Top 20 World Gold Producers 2017 – Countries and companies

A couple of tables from articles published on the Sharps Pixley website last week.

The first is from the article : World Top 20 Gold producing nations in 2017 – not peak gold yet!

Top 20 Gold Producing Nations 2016/2017 (Tonnes)

Rank Country 2017 Output 20 16 Output %  Change
1 China 429 464 -7.9%
2 Australia 289 288 +0.5%
3 Russia 272 253 +7.6%
4 USA 244 229 +6.3%
5 Canada 171 163 +5.0%
6 Peru 167 166 +0.3%
7 South Africa 157 163 -3.6%
8 Ghana 130 131 -0.8%
9 Mexico 122 128 -4.7%
10 Indonesia 114 109 +4.8%
11 Brazil 92 97 -5.1%
12 Uzbekistan 89 87 +2,6%
13 Argentina 65 58 +10.9%
14 Papua New Guinea 63 63 -0.1%
15 Kazakhstan 56 53 +7.1%
16 Mali 51 50 +1.2%
17 Tanzania 53.2 55.3 +4%
18 Colombia 49.2 51.8 +5%
19 Philippines 40 40 +0.6%
20 Sudan 40 37 +7.3%
Others 607 508 +3.1%
  Total 3,292 3,275 +0.5%

Source: Metals Focus

and the second looks at the world’s top producing gold miners: Top 20 Global Gold Miners – Newmont narrows the No. 1 gap

Top 20 Gold Mining Companies 2016/2017 (Tonnes) (1 tonne= 32150.7 troy ounces)

Rank Company 2017 Output 2016 Output %  Change
1 Barrick Gold 165.6 171.7 -4%
2 Newmont Mining 163.8 158.1 +4%
3 AngloGold Ashanti 116.8 112.8 +4%
4 Goldcorp 79.9 89.4 -11%
5 Kinross Gold 78.6 83.3 -6%
6 Navoi MMC (est) 75.5 75.5
7 Newcrest Mining 71.1 76.7 -7%
8 Polyus Gold 67.2 61.2 +10%
9 Gold Fields 62.6 63.0 -1%
10 Agnico Eagle Mines 53.3 51.7 +3%
11 Freeport McMoran 49.1 33.8 +45%
12 Shandong Gold 43.9 37.0 +19%
13 Sibanye Gold 43.6 47.0 -7%
14 China National Gold 42.4 42.0 +1%
15 Randgold Resources 40.9 39.0 +5%
16 Zijin Mining 35.8 42.6 -16%
17 Harmony Gold 34.0 33.2 +2%
18 Polymetal 33.5 27.7 +21%
19 Glencore 32.1 31.9 +1%
20 Yamana Gold 30.4 39.5 -23%

Source: Metals Focus,

a third article published on Seeking Alpha looks specifically at the top North American gold mining companies with notes on their individual performance: Mixed Results And Prospects For North America’s Top Gold Miners

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All fall down? Is the predicted crash starting to hit?

Edited and updated article which first appeared on the Sharps Pixley websire earlier i n the week

As I switched on my computer this morning I was faced with a sea of red ink!  Equity prices were down across the board – in the U.S., Asia and Europe and no doubt elsewhere too. Most major stock indices were down by between 1 and 3% yesterday and in early trade today with the NASDAQ being particularly hard hit.  The markets are currently mostly moving on whether a trade and tariff war between the U.S. and China is imminent or not and prospects and views on this are mixed.  Tech stocks too, which have been responsible for much of the peaking of the markets earlier this year, have also been falling out of favour.

Bitcoin (BTC) was this morning stuttering down below the $8,000 level (it has since fallen to the low 7,000s) – around 60% off its high point achieved only a month and a half ago – and if Ethereum is a pointer, with it down at $450 as I write, the next leg down for BTC could well be to around $6,000.  (When Bitcoin and Ethereum were at their respective peaks early in the year BTC was trading at about 14x the Ethereum price.)

In the precious metals, gold, silver and the pgms were all down as well, although perhaps not by nearly as much in percentage terms as the equity markets.  The dollar Index was one of the few positives showing a tiny gain but it was still stuttering well below the 90 level and thus around 13% lower against other currencies than it was when President Trump came into office some 14 months ago.  Obviously a strong dollar is not part of ‘making America great again’.

So what has changed?  The U.S. Fed seems to be committed to raising interest rates perhaps at a faster rate than had previously been anticipated with higher rate targets for 2019 and 2020.  Wall Street may not be liking this prospect.  But perhaps it is the sudden recent downturn in the FAANG stocks (Facebook, Apple, Amazon, Netflix, Google), following Facebook’s problems, which is a primary cause of the falls in the Dow, S&P and NASDAQ (in particular). High flyer Tesla is also a significant contributor to the Wall Street sell-off and when Wall Street falls equities worldwide tend to follow its lead.

Is this the start of the equities crash many commentators have been predicting – and if so how will it affect gold and the other precious metals?  It’s probably too early to say, but after almost nine years of virtually uninterrupted rises in the equities indices we suspect something will have to give – indeed it may already have started.  We’ve already seen the bitcoin bubble burst and, as noted above, we feel the cryptos may yet have further to fall until the bottom is reached.  Are equities next?

What will have changed with the latest downturns is investor sentiment.  Equity increases look to no longer be the ‘sure thing’ that they were, buoyed up by the Fed’s Quantitative Easing policy which poured increased liquidity into the markets.  Now the Fed’s policy is in reverse with what many observers now refer to as Quantitative Tightening.  If history is anything to go by, equities markets may well suffer as a consequence of a rising interest rate path, at least initially.

Precious metals have moved up from their lows, but down again from their subsequent interim peaks, with gold reaching around the $1,355 mark which has proved to provide strong resistance on the upside.  It has since fallen back to the low $1,320s and is still looking vulnerable, with silver following a somewhat similar pattern.  The pgms seem to be treading a slightly different path as befits their industrial metal status.  The gold:silver ratio (GSR) remains above 81 which usually suggests silver is a better buy than gold – the late Ian McAvity used to say buy silver if ratio above 80, but buy gold if ratio 40 or below which has proved to be pretty wise advice over the years, although the 40 level hasn’t been seen since 2011 when it touched 33.7.  We’d probably suggest a range of buying silver with a GSR of 80 and above and gold with a GSR of 60 and below as being good advice under more recent price patterns and with more modest expectations!

