Sharps Pixley website down – now restored

As readers of lawrieongold will hopefully be aware I publish most of my articles on the Sharps Pixley website.  Unfortunately that website has been down for the past day while some admin difficulties with ICANN are sorted out.  I also put occasional articles up on Seeking Alpha and US Gold Bureau websites – the latter only being accessible to North American domains unless one uses a web browser like Tor which enables one to access sites blocked to certain domains by making it appear you are accessing from somewhere which is acceptable.

I am now pleased to report that the Sharps Pixley website is back on line and my articles can be read at https://www.sharpspixley.com/articles/

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Gold in bargain territory for the holidays

By Frank Holmes, CEO and Chief Investment Officer U.S. Global Investors

Gold christmas tree decorations

One of the most compelling and engaging presenters at the Precious Metals Summit in London last month was Ronald-Peter Stöferle, a managing partner at Liechtenstein-based asset management company Incrementum. Incrementum, as you may know, is responsible for publishing the annually-updated, widely-read “In Gold We Trust” report, which I’ve cited a number of times before.

During his presentation, Stöferle shared the fact that his wife prefers to do her Christmas decoration shopping in January. When he asked her why she did this—Christmas should be the last thing on anyone’s mind in January—she explained that everything is half-off. A bargain’s a bargain, after all.

This is very smart. Here we are several days before Christmas, and demand for ornaments, lights and other decorations is red-hot, so be prepared to pay premium prices if you’re doing your shopping now. But mere hours after the Christmas presents have been unwrapped and Uncle Hank has fallen asleep on the couch with a glass of boozy eggnog, stores will begin slashing prices to get rid of inventory.

Gold bullion and mining stocks are currently in the “January” phase, so to speak, according to Stöferle. The Barron’s Gold Mining Index, which goes all the way back to 1938, recently underwent its longest bear market ever, between April 2011 and January 2016. And as I already shared with you, the World Gold Council (WGC) reported last month that gold demand fell to an eight-year low in the third quarter.

Barrons gold mining index bear markets since 1942
click to enlarge

“Most people get interested in stocks when everyone else is,” Warren Buffett famously said. “The time to get interested is when no one else is.”

The same logic applies to Christmas decorations, gold and mining stocks.

Gold on Track for Its Best Year Since 2010

As of my writing this, gold is trading around $1,280, up 11 percent in 2017. That’s off 5 percent from its 52-week high of $1,351 set in September. If it stays at its present level until the end of the year, the metal will end up logging its best year since 2010, when it returned 30 percent.

former national security advisor pleaded guilty to lying to fbi

Gold traded up on Friday as the U.S. dollar weakened following news that former National Security Advisor Mike Flynn pleaded guilty to lying to the FBI about conversations he had with Russian officials last December during the presidential transition. It’s possible that the details Flynn might provide as part of a plea bargain could help special prosecutor Robert Mueller advance his investigation into Russia’s meddling in the 2016 election.

But back to gold. Considering it’s faced a number of strong headwinds this year—a phenomenal equities bull run that’s drawn investors’ attention away from “safe haven” assets, lukewarm inflation and anticipation of additional rate hikes, among others—I would describe its performance in 2017 as highly respectable.

And yet if you listen to the mainstream financial news media, gold is “boring” and “flat.” Speaking to CNBC last week, Vertical Research partner Michael Dudas called the gold market “eerily quiet.”

10 day standard deviation

click to enlarge

Dudas was specifically describing gold’s volatility, but even here the facts tell a slightly different story. In the table above, you can see the 10-day standard deviation for a variety of assets, using data from the past 12 months. Gold traded with higher volatility than domestic equities, the U.S. dollar and global emerging markets. Of those measured, only oil and bitcoin showed higher volatility.

Based on volatility alone, it’s stocks that look pretty “boring” and “quiet” this year, but you’re not likely to hear a pundit or analyst describe them that way.

And with good reason. The S&P 500 hasn’t fallen more than 3 percent from a previous high for more than 388 days now, the longest stretch ever for the index. And for the first time in its 120-year history, the Dow Jones Industrial Average has reached four 1,000-point milestones in a single year—with a whole month left to go. It’s possible that excitement over the Senate’s tax bill will be enough to push the Dow above 25,000 sometime before the ball drops in Times Square. The drama involving Flynn, however, could threaten to derail those chances.

Dow jones industrial average made history again
click to enlarge

What this means is that, compared to domestic equities, gold is highly undervalued right now. The gold-to-S&P 500 ratio, a time-tested trading indicator, is near 50-year lows. I see this as a strong buy signal, especially now as we await the Federal Reserve’s decision to lift rates this month. If you recall, gold broke out strongly following the December rate hikes in 2015 and 2016.

Gold is a bargain right now compared to stocks
click to enlarge

In his December outlook on precious metals, Bloomberg Intelligence commodity strategist Mike McGlone writes that “gold is ripe to escape its cage soon,” adding that “prices just don’t get as compressed as they did for gold in November, indicating a breakout soon.”

Is a Recession Brewing? History Says Maybe

So what are the catalysts that could trigger a breakout? Stöferle mentions two: a possible recession and stronger inflation.

“I think the odds are pretty high that a recession might be upon us sooner or later because we’re in this rate hike cycle, and as always the central banks are way behind the curve,” he said.

