China’s SGE Gold Withdrawals still slipping but up year to date

The latest figures for Shanghai gold withdrawals in November have now been released and they are down a little on 2017 and a bit more on 2016, but the cumulative year to date figures are still up:

Table: SGE Monthly Gold Withdrawals (Tonnes)

Month   2018 2017 2016 % change 2017-2018 % change     2016-2018
January   223.58 184.41 225.08 +21.2%  -0.7%
February*   118.42 148.24 107.60 -20.1% +10.7%
March  192.61  192.25 183.24  +0.2%  +5.1%
April  212.64  165.78 171.40  +28.3% +24.1%
May  150.58  138.08 147.28  +9.1%  +2.2%
June  140.59  155.51 138.51  -9.6%  +1.5%
July 137.41  144.71 117.58  -5.0%  +16.9%
August  190.59  161.41 144.44 +18.1%  +32.0%
September  188.12  214.24 170.90  -12.2%  +10.1%
October*  142.94  151.54  153.25  -5.7%  -6.7%
November  179.08  189.10  214.72   -5.3%  -16.6%
December  185.21  196.37
Year to date 1,876.58 1,845.34 1,774.00 +  1.7% +5.8%
Full Year  2,030.48  1,970.37

Source: Shanghai Gold Exchange.  Lawrieongold.com

* Months include week long New Year and Golden Week holiday periods

For additional comment on the above click on the below link to my article on the sharps Pixley website:

Chinese gold demand slipping – but still up y-o-y

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A Tale of Two Conferences – 121 and Mines & Money head to head

The past couple of weeks in London have seen two major mining-oriented conferences/exhibitions which in many respects went head to head in attracting participants.  What is perhaps ironic is that the individuals who run the conference organisation for the first of these to take place – the 121 Mining Investment conference- used to be the organisers for the other – Mines & Money – until they deserted virtually en masse a few years back to set up their own conference business.  This they have built up very successfully with events in London, Hong Kong, Cape Town, New York and Singapore and have expanded conference focuses from mining to oil and gas, technology and property.

Mines & Money on the other hand has retained its mining focus and has also expanded geographically from London to Hong Kong, New York, Brisbane, Melbourne and Toronto, but is now run by Beacon Events which does have other conference streams too.

The revenue generating patterns for the two events are somewhat different.  The 121 conference generates all its income from the organisations (mostly junior mining and exploration companies) which give 10 minute presentations to mostly sparsely attended delegate sessions, but generate most interest from meetings set up at their individual display areas in a 2-day event, but with free admission to qualified delegates.  It would seem that Mines & Money might have the edge here as it provides something similar, plus has more general ‘expert’ presentation slots over 4-days, and attracts a number of service companies and national exhibits, but makes its money from attendee fees as well as exhibitor and presentation charges.  However, talking to paying participants, it appears that the 121 event had more of a buzz, perhaps better networking and, in general, the paying participants seemed happier with the overall benefits which may have accrued.

In general the 121 conference’s event facilities, were perhaps better, being held at the old County Hall on the Thames South Bank; the catering was definitely better and the printed conference programme was streets ahead of that given out at Mines & Money.  The latter held its event at the Business Design Centre in Islington as it has almost from the start (its first event some 16 years ago was at the Excel Centre much further from London’s City Centre) but at this year’s event the organisers do, on the face of things, appear to have been cutting some of the costs involved – notably on the catering front and in the printing of conference materials.

Mines & Money also has a very successful associated Awards Dinner, organised by Mining Journal, the original founder of the whole series of Mines & Money events.

So which is the better event?  Both have their strengths, but for paying participating companies we think 121 may have the edge.  The venue, close to Waterloo Station is arguably more convenient and it definitely comes out ahead on facilities and ambience as it does for the catering and printed material pertaining to the speakers and participating companies.. Mines & Money has a much broader conference programme and more ‘expert’ speakers plus the Awards dinner so there’s probably room for both although Mine & Money may have to make more of an effort in future years to retain any dominance it may still have.

May be a great time to buy back into the gold majors

Summary and link to an article published on Seeking Alpha.com

Now May Be The Time To Buy Into The Gold Majors

Summary

The proposed Barrick/Randgold merger, assuming it is implemented, will likely lead to a positive re-rating of the whole sector.

Randgold’s management has been brought in by Barrick in an attempt to change the latter’s management philosophy for the better.

Barrick shareholders may not be happy with a greater involvement in Africa, but Randgold has seen over a decade of virtually uninterrupted growth, wholly in the ‘Dark Continent’.

A more liberal dividend policy is likely to be implemented by Barrick, in itself helping to stimulate investment interest.

