Monday, December 31, 2012

Gold Market Report 31 December

Gold Records 5.7% Annual Gain, Still No Deal on Fiscal Cliff

WHOLESALE gold bullion prices touched their highest level since Christmas at $1669 an ounce during Monday morning's London session, before easing slightly towards lunchtime to record a 5.7% gain for 2012 at the final gold fix of the year.

Silver failed to hold gains from Asian trading, falling back towards $30 an ounce.

Major European stock markets ticked lower this morning following news that no deal has been done in Washington to avoid the so-called fiscal cliff. An exception was France's CAC 40 Index, which rose following news of a setback to the French government's plans to raise taxes on the wealthy.

Oil prices edged lower meantime, falling for the third day in a row, amid concerns the US economy is about to see automatic tax rises and cuts in government spending which could threaten a new recession.

"[The Republicans] say that their biggest priority is making sure that we deal with the deficit in a serious way," President Obama told Sunday's edition of NBC's Meet the Press.

"But the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected."

"Americans elected President Obama to lead, not cast blame," countered John Boehner, Republican speaker of the House of Representatives.

"The president's comments are ironic, as a recurring theme of our negotiations was his unwillingness to agree to anything that would require him to stand up to his own party."

If the two sides fail to agree a deal by tomorrow on how to tackle the budget deficit, automatic tax rises and spending cuts worth around $600 billion will come into effect.

"Some investors are looking through this in the hope that politicians can find a middle ground that will allow the increasing momentum in the economy not to be impeded," says Tim Schroeders, who helps manage $1 billion at Pengana Capital in Melbourne.

"It's disappointing that politics has got in the way to such an extent, with investors becoming increasingly nervous that this will drag on into the new year."

"Gold and silver will...find near-term support amid ebbing haven demand for the US Dollar," says a note from analysts at Swiss refiner MKS.

"But one should be cautious when an agreement is reached," they add, noting that this could be followed by "a sharp downtick".

Over in Europe, the French government will press ahead with plans to introduce a 75% tax rate for the wealthy, the country's finance minister has said, despite France's constitutional council ruling against the measures on Saturday.

"We are in a period of crisis...it is logical that the wealthiest should make a contribution at this time," Pierre Moscovici told the Financial Times, adding that the council's ruling was technical rather than fundamental.

Manufacturing growth in China meantime accelerated in December, according to HSBC's purchasing manager's index, which hit its highest level since April 2011 this month (a figure above 50 indicates increased sector activity during the month).

The final London gold fix of 2012 on Monday morning was $1664 an ounce – an annual gain of 5.7%.

Gold in Euros traded at €1261.56 an ounce at the time of the fix – up 3.7% on the year – while gold in Sterling ended the year up 0.9% at £1029.32 an ounce.

Ben Traynor

Iron ore, steel prices to fall in 2013 - Cochilco

Iron ore prices will fall to an average of US$120/t in 2013 before rising again to US$125/t in 2014, according to a study by Chile's state copper comission Cochilco.

The commission is estimating an average price of US$125/t for this year.

The price of iron ore fell 10% in 2012 due to a series of factors that resulted in a market surplus.

These include the larger than expected slowdown in the Chinese economy, the financial crisis in Europe that reduced demand for products and an increase in output as projects entered into production.

Next year will not be very different and the global surplus will continue into 2014, according to Cochilco.

Demand from China will also remain subdued, rising just 2% in 2013.

In the last five years, China has increased its consumption of iron ore from a 56.5% share in 2008 to 68.8% in October 2012, according to the report.

In 2011 global iron ore production was 2.93Bt, up 4.7% over the previous year. Output is expected to increase in 2012 by 3.5%.

STEEL

HRC steel prices registered a fall of 14% in 2012 and the commission is forecasting an average price of US$651/t for the year.

China is the main consumer absorbing 44% and therefore the slowdown in the Asian country affected demand and consequently prices during the year.