Where are we now?  If I were an investor in U.S. equities or in bitcoin I’d be nervous and with global markets tending to follow Wall Street that nervousness would tend to extend to any major global markets.  Watch U.S./China trade negotiations and don’t necessarily trust either side to keep to any promises made to the other.  I would prefer gold and silver as safer investments than equities and see bitcoin as pure speculation with the potential to crash much further than it has already.  Precious metals may well see some falls but these are unlikely to be of the kind of magnitude which could befall equities so we’d continue with the theme of using gold, and perhaps silver, as wealth insurance.  They may not see major gains if equities collapse, but they shouldn’t see major falls either and, as in 2009 in the aftermath of the last big financial meltdown, they will probably recover far faster.

Gold hit lowest level ytd – will it recover?

March has been a pretty bleak month for investors in almost all asset classes.  Equity investment, which had been a such a sure thing for the past few years, has been wavering and stocks in general are well off their highs and looking vulnerable to further falls, bitcoin has seen its bubble burst and has halved in value – and we think there could be more pain yet to come for the past year’s speculative investment star, and even precious metals have come down with gold languishing at the time of writing at around $1.312 (spot gold had fallen to around $1,307 an ounce at one stage yesterday morning) and could well breach that on the downside this week although it has made a small recovery since.

The bond market is also weaker on the prospect of continuing Fed interest rate rises.

The only positive spot seems to be the U.S. dollar, but people have short memories.  The dollar index did see a small recovery to sit back above the 90 level  but has been under pressure again and it is still around 12% below the level it was when President Trump took office only 15 months ago.  While there now seems to be a consensus that the dollar could continue to see a short term rise, along with whatever decision the FOMC meeting next week makes on U.S. interest rates, there are still many commentators who feel that a rising dollar is not sustainable long term and that it could quickly start coming down again.  If so that is certainly gold positive – at least in dollar terms

As for gold and the other precious metals we have noted before that they are facing headwinds, but perhaps not insuperable ones.  Global demand – particularly in the Middle East and Asia in general – remains relatively positive and there is the distinct impression that global new mined gold production has at last peaked and may be beginning to turn down, albeit at a pretty marginal rate.

Some commentators sing the praises of silver as perhaps the best speculative bet, with a current gold:silver ratio of over 80.  They feel the ratio is too high and recent pricing history tells us it is likely to come down from this level thus enhancing the percentage growth prospects for silver over gold.

Of the other precious metals, although it has some adherents, platinum tends to follow the ups and downs in the gold price to an extent, while palladium, for the time being at least, looks to be in a better fundamental position due to a perceived production deficit and stronger industrial demand in the autocatalyst sector.

So gold could fall back further – much will depend on whether the FOMC meeting seems to be suggesting a further two, three or even four more rate hikes this year, although given that equity and bond markets are looking vulnerable to more than the generally expected two more rate increases this year, we suspect that discretion may prove to be the better part of valour in this respect.  Certainly if the Fed looks at the historical effects of a rising rate scenario, caution may well reign.  Under such circumstances gold could see something of a recovery back to the $1,350s by the mid-year – but don’t put your shirt on it!

The above article is a lightly edited version of an article posted a day earlier to the Sharps Pixley website

Paul Burton R.I.P. updated with funeral details

We are sad to report the passing of Paul Burton, Camborne School of Mines graduate, erstwhile colleague, long time presenter and moderator at many gold conferences and specialist on gold and gold stocks.  Paul passed away in Cornwall UK on March 15th, after a long term battle with cancer which had returned aggressively after a period of remission.

Some years ago, when I was MD of Mining Journal, we hired Paul as editor of our gold publications and he quickly made his mark as an important contributor/expert on gold mining and gold companies worldwide setting him on course for his subsequent career.  He took the publications with him as part of a severance package and the then World Gold Analyst and World Gold – which had developed from Mining Journals’ Quarterly Review of Gold Stocks, and the International Gold Mining Newsletter (originally started by yours truly!) – were important and relevant reading within the global gold community.

After a spell with GFMS as one of their gold experts (he was managing Director of GFMS World Gold) and following the take-over by Thomson Reuters, Paul became an independent analyst, setting up his own company, Piran Mining Research With his own company, he conducted specialist research, mostly on gold, for a number of companies as well as continuing to publish World Gold Analyst which continued to  provide independent, online research on, and evaluations of,  selected gold companies worldwide.

Paul will be sadly missed within the global gold community.

Funeral is at Penryn Chapel, Penryn, Cornwall on April 4th at 11.30 am

Snakes and Ladders – Market Karma, Gold and Commodities

My latest posting on the sharpspixley.com website

Of the various regular publications which I receive in my inbox, one of the most thought provoking is always Grant Williams’ ‘Things that make you go hmm..’ (www.ttmygh.com) newsletter, published roughly fortnightly.  Grant always develops a theme for his exceedingly comprehensive commentaries – how he has the time and the imagination to do this to this degree of depth alongside his other work and interests I do not know – but his insights into aspects of the global economic picture are perhaps unsurpassed.  His newsletters are always inclusive of a large number of illustrative charts and are backed up with excerpts of articles from, and interviews with, some other key commentators.

Grant is also much in demand as a speaker at conferences and his presentations should not be missed – they are filled with remarkable insights into global finance and always presented with a degree of humour sadly lacking from many of the other financial speeches at these events.

Grant’s latest newsletter is over 60 pages long and he takes the ‘Snakes and Ladders’ board game as his inspiration.  According to the newsletter’s introduction, the game is one of the oldest board games known to man and has its origins in pre-Colonial India where it was called Moksha Patamu.

The game centres around the Hindu philosophy of Karma which is the spiritual principle of cause and effect whereby actions taken today will determine the nature of tomorrow’s consequential ramifications.  Grant applies this philosophy to the various supposedly ‘economy-supportive’ programmes implemented by the U.S. Federal Reserve, and other central banks, over the past four decades where successive Fed chairmen have taken interest rates on a continuous downward path and are only now trying to redress the balance, but in the meantime have built up staggering volumes of debt.  The problem with taking interest rates down to near zero is that that leaves the Fed with little interest rate lowering leeway should the economy teeter into the next almost inevitable financial crisis – hence the pressure to try and normalize rates before the next crisis strikes.

As Grant puts it though “For investors, the last 9 years has been one long, mostly pleasant climb up a nice, shallow ladder, however we’ve reached the point where the chances of stepping on a snake have reached a level which demands precautions be taken.”

Other commentators point to the fact that equity market investors represent only a small part of the population – the ‘already haves’ – but the years of investor prosperity have largely passed the general public by.  The rich and the Wall Street elite have been getting richer, while the average person in the street remains relatively unaffected financially and continues to struggle and may even be persuaded to spend money they don’t have by optimistic media reporting, bordering on the euphoric, that the economy is extremely strong!  It isn’t.

He also reckons that the new Fed Chairman, Jay Powell, has taken over and is ripe for what rugby players call a ‘hospital pass’.  While Powell in the past has expressed opinions on Fed policy which Grant strongly agrees with, he may well also have inherited a situation under which he may have little immediate control given the scenario which has already been set in motion.

