Update on Minera IRL and Ollachea

Those who have followed the trials and tribulations surrounding Peruvian junior gold miner, Minera IRL, which owns the existing Corihuarmi gold mine in Peru and the hugely prospective Ollachea gold project in the same country will be thankful that the ongoing saga may be coming to a successful end for the company.  The company is now now led by Diego Benavides – a long time director and champion of the company and who has an excellent relationship with the community around the Ollachea project whose goodwill will be an important factor in the development of a mine there.

Minera IRL is focused primarily on gold. The shares of the company are listed on the Lima Stock Exchange in Peru ( Bolsa de Valores Lima) (BVL:MIRL) and the Canadian Securities Exchange. (CSE:MIRL). The Company is in discussion with a London-based financial adviser, to help explore the options for re-listing the company in London and then advising and assisting with the listing process. (Minera IRL used to have an LSE AIM listing until it got mired in some seemingly unsavoury moves to try and wrest control by some Canadian/Peruvian individuals following the untimely death of company co-founder and driving force, Courtney Chamberlain.

Now, Minera IRL is led by a tightly knit team of experienced mining executives, engineers and geologists.

The company operates the Corihuarmi gold mine in the high Andes of central Peru, which has been in continuous production since the first quarter of 2008 but is eking out its final days as reserves are depleted, but is still producing a little over 5,000 ounces of gold a year.

Minera IRL’s flagship project is Ollachea, an advanced gold development project with high potential for reserve and resource expansion located in southern Peru. An Optimization Study to the 2012 Definitive Feasibility Study was completed in the second quarter of 2014, which outlined the presence of a robust underground mining operation. A drilling program of approximately 5,200 meters has been completed in the Minapampa Far East zone.

The company has been granted all of the significant environmental, social and construction approvals needed to build the Ollachea Gold Mine.  However the decisions necessary to move ahead were stymied by an ongoing dispute with Peruvian bank COFIDE which now seems to have ended in Minera IRL’s favour which would allow it to go ahead with the Ollachea development at last.

I am indebted to blog site Inca Kola News for keeping me up to date with the latest developments in reporting as follows:

“On Friday at 11:27pm the tribunal arbitrating on the case between Minera IRL (MIRL.cse) and quasi-State bank COFIDE over the fate of the Ollachea project and the U$70m bridge loan forwarded by COFIDE to the mining company published its verdict on the case. You can read it here. The need-to-know is:
  • The tribunal has found in favour of Minera IRL and against COFIDE
  • COFIDE has been ordered to pay U$18.75m in damages, plus another U$13.96m in loss of earnings. 
  • The tribunal also struck off all interest payments due on the U$70m bridge loan due as from July 17th, which I believe comes to around U$16m. 
  • Along with another small award, the total award package comes to just over U$50m
This is a massive win for Minera IRL, be in no doubt. Just the U$32m cash award is around U$0.14 per share (C$0.17). The whole package is worth around USD 22c/share with the interest write-off included. Plus of course IRL can now get on, fund and build its mine.” 
The Ollachea Project

Minera IRL acquired an option for the Ollachea project and began exploration fieldwork in 2008. The project is located in Peru‘s southern Puno district about 250 kilometers north of Lake Titicaca, on the eastern escarpment of the Andes.

Studies demonstrated the feasibility of a low-cost underground mining operation and Minera IRL is advancing with engineering studies. A large reserve base has been delineated and on-going drilling continues to produce promising results.

Logistically, the project benefits from easy access via the new Interoceanic Highway and it has a guaranteed electricity source from the nearby San Gaban hydroelectric station. There is abundant water. The Peruvian government has approved the project‘s environmental impact study and permits for construction.

The project has strong support from local communities, in both the direct and indirect areas of influence. The Ollachea mine project is expected to become an important source of employment in the area.

The company also signed an unprecedented 30-year surface rights agreement in 2012 and as part of that long-term agreement, the Community of Ollachea will earn a 5% participation interest in the mine once it begins commercial production.

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Volatile week for Gold

The time since the Labor Day holiday in the USA has seen some particularly volatile movements in precious metals prices.  My commentaries on this published on the http://www.sharpspixley.com website appear below.  Click on the titles to view full articles:

Precious metals prices underwent some heavy corrections in the past week but now seem to be picking up again, We still feel the overall trend is positive.

GOLD SEE-SAW: UP IN EUROPE, DOWN IN USA

Gold is riding something of a see-saw at the moment with positive price movement in European trade being counterbalanced by a pull-back when U.S. markets start to dominate. But overall we see the pattern as positive.

