Latest Gold Demand Trends from the WGC

The World Gold Council released its latest quarterly Gold Demand Trends report today with some mixed messages.  Although overall demand was seen as down 4% in Q2 year on year this was mostly due to outflows (or slower inflows) from/into the gold ETFs.  Positives include increased demand in China and in the industrial sector while jewellery and investment demand was pretty flat, albeit down marginally.

Supply is seen as increasing 3% year on year due to increased mine production – notably in Russia, Indonesia and Canada – yet another indicator that peak gold is not quite with us yet – and an increase in scrap supply, although the lower recent gold price may see this fall away again.

The WGC’s own report summary follows:

Slowdown in ETF inflows drives 4% decline in gold demand in Q2 2018

Global gold demand remained muted in Q2 2018 at 964 tonnes (t), 4% below the same period in 2017, according to the World Gold Council’s latest Gold Demand Trends report. Slower inflows into gold-backed exchange-traded funds (ETFs) created a weak comparison against the highs of last year, contributing to the lowest H1 demand since 2009. Whilst China, the world’s largest gold market, saw a 7% rise in consumer demand.

ETF inflows continued, albeit at a much slower pace compared with the high levels seen in 2016 and 2017. Inflows were down 46% y-o-y. However, European-listed funds saw decent inflows we believe due to uncertainty stemming from Italian elections and monetary policy outlook. In contrast, holdings of North American-listed funds fell by 30.6t as investors focused on domestic economic strength.

Despite the Q2 decline, H1 jewellery demand was scarcely changed at 1,031t. Weaker demand in India and the Middle East in Q2 was only partly offset by growth in China and the US, both up 5% compared with the previous year. Indian demand fell 8% y-o-y, crimped by higher local prices, as well as by seasonal and religious factors.

Q2 2018 saw the seventh consecutive quarter of year-on-year growth in the technology sector, with demand up 2% to 83t. Gold used in electronics continued to thrive, due to enduring demand for smartphones, games consoles and vehicles. H1 demand reached a three-year high of 165t.

Global bar and coin investment was virtually unchanged at 248t. Stronger demand in China and Iran – fuelled by increasing geopolitical tensions with the US – were offset by falls in Turkey, India and Europe, where local prices remained elevated.

Central banks added 89t of gold to global official reserves in Q2 2018, down 7% compared with Q2 2017. Cumulative H1 2018 purchases of 193t were the highest since 2015. Alongside the familiar cast list of Russia, Turkey and Kazakhstan, the Reserve Bank of India returned to the market, albeit with only a very small purchase (+2.5t).

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented:

“It’s interesting how investors around the world have reacted to some of the risks stalking financial markets. Weaker economic prospects and tumbling currencies off the back of heightened tensions with the US boosted Chinese and Iranian gold demand, while US investors shrugged off any geopolitical concerns. Demand from tech companies continued to grow, with H1 demand reaching a three-year high, while economic growth boosted jewellery demand in the US with Q2 demand hitting a ten-year high.

The total supply of gold increased by 3% in Q2 2018 to 1,120t, supported by increased mine production and recycling growth. Mine production in Q2 saw a rise of 3% to 836t, the highest Q2 on record, as projects in Russia, Indonesia and Canada continued to ramp-up. Gold recycling also grew, as currency weakness in India, Turkey and Iran boosted local gold prices and encouraged consumers to lock in profits from their holdings.

The key findings included in the Gold Demand Trends Q2 2018 report are as follows:

  • Overall demand was 964t, a decrease of 4% compared with 1,008t in Q2 2017
  • Total consumer demand fell by 1% to 758t, from 767t in the same period last year
  • Total investment demand was down 9% to 281t compared with 310t in Q2 2017
  • Global jewellery demand fell 2% to 510t, from 519t in the same period in 2017
  • Central bank demand decreased by 7% to 89t compared with 96t in Q2 2017
  • Demand in the technology sector increased 2% to 83t compared with 81t in Q2 2017
  • Total supply was up 3% to 1,120t, from 1,086t in the same period last year
  • Recycling was up 4% to 295t, compared with 283t in Q2 2017

The Gold Demand Trends Q2 2018 report, which includes comprehensive data provided by Metals Focus, can be viewed at http://www.gold.org/research/gold-demand-trends and on our iOS and Android apps. Gold Demand Trends data can also be explored using our interactive charting toolhttp://www.gold.org/data/gold-supply-and-demand/gold-market-chart.

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Lawrieongold one of top 5 UK gold blogs

American based web consolidator, Feedspot.com has selected lawrieongold as No. 3  in the listing of the top 5 UK gold blogs.  Incidentally No. 1 is sharpspixley.com which I also write for as a Special Correspondent. see: https://blog.feedspot.com/uk_gold_blogs/

Globally lawrieongold comes in at No. 49 although many of those which appear above it in the site’s compilation are websites for corporate gold mining companies.

I have to say I am honoured at being so selected, but I suspect it is a representation of how few good specialist precious metals websites there are out there!

Randgold: Q1 Production and Profits Lower but Guidance Unchanged

As readers of lawrieongold will know, Randgold Resources is a gold mining company I cover more comprehensively than most as its stock is an important constituent of the FTSE 100 index here is London.  It has released its Q1 2018 financials and production data today and I will be attending CEO Mark Bristow’s presentation to analysts at the london Stock Exchange later today.  In the meantime, to keep readers up to date, here is the company’s own release on the Q1 figures, but bear in mind as a company press release it will present the data in the best possible light!  Hopefully more detailed analysis will be available following Bristow’s presentation later.  He is not a CEO who tends to bypass difficult questions!

KIBALI SHINES AS RANDGOLD MAINTAINS ANNUAL PRODUCTION GUIDANCE

London, 10 May 2018  –  Randgold Resources said today its 2018 production guidance remained intact despite a softer first quarter in which it contended with multiple challenges.

Following the full commissioning of its underground mine, Kibali in the Democratic Republic of Congoincreased quarterly production by 22% compared to the corresponding quarter of the prior year and is on track to achieve its 2018 target of 730 000 ounces.

In Côte d’Ivoire, Tongon’s production was impacted by a series of work stoppages.  With operations now back at full capacity, the mine is committed to clawing back most of the lost production.  Randgold’s flagship operation, the Loulo-Gounkoto complex, made a strong start to the year although changes in the mining schedule affected the underground grade, impacting on production.