So how does one protect oneself from this particular snake should markets peak and start to slide. Equity markets, as is bitcoin, are essentially speculative, and have had a very good run, but have to be considered vulnerable to a major reversal.  (Bitcoin has already seen such a move, halving in value, and, in our view, there could well be further pain ahead for bitcoin investors).

Thus, those with the wherewithal to do so might look at alternative perhaps more stable assets like gold, though to protect themselves should Karma strike and overbought markets lose ground substantially as many are predicting.  This is particularly so as we appear to be transitioning from Quantitative Easing (QE) to Fed-implemented Quantitative Tightening (QT).  That could be seen as a significant game-changer and trend reverser for the markets.

Grant goes one step further though in recommending gold stocks over physical gold and looking at commodities in general which he feels have been heavily oversold.

So his initial recommendations are go long gold mining stocks against physical metal (as represented by GLD) and against general equities which he sees as ripe for a major downwards correction (the next snake).  He notes that the HUI Index of gold miners is at the same level it was in October 2000, when gold was trading at $265 and that with a current gold price of over $1,300 an ounce, and with the drastic improvements miners have been forced to make to their operations in the last 7 years, he expects gold miners to outperform the metal significantly.  It’s not that he doesn’t rate physical gold investment positively, but that he feels that, for now, gold mining stocks have an even better growth potential.

He also feels that commodities in general have been underpriced.  He thus suggests a thematic investment in the commodities sector could be well worthwhile thus capturing the overall thrust of his thinking revolving around a weak dollar in the long term, rising inflation and a Fed which will be forced to either hike rates to choke off inflation or embark on another round of monetary profligacy in the face of a recession triggered by its own policies.

He does have a caveat, though, in that the dollar may try to move swiftly higher in the short-term, but that he doesn’t see this continuing for long and, utilising the words of ice hockey player Wayne Gretsky feels that this positions him for where the puck is going – not necessarily where it is today.

Lawrieongold: Gold/silver articles published on other sites

As readers of lawrieongold will know I also publish articles on other websites.  A couple of recent ones are linked below:

Metals Focus sees strength in Chinese gold demand in 2018

 

SGE gold withdrawals down in Feb but up YTD

Both the above articles were published on www.sharpspixley.com.

However, I also write occasional articles for U.S. site – www.usgoldbureau.com, but this site is blocked for access from outside North America unless one uses a browser, like Tor, which can be set to mimic access from other countries.  So for North American readers, or Tor users, a link to my latest article on this site follows:

Equities and Bitcoin Looking Vulnerable, Put Your Trust in Precious Metals

Peak gold maybe but Australian and Russian output still rising

Article first posted today on sharpspixley.com

Now March is with us we are beginning to receive reasonably accurate figures on 2017 gold production around the world and the bi g question is is peak gold here or not.  The answer is maybe.  According to the World Gold Council’s figures, global gold output actually increased in 2017, but by such a small margin that it should probably be considered flat at 3,267 tonnes – as compared with 3,260 tonnes a year earlier – a tiny 0.2% increase and with global output continuing to trend downwards we can probably assume that 2017 was indeed the year of peak gold.

But, there is much variation between national outputs.  While the world’s largest gold producer – China – is estimated to have seen its gold output fall by 9-10%, the world’s second, third and fourth largest miners – Australia, Russia and the USA have reportedly seen their annual gold production increase, but perhaps by not as much in combination as the fall in Chinese output.

As to the actual figures it all comes down to the accuracy of those reporting.  China’s output reportedly fell to 430 tonnes from over 460 tonnes in 2017.

There is an argument ongoing as to which nation is currently the world’s second largest gold producer.  In 2016 it was Australia with 287 tonnes while Russia was in 3rd place with 274 tonnes.  Australian consultancy, Surbiton Associate which tends to produce very accurate figures on Australia reports 2017 Australian production at 301 tonnes, a good increase on 2016, and avers Australia remains the world’s second largest producer of gold.  However, as we reported here three weeks ago (See:  Russia may now be World No. 2 Gold Miner), the Russian Finance Ministry stated that Russian gold output in 2017 was a little over 306 tonnes which would put it ahead of Australia as the World No.2.  Reports also suggest that gold output from other top producers Canada and Peru grew in 2017, while that of the former No.1 gold miner, South Africa continued to fall by nearly 4% last year according to that country’s Bureau of Statistics.

But the actual league table of producers is probably immaterial – it is the overall figure which counts and that does suggest that global gold production has, at the very least, plateaued. Cutbacks on gold exploration and big new capital projects, as the lower gold prices after the 2012 peak caused the big mining companies to rethink their expansion plans and capital expenditures, are taking their toll.  Most of the big miners are predicting short term  production falls after a number of years of ‘growth at any cost’.

Back to Australia and the latest Surbiton Associates assessment though: Australian gold mine production in calendar 2017 resultedin the highest annual output since 1999.  Total gold mine output in 2017 reached 301 tonnes or almost 9.7 million ounces, up three tonnes on calendar 2016. Production in the December quarter 2017 totalled some 80 tonnes, up six tonnes on the previous quarter.

“At the average gold price for 2017, the 301 tonnes was worth almost A$16 billion,” said Dr Sandra Close, a Surbiton Associates’ director. “Australian gold production is still trending upwards and the next few years look promising.”

“The higher output in the December quarter was due to a number of factors including the strong recovery at Newcrest’s Cadia East mine near Orange, NSW which was almost 60,000 ounces higher,” Dr Close said. “Other operations with higher output included the Super Pit’s increase of 28,000 ounces, Peak up 21,000 ounces and Tropicana up 19,000 ounces.

“Further out, development of the Gold Fields and Gold Road Resources’ Gruyere joint venture in WA is one-third complete, with the start of mining scheduled for late this year,” Dr Close said. “The operation will commence in early 2019 at a rate of around 270,000 ounces of gold per year when in full production.”

The only closure of note was Doray Minerals’ Andy Well mine. It commenced production in 2013 and was placed on care and maintenance in early November, after producing about 40,000 ounces in 2017.

“Given the number of projects coming on stream and with few closures anticipated, it would not be surprising to see another 20 tonnes of production added to Australia’s annual output,” Dr Close said. “This suggests that Australia’s all-time record annual gold production of 314 tonnes recorded in 1997 might well be exceeded.”

She said however, that despite the generally upward trend anticipated, production will probably decline in the March quarter 2018 due to wet weather in Western Australia which is a common occurrence early in the year.

As noted above, Surbiton estimates thst Australia remains the world’s second largest gold producer behind China which produced an estimated 4300 tonnes in 2017.