Gold ETFs, Big correction in gold, silver, pgm prices, China’s latest gold reserve figures – only a small increase

My latest articles on the http://www.sharpspixley.com website look at the goings on in precious metals markets, the rise and rise in gold ETFs and China’s not so big latest gold reserve increase.  Click on the titles to read full articles:

A WGC analysis of global gold ETFs shows that they are near levels last seen in 2012 when they were at a record. This indicates that the big money is again investing in gold amid nervousness of an equities market meltdown.

Big correction in gold, silver and platinum. Equities recover.

 Precious metals prices suffered a major correction on Thursday and Friday after flying high at the beginning of the trading week. Equities picked up strongly after major falls earlier.

China says it only adds 5.9 tonnes of gold to reserves in August

The Peoples Bank of China reports adding only 5.91 tonnes of gold to its reserves in August – the lowest monthly addition since it restarted reporting monthly gold reserve increases in December last year

 

Gold, silver, pgms – all catching fire

My initial articles on sharpspixley.com/metalsdaily.com this month look at the current strength in precious metals.  Click on the titles to read in full:

GOLD APPROACHES $1,550 AGAIN, SILVER $20, PLATINUM $1,000 –ALL STILL MOVING UP!

From being the forgotten asset segment, precious metals have caught fire in the past month and a half and ,look like they have further to run, while equities are looking vulnerable

PLATINUM COMING LATE TO THE PRECIOUS METALS PARTY

In the past week the platinum price has started to play catch-up with the other precious metals and rose around 9%. We suspect it will shortly hit $1,000 but still has a long way to go to top the current palladium or gold price.

Chinese, Russian and Swiss gold data

Three more recent articles which I have published on sharpspixley.com look at massive silver ETF and institutional buildup, latest Russian gold reserve figures, Swiss gold exports and China cutting back on gold imports.  Click on titles to view full articles:

Is Russian Central Bank reducing its gold purchases?

The latest gold reserve figure from The Russian central bank shows the addition of 9.33 tonnes of gold to the nation’s forex reserves in July, back to the lower levels seen earlier in the year. Does this indicate a trend to lower accumulations?

Swiss gold exports re-distributed as Chinese imports curtailed

There has been a drastic change in the latest destination figures for Swiss gold exports with China apparently curtailing gold imports, but the UK taking pride of place as a destination due to the rise in Gold ETF deposits.

 

Enormous silver ETF inflows. Is it about to take off?

Massive flows of silver bullion into ETFs and Mutual Funds over past 2-3 months suggest something very positive may be afoot in future silver price movement

 

“This is the real move in gold and silver… it’s going to be multiyear.”

Interview by Mike Gleason of Money Metals Exchange with David Morgan

Precious Metals Soar on Falling Yields, Global Currency Turmoil

Mike Gleason: It is my privilege now to welcome back our good friend David Morgan of The Morgan Report. David, it’s always good to have you on and appreciate you joining us today. How are you, sir?

David Morgan: Mike, I’m doing all right and it’s good to be with you.

Mike Gleason: Well, David, I know we don’t have a whole lot of time today, but I’m really glad we’re able to speak to you this week because we’re finally seeing some real fireworks here in the metals lately. And I wanted to get your comments.

I should mention that we’re talking here on Thursday morning and we’ve got gold hovering around $1,500 and silver right at about $17. They both popped above those respective key levels yesterday, Wednesday. So first off, what do you make of this move, David? What’s driving it? And the bigger question, will it be sustained?

David Morgan: Well, what’s driving it is something that no one’s really, really talking about. This is my opinion. Of course, you’re asking for my opinion. A lot is the financial press, “Well, It’s all about this trade war with China and the trade war is getting worse. And there’s going to be more sanctions coming in,” and on and on and on. And that may have something to do with it.

But first of all, the underlying fundamental is financial uncertainty. That’s number one. But beyond that, it’s really something going on in the physical market that no one’s really writing about and I don’t know enough about the state other than it’s got to be part of it. The reason I say that is that the paper paradigm is very clear on how the markets move in the futures markets with trading this paper back and forth for contracts to buy and sell silver. And all they really do is set the paper price.

And of course the metals price goes along with that. I’m not trying to discount that very much. What I’m trying to state is that the paper markets dominate the price over and over again. And every now and again you’ll get in a situation like this where something’s going on, where something needs to be fulfilled and accomplished, and it hasn’t been settled out yet.

So for an example, let’s say there’s some bank that’s demanding a physical settlement in gold and they haven’t received it yet. Once that’s accomplished, you may, and most likely, see the market cool off and go more into some type of trading range where you’re more apt to be able to look at the paper trades, more of what we call levels that we’re used to seeing.

So, I think there’s something out there. Whether that’s occurring with silver or not, I doubt it, right now based on the fact that silver has been lagging gold so much. And there’s a couple of gaps in the charts that will probably be filled, one, you haven’t missed this move at all. If you bought yesterday at maybe the high, I don’t know yet, and it goes down and let’s say silver makes it all the way back down into the, I don’t know, $15.50 range or something, you haven’t missed much. Yeah, you wouldn’t want to buy and see a loss right away. But what I’m trying to state is this, I’m convinced, is the real move. It’s going to be multi-year. And silver and gold, at the end of three, four years from now are going to be substantially higher than they are today.