The saying goes that the best time to buy into a market is when ‘blood is running in the streets’. After a series of mostly disappointing Q3 results, media and commentators have been climbing into the gold majors, and many of these have seen their stock prices sink to new interim lows. Now may thus well be the time to climb back into investing in these stocks as they are likely to be at, or near, their low points as long as the gold price remains where it is at the moment, or moves higher over the remainder of the year as we think it will…..

To read full article click on: Now May Be The Time To Buy Into The Gold Majors 

 

Big anomalies in September’s Swiss gold exports

Here follows a lightly edited and updated version of an article first published yesterday on the Sharps Pixley website looking at some unusual export data for gold from Switzerland in September.  Switzerland is a key conduit for the transfer of gold bullion from West to East as being the location for a number of refineries which specialise in taking Western gold bars and dore bullion from mines and re-refining this to the smaller sized ultra high quality gold bars and wafers in demand in Asia and the Middle East:

Switzerland has announced its gold imports and exports for September and while imports are from the usual suspects there are some important anomalies from the normal pattern in the country’s September gold export figures.

Imports totalling around 177.8 tonnes largely came from the UK (91.8 tonnes – or a little over half the total) and the USA (33.1 tonnes) neither being abnormal numbers, with the UK being the centre of the global gold trade and the USA being the world’s fourth largest gold producer. The balance came from relatively small amounts mostly from other gold producing nations.

The real surprises came in the gold export recipients. Mainland China topped the list comfortably with 37.5 tonnes out of total gold exports for the month of 119.4 tonnes but the HUGE surprise in the figures was that during September Switzerland, apparently, according to the figures we were presented with initially, exported zero gold to both India and Hong Kong,  We were however fed incorrect data and now we have updated figures which corrects the anomalies.  The initial figures were indeed  erroneous.  In fact exports to India were down very substantially to 16.6 tonnes but Hong Kong still took a respectable 28.9 tonnes.  A graphic of the real figures is shown below:

However, some other Swiss gold recipients in September are indeed really anomalous as they also usually fall outside the country’s normal gold export listings; notably Hungary which imported 28.9 tonnes as it increased its central bank holdings tenfold (see: Central Bank gold buying – New kids on the block), although Hungary reported this as occurring in the first two weeks of October, but it apparently entered the Swiss export figures in the earlier month. Other big unusual importers were Indonesia (with 16.6 tonnes), the African nations of Ghana (5.2 tonnes), Gabon (4.8 tonnes) and Senegal (2.6 tonnes), while among the normal Swiss gold recipients Thailand (7.7 tonnes), Saudi Arabia (2.6 tonnes) and Taiwan (2.5 tonnes) absorbed larger amounts than normal.

It remains to be seen whether some, or all, of these were adding, like Hungary, to their official gold reserves. If they are this should become apparent when the IMF publishes its next table of changes in world gold reserves which is always available in the data section of the World Gold Council’s website (http://www.gold.org).

Interestingly the gold price soared yesterday reaching $1,240.80 at one time up from $1,221.70 when the U.S. market closed a day earlier. This may also have been prompted by a big plunge in general equity markets with Asian, European and North American markets all losing substantial ground.  They do seem to be picking up a little today, albeit nervously (the Hang Seng continued to fall and Germany’s DAX is down a little as I write)  but it remains to be seen if the apparent rise is just a temporary bounce and if there is further carnage to come.

The dollar index has also picked up a little today which could mitigate further rises in the gold price – at least temporarily

Is the oft-predicted plunge in equity prices beginning – and if so are we seeing a move into gold as a safe haven? The dollar index also appears to be slipping a little and we again saw inflows into the big gold and silver ETFs. Perhaps precious metals are coming back into favour again?

Gold may be waiting on U.S. midterms

An article published by me a few days ago on the info.sharpspixley.com website – and followed by on on the same subject from a U.S. commentator:

The gold price, after its recent uptick, seems to be consolidating in a US$1,220-$1,230 range, perhaps held in check by a stronger U.S. dollar index – although maybe even more likely by machinations on the COMEX paper gold futures market.  Every time upwards pressure moves the price to the $1,230 mark it appears to be smartly brought back down a few pegs!  Movements in and out of the big SPDR Gold Shares (GLD) gold ETF have been non-existent the past few days, suggesting  too that the institutional market may be biding its time, waiting for a break-out one way or the other before committing more funds, or withdrawing gold, out of the world’s biggest gold ETF.

With the U.S. midterm elections coming up in a few weeks’ time and with some uncertainty showing up in the polls, gold may well find itself in a hiatus period until after election date (November 6th).  There’s an interesting article published by the BBC in the UK which looks in some graphical detail at the various factors which have tended to move the electorate under past Presidencies and the latest corresponding figures (See:  US mid-terms: Can we tell if Democrats will win?)  Looking at the figures and charts, currently they would on average suggest good Democratic party gains, although whether enough to gain a majority in the House of Representatives, which the Republicans currently control by 241 seats to 194, let alone in the Senate, is not so certain.  President Donald Trump (who is a hugely contentious figure in U.S. politics) has confounded the polls before and could well do so again.  His supporters are fanatical in their partisanship – but then so are his opponents .