Australia’s largest gold producers for the 2017 year were:

Operation Ounces Owner
Boddington 787,000 Newmont Mining Corp
Super Pit – JV 738,000 Newmont Mining Corp 50%, Barrick Gold Corp 50%
Cadia Valley* 545,869 Newcrest Mining Ltd
Tropicana 461,704 AngloGold 50%, Independence Group NL 50%
Tanami 419,000 Newmont Mining Corp

 

 

Gold demand growing as supply starts to fall

Article firsT posted on sharpSpixley.com

Gold investors should be looking at gold for the long term.  Demand growth fundamentals are looking positive to this writer, while there is, in parallel, the prospect of diminishing supply.  It is the combination of these factors that makes gold so appealing in the medium and long term.  Even in the short term the general consensus among many analysts is that the gold price will likely rise as well – perhaps not by much but many are predicting a $1,400 gold price, or higher, by the year end.  The recent price drop is seen as a blip in an overall upwards path for the yellow metal.

The big factor to take into account is the sustained move into the middle class earnings category in the world’s biggest population nations – China and India – both of which currently have around 1.3 billion people.  By contrast the USA only has a population of some 320 million and is currently experiencing very slow population growth.

By contrast, China, currently the world’s largest gold consumer, is seeing huge growth in numbers entering the middle class classification.  Total population is estimated at over four times that of the USA.  Major, and well respected, consultancy McKinsey recently went on record as predicting that by 2022, 76% of China’s urban population will have moved into the middle class bracket.  That nation’s urban population numbers around 750 million, so 76% represents around 570 million people in what McKinsey describes as the middle class earnings bracket – more than one and three quarter times the total population of the USA.  McKinsey, however, classifies the Chinese middle class as urban households earning between US$9,000 and US$34,000 annually – which may seem low by U.S. standards, but purchasing priorities tend to be hugely different with many Chinese middle class families, even at the lower end of this income bracket, buying small amounts of gold on a regular basis as their prime savings mechanism.   The Chinese banks make this an easy process.

In the West gold is mostly seen as a tradable asset and is perhaps more readily sold as and when the price rises.  There are some in the West, notably large investors, who may see gold as a safe haven form of wealth protection, but in China that tends to be the norm rather than the exception and gold holdings there tend to be, consequently, in firmer hands than in the West and only released back into the market in cases of dire need.  Gold may also be held as jewellery and artefacts which, again in the East, tends to be a realistic option because price mark-ups are very low.

The gold purchase pattern in India, the world’s No. 2 gold consumer, somewhat mirrors that of China, although probably coming from a lower base.  But the birth rate is higher and the total population is set to exceed that of China in the next year or so – it may already have – and continue to grow at a significant rate.  Gold hoarding is an integral part of the Indian psyche, perhaps more so than anywhere else in the world, so it wouldn’t surprise us to see Indian gold demand move back above that of China in the next few years, despite the government’s attempts to thwart this because gold imports are a substantial component of the country’s current account deficit!  This year we have already seen a recovery in Indian gold imports to over 900 tonnes after an exceptional low of just over 580 tonnes in 2016.  The 2017 figure is still below those of 2010-2012 and 2015, but is indicative of a possible return to the old higher levels.

As a proxy for gold flows from West to East we only have to look at Swiss gold export figures with around 80% of these gold exports tending to be destined for Asia and the Middle East.  The Swiss figures are particularly significant because the Swiss gold refineries provide the key conduit for converting doré (impure) bullion, received from mines around the world, and large gold bars (mostly imported from the UK) into the small bar and wafer sizes in demand in the East.  Overall, Swiss refineries currently process a volume equivalent to around two-thirds of global new-mined global gold output annually.  These huge gold flow percentages are indicative of the total gold flows leaving depositories in the West for stronger hands in the East.  Sooner or later these will generate a shortage in the West which will ultimately positively impact prices beyond the capabilities of the powers-that-be to hold them down.

Asian and Middle Eastern demand alone would seem to be more than sufficient to keep the gold train rolling, but it is all in addition to some still decent gold demand throughout the rest of the world.  When the gold price came down from its 2012 peak, supply was boosted by huge liquidations of gold out of the big gold ETFs, but this source of supply has dried up and, if anything, gold is beginning to flow back into the ETFs – perhaps not at a high rate but the overall flow has very definitely seen a reversal to the positivel.

At the same time, the volume of new mined gold supply at around 3,200 metric tons a year, may well be beginning to fall .  Peak gold may well be with us.  The drop in the gold price following its 2012 peak led to cutbacks in capital projects and gold exploration around the world.  While any output decline may be very slow at the moment, with some countries like Russia, Australia and Canada still seeing growing new mined supplies, the overall global trend is definitely downwards.  It will take the industry some time – and probably much higher prices – to recover from this downtrend in output, particularly given the long lead times in bringing a new mine into production from scratch.

So, the twin effects of continuing high demand (in the East in particular) driven by the growth in the middle classes in the high population countries like China and India, coupled with a decline in new mined gold production – seen as likely to accelerate – are likely to increasingly put a strain on the supply/demand balance.  This may not initially lead to a big price boost for gold, but it should keep prices rising at least gradually over the years ahead.  Should the equities markets and bitcoin collapse, as many experts are predicting, then this could drive more investment into perceived safe havens like gold.

Looking at these gold fundamentals, the prospects for gold over the next few years look good – and given gold’s propensity to react positively to disruptive global geopolitical and geo-economic events we could even see much bigger increases than the general picture, as noted above, might suggest.

Swiss Gold Exports in 2017 – Down but far from out

Another of my articles published on the Sharps Pixley website looks at total gold exports from Switzerland last year – the lowest level for 11 years, but still substantial at 1,600 tonnes.  As has been apparent throughout the year over 80% of the gold routed through Switzerland has been headed for relatively strong hands in Asia and the Middle East, and taken together with gold production in Asia in particular – mostly China, but also in countries like Indonesia which is a significant producer in its own right (No. 9 in the world in 2016) [see:World Top 20 Gold: Countries, Companies and Mines]– these areas probably account for the accumulation of more than 80% of all the world’s newly mined gold.  China in particular absorbs goldlike a sponge and doesn’t release it back into the global market place.

With Asian populations growing, gold demand will continue to rise there given the propensity for the citizenry to own gold, while peak newly mined gold is almost certainly already with us we are going to see supplies squeezed in the years ahead with a consequent positive effect on the price regardless of the powers that be trying to suppress it.  Switzerland’s re-refining and expoirt business thus remains an excellent pointer to current and future gold flows.

