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

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World Gold Council: Gold demand at record levels in Q1 2016

World gold demand, as assessed by consultancy Metals Focus on behalf of the World Gold Council (WGC), rose 21% as investors surged into gold ETFs.  Key figures on global demand and supply for the quarter as released by the WGC are set out below:

According to the WGC figures, global gold demand reached 1,290 tonnes in the first quarter of  2016, a 21% increase compared to the same period last year, making it the second largest quarter on record. This increase was driven by huge inflows into exchange traded funds (ETFs), fuelled by investor concerns regarding economic fragility and an uncertain financial landscape. It was all the more remarkable in that Asian demand, primarily from China and India, has been weak so far this year. thus, global demand for jewellery was down 19%, as higher prices and industrial action in India and a softening of the economy in China meant many consumers delayed making purchases.

Inflows into ETFs totalled a massive  364 tonnes in the quarter – the highest quarterly level since Q1 2009 – and compares with 26 tonnes in Q1 a year ago. The WGC reckons that gold found favour as a risk diversifier due to the negative interest rate environment in Europe and Japan, combined with uncertainty over the Chinese economy, anticipation of slower interest rate rises in the US and global stock market turmoil.

Total bar and coin demand, even in Asia,  was stronger by some 254 tonnes, marginally higher than the same period last year. Weakness in price sensitive markets was offset by strength elsewhere with 5% growth in China (62 tonnes) and strong demand in the US and the UK, which grew by 55% and 61% respectively. In total, investment demand was 618 tonnes, up 122% from 278 tonnes in the same period last year, igniting a rally in the gold price which appreciated by 17% in dollar terms during the quarter.

This strong investment performance was not reflected in the bigger jewellery sector though, with demand levels sharply down in India and China. While both countries had a slow start to the year as a result of consumer uncertainty and rising gold prices, the situation was greatly exacerbated by the industrial action in India.

Central banks remained strong buyers, purchasing 109 tonnes in the quarter. This represents the 21st consecutive quarter that central banks have been net purchasers of gold as they continue to diversify away from the US dollar.

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, said: “Two major themes emerged in the first quarter of 2016. Spurred on by the uncertainty raised by negative interest rates, the investment sector was the dominant driver of gold demand, helping to push prices up 17% over the course of the quarter, as ETF inflows swelled. Conversely, jewellery demand endured a difficult quarter due to a continued lack of consumer confidence in the face of a weakening Chinese economy and a 42 day strike by jewellers in India. But we believe Indian demand has simply been postponed, with buying likely to increase for Akshaya Tritiya [Akshaya Tritya demand, which was a few days ago, turned out to be disappointing] and the wedding season.

“Looking ahead we anticipate that ongoing market uncertainty and unconventional monetary policies will continue to support both investment and central bank demand. This, combined with an expected recovery in India, should see gold demand remain healthy over the course of 2016.”

Total supply for Q1 2016 saw an increase of 5% to 1,135 tonnes compared with 1,081 tonnes in the first quarter of 2015. Increased hedging of 40 tonnes, coupled with slightly higher mine production of 734 tonnes (729 tonnes in Q1 2015), outweighed a marginal decline in recycling.

The key findings from the report for Q1 2016 are as follows:

  • Overall demand for Q1 2016 increased by 21% to 1,290 tonnes, up from 1,070 tonnes in Q1 2015.
  • Total consumer demand was 736 tonnes down 13% compared to 849 tonnes in Q1 2015.
  • Global investment demand was 618 tonnes, up 122% from 278 tonnes in the same period last year.
  • Global jewellery demand fell 19% to 482 tonnes versus 597 tonnes in the first quarter of 2015.  
  • Central bank demand dipped slightly to 109 tonnes in Q1 2016, compared to 112 tonnes in the same period last year.
  • Demand in the technology sector fell 3% to 81 tonnes in Q1 2016.
  • Total supply was up 5% to 1,135 tonnes in Q1 2016, from 1,081 tonnes in the first quarter of 2015. Mine supply was up 8% to 774 tonnes.