Results for the quarter, published today, show group production lower at 286 890 ounces (Q4 2017: 340 958 ounces) and total cash cost per ounce higher at $720/oz (Q4 2017: $627/oz).  Profit was down at $66.5 million (Q4 2017: $87.1 million).  Cash and cash equivalents grew by 3% to $739.5 million while the company remains debt-free.  At the recently held AGM, shareholders approved the 2017 dividend of $2 per share, a 100% increase on the previous year.

Chief executive Mark Bristow said coming off a strong prior quarter and record performance in 2017 the company had anticipated a slower start to this year with a gradual build-up throughout the year.  Despite the issues that arose, it was still confident of meeting its annual production guidance of 1.30 to 1.35 million ounces.

“It was a very active quarter, in which we ramped up the underground production at Kibali, advanced the Gounkoto super pit project and the development of the Baboto satellite pit at Loulo, and prepared the Ntiola satellite deposit at Morila for mining,” Bristow said.

“At the same time we also successfully handled the difficult labour situation at Tongon, sorted out the sequencing at Loulo and continued negotiations relating to the new mining code with the DRC government.  This demonstrates the depth and competence of our management team, and its ability to deal with complex operational and socio-political issues on multiple fronts.”

During the quarter, exploration highlighted the potential to add ounces at Kibali, Loulo and Tongon as well as new reserve opportunities at the Massawa project in Senegal.  Bristow said Randgold was also aggressively hunting for its next big project in the African gold belts as well as further afield.

DRC – Mining code proposals from mining companies

Mining companies operating in the Democratic Republic of Congo have submitted their own proposals regarding the recently announced new mining code which has raised some contentious issues.  However, given that the companies had been in discussion with the Mines Ministry ahead of the ratification of the new code without their proposed view being taken into account, we fear that the proposals will fall on deaf ears.  Should the new mining code remain in place, as we feel it will, it could seriously affect new mining investment in one of the world’s most mineral rich areas.

The mining companies have issued a press release regarding their proposals for constructive adjustments to the new code as follows:

Mining industry representatives* in the Democratic Republic of Congo have submitted a formal proposal to the country’s Ministry of Mines that is designed to address concerns about the recently revised mining code as well as the government’s revenue needs.

Among other things, it proposes linking a sliding scale of royalty rates to the prices of the key commodities, which industry representatives believe would be a more effective mechanism than the windfall tax introduced in the new code and at current prices would immediately give the government a higher share of revenues than what is provided in the new code.  It also deals with stability arrangements, state guarantees and mining conventions.

Along with the stability afforded to convention holders, enshrined in the 2002 mining code is a 10 year stability clause which provides that the holders of mining and exploration titles will continue to be governed by the terms of the 2002 mining code for such period in the event of the implementation of any new law.

Article 276:
“The State guarantees that the provisions of the present Code can only be modified if, and only if, this Code itself is the subject of a legislative amendment adopted by Parliament.

The rights attached to or deriving from an exploration licence or mining exploitation licence granted and valid on the date of the enactment of such a legislative modification, as well as the rights relating to or deriving from the exploitation licence subsequently granted by virtue of such an exploration licence, including among others, the tax, customs and exchange regimes set forth in this Code, remain acquired and inviolable for a ten-year period from the date of:

  1. the entry into force of the legislative modification for the valid exploitation licences existing as of that date;
  2. the granting of the exploitation licence subsequently granted by virtue of a valid exploration licence existing on the date of entry into force of the legislative modification.”

However, the proposal accepts 76% of the articles in the 2018 code and suggests changes to the rest only to ensure the effectiveness and legality of the code.  The mining industry representatives believe these changes will resolve issues with the code and contractual relationships while giving the DRC and its people increased participation in the proceeds of mining.

* Issued on behalf of members of the DRC mining industry representing more than 85% of the DRC’s copper, cobalt and gold production and most significant development projects: Randgold Resources, Glencore, Ivanhoe Mines, Gold Mountain International/ Zijin Mining Group, MMG Limited, Crystal River Global Ltd and China Molybdenum Co, Ltd (CMOC), AngloGold Ashanti.

 

Randgold’s Loulo-Gounkoto update

West and Central African focused gold miner, Randgold Resources, invariably provides updates on its key operations in the runup to the big Mining Indaba meeting in Cape Town alongside which the company, now traditionally. announces it Q4 and prior year figures.  We’ve already reported here on the big new Kibali mine, which has been built in a remote part of the north-eastern Democratic Republic of Congo which is due to become the company’s largest gold mine, but up until now the Loulo-Gounkoto complex in Mali has been the company’s largest operation in terms of gold production.

Ehe company says its Loulo-Gounkoto gold mining complex is on track to improve on its record performance in 2016, with last year’s production expected to reach a new peak and at lower cash costs of production, Chiaka Berthe, the company’s general manager of its West African operations, said to the media in Bamako, the Malian capital..

Speaking at the quarterly update for local media, Berthe said this positioned the complex strongly to continue rolling out its 10-year business plan, which targets production in excess of 600,000 ounces per year.

Berthe announced that the Malian ministry of mines had approved the development of a super pit at the Gounkoto opencast mine.  The existing mining convention is being reviewed to accommodate this new investment.

Also at the briefing, Randgold chief executive Mark Bristow said the company’s continuing investment in Mali had shown the way for others to follow, and the current development of new mines would bring additional production on line and increase the already considerable contribution the mining industry makes to the country’s economy.

Group regional manager West Africa Mahamadou Samake also highlighted the importance of maintaining a fiscal and regulatory environment capable of attracting investment and re-investment in the mining sector.

“It is therefore imperative that the current mining code review is undertaken with this objective in mind, and any proposed changes should be made in light of the code’s relative attractiveness compared to surrounding countries which are competing for the same exploration and investment dollars.  This is particularly important in coping with the challenges inherent in developing and operating a mine in an infrastructurally challenged country like Mali, and the difficulty of finding replacement reserves.  The government should focus on working with the industry to maintain Mali’s position as one of the premier destinations for mining investment in West Africa,” Samake said.

Bristow also appealed to Mali to consult with its neighbours in finding a cross-border solution to the growing problem of illegal mining.  In some parts of Mali this was now out of control, he said, and the damage to property and resources, if it was allowed to continue, would discourage global investors.