Mike Gleason: Certainly strong comments. You’re always take a very level-headed approach and have not been just pumping sunshine over these last several years every time we get a rally. So, that’s definitely something that we should all take note of.

Now, silver, you mentioned this, silver does seem to be underperforming a little bit vis-a-vis gold. And now we’ve seen the gold-silver ratio come down from, I think I saw it 93 to one, maybe about there, within the last few months. It’s about 88 to one right now. So, silver has gained somewhat but maybe not quite like you would expect given a big bull move and given that silver should vastly outperform gold in a bull market. So is this seeming lack of out performance from silver a cause for concern?

David Morgan: Somewhat still it is. First of all, I like to see, I mean 80 to 1 at a minimum. And even there that’s an extreme.

When I started the previous website – my website, I think everyone knows is TheMorganReport.com – I rebranded that for years now because I want everyone to be aware that I cover all the resource sector, lithium, rare-earths, et cetera, and not just silver.

But back in the older days with Silver-Investor.com, when I started that website, the ratio was 80 to one, and that was an extreme. And if you would have asked me, even, I don’t know, three years ago, a couple years ago, “Will you see the gold-silver ratio above 80 to one?” I would’ve said, “No. I really, really doubt it” and I’m wrong. It’s got to about 93, 4, 5, somewhere in that range.

So, to really be convinced that, and first of all, I’m convinced that we’re in a new bull market, to be convinced that things are, let’s say, going to show both metals really outperform many other sectors, the equity markets, the bond market, the real estate market, everything else, and take the dominating lead as this currency crisis continues, I want to see silver below a 70-to-one ratio. That would be ultimate confirmation for me, Mike that okay, we’re well on our way, and we’re not. We’re at 88.

Silver has some work to do. Silver is, in my view, much more difficult to analyze than gold, but it can make these moves rather drastically and quickly as gold is doing. Of course, silver’s done pretty good job here of late picking up some momentum and moving from the doldrums into the 17, which is still dirt cheap.

I mean, if you take an AISC, all-in sustaining cost, for some of the major silver producers, they’ll tell you they’re at $15 but they don’t tell you is what their taxes are. So if you add those in, a lot of them are right at basically where we’re at, in other words $17. They’re just break even.

And for any company, what they’re making dresses or corn chips or cola, you want as wide a margin as you can get commensurate with what the market’s willing to pay for your product. And in the case of silver, these companies are still struggling at these levels. So, silver’s got a long ways to go, as does gold, for the margins to be large enough for these companies to breathe easy and have a viable business and be able to have a cashflow that allows them to go out and explore further or retain assets or whatever. So, I see a lot of upside but I’m also anxious for silver to kind of show its wings and fly, and that type of thing.

Mike Gleason: Gold has risen to levels last seen in 2013 when it broke down. But silver obviously is nowhere near those levels, which was say the mid-20s at about that point. What is it going to take for silver to get back above that say into the $20 plus range and what are some of the key resistance points you’re watching for silver between here and there and then beyond?

David Morgan: Okay. Well for, yeah, it does take more interest in the metals all together. Obviously there’s a lot of interests coming in, but it’s mostly institutional. It’s not your retail (investors) at this time. I talk to many dealers such as yourself, Mike. And what I found out was a little bit surprising. A lot of this trading is going through, as I said, institutions which means futures trading and ETFs and a lot of the retail investors are saying, you know what gold’s back to where I bought it, I bought it at this $1,450. It’s there, I’m selling it back. So a lot of the retail investors aren’t believing this rally is for real. And what they’re doing is basically getting their money back. Not all of them of course, but so there’s a lot of work to be done on the silver side. There is lots of areas of resistance on this.

Pulling up a chart as we’re speaking, Mike, because I anticipated this. So there’s huge resistance at $17, which is where we’re at right now as we speak. Will it get through that? Yes. Eventually it will. Will it instantly? I doubt it. I think it’ll come back and fill the gap. And I’m going to do an update for my paid members here, show them where a good entry point is. If they have stopped, if they want to get into this market or add to their positions, whatever. Normally I do that all through equities. I use the futures as a proxy for the overall market. Doesn’t mean you should do futures. In fact, a dissuade anybody from using the futures market. It’s just, that’s where the price is set. So it’s easier to analyze, and I can show them on the chart when silver gets to this level, that’s a good time to start buying your top tier or your favorite junior or whatever you’re going to do.