What Stöferle is referring to is the strong historical correlation between new U.S. rate hike cycles and recessions. Going back more than 100 years, 15 of the last 18 recessions were directly preceded by monetary tightening.

Recessions have historically followed us rate hike cycles click to enlarge

The Federal Reserve isn’t just raising rates, remember. It’s also begun to unwind its $4.5 trillion balance sheet, which was built in the years following the financial crisis. This carries historical risk. The central bank has embarked on similar reductions six times in the past—in 1921-1922, 1928-1930, 1937, 1941, 1948-1950 and 2000—and all but one episode ended in recession.

“Quantitative tightening will fail,” Stöferle predicted.

Obviously, there’s no guarantee that this particular round will have the same outcome as past cycles, but if you agree with Stöferle, it might be prudent to have as much as 10 percent of your wealth in gold bullion and gold stocks.

The Risks Surrounding Tax Reform

Inflation is a trickier thing to forecast. A lot of people, myself included, had expected the cost of living to show signs of life this year in response to some of President Trump’s more protectionist and policies. But nearly 10 months into his term, no major legislation has been passed or signed.

That might be about to change with the highly anticipated tax reform bill, which the Senate passed late Friday night. If the bill reaches Trump’s desk, it will be the first time in a generation that the U.S. has amended its tax code.

But will the $1.5 trillion bill, as it’s currently written, lead to stronger economic growth and pay for itself, as its most vehement supports insist? My hope is that it will. As I’ve been saying for a while now, it’s time we begin relying more on fiscal policies to drive growth, especially now that the Fed is beginning to tighten policy.

In the spirit of staying balanced, though, there are troubling signs and forecasts that the bill could actually end up being a disappointment. After reviewing the bill, the Joint Committee on Taxation (JCT) estimates that its enactment could lead to a whopping $1.4 trillion increase in the deficit between now and 2027. Even if we factor in economic growth that might come as a result of reforms, the JCT says, we’d still be looking at a $1 trillion shortfall.

Many economists are also skeptical. A recent University of Chicago Booth School of Business survey of economists from Yale, MIT, Princeton, Harvard and other Ivy League schools found that over half did not believe the current tax bill will “substantially” grow GDP. Only 2 percent thought it would, and more than a third were uncertain. Additionally, nearly 90 percent believed that if the bill is enacted, the U.S. debt-to-GDP ratio will be “substantially” higher a decade from now.

And then there’s the Kansas experiment from five years ago. In May 2012, Governor Sam Brownback signed a sweeping state tax reform bill that in many ways resembles the Senate’s current tax bill. It slashed personal and business income taxes, consolidated the state’s three tax brackets into two and eliminated a number of credits and exemptions. Hopes were high that the reforms would kickstart economic expansion, help taxpayers and attract new business to the state.

Instead, none of that happened. Following the bill’s enactment, Kansas GDP growth remained stagnant, trailing the national growth rate as well as that of neighboring states and even its own rate from years past. This year, the nonprofit financial watchdog group Truth in Accounting gave Kansas a failing financial grade of D, citing its inability to pay its debts or balance its budget.

Kansas 2012 tax cuts failed to spur growth a lesson for the us click to enlarge

In June of this year, Kansas’ Republican-controlled state legislature voted to raise taxes for the first time since reforms were enacted and eventually had to override Governor Brownback’s veto. Many of those state legislators who initially supported the Kansas tax cuts are now warning federal lawmakersthat similar outcomes could occur on a nationwide scale.

I’m not sharing this to discredit tax reform—in fact, I’m strongly in favor of it. However, I believe it’s important to highlight the fact that nothing in life is guaranteed. Hope for the best, prepare for the worst. What steps can you take now in the event the tax reform bill doesn’t accomplish what it’s designed to do—or worse? This type of uncertainly has historically made gold shine the brightest.

Think Gold Has Fallen Short of Expectations this Year? Don’t Blame Bitcoin

At conferences I’ve attended and spoken at recently—the Silver & Gold Summit in San Francisco and Mines and Money in London among them—the suggestion has been made by a few big-name investors and money managers that bitcoin’s meteoric rise is to blame for the market’s apparent disregard for gold and gold stocks right now. With bitcoin up more than 1,050 percent since the beginning of the year, even after a 21 percent dip last Wednesday, many market-watchers might simply be too star-struck by the newness of bitcoin to be bothered by the “barbarous relic.”

I happen to think this is a mistake. As much as I believe in the value of bitcoin, gold and gold stocks still play a crucial role in the modern portfolio.

As I told Kitco News’ Daniela Cambone at the Silver & Gold Summit, bitcoin isn’t responsible for dismantling gold. Although both assets are currencies, I don’t see them at odds because they serve very different functions. For one, gold is more than money—it’s worn as jewelry, widely used in dentistry and can be found in art and even some high-end foods. It’s been traded around the world for millennia and, unlike bitcoin, does not require electricity. Indeed, it conducts electricity, which is why you can find it in your iPhone and GoPro camera’s circuitry.

Frank Holmes on CNBC london

Bitcoin is more than money as well. It’s the most influential spokesperson, if you will, of blockchain technology, upon which the currency is built. Speaking with SmallCapPower’s Angela Harmantas at the Mines and Money conference in London, I made the comparison that bitcoin is to email as blockchain is to the internet. In the earliest days of the internet, few people truly understood what it was or could predict the implications of this new technology—but email they understood. It’s what woke people up to the idea of using the internet. Bitcoin is doing just that for blockchain.