He noted that Randgold and the Malian fiscal authorities were working together to resolve their outstanding tax and TVA issues.

The company’s full Q4 and FY2017 operational results and financials are due to be released next Monday, when Bristow will make his presentation in Cape Town.

GFMS – latest gold outlook – Gold price to peak at $1,500 this year

Here’s GFMS’ latest outlook on gold from the new update for their 2017 Gold Survey incorporating 2017 Q3 results:

Gold prices started 2018 on an upbeat note, benefiting from a sinking dollar on softer economic data and concerns that the United States may pull out of NAFTA.

We believe that the geopolitical climate and equity markets will continue to support gold’s role as a risk hedge.

In the physical markets, Indian demand is set to remain at levels similar to 2017, while Chinese
investment demand will likely to pick up if we see gold’s price momentum going forward. We expect gold prices to average $1,360/oz and hit a 2018 peak of over $1,500/oz later in the year.

Our forecast discounts three Fed rate hikes, although a potential overheating from the effect of the new tax reform could lead to more aggressive tightening, limiting gold’s upside.

The full GFMS survey may be downloaded free of charge to corporate email addresses at the following link:

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Bitcoin no substitute for gold – World Gold Council

In its latest analysis, The World Gold Council concludes that bitcoin is no substitute for gold as a long term store of wealth – it is altogether too volatile.

We have seen bitcoin collapse from close to $20,000 to below $10,000 at one stage and it seems to be trying to make a recovery, but could be stalling at current levels – still way too high in our opinion.  A return to the rising pattern needs confidence in its growth potential and that will have been dented very severely.

A summary of the World Gold Council’s findings follows with a link to the full report at the end:

Bitcoin’s parabolic price rise was the big story of 2017 – putting the spotlight on the cryptocurrency market. While gold’s performance was a solid 13%, it was a fraction of the 13-fold increase of bitcoin by the end of the year.

Some commentators went as far as to claim cryptocurrencies could replace gold. Cryptocurrencies may become an established part of the financial system. But, in our view, gold is very different from cryptocurrencies, as gold:

  • is less volatile
  • has a more liquid market
  • trades in an established regulatory framework
  • has a well understood role in an investment portfolio
  • has little overlap with cryptocurrencies on many sources of demand and supply.

These characteristics underpin gold’s role as a mainstream financial asset that will likely continue to resonate in today’s digital world.

Chart 1: Bitcoin’s price saw a parabolic rise in 2017*

Cryptocurrencies and gold – competitors or complements?

Despite anecdotal comments from well-regarded financial commentators that gold prices and gold demand are suffering at the expense of cryptocurrencies, there isn’t any quantifiable evidence that gold holdings are directly suffering from competition from cryptocurrencies. The weakness in physical demand in 2017 – for example, the paltry sales of US Eagles – is largely explained by the steady march higher of the S&P 500. Other established gold markets – such as China – saw healthy levels of demand. Overall, the level of the gold price in 2017 appears to be consistent with drivers of the past few years and is showing no signs of suffering from crypto-competition.

Another factor to consider is competition within cryptocurrencies themselves. There are currently over 1,400 cryptocurrencies available and, while bitcoin is the largest by far, new technology could have devastating effects on the value and supply of any of the cryptocurrencies, including bitcoin.

Blockchain technology, the distributed ledger mechanism that underpins cryptocurrencies such as bitcoin, is genuinely innovative and could have wide-ranging applications across financial services and beyond. In the gold market, various players are exploring blockchain in the context of transforming gold into a ‘digital asset’, tracking gold provenance across the supply chain, and introducing efficiencies into post-trade settlement processes. Such applications are typically built on private blockchains operated by trusted parties rather than using bitcoin or other ‘public blockchains’.

Chart 2: Bitcoin’s price volatility is very high

Gold and Bitcoin supply

At a high level, there are some similarities between the supply profile of gold and cryptocurrencies. The stock of bitcoins, for example, increases in number at a rate of approximately 4% per annum, and is engineered to slowly decline to zero growth around the year 2140. While gold can be mined without a date limit, its production rate has been quite small and steady. Approximately 3,200 tonnes of gold have been mined on average, each year, adding about 1.7% to the total stock of gold ever mined. Bitcoin’s future diminishing growth rate and ultimate finite quantity are clearly attractive attributes, as is gold’s scarcity and marginal annual growth.

Analysis and insights on why cryptocurrencies are no substitute for gold

Download the full WGC report

 

 

Julian Phillips: RIP

We learnt today that Julian Phillips, whose informative regular reports on the gold and silver markets had been a continuing feature of our pages, passed away on August 26th.  Our thoughts are with his wife and daughters.  We will miss greatly such a strong follower of the precious metals markets and his regular contributions to our pages.

We reproduce below an obituary penned by Peter Spina of the Goldseek website who had been publishing Julian’s observations on the markets fo far longer than we have.  Peter’s views echo those of my own and I couldn’t produce a better summation of Julian’s character, life and work. His contributions to these pages will be sorely missed:

In Memory of Julian Phillips

By Peter Spina

Julian Phillips

It is with deep sadness that I share this notice of the sudden passing of Julian D.W. Phillips on the morning of August 26th. Julian was a much admired and a strong supporter of the gold and silver community, and a leading thinker who guided us for many years. His extensive work influenced tens of thousands of readers across the most recognized gold websites, media and subscribers and his passing is a big loss to many.

Over the past few decades, those who read Julian’s work know of his leadership in not just understanding the global gold, financial and monetary markets, but forecasting the major shifts to come. His work influenced many other precious metals commentators and assisted them to evolve their own understanding.  His important work provided guidance to many thousands of investors.

I met Julian shortly after the year 2,000 and he generously agreed to share his financial and monetary knowledge on GoldSeek.com during the very early days of the gold bull market. Not many authors were even covering gold at the absolute market bottom and very few had his global perspective from having lived on different continents. Julian’s weekly articles, then written under the publication Gold Authentic Money, brought incredible depth and knowledge to readers from around the world. He quickly became one of the top and most widely followed gold analysts on GoldSeek, with his expertise being highly prized by investment funds as well as the international media.

