Posted in Canadian Market, Gold, India, Markets, Silver | Comments Off

Gold Market Cheat Sheet (March 21, 2011)

Saturday, March 19th, 2011

Gold Mar­ket Cheat Sheet (March 21, 2011)

For the week, spot gold closed at $1,418.90, up $1.45 per ounce, or 0.10 per­cent for the week. Gold equi­ties, as mea­sured by the Philadel­phia Gold & Sil­ver Index, fell 1.21 per­cent. The U.S. Trade-Weighted Dol­lar Index slid 1.49 per­cent for the week.

Strengths

• In a chaotic week of fears over a nuclear plant melt­down and a new war front open­ing up in Libya, gold held up and the U.S. dol­lar fell.
• Even when gold sold off on Tues­day due to liq­uid­ity needs of cer­tain investors to cover other losses, there turned out to be a net pos­i­tive accu­mu­la­tion of gold bul­lion by exchange-traded funds.
• Across sev­eral Asian mar­kets, pre­mi­ums for gold bars and coins rose due to investor demand.

Weak­nesses

• Plat­inum and pal­la­dium fell on expected cur­tail­ments in auto pro­duc­tion in Japan, and renewed eco­nomic wor­ries over a col­lapse in U.S. hous­ing starts and ris­ing fuel prices pinch­ing eco­nomic growth.
• A recent report by the Bureau of Land Man­age­ment appeared to show there was no eco­nomic con­tri­bu­tion from hardrock min­ing on fed­eral lands.

Oppor­tu­ni­ties

• Hong Kong’s Chi­nese Gold & Sil­ver Exchange Soci­ety, a cen­tury old bul­lion trad­ing bourse, announced plans to start trad­ing gold quoted in yuan in May. The plan is to expand the role of the yuan in global trade as China works to reduce its depen­dence on the dol­lar as its func­tional for­eign exchange currency.
• His­tor­i­cally, gold demand is about 3,000 tons per year, with new mine sup­ply pro­vid­ing 2,400 tons, scrap sup­ply about 200 tons and cen­tral bank sells sup­ply­ing the bal­ance of roughly 400 tons.
• China replaced South Africa as the world’s largest pro­ducer of gold back in 2007. How­ever, the gold pro­duced in China is pur­chased entirely by their cen­tral bank. In addi­tion, dur­ing the first two months of 2011, China imported more gold than all its imports in the last year. At their cur­rent rate of buy­ing, Chi­nese con­sumers could buy half of the new mine sup­ply pro­duced this year. Mean­while, more than 400 tons his­tor­i­cally sup­plied by West­ern cen­tral banks has fallen to zero.

Threats

• In the upcom­ing pres­i­den­tial race in Peru, sev­eral of the can­di­dates are talk­ing about impos­ing wind­fall profit taxes on min­ers oper­at­ing within the country.
• In South Africa, Min­is­ter of Min­ing Susan Sha­bangu has con­veyed that she is look­ing at the tax tem­plate Aus­tralia tried to imple­ment on its min­ing indus­try last year.
• In response to China rec­og­niz­ing it may have to limit its exports of rare earth met­als, four U.S. Sen­ate Democ­rats sent the U.S. Trea­sury and the Sec­re­tary of the Inte­rior a let­ter urg­ing them to block Chi­nese min­ing projects in the U.S. and internationally.

Tags: Bureau Of Land Management, China, Chinese Consumers, Chinese Gold, Currency, Economic Contribution, Economic Worries, Exchange Society, Foreign Exchange Currency, Gold, Gold Bars, Gold Bullion, Gold Demand, Gold Equities, Gold Market, Hardrock Mining On Federal Lands, Investor Demand, Old Bullion, Philadelphia Gold, Silver, Silver Exchange, Silver Index, Spot Gold, Trading Bourse
Posted in Gold, Markets, Silver | Comments Off

Silver Lining Fades (Andrews)

Monday, March 14th, 2011

Sil­ver Lin­ing Fades

David Andrews, CFA – Direc­tor, Invest­ment Man­age­ment and Research, Richard­son GMP

Up until this week, Cana­dian stock mar­ket investors had been rel­a­tively immune to the con­flu­ence of risks devel­op­ing in the world around them. No mat­ter what, it always seemed, there was a pos­i­tive that would neu­tral­ize or off­set a neg­a­tive. Ris­ing crude oil prices, due to Arab world uncer­tainty was gen­er­ally good for a stock mar­ket largely influ­enced by energy pro­duc­ers. The ris­ing threat of global infla­tion in turn sup­ported the share prices of the Cana­dian gold min­ers and just when the thrill of another strong earn­ings sea­son was about to wane, the Cana­dian banks fol­lowed up with strong per­for­mances of their own. This week, it appears our luck and our tim­ing turned for the worse.
The TSX fell for three con­sec­u­tive days for a weekly decline of 4.06%. The index began the week well above the 14,000 level but crude oil prices declined fol­low­ing an the 8.9 mag­ni­tude earth­quake and sub­se­quent 7-metre tsunami that washed over parts of Japan and closed many of the refiner­ies of the world’s third largest con­sumer of crude. In addi­tion, Friday’s ‘Day of Rage’ in Saudi Ara­bia turned out to be any­thing but ‘rag­ing’. Brent crude had its first weekly loss in the past seven weeks.

Gold had its first weekly loss since Jan­u­ary, declin­ing from its March 7th all time high of $1444.95/oz. Profit tak­ing, falling crude oil prices and a stronger U.S. dol­lar weighed on Gold this week. The esca­la­tion of ongo­ing hos­til­i­ties in Libya could help gold get back to set­ting new all time highs very soon.

Eco­nomic data was poor this week with higher than expected unem­ploy­ment gains in the U.S. and a Feb­ru­ary trade deficit for China sour­ing the eco­nomic out­look. Moody's cut Spain's credit rat­ing by another notch, esca­lat­ing the ongo­ing debt cri­sis in the Euro­zone. Spain's rat­ing was down­graded to Aa2, Moody's third high­est rat­ing, as the agency warned that the coun­try had under– esti­mated the cost of res­cu­ing its bank­ing sector.

The Cana­dian dol­lar touched its low­est level in two weeks as Canada added fewer jobs in Feb­ru­ary than the prior month and crude oil, our biggest export, fell below $100 after the earth­quake in Japan. The Loonie closed the week at U.S.$1.0280.

Is Cop­per a Canary in the Mine?

Gold is often viewed as a store of value and a hedge against eco­nomic Armaged­don, but "Dr. Cop­per" is said to be the metal with a Ph.D. in eco­nom­ics for its abil­ity to presage the future of the global economy.

Prices have moved from a steep pre­mium to a dis­count recently. Feb­ru­ary cop­per ship­ments into China fell 35% from one month ear­lier; the low­est level in 2 years. Stock­piled inven­tory is 16% higher so far in 2011.Prices will likely con­tinue to slide until the Chi­nese buy­ers return. After such a steep fall, many began to won­der if the metal­lic pro­fes­sor is warn­ing of trou­ble. For­tu­nately, this doesn't appear to be the case. The cur­rent slide appears to be a tem­po­rary set­back, pre­sent­ing those on the side­lines with a chance to get in on the action.

The Trad­ing Week Ahead
Trad­ing vol­umes may indeed be a lit­tle lighter than usual with the peak of the March Break vaca­tion sea­son upon us. Many insti­tu­tional trade desks will be have lighter staffing than nor­mal as many traders will be off enjoy­ing the renewed pur­chas­ing power of the strong Cana­dian dol­lar. Notwith­stand­ing, investors will have the lat­est infla­tion data to con­sider as the week unfolds. Ris­ing com­mod­ity prices and energy costs are expected to show signs of build­ing which could poten­tially pres­sure cor­po­rate profit mar­gins. Investors will gauge to see how fast these costs are ris­ing and to see if busi­nesses have begun to pass these ris­ing costs on to their customers.

The Fed­eral Open Mar­ket Com­mit­tee con­gre­gates but no major news is expected to emerge in the state­ment on Tues­day. The FOMC is expected to main­tain the Fed Fund Rate between 0 and 0.25% and will announce the con­tin­u­ance of the asset pur­chase pro­gram, or QE2 as orig­i­nally planned. The Fed may indi­cate in the state­ment the improve­ment in eco­nomic activ­ity in early 2011, espe­cially as regards the labour mar­ket, and the increase in infla­tion­ary pres­sures. How­ever the lat­est data are not likely to force the Fed to remove the expan­sion­ary mon­e­tary pol­icy any­time soon.

The Mid­dle East and North Africa are expected to push volatil­ity higher once again next week. Energy and pre­cious met­als will con­tinue to be a main focus and will give direc­tional cues to equity and bond mar­kets.
Earn­ings announce­ments are few and far between this week with only Fed­eral Express likely to be mar­ket mov­ing. Fedex is a proxy and mea­sure of gen­eral busi­ness activ­ity for both North Amer­ica and Europe.

Tags: Canadian, Canadian Market, China, energy, Gold, oil, Silver
Posted in Canadian Market, Credit Markets, Energy & Natural Resources, Gold, Markets, Oil and Gas, Outlook, Silver | Comments Off

The Pimco Treasury Sale Conundrum…Or Is It?

Sunday, March 13th, 2011

The PIMCO Trea­sury Sale Conundrum…Or Is It?

03/11/2011

By The Golden Truth

By now every­one knows that Bill Gross/PIMCO has sold down his/its Trea­sury expo­sure to zero.  Rather than ask “why,” quite frankly, my ques­tion has been “why did it take so long?”   In other words, any­one who knows any­thing about the bond mar­ket knows that it would be sheer stu­pid­ity to own Trea­sury bonds in a ris­ing inter­est rate, infla­tion­ary and dol­lar deval­u­a­tion environment.  Furthermore, there’s way too many “ana­lysts” out there read­ing way too much into the decision.  And spec­u­la­tion that Gross has some kind of insight into whether or not the Fed will move onto QE3 is absurd.  I even laughed at the let­ter from the for­mer PIMCO employee posted on zerohedge.com explain­ing how seri­ous and com­pli­cated this deci­sion was.  That com­men­tary was grandios­ity at its epit­ome.  Again, as a total rate of return fund man­ager and a for­mer junk bond trader in The Show on Wall Street, the deci­sion to own a big posi­tion or to not own a par­tic­u­lar posi­tion is noth­ing more than mak­ing a deci­sion as to whether or not that posi­tion has bet­ter return/risk poten­tial vs. every other alter­na­tive or vs. hold­ing just cash.

Please keep in mind that the flag­ship PIMCO fund is a “total rate of return” fund, which means that the objec­tive is to max­i­mize return and min­i­mize risk in the con­text of man­ag­ing fixed income invest­ment risk.  In order to achieve the first objec­tive, total rate of return, it requires hav­ing con­cen­trated posi­tions – i.e. big bets – vs. hav­ing a highly diver­si­fied port­fo­lio.  I’ve never believed in hav­ing diver­si­fied hold­ings unless you just want to achieve aver­age returns, and below aver­age after all the fund man­agers and bro­kers take their cut.  Diver­si­fi­ca­tion does noth­ing more than diver­sify away total rate of return and any poten­tial to outperform.

Any fund man­ager who man­ages for return will “tilt” – or over­weight – his hold­ings at any given time within the con­text of the asset class objec­tive of the fund.  Over time, Gross will shift the weight­ings in his fund largely between mort­gages and Trea­suries, over­weight­ing one vs. the other depend­ing on his mar­ket view.

With that in mind, let’s look at why Gross might have – or more like “likely has” - unloaded all of his Trea­suries.  Rea­sons 1–10 have to do with his view of the total rate of return poten­tial of hold­ing a big Trea­sury posi­tion.  And this is why I was won­der­ing why it took so long for him to dump every­thing.  With rates where they are, the prob­a­bilty that rates will go lower are close to zero.  This inter­est rate cycle has been in place since like 1990 or so.  In a his­tor­i­cal con­text, not only is the bull mar­ket in bonds (i.e. rates going lower) not only over, the prob­a­bil­ity is very high that inter­est rates are going to start mov­ing a lot higher.  This is pure cyanide for fixed income securities, since the price of a bond goes lower when inter­est rates rise.  Even if you have a high coupon bond, the total rate of return for a bond in a ris­ing rate envi­ron­ment is going to be neg­a­tive.  I would sug­gest that this sim­ple deter­mi­na­tion was the pri­mary rea­son Gross unloaded all of his Treasuries.

To me this is a very obvi­ous deci­sion because clearly infla­tion is accel­er­at­ing and with the Fed spend­ing 100′s of bil­lions to buy Trea­suries, inter­est rates can not be held down – period.  Why own any bond in this con­text?  So the only sure thing we know about Gross’ deci­sion is that he thinks inter­est rates/inflation are headed higher.  Doesn’t take a rocket sci­en­tist to con­clude that.  Only an idiot would hold Trea­suries in that case.

I read with amuse­ment on clusterstock.com that Gross is mak­ing a bet on a huge rally in the dol­lar because he’s hold­ing so much cash.  That view is retarded.  Right now I’m sure Gross is just happy to have maneu­vered a big Trea­sury posi­tion to zero with­out the mar­ket know­ing until it was dis­closed and now he will take time to decide how to rede­ploy the cash in order to max­i­mize return and min­i­mize risk.  Gross has actu­ally pub­licly stated that he thinks the dol­lar is going a lot lower.  Again, rocket sci­ence is not required to fig­ure that out.  So, if the dol­lar goes lower and infla­tion moves higher, that’s a double-whammy for hold­ing Trea­suries vs. hold­ing just cash (although hold­ing dol­lars is not good either lol).  But at least in that con­text, cash will out­per­form Trea­suries since the price of Trea­suries goes lower and you get less cash for them if you have to sell them before matu­rity vs. just hold­ing cash now.  Every­one got that con­cept?  If not, think about owing a car that just sits in your garage vs. own­ing a car that you drive hard every­day.  Time value will decay the value of the car that just sits, but time plus hard road usage will act on the car the same way higher rates and dol­lar deval­u­a­tion acts on Treasuries.

