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.

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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

Gold, silver, platinum, pgms – price forecast reiterations

As gold and the other precious metals appear to be regaining some of their lustre as we approach the calendar year end, readers of lawrieongold might like to check out my precious metals price predictions for 2018 as posted on the Sharps Pixley website.  While the absolute forecasts do not differ materially from my prior article on Seeking Alpha   See: Gold, Silver, Platinum, Palladium – Price And Stock Forecasts some of the reasoning will be new or more detailed and it doesn’t refer to stock recommendations – just year-end price forecasts.  Click on Precious metals price predictions for 2018 – gold, silver, pgms to read.

Check out Seeking Alpha for my 2018 price predictions for gold, silver, platinum, palladium and precious metals stocks

My latest article on Seeking Alpha looks at the performance of my precious metals stock recommendations of a year ago – over half beat the record growth in the S&P 500, but some would have lost you money as well – and my new set of predictions for the year ahead.  Highlights as follows:

  • Precious metals stock picks made a year ago were mixed, but more than half beat the record growth in the S&P 500.
  • Most of the new 2018 precious metals stock picks are the same as those for 2017, but there are some deletions and additions.
  • Price forecasts for gold, silver, platinum and palladium, the dollar index

For the record looking for higher prices in the year ahead for gold, silver and platinum, but perhaps a fall back in palladium in the second half of  the year as we start seeing reverse substitution by platinum catalysts in the petrol (gasoline) section of autocatalyst manufacture due to the platinum price being lower than that of palladium.

Stock selections are virtually all in stocks which won’t collapse should precious metals not perform as expected.

To read the article on Seeking Alpha click on:

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

Gold and silver edge up as bitcoin tanks

My latest article on sharpspixley.com edited and updated slightly looking at the pre-Christmas crash in bitcoin and a slight upturn in precious metals.  To read the original article, and also one on the latest Swiss Gold Export figures by me click on SharpsPixley.com and then on the Market Comment dropdown menu.

Bitcoin has demonstrated over the past couple of days why it’s not exactly an ideal investment for widows and orphans.  Those who climbed onboard bitcoin as it seemingly unstoppably moved to breach the $20,000 level saw it tank by almost 40% in a couple of trading days and seemed possibly heading to a 50% fall.  Whether this is just a correction on its way back up to $20,000 and above, or the beginnings of a bursting bubble, remains to be seen, but it does emphasise the enormous volatility of an ‘asset’ which is being driven up purely on sentiment, and would appear to have little or no material substance.  It has all the similarities to a Ponzi scheme where there have to be new buyers in the market to drive the price to ever new highs.  But when the new buyers desert it the asset plunges as holders try to bailout at whatever price they can.  Of course that applies also to many other asset classes nowadays – even the equities markets which are being driven up to, in our view, unsustainable levels.  Bitcoin is perhaps an extreme example and if the crash is sustained, equities could well follow bitcoin’s example and end their bull market too.

What does seem to be happening at the moment is that a section of the bitcoin community is taking huge profits given the growth of the cryptocurrency this year – or indeed in the last couple of months.  As I began to  write this article, bitcoin itself seemed to have broken through downside resistance at the $12,000 level – still hugely profitable for those who may have bought the cryptocurrency earlier in the year.  There has since been a bit of a bounce back up from around $11,000 to the mid $13,000s, but whether this can be prolonged or is of the ‘dead cat’ variety remains to be seen.  If say, however, the bounce is not prolonged and $10,000 is breached on the downside, the so-far very heavy correction could become a rout! This was on the last trading day before Christmas and recent investors in bitcoin are not seeing much Christmas cheer so far.

Meanwhile gold appears to be edging up in the other direction, and had broken up through $1,270 before the U.S. opening session, although the COMEX futures market could well bring it back a few notches going by recent experience.  At the time of writing though it had moved up a few more dollars, while silver was accompanying it on an upwards path too.  One doubts gold’s rise is on the back of bitcoin’s fall, but if the latter’s downturn proves to be prolonged it could pull some investors back into precious metals.  As noted above, silver was moving up alongside gold but with the gold:silver ratio seemingly stuck firmly between 78 and 79, silver was just about moving in parallel with its yellow sibling.