But blockchain’s utility goes far beyond finance. As a decentralized, highly encrypted ledger, it has untold potential to change the way we run our lives, businesses and governments. Among other tasks, the technology can help manage digital rights to intellectual property, bring transparency to supply chains and reliably track the spending of public funds. It can even be used as a tamper-proof voting system, whether you’re voting for a new chairman of the board or president of the United States. One day soon, we might all be e-voting from our smartphones and tablets, reassured that our vote cannot be compromised.

For more on my outlook on bitcoin and blockchain, and to get my thoughts on why I think HIVE Blockchain Technology is well-positioned to be an industry leader, watch my full interview with Angela Harmantas.

WGC – Global gold demand in Q3 seen at eight-year low

The latest Gold Demand Trends report from the World Gold Council is now out and the full report can be downloaded from the WGC website – www.gold.org

World Gold Council Report Highlights as follows:

  • Gold jewellery demand fell in Q3. Jewellery volumes continue to languish below longer-term average levels. Indian weakness was the main reason for the y-o-y decline. Tax and regulatory changes in India weighed on domestic gold demand. The new tax regime deterred consumers, as did anti-money laundering measures governing jewellery retail transactions.
  • Inflows into gold-backed ETFs stalled: holdings grew by just 18.9t. Investors continued to favour gold’s risk-hedging properties, but the greater focus was on rampaging stock markets.
  • Gold bar and coin demand growth was driven by China. Global investment in bars and coins rose 17% from relatively weak year-earlier levels. Chinese investors bought on price dips, to notch up a fourth consecutive quarter of growth.
  • Volumes of gold used in technology increased for the fourth consecutive quarter. Demand for memory chips continued to soar thanks to the persistent popularity of high-end smartphones.
  • Total supply fell 2% in Q3. Mine production fell 1% y-o-y in Q3, which was also the fifth consecutive quarter of net dehedging. Recycling activity (-6%) continued to normalise after jumping in 2016

Stock Picks YTD, Newmont/Barrick and Randgold Q3 – Articles posted on Seeking Alpha

One of the other sites on which some of my articles are posted is U.S. site Seeking Alpha but this doesn’t allow me to publish the same articles here so if you’d like to read them you’ll need to read them on Seeking Alpha.  My three most recent articles here relate to the performance of the precious metals stocks I recommended at the end of last year – rather better than I had anticipated, particularly with respects of what are probably the top two royalty stocks, Franco Nevada and Royal Gold which both comfortably outperformed the Dow and the S&P500, despite the somewhat disappointing progress of the gold price, and a second one is on Randgold’s Q3, which on first look was pretty dire and the stock price plunged accordingly, but in fact was largely in the company’s own forecasts and still leaves it on track to reach the top end of its 2017 guidance.  Overall Randgold has been the star performing major gold miner and the recent stock price dip should provide a buying opportunity.

I also published one showing that Newmont is overtaking Barrick as the world’s No. 1 gold producing company – and may even do so this year:

To read the articles, click on the following links:

Precious Metals Stocks Update YTD

Newmont Closing Gap On Barrick As World’s Largest gold miner…

Randgold: Difficult Q3 But Still On Track To Meet Top End of Guidance.

Note:  the above articles were written for a North American investment audience so use U.S tickers – and spelling!

Commodity Cycle Upturn Should Lift Precious Metals Prices

by: Stefan Gleason*

The inverse of the extreme overvaluation in equities is the extreme relative cheapness of hard assets. Commodity indexes entered the summer at generational lows in real terms.

Equities Expensive, Commodities Cheap? Chart

The perception has been that the world is awash in plentiful, cheap oil. Just a few years ago, with oil over $100 per barrel, the headlines blared warnings about peak oil and supply shortages. At major cyclical turning points in commodity markets, the news tends to reinforce whatever trends brought about major highs or lows in prices.

What investors need to keep in mind is that commodity markets are always cyclical in nature. No matter how bullish or bearish the outlook happens to appear at any given time, prices will eventually turn and trend in the opposite direction.

Oil and agricultural commodities perked up as summer officially began. Whether it’s the start of a major cyclical bull market remains to be seen. But the supply and demand fundamentals are setting up bullishly for commodities markets.

Lower Prices Stunt Production & New Shortages Push Up Prices

The cycle for any commodity follows the same basic pattern. When prices are low, production falls. As new supplies diminish, the market tightens and prices move higher. The higher prices incentivize producers to invest in production capacity and increase output.

Eventually, the market becomes oversupplied, prices fall, and the cycle starts all over again.

As a resource investor, it’s important to have some idea of whether you’re investing in a commodity at a time in the cycle when it’s favorable to do so. Gold, for example, tends to be less correlated to swings in the economy than oil and industrial commodities. It responds more to investor fear and flight from paper asset markets.

Gold prices crashed from $850/oz in 1980 to $300/oz in 1982. It wasn’t until 2002 that gold crossed above the $300 level for the final time. The new gold bull market rose out of a 20-year base and reached a cyclical high of $1,900 in 2011. A four-year downturn followed, and since 2016 a new cyclical upturn appears to be taking shape.