Finally, QE3.  Let’s keep this one sim­ple.  I’m sure Gross has his view on whether or not QE3 will hap­pen.  But to think that just because Greenspan is a paid advi­sor to PIMCO gives Gross spe­cial insight to the Fed is ridicu­lous.  Greenspan has proved to be a senile old man now with less than half a brain.  Not that he had much of a brain as Fed Chair­man, but he’s gone off the deep-end in his old age.  Regard­ing whether or not QE is to be or not to be, answer me this:  if PIMCO and the Chi­nese are not buy­ing the 100′s of bil­lions in new Trea­suries that will be issued this year, and if the Fed stops buy­ing them, then who the hell will buy all this new paper?  Seri­ously.  The Fed HAS to keep print­ing and buy­ing Trea­suries or our Government/system will finan­cially col­lapse.  It’s absurd to think that the Gov­ern­ment will let this hap­pen as long as it has the abil­ity to keep print­ing paper.  So unless Bill Gross has some kind of insight into a con­spir­acy to let the our sys­tem col­lapse, I doubt he has any doubt about whether or not QE3 will occur.  And more QE will has­ten the deval­u­a­tion of the dol­lar and accel­er­ate infla­tion, thereby com­pletely ham­mer­ing bond prices – bonds of all fla­vors and credit risks.  So the Gross/PIMCO deci­sion again cir­cles back to the bino­mial deci­sion of “rates higher or rates lower?”

Again, to make a big bet on fixed income secu­ri­ties is noth­ing more com­pli­cated than decid­ing whether or not inter­est rates will be go higher or lower, espe­cially since default risk with Trea­suries is not in play for the rea­son I just gave (we will not include the com­pli­ca­tion of debat­ing wether or not a deter­mined, moti­vated cur­rency deval­u­a­tion con­sti­tutes a “de facto” default in order to keep this dis­cus­sion focused on the bino­mial deci­sion process of own­ing or not own­ing Trea­suries).  In fact, right about now I bet Gross is wish­ing that he had the abilty to buy a lot of phys­i­cal gold and sil­ver for his fund, because in this envi­ron­ment gold and sil­ver will con­tinue to pro­vide the best total rate of return of any asset class.  And I bet Gross also wished that min­ing com­pa­nies were not throw­ing off so much cash flow right now and that they had to issue a lot of bonds in which he could throw that cash hoard into…

Source: The PIMCO Trea­sury Sale Conundrum…Or Is It?

Tags: Currency, Gold, Silver
Posted in Credit Markets, Gold, Markets, Silver | Comments Off

Gold Market Cheat Sheet (March 14, 2011)

Saturday, March 12th, 2011

Gold Mar­ket Cheat Sheet (March 14, 2011)

For the week, spot gold closed at $1,417.45 per ounce, down $13.45 per ounce, or 0.94 per­cent for the week. Gold equi­ties, as mea­sured by the Philadel­phia Gold & Sil­ver Index, fell 4.19 per­cent. The U.S. Trade-Weighted Dol­lar Index gained 0.38 per­cent for the week.

Strengths

• In the World Explo­ration Trends 2011 report, Hal­i­fax, Nova Scotia-based Min­eral Eco­nom­ics Group (MEG) reported a com­bined 2010 explo­ration bud­get of $11.2 bil­lion. This was a 45 per­cent increase over the 2009 explo­ration bud­get. MEG pre­dicts explo­ration bud­gets will expe­ri­ence another healthy increase this year, “ris­ing to a new high-water mark for world­wide non­fer­rous explo­ration spending.”
• Acquir­ing firms from Canada con­tinue to top the list in min­ing M&A, at 36 per­cent of all resource M&A trans­ac­tions. The U.S. and Aus­tralia tied for sec­ond at 16 per­cent, accord­ing to PwC’s Min­ing Deals report. Chi­nese firms rep­re­sented only 6 per­cent of global min­ing merg­ers and acqui­si­tions in 2010, but the coun­try will take a more aggres­sive approach to merg­ers and acqui­si­tions this year, PwC said.
• Australia’s Resource Min­is­ter noted that Chi­nese firms should be more suc­cess­ful in get­ting invest­ments in Australia’s min­ing sec­tor approved because they now know how to nav­i­gate the process.

Weak­nesses

• Peru’s min­ing soci­ety warned on Wednes­day that polit­i­cal cam­paign talk about min­ing roy­al­ties and taxes could scare away investors. The Fraser Insti­tute, a Cana­dian research group, recently released a sur­vey of 494 global min­ing com­pa­nies that ranked Peru 48 out of 79 coun­tries or juris­dic­tions, down from its 2009 rank­ing of 39.
• A scarcity of skilled labor is forc­ing junior min­ers and devel­op­ers to dig deeper to attract and retain tal­ent, a trend that is likely to accel­er­ate cost increases, squeeze profit mar­gins and threaten some mar­ginal projects. To make mat­ters worse, ris­ing oil prices can lead to deep-pocketed energy com­pa­nies poach­ing work­ers from the min­ing side.
• Min­ing com­pa­nies within Brazil say they believe their gov­ern­ment is over­charg­ing for min­eral roy­al­ties, tak­ing away bil­lions of dol­lars from the companies.

Oppor­tu­ni­ties

• Li Yin­ing, a mem­ber of the Chi­nese People’s Polit­i­cal Con­sul­ta­tive Com­mit­tee, an advi­sory body to the national par­lia­ment, said that China should use the gold to hedge against risks of for­eign cur­rency deval­u­a­tions. “China should increase its gold reserves appro­pri­ately, and China must take every chance to buy, espe­cially when gold prices fall,” said Li, as quoted by the offi­cial Xin­hua news agency.
• Fed­eral Reserve Bank of Atlanta Pres­i­dent, Den­nis Lock­hart, stated on Mon­day that the Fed can­not rule out fur­ther asset pur­chases fol­low­ing the end of QE2 on June 30 of this year. Lock­hart also noted that despite the falling unem­ploy­ment rate and improv­ing lev­els of job cre­ation, “it is pre­ma­ture to declare a jobs recov­ery firmly established.”
• Doug Casey, founder of Casey Research, noted at the Prospec­tors & Devel­op­ers Asso­ci­a­tion of Canada con­ven­tion in Toronto that, “Cen­tral banks all over the world are cre­at­ing tril­lions of cur­rency units and that, in turn, is cre­at­ing lots of bub­bles. It’s very prob­a­ble that they’re going to ignite a bub­ble in gold and they’re going to ignite a really wild bub­ble in small resource stocks.”

Threats

• Bank of Amer­ica Mer­rill Lynch low­ered their out­look on free cash within the North Amer­i­can pre­cious met­als indus­try. They esti­mate the indus­try will gen­er­ate $6.3 bil­lion of free cash flow in 2011, which is down by more than half com­pared to their prior 2011 free cash flow esti­mate of $13.1 bil­lion. This is due to com­pa­nies report­ing higher than antic­i­pated cap­i­tal spend­ing plans for 2011, strong com­mod­ity prices lead­ing com­pa­nies to advance devel­op­ment projects more rapidly, and expand­ing exist­ing mines.
• The decline in free cash flow may restrain some com­pa­nies from mak­ing acqui­si­tions this year absent a boost in metal prices.

Tags: Brazil, Canadian Market, China, Currency, energy, Gold, oil, Silver
Posted in Brazil, Canadian Market, Energy & Natural Resources, Gold, Markets, Oil and Gas, Outlook, Silver | Comments Off

Canadian Banks are Cash Machines

Monday, March 7th, 2011

Cana­dian Banks are Cash Machines
by Gareth Wat­son, CFA – Vice Pres­i­dent, Invest­ment Man­age­ment and Research, Richard­son GMP

It was a good week to be a TSX investor. When three quar­ters of that index are exposed to com­modi­ties and finan­cials, investors can’t help but smile when banks post solid earn­ings and com­mod­ity prices con­tinue to climb. Such was the case over the past 5 days. The biggest story domes­ti­cally had to be the con­tin­u­a­tion of bank earn­ings sea­son after CIBC and National Bank reported last week. Bank of Mon­tréal man­aged to just beat expec­ta­tions on Tues­day, while TD Bank and Royal Bank eas­ily sur­passed con­sen­sus esti­mates on Thurs­day. TD Bank raised its quar­terly div­i­dend by 5 cents to $0.66/share. Bank of Mon­tréal actu­ally fell in price on the day it reported as higher expec­ta­tions had been built to the mar­ket, but TD Bank and Royal’s easy beat caused their stock prices to rally 3.8% and 5.2% respec­tively. While Royal Bank has under­per­formed all of its peers over the past 52 weeks, it is out­per­form­ing all Cana­dian banks on a year-to-date basis.

While banks were cer­tainly at the fore­front, com­mod­ity prices were not will­ing to take a back seat as events in the Mid­dle East and North Africa con­tin­ued to influ­ence oil and pre­cious metal prices. In fact, WTI crude oil prices advanced by another US$7.00 per bar­rel since last Mon­day which has caused noth­ing but fur­ther pain at the gas pumps. While the gains were not as strong, the uncer­tainty of geopo­lit­i­cal events and the uncer­tainty of the U.S. Bud­get caused pre­cious metal prices to move higher with sil­ver spot prices adding another US$2.00 per ounce.

While the ongo­ing bud­getary debate dom­i­nated talk on Capi­tol Hill in Wash­ing­ton, Apple’s unveil­ing of the iPad 2 was one of the top cor­po­rate sto­ries of the week as Steve Jobs decided to make an appear­ance to reveal the new and improved device which will be shipped in the United States on March 11 and to 26 other coun­tries, includ­ing Canada, on March 26. While no offi­cial launch date for the Research In Motion Play­book has been released, April 10 is the date being dis­cussed around the water cooler. And it wasn’t just stocks mak­ing head­lines this week as the Cana­dian dol­lar reached a level not seen since early 2008. The loonie was get­ting closer and closer to the US$1.03 level by week’s end.

Banks Like Trad­ing Revenue

Before Royal Bank reported earn­ings this week, the stock had vastly under­per­formed its peers over the past year with an essen­tially flat 52 week return. Its under­per­for­mance was likely a result of its poor trad­ing rev­enues in the third fis­cal quar­ter of 2009. Royal Bank’s Q1/11 earn­ings eas­ily sur­passed  expec­ta­tions on Thurs­day and a return of trad­ing rev­enue above the $1 bil­lion mark is one of the rea­sons. As the chart to the left shows, it’s hard for a bank stock to rally when mar­ket con­di­tions are poor and trad­ing rev­enue falls. While the past quarter’s results were cer­tainly pos­i­tive, it’s also impor­tant to remem­ber that trad­ing rev­enues are a func­tion of mar­ket con­di­tions, so improv­ing EPS results thanks to stronger mar­kets in the past do not guar­an­tee pos­i­tive results in the future.

The Trad­ing Week Ahead
From a cor­po­rate and eco­nomic news per­spec­tive, next week is shap­ing up to be rel­a­tively quiet in the United States as the bulk of Q4/10 report­ing sea­son is over and eco­nomic releases will be low in quan­tity. If any­thing, we will find out what the “US con­sumer” is think­ing with retail sales for Feb­ru­ary to be announced on Fri­day along with the Uni­ver­sity of Michi­gan Con­sumer Con­fi­dence Index. The bud­getary squab­bles in Wash­ing­ton will per­sist which could add more pres­sure to the Green­back as the U.S. trade weighted dol­lar finds itself at its low­est level since last November.

Cor­po­rate earn­ings will con­tinue to flow out of Canada with the Bank of Nova Sco­tia being the last of the big banks to report on Tues­day. Con­sid­er­ing that all the other banks have either met or beaten expec­ta­tions, there is no rea­son to think that Sco­tia will be dif­fer­ent. And while there are few eco­nomic releases com­ing out of Canada next week, the employ­ment data on Fri­day will be mate­r­ial as econ­o­mists are expect­ing our job growth to con­tinue and our  unem­ploy­ment rate to fall. This data will fol­low a stronger than expected employ­ment report out of the U.S. this morn­ing where 192,000 jobs were created.

It’s unlikely that events in the Mid­dle East will be resolved over the week­end, so investors are likely to see con­tin­ued volatil­ity in com­mod­ity mar­kets with energy and pre­cious met­als being the main focus. While Libya has dom­i­nated the news head­lines from the Mid­dle East region, this was the first week in many where we did not see demon­stra­tions flare up in a new coun­try. And the volatil­ity in the com­mod­ity mar­kets can only mean con­tin­ued volatil­ity for the Cana­dian dol­lar. Admit­tedly, this volatil­ity has only caused an upward tra­jec­tory for the loonie since Tunisia began its protests, but any indi­ca­tion that the region could set­tle down in the near future could take some wind out of the sails of the Cana­dian dol­lar. Whether or not that will hap­pen is cer­tainly the sub­ject of debate.

Copy­right © Richard­son GMP

Tags: Canadian Market, CIBC, Commodities, energy, oil, Silver
Posted in Canadian Market, Commodities, Energy & Natural Resources, Markets, Oil and Gas, Silver | Comments Off

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."