The Q1 2016 Gold Demand Trends report, which includes comprehensive data provided by Metals Focus, can be viewed  here  and on the WGCs iOS and Android apps. Gold Demand Trends data can also be explored using the WGC interactive charting tool 

Randgold Resources: Tough Quarter, Good results

Followers of perhaps the best performing gold mining major of the past few years are directed to the following article I’ve published on the Seeking Alpha website: Randgold: Tough Quarter, Good Results.  Interestingly Randgold (LSE: RRS, NASDAQ: GOLD)’s stock price has not risen nearly as much as some of its peers but that is because of its far better performance while virtually all the other major gold stocks were dropping like stones.  It has no debt, has not needed to take any impairments and is operating a progressive dividend policy where again most of its peers have been slashing their shareholder payments.  It has thus just announced a 10% dividend increase to $0.66 a share.

Highlights from Q1 2016 are as follows:

  • Profits up 19% quarter on quarter and 25% on corresponding quarter of prior year
  • Production down 11% quarter on quarter but up 4% on corresponding quarter of prior year
  • Total cash cost/oz up 3% quarter on quarter but down 8% on corresponding quarter of prior year
  • Cash increases 19% to $253.8 million on the back of reduced total cash costs and higher gold price
  • Solid quarter from Loulo-Gounkoto with production in line with plan and significant decrease in total cash cost/oz
  • Morila delivers steady performance with lower costs
  • Tongon production impacted by quaternary crushers commissioning and power supply interruptions
  • Kibali completes challenging quarter including optimising 100% sulphide feed, compounded by mill downtime
  • New Moku JV adds 1 275km2 to Randgold exploration portfolio in same greenstone belt as Kibali
  • West African exploration programmes deliver positive borehole and trench results
  • Shareholders approve 10% increase in annual dividend of $0.66 per share

In addition to the article on Seeking Alpha linked above, you can download the full quarterly statement at http://www.randgoldresources.com/quarterly-reports-page/3321

Randgold’s Kibali mine in DRC shines in record gold production year

For the record here follows a statement from Randgold Resources noting the success of its new Kibali mine in the DRC, which is already Africa’s biggest gold mine in terms of annual gold output.  Kibali is jointly owned by Randgold and AngloGold Ashanti, each holding 45% with the balance owned by DRC parastatal SOKIMO.  Randgold is the operator.

The Kibali gold mine in the Democratic Republic of Congo was the star performer in Randgold’s portfolio of operations in 2015, exceeding its target by 7% to contribute 642 720 ounces to the group’s record production for the year.

Speaking at a local media briefing here, Randgold chief executive Mark Bristow noted that the two-year-old operation’s remarkable success was a tribute to an effective cooperative effort which had united the developers, the authorities, the community, the contractors and suppliers in a strong commitment and a common purpose.

“It’s been a significant achievement for a country which is rich in mineral resources but has not always managed to make the most of this endowment.  Kibali is going to make a major impact on the Congolese economy – it has already spent more than $1 billion with local service and goods providers – and I believe it will also be the flagship for the development of a major gold mining industry in this country,” he said.

Bristow cautioned, however, that Kibali was still a work in progress and faced many challenges as it worked towards its completion in 2018, when the underground mine was expected to be fully operational.

“The next two years will be particularly tough, as Kibali continues to ramp up its underground production within the constraints of a lower grade and the consequent need for a higher throughput, and we are therefore forecasting an output of 610 000 ounces for 2016 and 620 000 ounces for 2017,” he said.

“To ensure Kibali’s continued delivery, our partnership with government and the community will if anything have to be strengthened.  For its part, government has to focus on the urgent need to establish an effective local administration, in an area where rapid population growth and the lack of functional structures are generating a complex social dynamic that will become increasingly difficult to deal with.”

Bristow said that despite the stressed gold market, the operational challenges at Kibali and socio-political issues in the DRC, Randgold remained committed to increasing its presence in the country, and had recently entered into a new joint-venture agreement – its third in the region – with government-owned Société Minière de Kilo-Moto SA (SOKIMO) and Moku Goldmines AG (Moku) for the Moku-Beverendi gold exploration project, along the same greenstone belt that hosts Kibali.  In terms of the agreement with the owner of the project, Société Minière de Moku-Beverendi SA, Randgold can earn in a minimum 51% stake in the project by funding and conducting exploration and completing a prefeasibility study.  This addition to its portfolio extends Randgold’s exploration footprint in the DRC to 7 824km², spanning the major gold belt in the north-east of the country.