Chart reading is always a tenuous undertaking, but when combined with supply and demand fundamentals it can help investors identify favorable times to be a buyer or seller. Right now it appears that gold, silver, oil, and other commodities are transitioning one by one into a period in the commodity cycle of diminishing supply.

In the case of crude oil, the major storyline in recent months has been a supply glut. North American shale production has swelled inventories in the U.S.

The longer-term supply outlook actually augurs for shortfalls… and much higher prices.

Curde Oil

According to the International Energy Agency (IEA), new oil discoveries last year sunk to their lowest number in decades.

The IEA warns that in order to offset recent declines and meet rising global demand, the oil industry will need to develop 18 billion new barrels every year between 2017 and 2025.Oil’s recent price range in the low $40s to $50s per barrel doesn’t seem to be incentivizing the necessary new production capacity.

Higher energy costs would mean higher production costs for the gold and silver mining industry. Mines are already having to process more and more tons of earth to extract ounces of precious metals.

According to metals analyst Steve St. Angelo, “The global silver mining industry will continue to process more ore to produce the same or less silver in the future. While the cost of energy has declined over the past few years, falling ore grades will continue to put pressure on the silver mining industry going forward.”

The cycle appears to be in the early stages of turning bullish for commodity prices – making it a favorable time to be taking out long positions in hard assets. That doesn’t necessarily mean metals markets will immediately begin moving up in a big way.

Gold and silver still face potential headwinds from two sources: first, another Fed rate hike or two before year end; and second, a vowed gradual reduction of the central bank’s QE-bloated balance sheet, which could cause longer-term bond yields to go up.

Contrary to popular misconceptions, nominal increases in interest rates aren’t inherently negative for metals prices. More important is whether inflation, and expectations of future inflation rates, are rising or falling relative to interest rates. If oil prices break out of their trading range to the upside, that could help ignite inflationary fires.

Gold starts the week at over $1,280

Gold Today –New York closed at $1,278.20 Friday after closing at $1,270.10 Thursday. London opened at $1,281.00 today. 

Overall the dollar was weaker against global currencies, early today. Before London’s opening:

         The $: € was weaker at $1.1264 after Friday’s $1.1222: €1.

         The Dollar index was weaker at 96.77 after yesterday’s 97.20

         The Yen was stronger at 110.51 after Friday’s 111.51:$1. 

         The Yuan was stronger at 6.8036 after Friday’s 6.8153: $1. 

         The Pound Sterling was stronger at $1.2905 after yesterday’s $1.2875: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    6    5

     2017    5    2

     2017    5    1

SHAU

SHAU

SHAU

 

 

278.34

278.93

 

Trading at 281.60

277.96

278.63

 

$ equivalent 1oz at 0.995 fineness

@    $1: 6.8036

       $1: 6.8153

       $1: 6.8062     

 

   

 

$1,265.28

$1,269.67

 

Trading at $1,282.37

$1,263.55

$1,268.30

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

New York closed $4.17 lower on Friday than the Shanghai Gold Exchange was trading at today ahead of Monday’s opening. London opened at around $1 lower than Shanghai was trading earlier today. These are very small price differences evidencing arbitrage operations at very professional levels [likely banking operations]. We have been watching these markets, as you know, very carefully over the last year. Our conclusion is that we are watching global gold market developments that are much more significant than the 2005 ‘de-hedging’ operations by gold mining companies and the establishment of gold ETFs by the World Gold Council. These changes not only bring structural changes to the global gold market but demonstrate where gold is going in the future. As China has integrated gold into its financial system, the weight of physical gold trading is being brought to bear on global gold prices. As the  emphasis moves to physical dealing in gold, so its importance as an international reserve asset as well as an asset in support of global finances will increase in the months and years to come.

We are now watching a three sides of the global gold market that is just about in sync. Shanghai is the most influential on gold prices as it is the physical, global gold bullion hub now.

Silver Today –Silver closed at $17.52 Friday after $17.28 at New York’s close Thursday.

We expect to see silver outperform gold as it rises solidly. The Technical picture for silver will become dramatic if the gold price rises further.

LBMA price setting:  The LBMA morning gold price was set today at $1,280.70 from Friday’s $1,260.95.  The gold price in the euro was set at €1,137.04 after Friday’s €1,121.09.

Ahead of the opening of New York the gold price was trading at $1,280.80 and in the euro at €1,139.60. At the same time, the silver price was trading at $17.56. 

Price Drivers

The U.S. Friday’s jobs data disappointed markets, which were expecting much higher numbers. The figures imply that the momentum of jobs creation in the U.S. is waning. But the more important figure was the one giving the inflation picture which showed it was decreasing, a factor likely to influence the Fed’s decision to raise rates this month. We ask, “Will they?” Markets are telling us that they will, but the Fed will be considering the impact on financial markets if they go ahead and raise rates. They will be keen to ensure nothing interferes with the moderate growth the U.S. in experiencing right now. As a result the U.S. SPDR gold ETF and other gold ETFs saw an inflow of funds which pushes them into the market to buy physical gold. This return of demand may well continue to push prices higher.

Indian GST on Gold

At last, the Indian government has issued the level of General Services Tax to be levied on gold inside the country. It will be at 3% and was announced on Saturday by the Indian government [and is lower than industry expectations of around 5%] which will come into effect on July 1 and will replace a number of federal and state levies. The net effect is to raise taxes by around 0.5%, a figure that is going to make little difference to demand in the country. They are currently paying 1% excise duty and 1.5% VAT on gold.