The Sharps Pixley article follows:

Swiss gold exports in 2017 lower but still 80% plus flowing east

The continued accumulation of physical gold in Asia and the Middle East goes on regardless as shown by gold exports from Switzerland – the leading national conduit for gold bullion.  Switzerland has achieved this position through its refineries specialising in taking gold in unmarketable forms and importing dore bullion from mines and refining, or re-refining it into the sizes and purities in demand in the eastern market place.  This is combined with the great reputation of Switzerland in the gold marketplace and as a conduit for such activities.

Although Swiss gold exports in 2017 were the lowest in 11 years they were still substantial at over 1,600 tonnes. That is equivalent to half the world’s annual new mined gold output, and with China the world’s largest gold miner already, and a known non-exporter, the Asian and Middle Eastern regions will have accumulated at least 65% of global gold output adding up the imports from Switzerland plus Chinese domestic production alone.  But other countries also export gold directly to Asian and Middle Eastern refineries and we would guesstimate that perhaps 80% of all the gold bullion moving around the world may be ending up in these regions – a huge proportion of what remains the world’s No.1 monetary asset (in our opinion at least).  With bitcoin continuing to crash – it has lost almost 60% of its value from its peak in December and could well crash much further as scared investors offload on the way down – gold may be again coming into its own as a key investment asset class in the minds of investors seeking to preserve their wealth.

In December, Swiss gold exports followed the pattern established over the year with India the no. 1 individual destination with 32.3 tonnes – or around 21.5% of the total – closely followed by China (25.7 tonnes) and Hong Kong (21.1 tonnes).  Assuming that most, if not all, the Hong Kong exports are also bound for the Chinese mainland, greater China was thus the biggest recipient of the Swiss gold.  Overall around 86% of Switzerland’s December gold exports (totalling 150.4 tonnes) was destined for Asian and Middle Eastern nations.

If we look at the full year 20i7 figures for Swiss gold exports – neatly laid out in the bar chart below from Nick laird’s www.goldchartsrus service – we see that these proportions pretty well mimic the full annual picture:

This chart shows that over the full year around 81.6% of the Swiss gold was headed for Asia and the Middle East with India the biggest individual national importer with 26.2%, but with China and Hong Kong combined taking 35.8%.

The other point which is apparent from the Swiss gold export figures is something we have stressed continually over the past year – that Hong Kong gold exports to mainland China can no longer be seen as a proxy for Chinese gold imports – or even a rough guide.  Mainstream media, and some analysts who should know better, still seem to equate the regularly published Hong Kong gold export figures as such, but as the Swiss figures show the greater part of mainland China’s gold imports now comes in direct – avoiding Hong Kong altogether.  This percentage of direct imports appears to be growing.

The figures also show that there has been a major recovery in Indian gold imports last year after a very low 2016 figure, but still Greater China remains comfortably the biggest importer – and if you add China’s own gold production of perhaps 450 tonnes last year into the mix, as well as direct imports from a number of other countries, China remains easily the world’s No. 1 accumulator of gold – although the breakdown of where this gold actually goes internally is rather less certain – hence the seeming anomalies in the nation’s estimated consumption figures from the big precious metals consultancies like Metals Focus and GFMS.

Bitcoin Could Crash Another 50% or More, But Gold and Gold Stocks to Advance

My latest article on Seeking Alpha – under the Seeking Alpha terms and conditions I cannot publish full article here, but you can click on the link at the end of the Summary to go directly to it:

Summary
  • Rearguard action in Bitcoin may be too little too late – the cryptocurrency  could well see another 50% decline or more!
  • Gold and gold stocks would probably be the best investments in a general economic collapse if it occurs.
  • Governments are unlikely to remain on the sidelines and are likely to regulate bitcoin given its increasing use by criminals and in tax avoidance.

To read full article click on Bitcoin Could Crash Another 50%, or More, But Gold And Gold Stocks to Advance

Gold not allowed to close the week above $1,350.

My latest article on the Sharps Pixley website looks at gold’s performance over the past week with it affected positively and negatively by conflicting statements on U.S. policy on the dollar at the World Economic Forum in Davos, but culminating in gold being held marginally below the psychologically important $1,350 level at the week’s end through activity in the gold futures and currency markets.

With potentially conflicting comments re. the weakness of otherwise of The U.S. dollar from U.S. Treasury Secretary Steve Mnuchin and President Trump, the gold market didn’t know which way to run.  Mnuchin had to backtrack, but not particularly convincingly, on his weaker dollar being beneficial to the U.S. economy statement lest he be accused of talking the dollar down in conflict with U.S. assurances that it would not do so.  President Trump’s Davos statement suggested he was in favour of a stronger dollar, contrary to his earlier position on the currency, and following this the dollar rose, and gold fell on Thursday.  But then the former reverted to lower levels in Friday afternoon trade in the U.S. and gold rose back above $1,350 before activity in the futures markets  and gentle dollar support brought gold back to heel and the yellow metal ended the week a fraction under the key $1,350 level.

To an impartial (relatively) external observer of the market the gold price did appear to be trying to rebound back above $1,350 but kept being knocked back again.  Whether it can build sufficient momentum to breach the $1,350 level permanently next week remains to be seen, but one suspects it will do so barring any major adverse news or data.

So far this year precious metals have all done well as Nick Laird’s bar chart from www.goldchartsrus.com shows (below).  The bar chart shows the relative performances of the four major precious metals, the HUI (the NYSE ARCA Gold Bugs index) and Nick’s Silver 7 index tracking seven major silver stocks and the stock indices have generally outperformed the metals which are their key drivers.  As can be seen platinum is by far the best performer year to date, but all have done pretty well given the year is only just over 3 weeks old.  We suspect that Silver and the Silver 7 Index will ultimately outperform the others – however we would have said that in 2017 too – and ever-unpredictable silver ended the year as performing far more poorly than gold, and particularly palladium which was far and away one of the best assets of any type to hold last year.

As readers of my writings here will know I am anticipating precious metals to do well this year – except perhaps palladium which may have risen too far too fast in 2017.  But I don’t anticipate any of them doing spectacularly well with rises pretty much in line with gold’s 2017 performance (See:Precious metals price predictions for 2018 – gold, silver, pgms, but this year stocks may comfortably well outperform the metals assuming the general trajectory for both is upwards.  The key may well be dollar strength and if the Trump Administration sees exports picking up, and imports falling, due to a weaker dollar, then the engineered decline in the dollar index may be allowed, or even encouraged,  to continue.  This process may well be mitigated though by similar effective currency devaluations among competitor nations or areas as others seek to contain any competitive disadvantage with their own export businesses.

Falling dollar, rising gold – where will that take us?

Here’s my latest article published on the Sharps Pixley website earlier today looking at the collapsing US Dollar and its impact on the gold price.  While gold is very definitely sharply higher in dollars, the fall in the dollar index means that in some other significant currencies – notably the British pound which finds itself at its highest level against the dollar since the Brexit vote a year and a half ago – the gold price may actually have fallen.