In 2005 his co-contributing technical analyst retired from Gold Authentic Money and Julian approached me to join him on a new publication, resulting in our launch of The Gold Forecaster – Global Watch. I was in my mid-20s at the time and felt quite honored to have been even considered by Julian, whom I consider one of my mentors. I was reluctant but Julian encouraged me to share my decade long experience in precious metals with my focus on junior mining companies and my technical forecasts.

In this way, our collaboration began and together we provided subscribers with an in-depth weekly newsletter forecasting the fundamental and technical aspects of precious metals with regards to the many markets and influences on its price. We produced nearly 600 weekly Gold Forecaster newsletter issues over these prior dozen years, through both the good and the difficult times, guiding thousands of subscribers through this evolving bull market. Julian’s strong fundamental knowledge truly made up the core contribution of the typically 20-30 long page weekly publication and I remain honored to have been able to work with him for so many years and sharing his insights with so many through GoldSeek.com.

Together we actively managed a multi-million dollar precious metals hedge fund for a wealthy family office, yielding millions in profitable returns in just the several months of management. But after our strong returns in the early phase of the bull market, the family office felt like gold was nearing its peak as it was running towards $800/ounce.

This then opened the door for Julian to create and develop an exceptional product for gold investors providing gold confiscation protection in the form of a storage fund. Using his experience helping families protect and move their wealth from Zimbabwe’s confiscation in the 1980’s, Julian spent the last several years creating The Ultimate Gold Trust with the assistance of skilled lawyers, bankers and bullion administrators. Now many years into its establishment, there still is no other product of its kind which provides such an exclusive gold protection structure against future confiscations.

The Ultimate Gold Trust has attracted numerous clients resulting in a large amount of physical bullion stored securely in Switzerland and all of the hard work Julian undertook to build this gold protection fund remains active today. Because of this, Julian’s legacy will endure for many years to come, providing critical confiscation protection to gold and silver investors.

Julian’s work is vast and he had an incredible amount of knowledge to share which included his daily Gold & Silver Market Mornings, the weekly Gold & Silver Forecaster newsletters, special feature reports, interviews, in addition to being an advisor to major investment funds from Hong Kong, London to New York City and not limited to organizations including GFMS. Yet unknown to most, over the past few years Julian had begun work on a book entitled “The Book on Gold” that was to “speak to all investors with a focus on the very basics of money.”

What is not known by most of the tens of thousands who followed Julian was the personal side of Julian. If you had the opportunity to ever speak with Julian, ever so generous with his time, you would quickly come to know Julian’s character. An honest man with such integrity, Julian had a wonderful wit and humor. He was a deeply caring man, a true gentleman with such class. He had such delightful analogies to describe not only financial concepts but also his perspectives on life, usually weaving his love of sailing into lengthy conversations I was privileged to engage in often over the many miles between South Africa and Colorado.

I feel honored and extremely blessed to have spent the past decade and half working with Julian. I hold him and his work in the highest regard. I will deeply miss our talks and his constant guidance which I was able to share with so many others. He was a wonderful person to have worked with and will miss him as dear, close friend as will so many.

I would kindly ask all those who were impacted by Julian’s work to please send us your messages to julian@goldseek.com

I would like to share them with his loving wife and daughters which he leaves behind.

Julian was a huge proponent of gold and a strong supporter of the gold community. In the coming months, I will be reviewing and releasing some of Julian’s vast and yet unreleased work and articles. Some of which was written for our Gold Forecaster subscribers, some of which was intended for his book, but much of it remains relevant to the gold community today.

You can subscribe to Julian’s email list here to receive them, but we will also publish and share them with the precious metals community on GoldSeek in the coming month(s).

Peter

World Gold Council – Latest Gold Demand Trends

Here’s what the World Gold Council reckons are the key takeaways from its new Gold Demand Trends report.  As can be seen it reckons demand has slowed y-o-y but that’s entirely because of lower gold ETF demand in the first half.  When reviewing these figures, and extrapolating them for the full year, it should be borne in mind that H2 2016 gold ETF demand fell back sharply too in comparison with H1 2016.

WGC: Q2 and H1 gold demand down on slower ETF inflows

Q2 gold demand of 953.4t was 10% lower than 2016, while H1 demand slowed 14% to 2,003.8t. Y-o-y comparisons are affected by record ETF inflows in 2016: demand from this sector slowed dramatically after last year’s H1 surge. Central bank net purchases of 176.7t were also slightly lower in the first half (-3%). By contrast, bar and coin investment improved, as did jewellery demand, although the latter remains weak in a long-term context. Technology demand also made modest gains.

Slower ETF inflows drove H1 weakness

Highlights

ETF inflows slowed dramatically from last year’s record pace. But holdings continued to grow: after adding 56t in Q2, H1 inflows reached 167.9t. European ETFs saw the strongest H1 inflows: holdings in these funds reached a record 977.7t.

Bar and coin investment rebounded from very low levels.Q2 demand gained 13% from Q2 2016, while H1 demand rose 11%. A strong jump in Turkey was fuelled by economic recovery, double-digit inflation and relative currency stability.

Jewellery demand strengthened from a weak 2016, but fell short of the long-term average. India was the main contributor to the 8% gain in Q2, as it recovered from extremely low 2016 demand.

Central banks continued to buy, but at a more modest pace than in recent years. The most recent quarter saw Turkey’s central bank add to its gold reserves – the first significant purchase since the 1980s.

Technology demand registered its third consecutive quarter of growth: up 2% to 81.3t. Growth in wireless charging and development of features that use LEDs boosted demand. New smartphone handsets supported chip production.

Randgold H1

Attending the Randgold analysts briefing at noon today.  In the meantime here’s Randgold’s own spin on the H1  and Q2 Highlights.  On the face of things a positive quarter!