“Our commitment to expanding our presence and stepping up our greenfields exploration here demonstrates our long term intent of finding world-class gold deposits and developing them into profitable mines, thus contributing to the DRC’s continuing evolution as a democratic society with a robust economy,” Bristow said.

121 Mining Investment Conference, London – next week

The 121 Group is a mining focused investment events company set up by the principal team which made the Mines & Money events such a success over a number of years.  The 121 conferences are designed, as the name suggests, to facilitate one-to-one meetings with the presenting companies in a relatively relaxed environment.

The next such event will be held in a new conference centre in London by Fenchurch Street Station, at the end of next week.  Registration is free for investors and analysts.  Check out the programme, which includes special presentations from industry experts and panel discussions, as well as corporate presentations, on the 121 Group website

Targeted networking – Two days of pre-arranged and targeted 1-2-1 meetings connecting projects to capital

Exclusivity – Entry is restricted to qualified investors, analysts, senior mining company executives and relevant mining investment professionals only

Market intelligence – Interactive two-day programme where presenters and panelists actively engage with the audience to create a two-way conversation

Convenience – Located in a brand new conference venue in the heart of London’s financial district

Local expertise – 121 Mining Investment London is run by a team with many years’ experience running leading mining investment events in London

Mining corporates – Present project updates, connect with current and potential shareholders and discuss your financing and capital raising needs with leading mine financiers and investment specialists

Mining investors and financiers – Meet with the management teams of mining production, development and exploration companies, brought together for your convenience in a state of the art City venue

Registration for the event is available via the 121 Group website noted above.

Three hugely informative reports on gold published today.  Free downloads available

Seldom has so much information on gold been released in a single day.  The last day of Q1 2016 has seen the publication of consultancy Metals Focus’ Gold Focus 2016 and the similar GFMS Gold Survey 2016.  Both run to nearly 100 pages and are packed with analysis and data.

The third report is out from the World Gold Council (for which nowadays Metals Focus is the major gold statistics provider).  This looks at gold in a negative interest rates environment.

All three of these reports are downloadable off the internet free of charge and are absolute musts for anyone with an interest in gold analysis and trends.  To download click on the respective links below:

Metals Focus Gold Focus 2016

GFMS Gold Survey 2016

World Gold Council:  Gold in a world of Negative Interest Rates

UK’s Royal Mint introduces ‘The Queen’s Beasts’ gold and silver coins

The UK’s Royal Mint has expanded its bullion sales portfolio with the addition of gold and silver coins celebrating The Queen’s Beasts – ten creatures that have featured throughout hundreds of years of British royal heraldry.

The series will be introduced a ‘beast’ at a time, starting with the gallant Lion of England, by British coin designer Jody Clark.  The coins are legal tender with face values way below their worth, but this makes them both VAT and Capital Gains Tax exempt for the investor.  The price for a single 1 ounce Gold Lion coin is priced on the Royal Mint’s website at the time of writing at £sterling 917.66 – suggesting that it carries a premium over the gold price of around 7% which does not seem unreasonable given the VAT and CGT exemptions.  Discounts are available for larger orders which will represent smaller premiums over the gold price – down to £898.27 for orders of 500+ suggesting a premium of only 5% for such a large order.  However one would need contact the Royal Mint directly for the latest price which will depend on fluctuations in the daily gold price.

Head of Bullion Sales, Nick Bowkett said: “The introduction of The Queen’s Beasts series brings an exciting new series of bullion coins to investors around the globe. With the current range consisting of 1 oz and 1/4 oz gold coins, the series also sees the introduction of our first two-ounce 999.9 pure silver bullion coin.”

Bearing The Queen’s Fifth portrait, also by Jody Clark, the new coins take their place in The Royal Mint’s core bullion range alongside the organisation’s flagship gold Sovereign and gold and silver Britannia bullion coins, as well as the Royal Mint Refinery range of gold and silver bars.

The Queen’s Beasts bullion coins will be exclusively available in the UK from www.royalmintbullion.com. The Queen’s Beasts bullion coins are also available for purchase via The Royal Mint’s global wholesale distributor A-Mark.

About the design

Inspiration for this series has been taken from The Queen’s Beasts sculptures, each standing at around 2 metres tall, originally created by James Woodford RA for the coronation ceremony of Her Majesty The Queen Elizabeth II held in Westminster Abbey in 1953. The heraldic creatures symbolised the various strands of royal ancestry brought together in a young woman about to be crowned queen. Each beast, used as an heraldic badge by generations that went before her, was inspired by the King’s Beasts of Henry VIII that still line the bridge over the moat at his Hampton Court Palace.