Regarding bitcoin there do seem to be rumblings on both sides of the Atlantic about possible regulation of cryptocurrencies being imposed.  If this happens, which we feel is inevitable, it will strike at the very heart of bitcoin’s raison d’etre and certainly reduce its desirability as the monetary payment medium of choice for the world’s criminal sector.  Lack of any real controls means it is a money launderers dream and that is something governments around the world are trying hard to clamp down on.

Russia upping the ante in its gold reserve increases

The Russian central bank has announced adding another 900,000 ounces (29 tonnes) to its gold reserves in November,  This makes 2017 the highest ever year in Russian central bank gold reserve rises and there’s still a month to go.

Have covered and commented on this in ny latest article on the shapspixley.com website.  To read the article please click on:

Russia upping the ante in its gold reserve increases

2018 gold price forecasts – Murenbeeld and World Gold Council

Lightly edited version of another of my articles published yesterday on sharpspixley.com

We recently published an article which drew quite heavily on research by Canada’s Murenbeeld & Co regarding headwinds ahead for gold – click on Gold facing severe headwinds despite overvalued dollar – Murenbeeld to read or re-read – and one suspects that Dr. Murenbeeld reached these conclusions in his research for his annual gold price predictions for the year ahead.  These conclusions are usually the highlights of his early-year presentations at various events around the world.

His new predictions for 2018 have just been published for subscribers to his economic service -see:www.murenbeeld.com – and as usual he presents three price scenarios for gold looking ahead to which he gives various weightings and uses these weighted averages (for worst, base and optimistic cases) to draw an almost final quarter by quarter gold price conclusion for the year ahead.  But he again adjusts these figures further to take into account possible external geo-political events which are not considered in his initial price scenarios.  The forecasts are all generally conservative and sometimes his overall predictions come close to eventuality.  Other times they fall short on the positive or negative side, but seldom are they out by any significant amount.

Thus Dr. Murenbeeld’s 2018 predictions, if they come about, will disappoint the gold bulls, but also confound the gold bears.  He is very much on the middle path, although he thinks his more positive scenario is the one which should be followed by the world’s central bankers, but only gives this a 25% likelihood weighting.

His weighted predictions for the gold price averages for 2018 are as follows (taking into account his geopolitical event adjustments):

Q1: $1,281,   Q2: $1,301,  Q3: $1,329,  Q4: $1,347.  However he does say in his commentary that he would not be surprised if at some point during the year the $1,400 level might be breached intra-day, but obviously doesn’t anticipate that this level is sustainable.  Looking beyond 2018 he also predicts gold averaging $1,351 in Q1 2019 and continuing to rise further to $1,368 in 2019 Q2.  Bear in mind that these are all average prices and they thus could encompass some sharp fluctuations above and below the specified levels.  As an example, in 2017 gold prices have fluctuated between around $1,149 and $1,351 with an average price of only $1,206 year to date.

Meanwhile the World Gold Council (www.gold.org) has just published its latest Gold Investor publication in which its chief strategist, John Reade, is also optimistic on gold’s likely performance in 2018.  He cites global monetary policy, a possible fall in the US dollar index, a switch from overpriced equities into precious metals, demand growth in China, India and other gold supportive markets like Germany, all as likely positives for gold.  He makes no price forecasts  but anticipates the gold price continuing to grow in the year ahead, but again at a pretty conservative rate.

Neither of these stated reports suggest an on-fire gold price next year, but both are at least conservatively positive.  Deep down we suspect things could move a little faster and gold end the year at $1,400 plus but that very much relies on those holders of the big shorts on the COMEX futures market allowing prices to rise faster than they have been allowed to in the current year and a turnaround in precious metals investment – in bullion in particular in the North American markets.  Gold demand there may be dwarfed by that in the East, and even in Europe, but the U.S. markeyts in particular still seem to be setting the gold price.  We hope for better things but aren’t holding our breath in anticipation.