But the net figure paid by Indians for gold is to be 13%, when one adds the Customs Duty of 10%. There is talk that the government will reduce Customs duty, but that talk has been around for well over a year already. We cannot see that happening soon.

As a result, India has a thriving gold smuggling industry that is now that little bit more profitable now. Two years ago the WGC guesstimated that that was 250 tonnes then. With its profitability even higher now, this well-established industry will undoubtedly be bringing in greater volumes. But that demand will not be registered in official figures, but analysts should add that sum to official numbers.

Gold ETFs – Friday, saw purchases of 3.551 tonnes of gold into the SPDR gold ETF (GLD). There were purchases of 1.37 tonnes of gold into the Gold Trust (IAU) since their internet page went down. It has now been corrected. Their holdings are now at 851.003 tonnes and we presume, at 204.34 tonnes respectively.

Since January 6th 2017 43.759 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips  GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

China continuing to pull gold upwards

 Gold Today –New York closed at $1,228.80 Friday after closing at $1,226.30 on the 16th March. London opened at $1,232.75 today. 

Overall the dollar was weaker against all global currencies early today. Before London’s opening:

         The $: € was weaker at $1.0765: €1 from $1.0754: €1 Friday.

         The Dollar index was weaker at 100.16 from 100.38 Friday. 

         The Yen was stronger at 112.74:$1 from Friday’s 113.44 against the dollar. 

         The Yuan was stronger at 6.9051: $1, from 6.9068: $1, Friday. 

         The Pound Sterling was stronger at $1.2419: £1 from Friday’s $1.2343: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    3    20

     2017    3    17       2017    3    16

SHAU

SHAU

SHAU

/

275.49

275.34

/

275.78

275.79

$ equivalent 1oz @  $1: 6.9051

      $1: 6.9068

$1: 6.8967

  /

$1,240.62

$1,241.76

/

$1,241.92

$1,243.79

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 At the close in Shanghai today, the gold price was trading at 277.50 Yuan, which directly translates into $1,249.98. But allowing for the difference of gold being traded this equates to a price of $1,244.98. This more than $16.18 higher than the New York close and $12.22 higher than London.

The price differential between the three centers is widening again as China once again is leading the way on gold prices. But you will note that Chinese gold prices have barely changed in the last two days leading to the conclusion that Shanghai is making the gold price but exchange rate changes are changing prices in other currencies. The dollar continues to weaken taking gold prices higher there.

LBMA price setting:  The LBMA gold price was set today at $1,233.00 up from Friday’s $1,228.75.  

The gold price in the euro was set at €1,146.34 after Friday’s €1,144.51.

Ahead of the opening of New York the gold price was trading at $1,232.10 and in the euro at €1,145.71 At the same time, the silver price was trading at $17.40. 

Silver Today –Silver closed at $17.38 at New York’s close Friday against $17.32 on the 16th March. Silver prices have begun rising slowly in line with gold’s dollar prices.

Price Drivers

When we look at the G-20 meetings we are always underwhelmed. But this last one contained more significance as the U.S. refused to support, in the final communiqué, the words that implied all were agreed against ‘protectionism. President Trump has made it clear that he will ‘make America great again’ putting its interests over its trading partners. This is very definite ‘protectionism’. His highest profile targets are Mexico, China and now Germany. His objection is that there are Trade deficits with each of these countries. He wants a Trade Balance that has no deficit. This has great implications for gold prices.

The U.S. has had a Trade deficit for as long as we can remember. It has been described as the ‘exorbitant privilege’ [of being able to pay for goods with printed paper and not through the sale of its goods] So why is the elimination of the Trade deficit of importance to the new administration? Yes, it will bring jobs back to the U.S., but seen through monetary eyes it is a step away from dollar hegemony to a dollar that can stand internationally on its own valuation through a balance, or surplus, on its Balance of Payments.  

It is preparation for a multi-currency monetary system in which Trump hopes the dollar will stay as strong as it is now. Protectionism through tariffs will go a long way to ensure this objective. This is why we see tariffs on oil imported into the U.S. in the future. It will stabilize the ‘fracking’ oil companies and move them away from international oil price dependency.  This would be gold positive!

Evidence of Trump acting on a hard line on this came over the weekend with his meeting with Chancellor Merkel of Germany.

Gold ETFs – Friday saw sales of 2.962 tonnes from the SPDR gold ETF but no change in the Gold Trust.  Their respective holdings are now at 834.100 tonnes and 197.82 tonnes. 

Since January 4th 2016, 230.89 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6th 2017 20.834 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips –  GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold: $1,250 resistance becoming support

 Gold Today –New York closed at $1,256.70 on the 24th February after closing at $1,248.80 on the 23rd February. London opened at $1,255.00 today.

 Overall the dollar was slightly stronger against global currencies early today. Before London’s opening:

         The $: € was slightly stronger at $1.0586: €1 from $1.0589: €1 on Friday.

         The Dollar index was slightly stronger at 101.06 from 100.95 on Friday. 

         The Yen was slightly stronger at 112.30:$1 from Friday’s 112.85 against the dollar. 

         The Yuan was weaker at 6.8800: $1, from 6.8717: $1, Friday. 