Tags: African Continent, Bullion Prices, Canadian Market, Canadian Provinces, Cheat Sheet, China, Commodities, Crude Oil Prices, Dollar Index, East China, Emerging Markets, Exploration Companies, Fraser Institute, Gold, Gold Equities, Gold Market, Gold Producer, India, International Intervention, Investor Fears, Mining Community, mining companies, oil, Philadelphia Gold, Price Of Gold, Silver, Silver Index, Spot Gold
Posted in Commodities, Credit Markets, Energy & Natural Resources, Gold, India, Markets, Oil and Gas, Outlook, Silver | Comments Off

The 'Crude' Reality of Unrest

Monday, February 28th, 2011

The 'Crude' Real­ity of Unrest

by David Andrews, CFA-Director, Invest­ment Man­age­ment and Research, Richard­son GMP

Investor sen­ti­ment turned decid­edly more cau­tious this week with major North Amer­i­can indexes retreat­ing amid the grow­ing pro-democracy move­ment in the Arab world. Fol­low­ing the mostly peace­ful demon­stra­tions in Tunisia and Egypt, the pro-democracy ral­lies in Libya turned ugly as pro­test­ers were met with a stiff and inhu­mane response from pro-Gaddafi sup­port­ers. Mer­ce­nar­ies and Mili­tia were report­edly fir­ing on unarmed crowds amidst the inco­her­ent ram­blings of embat­tled leader, Muam­mar Gaddafi. Gaddafi went so far to sug­gest the pro­test­ers were being drugged and under the influ­ence of Al Qaeda. The unsta­ble sit­u­a­tion saw the price of Brent crude oil surge to 2–1/2 year highs near $120 a barrel.

As a result, Cana­dian com­muters felt the sting at the gaso­line pumps this week as prices seemed to increase a few cents a litre each night. Stock mar­ket investors also felt the pinch with the TSX slip­ping below the recently attained 14,000 level. Three con­sec­u­tive down ses­sions on the hol­i­day short­ened week (Cana­dian and U.S. exchanges were closed Mon­day) were fol­lowed by a Fri­day reprieve as Saudi Ara­bia announced it would increase its crude oil pro­duc­tion in an attempt to off­set any global sup­ply dis­rup­tion from Libya. The influ­en­tial Mate­ri­als and Finan­cial stocks surged and helped boost the index by 1.25% on the day and back above 14,000. For the week, the TSX lost a lit­tle more than half of one per­cent. The major U.S. indexes fell about 2 per­cent on the week as investors bet higher oil costs may unseat the early stages of the eco­nomic recovery.

Speak­ing of the econ­omy, there were a few pos­i­tive signs of things get­ting bet­ter with U.S. con­sumer con­fi­dence at 3 year highs in Feb­ru­ary despite higher food and fuel costs. U.S. weekly employ­ment data also showed fewer Amer­i­cans filed for job­less claims sug­gest­ing the employ­ment sit­u­a­tion is con­tin­u­ing the slow process of heal­ing. If employ­ment and con­fi­dence are a sil­ver lin­ing, hous­ing con­tin­ues to be the dark cloud. Jan­u­ary new home sales were again below already depressed expec­ta­tions. In Canada, retail sales in Decem­ber fell but most of that was due to the auto sec­tor. Ex autos, retail sales were up 0.6% which was expected.

IS Gold Set To Rally?

Despite the fact that Gold is trad­ing near its record high, some sug­gest that Bul­lion will out­per­form Oil as surg­ing infla­tion will under­score the metal’s role as an invest­ment hedge. The chart to the left shows the price of both Gold and Oil since 2008. The chart below is the ratio of Gold to Oil, or how many bar­rels an ounce of gold will buy. At its peak in late 2008, an ounce of gold bought you about 28 bar­rels of crude oil. Cur­rently, oneounce buys about 15 bar­rels. Notwith­stand­ing OPEC’s spare pro­duc­tion capac­ity, energy mar­kets have priced in a con­sid­er­able risk pre­mium. If ten­sions ease and or pro­duc­tion comes on stream, oil prices could drop rather quickly. Gold has fallen 1.6% this year fol­low­ing a 30% rally in 2010. Crude is up about 5% this year fol­low­ing last year’s 15% rise.

The Trad­ing Week Ahead

Cana­dian stock mar­ket investors are expect­ing the rest of the Big Banks will be able to fol­low the solid start to bank earn­ings sea­son set by CIBC and National Bank. Fol­low­ing a softer sec­ond half of 2010, the banks are poised to ben­e­fit from bet­ter mar­ket con­di­tions for their retail and whole­sale lend­ing busi­nesses. Investors look­ing for div­i­dend increases will have to wait on National and Com­merce but they may not have to wait on the oth­ers. Bank of Mon­tréal reports Tues­day and is fol­lowed by TD and Royal on Thurs­day. (Sco­tia reports March 8th).

U.S. report­ing sea­son has con­cluded with another upbeat quar­ter and sub­stan­tial pos­i­tive earn­ings sur­prises. The biggest pos­i­tive sur­prises were in the Mate­ri­als sec­tor where ele­vated com­mod­ity prices boosted the bot­tom line. Con­sumer goods, specif­i­cally Auto­mo­biles, pro­vided the biggest earn­ings dis­ap­point­ment in the fourth quar­ter on the S&P500.

The eco­nomic cal­en­dar will likely con­tinue with the theme of improv­ing con­sumer and busi­ness con­fi­dence but scant signs of improve­ment in the U.S. hous­ing mar­ket. Pend­ing homes sales in Jan­u­ary are expected to once again come in lower. The Feb­ru­ary employ­ment report is released on Fri­day. For the past three months we have over­looked dis­ap­point­ing results and explained them away by bad weather. We did not have weather issues of sig­nif­i­cance this month so the non farm pay­rolls on Fri­day could be significant.

Com­modi­ties prices, specif­i­cally oil & gold, will be influ­enced by the evolv­ing and volatile demon­stra­tions in the Mid­dle East and North Africa. Risk pre­mi­ums for both oil and gold remain rather ele­vated help­ing to push the loonie higher. Watch for no move in pol­icy by the Bank of Canada on Tues­day, but the word­ing of the state­ment will be scru­ti­nized for signs of their next move likely around mid 2011.

Copy­right © Richard­son GMP

Tags: Brent Crude Oil, Canadian Market, CIBC, Commodities, Consumer Confidence, Crude Oil Production, Democracy Movement, Employment Data, Employment Situation, energy, financial stocks, Food And Fuel, Gasoline Pumps, Global Supply, Gold, Incoherent Ramblings, Investor Sentiment, Jobless Claims, Muammar Gaddafi, oil, Oil Costs, Peaceful Demonstrations, Positive Signs, Silver, Stock Market Investors, Supply Disruption, Unstable Situation
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Gold Market Cheat Sheet (February 28, 2011)

Sunday, February 27th, 2011

Gold Mar­ket Cheat Sheet (Feb­ru­ary 28, 2011)

For the week, spot gold closed at $1,410.20 per ounce, up $20.67 per ounce, or 1.49 per­cent for the week. How­ever, gold equi­ties, as mea­sured by the Philadel­phia Gold & Sil­ver Index, fell 0.11 per­cent. The U.S. Trade-Weighted Dol­lar Index moved fell 0.55 per­cent for the week.

Strengths

• Ris­ing ten­sions in the Mid­dle East and North Africa and con­cerns about loose money in the West once again sent investors look­ing to gold as a means to pro­tect their wealth. This caused gold to approach pre­vi­ous record-high price levels.
• The World Gold Coun­cil announced updates on new com­mer­cial uses for gold in auto­mo­tive emis­sions con­trol sys­tems which began being used dur­ing the first quar­ter of this year. Other recent devel­op­ments that could increase gold demand include uses in cat­a­lysts and nanopar­ti­cles to clean con­t­a­m­i­nated water sup­plies, reduce mer­cury emis­sions and improve the effi­ciency of pro­duc­tion of other com­mon chemicals.
• Devel­op­ing global polit­i­cal and finan­cial prob­lems pushed the sil­ver price to $34 per ounce, a new all-time high for the metal.

Weak­nesses

• With gold approach­ing its pre­vi­ous highs, investors have become a bit skit­tish. Over the last quar­ter, a num­ber of com­pa­nies have seen surges in their share prices, but this week some shorter-term investors were will­ing to sell their posi­tions with no con­cern over a 5 per­cent hit to the share price if they could lock in a short-term profit.
• This type of price action caused a surge in many volatil­ity indexes this week, which can worry investors.
• Ris­ing oil prices and a pickup in cap­i­tal costs, which were out­lined by a num­ber of com­pa­nies report­ing year-end results, are also of concern.

Oppor­tu­ni­ties

• In the report "Ungeared for Growth: Merg­ers, Acqui­si­tions and Cap­i­tal Rais­ing in Min­ing and Met­als," Ernst & Young (E&Y) pre­dicts this year will see strong growth in min­ing M&A "with com­pe­ti­tion becom­ing fierce." E&Y says the same fac­tors that drove growth in deals last year will con­tinue to drive the mar­ket in 2011. This includes: resource secu­rity, higher com­mod­ity prices, improved cash flow and avail­abil­ity of cap­i­tal, ongo­ing indus­try ratio­nal­iza­tion and the desire for greater ver­ti­cal integration.
• Min­ing will become a thriv­ing sec­tor in South Africa within the next five to 10 years, the South African Mines Min­is­ter Susan Sha­bangu says. "Our reg­u­la­tory frame­work is con­ducive to investors and they also have incen­tives to invest in our coun­try," Sha­bangu said.
• Charles Evans, Pres­i­dent of the Fed­eral Reserve Bank of Chicago, stressed the need for con­tin­ued “dovish” mon­e­tary poli­cies. While Evans did not specif­i­cally refer to a third round of quan­ti­ta­tive eas­ing (QE3), he hinted at such a move by say­ing that “the mes­sage that comes out of what I think of as high-quality research on this sub­ject is that pol­icy ought to remain accom­moda­tive for really quite a while, even a while after con­di­tions start to improve.”

Threats

• A bill pro­posed in the State of Wash­ing­ton seeks to cap­ture "the name, date of birth, sex, height, weight, race, and address and tele­phone num­ber of the per­son with whom the trans­ac­tion is made" of every pur­chaser of gold. Fur­ther­more, if passed, the bill will record "a com­plete descrip­tion of the prop­erty pledged, bought, or con­signed, includ­ing the brand name, ser­ial num­ber, model num­ber or name, any ini­tials or engrav­ing, size, pat­tern, and color or stone or stones" and price paid of course.
• What’s also sig­nif­i­cant in the bill is that any trans­ac­tion in the amount over $100 would require a sig­na­ture, photo and fin­ger­print of the per­son with whom the trans­ac­tion is made.
• Tiberius Asset Man­age­ment co-founder and head of trad­ing, Chris Eibl, said that if one looks at gold in the con­text of the rest of the pre­cious met­als com­plex, "gold will prob­a­bly be a mar­ket per­former and maybe slightly under­per­form ver­sus the other met­als such as plat­inum group met­als and maybe even silver."

Tags: Cheat Sheet, Contaminated Water, Dollar Index, Emissions Control, Gold, Gold Demand, Gold Equities, Gold Market, Loose Money, Mercury Emissions, Mergers Acquisitions, Nanoparticles, oil, Philadelphia Gold, Rising Oil Prices, Silver, Silver Index, Silver Price, Spot Gold, Term Investors, Term Profit, Volatility Indexes, World Gold Council
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Gold Market Cheat Sheet (February 22, 2011)

Saturday, February 19th, 2011

Gold Mar­ket Cheat Sheet (Feb­ru­ary 22, 2011)

For the week, spot gold closed at $1,385.53 per ounce, up $32.48 per ounce, or 2.39 per­cent for the week. Gold equi­ties, as mea­sured by the Philadel­phia Gold & Sil­ver Index, rose 4.28 per­cent. The U.S. Trade-Weighted Dol­lar Index fell 1.04 per­cent for the week.

Strengths

• World gold demand grew 9 per­cent dur­ing 2010, its high­est level in 10 years, said the World Gold Coun­cil Thurs­day in its quar­terly demand trends report. “This per­for­mance was mainly attrib­ut­able to higher jew­elry demand, strong momen­tum in key Asian mar­kets and a par­a­digm shift in the offi­cial sec­tor, where cen­tral banks became net pur­chasers,” said the report. “The WGC expects total demand to remain resilient across the jew­elry, invest­ment and tech­nol­ogy sec­tors in the com­ing quarter.”
• The World Gold Coun­cil and ICBC launched the Only Gold Gift Bar as the “first gold invest­ment gift­ing prod­uct” in China, which the Gold Coun­cil says should fur­ther boost the already-growing gold mar­ket in the coun­try. The prod­uct con­sists of bars weigh­ing 10, 20, 50, 100 and 1,000 grams. The Only Gold Gift Bar is another inno­va­tion result­ing from a strate­gic part­ner­ship between ICBC and the World Gold Coun­cil. It fol­lows the launch of the Gold Accu­mu­la­tion Plan (GAP) last year, cur­rently account­ing for over 1 mil­lion account holders.
• Demand in China for phys­i­cal gold and gold-related invest­ments is grow­ing at an explo­sive pace. ICBC, the world’s largest bank by mar­ket value, sold about 7 tonnes of phys­i­cal gold in Jan­u­ary this year, nearly half the 15 tonnes of bul­lion sold in the whole of 2010, said Zhou Ming, deputy head of the bank’s pre­cious met­als depart­ment on Wednes­day. “We are see­ing explo­sive demand for gold. As Chi­nese get wealthy, they look to diver­sify their invest­ments and gold stands out as a good hedge against infla­tion,” Zhou told Reuters.