We think that perhaps the best pointer to the eventual result may lie in the numbers of political retirements ahead of the midterms from each party – and far more Republicans are retiring than Democrats.  The Democrats have also been far more successful in raising funds for advertising campaigns supporting their candidates than the Republicans.

As the BBC article notes on the political retirements: “Several key committee chairs and Speaker of the House Paul Ryan have already joined what’s become a modern record for retirements from a majority party – a telling sign that they think Republicans may not be a majority much longer.  Several incumbents – on the left and right – also were forcibly retired, as they lost primary races to grass-roots challengers. That could be another indication of an anti-incumbent mood in the electorate that, because there are more Republicans running for re-election than Democrats, could help fuel a Washington power shift.”

As noted above, President Trump is a contentious figure, even within his own party, and we suspect that the record number of Republican legislators standing down could be as much a sign of their dissatisfaction with the incumbent President and his policies as a normal retirement pattern.  Out of the political mainstream they no longer have to support his proposals – or comment positively on his numerous off-the-cuff tweets.  If this sense of dissatisfaction filters down to the grassroots there could well be a very big Democratic Party resurgence.

So all in all we would not be at all surprised if the Democratic Party overturns what is a pretty decent Republican majority in the House, but perhaps the GOP will retain its slender majority in the Senate.  If the Democrats overturn the Republican majority in both houses then the currently hugely partisan state of U.S. politics could lead to any, or all, of President Trump’s policy proposals being mitigated or ended altogether.  But what a wounded President Trump might do in such circumstances, while retaining executive and Commander-in-Chief powers, could be very worrying for both the U.S., and the world as a whole.

While President Trump, and his utterances, are not to everyone’s taste he has been presiding over a growing U.S. economy and falling unemployment – at least as far as perhaps tweaked official statistics tell us.  However the country’s trade deficit has been growing, while some are increasingly worried about the prospective economic implications of the trade wars the President has unleashed.

Should the Democrats prevail in the midterms then that would likely throw the U.S. into a political impasse and could severely knock confidence in the U.S. dollar which has been riding high of late.  A falling dollar would likely mean a rising gold price so political change and uncertainty in the U.S. could well be positive for gold despite the Republicans being, in theory, perhaps more precious metals-friendly than the Democrats.

President Trump and his policies seem to have been good for Wall Street and even many of those who were on the political right, but seemingly opposed to the idea of The Donald becoming President, now, perhaps grudgingly, are prepared to accept that what he has been doing has been positive for the economy.  But the worry for the Republican Party is not necessarily that those of this opinion will vote Democrat – they probably won’t – but they may abstain from voting altogether thus allowing Democrat victories by default.

So the big money, which can swing the gold price either way, may well be holding off for the time being until they are sure which way the political wind is blowing.  But the nearer to the polling date we get, if the polls are looking decisive one way or the other, the more likely we are to see gold breaking out up or down.  At the moment virtually all the polls are predicting Democrat gains, although Republicans still look to be comfortably ahead in the Senate.  The House is a different picture altogether and we look likely to see significant Democrat gains, although whether enough to achieve a majority is still in the balance.  The recent Kavanaugh hearings could have a negative impact on the Democrat vote as there is a general feeling that opposition to the judge’s appointment was purely politically motivated.  That has consolidated Republican support and perhaps weakened likely Democrat turnout.

 

GLD Rising. Is this the move we’ve been waiting for?

Updated version of an article published on sharpspixley.com on Monday.  To read original article click here

In a post a few weeks ago we suggested monitoring inflows or outflows of gold into or out of the big SPDR Gold Shares gold ETF (GLD) as a way of judging big money sentiment on gold (See: Watch GLD for gold price guidance) and for a corresponding gold price direction. And, after a series of consistent gold withdrawals from the ETF, this does seem as if it may have turned around sharply last week at almost exactly the same time as the big fall in the equities markets commenced. Last Tuesday, for example, 8.82 tonnes of gold were added into GLD – the first increase since July – and after a couple of days of zero movement in the ETF, another 5.65 tonnes of gold were added into it on Thursday. the additions continued over the weekend with a further 4.12 tonnes added.  These are not insignificant amounts. 18.59  tonnes of gold is equivalent to around the annual production of the world’s 32nd largest gold producer last year – and this amount was added only over a 6-day period. This week’s continuing GLD figures will thus be particularly worth watching to see if the build-up continues – and if it does watch out!