So, $17… $17 to $17.25 is a pretty big area of resistance. After that, it floats up to a really $19-20 pretty easily. So once we work through that level, Mike, you’ll probably see an acceleration of silver from, I’m going to say $17.50 up to $19.50 I expect it to go to that level fairly quickly. It won’t be like two trading days, but it may probably won’t take very long. Silver could surprise anybody, even me as far as how it reacts. It doesn’t seem to ever do what you expect it to do. But regardless it will outperform and we do need to see a higher level. Once again, over the $20 level, I think the psychology will change and people will say, “It’s silver, not so bad.” Now, they won’t touch at $15. I know you guys sell silver at all levels and every day and there’s always purchases.

But, mark my words, you check the volume and activity at your business. How many people are calling in and buying silver or when it gets silver when it gets over $20, what it’s doing now, and I’m sure you’ll be selling more at that level. People just love to buy the metals at a higher price. When I’m pounding the table saying “This is it.”

Because most people don’t want to put up with, the time, the patience that’s required, if you bought silver at $14 at the end of 2015. Watched it rally all the way up to $21. I was convinced at that time where the bull mark was back in tact. And in a way it is, I mean if you look at gold from that perspective, that’s where it bottomed and has had high or lows all the way up. Silver’s chart doesn’t look like that. Silver bottoms at the same time as gold, which is December, 2015. and it has not made high or lows all the way up. And we’ve basically stayed flat to about $15.75 and then it broke down from there and it got down as low as the 14s. So still higher than it was in December, 2015 but a messy chart, let’s say.

Mike Gleason: Yeah, there’s certainly some big, big levels above us and yeah, I agree. I think when we see silver, get that two handle again. I think that’s when a lot of people are going recognize that okay, it’s time to start moving and the smart people will do it before then.

Again, thanks David for fitting us in. I know we had a tight window here and it’s been great to have you on. But as we wrap up though, I want to give you a chance to fill our audience in on any of the other markets that you’re looking at here.

David Morgan: Sure. Always looking at the equity market and of course the bonds are the key and the currency markets – we looking at everything really. I think the stock market is showing some wear. It’s been a bull market for quite some time. It’s overvalued by any metric you want to use. I’m looking at that and see it get rolled over further. And then bond market of course is the key because this is the debt markets that everything depends on and how much faith there is in that is going to determine the future of the financial system. So, those are key currencies. As I’ve said many times you can see gold and the dollar go up. Dollar’s making new highs. Gold’s making a six year high. And I said “Watch.” And of course here we are. There’s a reason for that. So, I think that’s about it.

I just close out, I got this email. “I’m a young guy, I have a high conviction, precious metal is the best place to be in the next three to five years. I’m in need of guidance of how to build a long-term precious metals portfolio. I want to fund this as soon as possible. I know you’re not a financial adviser, but you offer services that will help me start a precious metal portfolio. I continue to monitor the market on an ongoing basis with your analysis, can you help me?” And that’s almost precisely what I do. So, I will get with this gentleman and kind of reaffirm what he’s already asking. Can you help me? Yeah, that’s what our business is. So anyway, if you want to learn more, just go TheMorganReport.com put in a first name and an email address, be happy to put you on our free list. And you can determine from there, if you want to go further.

Mike Gleason: There’s probably no better time to get in and get on board with services like The Morgan Report, and the great commentary that David and his team put out there. And, and just see what’s going happen and what they have to say about these markets as we could be entering this new bull phase. I mean, you heard David say it, he’s convinced we’re in a new bull market and this is going to be an exciting time and the time that precious metals investors have been waiting for, for a number of years. So definitely urge people to take advantage of that and go to TheMorganReport.com it’s truly great stuff. You have just heard what David was talking about. A great approach to all these markets and lots and lots of experience over the years. He’s seen everything.

Well good stuff David. Always appreciate it. Thanks so much. I hope you enjoy the rest of your summer and I can’t wait for our next conversation, take care.

David Morgan: Thanks so much Mike. It’s great to be back with you.

Low or negative interest rates drive gold to new interim highs as Central Banks continue to buy

With Yields Sinking Everywhere, Gold Just Hit New All-Time Highs…

By Frank Holmes – CEO and Chief Investment Officer U.S. Global Investors

With Yields Sinking Everywhere, Gold Just Hit New All-Time Highs…

“It is no longer absurd to think that the nominal yield on U.S. Treasury securities could go negative,” Joachim Fels, PIMCO’s global economic advisor, warned investors last week. “Whenever the world economy next goes into hibernation, U.S. Treasuries—which many investors view as the ultimate ‘safe haven’ apart from gold—may be no exception to the negative yield phenomenon.”

Fels seems not to be the only investor with this idea, judging by the increased demand for gold.