STRONG FIRST-HALF PERFORMANCE POSITIONS RANDGOLD TO DELIVER ON 2017 TARGETS 
KEY PERFORMANCE INDICATORS FOR THE Q2 ENDED 30 JUNE 2017

• Profit up 21% quarter on quarter and 53% on corresponding 6 months of prior year

• Production up 6% quarter on quarter and 16% on corresponding 6 months of prior year
• Earnings per share up 20% quarter on quarter and 49% on the corresponding 6 months of prior year
• Total cash cost per ounce down 8% quarter on quarter and 13% on corresponding 6 months of prior year
• Net cash of $572.8 million up 11% during the first 6 months of the year, after paying $94.0 million annual dividend
• Loulo-Gounkoto delivers strong first half performance
• Morila performs in line with plan and completes Domba permitting
• Tongon production up 15% quarter on quarter and 38% on corresponding 6 months of prior year
• Process plant upgrades produce results as Kibali prepares for underground ramp-up
• Ongoing brownfields exploration highlights reserve extensions at Yalea, Gara and Kibali
• Exploration along Fonondara trend in Côte d’Ivoire extends mineralisation and leads a portfolio of targets with +5km strike lengths

U.S. Gold Bureau’s Parent Company to Operate Texas Bullion Depository

 For those unaware, I write occasional articles for Austin, Texasbased precious metals dealer, U.S. Gold Bureau, one of the largest such operations in the USA.  For non-US-based readers of this column the site – usgoldbureau.com  – has blocked access from non US ISPs as the company does not do business outside its home country – that is unless you use something like the Tor Browser (www.torbrowser.com ), which can be set up to make it appear you are based almost anywhere in the world, including the U.S.  While this saves U.S. Gold Bureau from the necessity of responding to queries from people it cannot do business with, it also means that people not located in the USA are also unable to access some interesting market commentary and articles on precious metals published on  the usgoldbureau site.

For this reason I am including this article, with permission, from usgoldbureau.com on the setting up of the Texas Bullion Depository – as the article notes the world’s first state (as opposed to country)-administered bullion depository which is to be run by U.S. Gold Bureau’s parent company, Lone Star Tangible Assets.  US-based readers of lawrieongold.com will, of course, be able to go directly to the usgoldbureau.com website and read it, and the other market commentary which appears on the site, directly.

The article on the Texas Bullion Depository follows:

Texas Comptroller Glenn Hegar has announced the selection of Lone Star Tangible Assets (LSTA) as the vendor that will partner with the Comptroller’s office to build and operate the Texas Bullion Depository – one of the first ever state-administered gold bullion depositories in the world (It has been pointed out to me that the Perth Mint in Western Autralia has a state-owned Gold Depository – Editor). LSTA is the parent company of the U.S. Gold Bureau, one of the nation’s leading tangible assets education and investment firms.

“Lone Star Tangible Assets brings the right combination of experience, financial stability and infrastructure necessary to make this depository a success,” said Hegar. “LSTA had a comprehensive vision for a safe and secure vaulting facility … and they addressed a lot of concerns we had relating to everything from transportation and security to customer service and IT infrastructure.”

Representatives from LSTA and the U.S. Gold Bureau were on hand at the announcement that took place at the Texas Capitol Building to provide more detail regarding existing facilities as well as next steps in the process. LSTA and the U.S. Gold Bureau are based in Texas and have been in the business of buying and selling precious metals since 2008. Their current vault facility is a highest rated Class 3 vault and will serve as the initial location for the depository as the company works to build a new vault facility for the Texas Bullion Depository.

“This is a great moment in the history of our state,” said Hegar. “The Texas Bullion Depository will be yet another example of why Texas is the greatest state in the nation and a leader when it comes to economic innovations. People will be able to sleep at night knowing the State of Texas is protecting their gold.”

“Lone Star Tangible Assets is honored and proud to have been selected for this incredible opportunity,” said Matt Ferris, chairman of LSTA and U.S. Gold Bureau. “We have already developed a fantastic collaborative relationship with the Comptroller’s office and we look forward to working with Comptroller Hegar and his staff as we make history together.”

The Comptroller’s office will provide ongoing oversight of the project to build out the depository and prepare for the opening. The Comptroller’s Criminal Investigation Division (CID) has already performed inspections of existing facilities and physical security measures, while the Information Technology and Information Security Divisions examined proposed software and digital security systems.

“Oh they were very thorough,” added Ferris. “But I think everyone involved in this process wants it to be done right rather than done fast. When you are asking people to trust you with their literal treasure, you need to make sure you’ve done your homework.”

The U.S. Gold Bureau and usgoldbureau.com will continue to operate as they have and will eventually offer secure metals storage at the Texas Bullion Depository, once the facility opens and the necessary details are worked through

 

Best performing gold and silver stocks ytd

Reproduced below is a very interesting graphic from Scotia Capital showing the best performing precious metals mining stocks year to date – an interesting list, but one showing that most have made gains this year, but a small few have been decidedly poor choices.  Pleased to say that my own gold stock recommendations as published in articles on Seeking Alpha are not among the losers, but then I haven’t managed to pick the very top ones either – but it’s early days in 2017 so far.

World Gold Council’s Latest Gold Demand Trends Report

The World Gold Council (WGC)’s quarterly Gold Demand Trends report is always well worth analysing as it contains some excellent statistical research on global gold supply and demand supplied by London based precious metals consultancy, Metals Focus.  One may not agree with all their data, but overall it is among the most comprehensive available to the gold market analyst.  Here follows the WGC’s own release on the latest report, published today, and links to enable readers to access the full data set:

Gold demand rises 2% in 2016 as investment surges

Global gold demand rose 2% in 2016 to reach 4,309 tonnes (t), the highest level since 2013, according to the World Gold Council’s latest Gold Demand Trends report. This was largely driven by inflows into gold-backed Exchange Traded Funds (ETFs) of 532t, the second-highest year on record, as investors responded to concerns over future monetary policy, geopolitical uncertainty and negative interest rates.

Continued global economic and political uncertainty, most notably Brexit, the US election and currency weakness in China, helped to boost overall investment demand by 70%, to a four-year high of 1,561t.   The price dip in November led to a strong recovery in the bar and coin market in the final quarter of 2016, although this didn’t offset weak demand in the first three quarters; annual demand reached 1,029t, down 2% year-on-year.

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented: “2016 saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold. Retail investors – having been subdued for most of the year – responded quickly to the price fall in Q4, a fact reflected by a surge in demand in the physical market. With an equally uncertain political and economic environment likely in 2017, we expect investment demand to remain buoyant.”

While overall investment demand rose sharply, it was counterbalanced by declines in both jewellery, a 15% fall in 2016 to 2,042t, and central bank purchases. Central banks faced a challenging backdrop, with increased pressure on foreign exchange reserves resulting in demand falling by 33% to 384t for the year. Despite this, 2016 was the seventh consecutive year of net purchases by central banks.