Many observers have suggested that for a sustained increase in the gold price this would be accompanied by a significant downwards correction in the general equities markets which are seen by many as overbought, with such a correction perhaps overdue and inevitable. But beware of a really big downward move in equities should this happen, as some commentators suggest. Such an occurrence could bring precious metals down in price too as happened in 2008. The prospect of this may have lightened somewhat in comparison with the last big downturn as many institutions are out of any substantial precious metal holdings given they have been somewhat out of favour as an investable asset in the past several months. And even if they do drop in price alongside equities they will likely recover far faster – as in 2008/2009.

Today has seen a bit of a pick-up in equities in most markets, although gold has pretty well held on to its gains.  What is too early to tell though is whether today’s equity recovery is a shortlived bounce, or a start of the continuation of the bull market in general equities.  It’s perhaps worth reading the transcript of the Stephen Leeb interview published on this site a day or so ago.  Despite a slightly rambling interview, Leeb is one of the smartest guys around and he reckons that if this recent move in equities is not the start of the long-awaited crash, the latter is not far ahead.  We shall see in  the next few days.

Is this the turning point for gold and silver?

Here follows a lightly edited and updated version of an article I published on the info.sharpspixley.com website earlier today.  (To read original article click here)

We wrote here recently about the short term headwinds facing gold and the longer term positives, but some of the short term negatives seemed as if they fell away at a single swoop yesterday!  Could the 800 point fall in the Dow be the start of the much predicted equities collapse?  Indeed the Dow and the S&P 500 were both down around 3% on the day and the NASDAQ down a massive 4%.  These falls have been mirrored by big falls in general equities in Asia and Australia, and this morning in Europe. The equities sell-off has continued today, but not, so far, as severely as yesterday.

As perhaps another indicator,  yesterday a massive 273,851 ounces of gold were added to the SPDR Gold Shares ETF (GLD) – that’s over 8.5 tonnes and is the first positive movement of gold into GLD for nearly 3 months, and a very sizeable amount to boot.  We have stated here before that one should watch GLD additions or withdrawals as a guide to institutional sentiment towards gold and since April we have mostly seen withdrawals – an enormous 141 tonnes of gold had been taken out from GLD from end-April until yesterday.  Again could this be a turning point for gold?  One day’s figures are perhaps not a sufficient indicator of what’s to come, but are a  and it is essential to monitor this indicator as a guide to precious metals sentiment.

Today we have seen a big rally in the gold price which has hit its highest level since the beginning of August, up over 2% at its intra day peak so far today.  Silver has seen a slightly stronger increase too, but not enough yet to see it break out from its correlation with the gold price.  But investor interest has been strong as witness the high level of silver Eagle sales out of the U.S. Mint.  It has the potential to outperform gold should the rallies in both metals continue.

As always commentators’ views are mixed on the likely effect of yesterday’s falls in equities valuations.  Some see them as a buying opportunity in an ongoing bull market pointing to a similar fall in February from which the major indexes made a fairly rapid recovery.  All eyes will be on the Dow and the S&P over the next few days to see if the falls will continue, or if there will be a bounce back.

We are entering a time where Fed tightening by raising interest rates may well be making markets nervous.  President Trump has been quick to lay the blame for yesterday’s fall on the Fed’s policy of raising interest rates thus leading to a stronger dollar (which has adversely affected the gold price in dollars if not in some other currencies).  This fall in other currencies against the dollar has had a counter-effect on some of the Administration’s tariff impositions.  Yet even so some U.S. manufacturers are already warning that the tariffs on Chinese goods in particular will have a negative impact on input and consumer prices.

So, we are likely going to see a steady increase in U.S. inflation, and unless there is a slew of positive data on job creation, wages and in PMI forecasts, we could see sentiment turning down which could further impact U.S. equities markets.  If equities are seen as likely to fall further this could see an increased move towards safe haven assets like gold and silver.

Although be warned, if equities markets really do tank as some are predicting, then precious metals prices could suffer too as individuals and funds/institutions struggle to maintain liquidity and are forced to sell off good assets with the bad.  We saw this happen in the 2008 market crash, although it should be noted that gold, in particular, was far quicker to recover than equities and climbed back to pre-crash levels while equities were still falling.

And what of silver?  This has had a pretty torrid time of late as represented by a gold:silver ratio (GSR) at around its highest level for around 20 or more years.  When the GSR has been this high in the past it has tended to precede either an economic crisis or a big stock market turndown, or both.  Is that what we are now experiencing?  We have often said we don’t anticipate a return to the supposed old average GSR of around 15 as the out and out silver bulls will suggest, but a return to the 70 level, or even 60, could be on the cards with a huge positive impact on the price of silver. vis-a-vis that of gold

This morning, gold has already regained the $1,200 level which had previously seen major resistance to an increase coming in.  And once U.S. markets opened the price shot up another $20.  If this level is sustained through the end of the week and equities continue to fall, then we could see a big surge in precious metals prices in the days and weeks ahead.  Chart followers had been pointing to a gold close above $1,215 as being the significant level from which gold might continue to appreciate and, as I update this article gold is sitting comfortably higher than this level.  it obviously remains to be seen whether it will stay there, but we think there is a good chance of it so doing and then move on to get some of its lustre back.