Today, The Queen’s Beasts sculptures can be found at the Canadian Museum of History in Quebec, while Portland stone replicas, also carved by James Woodford, watch over Kew Gardens in the UK.

The Lion

The Lion of England is the first of the beasts to be introduced for this new bullion coin series. Royal Arms are the arms of the monarch, an ancient device that represents their sovereignty. For the arms that represent Queen Elizabeth II and the United Kingdom, two beasts are shown supporting a quartered shield, the Scottish Unicorn and the English Lion. The crowned golden Lion of England has been one of the supporters of the Royal Arms since King James I came to the throne in 1603, but the symbol of a lion has stood for England far longer. Richard the  Lion-heart,  son of King Henry II, is famed for his three golden lions as the Royal Arms of England, and since the twelfth century, lions have appeared on the coat of arms of every British sovereign.  

The designer

Jody Clark is a member of The Royal Mint’s team of graphic designers and engravers. Jody has worked on notable projects such as the medals struck to celebrate the 2014 Ryder Cup and Nato Summit, whilst his contemporary interpretation of the iconic Britannia was chosen for the celebrated coin’s 2014 collection.

Jody is best known for creating the latest definitive coinage portrait of Her Majesty The Queen, released on United Kingdom coins in 2015, which features on these bullion coins.

In turning his talents to the reverse designs for The Queen’s Beast’s Bullion Range, Jody said: “I took inspiration from the original Queen’s Beasts, both the original versions in Canada and the Portland Stone replicas here that look out over Kew Gardens. They are very stylised and look imposing as statues, but the challenge was to capture this on the surface of a coin.

“I researched the origins of heraldry and coats of arms, and wanted to replicate the sense of strength and courage they were designed to convey. I created a sense of movement to make the beasts bold and dynamic, but the shields they guard still feature strongly as they are integral to the story.

“The lion in my design takes a rampant stance, the most fierce. I researched imagery of lions in the wild to make sure that mine had a true likeness to the creature’s character, but I was careful that it wasn’t too realistic. In this context the lion is a ‘beast’ and I wanted it to feel fantastical, so when it came to areas like the eyes I kept them blank. Adding too much detail softened the look and I think this way there is still a sense of sculpture reflecting the originals.”

Specification

Coin title The Queen’s Beasts 2016 – The Lion One Ounce Fine Gold Bullion Coin The Queen’s Beasts 2016 – The Lion Quarter-Ounce Fine Gold Bullion Coin The Queen’s Beasts 2016 – The Lion Two-Ounce Fine Silver Bullion Coin
Denomination: £100 £25 £5
Issuing Authority: UK
Metal: 999.9 Au 999.9 Au 999.9 Ag
Weight: 31.21g 7.80g 62.42g
Diameter: 32.69mm 22.00mm 38.61mm
Obverse Designer: Jody Clark
Reverse Designer: Jody Clark
Quality: Bullion
Packaging: Available as singles or in tubes of 10 coins. Available as singles or in tubes of 25 coins. Available as singles or in tubes of 10 coins.

 

Images of The Royal Mint and its products are available upon request. The Royal Mint retains copyright ownership © of all images. These may only be used for editorial purposes and cannot be sold or used for other marketing purposes without the permission of The Royal Mint.

About The Royal Mint

The Royal Mint has an unbroken history of minting British coinage dating back over 1,000 years. By the late thirteenth century the organisation was based in the Tower of London, and remained there for over 500 years. By 1812 The Royal Mint had moved out of the Tower to premises on London’s Tower Hill. In 1967 the building of a new Royal Mint began on its current site in South Wales, UK.

While The Royal Mint’s finest traditions are always respected, it continually innovates in order to stay at the forefront of world minting, embracing the latest production techniques and technology in order to offer excellence to our clients across the globe. By underpinning our proud heritage with a highly progressive outlook, The Royal Mint produces coins that remain a byword for trust and reliability the world over.

There were estimated to be 28.9 billion UK coins in circulation at 31 March 2014 ,with a total face value of over £4 billion, all manufactured by The Royal Mint. In total, nearly 2 billion UK coins were issued during 2013-14.