Weak­nesses

• Pres­i­dent Obama’s Fis­cal Year 2012 pro­posed bud­get calls for charg­ing a 5 per­cent roy­alty on the gross pro­ceeds of hardrock min­er­als mined on pub­lic lands includ­ing sil­ver, gold and cop­per. The President’s bud­get would also estab­lish a new Aban­doned Mine Land fee on hardrock min­ing, “so that the hardrock min­ing indus­try is held respon­si­ble in the same man­ner as the coal min­ing industry.”
• The Com­mis­sion on Min­eral Resources opposes the gov­er­nor of Nevada’s pro­posed reor­ga­ni­za­tion of the Nevada Divi­sion of Min­er­als, which pro­motes min­ing, into the Depart­ment of Con­ser­va­tion and Nat­ural Resources, which reg­u­lates min­ing. Fred D. Gib­son, Jr., chair­man of the Com­mis­sion on Min­eral Resources, said the commission’s oppo­si­tion is due to “pol­icy incon­sis­ten­cies inher­ent in the enabling stat­ues of the two orga­ni­za­tions.” The com­mis­sion advised, “Plac­ing the agency into the Depart­ment charged with issu­ing per­mits to the nat­ural resource indus­try and pro­tect­ing nat­ural resources presents a poten­tial con­flict of interest.”
• In another action hos­tile to min­ing in the U.S., the Nevada Sen­ate Judi­ciary Com­mit­tee is con­sid­er­ing leg­is­la­tion that would ban the use of mining-related emi­nent domain actions in the state.

Oppor­tu­ni­ties

• The offi­cial sec­tor was a net buyer of gold for the first time in 21 years in 2010 and, accord­ing to the World Gold Coun­cil, it is likely to remain so for a while. The World Gold Coun­cil, in its lat­est edi­tion of Gold Demand Trends, sug­gests that this reflects a desire to pre­serve national wealth as well as pro­mot­ing greater finan­cial mar­ket sta­bil­ity. The Coun­cil also believes that fur­ther sales from “advanced economies” are unlikely to be sig­nif­i­cant in the near future because the offi­cial sec­tor remains highly risk-averse.
• Ana­lysts expect Cana­dian gold min­ing stocks to shrug off a recent pull-back in prices and per­form well in 2011 as eco­nomic uncer­tainty and cen­tral bank demand help sup­port bul­lion. Ana­lysts say risks, includ­ing the uneven U.S. eco­nomic recov­ery, Europe’s debt prob­lems and creep­ing infla­tion in emerg­ing mar­kets, should all help gold regain momentum.
• Ted White­head, senior port­fo­lio man­ager at Man­ulife Asset Man­age­ment, thinks the bul­lion price could reach a record $1,500 an ounce if the U.S. Fed­eral Reserve resorts to more quan­ti­ta­tive eas­ing, effec­tively print­ing money to buy gov­ern­ment debt, to try to boost the economy.

Threats

• A two-year time­out on thou­sands of min­ing claims near the Grand Canyon will expire this sum­mer, but the U.S Depart­ment of the Inte­rior (DOI) is con­sid­er­ing extend­ing the ban another 20 years. The DOI is sched­uled to release a Draft Envi­ron­men­tal Impact State­ment on Fri­day that would ban new min­ing claims on one mil­lion acres near the Grand Canyon.
• Aus­tralia will col­lect an esti­mated $60 bil­lion less in a new min­ing tax over the next decade than orig­i­nally pre­dicted because of changes in the tax before last year’s elec­tion. Trea­sury fig­ures show the orig­i­nally pro­posed tax would have raised $99 bil­lion between 2012–2013 and 2020–2021, but the revised tax is pro­jected to earn only $38.5 bil­lion dur­ing the period.
• Clearly, rev­o­lu­tion is the order of the day in the Mid­dle East where the peo­ple are begin­ning to under­stand that you can’t rely on the gov­ern­ment to pro­vide pros­per­ity and free­dom. This insta­bil­ity is cre­at­ing a lot of uncer­tainty, but may not be fully priced into U.S. mar­kets as the media is focused on cel­e­brat­ing free­dom and ignor­ing the cre­ation of a power void.

Tags: Budget Calls, Canadian Market, Central Banks, China, Demand Trends, Dollar Index, Emerging Markets, Explosive Demand, Explosive Pace, Gold, Gold Demand, Gold Equities, Gold Gift, Gold Investment, Gold Market, Paradigm Shift, Philadelphia Gold, physical gold, Plan Gap, precious metals, Silver, Silver Index, Spot Gold, Technology Sectors, World Gold Council
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Energy and Natural Resources Market Cheat Sheet (February 22, 2011)

Saturday, February 19th, 2011

Energy and Nat­ural Resources Mar­ket Cheat Sheet (Feb­ru­ary 22, 2011)

Strengths

• Accord­ing to ana­lysts at Mac­quarie Cap­i­tal, 2010 saw the fastest liq­ue­fied nat­ural gas (LNG) demand growth on record, up over 30 mil­lion tonnes or almost 18 per­cent over the past year (to approx­i­mately 215 mil­lion tonnes), reflect­ing the con­sid­er­able capac­ity addi­tions brought on dur­ing 2010.
• Cop­per broke a new all-time high at $10,190 this week.
• Prices of pre­cious met­als edged higher across the com­plex for a sec­ond ses­sion this week, as equity mar­kets eased and the dol­lar sta­bi­lized against the euro.
• Pal­la­dium prices reached $825.10 this week, the high­est since March 20, 2001.
• The Baltic Dry Index has now moved up for the eighth con­sec­u­tive ses­sion, in line with the rise in freight rates after the Chi­nese holidays.

Weak­nesses

• Chi­nese banks extended 1.04 tril­lion Yuan ($157.8 bil­lion) of new loans in Jan­u­ary. The fig­ure was 318.2 bil­lion Yuan lower than a year ago, accord­ing to the People’s Bank of China (PBOC). This pull­back in eco­nomic growth is due to infla­tion concerns.
• The world’s largest gold-backed ETF, SPDR Gold Trust said its hold­ings fell to 1,224 tonnes by Feb­ru­ary 15, a nine-month low.

Oppor­tu­ni­ties

• China’s steel out­put may rise 5 per­cent to 660 mil­lion tonnes this year, the Min­istry of Indus­try and Infor­ma­tion Tech­nol­ogy said.
• Aus­tralian floods seem to be serv­ing U.S. coal min­ers. Accord­ing to the Energy Depart­ment in Wash­ing­ton, U.S. coal exports are poised to rise 8.8 per­cent this year to about 86.5 mil­lion tons, the high­est since 1996.
• Silver’s use in the solar power indus­try has received much press this week. Sil­ver is used in pho­to­voltaic (PV) cells in solar pan­els, and as this indus­try grows rapidly, so has its demand for sil­ver. This sector’s require­ment for the metal has now become larger than the sil­ver­ware market.
• Chi­nese oil major PetroChina Co. Ltd. plans to boost annual coal bed methane (CBM) gas out­put 12-fold to 4 bil­lion cubic metres (bcm) by 2015 from 0.3 bcm in 2010, a com­pany offi­cial said.
• Rio Tinto Group fore­casts high cop­per prices will con­tinue amid ris­ing demand and before out­put from new projects eases a sup­ply short­fall. Tom Albanese, CEO of Rio Tinto, said in Aus­tralian Broad­cast­ing Corp.’s “Inside Busi­ness” tele­vi­sion pro­gram that he expects to see a con­tin­ued period of strong cop­per pric­ing, largely because many of the large mines, includ­ing Rio, see declin­ing grades, deep­en­ing pits.

Threats

• China’s infla­tion exceeded the government’s 2011 tar­get for a fourth month as prices exclud­ing food rose the most in at least six years. Con­sumer prices rose 4.9 per­cent last month from a year ear­lier after a 4.6 per­cent gain in Decem­ber, the sta­tis­tics bureau said. Producer-price infla­tion quick­ened to 6.6 per­cent from 5.9 per­cent. The accel­er­a­tion reflects higher rents, a 53 per­cent surge in money sup­ply in the past two years and increas­ing domes­tic demand in China.

Tags: Baltic Dry Index, Bank Of China, Capacity Additions, China, Chinese Banks, Chinese Holidays, Chinese Oil, Coal Bed Methane, Coal Exports, Coal Miners, energy, ETF, Freight Rates, Gas Lng, Gold, Inflation Concerns, Liquefied Natural Gas, oil, Palladium Prices, Pboc, Petrochina Co Ltd, precious metals, Pullback, Pv Cells, Silver, Steel Output
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Surging Gold Demand a “Global Phenomenon” — Chinese Demand for Silver “Voracious”

Thursday, February 17th, 2011

From Gold­Core

Surg­ing Gold Demand a “Global Phe­nom­e­non” — Chi­nese Demand for Sil­ver “Voracious”

Israeli com­ments led to dol­lar weak­ness and gold, sil­ver and oil ral­ly­ing yes­ter­day. The Israeli gov­ern­ment described the Iran­ian war­ships move into the Suez canal as a “provo­ca­tion” and hinted at a pos­si­ble response.

Gold in USD – 10 Day (Tick)

An exam­ple, if one was needed, about how pre­car­i­ous the geopo­lit­i­cal sit­u­a­tion in the Mid­dle East is and how mar­kets con­tinue to under­es­ti­mate the risk of mil­i­tary conflict.

Besides the very strong fun­da­men­tals, gold is look­ing bet­ter and bet­ter tech­ni­cally. After a 4 month period of cor­rec­tion and con­sol­i­da­tion gold remains below lev­els seen last Octo­ber (see chart below).

Gold bounced off sup­port seen at the 150 day mov­ing aver­age and is now above the 100 day mov­ing aver­age. It is only 3.5% below the nom­i­nal record high of $1,423.75/oz seen in early Decem­ber 2010.

Gold in USD – 1 Year (Daily) and 150 Day Mov­ing Average

Even more impor­tant is the sig­nif­i­cant increase in demand seen in India, China and glob­ally as peo­ple buy gold to pro­tect them­selves from macro­eco­nomic risk and deep­en­ing inflation.

The World Gold Coun­cil reports that the increase in invest­ment demand is a 'global phe­nom­e­non', report­ing a 19% year-on-year rise across the world in its most recent report this morning.

In China alone, gold invest­ment demand jumped 70% last year as Chi­nese peo­ple bought gold as a store of value. Demand is pro­jected to grow a fur­ther 40 per­cent to 50 per­cent this year and jew­elry demand will expand by 8 per­cent to 10 per­cent this year.

Gold imports by India, the largest buyer of gold in the world, climbed to a record of 918 met­ric tonnes in 2010, dri­ven by a surge in jew­elry demand with Indi­ans con­tin­u­ing to buy jew­elry as a store of value.

Reuters quoted a lead­ing Chi­nese exec­u­tive from Indus­trial and Com­mer­cial Bank of China (ICBC) (1398.HK)(601398.SS), the world's largest bank by mar­ket value, as say­ing that demand for gold was grow­ing at a vora­cious pace due to surg­ing inflation.

Zhou said that the huge increase in Chi­nese demand seen last year would hap­pen again in 2011 due to a “choppy stock mar­ket” and con­cerns about how ris­ing inter­est rates will affect prop­erty markets.

Per­haps most impor­tantly and rarely men­tioned in the west­ern media is the fact that the Chi­nese gov­ern­ment is encour­ag­ing their cit­i­zens to buy phys­i­cal gold and sil­ver bul­lion hav­ing banned gold own­er­ship from 1950 to 2003 (see video).

"Unlike the prop­erty mar­ket, invest­ment in the gold sec­tor is some­thing the gov­ern­ment is encour­ag­ing," Zhou said.

Zhou said there was also vora­cious demand for sil­ver, with ICBC bank alone sell­ing about 13 tonnes of phys­i­cal sil­ver in Jan­u­ary alone, com­pared with 33 tonnes in the whole of 2010. Were that demand to con­tinue then demand for sil­ver from ICBC alone could be as high as 156 tonnes this year. This would be a 370% increase on 2010.

Given the degree of demand for sil­ver in China and inter­na­tion­ally the fore­cast that sil­ver could reach $36 an ounce this year, by Bloomberg ana­lysts, is look­ing very conservative.

Those con­tin­u­ing to call­ing gold and sil­ver “bub­bles” con­tinue to ignore the facts and the many, many extremely impor­tant devel­op­ments in the gold and sil­ver bul­lion markets.

NEWS:

(Bloomberg) — China Invest­ment Gold Demand to Grow 40–50% This Year, WGC Says
China’s gold invest­ment demand will grow 40 per­cent to 50 per­cent this year, Wang Lixin, the China rep­re­sen­ta­tive for the World Gold Coun­cil, said today. The country’s jew­elry demand will expand by 8 per­cent to 10 per­cent this year, he said.

(Bloomberg) — China’s Gold Invest­ment Demand Jumps 70%, Coun­cil Says
Gold invest­ment in China jumped 70 per­cent last year and con­sump­tion by the jew­el­ery sec­tor gained to a record as investors stepped up pur­chases of the pre­cious metal as a store of value, said the World Gold Council.

Invest­ment demand jumped to 179.9 met­ric tons last year, sur­pass­ing Ger­many and the U.S., as buy­ers sought out gold bars and coins, accord­ing the London-based indus­try group. Demand from the jew­elry sec­tor was 400 tons, it said.

Gold reached a record $1,431.25 an ounce on Dec. 7 and soared nearly 30 per­cent last year as the dol­lar dropped and investors sought a store of value amid cur­rency debase­ment. China’s con­sumer prices increased 4.9 per­cent in Jan­u­ary from a year ear­lier, exceed­ing pol­icy mak­ers 4 per­cent infla­tion ceil­ing for a fourth month, data showed this week.

“The main moti­va­tion behind this demand has been con­cern over domes­tic infla­tion pres­sure and poor per­for­mance of alter­na­tive invest­ments, com­bined with expec­ta­tions of fur­ther gold price gains,” the council’s report said.

Bul­lion gained 0.3 per­cent to $1,379.50 at 3:34 p.m. in Shanghai.

