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
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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..

War on cash Turns to $20, $50, and $100 Bills

Another guest editorial looking at Ken Rogoff’s new book suggesting that cash – or at least large denomination bills – should be phased out, and the likely unintended consequences.  See also: The War on Cash Is Still Good for Gold and Will the war on cash morph into a war on gold and diamonds

Article by Clint Siegner*

Harvard professor and economist Ken Rogoff is once again leading the chorus of high-level academics and officials who declare cash is only for criminals. He made his case in a recent Wall Street Journal editorialcalled the “Sinister Side of Cash.” The solution, he declares, is to simply get rid of anything but the smallest bank notes.

Blame on Cash

In his vision, drug dealers, human traffickers, and tax cheats are everywhere, but they are reliant on cash. Our benevolent central planners can largely incapacitate them by ridding society of anything larger than a $10 bill.

Kingpins won’t know what to do when a single-engine Cessna full of cocaine requires a Boeing 747 full of $1s, $5s, and $10s to make payment.

Rogoff seems to blame cash, not bad people, for facilitating criminal activity. He writes;

“There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism.”

People worried about meth dealers swapping dangerous drugs for “dirty” cash might get mad enough, and afraid enough, to put up with what Rogoff calls a “less cash” society. While elimination of most cash might make it harder for black marketeers who operate in the small dark corners of society, it will be a bonanza for the undesirables along Wall Street and in Washington DC who are planning to shake down literally everyone.

Getting rid of large bills is a terrific way for them to herd people down a blind alley and pick their pockets. Bankers will grab handfuls of fees and deposits they wouldn’t otherwise get because people can no longer hold or transact with cash. Fed officials can impose negative interest rates, robbing even more of the value from everyone’s savings. And bureaucrats in government can swipe everyone’s ability to transact privately using off-the-grid cash.

At least Rogoff is willing to admit the REAL REASON cash is a problem for central bankers who want to impose negative rates. You just have to read much further down, past the pictures of shady characters and contraband:

“Unfortunately, the existence of cash gums up the works. If you are a saver, you will simply withdraw your funds, turning them into cash, rather than watch them shrink too rapidly. Enormous sums might be withdrawn to avoid these losses, which could make it difficult for banks to make loans – thus defeating the whole purpose of the policy.”

Like all Keynesians, Rogoff doesn’t care much for savers. How dare they withdraw cash to avoid negative yields and other losses!

He wants savers to be treated more like livestock – ready to be milked, shorn, and butchered by smarter policy makers such as himself.

One thing is for sure – many people, criminals, and honest people alike aren’t going to let themselves be herded to financial slaughter.

Officials certainly have control over the supply of cash circulating in society. But they do not control the alternatives, the first and foremost being gold and silver rounds, coins, and bars.

It won’t take long for drug lords to figure out that while an airliner full of small bills is impractical, a briefcase full of small gold bars can work just fine. Nor will all savers stand for paying their bank to hold deposits when they can convert those savings to precious metal instead. It is easy to predict these sorts of unintended consequences – the very reasons why central planners such as Rogoff inevitably fail.

 *Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

RIP Mike West

A doyen of mining journalism sadly passed away last week

I was hugely saddened to hear of the passing of Michael (Mike) West, CEO of Mining Journal Ltd for 25 years, and then company chairman for another 14.  Mike took me into the company in 1970 as Financial Editor and ended up selling half the company to me – and 20% to Chris Hinde – in 1990 and was hugely well known within the international mining community – particularly in the gold mining sector giving many talks at conferences on the subject.  Many will mourn his death.  He was undoubtedly one of the greats of the mining publishing sector.

The following, lightly edited, note has been penned by my erstwhile colleague and partner when Mike turned Mining Journal over to us in 1990, Chris Hinde.  Chris now works for SNL.

Lawrie Williams

Pick and Pen

The concept of internationalization in mining is at least 2,000 years old, but the first international mining society was formed barely 230 years ago when European engineers met together at Schemnitz in Hungary’s mining district. The 150 attendees at the inaugural Societat der Bergbaukunde (Society of Mining Professors) in 1786 included the inventor of the modern steam engine, James Watt, the celebrated German poet Johann Wolfgang von Goethe (who was in charge of the mines of the Duchy of Weimar), the discoverer of titanium, Professor Martin Klaproth, and one of the discoverers of oxygen, Antoine-Laurent de Lavoisier.