The steel market will continue to be in surplus in 2013, although smaller than in 2012. The market is expected to enter into balance in 2014, according to the report.

Cochilco is forecasting a price of US$693/t for HRC steel to the Asian market in 2013 rising to US$716/t in 2014.

Despite the slowdown in demand from China and India, Cochilco believes that steel consumption in these countries will continue to grow in 2012-14, but at a slower pace than in the past.

Crude steel production in 2011 was 1.49Bt, up 6.2% from 2010. In 2012, production is expected to increase 2.9% to 1.54Bt.

Sunday, December 30, 2012

India’s ultra rich: younger, richer and buying gold

India has one of the fastest growing high net worth segments in the world and its members like to have gold in the kitty

Author: Shivom Seth

India’s community of high net worth individuals is growing fast and, for them, the most favoured form of investment is gold.

The HNI population in India rose by around 20.86% in 2010, and their wealth is estimated to have grown by more than 11%, to $530 billion. India is one of the fastest growing HNI segments in the world, currently contributing approximately 1.2% to the global HNI wealth.

“The number and wealth of the ultra HNIs has leapfrogged in the last decade. With an estimate that in the next five years, there would be about 219,000 such households, up from the current 62,000 households, their net worth is also expected to grow five times,'' says Rupesh Nagoria, product head at broking firm, Alchemist House.

And, importantly, while their assets are growing the members of this class are also getting younger.

The average age of Indian high networth individuals (HNIs) has fallen to the mid-40s from the early 50s in just five years. Though precious metals still holds the roost, Indian HNIs are experimenting with a gamut of investments, from fixed income instruments, commodities to art and private equity firms.

But, with equities in India looking overvalued, wealth managers are setting their eyes on the yellow metal.

“We have been advising clients to invest in gold since the last one year. The interest has tremendously shot up during the last few days, with the festive season coupled with the marriage season. The allocations have certainly gone up from less than 1% to 5% of our clients’ portfolio,'' says Manish Dange, bullion advisor at investment firm, Wealth Management.

Manish Bhatia of Religare Macquarie Private Wealth said that around five years ago, people did look at art or films funds as an alternative investment option. ``It turned out to be too exotic for most. Not many are looking at these as investment options now, and have moved to less riskier options like gold,'' he adds.

Adding that Indian gold prices are highly correlated with international prices, he said the fluctuations in the Rupee-US Dollar impact domestic gold prices and have to be closely followed by most HNI investors.

Investment in gold is expected to continue to be the largest and preferred investment class, at least in the next couple of years.

According to Nagoria, most investors typically look at protecting their wealth and making real returns. ``They tend to take a higher risk in their business and want their investment portfolio to be comprised of safer assets. They also like to maintain close control over their assets, and gold affords them that ease,'' he said.

Investment bankers added that though a wide range of better regulated investment options have made their way into the financial marketplace over the last decade, the sheer complexity of these options, in terms of inherent risks, benefits and objectives, has got the average investor more confused than ever.

At such a time, most HNIs prefer to invest in gold and leave the headache to someone else, added Nagoria. Most analysts are positive on the precious metal for two reasons: the dollar depreciation and the sword of inflation in India.

``Gold is an asset class which can give one easily more than 10% stable returns annually. We advise our HNIs to go for gold or even gold ETFs for ease of saving,'' said Bhatia.

Investors, specifically those in the ultra HNI category, invest significantly in gold. ``They do not consider buying jewellery for investments. Instead, they prefer investing in the form of ETFs and bars. Most brokers tend to recommend ETFs to their HNI clients, as there is a problem of storage with bars. Gold bars cannot be sold in the open market in India and in most cases, the seller himself will not buy it back,'' said Shailesh Manthan, bullion retailer.

With the country's savings rate expected to stabilise at 35% levels going forward owing to high economic growth, HNI investors are expected to continue to show robust interest in gold as an asset class.