Dollar drops, gold soars as U.S. starts to lose control

If gold trading this morning in Europe is anything to go by, gold is headed for US$1,350 an ounce, and not before time.  But before non-U.S. gold-owning citizens get carried away with euphoria they should also be aware that the dollar index has dropped below 90 for the first time since early 2014 and the gold price in many other key currencies like the British pound (easily at its highest level against the dollar since the Brexit vote) the Swiss Franc and the Japanese yen, has actually fallen.  Silver though has been somewhat left behind with the Gold:Silver Ratio at well over 78, but we do anticipate, if gold stays in the high $1,340s, or breaks through $1,350, that silver will play catch-up.  It usually outperforms gold when the latter is rising sharply.

The performance of the dollar gold price level, though, does suggest that the big money into the gold futures markets, which had been successful in keeping the shiny yellow metal price down below $1,340, may be losing control.  It could thus see discretion as the better part of valour and allow gold to find a new top and then work hard again to keep it there.

The key though looks to be U.S. dollar strength and it remains to be seen whether the recent decline is an engineered one in an attempt to make U.S.-manufactured goods more competitive (a policy that had had been signalled by President Trump some time back – although since denied).  If so a dollar decline may have gained more steam than intended, as these things do.  On the face of things the U.S. economy is in a decent growth stage, unemployment is at a low level – both things that might normally lead to dollar strength, not weakness.  But perhaps massaged government-produced statistics are beginning to be doubted and the huge U.S. debt level is beginning to come home to roost as some countries seemingly (reportedly) are beginning to reduce their reliance on dollar denominated securities in their foreign exchange holdings.  Perhaps the Trump Presidency is not making America great again – at least in terms of dollar dominance of global financial markets –  but having the opposite effect globally.

Could all this herald the start of the much predicted crash.  Stock markets appear to be stalling, bitcoin has come off nearly 50% from its peak – maybe the speculators and wealth protectors are at last beginning to see gold as an answer.  It’s probably too early to tell yet, but signs don’t augur well for the seemingly unending bull markets in equities we have been seeing in the past few years.  Market growth is all about confidence.  Once that starts getting eroded it can turn into a desperate downwards spiral.

The problem of course for gold is that, should markets collapse, it too could suffer collateral damage as institutions and funds struggle for liquidity and have to sell good assets to stay afloat.  We saw this in 2008 in the last big stock market collapse, but the comfort for gold holders, perhaps, is that gold was far faster to recover than equities and went on to perhaps its strongest bull market ever taking the price up to around $1,900-plus over three and a half years, nearly tripling its price from its October 2008 nadir.

As I write the spot gold price has indeed briefly hit the $1,350 level.  Whether the U.S. market will allow it to stay there when it opens in just over 3 hours time remains to be seen.

Randgold’s Kibali on track to produce 700,000 gold ounces this year

Africa-focused gold miner, Randgold Resources has a remarkable track record in developing gold mining operations in a part of the world most of its Tier 1 gold mining peers avoid – West and Central Africa  It has built up a major gold production base in Mali and Cote d’Ivoire, but it deserves particular credit for its development and operation of the Kibali open pit and underground operation in one of the remotest parts of the African continent in the far northeast of the Democratic Republic of Congo (DRC), close to the border with South Sudan.  The logistics of building what is probably now Africa’s single largest mine about as far from the coast as any mine could be, will have been daunting, yet Randgold brought Kibali on stream ahead of schedule and within its estimated cost parameters.

Kibali is owned 45% by Randgold and 45% by the far larger gold miner, Anglogold Ashanti, with the balance owned by DRC parastatal SOKIMO.  Even though Angolgold is the much larger company it ceded development and management of the Kibali mine to Randgold due to the latter’s particular expertise in running mining operations in remote areas of Africa and, perhaps most importantly, maintaining good working relationships with the host governments – a skill where many of the other gold majors fall short.

It is now eight years and $2.5 billion since Randgold started developing Kibali, and the giant gold mine is expected to be in full production this year following the successful commissioning of its underground operation’s integrated automated ore handling and hoisting system.

Randgold chief executive Mark Bristow, who is touring his company’s African mines en route to Cape Town for this year’s Mining Indaba Conference,  told local journalists in Kinshasa in the DRC that the mine was on track to produce its targeted plus 700,000 ounces of gold in 2018, making it Africa’s largest gold mine and one of the largest of its kind in the world.

Its high level of mechanisation, which features multiple driverless loaders operating with full automation as well as a single haulage drive with a high-strength surface, is believed to be a first for the gold mining industry in Africa.

“The past quarter has been a particularly busy one for Kibali.  In addition to completing the underground haulage and hoisting system, the team has settled the processing challenges, improving the recovery while keeping throughput above the plant’s nameplate design level.  At the same time, the mine’s conversion to the latest ISO 14001:2015 environmental standard was successfully certified and it readied itself for alignment with the new, and yet to be published, ISO 45001 safety standards,” Bristow said.

“All that now still remains to be done is to ramp-up the underground production and complete the construction of Azambi, Kibali’s third new hydropower station, which is scheduled to be plugged into the grid by the middle of this year.”

Bristow noted that with development expenditure tapering off, Kibali should now be in a position to start repaying its capital loans.  Unfortunately, Bristow commented, due to the continued non-repayment of tax credits to the tune of $192 million, Kibali’s shareholders have had to inject more money into the operation during the past year to enable the mine to pay its creditors.

“Over the past eight years, while Kibali was still a work in progress, it has paid $2.25 billion to the state and people of the DRC in the form of taxes, permits, infrastructure, salaries and payments to local suppliers.  Its shareholders, on the other hand, have not as yet received a return on their investment,” Bristow said.

“The surprise re-tabling of the controversial new draft mining code, which takes no account of the industry’s very serious concerns about the negative impact it will have on any prospect of further investment in this sector, is particularly disappointing.  I appeal again to the government to engage with the industry in the formulation of a code that will stimulate this key component of the DRC’s economy instead of crippling it.” said Bristow.

Bristow stressed that Randgold remained committed to a future in the DRC, and was already hunting for new development opportunities there.  In the DRC as in its other host countries, Randgold regarded itself as a partner of the government and the people, and its view on this issue should be seen not as unconsidered criticism but as a plea, from a major investor, for an outcome that will benefit all these partners equitably.

So the Kibali development has not been without its problems, but Bristow has a major point in that if the DRC does not put its mining code and its government-industry relations in order it could dissuade future external investment in the further development of the country’s very substantial mineral potential.  Geologically it is one of the world’s richest nations with enormous resources of precious, base and key industrial metals just waiting to be exploited.