         The Pound Sterling was weaker at $1.2412: £1 from Friday’s $1.2553: £1.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    2    27

     2017    2    24

      2017    2    23

SHAU

SHAU

SHAU

/

278.49

276.08

/

279.76

275.93

$ equivalent 1oz @  $1: 6.8800

      $1: 6.8717

$1: 6.8786

  /

$1,260.53

$1,248.37

/

$1,266.28

$1,247.69

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 At the close in Shanghai today, the gold price was trading at 280.0 Yuan, which directly translates into $1,265.84. But allowing for the difference of gold being traded this equates to a price of $1,260.84. This is $4 higher than the New York close and $6 higher than London.

Shanghai opens the week pulling both London and New York higher again but with the two centers following close behind.

LBMA price setting:  The LBMA gold price was set today at $1,256.25 up from Friday’s $1,255.35.  

The gold price in the euro was set higher at €1,187.05 after yesterday’s €1,185.02.

Ahead of the opening of New York the gold price was trading at $1,255.20 and in the euro at €1,185.94.  At the same time, the silver price was trading at $18.37. 

Silver Today –Silver closed at $18.35 at New York’s close Friday against $18.18 on the 23rd February.

Price Drivers

Looking back over the last week, we see only purchases of 0.44 tonnes of gold into the U.S. based gold ETFs. This confirms to us that the upward pressure on the gold price is coming from the Far East, primarily Shanghai.

This is remarkable as the gold price has risen around $20 in the same period, breaking through persistent overhead resistance on the way.It clearly shows that U.S. factors and U.S. buying has not provided the upward pressure on the gold price and confirmed our view that it has been upward pressure from Shanghai.

Political uncertainty is certainly preventing any selling in the developed world as we move towards the Dutch, French and German elections. Italy is looking like a major source of such uncertainty too.

Gold ETFs – Friday again saw no sales or purchases from or into the SPDR gold ETF or the Gold Trust.  Their respective holdings are now at 841.169 tonnes and 201.82 tonnes. 

 Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Structural Change in Global Gold Markets as Price Touches $1,260

 

 Gold Today –New York closed at $1,248.80 on the 23rd February after closing at $1,238.10 on the 22nd February. London opened at $1,254.00 today.

 Overall the dollar was weaker against global currencies early today. Before London’s opening:

         The $: € was weaker at $1.0589: €1 from $1.0545: €1 on yesterday.

         The Dollar index was weaker at 100.95 from 101.36 on yesterday. 

         The Yen was stronger at 112.85:$1 from yesterday’s 113.20 against the dollar. 

         The Yuan was stronger at 6.8717: $1, from 6.8786: $1, yesterday. 

         The Pound Sterling was stronger at $1.2553: £1 from yesterday’s $1.2477: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    2    24

     2017    2    23

      2017    2    22

SHAU

SHAU

SHAU

/

276.08

275.89

/

275.93

275.8

$ equivalent 1oz @  $1: 6.8717

      $1: 6.8786

$1: 6.8818

  /

$1,248.37

$1,246.93

/

$1,247.69

$1,246.53

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 At the close in Shanghai today, the gold price was trading at 279.50 Yuan, which directly translates into $1,265.10. But allowing for the difference in quality of gold being traded this equates to a price of around $1,260.10. This is $8 higher than the New York close and $7 higher than London.

Bearing in mind that the prices of the 23rd [yesterday] above are the prices ahead of London’s opening and well ahead of New York’s opening. As you can see both London and New York were dragged higher by Shanghai. Looking at Shanghai’s closing prices today [not in the table as they have not yet been officially released], we are looking at prices over $1,260. If London and New York continue to follow Shanghai, which we believe will happen, then both London and New York will see good rises today.

LBMA price setting:  The LBMA gold price was set today at $1,255.35 up from yesterday’s $1,237.35.  

The gold price in the euro was set higher at €1,185.02 after yesterday’s €1,172.40.

Ahead of the opening of New York the gold price was trading at $1,257 80 and in the euro at €1,186.16.  At the same time, the silver price was trading at $18.30. 

Silver Today –Silver closed at $18.18 at New York’s close yesterday against $18.04 on the 22nd   February.

Price Drivers

The media will continue to attribute rises in the gold price to events in the U.S. with an occasional nod towards gold ETF buying. But today we see there was no purchases into the U.S. based gold ETFs. The dollar weakened against most currencies, but even in the euro against which the dollar is most often measured, the gold price rose almost the same as it did in the dollar. So, today is a day when the gold price has again risen against all currencies, with Shanghai leading the way! This pattern, now that the slowdown in Chinese demand due to the Lunar New Year is out of the way, seems to be taking hold of the gold markets.

It is a structural change in the global gold markets and appears to us that effective arbitraging [dealing between two markets] has become efficient. Banks that are permitted to take gold into China must be active in doing this but the main player has to be the ICBC which is a member of the price setting committee and a ‘market maker’ in London with their vaults, in total, accommodating 3,500 tonnes of gold for clients and itself.

Gold ETFs – Yesterday saw no sales or purchases from or into the SPDR gold ETF or the Gold Trust.  Their respective holdings are now at 841.169 tonnes and 201.82 tonnes. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

To ensure you can benefit from the future higher gold prices we will see then, you need to hold it in a manner that makes sure it can’t be taken from you. Contact us at admin@stockbridgemgmt.com to buy physical gold in a way that we feel, removes the threat of it being confiscated. We’re the only storage company that offers that!