 

The Likely Rise Of Electric Vehicles And The Impact On Metals

I have published an article on Seeking Alpha on the growth in Electric Vehicle demand and technology and the likely effect on metals.  I am not permitted to publish it in full here but a synopsis and the opening few sentences follow:

Summary

We expect the growth in the electric vehicle (EV) element of the automobile sector to be more rapid than most projections suggest.

Battery technology is improving very rapidly and will shortly overcome range anxiety and charging time worries.

A number of metals will benefit strongly from the growth in EV uptake, while some others will suffer, but this is a longer term viewpoint.

The take-up of electric vehicles (EVs) may well be in a growth pattern which could rival that of the price of bitcoin, but is unlikely, like the latter to push sales into bubble territory. As range anxiety and long charging times recede into obscurity with the enormous developments in battery technology, the environmental, and ultimately the cost, benefits of electric drive for automobiles over internal combustion engine (ICE)-driven small vehicles is likely to become paramount………

To read full article click on: www.seekingalpha.com  

and search for my articles under Lawrence Williams in the search box.  You may find some of my other articles to be of interest too.

Palladium outperforming platinum – but for how long?

Another article – this time on pgms – published today on the www.sharpspixley.com website.

This morning, as I write, the palladium price is sitting at $1,024 an ounce, aided by a small fall in the dollar index following on from the latest statements from the U.S. Fed and the ECB, while platinum was at only $882 an ounce.  This is a massive deficit of almost 14% for the platinum group metal (pgm) which has for most of time been at a substantial premium over the former.

But can palladium’s price advantage be sustained?  The answer is almost certainly not in the medium to long term – while in the ultra long term the future for all the platinum group metals looks pretty bleak given the likely rise in Electric Vehicles (EVs) sales and a matching decline in Internal Combustion Engine (ICE) driven units.

The principal usage these days for palladium and platinum is as a catalyst in ICE exhaust emission control systems.  Platinum remains predominant in the diesel emissions control market, but diesel, in the car market has had a bad press and sales have been slipping, particularly in Europe and Asia, while it has never really taken off in the big U.S. automobile market.

Over time the then high price premium of platinum (once the preferred emissions control catalyst for all kinds of ICE driven vehicles) over palladium has led to the development of what was then far cheaper palladium/rhodium emissions control catalytic exhaust control system for the predominant petrol (gasoline) driven car market.  But how long can this last with palladium and rhodium commanding the premium price slot?

It is true that palladium demand appears to be in a substantial deficit at the moment, thus accounting for the rapid price advance for palladium which as risen in price by some 40% this year.  However  a switch back by manufacturers to what appears to be a marginally more efficient platinum-based catalytic converter system, which would be currently considerably less costly given comparative pgm prices, could well mean that platinum demand will rise and palladium will fall.  This will take time, but the longer palladium remains at a price premium over platinum the bigger the incentive to switch back to a platinum-based catalyst system.  Gearing up to a reverse switch of this type could happen far more quickly than is currently anticipated given the manufacturers of emission control catalytic systems are already producing platinum based systems for the diesel market.

The global ICE-driven vehicle market is enormous, and likely to remain so until early in the next decade at least, despite an increasing take up of EVs.  This will not happen overnight and ICE-driven cars are expected to dominate the auto market for at least the next ten years, although beyond that we see EVs becoming dominant and demand for platinum, palladium and rhodium slipping away – drastically as the trend to EVs continues.  But that still leaves a good few years when pgms will remain dominant in the sector – but which ones?