Bitcoin too has been stuttering with BTC down around 5% and the smaller cryptos, like ETH, mostly down more than 10%.  We have long warned that we have no confidence in the stability of a bitcoin investment and this kind of volatility perhaps makes the point for us.  Some observers reckon that BTC will fall to around $2,000 by the year end, or even lower, and some of the lesser cryptos to close to zero.  We wouldn’t be surprised if this were to come about!

 

Latest SGE figures could point to a Chinese gold demand turndown

Perhaps a week later than usual – due to the Golden Week holiday, China’s Shanghai Gold Exchange has just published its gold withdrawal figures for September, and they’ve come in around 12% down on the same month a year ago.  The question is does this represent a downturn in Chinese gold demand, despite the relatively low gold price with lower metal prices usually sparking an upturn in retail gold demand in mainland China and Hong Kong?  – See table below for monthly SGE gold withdrawals for the past couple of years:

Table: SGE Monthly Gold Withdrawals (Tonnes)

Month   2018 2017 2016 % change 2017-2018 % change     2016-2018
January   223.58 184.41 225.08 +21.2%  -0.7%
February*   118.42 148.24 107.60 -20.1% +10.7%
March  192.61  192.25 183.24  +0.2%  +5.1%
April  212.64  165.78 171.40  +28.3% +24.1%
May  150.58  138.08 147.28  +9.1%  +2.2%
June  140.59  155.51 138.51  -9.6%  +1.5%
July 137.41  144.71 117.58  -5.0%  +16.9%
August  190.59  161.41 144.44 +18.1%  +32.0%
September  188.12  214.24 170.90  -12.2%  +10.1%
October*  151.54  153.25
November  189.10  214.72
December  185.21  196.37
Year to date 1,554.55 1504.70 1406.03 +  3.3% +10.6% 
Full Year  2,030.48  1,970.37

Source: Shanghai Gold Exchange.  Lawrieongold.com

* Months include week long New Year and Golden Week holiday periods

A double digit percentage downturn for one month may in reality not be indicative of a downturn – yet – but taken into account with other factors  (not least the initial impact of the trade and tariff ‘war’ with the U.S.) we think it may be time to take note given the huge impact of Chinese gold consumption on global gold trade.

It is actually a somewhat contentious point as to whether SGE gold withdrawals are a real representation of Chinese demand.  The major gold consultancies dispute this and come up with far lower figures for Chinese  consumption, but, in terms of actual gold flows they do seem to be far closer to reality than the consultants’ estimates.  Known gold imports from those countries which break down their gold export figures by national destination, plus China’s own gold production, plus an allowance for scrap come far closer to the SGE withdrawal total than the consultants’ consumption estimates.  If we add in a small allowance for gold imports not detailed in national statistics we do end up with a sum total which equates to SGE withdrawals.  Regardless, though, the SGE figures given they are released monthly, are an easily accessed measure of trends in gold activity in the world’s largest gold consumer.

 

So we await future months’ SGE figures with particular interest given they will include demand leading up to the next Chinese New Year which falls on February 5th (a year of the pig), around 10 days earlier than the 2018 New Year.

Those with sharper eyes may note that this year’s February SGE gold withdrawal figures were some 20% lower than the previous year without prompting the kind of comment we are seeing here, but this is explainable by the comparative dates of the Chinese New Year, which fell mid-February this year and end-January in 2017 with much more of the corresponding holiday period, when the SGE is closed, falling within February this year.

I have added additional comment on the state of the Chinese economy and the impact of the SGE gold withdrawals in a post on sharpspixley.com which may be accessed directly by clicking here.

Suffice it to say that if the latest SGE gold withdrawal figures do presage a turndown in Chinese gold demand, this could have an important impact on global demand fundamentals given that China is the world’s largest gold consumer.

Two connected gold posts from me on Sharps Pixley

This past week I have published a couple of gold-relevant posts on the info.sharpspixley.com website which look at the current price pattern for gold and whether it has bottomed yet.

The first was:

Gold battles to hold $1,200

The first couple of paras  follow – to read the full article click on the linked title  above:

The past few trading days have seen the gold price hovering above and below the $1,200 mark in the light of a stronger dollar and a lack of Chinese data due to the nation’s Golden Week holiday this week.  Every time the gold price has nosed above $1,200 it has been taken down a few dollars again.