Con­sump­tion in China, the second-largest buyer, may gain 15 per­cent in the first half, fueled by grow­ing demand for alter­na­tive invest­ments and a hedge against infla­tion, the China Gold Association’s deputy chair­man Zhang Bing­nan said last month.

China dis­placed South Africa as the world’s biggest gold pro­ducer in 2007. Imports through Octo­ber rose almost five­fold from the total shipped in the pre­vi­ous year to 209 tons, accord­ing to the Shang­hai Gold Exchange. Mine out­put reached a record 340 tons last year, the China Gold Asso­ci­a­tion said.

The Indus­trial and Com­mer­cial Bank of China Ltd, the world’s biggest lender by mar­ket value, started physical-gold linked sav­ings accounts in Decem­ber in an ini­tia­tive with the World Gold Coun­cil. Account open­ings sur­passed 1 mil­lion with over 12 tons of gold stored on behalf of investors, it has said.

(Bloomberg) — Gold, Sil­ver ‘Appeal­ing’ as Long-Term Invest­ments, Burns Says
Gold and sil­ver look “extremely appeal­ing” for long-term invest­ments as world cur­ren­cies strug­gle to main­tain their value, Pan Amer­i­can Sil­ver Corp. Chief Exec­u­tive Offi­cer Geoff Burns said.

Pan Amer­i­can expects Argentina’s Chubut province to over­turn a ban on open-pit min­ing this year to be able to develop the company’s Navi­dad sil­ver deposit, Burns said today on a con­fer­ence call.

(Bloomberg) — Pan Amer­i­can Sil­ver Shifts Assets to Cana­dian Dol­lars
Pan Amer­i­can Sil­ver Corp., the world’s fourth-largest sil­ver pro­ducer, said it’s shift­ing its cur­rency hold­ings into Cana­dian dol­lars, bet­ting the U.S. dol­lar may fall further.

The world’s reserve cur­ren­cies are strug­gling to main­tain their value amid “ridicu­lous” debt lev­els, Chief Exec­u­tive Offi­cer Geof­frey Burns said today on a con­fer­ence call with ana­lysts. Gold and sil­ver look “extremely appeal­ing” as alter­na­tive long-term invest­ments, he said.

“We diver­si­fied some of our cur­rency hold­ings into Cana­dian dol­lars away from U.S. dol­lars to pro­vide more sta­bil­ity in the event we do see con­tin­ued weak­ness in the U.S. dol­lar,” Burns said. “It’s not just the U.S. dol­lar — the euro, the Japan­ese yen are going to have extreme dif­fi­culty hang­ing onto their long-term val­ues as a com­mod­ity of trade.”

The dol­lar fell against most of its major coun­ter­parts today, while gold rose to the high­est price in almost five weeks on spec­u­la­tion that the accel­er­at­ing pace of infla­tion will boost demand for the pre­cious metal as an invest­ment hedge. Whole­sale prices rose for a sev­enth straight month in the U.S., led by higher prices for fuel.

Gold futures for April deliv­ery rose $1, or 0.1 per­cent, to set­tle at $1,375.10 an ounce at 1:34 p.m. on the Comex in New York. Sil­ver futures for March deliv­ery fell 6.7 cents, or 0.2 per­cent, to $30.629 an ounce.

Vancouver-based Pan Amer­i­can expects Argentina’s Chubut province to over­turn a ban on open-pit min­ing after local elec­tions in March, allow­ing the com­pany to develop its Navi­dad sil­ver deposit, Burns said. The company’s sil­ver out­put will fall to 23 mil­lion ounces this year from 24 mil­lion ounces in 2010, he said. Indus­tria Penoles SA, BHP Bil­li­ton Ltd. and KGMH Pol­ska Miedz SA are the world’s largest sil­ver producers.

(FT) — Investors look for a sil­ver lin­ing
The mint ratio, which shows how many ounces of sil­ver it takes to buy an ounce of gold, is close to its low­est lev­els since 1998, cur­rently about 45. Why?

With gold near a record high the sim­ple expla­na­tion is that sil­ver has been per­form­ing even bet­ter of late, dri­ven by increased demand rather than any sup­ply contraction.

Sil­ver tends to hang on to gold’s coat tails when gold is stronger, dur­ing peri­ods of infla­tion or polit­i­cal tur­moil, per­haps. But gold’s recent gains have come at a time of improv­ing eco­nomic fun­da­men­tals, so sil­ver, which has a tight indus­trial demand cor­re­la­tion, has enjoyed extra impetus.

Another boost has come from retail investors who would rather spend their $200 on roughly five 1-ounce Amer­i­can Eagle sil­ver coins, than one 10th-of-an-ounce gold coin. Doubt­less the “penny-share syn­drome” also applies a bit here too – when smaller priced assets are per­ceived as pro­vid­ing bet­ter oppor­tu­nity for gains.

This is pos­si­bly why the US mint sold a record 6.4m Eagle sil­ver coins in Jan­u­ary, a 78 per cent increase on the pre­vi­ous year, when sil­ver was more than 40 per cent cheaper. Gold sales were up 57 per cent over that period.

(Bloomberg) — Impala Plat­inum Sees 2011 Pal­la­dium Deficit of 560,000 Ounces
Impala Plat­inum Hold­ings Ltd. said global pal­la­dium demand may out­strip sup­ply by about 560,000 ounces this year. Plat­inum sup­plies may exceed demand by about 20,000 ounces in 2011 while the rhodium mar­ket may have a 55,000 ounces sur­plus, Impala said in a copy of a pre­sen­ta­tion posted on its web­site today.

(Bloomberg) — Gold Jew­elry Demand Is ‘Still Very Strong,’ Council’s Grubb Says
Gold jew­elry demand is “still very strong,” after ris­ing last year, World Gold Coun­cil man­ag­ing direc­tor Mar­cus Grubb said on Bloomberg TV today.

“I cer­tainly think we will see another very strong year for gold” this year, he said.

(Bloomberg) — Gold Jew­elry Demand in India is Strong, World Gold Coun­cil Says
Gold demand in India for jew­elry is “out­stand­ing” and high prices are no longer “a bar­rier” for con­sumers in the world’s largest user of bul­lion, accord­ing to Ajay Mitra, man­ag­ing direc­tor of the World Gold Coun­cil for India and the Mid­dle East.

Demand will stay “robust” this year, he told reporters in Mum­bai today.

(Bloomberg) — Gold Imports by India Reach Record on Jew­elry Sales
Gold imports by India, the largest user, climbed to a record in 2010, dri­ven by a surge in jew­elry demand and amid expec­ta­tions that the 10-year rally in prices would extend, accord­ing to the World Gold Council.

Pur­chases totaled 918 met­ric tons, accord­ing to pro­vi­sional data released by the producer-funded group today. That exceeds the pro­jec­tion of about 800 tons made last month by Ajay Mitra, the group’s man­ag­ing direc­tor for India and the Mid­dle East.

Bul­lion advanced 30 per­cent last year, reach­ing a record $1,431.25 an ounce on Dec. 7, as investors bought the metal as a pro­tec­tor of wealth. Jew­elry demand in India jumped 69 per­cent in the year to the high­est ever, help­ing drive global demand to a 10-year peak, accord­ing to the council.

“India was the strongest growth mar­ket in 2010,” said the report. “The ris­ing price of gold, par­tic­u­larly in the lat­ter half of the year, cre­ated a ‘vir­tu­ous cir­cle’ of higher price expec­ta­tions among Indian con­sumers, which fuelled pur­chases, thereby fur­ther dri­ving up local prices.”

Fourth-quarter imports rose to 265 tons from 204 tons a year ear­lier, the group said. Jew­elry demand gained 47 per­cent to 210.5 tons and invest­ment demand grew 15 per­cent to 74.40 tons. Total demand in the period climbed 37 per­cent to 284.9 tons, accord­ing to the report.

Con­sumer demand for bul­lion in India ral­lied 66 per­cent in 2010 to 963.1 tons by vol­ume from a year ear­lier and more than dou­bled in value to $38.2 bil­lion, the coun­cil said.

(Reuters) — China gold demand grow­ing at "explo­sive" pace: ICBC
Demand in China for phys­i­cal gold and gold-related invest­ments is grow­ing at an "explo­sive" pace and its appetite for the yel­low metal is poised to remain robust amid infla­tion con­cerns, said an Indus­trial and Com­mer­cial Bank of China (ICBC) executive.

ICBC (1398.HK)(601398.SS), the world's largest bank by mar­ket value, sold about 7 tonnes of phys­i­cal gold in Jan­u­ary this year, nearly half the 15 tonnes of bul­lion sold in the whole of 2010, said Zhou Ming, deputy head of the bank's pre­cious met­als depart­ment on Wednesday.

"We are see­ing explo­sive demand for gold. As Chi­nese get wealthy, they look to diver­sify their invest­ments and gold stands out as a good hedge against infla­tion," Zhou told Reuters.

"There is also fran­tic demand for non-physical gold invest­ments. We issued 1 bil­lion yuan worth of gold-price-linked term deposits in 2010, but we man­aged to sell the same amount over just a few days in Jan­u­ary this year," Zhou said, adding that such deposits would eas­ily exceed 5 bil­lion yuan ($759 mil­lion) this year.

Gold imports into China soared in 2010, turn­ing the coun­try, already the largest bul­lion miner, into a major over­seas buyer for the first time.

The surge, which comes as Chi­nese investors look for insur­ance against ris­ing infla­tion and cur­rency appre­ci­a­tion, puts the coun­try on track to over­take India as the world's top gold con­sumer and a sig­nif­i­cant force in global gold prices.

Gold prices jumped 30 per­cent in 2010 and struck an all-time high of $1430.95. Spot sil­ver surged 83 per­cent last year and is cur­rently hov­er­ing at around $30 per ounce.

Zhou said China's gold demand could grow at a stronger pace this year com­pared with 2010, as a choppy stock mar­ket and moves by Bei­jing to rein in prop­erty spec­u­la­tion and pur­chases means more investors will pile their cash in bul­lion investments.

"Unlike the prop­erty mar­ket, invest­ment in the gold sec­tor is some­thing the gov­ern­ment is encour­ag­ing," he said.

Bei­jing has encour­aged retail con­sump­tion and announced last August mea­sures to pro­mote and reg­u­late the local gold mar­ket, includ­ing expand­ing the num­ber of banks allowed to import bullion.

"China has a centuries-long cul­tural attrac­tion to gold and because we have started at such a low base, I think demand growth will likely stay strong for quite some time," he said.

Zhou said there was also vora­cious demand for sil­ver, with the bank sell­ing about 13 tonnes of phys­i­cal sil­ver in Jan­u­ary alone, com­pared with 33 tonnes in the whole of 2010.

The scale of China's gold demand, which has increased on aver­age at a double-digit clip over the past decade, has caught the mar­ket by sur­prise. Data showed China imported 209 tonnes of gold the first 10 months of last year, ver­sus 333 tonnes by India for the whole year.

The bank on Tues­day launched its sec­ond phys­i­cal gold invest­ment prod­uct, which sells gold bars to investors, which can be resold for cash through ICBC based on real-time gold prices.

The WGC said ICBC's intro­duc­tion of this gold invest­ment could lift China's gold retail invest­ment by 10 to 15 per­cent in 2011 from about 170 tonnes last year.

(Bloomberg) — U.S. Mint’s Sil­ver Sup­pli­ers Trea­sure Pre­cious Metal’s Rally
The value of con­tracts for sup­ply­ing sil­ver to the U.S. Mint has surged along with the pre­cious metal’s rise in the world mar­ket, accord­ing to data com­piled by Bloomberg.

The fed­eral agency that makes coins for cir­cu­la­tion and invest­ment paid at least $693.1 mil­lion to two of its main sil­ver sup­pli­ers in the 2010 fis­cal year, a 66 per­cent increase over 2009, the data show.

“For a small com­pany, the government’s a good long-term cus­tomer to have,” Tom Power, chief exec­u­tive offi­cer of Sun­shine Mint­ing Inc., said in a Feb. 4 tele­phone inter­view. The Coeur d’Alene, Idaho-based com­pany is the Mint’s pri­mary sup­plier of sil­ver blanks for bul­lion coins, which are sold to investors.

The increase in pay­ments to Sun­shine Mint­ing and Stern Leach Co. of Attle­boro, Mass­a­chu­setts, a unit of London-based Cook­son Group Plc, has coin­cided with silver’s rally as investors bought pre­cious met­als in the eco­nomic decline and to pro­tect against Europe’s finan­cial cri­sis. Spot sil­ver has more than tripled to $30.785 an ounce through Feb. 15 from $8.967 on Nov. 20, 2008, its low­est set­tle­ment in the last five years.

Over the past 11 years, the U.S. Mint has spent at least $2.1 bil­lion on con­tracts with its two main sup­pli­ers of sil­ver blanks, or unstamped coins, accord­ing to data com­piled by Bloomberg. About 80 per­cent of that was paid to Sun­shine Minting.

Lit­tle Com­pe­ti­tion
Sun­shine Mint­ing works on five-year rolling competitive-bid con­tracts with the Mint, said Power. All 58 unique con­tracts the agency exer­cised in fis­cal year 2010 to buy sil­ver from the Idaho com­pany were open to com­pe­ti­tion, accord­ing to the Fed­eral Pro­cure­ment Data Sys­tem. In 24 cases, Sun­shine was the only bid­der, the data show.

“The pro­duc­tion of blanks for the Mint is not easy, so there’s not a lot of com­pe­ti­tion,” Leonard Kaplan, pres­i­dent of Prospec­tor Asset Man­age­ment in Evanston, Illi­nois, said in a tele­phone inter­view Feb. 10. “It’s only two or three com­pa­nies that have the equip­ment to do this and are will­ing to jump through all the loops that the U.S. Mint wants,” such as prod­uct spec­i­fi­ca­tions and pay­ment sched­ules, he said.