As well as over 1,000 years of producing British coinage, The Royal Mint has long been trusted with the currencies of other countries. It has served more than 100 issuing authorities around the world and currently meets approximately 15% of global demand, making us the world’s leading export mint.

The Royal Mint has been making official military campaign medals since it was commissioned to make awards for soldiers who fought in the battle of Waterloo in 1815. The year 2012 was of particular significance for The Royal Mint’s medal-making team, with the manufacture of all 4,700 Victory Medals for the London 2012 Olympic and Paralympic Games.

The Royal Mint has recently introduced a new fineness of Britannia bullion coins and a highly-secure on-site bullion vault storage facility, building on the gold Sovereign’s long-standing reputation for integrity, accuracy. This positions The Royal Mint and its bullion products as a premium proposition in this marketplace.

In September 2014, The Royal Mint launched a new bullion trading website, www.royalmintbullion.com, enabling customers to buy, store and sell bullion coins at constantly updated prices directly from The Royal Mint quickly, effortlessly and securely, 24 hours a day, 365 days a year.

In January 2015, The Royal Mint announced the revival of The Royal Mint Refinery bullion brand. Gold and silver minted bars bearing the historic marque became available for the first time since 1968, available direct to the public at www.royalmintbullion.com.

In June 2015, The Royal Mint launched Signature Gold, a new addition to its bullion trading service, allowing customers to purchase and own a fractional amount of a 400 oz gold bar from www.royalmintbullion.com.

In April 2014, The Royal Mint unveiled plans to develop a purpose-built visitor centre at its headquarters in Llantrisant, South Wales. Construction is expected to be completed during 2016.

 

Today’s gold headlines from Sharps Pixley

This morning’s top gold headlines on Sharps Pixley

Buy Gold From SharpsPixley.com

This morning’s top news headlines on sharpspixley.com

Silver mine margins benefiting from falling costs

London based precious metals consultancy, Metals Focus has noted an improvement in operating margins at the silver mining operations it analyses as the mining companies have been succeeding in making some substantial unit costs savings.  With most silver production coming from countries which have seen significant currency depreciation against the US Dollar, this has played a significant part in the margin improvement.  The Metals Focus note on this from its latest Precious Metals Weekly newsletter follows:

In spite of a fall in silver prices, basic operating margins rose q-o-q in Q2.15, aided by some notable cost reductions. Utilising data from our Silver Mine Cost Service, primary by-product silver total cash costs saw a 12% decrease q-o-q, falling to US$6.84/oz, a level not seen since 2011. This continued decline in operating costs is linked to the depreciation of many producers’ currencies relative to the US dollar. Of note, the Mexican Peso and Peruvian Nuevo Sol weakened by a further 2-3% versus Q1.15. In addition to the positive FX impact, increased revenue from by-product credits also helped. Q-o-q, lead, zinc and copper prices rose by 7%, 5% and 4% respectively, although this was partially countered by a 2% reduction in gold. Outside of this, oil rose by 7% q-o-q (based on the Brent price), although at an average of $66/bbl it was still some 35% lower versus Q2.14. Global silver grades also remained unchanged, averaging 160 g/t over the past 12 months.

All-in sustaining costs continued to fall, although this was solely attributable to the decline in underlying total cash costs, with the all-in sustaining component actually rising by $0.55 q-o-q; this additional component includes items such as stay-in business capital, near mine exploration and corporate head office costs. Looking at the financial standing of the industry, based on an average silver price of $16.44 in Q2.15, just 9% of the industry was loss making on an all-in sustaining basis; in comparison, 23% of gold production was loss making on an all-in sustaining basis during the quarter.

Looking to the current quarter, although mine site costs will benefit from further domestic currency weakness and falling oil prices, costs in the current quarter will be impacted by falling by-product metal prices. To date in the third quarter, lead, zinc and gold are on average some 11%, 14% and 6% below their second quarter level, while the fact that silver itself is down 9% will further eat into producer margins.

Platinum fundamentals still look positive

The World Platinum Investment Council (WPIC) has announced  the publication of its fourth Platinum Quarterly – an independently-researched, freely-available, quarterly analysis of the global platinum market. The report incorporates analysis of platinum supply and demand during the second quarter of 2015.  This shows that basic fundamentals for the metal remain positive with the WPIC forecasting an increased supply deficit for the year due to increased investment activity compared with its Q1 analysis – however this has had little effect on the price performance which remains weak.