The price of the yellow metal had its best week in nearly two months as the total value of negative-yielding debt around the world touched a new record of $15 trillion. With the nominal yield on the 10-year Treasury having fallen below 2 percent—and just shy of 0 percent on an inflation-adjusted basis—gold surged above $1,500 an ounce in U.S. dollars (USD) for the first time since September 2013.

It also hit historic all-time highs when priced in a number of other world currencies, including the British pound, Russian ruble and Indian rupee. Last week, the central bank of India, along with those in New Zealand and Thailand, surprised markets by cutting rates more than expected, adding to fears that an economic slowdown is imminent.

On Wednesday, gold’s performance for 2019 caught up with and surpassed that of the stock market.

gold is now beating the market year-to-date
click to enlarge

Analysts at Goldman Sachs now say that $1,500 is only the beginning, and that we could see $1,600-an-ounce gold within the next six months.

“If growth worries persist, possibly due to a trade war escalation, gold could go even higher, driven by a larger ETF gold allocation from portfolio managers who still continue to under-own gold,” Goldman analyst Sabine Schels said in a note to investors last week. “Gold ETFs have recently built momentum almost as strong as in 2016, and we believe that can be maintained in the short-term.”

Indeed, gold ETFs attracted $2.6 billion of net global inflows in July alone, raising their collective holdings to 2,600 tonnes—a level unseen since March 2013, according to the World Gold Council (WGC).

A $1.2 Trillion Hit to the World Economy

For further insight on global trade, Goldman no longer believes a resolution to the U.S.-China trade war will occur before the 2020 presidential election. On Friday, in fact, President Donald Trump told reporters that “we are not ready to make a deal” with China, “but we’ll see what happens.”

Should the trade war continue to escalate, it could cost the world economy “dearly,” according to Bloomberg. New modeling by Bloomberg analysts shows that global GDP would be 0.6 percent lower by 2021, amounting to a whopping $1.2 trillion hit, if markets slumped as a result of a full blown trade war.

Currency Wars Are Pushing Up the Price of Gold

Again, it’s not just USD-priced gold that’s done well in recent days. The precious metal blew past new all-time highs in a number of currencies on top of those I already mentioned. They also included currencies in major gold-producing economies such as Australia, Canada and South Africa. Australia’s dollar traded at its lowest level against the USD since the financial crisis a decade ago.

gold has hit all-time highs in multiple currencies
click to enlarge

One of our favorite ways to play this appreciation is with Russia gold stocks, particularly Moscow-based Polyus, which was up nearly 55 percent in the 12 months through August 8. Its peers, Polymetal (up 51 percent) and Highland Gold (75 percent), have also been winners in a strong gold-price environment.

Russian gold stocks have made giant moves
click to enlarge

“Polyus is undoubtedly a growth company,” according to equity research firm Wood & Company. Analysts there note Polyus’ lower-than-average production cost of only $348 an ounce last year and attractive valuation of 6.8 times price-to-earnings (P/E). “It offers a decent yield more long-term growth than any other stock in Russian metals and mining, and we believe the sanction risks are small,” Wood analysts write. The producer’s dividend yield is expected to average between 5 percent and 6 percent this year, well above its peers.

Beijing Wants Even More Gold in Its Reserves

In other currency war news, China added to its official gold holdings for the eighth straight month in July. Its central bank increased holdings as much as 10 tons, after raising it 84 tons in June. Total holdings now stand at 62.26 million ounces, as the world’s second largest economy expands its efforts to diversify away from the USD.

China added to its gold reserves for eighth straight month
click to enlarge

As I explained earlier last week, China allowed its currency, the renminbi, to weaken past 7.0 versus the USD, a level not seen since 2008. This was just the latest development in the country’s trade spat with the U.S. that’s nearing its 18th month.

Doctor Copper Hits a Two-Year Low on Growth Concerns

Fears of slower growth may be beneficial for the price of gold right now, but they’re taking a toll on copper, often seen as a barometer for the global economy. The red metal is widely used in, well, anything that needs to conduct an electrical charge, and when a slowdown in industrial demand is expected, prices struggle.

Take a look below. Copper has more or less followed the global manufacturing purchasing manager’s index (PMI) down over the past year and a half. Factories across the globe contracted for the third straight month in July.

copper price falls to a two-year low on weaker manufacturing demand
click to enlarge

As the Wall Street Journal puts it, the slide “threatens to limit investment in new mines, a trend that industry analysts and executives say could lead in coming years to sizable shortages of the material critical to manufacturing and renewable-energy projects.”

The price of copper slid as low as $2.53 per pound on last Monday, a 52-week low and nearly 25 percent down from its recent high of $3.30 from last June.

An economic gauge of heavy copper-using manufacturers indicated contraction in July. The Global Copper Users PMI fell from 50.0 in June to 48.6 last month, the weakest result in five months, according to IHS Markit.