The hard right wing gold fraternity generally put this down to manipulation by the powers that be on the futures markets where at key times remarkable amounts of paper gold are offered for sale – although spoofing, where massive sales or purchase orders are placed on the futures markets, but with an intent to cancel orders before they can be implemented, may well be a prevalent cause. For example, the U.S. CFTC regulator has just fined Canada’s Scotiabank a paltry $800,000 for doing this on the COMEX futures markets for gold and silver from at least June 2013 to June 2016.  It makes one wonder how common this kind of market manipulation is among the other major bullion banks.  The profits that can be gained from playing the markets to their advantage in this manner far exceed any fines that may be imposed by the regulators and the banks may view the prospect of being caught out and fined just as a cost of doing business.  After all an $800,000 dollar fine is just peanuts to a major banking entity.  Who knows what huge profits were made by playing the markets in this manner ?

The Chinese Golden Week holiday suggests………….  To read full article click on the title above.

The second article looked at the weekend close above the $1,200 level, looks at the short term headwinds facing gold, and then the long term positives.  To read the full article click on the link below:

Gold ends week above $1,200. Is the bottom in yet?

The gold price managed to end the past week above the $1,200 level, but still a little below its 50 day moving average, although it did manage to breach that line intra-day, so it is close. But the big question is is it there to stay, or will it turn down again and test its recent low of around $1,183 again?

We have read a number of gold commentaries suggesting the bottom is in on numerous occasions during gold’s decline from above $1,350 earlier in the year, with most such forecasts being overtaken by further declines within a very short space of time. But this time around it does look like there may have been a firm bottom in the low $1,180s. But as we noted in an earlier article this past week, gold has been struggling to remain consistently above the $1,200 level, despite continuing buying pressure.

Gold has been range bound for most of the past few days between around $1,190 and $1,210 being unable to break out in either direction so far. There are certainly short term headwinds………

To read full article click on the title above

 

Culture Clash In Barrick/Randgold Merger Could Be Hugely Beneficial For Both

Link to my latest article on Seeking Alpha on the proposed Barrick/randgold merger
Summary

Top gold miners Barrick Gold and Randgold Resources are planning to merge in an US$18 billion plus all-share deal.

Key operating management positions will be held by Randgold executives with the intent of applying Randgold’s leaner and meaner ethos to Barrick’s management and operations.

The merged company will majority own and operate five of the top ten Tier One global gold mining assets and will again become the world’s biggest gold mining company.

If I were a Barrick Gold (NYSE:ABX) shareholder, I would be enthused about the proposed merger of the company with Randgold Resources (GOLD). Not only would Barrick be merging with one of the most successful companies in the gold mining universe over the past several years, it will return it to being the world’s largest gold miner (eclipsing Newmont Mining (NEM) – which has only just become the current No.1) – but also by effectively buying new management with a totally different approach to the top tier gold mining sector. While Barrick’s current Chairman, ex-Goldman Sachs banker John Thornton, will be Executive Chairman of the combined company, two key executive management positions will be held by Randgold executives Mark Bristow as President and CEO and Graham Shuttleworth as Senior Executive Vice President and Chief Financial Officer. In some respects, the merger could thus almost be seen as a reverse take-over. According to a quote in the UK’s Daily Telegraph newspaper, the Randgold execs will have the brief to “implement the Randgold way” across the enlarged company…….

To read full article click here

Hong Kong an also-ran in latest Swiss gold export figures

Another of my articles on Sharpspixley.com emphasising the reduction in importance of Hong Kong as a conduit for gold flows into mainland China.  The latest gold export figures from Switzerland demonstrate this well.  For many year gold flows through Hong Kong were considered a proxy for those into China at which time ups and downs in the Hong Kong figures were indeed significant – but the Territory has for several years now been of diminishing importance in this respect but still some of the media considers them as the proxy for ups and downs in Chinese demand.  Such articles should thus be ignored as not presenting the true picture.

An excerpt from my Sharps Pixley article follows – and a link to the full article is available by clicking here:

Perhaps then biggest surprise was the enormous fall in gold exports to Hong Kong in the Ausuts Swiss gold export figures. The Chinese semi-autonomous administrative state imported only 3.4 tonnes of gold from Switzerland in August demonstrating in no uncertain terms that the Territory is being sidelined as an import routing for mainland Chinese gold imports in favour of mainland ports of entry like Beijing and Shanghai. Hong Kong gold imports can definitely no longer be considered a proxy for Chinese gold demand as we have been saying for some time, although global media still gives undue importance to the level of Hong Kong gold imports and to the Territory’s exposts to the Chinese mainland.