The Mint pur­chases sil­ver on the open mar­ket “at pre­vail­ing prices” to pro­duce bul­lion, Mint spokesman Michael White said in an e-mail Feb. 8.

“The vol­ume of bul­lion coins, gold and sil­ver, pro­duced and sold by the U.S. Mint are at peak lev­els since 2008,” White said. “As the price of gold and sil­ver fluc­tu­ate, the value of blanks orders reflects that fluctuation.”

The Mint sold 35.8 mil­lion ounces of gold and sil­ver bul­lion coins last year, up 30 per­cent from 2009, accord­ing to the agency’s annual report.

Sunshine’s Rise
Sun­shine Minting’s sales to the Mint totaled $10.2 mil­lion in fis­cal year 2000, the start of a rapid esca­la­tion in fed­eral con­tracts that reached $579.1 mil­lion last year, accord­ing to the data com­piled by Bloomberg.

Stern Leach, another major sil­ver sup­plier to the Mint, expe­ri­enced a sim­i­lar upswing in sales to the fed­eral gov­ern­ment. The company’s con­tracts totaled $114 mil­lion last year com­pared with $70.4 mil­lion in 2009 and $10.7 mil­lion in 2005.

A spokesman for Stern Leach in Attle­boro, Mass­a­chu­setts, who refused to be iden­ti­fied, said Feb. 3 it is com­pany pol­icy to decline inter­views with the news media.

Bul­lion Boom
The Mint’s sales of sil­ver bul­lion coins jumped 77 per­cent to $660 mil­lion in fis­cal year 2010, accord­ing to the annual report. Bul­lion prod­ucts made of gold brought in $2.2 bil­lion last year, up 69 per­cent from the pre­vi­ous year.

“They try to bal­ance their sup­ply and demand, and demand has been very, very strong, so of course they buy more,” Kaplan said. “Right now they’re mak­ing a fortune.”

White said the Mint is required by law to pass its met­als costs onto the buy­ers of prod­ucts such as bul­lion coins so that it can oper­ate at no net cost to taxpayers.

“By law, the U.S. Mint must sell sil­ver bul­lion coins at a price equal to the bul­lion value of the coin at the time of the sale, plus pro­duc­tion costs,” White said.

The agency’s more pub­lic role is to pro­duce coins and sell them to the Fed­eral Reserve’s dis­trict banks at face value, yield­ing a so-called seignior­age profit that is sent back to the Treasury’s gen­eral fund.

Higher metal costs and a shift to pro­duc­tion of less prof­itable, lower denom­i­na­tion coins brought the Mint’s seignior­age from cir­cu­la­tion down 30 per­cent in fis­cal year 2010, from $428 mil­lion to $301 mil­lion, accord­ing to its annual report.

Copy­right © Gold­Core

Tags: 1398 Hk, 601398, Bank Of China, Canadian Market, China, Chinese Demand, Commercial Bank Of China, Currency, Dollar Weakness, Geopolitical Situation, Global Phenomenon, Gold, Gold Demand, Gold Imports, Gold Investment, India, India China, Industrial And Commercial Bank Of China, Industrial And Commercial Bank Of China Icbc, Investment Demand, Metric Tonnes, Military Conflict, Moving Average, oil, Silver, Suez Canal, World Gold Council
Posted in Energy & Natural Resources, Gold, India, Markets, Oil and Gas, Silver | Comments Off

Chinese Demand For Gold "Explosive"

Wednesday, February 16th, 2011

Accord­ing to an exec­u­tive of Indus­trial and Com­mer­cial Bank of China, the world's largest bank by mar­ket value, demand in China for phys­i­cal gold and gold-related invest­ments is grow­ing at an "explo­sive" pace and its appetite for the yel­low metal is poised to remain robust amid infla­tion con­cerns, reports Reuters. In other words, what was pre­vi­ously repeat­edly reported on Zero Hedge, and by the World Gold Coun­cil, is start­ing to be appre­ci­ated by every­one else. Yet in a mar­ket in which sup­ply and demand are com­pletely dis­con­nected from price dis­cov­ery thanks to global cen­tral plan­ning, and cour­tesy of pre­cious metal price sup­pres­sion by JPM, China investors are able to accu­mu­late gold and other non-dilutable met­als at prices that no longer reflect surg­ing global demand. And just like in the US, China is also start­ing to fall for phys­i­cal sub­sti­tute invest­ments: "There is also fran­tic demand for non-physical gold invest­ments. We issued 1 bil­lion yuan worth of gold-price-linked term deposits in 2010, but we man­aged to sell the same amount over just a few days in Jan­u­ary this year," Zhou said, adding that such deposits would eas­ily exceed 5 bil­lion yuan ($759 mil­lion) this year." Although in China, unlike in Lon­don, these deposits may actu­ally have real cov­er­age behind them.

From Reuters:

ICBC, the world's largest bank by mar­ket value, sold about 7 tonnes of phys­i­cal gold in Jan­u­ary this year, nearly half the 15 tonnes of bul­lion sold in the whole of 2010, said Zhou Ming, deputy head of the bank's pre­cious met­als depart­ment on Wednesday.

"We are see­ing explo­sive demand for gold. As Chi­nese get wealthy, they look to diver­sify their invest­ments and gold stands out as a good hedge against infla­tion," Zhou told Reuters.

Gold imports into China soared in 2010, turn­ing the coun­try, already the largest bul­lion miner, into a major over­seas buyer for the first time.

The surge, which comes as Chi­nese investors look for insur­ance against ris­ing infla­tion and cur­rency appre­ci­a­tion, puts the coun­try on track to over­take India as the world's top gold con­sumer and a sig­nif­i­cant force in global gold prices.

Gold prices jumped 30 per­cent in 2010 and struck an all-time high of $1430.95. Spot sil­ver surged 83 per­cent last year and is cur­rently hov­er­ing at around $30 per ounce.

Zhou said China's gold demand could grow at a stronger pace this year com­pared with 2010, as a choppy stock mar­ket and moves by Bei­jing to rein in prop­erty spec­u­la­tion and pur­chases means more investors will pile their cash in bul­lion investments.

"Unlike the prop­erty mar­ket, invest­ment in the gold sec­tor is some­thing the gov­ern­ment is encour­ag­ing," he said.

Bei­jing has encour­aged retail con­sump­tion and announced last August mea­sures to pro­mote and reg­u­late the local gold mar­ket, includ­ing expand­ing the num­ber of banks allowed to import bullion.

"China has a centuries-long cul­tural attrac­tion to gold and because we have started at such a low base, I think demand growth will likely stay strong for quite some time," he said.

Oh yes, sil­ver too

Zhou said there was also vora­cious demand for sil­ver, with the bank sell­ing about 13 tonnes of phys­i­cal sil­ver in Jan­u­ary alone, com­pared with 33 tonnes in the whole of 2010.

Not sur­pris­ingly, China is doing all it can to offload bub­ble frenzy to its bil­lion plus consumers:

The bank on Tues­day launched its sec­ond phys­i­cal gold invest­ment prod­uct, which sells gold bars to investors, which can be resold for cash through ICBC based on real-time gold prices.

The WGC said ICBC's intro­duc­tion of this gold invest­ment could lift China's gold retail invest­ment by 10 to 15 per­cent in 2011 from about 170 tonnes last year.

For those who think gold is already in a bub­ble... check back in 1 year.

Tags: Bank Of China, China, China Investors, Chinese Demand, Chinese Investors, Commercial Bank Of China, Curre, Currency, Explosive Demand, Explosive Pace, Global Demand, Gold, Gold Imports, Gold Investments, Gold Price, India, Industrial And Commercial Bank Of China, Inflation Concerns, Overseas Buyer, physical gold, Precious Metal Price, precious metals, Price Discovery, Silver, World Gold Council
Posted in Gold, India, Markets, Silver | Comments Off

Precious Metals Surge Immediately On Higher Than Expected UK Inflation

Tuesday, February 15th, 2011

From Gold­Core

Pre­cious Met­als Rise Imme­di­ately on Higher than Expected UK Inflation

Sil­ver and par­tic­u­larly gold rose sharply on the release of the higher than expected UK infla­tion data. It showed that UK infla­tion quick­ened to 26 month highs at 4.0%. Cur­rency debase­ment and higher food and energy prices are lead­ing to an infla­tion surge in both devel­oped and emerg­ing markets.

Gold in British Pounds — 1 Day (Tick)

The extent of the surge is being masked as the fig­ures in the UK and inter­na­tion­ally under­es­ti­mate real infla­tion. Increas­ingly many econ­o­mists are con­cerned that offi­cial sta­tis­tics are mis­lead­ing and hide the true increase in the cost of liv­ing (see ‘Offi­cial sta­tis­tics hide true increase in cost of liv­ing' in News today). A double-digit jump in food prices pushed China's infla­tion higher in Jan­u­ary — see­ing con­sumer prices rise 4.9 per­cent, dri­ven by the 10.3 per­cent jump in food costs.

The Chi­nese infla­tion data appears to be even more mis­lead­ing and manip­u­lated than that in west­ern economies. Many gov­ern­ments are attempt­ing to man­age con­sumers per­cep­tions regard­ing the sig­nif­i­cant increase in the cost of liv­ing as fiat cur­ren­cies are debased.

Sil­ver is now less than 2% from its 30 year nom­i­nal high of $31.25/oz seen at the start of the year and looks set to chal­lenge and sur­pass this level in the com­ing days due to con­tin­ued robust phys­i­cal demand (both invest­ment and indus­trial) and the fact that the futures mar­ket is see­ing some big money go long again after the recent correction.

Sil­ver remains in back­war­da­tion with spot trad­ing at $30.68/oz while the July 11 con­tract trades at $30.55/oz and the Decem­ber 14 at $30.40/oz.

News:

(Bloomberg) — Soros Cuts Stake in Mon­santo, Leaves Gold Shares Unchanged
Bil­lion­aire investor George Soross hedge fund cut its stake in Mon­santo Co. and left its bet in gold unchanged, accord­ing to a quar­terly fil­ing with the Secu­ri­ties and Exchange Commission.

The $27 bil­lion Soros Fund Man­age­ment, based in New York, cut its shares in the St. Louis, Missouri-based agri­cul­tural com­pany to 3.29 mil­lion shares from 6.52 mil­lion in the pre­vi­ous quar­ter, accord­ing to the reg­u­la­tory fil­ing. As of Dec. 31, the shares were worth $229 million.

Soros, who called gold "the ulti­mate asset bub­ble," left his gold bet lit­tle changed.

(Bloomberg) — Paulsons SPDR Gold Hold­ings Unchanged at 31.5 Mil­lion Shares
Paul­son & Co.s SPDR gold hold­ings were unchanged at 31.5 mil­lion shares as of Dec. 31 com­pared with three months ear­lier, accord­ing to a U.S. Secu­ri­ties and Exchange Com­mis­sion filing.

(Bloomberg) — Soros Raises SPDR Gold Hold­ing 0.5% in Fourth Quar­ter (Update2)
Investor George Soros increased his SPDR Gold Trust share hold­ing by 0.5 per­cent in the fourth quar­ter and John Paul­son kept his invest­ment unchanged, fil­ings with the U.S. Secu­ri­ties and Exchange Com­mis­sion show.

Soros Fund Man­age­ment LLC held 4,721,808 SPDR Gold Trust shares as of Dec. 31, com­pared with 4,697,008 shares at the end of the third quar­ter, accord­ing to the fil­ing. Soross call options on 705,000 shares in the trust as of Sept. 30 were not listed in the lat­est report. Paul­son & Co.s hold­ing, the largest in the SPDR fund, was 31.5 mil­lion shares.

A decade-long surge in gold has attracted investors seek­ing bet­ter returns than equi­ties or bonds, and helped boost hold­ings in exchange-traded prod­ucts backed by the metal to a record in Decem­ber. The met­als climb last year to an all-time high was more than triple the gain in global equi­ties, and bul­lion beat shares in five of the past six years.

"Invest­ment demand remains the most impor­tant dri­ver for the gold mar­ket," said Daniel Breb­ner, an ana­lyst at Deutsche Bank AG in Lon­don. "The entrance or exit of large funds in and out of exchange-traded prod­ucts can give an idea of the con­vic­tion by these investors as to the prospects for gold."

Investors in 10 gold-backed exchange traded prod­ucts own metal val­ued at $88.6 bil­lion as of yes­ter­day, accord­ing to Bloomberg cal­cu­la­tions, even after cut­ting assets in tons by 4.5 per­cent since Dec. 20 when hold­ings peaked. Immediate-delivery gold traded at an all-time high of $1,431.25 an ounce on Dec. 7 and erased more than 4 per­cent since then to $1,365.47 today.

Soros, Paul­son
Michael Vachon, a spokesman for Soros, declined to com­ment on gold invest­ments and the fil­ing, when asked before its release. Armel Leslie, a Paul­son spokesman, declined to comment.

Soros Fund Man­age­ment LLC man­ages about $27 bil­lion. The com­pa­nys SPDR Gold Trust hold­ing was worth $655 mil­lion as of Dec. 31, the fil­ing showed, rep­re­sent­ing 8.5 per­cent of the $7.7 bil­lion total in the SEC filing.

The firms hold­ings in the iShares Gold Trust of 5 mil­lion shares, also backed by the metal, remained unchanged as of Dec. 31 from the pre­ced­ing quarter.

Soros described gold at the World Eco­nomic Forums meet­ing in Davos, Switzer­land, in Jan­u­ary last year as "the ulti­mate asset bub­ble." In a Nov. 15 speech in Toronto the 80-year-old said con­di­tions for the metal to keep ris­ing were "pretty ideal" and at this years Davos forum he said the boom in com­modi­ties may last "a cou­ple of years" longer.