In spite of resilient consumer demand in the fourth quarter of 2016, the two leading gold markets, India and China, both experienced a drop in consumer buying in 2016, falling 21% and 7% respectively. In China, jewellery demand was dampened due to a high gold price throughout much of the year, coupled with constrained levels of supply in Q4, owing to a tightening of currency controls in the country.

Indian demand also faced a raft of challenges throughout the year, including regulatory changes, culminating in the surprise demonetisation policy, which severely hampered demand in both the jewellery and retail investment sectors.

Alistair Hewitt added: “The Indian market faces a challenging time in 2017. We anticipate many of the headwinds that affected demand in 2016 to continue into this year, but we are confident that the Government’s move towards a more transparent gold market will ensure that gold remains an important asset class for millions of people in India.”

Total supply reached 4,571t in 2016, an increase of 5% compared with 2015. Growth in the sector was supported by net producer hedging, which doubled in 2016, as gold producers saw an opportunity to secure cashflow at higher prices. It was also supported by high levels of recycling in Europe and the Middle East, driven by weak currencies and a high gold price. Mine production remained virtually unchanged from 2015 as a result of industry cost-cutting schemes, however, higher gold prices and lower costs have seen a renewed interest in exploration and increased project development is likely in the years ahead.

The key findings included in the Gold Demand Trends Full Year 2016 report are as follows:

Full year 2016 figures:

  • Overall demand for FY 2016 was 4,309t, up 2% compared with 4,216t in 2015
  • Total consumer demand for FY 2016 fell by 11% to 3,071t, from 3,436t in 2015
  • Total investment demand grew by 70% to 1,561t in FY 2016 from 919t in 2015
  • Global jewellery demand was down 15% at 2,042t, compared with 2,389t in 2015
  • Central bank demand was 384t, down 33% compared with 577t in 2015
  • Demand in the technology sector decreased by 3% to 322t from 332t in 2015
  • Total supply grew by 5% to 4,571t this year from 4,363t during 2015. This was largely driven by recycling, which increased 17% to 1,309t from 1,117t in 2015.

 Q4 2016 figures:

  • Overall demand was 994t, a fall of 11% compared with 1,123t in Q4 2015
  • Total consumer demand increased by 5% to 989t from 940t in Q4 2015
  • Total investment demand fell 21% to 174t this quarter compared with 220t last year
  • Global jewellery demand was down 5% at 622t, compared with 653t in Q4 2015
  • Central bank demand reached 114t this quarter, a fall of 32% from 169t in Q4 2015
  • Demand in the technology sector increased by 3% year-on-year, up to 84t compared with 82t during Q4 2015
  • Total supply fell by 4% to 1,036t this quarter from 1,081t during Q4 2015.  
  • Recycling increased by 5% to 250t during the fourth quarter, from 239t during Q4 last year.

The Gold Demand Trends Full Year 2016 report, which includes comprehensive data provided by Metals Focus, can be viewed at http://www.gold.org/supply-and-demand/gold-demand-trends and on our iOS and Android apps. Gold Demand Trends data can also be explored using our interactive charting tool http://www.gold.org/supply-and-demand/interactive-gold-market-charting.

How Big Is Your Gold and Silver Picture?

By David Smith*

Gold Bear and Bull Markets

Whether you surf the Internet for information about the precious metals and mining stocks or receive newsletters by snail mail, you’re exposed to predictions by all and sundry:

  • How high will prices go?
  • How long will it take?
  • Will they remain elevated if/when they reach record nominal and/or inflation-adjusted highs?

Truth be told, all of us are “inquiring minds who would like to know.” We want to believe that someone somewhere can predict the future. So we seek out gurus who might have special knowledge that puts us on the inside track.

It could be on a site like GoldSeek.com, where newsletter writers publish a portion of their work a short time after subscribers have read the current issue (perhaps from a subscription costing $10 a month…or $3,000 a year).

At the edge of propriety, a small number of “tire kickers” – the bane of the subscription newsletter industry – sign up, take a position in the recommendations, and then cancel their subscription.

A subset of this is the legitimate subscriber who, as soon as a new issue comes out, buys the stock pick without even reading why it’s being recommended!

Beyond the fact that they will always need to be given the proverbial fish rather than learning how to fish for themselves – their fickle behavior causes them to view the future through a short-term, near-sighted lens. They will never be able to establish a core position, hold onto it for the majority of a bull run, then sell into a late-term rise for a substantial profit.

My Biggest Lesson from the 1970s Epic Gold-Silver Bull Market…

An example from my past might be instructive. In 1980, I went to San Francisco to attend my only investment conference during that historic precious metals’ bull run. (It ironically ended the same year.) All the luminaries of the day were presenting. A few, such as Doug Casey, are still active in the business. For this attendee, there were two speakers of particular note – indeed they were the pre-eminent gold and silver gurus of their day – Harry Browne and Jerome Smith.

Harry had made a particularly large splash in the 1970’s when he wrote the prescient titles How You Can Profit from the Coming Devaluation, and New Profits from the Monetary Crisis. He had discussed dollar devaluation vis a vís the Swiss Franc, the little-understood (even today) corrosiveness of “moderate” inflation on the average person’s wealth, and the historic role played by holding real money – gold and silver – in one’s possession.

At first, just like now, few paid attention, because they saw no reason to hold onto something that “didn’t pay interest.” But by early 1980 in the major cities, there were lines around the block in front of coin shops to buy gold and silver.

When silver was trading for $4, Jerome Smith had written Silver Profits in the Seventies, with the “wild” prediction that silver would hit $50. By the 1980 San Francisco Conference, it had done just that.

Having invested in physical silver and gold and Swiss franc futures based upon Browne’s predictions, I had built up a large “paper profit.” Harry, the keynote speaker, told the audience that the silver bull market, now trading in the mid-$40 range after having touching $50 the ounce, would be in jeopardy if the price dropped below about $37.50. After hearing the guru speak, my first inclination was to go out on the break and place a stop loss to sell silver if it fell below that $37.50 level.

Not Greed

But then… Jerome Smith rose to speak. Smith (no relation to me) was now talking about $100 silver!