Mainland China was again the biggest recipient of Swiss gold in August at 45.2 tonnes, closely followed by India with 40 tonnes (see chart from Nick Laird’s www.goldchartsrus.com website below.), suggesting that gold demand in the two biggest gold consumers is holding up reasonably well, but perhaps the biggest surprises were the big rise in Swiss gold exports to Singapore (12.6 tonnes) and even more so Thailand (21.6 tonnes). Interestingly Turkey apparently imported no gold at all from Switzerland in August, but actually exported 12.8 tonnes to the small European nation at the centre of the global gold refining trade.

As usual, the Swiss figures show an ever-continuing flow of gold from West to East with Asia and the Middle East accounting for over 88% of the total export figures…..

To read the rest of the article and view a graphic of the latest country-by-country Swiss gold exports please click on this link

Could proposed Barrick/Randgold merger kick off new era for top gold miners?

My latest article on Sharps Pixley website

Where the leader goes, others will follow! Arguably Barrick Gold is the company other top gold miners aspire to emulate, so will its proposed merger with Randgold Resources to buy in an alternative management strategy see other top gold miners follow suit in terms of management direction? If the proposed merger goes ahead and the ‘Randgold way’ is successfully implemented at what will again be the world’s top gold miner, the answer is probably yes!

Barrick was very much at the forefront of the production growth at any cost strategy which worked well in a continuing rising gold price scenario, but once gold peaked in 2011 and started to come down from its highs, the company was left with some hugely expensive capital projects on its books and a mountainous debt position. Most of its capital projects were too far advanced to be halted, although the horrendously costly, and technically complex Pascua Lama development straddling the Chile/Argentina border was able to be stopped, but only after expenditures of around $6 billion had already been sunk into the project. When gold was strong and rising mega producers like Barrick could handle costs like this and the banks were still falling over themselves to lend money accordingly.

But when the gold price plateaued and started to fall it was another story altogether. Profits and any free cashflow were substantially reduced and big institutional shareholders who had been perfectly happy with the growth at almost any cost strategy pressured Barrick into top management changes and some fairly drastic cost cutting and debt reduction programmes. So it was with other major god miners too. They had been pursuing similar strategies to Barrick and found them selves in similar predicaments. In that period from 2012 to 2015 virtually all the gold major CEOs were ousted and replaced as were many others in exec management positions. The miners entered a period of unmatched austerity from which few have recovered to any meaningful extent. The industry as a whole has substantially reduced debt, has cut back drastically on capital projects and has cut, or reduced, various management tiers. But with a lacklustre gold price stock p[rices have continued to slip and shareholders with clout are not happy…..

But all the while one tier one gold mining company with operations all in the unfavoured regions of West and Central Africa continued to grow without incurring massive debt and managing at the same time to sharply increase its dividend payments by sticking to strict new mine investment parameters…..

To Read Full article click here

Could gold and bitcoin be headed for parity?

Here’s a lightly edited version of an article I published on the http://www.sharpspixley.com website.  To read the original article click here.

At current prices with gold closing last week back over $1,200 and the bitcoin BTC token at around $6,600, the idea of gold and bitcoin regaining parity they last saw a year and a half ago might seem a little far fetched. But Bloomberg Intelligence’s Mike McGlone seems to think otherwise. In a report earlier this week, he painted a scenario of the BTC price falling and gold rising which could bring the two back into parity.

McGlone’s hypothesis is that market volatility, particularly in the bitcoin price, is an important indicator which investors need to watch. After all, bitcoin has already fallen from its peak of almost $20,000 achieved only seven months ago, to its current levels – a fall of nearly 70% – and he sees another similar fall, coupled with a possible pick-up in the gold price as being a distinct, but perhaps arguable, possibility.

As readers will be aware, this commentator is no believer in bitcoin. We feel there is no substance behind it. It is only worth what people are prepared to pay for it. It has no real inherent value having been purely a computer creation. I read somewhere that one observer (Richard Bernstein) likened it to a Candy Crush token which struck me as being extremely apposite. As people fall out of love with bitcoin – and it will have lost a lot of adherents with its fall from last December’s peak – the potential for it to fall back towards zero is, to my mind, a strong one. Bitcoin itself (BTC) is currently struggling to stay above the $6,000 mark despite a concerted campaign by pro-bitcoin commentators to drive it back up – many will probably have a vested interest in high crypto-currency prices. If it does come back down to the $5,000s or below this could signify a stronger fall ahead.

We tend to watch some of the other less costly cryptos as a guide and the fall of these from their respective peaks has been immense. Ethereum, probably the second highest market cap cryptocurrency, for example is nowadays comfortably below the $300 mark. It peaked in January at just under $1,400, so it has seen a fall of over 80% in around seven months. Monero, reputedly the crypto of choice for ransomware scammers and the criminal element wishing to keep transactions out of sight of the law and the tax collectors, is also down over 80% from its December 2017 peak and most of the other minor cryptocurrencies are also down by similar percentages or more.