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  Global Gold Price (1 ounce)
  Today Yesterday
Franc Sf1,263.52 Sf1,250.94
US $1,257.80 $1,240.15
EU €1,186.16 €1,174.00
India Rs.83,818.53 Rs. 82,866.82

 

Gold Sidelined as Trump Equities Rally Continues and Yields Surge

By Frank Holmes – CEO and Chief Investment Officer, US Global Investors

For only the second time since 2008, the Federal Reserve raised interest rates last week, surprising no one. Although the 25 basis point lift was in line with expectations, markets took some time to digest the news that three rate hikes—not two, as was earlier expected—were likely to happen in 2017. Major averages hit the pause button for the first time since last month’s presidential  election, but the Trump equities rally quickly resumed Thursday morning.

The two-year Treasury yield immediately jumped to a nominal 1.27 percent after averaging 0.80 percent for most of 2016, an increase of 58 percent. In real, or inflation-adjusted, terms, the yield is still in negative territory, but it’s clearly heading up following the U.S. election and rate hike. Thirty-year mortgage rates, meanwhile, hit a two-year high.

Real 2-Year Treasury Yield Heading Up Following Election and Rate Hike
click to enlarge

Gold retreated to a 10-month low. As I’ve explained many times before, gold has historically had an inverse relationship with bond yields, performing best when they’re moving south.

It’s worth pointing out that the most recent gold bull market, which carried the yellow metal up 28 percent in the first six months of 2016, was triggered last December when the Fed hiked rates.

Will Gold Respond Similarly to Fed Policy?
click to enlarge

Again, as many as three rate hikes are expected in 2017—unlike the one this year—with Fed Chair Janet Yellen commenting that economic conditions have improved well enough to warrant a more aggressive policy. If true, this should accelerate upward momentum of Treasury yields and the U.S. dollar—currently at a 14-year high—which could dampen gold’s chances of repeating the rally we saw in the first half of this year.

More Than $10 Trillion in Negative-Yielding Bonds

Other gold drivers still remain in place, though, including negative-yielding government bonds elsewhere around the world. The value of such debt has dropped considerably since the election of Donald Trump, but it still stands at more than $10 trillion, supporting the investment case for the yellow metal. And many of Trump’s protectionist policies—opposition to free trade agreements, imposition of tariffs on Chinese-made goods—are expected to heat up inflationary pressures in the U.S., which could serve as a gold catalyst.

What’s more, gold is looking oversold, down two standard deviations for the 60-day period, which has historically signaled a good buying opportunity. With prices off close to 12 percent since Election Day, I believe this is an attractive time to rebalance your gold position. I’ve always recommended a 10 percent weighting, with 5 percent in gold stocks and the other 5 percent in bullion, coins and jewelry.

Out of hospital

At long last Lawrie is out of hospital, although still far from back to normal physically, and hopes to resume posting on the site shortly.

Much has occurred since he had his stroke around 8 weeks ago – notably of course Donald Trump winning the U.S. Presidential election.  Virtually all the pundits, who were  mostly pro-Hillary, predicted that a Trump victory would see gold soar and markets collapse, yet the reverse happened.  Moral – don’t pay any attention to the pundits.

Also has anyone else noticed that nearly all the media pictures of Trump pre the election were decidedly unflattering, yet most after it have actually made the Donald look almost Presidential!  The media is talking up the U.S. economy likening Trump’s somewhat off-the-cuff policy  proposals to Reaganomics.  At some stage reality will rear its head.  Trump remains a loose cannon on the political front.  The next few years could prove to be ‘interesting times’ in the Chinese  proverbial sense.  Hillary would perhaps have been more predictable as President, but whether she would have proven to be a better leader of the so-called ‘free world’ we will presumably never know.

Lawrie Health Update

Hospital stays are not really conducive to writing analytical articles which is why lawrieongold has not carried any original articled from yours truly for the past few weeks.  My apologies, but am likely to remain in hospital for the next two weeks at least as I recover from a stroke which has left me unable to walk without assistance, and what is even more frustrating an inability to swallow so I’m being fed through a tube to the stomach via my nose.  Muscular co-ordination isn’t great either, which makes typing a bit problematic.  I have managed to write an article for sharpspixley,com looking at the aftermath of the Trump election win  and its likely effect on gold and that is included in full as a separate article on the site.  Meanwhile I will continue to publish articles from some commentators who submit material to me in order to keep readers up with is going on in the markets.  Hopefully I’ll be back in full swing  by the end of the year, but progress is frustratingly slow.

Randgold’s flagship Kibali gold mine delivering progress on all fronts

We have commented here before on Randgold Resources’ remarkable achievement in building Africa’s largest gold mine in one of the most remote locations on the Continent.  In his latest  progress report on the operation, Randgold CEO Mark Bristow had the following comments to make on the operation’s latest progress:

After a slow start to 2016, the Kibali gold mine is picking up speed, with the substantial performance improvement forecast for the second half of the year already manifesting itself.

Speaking at a briefing for local media, Bristow said Kibali was delivering progress on all fronts towards the achievement of its 2016 business plan, with a ‘step change’ in production expected in the third and fourth quarters of the year.  Throughput was currently at or above the nameplate specification and there had been a big improvement in the recovery rate, while costs were also expected to be better.

