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. 

Gold exchanges battling it out for leadership

Gold TodayGold closed in New York at $1,337.90 on Thursday after Wednesday’s close at $1,346.70.  London opened at $1,337.

    • The $: € was slightly weaker at $1.1156 from $1.1144.
    • The dollar index rose slightly to 95.83 from 95.82 Thursday.
    • The Yen was slightly stronger at 101.04 from Thursday’s 101.28 against the dollar.
    • The Yuan was weaker at 6.6440 from 6.6406 Thursday.
    • The Pound Sterling was slightly weaker at $1.2956 down from Wednesday’s $1.2958.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  12

2016  08  11

SHAU

SHAU

286.86

287.34

286.95

287.36

Dollar equivalent @ $1: 6.6440

$1: 6.6406

$1,342.92

$1,345.85

$1,343.34

$1,345.95

Shanghai took the gold price closing in New York higher more in line with the higher Shanghai price the day before. London then ignored Shanghai prices and opened at New York’s close. At the moment we are seeing a small battle between the developed world centers and Shanghai the physical market.  This battle can be resolved provided the arbitrageurs in the market do their job. They can’t move gold but can adjust their positions with currency plays.

We will be discussing the state of the gold market in China in particular the Commercial Bank gold market there, in our coming newsletters.

We are rapidly approaching the days when the Yuan becomes an integral part of the I.M.F.’ Special Drawing Rights. What will this unleash? Because the I.M.F. will not be able to dismiss it from this role thereafter, we do see more flexibility in the exchange rates of the Yuan. It is logical then that the People’s Bank of China then allow markets to establish the market exchange rate. We see that as continuing to fall to 7.00 to the dollar. No doubt this will produce howls of outrage from the U.S. if it happens brutally. But we suspect the PBoC. will make their adjustments behind the scenes so it happens gently.

What it does do for the Yuan is to establish it as one of the world’s main ‘hard’ currencies. The PBoC will then expand their program of Yuan globalization.

LBMA price setting:  $1,336.70 after Thursday 12th August’s $1,344.55.

The gold price in the euro was set at €1,198.40 down €7.80 from Thursday’s €1,206.20.

Ahead of the opening in New York the gold price stood at $1,338.85 and in the euro at €1,200.76 but some weak U.S. economic data saw the gold price move subsequently to over $1,350 again.  

Silver Today –The silver price closed in New York at $19.95 on Thursday down from $20.17 on Wednesday.  Ahead of New York’s opening the price was trading at $19.87. Following gold’s rise after the poor economic data, silver regained the $20.10 level

Price Drivers

Over the last day we have seen COMEX dominate London prices, ignoring those of Shanghai. The day before, saw Shanghai taking prices higher than New York and London following Shanghai. While the price differences are not that large and are influenced by exchange rates between the Yuan and the dollar, there is an ongoing pricing play between the two markets. With the Shanghai Gold Exchange/PBoC. Being the last resort counterparty we believe it does dominate prices. However, its prime objective in the exercise is not only to build a stable, orderly physical gold market and to have its prices dominate the world’s gold markets, it is to assist in the establishment of the Yuan as a leading ‘gold’ currency.

This is the way forward for the gold price. It makes little sense to have the world’s largest physical gold markets with 10,000 institutional participants and 8.3 million individuals so far bow to a mini-physical paper market in New York.

The most positive news today for gold and silver is the rapid approach of the “Gold Season” in September.

  • At this point the summer holidays for the developed world are coming to an end and the focus in the gold market is for jewelry producers to buy for the festive season at the end of the year.
  • In India, after falling to the lowest in seven years in the first half, demand for gold is certain to rise because of the excellent monsoon rains achieved this year since May continuing into September. This will boost rural demand during the festive season, starting in September.
  • In China, the expectation of a lower Yuan is broadcast in the Chinese media, encouraging growing demand in line with internal trends we mentioned in earlier newsletters from the Gold Forecaster.
  • In the last quarter of the year we expect U.S. demand for physical gold from investors in the shares of their Exchange Traded Funds to continue steadily.