Gold, on the other hand, despite it having been having a particularly torrid time of late is only down by 12% from its peak this year in U.S. dollars and beginning to pick up again as the dollar turns weaker. Unlike the cryptocurrencies, gold has stood the test of time as a store of value and does at least have substance behind it.  The recent price fall has been all about dollar strength after a period of sustained decline, and perhaps we are due a reversal again as the real ramifications of the confrontational U.S. trade tariff impositions begin to sink in in terms of raised prices, and thus inflation, in the U.S. domestic economy.

We see gold’s long term fundamentals as strong. Even if we are not quite yet at peak gold we are there or thereabouts and global new mined production will start to decline – and once the decline starts it will accelerate as there has been a huge drop in gold exploration and new mega-project construction necessary to replace depleting older assets. Meanwhile global incomes in the emerging gold buying nations are rising and the longer term increase in demand likely to be thus generated, coupled with eventually declining output, will put the gold price under some strong positive pressure.

Gold at the moment is being squeezed by the strong dollar brought on by President Trump’s tariff war and the prospect of rising U.S. Fed interest rates. But Trump is beginning to recognise that the strong dollar is putting U.S. exporters at risk while mitigating the pricing effects of the tariffs and is unhappy with this. How long before he initiates steps, perhaps behind the scenes, to start to bring the dollar down with a corresponding uplift in the gold price?

Back to Bloomberg’s McGlone: he comments that “Bitcoin is down to about 5x the price of gold after stretching toward 15x. There’s little to prevent another four-turn reduction to get it back toward 1-to-1, in our view”.

He also feels that the gold market is about to start picking up again. He pointed out that gold’s 90-day volatility is at its lowest level since 1999, at the same time its 60-day volatility is at its lowest level since 1997 and that the last time volatility was this low, the price entered a three-week rally which saw it pick up 34%. A similar increase now would put the price back to close to $1,600 and that it only needs a minor spark to ignite such a change in perception. There are plenty of geopolitical uncertainties out there which could initiate such a spark. Gold investors will hope McGlone is at least halfway correct in his analysis. Bitcoin investors will be less enamoured!

Gold News from Russia and China

My latest articles published on http://www.sharpspixley.com website looking at the latest gold related news from China and Russia – two real believers in the future of the precious metal.  Click on the titles to read full articles

Russia’s largest gold miners sees H1 gold output rise substantially

Both Polyus Gold and Polymetal – Russia’s two largest gold producers have seen substantial output increases in H1 making suggestions that Russia’s gold output this year might rise by 3% look distinctly conservative.

China’s H1 gold output falls 7.9%, but demand rises

China, the world’s largest gold consumer, appears to be seeing its own gold production fall – down 7.9% in H1 2018

China imports 400 tonnes of Swiss gold in H1

Greater China (mainland plus Hong Kong) remained the principal destination for Swiss gold exports again in June. So far this year Greater China has imported around 400 tonnes of gold from Switzerland alone.

Russia continues to add to its gold reserves

Russia, which has been running down its holdings of U.S. Treasuries, is continuing to increase its gold reserves at a rate of over 200 tonnes a year. At the current rate of increase the nation’s holdings will exceed 2,000 tonnes by the end of 2018.

 

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

My latest article on Seeking Alpha looks at changes to my precious metals price predictions for 2018 and recommended stocks given the underperformance in the precious metals space so far this year

Summary

Our precious metals-related stock selections of late December last year have underperformed along with the corresponding metals prices.

We anticipate an improvement in precious metals prices in the remaining months of 2018.

We have re-worked our tabulation of stock and metal price predictions and look for growth over the remainder of the year.

To read the full article click on: Gold And Silver Now And Forecast Target Price Adjustments For End 2018

China, South Africa, Trump trade moves and the Dollar – My recent SP articles

Here are links to four recent articles published by me on the Sharps Pixley website.  Sharps Pixley is probably about the best consolidator of links to pertinent articles on precious metals globally so should be on every gold investor’s list of go-to places for precious metals news and comment.

China’s gold reserves – fact or fiction?

China has again reported a zero increase in its official gold reserves to the IMF for the 20th successive month increasing speculation that it is building up its gold holdings in other non-reported accounts.

How the mighty are fallen. RSA gold on the decline

The Republic of South Africa (RSA) used to be by far the world’s biggest gold producer but output there peaked nearly 50 years ago and has been on the decline ever since.

Markets nervous as Trump trade rhetoric escalates

The U.S.-China trade (tariff) war appears to be escalating and markets are reacting nervously accordingly.

Gold held back by dollar index upturn

Gold looked as though it might be about to break out from its recent weak trading range, but has been brought back down to earth by a stronger dollar