We should learn more about progress at Kibali and the company’s dealings with the DRC Government, as well as on Randgold’s other operations and exploration progress when CEO Bristow presides over the release of the Q4 and FY 2017 financial and operational results on February 5th in Cape Town.

Gold on a tear as dollar weakens – silver being left behind

Article first published on the Sharps Pixley website, and lightly edited here, looking at the strong performance of gold over the past week, but also the weakening of the U.S. dollar index.

Since Donald Trump assumed the Presidency of the world’s richest and most powerful nation, the US dollar index (relating the dollar to a basket of other currencies) has fallen by around 11% accounting for much of the increase in the gold price in US dollar terms.  By contrast, the gold price in Euros has actually fallen by 1% over the past year, so what may appear to have been an appreciation in the gold price has been more a reflection of the depreciation in the value of the supposedly mighty US dollar.  It’s only that most people around the world look primarily at movements in the gold price in the US dollar – as we do in the title of this article – that the gold price is seen as actually having advanced.

But gold in US dollar terms does provide a useful benchmark as over time the dollar is probably the world’s most stable currency and is, for most nations, their primary reserve currency in their foreign exchange holdings.

This relationship between gold and the US dollar, with the former providing perhaps the most overt indication of how the greenback is doing vis-à-vis other currencies is the reasoning behind what seems to be an ever-increasing view that the powers-that-be collude to suppress the gold price to hide what is an overall indicator in the decline of the dollar’s purchasing power.

Some put this decline at upwards of 80% since President Nixon severed the convertibility of the dollar for gold to protect US gold reserves. In some sectors of the economy this decline is readily apparent.  Grocery shopping, property prices, salary levels etc.  In others less so, notably transportation and electronics, but in general $100 today would only buy you a fraction of what you could have purchased with $100 in 1971.

But it’s not only the purchasing power of the dollar which has been in decline.  The same is true of virtually any nation’s currency.  All currencies nowadays are fiat in that they have no backing, which is why some economists call for a return to a gold standard.  This is probably impractical without a massive gold price increase and, even then, would probably be overrun very quickly by ever increasing consumer demand for goods and services.

There is also talk of China trying to introduce some kind of gold backing for the renminbi (yuan) at some time in the future thereby leapfrogging the dollar as the world’s go-to currency, but this is probably more a theory than a likely eventuality.  It is seen as the reason China is assumed by many to be building its gold reserves at a far higher rate than it has been reporting, but this may also, if true, be just as support for a future petro-yuan – with the yuan exchangeable for gold – as a very competitive Chinese bid to replace the petrodollar!

So perhaps gold investors should treat the latest rise in the gold price purely as a wealth protection exercise.  That is what gold is good at over time.  If the dollar declines further then gold will rise further, as will all the major precious metals – and most other commodities too.  Changes in prices over  the 47 years since President Nixon stopped dollar convertibility are self evident, but in geographic areas like Europe where currency purchasing power has diminished similarly the imposition of a new currency, and/or the implementation of other changes like decimalisation in the UK, have made direct comparisons that much harder for the peerson in the street to relate to.

But regardless, gold has moved up sharply in dollar terms in the past few days despite mixed economic data out of the USA.  Much of this increase so far seems to have passed silver by and the gold:silver ratio has actually risen a little standing at close to 78 at the time of writing, although silver has been making a bit of a late run ahead of the weekend as have platinum and palladium.

We still stand by our forecast that the gold:silver ratio will come down to 70 or lower during the course of the year which would make silver potentially a better investment than gold if it does follow its historic pattern and rise faster than gold when the latter is on the increase.  At the moment we see no reason to change our forecast for gold to hit $1,425 or thereabouts this year and silver $20.50.  As I stated in the article in which I made these predictions- Precious metals price predictions for 2018 – gold, silver, pgms – I look at these forecasts as being conservative and if the dollar continues to fall and precious metals prices to rise sharply. as they have this past week, then I may see the need to adjust the forecasts – at least in US dollar terms.  However, also bear in mind that gold and silver had a strong start in 2017, but then tended to pull back.  2018 could see a repeat of this pattern, although I don’t see palladium making the kind of gains it did last year.

For those interested in my precious metals stock price forecasts for the year ahead do look at a series of articles i have published on Seekingalpha.com.  

The terms and conditions for publication of articles on Seeking Alpha prevent me from posting them here, but follow the links to read them on that site.

Gold, Silver, Platinum, Palladium – Price And Stock Forecasts/Recommendations For 2018

Precious Metals Stock Performance And Recommendations Update

Top Silver Stock Suggestions For The Year Ahead

 

Gold, silver, platinum, palladium prices – where are they headed in 2018?

This is the time of year for precious metals price predictions and these are flowing thick and fast, and the majority of such we have seen so far this year are positive for virtually the whole complex.  Indeed all the precious metals seem to have have started the year off in decently positive territory, but will it last?

We are already beginning to see heavy hands in the futures markets which could, given the monetary resources available, keep precious metals prices depressed – a pattern we have seen in the past, although the encouragement here is that we have at least seen prices rise in general over the past two years.  However the rises have been relatively small in the metals themselves.  Bur maybe they are at the early stages of another bull market.

We have been making our own predictions on the websites for which we write, including this one, but some require exclusivity so the only way you can read what we have to say on these is by accessing these websites directly.  Thus we would direct our North American readers to the U.S. Gold Bureau website, which is blocked to non-North American-based precious metals investors unless you have something like the Tor web browser (which uses Firefox) installed on your computer.

Tor allows you to browse anonymously and simulate access from any specific country, so for those looking to access North American sites which are blocked to non-residents, the browse can be set for your access to appear to be from the USA itself.  The browser software also protects you by bouncing your communications around a distributed network of relays run by volunteers all around the world: it prevents somebody watching your Internet connection from learning what sites you visit, it prevents the sites you visit from learning your physical location, and it lets you access sites which are blocked.  The browser works on Microsoft Windows, Apple MacOS, or GNU/Linux without needing to install any special software. It can run off a USB flash drive, comes with a pre-configured web browser to protect your anonymity, and is self-contained (portable).  The software is perfectly legal and if you wish to download it a link is here: Tor Browser – Download

The reason I’ve given the above information on Tor is that’s the only way I’ve found of accessing my own articles on the US Gold Bureau website, where I’ve been publishing one or two exclusive articles a month.  My latest one is: Precious Metals Price Predictions for 2018 (accessible directly if your browser picks you up as located in the USA, but if not only accessible on something like the Tor browser) and is something of an update to one published on Seeking Alpha just before Christmas entitled Gold, Silver, Platinum, Palladium – Price And Stock Forecasts/Recommendations for 2018.  This latter article has been linked here before so some readers may have read it already, but for those who haven’t it looks at the performance of my precious metals stock prediction for last year – over half outperformed the S&P 500 despite that Index breaking record after record during 2017, as well as metal price and precious metals stock forecasts for the current year.