He noted that the mine was capable of funding the continued capital required for the completion of its development with the full commissioning of its underground operation scheduled for the second half of 2017.  The second of its hydropower stations, Ambarau, is planning to deliver its first power in November this year.  Construction of the third, Azambi, will start soon with site preparations underway.

“In line with our policy of supporting local economic development in our host countries, all the contracts for the work on Azambi have been awarded to companies with a majority Congolese shareholding, while the main contractor, who will be working in partnership with our capital projects team, is 100% locally owned,” Bristow said.

“Our local supply strategy is evidenced by the fact that in the year to date Kibali has spent more than $141 million with Congolese contractors.  In addition to construction work, we also rely on local suppliers for services ranging from catering to trucking.”

Bristow said despite the stresses associated with developing a project the size of Kibali in a remote part of a country that was still evolving politically, Randgold had a long term commitment to a partnership with the DRC and was laying the foundation for further investment there through its exploration programmes around the mine and further afield.  “We see ourselves continuing to play a significant role in the growth of the Congolese mining industry,” he said.

This commitment extended to its support for local economic and general community development through a range of initiatives.  These include a number of large-scale agribusiness projects which are designed not only to provide economic activity and a secure food supply in the near future but also to leave a sustainable legacy to the community after the mine’s eventual closure.

Randgold operates the Kibali mine in north east DRC which is a joint venture between Randgold (45%), AngloGold Ashanti (45%) and the Congolese parastatal SOKIMO (10%).

Gold and silver break down below $1,300

Gold TodayNew York closed at $1,313.30 yesterday after the previous close of $1,317.40.  London opened at $1,309.80.

    • The $: € was stronger at $1.1171: €1 from $1.1237: €1 yesterday.
    • The Dollar index was stronger at 96.15 from 95.82 yesterday.
    • The Yen was weaker at 102.34: $1 up from 101.21: $1 yesterday against the dollar.
    • The Yuan was stronger at 6.6745: $1 from 6.6720: $1 yesterday.
  • The Pound Sterling was very weak at $1.2775: £1 from yesterday’s $1.2956: £1.

Yuan Gold Fix- Chinese markets are closed for a week-long holiday

Shanghai remains on holiday. New York prices continue to dominate when China is closed.

The Yuan is now part of the SDR of the IMF, for the Chinese an important step on the way to international acceptability as a global currency. We must wait for the Golden Week to be complete before we see how the People’s Bank of China reacts after this event.

It is unsurprising to see the gold price fall when the largest physical market is closed, despite COMEX dominating prices when it is just a very small physical gold market. The COMEX ‘paper’ market is used to establish the dollar gold price, but it is very important that investors follow the gold price in their own currency as that is the one that affects them. The dollar price is great for U.S. citizens, but where even they want to maximize returns they take a short position in a weak currency matching their gold position [physical gold positions too]. For instance when sterling was $1.44 against the dollar gold was not too far away from current levels. A short position in the pound would see them gain, so far,  [$1.44 – $1.27] another nearly 12% or $158 on the total position. After all gold is a measure of currency’s value so to have a position against the weakest currency gives you the greatest gains.

LBMA price setting:  The LBMA gold price setting was at $1,309.15 against yesterday’s $1,318.65.

The gold price in the euro was set at €1,173.39 against yesterday’s €1,173.49. This shows that the gold price in the euro had barely moved. In dollars the gold price fell in direct proportion to the dollar’s strength against the euro. But now gold has broken down through support.

Ahead of the opening of New York the gold price was trading at $1,291.60 and in the euro at €1,156.78.  At the same time, the silver price was trading again at $18.52.

Price Drivers

The Technical picture shows a breakdown through support and is now looking for the bottom or are we there now? We do know that at these levels there are many buyers just waiting to get in once a bottom is found. With China in its ‘Golden Week’ of holidays there is little drive to take gold prices higher at the moment. Even U.S. based gold ETFs are now seeing no demand [just small sales].

In India we hear reports of very little demand. We have difficulty in accepting that. What we do know is that smugglers have been in the game since the imposition of duties years ago and could well get a further boost if these are increased. Smugglers don’t report turnover even to the WGC, so there is no way of knowing accurately just how much gold is coming in. But we believe it is substantial and would take import figures back to where they were at their peak, particularly after the good monsoons they had this year.

Gold ETFs – There were no sales or purchases from or to the SPDR gold ETF or the Gold Trust yesterday, leaving their respective holdings at 947.952 tonnes and 226.68 tonnes.  

Since January 4th this year, the holdings of these two gold ETFs have risen by 374.33 tonnes.

Silver – Silver prices will fall in the short term and will go the same direction as gold but should turn faster than gold when it does.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

Ramifications of Barrick Gold’s Veladero mine spill

Barrick Gold’s Veladero mine chemical spill in Argentina could have adverse ramifications for other Barrick developments in the region and also for other companies looking to mine there.

The temporary closure of the mine while the problem is rectified is costing the company around $2 million a day in lost revenues.

Veladero is Barrick’s third largest gold mine producing around 10% of the company’s attributable annual gold output.

To read full article on Seeking Alpha click on: Barrick Gold’s Latest Veladero Spill Bad News For Argentinean Gold Mining..