“Companies noted that raised trade tensions played a part in reducing production, as new export orders fell at a sharper rate,” said IHS Markit economist David Owen, who added that weakness in the European auto sector also played a role in declining copper demand.

Gold stars aligning; China reserves and demand and trade war escalation impact

Four recent articles wRitten by me and published on the Sharps Pixley website.  To read the articles in full click on the titles

Gold: The Stars are all Aligning – Again

The latest issue of Grant Williams’ Things that make you go hmmm.. newsletter point to market performance parallels with that ahead of the Great Depression and other major recessions as well as other factors seen as positive for gold

Chinese 2019 gold demand still slipping but don’t panic

Latest gold withdrawal figures for July from China’s Shanghai Gold Exchange suggest that Chinese gold demand continues to falter this year, but any shortfall in demand is being counterbalanced by gains elsewhere.

China says it added 10 tonnes to gold reserves in July

The Chinese Central Bank reports adding just short of 10 tonnes of gold to reserves in July while overall Central Bank purchases remain elevated and gold ETF holdings rise.

U.S./China trade war escalation drives gold to $1,500

The apparent escalation of trade tensions between the world’s two biggest economies, the U.S. and China, has given a huge boost to the gold price which is hovering close to the US$1,500 level.

 

Peak gold, Fed rate cut and Palladium

Three of my recent articles published on the Sharps Pixley/Metals Daily websites

Peak gold continues to be elusive– WGC

The latest Gold Demand Trends report from the World Gold Council covering Q2 2019 shows that global gold supply is still rising despite many commentators suggesting we are already reaching/have already reached ‘Peak Gold’.

Has palladium had its day in the sun?

While gold has seen a decent price rise, palladium has seem something of a price collapse to below that of the yellow metal. Will it recover to be worth more than gold again?

Gold and silver dive on less downbeat Fed but recover fast

The U.S. Fed decision to cut interest rates by 25 basis points as ‘insurance’ and a more upbeat outlook in Fed Chair Powell’s subsequent statement saw all thee precious metal prices marked down sharply. – but for gold and silver not for long.

 

Gold Demand Trends Q2 2019

Here’s a summary of some of the key findings in the World Gold Council’s Q2 Gold demand Trends report.  For further details click on: https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2019

Central bank buying and ETF inflows boosted H1 demand

Gold demand was 1,123t in Q2, up 8% y-o-y. H1 demand jumped to a three-year high of 2,181.7t, largely due to record-breaking central bank purchases.

Central bank buying and healthy ETF inflows were the driving forces behind gold demand throughout the first half of 2019. Growth in H1 jewellery demand was largely the product of a more positive environment for Indian consumers. Shifts in bar and coin investment were very much price-related: as the gold price powered its way to multi-year highs, profit-taking kicked in and retail investment all but dried up. The technology sector reduced its usage of gold due to challenging global conditions, although the outlook is for this element of demand to establish something of a floor over coming quarters. Solid growth in both mine production and recycling fed into a 2% increase in total H1 gold supply.

H1 gold demand boosted to a three-year high by record central bank buying

Highlights

Central banks bought 224.4t of gold in Q2 2019. This took H1 buying to 374.1t – the largest net H1 increase in global gold reserves in our 19-year quarterly data series. Buying was again spread across a diverse range of – largely emerging market – countries.

Holdings of gold-backed ETFs grew 67.2t in Q2 to a six-year high of 2,548t. The main factors driving inflows into the sector were continued geopolitical instability, expectation of lower interest rates, and the rallying gold price in June.

A strong recovery in India’s jewellery market pushed demand in Q2 up 12% to 168.8t. A busy wedding season and healthy festival sales boosted demand, before the June price rise brought it to a virtual standstill. Indian demand drove global jewellery demand 2% higher y-o-y to 531.7t.

Bar and coin investment in Q2 sank 12% to 218.6t. Combined with the soft Q1 number, the H1 total ended at a ten-year low of 476.9t. A 29% y-o-y drop in China accounted for much of the global Q2 decline.

Gold supply grew 6% in Q2 to 1,186.7t. A record 882.6t for Q2 gold mine production and a 9% jump in recycling to 314.6t – boosted by the sharp June gold price rally – led the growth in supply. H1 supply reached 2,323.9t – the highest since 2016.

Gold prices shot to multi-year highs. The gold price broke through US$1,400/oz for the first time since 2013. Among the factors driving this rally were expectations of lower interest rates and political uncertainty, with further support coming from strong central bank buying.

Personal Views on Brexit

This is a bit of a departure from the normal subjects on this site – Precious Metals – although the  eventual outcome, one way or the other, of the UK’s Brexit dilemma may have a, perhaps brief, impact on prices.  Personally I’m a Remainer turned Leaver convinced that the ultimate outcome of a departure from the restrictions imposed on the UK by EU rules and regulations will be beneficial – and I also think that there’s a good chance that the EU will implode anyway within the next few years with, or without, Brexit.