Overview of key data presented in the latest Platinum Quarterly: 

The global platinum market remained in deficit during the second quarter of 2015 with an estimated shortfall of 55 koz.

The key drivers behind the smaller deficit in Q2 2015 from today’s report include:

  • Increased mining supply from South Africa due to higher operational efficiencies and improved safety performance than in Q1 2015.
  • Lower jewellery demand in China, partly as expected, as Q1 2015 benefitted from Chinese New Year related sales.
  • A sharp increase in investment demand with significant growth in bar and ETF demand reversing the weakness in the preceding three quarters.
  • Robust automotive demand remaining at similar levels to Q1 2015 supported by strong vehicle sales in Western Europe.

Total global supply of platinum was 1,985 koz during the second quarter of 2015, with total mining supply estimated at 1,520 koz.

  • South African refined production rose to 1,080 koz as operational and safety performance improved, compared to the below par production of 890 koz in the first quarter of 2015.
  • Increased output from Zimbabwe and Russia contributed an additional 20 koz and 10 koz respectively to the increased mine supply, compared to the first quarter of 2015.
  • Supply from recycling increased 7% quarter-on-quarter to 465 koz, with growth in jewellery recycling offsetting slightly lower secondary supply from scrapped autocatalysts.

Total global demand for platinum was 2,040 koz during the second quarter of 2015, up 15 koz compared to the first quarter of 2015.

  • Automotive demand remained robust at 875 koz for Q2 2015, with strong demand from the main platinum markets of Western Europe and North America.
  • Platinum jewellery demand for the second quarter is estimated at 665 koz, an 11% decline quarter on quarter. Demand in China in Q2 eased as expected without the benefit of Chinese New Year related sales, due to the declining platinum price and ongoing lower gold related footfall through stores. Continued growth in jewellery sales in India softened the overall decline in the second quarter.
  • Industrial demand declined by an estimated 4% (15 koz) quarter-on-quarter to 400 koz in Q2 2015, primarily due to uneven timing in plant expansions in the glass and chemical sectors.
  • A sharp increase in investment demand reflected the increase in bar and coin sales and the turnaround in ETF demand, from three quarters of net sales (50 koz in Q1) to net purchases of 45 koz. The majority of gains were in the two South African funds, which increased their holdings by a combined 60 koz. US investors also moved from being net sellers in Q1 2015 to modest purchasers in Q2 2015, increasing their ETF holdings by 9koz.
  • Bar and coin purchases totalled 60 koz in Q2 2015 up from 35 koz in Q1 2015, as Japanese investors took advantage of lower prices in local currency terms.

The full year 2015 global platinum market deficit forecast increases to 445 koz from the 190 koz forecast in the Q1 2015 Platinum Quarterly. The sharp rise in investment demand in the second and third quarters of 2015 underpins the increased forecast.

  • The total supply forecast is expected to increase by 9% to 7,910 koz, with higher South African production reflecting the recovery from the 2014 strikes and contribution from an increase in recycling of 3%.
  • Total demand is forecast to reach 8,355 koz in 2015, representing 4% annual growth. This is primarily due to projected investment demand, which has been upwardly revised to 310 koz for the year following accelerated Japanese bar purchases and substantial ETF buying in South Africa.
  • The continued growth in automotive, industrial and investment demand is set to offset a decline in jewellery demand in 2015 when compared to 2014.
  • Autocatalyst demand is forecast to grow by 5% to 3,445 koz for the year.

Paul Wilson, chief executive officer of WPIC commented: “The fourth edition of Platinum Quarterly shows that developments in Q2 2015 support the forecast deficit in 2015 of 445 koz, which is significantly up from the 190 koz forecast in May. This is despite a smaller deficit for Q2 2015 than the 230 koz deficit in the first quarter following improved mine supply and, partly as expected, the seasonal decline in Chinese jewellery demand. The second and third quarters have also seen an encouraging turnaround in investor demand, with positive flows into the South African ETFs in particular”.

“While the past quarter has seen an improvement in mine supply due to improved mine performance, the medium term picture looks less promising. Our recently commissioned report by Venmyn Deloitte, an independent consultancy, highlights that the collapse of capital investment, from over $3 billion per annum in 2008 to under $1 billion per annum in 2015, has had a negative impact on South African platinum supply. Using capital expenditure alone as an indicator would imply that South African mining supply in 2016 and 2017 will be noticeably lower than 2015 levels and would support ongoing deficits in the platinum supply-demand balance.”