Plat­inum Invest­ment
The firms hold­ings of Plat­inum Group Met­als Ltd., a Vancouver-based miner, jumped to 12.7 mil­lion shares worth $34 mil­lion as of Dec. 31, from 1.5 mil­lion shares as of Sept. 30, fil­ings showed. Plat­inum Group Met­als said Feb. 9 it began devel­op­ing a mine in north­ern South Africa with first pro­duc­tion sched­uled to start in 2013. The mine will pro­duce plat­inum, pal­la­dium, rhodium and gold.

Pal­la­dium jumped 42 per­cent in the fourth quar­ter and plat­inum gained 6.8 percent.

Eric Mindichs Eton Park Cap­i­tal Man­age­ment LP added 5 mil­lion put options on the SPDR Gold Trust as of Dec. 31 to bring the total to 8 mil­lion, its fil­ings show. The com­pany owned 4.5 mil­lion shares in the trust at the end of the year.

A put option gives the holder the right to sell the secu­rity at a set price and date. Bul­lion has declined 3.9 per­cent this year as signs the global econ­omy is strength­en­ing curbed demand for the metal.

Tags: Backwardation, Billi, British Pounds, China, Commodities, Currency, Debasement, Emerging Markets, energy, Energy Prices, Fiat Currencies, Food Costs, Food prices, Futures Market, Gold, Gold Shares, Hedge Fund, India, Inflation Data, Monsanto, Monsanto Co, Official Statistics, precious metals, Securities And Exchange Commission, Silver, True Increase, Uk Inflation, Western Economies
Posted in Commodities, Gold, India, Markets, Outlook, Silver | Comments Off

Gold Market Cheat Sheet (February 14, 2011)

Saturday, February 12th, 2011

Gold Mar­ket Cheat Sheet (Feb­ru­ary 14, 2011)

For the week, spot gold closed at $1,356.72 per ounce, up $7.87 per ounce, or 0.58 per­cent for the week. Gold equi­ties, as mea­sured by the Philadel­phia Gold & Sil­ver Index, fell 1.70 per­cent. The U.S. Trade-Weighted Dol­lar Index rose 0.50 per­cent for the week.

Strengths

• Barry Wain­stein, Vice Chair­man of Bank of Nova Sco­tia, announced that the com­pany is plan­ning to expand its Sco­ti­aMo­catta Pre­cious Met­als eStore busi­ness to coun­tries includ­ing Dubai and Mex­ico. Also known as Sco­tia­Bank, the com­pany is Canada’s third-largest bank by assets. Sco­tia­Bank cur­rently sells gold bars and coins through an online store to clients in Canada. Wain­stein stated, “We’re look­ing at a num­ber of dif­fer­ent coun­tries simul­ta­ne­ously. In 2011, we may be up and run­ning in one or two countries.”
• Peru’s Vice Min­is­ter of Mines, Fer­nando Gala Sol­dev­illa, said pre­lim­i­nary data for 2010 indi­cated that Peru ranked third in the amount of explo­ration invest­ment, only sur­passed by Canada and Aus­tralia. Sol­dev­illa esti­mated that nearly 200 explo­ration com­pa­nies are now reg­is­tered with Peru’s Min­istry of Energy and Mines. He noted the coun­try now has nearly $4 bil­lion in min­ing invest­ment, com­pared to the $2.8 bil­lion in min­ing invest­ment reported in 2009.
• J.P. Mor­gan stated it is the only tri-party col­lat­eral man­ager to accept phys­i­cal gold as col­lat­eral to sat­isfy secu­ri­ties lend­ing and repo oblig­a­tions with coun­ter­par­ties. This comes as more clients look to use gold as a hedge against infla­tion and to post as col­lat­eral. “The abil­ity to finance and lever­age the broad­est range of asset classes is impor­tant to our clients. Many clients are hold­ing gold on their bal­ance sheets as an infla­tion hedge and are look­ing to make these assets work for them as col­lat­eral,” said John Riv­ett, Col­lat­eral Man­age­ment Exec­u­tive for J.P. Mor­gan World­wide Secu­ri­ties Services.

Weak­nesses

• Mark Cuti­fani, CEO of South Africa’s largest gold min­ing com­pany, said it costs more than $1,000/oz to pro­duce an ounce of gold when you take project devel­op­ment, explo­ration and all the other costs—cash oper­at­ing costs and sus­tain­ing capital—into account. Mark Bris­tow, CEO of one of West Africa’s largest gold min­ing com­pa­nies, added that costs are an inter­est­ing dilemma for the indus­try, “the real dri­ver of costs at this time is always grade and so the pres­sures that you’re see­ing in the costs—and it’s easy to blame fuel which is a real cost for some—but what you’re see­ing is an ever decreas­ing pay limit as the gold price goes up, and the indus­try tries to keep pro­duc­ing more and keep­ing their reserves intact.”
• The offi­cial open­ing of Ind­aba 2011 by Susan Sha­bangu, the South Africa Min­is­ter of Nat­ural Resources, did not pro­vide any of the assur­ances investors were look­ing for. After some recent high-profile prospecting/mineral rights issues there was an expec­ta­tion that Sha­bangu would offer com­fort that ambi­gu­i­ties in the license-granting processes would be more trans­par­ent. While acknowl­edg­ing the government’s con­cern that the South African min­ing sec­tor con­tracted dur­ing the com­modi­ties boom, all Sha­bangu really offered was the hope that a new online prospect­ing and min­ing license process would stream­line appli­ca­tions. She did not address any of the impli­ca­tions of the license debate. She also did not address the calls made locally by some for a limit on coal exports to ensure ade­quate sup­plies to util­ity Eskom (61 per­cent of South Africa’s coal is con­sumed by power sta­tions) nor did she offer specifics on ensur­ing suf­fi­cient infra­struc­ture expan­sion to sup­port min­ing indus­try growth.
• Ernst & Young’s global leader for met­als, Mike Elliot, expects that gov­ern­ments are likely to look increas­ingly toward equity par­tic­i­pa­tion in min­ing com­pa­nies as a way of get­ting their own, big­ger slice of the resources pie.

Oppor­tu­ni­ties

• The Indus­trial and Com­mer­cial Bank of China’s ICBC Gold Accu­mu­la­tion Plan (ICBC GAP) allows investors in China to accu­mu­late gold through a daily dol­lar aver­ag­ing pro­gram. The min­i­mum invest­ment required is 200 Ren­minbi or 1 gram of gold per day, which is equal to 42 dol­lars. One mil­lion accounts have already been opened since April, result­ing in the pur­chase of over 10 tonnes of gold thus far. The ICBC Bank is the world’s largest con­sumer bank with approx­i­mately 212 mil­lion accounts.
• Brazil’s boom­ing min­ing sec­tor will more than triple its out­put of iron ore, cop­per and gold by 2030, accord­ing to a gov­ern­ment plan. The broad plan fore­sees invest­ments of around $270 bil­lion dur­ing the next 20 years.
• Global econ­o­mist David Hale dis­cussed “the state of the world” this week and the­o­rizes on how global eco­nomic con­di­tions will impact infla­tion and mon­e­tary poli­cies and how these will impact the price of com­modi­ties, par­tic­u­larly gold. He pre­dicts that the price of gold will reach as high as $2,000 per ounce by 2015. The fac­tors dri­ving this pre­dicted rise are eco­nomic and geo-political. The biggest dri­ver of gold prices, he says, is China, and to a lesser extent, Africa. Hale notes that much depends on the risk of infla­tion and its impact on growth in the devel­oped and devel­op­ing world.

Threats

• The pos­si­bil­ity of a return to hedg­ing by gold pro­duc­ers dur­ing 2011 was raised by Credit Suisse ana­lyst Tom Kendall dur­ing his pre­sen­ta­tion to the Min­ing Ind­aba being held in Cape Town. He told del­e­gates that the term “nor­mal­iza­tion” would be increas­ingly heard in the finan­cial mar­kets dur­ing 2011, and that was not nec­es­sar­ily good for the gold price.
• A senior trader with Mit­subishi Cor­po­ra­tion said, “We are fac­ing some liq­ui­da­tion from gold this year because of mar­ket opti­mism towards good cor­po­rate results and eco­nomic recov­ery. The Mid­dle East unrest is sup­port­ing gold prices, but gold is going to under­per­form other pre­cious and base metals.”
• Chile, which relies heav­ily on hydro­elec­tric power, is con­cerned about the impact of a severe drought on its elec­tric­ity sup­plies and says it could lower volt­ages and save water in hydro­elec­tric reser­voirs. Chile’s fear is height­ened, as the coun­try needs hydro­elec­tric power to meet energy needs in the world’s top cop­per pro­ducer, and rain short­ages force gen­er­a­tors to rely on costly fuel-driven plants, com­pound­ing infla­tion risks in the country’s fast-growing economy.

Tags: Bank Of Nova Scotia, Brazil, Canadian Market, China, Collateral Management, Commodities, Counterparties, Dollar Index, energy, Exploration Companies, Gold, Gold Bars, Gold Equities, Gold Market, Inflation Hedge, Ministry Of Energy, Ministry Of Energy And Mines, Philadelphia Gold, physical gold, precious metals, Rivett, Securities Lending, Securities Services, Silver, Silver Index, Spot Gold, Vice Minister
Posted in Brazil, Canadian Market, Commodities, Credit Markets, Gold, Infrastructure, Markets, Silver | Comments Off

Technical Talk: Gold, Silver and Rare Earths

Thursday, February 10th, 2011

Gold, sil­ver and rare earths are three mar­kets being widely fol­lowed at the moment. I am bull­ish on all three, but only a buyer on pull­backs. Notwith­stand­ing the prospect of some­what slower eco­nomic growth over the next few months, China and a num­ber of other Asian coun­tries will keep buy­ing gold and sil­ver. These pur­chases should pro­vide a floor to price declines – an “Asian put” so to speak. As far as rare earths are con­cerned, China has for all intents and pur­poses cor­nered the lim­ited sup­plies, catch­ing most coun­tries asleep at the wheel.

For a tech­ni­cal per­spec­tive on these mar­kets, Adam Hewi­son (INO.com) pro­vided a brief video analy­sis. Click here to access the presentation.

Tags: Asian Countries, Buying Gold, China, Economic Growth, Gold, Gold And Silver, Gold Silver, Ino, Intents And Purposes, Limited Supplies, Price Declines, Pullbacks, Silver, Technical Perspective, Video Analysis, Wheel
Posted in Gold, Markets, Silver | Comments Off

Jim Rogers: How to Profit During Monetary Crises

Wednesday, February 9th, 2011

In this video clip, investor Jim Rogers sits down with Judge Andrew Napoli­tano to dis­cuss profit strate­gies dur­ing mon­e­tary crises.

Rogers said: “… what you have to do is you have to find things that will pro­tect your assets real assets sil­ver rice nat­ural gas some­thing that will hold its value in an infla­tion­ary time … I do it two ways: I own gold and sil­ver coins in my hand in my house in my box; I also own gold and sil­ver futures that’s another way to do it.”

He also com­mented Fed as fol­lows: “Bernanke, he does not under­stand finance, eco­nom­ics and cur­ren­cies; all he under­stands is print­ing money and now we have giv­ing him the print­ing presses he has run those print­ing presses as fast as he can …”

Source: Free­dom Watch (via YouTube), Feb­ru­ary 7, 2011 (hat tip: Global Investor Blog).

Tags: China, Crises, Currencies, Finance Economics, Freedom, Global Investor, Gold, Hat Tip, Jim Rogers, Natural Gas, Printing Money, Printing Presses, Profit Strategies, Real Assets, Silver, Silver Coins, Silver Futures, Two Ways, Video Clip, Youtube
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Eric Sprott: Investment Outlook (February 2011) "Gold Tsunami"

Monday, February 7th, 2011

Gold Tsunami

By Eric Sprott & David Franklin, Sprott Asset Man­age­ment

Ignor­ing real estate, most peo­ple invest their hard earned money in paper things. Stocks, bonds, annu­ities, insur­ance — it’s all paper, and it sits nicely in our bank accounts and shows up on our com­puter screens. Halfway across the world, investors in China and India have never trusted paper invest­ments as a store of value — and they’re con­vert­ing their hard earned paper money into gold and sil­ver bul­lion. Not that this is any­thing new. It isn’t. But the scale and speed with which they are accu­mu­lat­ing pre­cious met­als IS new, and it’s dri­ving the fun­da­men­tals that we believe will lead to higher prices in 2011.

Demand for the met­als is lit­er­ally explod­ing in Asia, and it’s cre­at­ing short­ages of phys­i­cal bul­lion around the world. The sta­tis­tics are extra­or­di­nary. China, the world’s largest gold pro­ducer, now requires so much of the pre­cious metal (in addi­tion to what it already mines) that it imported over 209 met­ric tons (6.7 mil­lion oz) of gold dur­ing the first ten months of 2010. This rep­re­sents a five­fold increase from the esti­mated 45 met­ric tons it imported in all of 2009.¹

Accord­ing to the World Gold Coun­cil, Chi­nese retail demand for gold increased by 70% from Octo­ber 2009 to Sep­tem­ber 2010, rep­re­sent­ing a total of 153.2 tonnes of gold imports. Yet, over the same period, the demand for gold jew­elry rose by only 8%.² There is a clear trend devel­op­ing for Chi­nese invest­ment in gold as a mon­e­tary asset, and China is buy­ing so much gold for invest­ment pur­poses that it now threat­ens to supercede India as the world’s largest gold con­sumer. Chi­nese demand in 2010 is expected to reach approx­i­mately 600 tonnes, just behind India’s 800 tonnes.³ To put that in per­spec­tive, 2010 world mine pro­duc­tion is fore­casted to be 2,652 tonnes, which means China and India could col­lec­tively lock-up over half of global annual production.