The world was going to run out, with the price destined to double from his original prediction! So, no action was taken on the stop loss!

Soon thereafter, the price dropped below Harry Browne’s price point, on its way first to $10.80, a bounce to $25, and then a two-decade-long decline to $5.

My big mistake? Not greed (Honest!) but rather, a fixation on a specific price point rather than paying attention to the market’s prevailing structural integrity (or lack thereof). I knew the market was at risk from a technical perspective, and I was aware that the Hunt Brothers were getting boxed in on the exchanges.

It’s a Mistake to Focus on Price Predictions

This conceptual error in thinking is equally instructive for today’s rising market. Try not to focus on price predictions, but rather gauge the market’s internal strength, the dominant trend, and where we are on that continuum.

The new book David Morgan and I will soon publish, Second Chance: How to Make and Keep Big Money during the Coming Gold and Silver Shock-Wave, includes more detail about this event, wherein I was able to speak with both Harry Browne and Jerome Smith that day. That incident, and many other topics we discuss, can help inform your own decision-making during the coming years.

The takeaway is this, you must keep a big picture – on the upside – for at least the next few years as the public mania builds. Then monitor it later as it appears to top out, when just about “everyone watching the parade has already become part of that parade.”

Stewart Thomson, whom we quote in our book, says it as succinctly as anyone we know: “If you look at your investment efforts through a microscope, your results will be… microscopic.”

Learn How to Read the Tea Leaves

What follows are two pieces of counsel – one each for gold and silver – that are the types of information you should pay attention to when looking for big picture (both fundamental and technical analysis) data supporting the bullish thesis.

In a recent interview with Mining Weekly, South Africa’s leading resource sector publication, Randgold CEO Mark Bristow said the following about the trend in global gold production:

Just to keep the industry supplied, he estimates that it will require the discovery of 90-million ounces a year, and to reverse the grade deterioration (mining gold with lower g/t values), 180-million ounces a year will need to be discovered. However, current discovery levels are a fraction of what is required, in the range of 10-15 million ounces (moz) a year…

On the silver side, discussing the significance of silver trading above its 20-month moving average, Roland Watson for Silver Analyst said:

Largest Precious Metals Inflows on Record (Data Since 2005)

Now we come to the present day and having spent exactly four years under the moving average, silver broke clear this May with monthly silver closing at $15.99.

Based on our prior examples, this suggests that silver has now entered a new multi-year bull market.

Processing information like this can “keep your picture big enough,” and help you avoid getting caught up in the game of allowing your decisions to be driven by specific price expectations.

Precious metals do not “have” to reach a certain price point in order for your analysis to be correct, and for you to amass substantial profits. They just need to advance smartly over time, in line with what tends to take place as a robust bull market builds momentum and then much later, plays itself out. In respect to gold and silver, that upside run is – as a Canadian would say – “written in the rocks.”

Barrick Announces Resumption of Operations at Veladero

Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) (Barrick or the “company”) today announced the resumption of normal operations at the Veladero mine in Argentina following approval from San Juan provincial authorities.

Operations at the mine were suspended on September 15, a week after falling ice damaged a pipe carrying process solution in the leach pad area, causing some material to leave the leach pad. This material, primarily crushed ore saturated with process solution, was contained on the mine site and returned to the leach pad. Extensive water monitoring in the area has confirmed the incident did not result in any environmental impacts. The company has completed a series of remedial works required by provincial authorities designed to prevent such an incident from reoccurring, including increasing the height of the perimeter berms that surround the leach pad.

As normal operations resume, the company will continue to assess the impact of the temporary suspension on Veladero’s production for 2016. However, Barrick continues to expect total gold production for 2016 in the range of 5.0-5.5 million ounces at a cost of sales applicable to gold of $5.2-$5.5 billion and all-in sustaining costs1 of $750-$790 per ounce.2

Will the COMEX need a golden rescue?

This commentary from Ed Steer* – with a couple of opening paragraphs from Ted Butler – looks at some hugely anomalous transactions on the U.S. gold and silver markets over the past week which appear to breach regulations – indeed Ted describes them as illegal.  As Ed points out in his introductory paragraphs, before he gets to his own opinions on what may happen now in his Wrap-up: “Although the Commercial net short position in gold decreased by the expected smallish amount, there was a tiny increase in silver once again.  But under the surface in the headline gold number, was an absolutely stunning change that both Ted and I were shocked to see.  But it proves Ted’s premise that one of the smaller traders in the Big 8 category most likely had its financial back against the wall — and had to get bailed out in whole or in part by one or more the Big 4 traders.”

Ed goes on: “Even though the Commercial net short position declined by 6,454 contracts during the reporting week, Ted said that the Big 4 traders actually increased their net short position by about 8,400 contracts — plus the raptors, the commercial traders other than the Big 8, also increased their short position by around 1,800 contracts.  But the biggest change was in the ‘5 through 8’ category, as they reduced their net short position by about 16,700 contracts.  My immediate reaction when I saw that number was that one of the Big 4 — most likely JPMorgan, and I’m speculating here — had to come to the rescue of one of the ‘5 through 8’ traders that was about to go bust because of margin calls.  And rather than have this trading firm cover their short position in the open market, which would have driven gold [and most likely silver] prices to the moon and the stars, and bankrupted everyone else in the process — a Good Samaritan stepped in to prevent that from happening, saving themselves, plus everyone else in the process — at least for the moment.

“If this is what actually happened, then it has all the hallmarks of another Bear Stearns moment, when JPMorgan was forced to take over that firm back in early 2008 when the same thing was about to happen there.”  

Now the shenanigans which take place on COMEX where these kinds of paper gold transactions seem to be the norm rather than the exception – although perhaps not to the kind of extent noted above – tend to fall outside my own zone of understanding as far as relevance to overall gold and silver prices are concerned – apart from having an obvious impact in terms of setting (controlling) U.S. precious metals prices, which tend to be followed by the rest of the world’s markets, but Ted Butler has been following this activity for many years in meticulous detail and has no compunction in calling some of these activities, and their perpetrators as technically criminal in effect, but the authorities trusted with overseeing these markets seem to turna a continual blind eye to them.