This edition of Platinum Quarterly may be downloaded free of charge from the WPIC’s website: www.platinuminvestment.com

Australian golds benefit enormously from weak Aussie dollar

With the Australian dollar gold price currently sitting at over AUD $1,600, gold miners in the world’s second largest producing nation after China are seeing price strength, whereas their U.S. counterparts are seeing the opposite.  I have been pointing this out for some time – here and on other websites I write for – so its nice to see such a heavy hitter as the Metals Focus specialist precious metals consultancy coming up with commentary on the same theme.  The following is abstracted from their latest Precious Metals Weekly newsletter:

It’s not all doom and gloom for Australian Gold Miners

Gold priced in US dollar terms is languishing some 40% below the 2011 peaks, however, when priced in Australian dollars (AUD) it is just 11% down and since November has risen by some 24%. The Australian economy is heavily exposed to the commodities sector and has been one of the hardest hit by the general decline in prices. The AUD, which at its peak would buy 1.10 US dollars (USD) has now declined by 36% and can now purchase 0.70 USD.

One of the features of the recent commodity bull market was a high cost inflation environment. Particular pressure was felt from labour costs, as shortages of skilled personnel and competition from bulk commodities drove wages up. Labour often makes up as much as 50% of a mine site’s costs. The slowdown across the commodities sector over the last few years has now led to less competition and an end to above inflation wage demands. Other input costs such as oil, which on average makes up circa 10% of mine site cost, have also dropped significantly (circa 40%) over the last year.

Looking at the second quarter 2015 and focusing on Australian producers, total cash costs have averaged A$805/oz and all-in sustaining costs (AISC) averaged A$1,124/oz, a decline of 9% and 4% from their Q2 2013 peaks. But in US$ terms, when the benefits of the fall in the Australian dollar are added in, costs have fallen by 28% and 26% respectively. This has helped mining companies increase their basic margin between AISC and the gold price to A$401/oz, from the low of A$243/oz which was hit in Q2 2013.

Today’s precious metals headlines from Sharps Pixley

GOLD NEWS

SILVER NEWS

Official: IMF extends composition of current SDR basket for 9 months.

In an announcement today, the IMF Executive Board has confirmed the previously suggested extension of the current SDR basket of currencies by nine months from December 31 this year up until September 30th next.  This leaves the way open for changes to be made, and implemented, in the structure of the SDR basket for a revised basket (if so chosen) to be implemented in October 2016.

The proposal for the extension was put forward by IMF staff in a paper published on August 4, 2015 (see Review of the Method of Valuation of the SDR – Initial Considerations) and subsequently submitted to the Executive Board for lapse-of-time decision.

Normally the IMF would review, and restructure if it chooses to do so, the SDR basket every five years which would have made this process due to be announced in October this year, and implemented at the beginning of next.  However the extension is undoubtedly due to internal arguments over the inclusion of the Chinese renminbi and the delay gives the Chinese time to meet some of the requirements of key IMF board members (the USA?)  which have almost certainly already led to China’s recent renminbi devaluation against the U.S. dollar.  This may at least give it the appearance of no longer being tied directly to the greenback with which it had been in lockstep for a number of years.  Whether China will allow a full float of the renminbi on the global currency markets remains to be seen – this may be a step too far, and perhaps also an over-worrying move if implemented for some IMF board members (the USA again?)

The official statement from the IMF says that the ‘nine-month extension is intended to facilitate the continued smooth functioning of SDR-related operations and responds to feedback from SDR users on the desirability of avoiding changes in the basket at the end of the calendar year. The extension would also allow users sufficient lead time to adjust in the event that a decision were to be taken to add a new currency to the SDR basket.’ (The italics are ours – with the only currency likely being considered for inclusion being the Chinese renminbi, and with the country’s now global top GDP status as confirmed by the IMF, it would presumably form a major – if not the major – currency in the SDR basket.)

The inclusion of the renminbi in the SDR basket may be seen by many as downgrading the status of the U.S. dollar in global trade and even possibly as the leading global reserve currency with all the advantages that brings.  However any such change in status may take some years to take effect.