This meeting was held in the middle of the industrial revolution — the transition to new manufacturing processes that occurred in the period from about 1760 to circa 1830. These industrial changes were led by Britain, which was well endowed with coal, iron and base metals.

Britain was also a leader in the technical reporting of the industrial revolution, and this was particularly true for mining. In 1829, the first of a series of quarterly mining reports was published by Henry English. Then, on August 29, 1835, English launched the weekly Mining Journal and Commercial Gazette, which has remained in continuous publication (albeit without the Commercial Gazette handle for some years).

The birth of the publication more or less coincided with the start of modern mining. A large number of important inventions were introduced in the 1830s with the growing commercial use of steam power.

In 1910, writing in the 75th anniversary issue of Mining Journal, Edward Baliol Scott (who was nine years into a 53-year tenure as editor) warned against treating mining as other investments, saying, “The investor suffers by reason of two conditions natural to it. In the first place it is speculative; in the second its duration, though uncertain, is certainly limited.”

Baliol Scott also wrote about the growth of big business: “Capital is now so plentiful and well organised, and so alive to the profits that are to be realised” that “even if important discoveries are made by independent prospectors, they are certain to give place to the wealthy corporation.”

All this comes to mind because a doyen of the mining industry, and the owner of Mining Journal Ltd from 1965 to 1990, died on Monday, August 22. The Reverend Michael John West (he was surely one of the few modern mining engineers to be ordained into the Church of England) was almost certainly the most highly regarded mining publisher of the second half of the 20th century, being instrumental in restoring Mining Journal to strength in the 1970s and 1980s.

West wrote about the Schemnitz meeting in the 150th anniversary issue of Mining Journal in 1985. In that comment 31 years ago, West noted the “incredible” advances in technology, and that “telex is now a universal facility.”

A Royal School of Mines graduate, Michael worked on the Zambian Copperbelt before joining Mining Journal Ltd in 1960. In 1962 he was involved in the acquisition of the monthly Mining Magazine, and took ownership of the enlarged company three years later. During his 25 years in control, Michael published numerous books, and was the company’s CEO when it launched International Gold Mining Newsletter, World Tunnelling , Mining Environmental Management, Geodrilling International and the improbably titled No-Dig International.  He was also primarily responsible for the move to mailing Mining Journal around the world by air – an absolute necessity in this day and age

During his tenure, Michael led many campaigns to improve the responsibility of the industry to stakeholders (not that they were called that back then). He was also a leading member of the Institution of Mining and Metallurgy (now part of the Institute of Materials, Minerals & Mining), including a period as its president (1982-83). So that he could devote more time to the church, Michael passed over control of Mining Journal Ltd in 1990 but remained as chairman until the company was acquired by venture capitalists in 2004 (and two years later by Aspermont Ltd).

In 1837, English, the first editor of Mining Journal, had expressed the publication’s intentions of “zealously performing our duty,” relying on subscribers for “succour and support, and on their assistance in rendering Mining Journal more generally useful.”

Mining Magazine had been launched in September 1909 by the best known American mining engineer of the time, Herbert Hoover, as a competitor to Mining Journal. In the first issue, its editor, Thomas Rickard, wrote, “The purpose of this periodical is to be useful to those engaged in mining. To be useful, a publication must be interesting, and to be interesting it must be truthful.”

As the successor to both English and Rickard, West delivered on both mens’ promises, and cemented the relationship between industry and readership to a remarkable degree. Much of this achievement was highlighted in Arthur Wilson’s book, The Pick and the Pen, published by Mining Journal Ltd. in 1979.

The first issue of Mining Journal, on August 29, 1835, included a reference to sighting of Halley’s Comet, which returns only every 75 years. Like the famous comet, it will be a long time before we see another mining engineer of the calibre of Michael West.

[Chris Hinde worked with Mike West at Mining Journal Ltd for over 20 years.]

There is to be be a private cremation.  A Thanksgiving Service is to be held at St. Mary’s Church in Horsham, with which Mike was closely associated, on Wednesday September 7th at 2 pm.