I can also point you to a couple more articles I’ve published on the Sharps Pixley website which look at generalistic precious metals forcecasts from Martin Murenbeeld and the World Gold Council: 2018 gold price forecasts – Murenbeeld and World Gold Council  and a summary of the precious metals performance prognostications for 2018 from one of the UK’s top precious metals consultancies: Metals Focus’ precious metals predictions for 2018

There are plenty of other analysts out there who will be giving their opinions on where Precious meta;s are headed this year.  A good source for reading these is the News section of the  Sharps Pixley website which picks up precious metals news items from all around the world.

Wishing all readers of lawrieongold a prosperous 2018 and the hope that precious metals perform at least as well as we are forecasting throughout the year.

Dollar being allowed to fall; Gold rising

A pre-New Year article published on the Sharps Pixley website – and since posting gold has moved up further and the US dollar fallen some more.  The original article – shown below, also pointed to a disappointing performance by silver at the time, but since it was written silver has also picked up nicely and the Gold:Silver ratio come back to below 77.

Dollar being allowed to fall; Gold up; Silver disappoints so far

Original article published December 29th on Sharps Pixley website

As the final trading session of the year is already under way in Europe and has just begun in North America, precious metals are trending higher, but most of the increase is due to the gradual decline in the dollar index (DXY).  Since end 2016 the DXY has been allowed to drop from 102.65 on December 29th last year to 92.29 as I write on December 29th this year.  That is a fall of around 10%.  Again as I write, the gold price in the US dollar is up around 12% over the full year after its recent rally.  Silver, on the other hand, is only up a little over 4% over the same period – a particularly disappointing experience for the silver investor given that historically silver tends to outperform gold in a rising gold market.

Silver though is, or should be, somewhat anomalous vis-a-vis gold as it is much more of an industrial metal, although its performance as such may not be the real reason it has underperformed its sibling precious metal in 2017.  Silver is a much smaller market than gold and its price can thus be even more subject to futures trading patterns where big money is involved.  Silver followers reckon the price is being manipulated in a major way on the futures markets and point to the huge short positions taken in the metal by the big bullion banks and traders as being key to the price patterns.  These big shorts do not relate easily to some huge accumulations of physical metal by the same big banks that dominate these short positions – a point being made continuously by silver analyst Ted Butler (probably the world’s No. 1 expert on this anomalous situation) who reckons the activity in the silver markets by the big players – notably by JP Morgan – is, in effect, a criminal activity to which the market regulators continue to turn a blind eye.

Of course gold bulls also see the gold market as being manipulated too by many of the same players as in the silver market.  But here the motivation, if the gold price is indeed being held down, may be in support of governments and the dollar given the huge global debt position.  The gold price is considered by many as a bellwether for the state of the economy and a big rise in gold could be seen as a huge fall in confidence in global economic management.  That does not suit the big money and the markets, let alone government policies.  Whether there is collusion between major governments/central banks and the bullion banks to keep the gold price suppressed remains arguable, although there is considerable evidence to suggest that this has indeed been policy in the past and thus probably still is the case today.

The big question today is whether gold will indeed stay back above $1,300 on the year’s final trading day and what will happen when trading resumes in the New Year.  Silver could also possibly break back up through $17 and as I write gold has indeed breached $1,300 and silver looks well placed to break out above $17. These price advances have survived the New York market open and whether they will survive the full trading period at these levels remains to be seen, but the force is certainly with them at the moment.  Gold at $1,300 and silver at $17 would put the gold:silver ratio (GSR) at 76.5 which is certainly not unreasonable given that the GSR has ranged between  around 67.7 and 79.4 over the past year.  Indeed we have gone on record as suggesting the GSR will come down to 70 during the year.  Some feel this is a very conservative prediction.

Platinum is also moving up along with the other precious metals apart from palladium which has come off a few dollars.  We think there’s a good chance that platinum will be back at a higher price than palladium by the end of 2018, although I have received a recent email from former Stillwater CEO, Frank McAllister, who would strongly disagree having published a paper back in 2012 that palladium and platinum should at least be on a par with each other.  He further suggested that the demand for palladium in the autocatalyst sector could well drive its price ahead of platinum.  He has certainly been correct in this viewpoint.

Ted Butler’s latest theory, is also worthy of comment.  He avers that JP Morgan was in effect given a 10-year carte blanche by the U.S. Government and regulators as a reward for its assumption of the huge Bear Stearns short position in silver, at the government’s prompting, when that bank collapsed in the 2008 financial crisis.  That 10 year period will now be up in 2018 and, if Butler is correct in his suggestion, JP Morgan could now be in a position to reap multi-billion dollar rewards from unwinding some of its silver market activities.  Butler though has been permanently bullish on the silver price and some of his theorising, however well supported in fact, may just be wishful thinking.  BUT – he could also be correct and if he is there could be a run up in the silver price that would at least match that of 2011 when the metal peaked at just short of $50.  Silver investors will certainly be nailing their colours to that mast!  And if silver runs in this manner it could drag gold up with it too.  The tail wagging the dog!

There have been many changes in both the gold and silver markets over the past several years and most would seem to be price supportive – not least the continued flow of bullion from generally weaker hands in the West into stronger hands in the East.  Global gold production has probably peaked –it has certainly at least plateaued – and the year-end figures will be viewed with particular interest when they come in.  We would suspect global gold production in 2017 could be down as much as 1% overall.  It is falling in some countries, although still rising in others, but cutbacks in capital programmes and in exploration spending, particularly by some of the majors, suggest that there could be several years of declining global output, although not at a particularly high rate

Eastern demand appears to be holding up fairly well.  While neither of the two leading consumers – China and India – are importing gold at their past record levels, demand appears to have been increasing in 2017 over that of 2016 and we would expect that trend to continue along with the gradual increase in percentages of their populations falling into the middle class (and potentially gold-buying) categories – a growth that is being echoed around the world.

Geopolitics could also be playing a role here, although the gold price has been showing little sign of any sustained upwards movement with some of the worrying events taking place around the world and President Trump’s seemingly increasingly combative rhetoric which could be considered destabilising.  However we have noted that the passing of major holidays often seems to mark an inflection point in market behaviour and perhaps Christmas 2017 is yet another one of these.  So far the portents for gold and the other precious metals look positive.  It remains to be seen how they play out through the year ahead.

For those interested in a follow up as the first day of 2018 trading has got under way in Asia and Europe, Click on:

 Gold and silver continue rising as dollar and bitcoin slip