I have penned a longish piece on why I now feel positively towards a deal, or no-deal, Brexit which has just been published on the South African-based business website, Biznews,com run by Alec Hogg who I used to work for when he owned and ran Moneyweb.  Moneyweb is a largely South African business website which had spawned Mineweb – a very international website on global mining investment – probably the leading global mining website at the time.  I was employed to manage and edit this latter site which I did for some years until Alec lost control of that business and the subsequent policy change by the new owners of Mineweb to withdraw from its international focus to what it is today – just a South African focused ancillary to the current Moneyweb.  This did not appeal to me so I switched my writing to this site, and to Sharps Pixley and US Gold Bureau where my articles on Precious Metals now appear,

I asked Alec if he would be willing to publish my Brexit views because the subject matter does not fit in with Sharps Pixley or US Gold Bureau, and Biznews has a far wider, and broader,  readership than lawrieongold – even in the UK.  And he kindly welcomed the suggestion – so here’s a link to the full article as it appears on Biznews – https://www.biznews.com/global-citizen/2019/07/28/lawrie-williams-brexit-boris-leave.

Whether you agree, or disagree with my arguments I hope you enjoy reading it.

Silver picking up steam

My latest silver post on sharpspixley.com/metalsdaily.com:  Relevant because of silver’s latest surge but slightly outdated already in that silver, having stagnated fir a long time with the Gold:Silver ratio climbing to over 93, has seen it come back down to 87 meaning that the metal price has hugely outperformed gold over the past few days.  Also, not mentioned in the article is the fact that there have been enormous inflows into the SLV silver ETF over the past month which suggests some of the big players may well have anticipated a silver lift-off – if indeed they haven’t been directly responsible for it.  Click on the title to read full article:

SILVER PICKING UP STEAM AS GOLD BURSTS UPWARDS

18 Jul 2019 – Silver had been the poorest performer among the precious metals, but this week, as gold has also seen something of a renewed surge, silver has been picking up nicely with the GSR coming down a few points at long last

 

Gold’s bounce, disappointing silver, China gold reserves and demand, Silver Top 20, gold bullish amid headwinds

As regular readers of lawrieongold will know, nowadays I am primarily publishing my articles on the Sharps Pixley /Metals Daily’s websites rather than here on this site.  Links to my most recent articles follow:

GOLD BOUNCES BACK BUT SILVER STILL DISAPPOINTS – FOR NOW

13 Jul 2019 – Comments from Fed chairman Jerome Powell confirming the likelihood of a rate cut at this month’s FOMC meeting have given the gold price a bit of a boost, but silver continues to disappoint, But for how long?

CHINA CONTINUES TO ADD TO ITS GOLD RESERVES – BUT AT LOWER RATE M/M

09 Jul 2019 – The Chinese Central Bank has announced it added 10.26 tonnes of gold to its forex reserves in June – a lower level than the prior two months’ additions. Total global Central Bank accumulations are already up 73% this year according to the WGC.

WORLD TOP 20 SILVER PRODUCERS AND METAL’S PRICE PROSPECTS

09 Jul 2019 – Even though it saw a 3% production decline for silver last year,but still reckons on a supply surplus, UK precious metals consultancy is marginally bullish on the metals price prospects in H2. Top 20 silver producers tabulated.

2019 H1 China gold demand lowest for five years

08 Jul 2019 – June gold withdrawal figures out of the SGE show that the downturn in Chinese gold demand is still slipping compared with the previous 2 years – and hugely below that seen in the record 2015 year

Gold price faces some headwinds but prospects remains bullish

07 Jul 2019 – Gold and silver prices were brought back sharply following the Independence Day holiday in the U.S. closing the week below $1,400 and $15 respectively, but we anticipate the latest setbacks to be shortlived.

My initial July gold and silver articles on Sharps Pixley websites

The gold price started July positively, silver rather less so and my initial takes on this, as published on the http://www.sharpspixley.com Metals Daily website are linked below.  Note the dates of the articles.  Gold and silver may have performed a little differently (positively in gold’s case) since the articles were written. Click on the titles to read in full:

Gold catches another wave ahead of U.S. holiday

04 Jul 2019 – The gold price moved sharply upwards over $1.400 on Tuesday and remains above that level for the Independence Day holiday. Will prices move on further once th holiday is over next week? Silver, though, remains muted

Silver should be good to go

03 Jul 2019 – Silver has been the weak link in the precious metals chain, but is should start to play catch-up alongside a booming gold price’

 Gold: What a difference a month makes

01 Jul 2019 – June saw the gold price increase by around $100, and more at one time, before falling $30-40 back after various accords at the G20 meeting. What will happen now?