There is also perhaps a better correlation between platinum and gold prices, with increases in the latter tending to drive similar increases in the former.  Historically the platinum price has been higher than that of gold most of the time, and some analysts suggest that that price premium could re-appear – although this writer would disagree with that argument given the potential long term decline in pgm demand noted above.  But if the gold price does rise over the next few years, as we anticipate, it seems more likely to drag platinum up with it than palladium, given the stronger jewellery demand for the former.  But then if platinum again becomes more expensive than palladium we could see the exhaust catalyst demand switch around yet again, assuming the current price differential does lead to perhaps a temporary platinum demand dominance again.  But this may all happen too late for the ultra-long term futures for either metal.  They will both suffer from what we see as the inevitable rise of the EV in the personal transportation sector – and ultimately in the heavy truck sector too, although this may be slower to come about.

Gold facing severe headwinds despite overvalued dollar – Murenbeeld

Another post published on the Sharps Pixley website earlier today

The latest issue of economist Dr. Martin Murenbeeld’s Gold Monitor newsletter (www.murenbeeld.com) does not come up with a particularly optimistic view on the short term future for the gold price.  In fact it suggests the contrary may prove to be the case.

For those who do not know him, Dr. Murenbeeld is a hugely respected Canadian financial analyst who now runs his own advisory service after working for Dundee Economics as the group’s chief economist for many years.  He concentrates, among other things, on gold and is known, and respected, for his impartial views and forecasts for gold and other precious metals.  His annual gold price forecasts have tended to be among the most accurate out there, so his views are always balanced and well worth taking into account when assessing the likely path of the gold price.  He is neither really a gold bull nor a gold bear, but tells it how he sees it at any specific point in time, although on balance is probably long term gold positive.

In his latest Gold Monitor newsletter Dr. Murenbeeld comments that rising equity markets, a rising dollar on the back of a likely tax deal out of Congress before yearend, the certainty of more Fed rate hikes – the next one on December 13 – and other attractive speculative alternatives including art, real estate, bitcoin, etc are all putting a dent in the short term investment prospects for the yellow metal as investors look for better returns elsewhere.  He does however point to some uncertainties out there which could turn the scenario around – notably Mueller’s investigation, a geopolitical crisis (North Korea?), and/or Trump Administration internal problems (will Tillerson go in the end?), to which we would add a further possible Middle East conflagration, an escalation in the Trump/Iran rhetoric (which some suggest could lead to military action), the much predicted crash in equities markets and a possible bursting of the bitcoin bubble, although neither of the financial turnarounds currently seem to be on the short term horizon.

Dr Murenbeeld has for some time, though,  reckoned that the U.S. dollar is overvalued and sees President Trump’s proposed tax cuts as exacerbating the country’s severe debt problems and budget deficit which, ultimately could lead to the dollar diminishing in value against gold and other currencies.  But this is unlikely to happen in the short term.  Dr. Murenbeeld notes: ‘Given the low domestic savings rate, funding for the rise in the US budget deficit will also have to come from abroad, meaning US interest rates will likely need to rise. Assuming the extra capital inflows push the US dollar higher, and the expansive fiscal policy raises US growth rates, the US trade deficit will rise. (For those readers familiar with GDP accounting identities, a rise in capital inflows must go hand in hand with a rise in the current account deficit!)’, so although he sees the dollar as overvalued it may well rise in the short to medium term, which would not be positive for gold.

Dr. Murenbeeld continues: ‘Our ongoing question is how the Trump Administration will manage all this – a bigger budget deficit and higher GDP growth rates – without a rise in the US trade/current account deficit. It can be done, but the US will need a higher savings rate, more exports, and a much lower dollar. Indeed, the US will need to fund the budget deficit from domestic sources, i.e. from savings generated on the back of less imports and more exports! Or the Trump Administration will go further down the road of protectionism – which is not the best alternative when the dollar should instead be devalued!’.

He sees this as all adding up to an awkward near-term outlook for gold. However President Trump has himself indicated a preference for a reduction in the dollar index (although has been a little ambivalent about this) and indeed the dollar index has fallen by around by around 9% since he took office.  But, Murenbeeld notes, failing a further engineered decline in the dollar parity against other currencies and gold, the reverse may come about and the dollar rise, putting even more pressure on the gold price.