In his introductory paragraphs, which incorporate charts, mostly from Nick Laird’s sharelynx.com site, Ed also notes: “The changes in this week’s Commitment of Traders Report are certainly unprecedented — and hint at desperation on part of the commercial traders, especially the smaller ones that don’t have deep pockets like JPMorgan, Citigroup, or maybe Canada’s Scotiabank.  Firms like Morgan Stanley would certainly be a member of the Big 8 — and even Goldman Sachs could even be included in this group now.  These would be five members of the Big 8 — and whoever the three remaining firms that are part of the Big 8, wouldn’t have access to unlimited funding like the Big 5 I just mentioned.  Of course, with the probable rescue of one of the ‘5 through 8’ traders, all that does is elevate one of Ted’s raptors, the commercial traders other than the Big 8, into the Big 8 category by default — and as Ted correctly mentioned, you have to wonder about their financial ability to meet margins calls along with some of the other raptors that are close to Big 8 status as well.

“One thing is for sure — there’s big, big trouble brewing in River City at the moment — and how this is resolved remains to be seen”

Ed’s full introductory comment and conclusions are available on goldseek.com – click here to read

Conclusions

Ed’s wrap-up on what has been happening – with the intro paragraphs from Ted Butler now follows:

I find myself thinking about the circumstances of how the big 5 thru 8 gold short which bought back its short position and came to be replaced by JPMorgan or another big short trader. This doesn’t sound at all like a fully open market transaction in which a big short moved to buy back in a transparent manner and accepting free market sell orders to close out the short position. Instead, it reeks as an arranged trade (highly illegal) in which the vast majority of market participants and observers knew nothing about as it was transacted. The price action during the reporting week it which it occurred was highly orderly and no hint was given that a big short fish was in trouble. My guess is that the big gold short which covered came into financial distress weeks ago and was carried by the exchange until the position rearrangement was finalized.

As such, someone had to know of it – certainly the short trader which bought back and JPMorgan or whoever else added gold shorts. The CME clearing house had to know and probably arranged the illegal transaction. While I am convinced few other traders were aware of the gold short in trouble, I am not sure if the CFTC was in on this or is as out to lunch as some (including me) profess. My hunch is that the CFTC was told after the gold short got in trouble but before the transaction was effected. In any event, this was an arranged transaction in keeping with a long COMEX tradition of arranged transactions (such as the Bear Stearns takeover and the May 1, 2011 silver price massacre). The only questions are was it enough and what now?

Even though I think I have a clear reading on what took place that doesn’t extend to blueprinting short term price action. As I’ve maintained all along, I’ve narrowed it down to either we go straight up from here or experience one last hard shake to the downside before lifting off for good. This week’s extraordinary big 8 gold repositioning just accentuates either outcome. Should the commercials lose control, prices will surge and it is hard to understate all the unintended consequences. I’m not an end of the world guy, but a genuine commercial failure could rock the world.Silver analyst Ted Butler: 30 July 2016

It was obvious that the powers-that-be were all over the precious metal prices during the COMEX trading session on Friday, because if they’d been allowed to trade freely, the moon and the stars would have been the limit as far as closing prices were concerned.  Then the resulting margin calls to the Big 8 traders alone would have certainly buried more of them and, as I said in my discussion on the COT Report, it appears that one of the smaller trader has already been bailed out.

Ted mentioned on the phone yesterday that the current paper loses for the Big 8 now total at least $3 billion dollars as of the close of trading on Friday — and those loses do not include the realized gains that they made earlier this year.  He says it’s likely more than that, but wasn’t able to compute it more precisely during the time we spent on the phone yesterday, which was considerable.  These are huge loses, but there’s now no question that for some of the small traders in the Big 8 category, plus most likely for some of the raptors [the commercial traders other than the Big 8] the writing is on the wall.

I’d guess that a resolution to all this is very near — and there are only three end-game scenarios that I can think of at this time of morning — and they are all ugly — and are as follows: 1] with the approval of the CFTC and SEC, both organizations that most certainly know what’s going on at the moment, we’ll get another JPMorgan-led drive-by shooting like we had starting on May 1, 2011 in silver.  This time it would be in gold as well, plus platinum most likely.  But as to how successful that might be in the current financial and monetary environment remains to be seen. 2] Another one or more small Commercial traders rush to cover — and we have a melt-up in precious metal prices, plus a melt-down in the U.S. banking system as the margin calls bankrupt ever larger players up the precious metal food chain as the price management scheme unwinds around the world, or 3]  The CFTC is forced to close the COMEX in order save JPMorgan et al.  That would save all the short players, but suddenly the precious metals would be selling on the spot market, with no futures and options attached to them.  I can’t even begin to comprehend what would happen to the financial market on a world-wide basis if that came to pass.

Ted was of the opinion that the possibility existed that these unprecedented gold deliveries we’ve been watching unfold over the last two or three months could be part and parcel of what’s happening now.  I couldn’t agree more.

The other thing we talked about — and I alluded to in my discussion on the COT Report earlier, was the fact that with such huge volume and open interest, there could be all kinds of things going on under the hood in the COMEX futures market that can’t be seen in the COT Report, or at least that are not that obvious.  But in the ‘obvious’ category — and as a ‘for instance’ the huge increase in the long position in silver in the Managed Money category this week.  Who was that — and what was it all about?

There are many more questions than answers, but JPMorgan et al have now painted themselves into such a small corner that there doesn’t appear to be any more wiggle room left — and the first sign of big trouble was the apparent rescue of one of the Big 8 traders in the COMEX futures market in gold.

A cornered beast is a dangerous animal — and those caught in the price management scheme as it breaths its last, will do just about anything, legal or otherwise, to save themselves and the system that nurtures them.  So this bears watching carefully in the days and weeks ahead, if in fact we actually have that much time left.

‘Push’ really has become ‘shove’ at this juncture — and I must admit that I’m on ‘Red Alert’ from this point onward.

How did it come to this?

*Ed Steer publishes a 5 day a week newsletter on gold and precious metals and on geopolitics and geo-economics which he finds relevant to the precious metals markets.  It is a subscription publication but gives insights into what is going on in the sector seldom covered by mainstream media.  To learn more click click on edsteergoldandsilver.com 

Ted Butler is perhaps the doyen of all commentators primarily covering the silver markets, but also touching on gold given its particular relevance to the path taken by its less costly sibling.  Again he publishes a subscription newsletter.  To learn more click on www.butlerresearch.com