     So far in 2016 investment demand for gold has overtaken the previous-ever high of 917 tonnes in 2009 [First half]  to reach 1,064 tonnes.

Gold ETFs – In New York on Wednesday there were no sales or purchases to or from the SPDR gold ETF (GLD) or the Gold Trust (IAU). This left their respective holdings at 972.618 tonnes and 221.24 tonnes.

Silver –Silver prices jumped back to over $20 after falling back this morning and will hold and move strongly when we see the strong move, either way, which we now expect from gold prices.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]

Could we see strong gold demand continue in H2?

Gold TodayGold closed in New York at $1,346.70 on Wednesday after Tuesday’s close at $1,340.60.  London opened at $1,346.

    • The $: € was barely changed at $1.1144 from $1.1146.
    • The dollar index fell to 95.82 from 95.82 Wednesday.
    • The Yen was stronger at 101.28 from Wednesday’s 101.84 against the dollar.
    • The Yuan was stronger at 6.6406 from 6.64 Wednesday.

 

  • The Pound Sterling was weaker at $1.2958 up from Wednesday’s $1.3050.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  11

2016  08  10

SHAU

SHAU

287.34

288.63

287.36

289.47

Dollar equivalent @ $1: 6.6406

$1: 6.6400

$1,345.85

$1,352.02

$1,345.95

$1,355.95

All three chief global gold markets were in line in the last day. Looking at the Technical picture, we see that the gold price is showing a ‘quiet before the storm’.

The gold and silver markets are no place for the cautious now. Even a small bit of gold related news will trigger a strong move. Question is, “Which Way will it go”.

LBMA price setting:  $1,344.55 after Wednesday 10th August’s $1,351.85.

The gold price in the euro was set at €1,206.20 down €3.79 from Wednesday’s €1,209.98.

Ahead of the opening in New York the gold price stood at $1,345.45 and in the euro at €1,206.47.  

Silver Today –The silver price closed in New York at $20.17 on Wednesday up from $19.85 on Tuesday.  Ahead of New York’s opening the price was trading at $20.16.

Price Drivers

The most positive news today for gold and silver is the rapid approach of the “Gold Season” in September.

  • At this point the summer holidays for the developed world are coming to an end and the focus in the gold market is for jewelry producers to buy for the festive season at the end of the year.
  • In India, after falling to the lowest in seven years in the first half, demand for gold is certain to rise because of the excellent monsoon rains achieved this year since May continuing into September. This will boost rural demand during the festive season, starting in September.
  • In China, the expectation of a lower Yuan is broadcast in the Chinese media, encouraging growing demand in line with internal trends we mentioned in earlier newsletters from the Gold Forecaster.
  • In the last quarter of the year we expect U.S. demand for physical gold from investors in the shares of their Exchange Traded Funds to continue steadily.

     So far in 2016 investment demand for gold has overtaken the previous-ever high of 917 tonnes in 2009 [First half]  to reach 1,064 tonnes.

Gold ETFs – In New York on Wednesday there were no sales or purchases to or from the SPDR gold ETF (GLD) or the Gold Trust (IAU). This left their respective holdings at 972.618 tonnes and 221.24 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen by 396.243 tonnes.

Silver –Silver prices jumped back to over $20 in the last day and will hold and move strongly when we see the strong move, either way, which we now expect from gold prices.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]

WGC Report Shows H1 Gold Demand Highest On Record

The latest Gold Demand Trends report from the World Gold Council (WGC) is now out with data supplied by London-based precious metals research consultancy, Metals Focus.  It shows the highest level of H1 gold demand on record, largely on the back of investment demand – particularly in gold ETFs which absorbed 580 tonnes in the first half of the year.  Overall this countered a fall in net central bank gold sales, and falling consumer demand in the world’s two biggest countries for this in India and China.

While demand was high – so was supply with a resurgence in scrap supply brought on by the 25% rise in the US dollar gold price over the half year – which was enhanced in some countries by falling domestic currency parities against the dollar.