Even more sur­pris­ing is the increase in Chi­nese demand for sil­ver. Recent sta­tis­tics show that sil­ver imports have increased four­fold from 2009 to 2010. In 2005, the Chi­nese exported just over 100 mil­lion oz. of sil­ver.⁴ In 2010, they imported just over 120 mil­lion oz. This rep­re­sents a swing of 200 mil­lion+ oz. in a mar­ket that sup­plied a total of 889 mil­lion oz. in 2009 — a truly tec­tonic shift in demand!⁵

We are see­ing wide­spread evi­dence of major short­ages of phys­i­cal gold and sil­ver bul­lion across the globe. The Perth Mint recently stated that: "Demand for our coins and medal­lions is strong, but the biggest demand is com­ing from banks and traders look­ing for kilo bars."⁶ Three weeks ahead of Chi­nese New Year, Asian deal­ers were report­ing pre­mi­ums in main­land Chi­nese gold exchanges of $23 per ounce.⁷ Even Jim Cramer has acknowl­edged the cur­rent short­age in minted US gold coins, stat­ing on his CNBC tele­vi­sion show in Decem­ber that: "As some­one who tried to buy U.S. coins in Decem­ber, there was a real scarcity. My dealer report­edly just couldn’t get any coins — tried to sell me Aus­tralian bul­lion. Said there was a short­age. Very telling."⁸

While Chi­nese New Year cel­e­bra­tions typ­i­cally drive gold demand in the month of Jan­u­ary, there are stronger forces at work here. The Chi­nese are fight­ing the resur­gence of infla­tion. To pro­tect their wealth, the pop­u­lace is turn­ing to gold and sil­ver as a store of value. Pre­cious met­als own­er­ship is a rel­a­tively new phe­nom­e­non in China, where Chi­nese cit­i­zens have only been able to pur­chase gold freely within the last ten years. Own­er­ship restric­tions were lifted in 2001 when the Chi­nese cen­tral bank abol­ished its long-term gov­ern­ment monop­oly over gold. The Shang­hai Gold Exchange was then cre­ated in Octo­ber 2002 to replace the People’s Bank of China’s gold pur­chase and allo­ca­tion sys­tem, thus ush­er­ing in a new era of gold invest­ment in China.⁹ Investor inter­est in pre­cious met­als has increased dra­mat­i­cally since then, and new invest­ment prod­ucts are mak­ing gold more con­ve­nient to pur­chase and eas­ier to own.

One such pro­gram recently caught our eye and speaks to the new era of gold invest­ment within China. On April 1, 2010, the World Gold Coun­cil and Indus­trial and Com­mer­cial Bank of China (ICBC) issued a press release announc­ing a strate­gic part­ner­ship.¹⁰ Though seem­ingly innocu­ous, this press release intro­duced a com­pletely new invest­ment prod­uct for Chi­nese investors: The ICBC Gold Accu­mu­la­tion Plan ("ICBC GAP"). ICBC GAP allows investors in main­land China to accu­mu­late gold through a daily dol­lar aver­ag­ing pro­gram. The min­i­mum invest­ment required is either 200 RMB per month or 1 gram of gold per day (equiv­a­lent to approx­i­mately US$42).¹¹ Cus­tomers may renew the con­tracts at matu­rity, con­vert them into cash or exchange them for phys­i­cal gold. The accounts are per­fect for investors who want to accu­mu­late gold over the long-term. While gold accu­mu­la­tion plans exist in Japan, Switzer­land and other coun­tries, this is a first for main­land China. Kudos to the World Gold Coun­cil for their efforts in set­ting up and pro­mot­ing the program.

The most sig­nif­i­cant fact related to the ICBC GAP pro­gram is how fast it has cap­tured the invest­ing pub­lic in China. One mil­lion accounts have already been opened since the pro­gram launched on April 1st, result­ing in the pur­chase of over 10 tonnes of gold thus far. Accord­ing to press releases, the ICBC GAP plan was taken up by a mere 20% of total depos­i­tors at ICBC, and was only launched in select Chi­nese cities dur­ing the test phase. The ICBC bank just hap­pens to be the largest con­sumer bank on earth with approx­i­mately 212 mil­lion sep­a­rate accounts. If we apply some real­is­tic assump­tions and arith­metic, it’s easy to imag­ine how large this pro­gram could poten­tially become.

Sup­pose, for exam­ple, the ICBC GAP plan were expanded to cover all ICBC depos­i­tors, and also expanded to the next four largest Chi­nese banks. Let’s fur­ther assume that the gold pur­chases within the plan enjoyed the same rate of growth as the test phase men­tioned above. If we add all these num­bers together, it results in gold pur­chases of an extra 300 tonnes of gold per year, or over 10% of the esti­mated 2010 global gold production.

The impli­ca­tions of this bur­geon­ing Chi­nese demand for the gold mar­ket are immense. If these pre­dic­tions prove accu­rate, the ICBC GAP plan could become the sin­gle largest buyer of phys­i­cal gold on the planet. Con­sid­er­ing that the pro­gram has only been launched in one Chi­nese bank thus far, imag­ine if it were extended to other insti­tu­tions or other large gold con­sum­ing coun­tries such as India, Rus­sia or Turkey?

Speak­ing from Japan, the head of the World Gold Coun­cil recently com­mented on the early suc­cess of the ICBC GAP plan in China: "Here in Japan, it has taken over 10 years for the gold-savings account indus­try as a whole to reach 700,000 accounts. It is impres­sive that only one Chi­nese bank can exceed that level so eas­ily, within one year, with­out PR or active mar­ket­ing in-branch." The World Gold Coun­cil does their own arith­metic on how much gold the Chi­nese can con­sume: "In 2009, per capita gold con­sump­tion in China was 0.33 grams, up from 0.17 grams in 2002." Based on this data total Chi­nese gold con­sump­tion could range from 1,000 tonnes per year or more.¹² This implies that the Chi­nese could con­sume almost half of the gold pro­duced glob­ally on an annual basis.

The ICBC Gold Accu­mu­la­tion Plan and other alter­nate meth­ods of invest­ing in gold have the poten­tial to over­whelm cur­rent sup­ply in the gold mar­ket. If a sim­i­lar pro­gram were launched for sil­ver accu­mu­la­tion, in the same dol­lar terms at cur­rent prices, it would con­sume over half of the sil­ver pro­duced each year! In Asia, only phys­i­cal gold and sil­ver will do… and unlike the sup­ply of trea­sury bills, bonds or paper cur­ren­cies, the sup­ply of phys­i­cal gold and sil­ver is undoubt­edly finite.

We believe Asian demand for phys­i­cal gold and sil­ver is akin to a tsunami. While pre­cious met­als prices have cor­rected on the paper exchanges, the infla­tion resur­gence in Asia is qui­etly dri­ving new, unfore­seen lev­els of phys­i­cal demand for the met­als. While the world con­tin­ues to float on a sea of paper, this mas­sive wave of phys­i­cal demand silently threat­ens to crash into the phys­i­cal gold and sil­ver mar­ket, poten­tially wip­ing out tan­gi­ble supply.

Ref­er­ences:
1 Hook, Leslie. (Decem­ber 2, 2010) China’s gold imports surge five­fold. Finan­cial Times. Retrieved on Jan­u­ary 31, 2011 from:
http://www.gold.org/download/rs_archive/WOR5797_Gold_Invest_Report_China_Web.pdf

2 D’Altorio (Decem­ber 30, 2010) China’s Gold Rush. Invest­ment U. Retrieved on Jan­u­ary 31, 2011 from:
http://www.investmentu.com/2010/December/chinas-gold-rush.html

3 Pear­son, Made­lene. (Jan­u­ary 12, 2011) Gold Imports by India Likely Reached Record, WGC Says. Bloomberg Busi­ness­week. Retrieved on Jan­u­ary 31, 2011 from:
http://www.businessweek.com/news/2011–01-12/gold-imports-by-india-likely-reached-record-wgc-says.html

4 (Decem­ber 2, 2010) Gold Imports by China Soar Almost Five­fold as Infla­tion Spurs Invest­ment. Bloomberg. Retrieved on Jan­u­ary 31, 2011 from:
http://www.bloomberg.com/news/2010–12-02/china-gold-imports-jump-almost-fivefold-as-inflation-outlook-spurs-demand.html

5 The Sil­ver Insti­tute. Demand and Sup­ply in 2009. Retrieved on Jan­u­ary 31, 2011 from:
http://www.silverinstitute.org/supply_demand.php

6 Camp­bell, James (Jan­u­ary 12, 2011) Unre­lent­ing demand for gold below $1400 — Perth Mint. Retrieved on Jan­u­ary 30, 2011 from:
http://www.mineweb.com/mineweb/view/mineweb/en/page103855?oid=118307&sn=Detail&pid=102055

7 Ash, Adrian (Jan­u­ary 12, 2011) Shang­hai Gold Pre­mium Hits $23/Oz, China Opens 1 Mil­lion Gold-Savings Accounts. Lon­don Gold Mar­ket Report. Retrieved on Jan­u­ary 31, 2011 from: http://www.resourceintelligence.net/shanghai-gold-premium-hits-23oz-china-opens-1-million-gold-savings-accounts/14715

8 CNBC: Buy this pause in gold’s bull run, "Mad Money" host Jim Cramer advises. Retrieved on Jan­u­ary 31, 2011 from:
http://www.blanchardonline.com/investing-news-blog/econ.php?article=1697&title=CNBC%3A_Buy_this_pause_in_gold%27s_bull_run%2C_%22Mad_Money%22_host_Jim_Cramer_advises

9 China Gold Report: Gold in the Year of the Tiger. The World Gold Coun­cil (March 29, 2010). Retrieved on Jan­u­ary 31, 2011 from: http://www.gold.org/download/rs_archive/WOR5797_Gold_Invest_Report_China_Web.pdf

10 World Gold Coun­cil (April 1, 2010) World Gold Coun­cil and ICBC Enter into Strate­gic Part­ner­ship to Pro­mote China’s Gold Mar­ket. Retrieved on Jan­u­ary 31, 2011 from: http://www.gold.org/download/pr_archive/pdf/ICBC_MOU_010410_pr.pdf

11 World Gold Coun­cil. (Decem­ber 16, 2010) World Gold Coun­cil and ICBC launch first gold accu­mu­la­tion plan in China. Retrieved on Jan­u­ary 31, 2011 from: http://www.gold.org/download/pr_archive/pdf/2010–12-16_ICBC_GAP_release.pdf

12 Ash, Adrian (Jan­u­ary 31, 2011) Gold Shorts Beware China’s Million-Strong Gold Savers. Forbes. Retrieved on Jan­u­ary 2011 from: http://blogs.forbes.com/greatspeculations/2011/01/13/gold-shorts-beware-chinas-million-strong-gold-savers/

Copy­right © Sprott Asset Management

Tags: China, Chinese Demand, Chinese Investment, Computer Screens, David Franklin, Eric Sprott, Fivefold Increase, Gold, Gold And Silver, Gold Bullion, Gold Imports, Gold Jewelry, Gold Producer, India, Investment Outlook, Investment Purposes, Monetary Asset, precious metals, Retail Demand, Russia, Silver, Silver Bullion, Stocks Bonds, World Gold Council, World Investors
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Gold Stocks Reverse Downtrend

Monday, February 7th, 2011

I pub­lished a post a week ago, pos­ing the ques­tion “Gold bul­lion – is a cycle low immi­nent?” I con­cluded the post as fol­lows: “Although it is dif­fi­cult to pin­point short-term bot­toms, I am of the opin­ion that the gold bull mar­ket remains intact, espe­cially with infla­tion blow­ing up all around the world. Mean­while, China and a num­ber of other Asian coun­tries keep adding gold to their reserves. These pur­chases should pro­vide a floor to price declines – an “Asian put” so to speak.” Gold bul­lion was $1,335 at the time of writ­ing and has since moved up to $1,349.

Gold shares recorded a so-called upward dynamic on Thurs­day, under­pin­ning the view that the pull­back from the Decem­ber high has been a nor­mal down­wards reac­tion within a bull trend.

John Mur­phy of StockCharts.com on Fri­day said: “My Tues­day mes­sage showed the Mar­ket Vec­tors Gold Min­ers ETF (GDX) test­ing long-term sup­port at its 200-day mov­ing aver­age, and sug­gested watch­ing it closely for signs of an upturn. Today’s strong rally in pre­cious met­als assets may be the start of that upturn. The chart below shows the GDX surg­ing more than 2% today and clear­ing its 20-day mov­ing aver­age (green line) for the first time this year. In addi­tion, its 14-day RSI line (top of chart) has turned back up. The daily MACD his­togram (below chart) has also turned pos­i­tive (see cir­cle) for the first time in two months. In my view, these signs of improve­ment increase the odds that the pull­back in pre­cious metal stocks is over. Gold and sil­ver stocks are ral­ly­ing on the backs of their respec­tive commodities.”

Source: StockCharts.com

Sep­a­rately, Adam Hewi­son (INO.com) also pro­vided a brief video analy­sis on the tech­ni­cal out­look for gold. When the video was pro­duced ear­lier in the week he argued that a buy sig­nal had not yet been given, but this has just hap­pened by means of a daily trade tri­an­gle sig­nal and a pop to the upside appears likely. Click here to access the presentation.

Tags: Asian Countries, Bottoms, China, Commodities, ETF, Gold, Gold And Silver, Gold Bullion, Gold Shares, gold stocks, Macd Histogram, Market Vectors Gold Miners, Moving Average, Precious Metal Stocks, precious metals, Price Declines, Pullback, Silver, Silver Stocks, Technical Outlook, Trade Triangle, Upturn, Vectors Gold Miners, Video Analysis
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