 

Swiss gold exports, Indian imports, GLD massive addition, Russian and Chinese gold reserves – my recent Sharps Pixley articles

I may be winding down the lawrieongold site as far as original articles are concerned, but I am still writing on precious metals – primarily for the Sharps Pixley/Metals Daily site.  My most recent articles are linked below.  To read them in full click on the titles:

Swiss gold exports – India surges back on top in May

25 Jun 2019 – The latest Swiss gold export figures for May see India regaining its place as comfortably the leading recipient and over 80% of Swiss gold exports still heading for Asian and Middle Eastern markets

GLD adds massive 35 tonnes of gold Friday

24 Jun 2019 – As an indicator of a massive change in investor sentiment towards gold, Fridays 35 tonne increase in the GLD holding stands out, while silver’s continuing underperformance could make it a bargain buy

Gold tops $1,400, falls back but recovering

21 Jun 2019 – The gold price shot past $1,400 in overnight trade before falling back nearly $20 this morning. but in European trade gradually made up much of its lost ground again. Can it close the week above $1,400?

Russian gold purchases slowing? – 6.22 tonnes in May

21 Jun 2019 – In May the Russian Central Bank reports adding 200,000 ounces (6.22 tonnes) of gold to its reserves – well below the levels reported for the three months previous, but whether tis represents a slowing down of gold accumulations is too early to tell.

Can gold’s breakout be sustained?

20 Jun 2019 – Statements from the U.S. Fed, the ECB and a tweel from the U.S. President all combined to give precious metals a sharp price boost. Are the new levels, and a likely increase in expectations for the second half of the year, sustainable?

Gold at $1,350 and silver at $15 – what now?

14 Jun 2019 – The gold price briefly rose back above $1,350 – indeed it even touched $1,360 – before being brought back down at one time to below $1,340. The rise was due to, increasing U.S/Iran tensions – but what next

China upping the ante in gold reserves

11 Jun 2019 – The Chinese central bank reports having added 15.86 tonnes of gold to its reserves in May – the highest level so far in its current spate of reporting apparent monthly increases.

 

Some thoughts on silver’s poor performance vis-a-vis gold.

What is puzzling in the precious metals space is the underperformance of silver in comparison with gold during the latter’s very sharp recent price rise. Historically silver tends to outperform gold percentage wise when the latter is rising sharply.  This time around, so far, this has not been the case,  Silver guru Ted Butler puts this down to continued price manipulation on the U.S. COMEX Futures Exchange – see: http://silverseek.com/commentary/stranger-fiction-17678 for his latest outspoken commentary on this subject, and who he sees as the main culprits.

Meanwhile appended below is Stefan Gleason’s latest commentary from Money Metals Exchange, where he predicts a potentially explosive rise in the silver price should gold continue its upwards path.  Gleason heads up a precious metals trading business in the U.S. so he does have an interest in higher prices, but his views on the current silver situation are echoed by many perhaps more impartial observers too:

Will Silver Soon Follow Gold’s Lead?

Gold Price (June 21, 2019)

To be sure, there is also the possibility of some retracing and back-testing this summer before the $1,400 level is conquered for good.

The fall and winter periods are typically more conducive to big precious metals rallies.

Seasonality, however, isn’t a dependable trading tool. Some technical analysts (who will go unnamed here) wrongly turned bearish on gold and gold stocks after they put in a disappointing early spring performance and were thought to be headed straight into the summer doldrums.

Instead, the summer solstice arrived with gold’s chart displaying a powerfully bullish long-term setup.

The one glaring problem with the current setup in precious metals markets: silver hasn’t yet confirmed gold’s breakout.

Silver Price (June 21, 2019)

Silver needs to break above $15.50, then $16.00 (the last intermediate cycle high) in order to establish a bullish trend on par with gold’s.

The white metal’s lagging price performance in recent months has resulted in it trading at its biggest discount to gold in three decades.

Hardy silver bugs are excited at this rare opportunity to buy more ounces on the cheap. Others are understandably concerned that silver isn’t showing any leadership during rallies in the metals sector.

Silver, being a smaller and naturally more volatile market than gold, is supposed to amplify gold’s moves on both the upside and downside. So why is silver instead acting like an anemic version of gold?

Lots of reasons can be proffered – from record central bank buying of gold, to silver’s reliance on industrial demand, to low (official) inflation, to market manipulation.

It probably comes down largely to investor psychology. When precious metals markets have been out of the “mainstream” news cycle for years – trumped by a rising stock market and the rise of digital currencies – the general public won’t be interested in precious metals.

The super-rich and large institutional investors who are more apt to take contrarian positions in overlooked assets generally prefer gold over silver because it is more convenient for them to accumulate in large quantities.

We are still in the stealth phase of a precious metals bull market. When we enter the public participation phase – and demand for physical bullion increases – we have no doubt that silver will shine.