The World Gold Council’s summary press release detailing some of the highlights of the latest report is reproduced below, complete with a link to download the full report.

Near record high in H1 demand driven by western investors

Global gold demand reached 2,335 tonnes (t) in the first half of 2016 with investment reaching record H1 levels, 16% higher than the previous record in H1 2009, according to the World Gold Council’s latest Gold Demand Trends report.

Q2 2016 continued in the same vein as the first quarter this year with overall gold demand growing to 1,050t, up 15% from the Q2 2015 figure of 910t, boosted by considerable and consistent investment demand. Investment demand reached 448t as investors sought risk diversification and a safe store of value in the face of continued political, economic and social instability. Exchange traded funds (ETFs) had a stellar first half of the year at almost 580t due to the additional inflows in Q2 of 237t. Bar and coin demand was also up in a number of markets in Q2, including the US at 25t (up 101%), leading to H1 bar and coin investment of 485t, 4% higher than the first half last year.

A cause and effect of the growth in investment demand was a 25% rise in the US$ gold price, the strongest H1 price gain since 1980. This contributed to lacklustre consumer purchasing, particularly in price sensitive markets. While there were increases for jewellery demand in the US (up 1%) and Iran (up 10%), the customary powerhouses of China and India saw drops in Q2 of 15% to 144t and 20% to 98t respectively. India was further impacted by rural incomes remaining under pressure, as well as the government’s decision to increase excise duty. Meanwhile, China faced a challenging quarter against a relatively soft economic backdrop and the implementation of new hallmarking legislation in May.

Central bank demand decreased 40% in Q2 2016 (77t), compared to 127t in the same period last year, resulting in net purchases for H1 now totalling 185t. While this quarter was the lowest level of net purchases since Q2 2011, it comes amid a significant rise in gold prices over H1, dramatically increasing the value of central bank gold holdings to US$1.4trn. Central banks are still expected to be key contributors to global demand, as gold provides diversification from currency reserves and, most notably, the dollar.

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

“The strength of this quarter’s demand means that the first half of 2016 has been the second highest for gold on record, weighing in at 2,335t. The global picture for gold is dominated by considerable and continued investment demand driven by the West as investors rebalance their investments in response to the ever-expanding pool of negative yielding government bonds and heightened political and economic uncertainty.

The foundations for this demand are strong and diverse, drawing on a broad spectrum of investors accessing gold via a range of products, with gold-backed ETFs and bars and coins performing particularly strongly. But the global gold market is, and has always been, based on balance: so whilst investment is currently the largest component of demand, we see a gradual return for the jewellery market in the second half of 2016.”

Total supply for Q2 2016 saw an increase of 10% to 1,145t compared to 1,042t in the second quarter of 2015. The primary driver of this increase was recycling, which saw a significant rise  of 23%, as consumers capitalised on the rising gold price, leading to first half recycled gold supply of 687t, 10% higher than the 626t seen in H1 2015. Mine production remained broadly flat at 787t (790t in Q2 2015), while gold producers added 30t to the hedgebook.

The key findings included in the Gold Demand Trends Q2 2016 report are as follows:

  • Overall demand for Q2 2016 increased by 15% to 1,050t, up from 910t in Q2 2015.
  • Total consumer demand was 656t down 9% compared to 723t in Q2 2015.
  • Global investment demand was 448t, up 141% from 186t in the same period last year.
  • Global jewellery demand fell 14% to 444t versus 514t in the second quarter of 2015.
  • Central bank demand fell 40% to 77t in Q2 2016, compared to 127t in the same period last year.
  • Demand in the technology sector fell 3% to 81t in Q2 2016.
  • Total supply was up 10% to 1,145t in Q2 2016, from 1,042t in Q2 2015. Mine production in Q2 2016 was virtually flat year-on-year at 787t.

The Q2 2016 Gold Demand Trends report, which includes comprehensive data provided by Metals Focus, can be viewed at http://www.gold.org/supply-and-demand/gold-demand-trends and on our iOS and Android apps. Gold Demand Trends data can also be explored using our interactive charting tool http://www.gold.org/supply-and-demand/interactive-gold-market-charting.

Gold and gold stocks shine for Australia

The big annual Diggers and Dealers event is now under way in Kalgoorlie, W. Australia – probably the country’s most important annual mining sector conference – and, given its location in the heart of Australia’s principal gold belt, the event tends to have something of a concentration on the gold and gold mining sector.

One of the country’s premier consultancies specialising in analysis and statistical information gathering for the Australian gold sector is Surbiton Associates out of the Melbourne area, so what Surbiton Director, Dr Sandra Close had to say in Kalgoorlie gave a great insight into the huge success of the Australian gold sector, and the resource sector in general, over the past year or so, helped substantially by the decline in value of the Australian dollar against its US counterpart (in which gold revenues are received) and which has seen the gold price trading at or near all-time highs in Australian dollar terms.  Some of Dr. Close’s comments are set out below:

The Australian gold sector has certainly proved to be the outstanding performer in the local resources industry in the first half of 2016, Melbourne based specialist mining consultants Surbiton Associates said at the Diggers & Dealers Forum in Kalgoorlie today.

Gold output for 2015 totalled 285 tonnes or 9.2 million ounces which was worth over A$14 billion at the average spot price for the whole year of some A$1,540 per ounce, but since the start of the current year the Australian dollar gold price has risen further.

“The average spot price for the first half of 2016 was A$1,665 per ounce, 8 per cent higher than last year’s average price,” said Dr Sandra Close, a director of Surbiton Associates. “So far this year the gold price has generally trended upwards and is now nearing A$1,800 per ounce. With producers still keeping a tight rein on costs, such prices are providing a real boost.”

As world markets experienced uncertainty due to the Brexit vote, the Australian dollar gold price peaked briefly to an all-time record high of over A$1,850 per ounce on 24 June, due to a rise in the US dollar gold price combined with a weaker Australian dollar.

“Lately we have seen more producers locking in attractive prices and ensuring some excellent margins, by taking advantage of peaks in the local price and hedging part of their output,” Dr Close said. “Output is remaining strong for the moment too, as producers ‘make hay while the sun shines,’ reduce their debt and pay some dividends.”

However, she said that if the price remains high producers may well begin to treat slightly lower grade material, to prolong the life of their operations and better utilise their resource, while still maintaining reasonable margins.

“Gold shares have once again caught the market’s attention,” Dr Close said. “Prices of some of the ASX listed producers have risen substantially, as gold has come back into favour, by virtue of higher gold prices plus gold’s traditional role as a store of wealth in uncertain times.”

She said that since the beginning of 2016, Saracen’s share price has almost tripled; the share prices of St Barbara and Evolution have more than doubled; and Newcrest’s share price has almost doubled.

Dr Close said that while the gold sector is travelling better than most at the moment, the local minerals and energy industries are still well and truly in business too, despite what many people think, and resources remain by far Australia’s greatest export earner – vital to our well-being.

“The latest government figures available show that for the 2014/15 financial year resources and energy exports, at A$172 billion, were just over four times greater than total agricultural exports of A$42 billion,” Dr Close said. “It’s a long time since we rode on  the sheep’s back – these days we well and truly ride on the back of giant yellow trucks and in big bulk carriers.”

She said that on an annual basis the value of iron ore exports alone, at around some A$50 billion, was greater than the total of all agricultural exports, while the values of the next four largest single exports – coking coal, LNG, thermal coal and gold – were between A$15 billion and A$20 billion for each commodity.

“The resources industry has undergone many changes in the 25 years since the first Diggers and Dealers Forum,” Dr Close said. “I sometimes wonder how many Australians really appreciate the huge expansion the minerals and energy sectors have undergone in that time and how much they have contributed to our economy and our standard of living. Where would we be without them?”

You can learn more about Surbiton Associates at www.surbiton.com.au