Source: Mineweb

Friday, December 28, 2012

Gold Market Report 28 December

"Gold Market Overhang" Poses Risk of Another Price Fall, Fiscal Cliff "Will See Minimal Last Minute Deal"

THE SPOT MARKET gold price fell back to $1660 an ounce Friday morning, close to where it started the week, as stock markets also edged lower, ahead of talks in Washington aimed at avoiding the $600 billion "fiscal cliff" of spending cuts and tax rises due within days.

Gold will break its four-week losing streak today if the spot price ends the week above $1657 an ounce, while spot silver needs to close above $30.03 an ounce to do likewise.

"The weight of the [gold] market still overhangs with resistance seen at $1673, the November low, and $1685, the December support," says the latest technical analysis from bullion bank Scotiabank.

"While the market holds below $1685 the technical risk remains for another leg lower."

"There's some buying but you don't see heavy activity," one physical gold bullion dealer told newswire Reuters this morning.

Silver meantime eased back towards the $30 an ounce mark, while other commodity prices were little changed.

On the currency markets, the Euro fell against the Dollar Friday morning, dropping 0.6% in two hours, with traders blaming thin volumes and stop loss selling.

President Obama is due to hold talks with congressional leaders later today, as part of ongoing negotiations on how best to tackle the US federal deficit. The US economy is due to hit the so-called fiscal cliff next week unless Congress agrees to halt planned spending cuts and extend tax cuts from the Bush administration.

Democrats have proposed maintaining the Bush tax cuts for anyone earning $250,000 a year or less, while Obama has indicated he would consider raising that threshold to $400,000. 

Republican House of Representatives speaker John Boehner meantime has said he would consider allowing the cuts to expire for anyone earning more than $1 million a year, after previously expressing outright opposition to a rise in taxes. Boehner included this proposal in his so-called 'Plan B' last week, but failed to garner enough support from fellow Republicans for it to be put to a House vote.

"The way to avoid the fiscal cliff has been right in the face of Republican leaders for days and days and days," Senate majority leader Harry Reid, a Democrat, told the Senate Thursday, adding that Boehner's unwillingness to agree a deal is motivated by concerns about being re-elected speaker of the Republican-controlled House next week.

"I say to the speaker, take the escape hatch that we've left you. Put the economic fate of the nation ahead of your own fate as Speaker of the House."

"Republicans aren't about to write a blank check for anything Senate Democrats put forward just because we find ourselves at the edge of the cliff," countered Republican Senate minority leader Mitch McConnell.

"That having been said, we'll see what the president has to propose."

"Time is running out for the long-awaited solution in fiscal-cliff negotiations," says Kai Fachinger, portfolio manager at Sustainable Asset Management in Zurich. 

"As the positions of the two parties are just too far off, it's likely to happen in the very last second."

"[We expect a] deal to happen at the last minute," agrees Dominic Schnider at UBS Wealth Management.

"But it will be a minimal deal...I think that should be gold supportive."

Vietnam's central bank meantime will play the role of market maker in the gold market next year in a bid to control the domestic gold price, Vietnamica reports, citing comments from State Bank of Vietnam governor Nguyen Van Binh.

Earlier this year the SBV claimed the exclusive right to manufacture gold bars in Vietnam.

Ben Traynor

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Iron ore up most since 2010 on China hopes

The steel making ingredient is rallying the most in around two years on expectations that China will import a record amount of iron ore in 2013

Author: Phoebe Sideman and Isaac Arnsdorf

Iron ore is rallying the most in about two years as analysts predict that China, the biggest buyer, will import a record amount in 2013 as its accelerating economic growth spurs demand for steel.

Trade to China will climb 6.9 percent to 778 million metric tons in 2013, or 65 percent of all shipments, according to the median of 10 analyst estimates compiled by Bloomberg. Seaborne demand will exceed supply for at least a 10th year, Morgan Stanley data show. Prices will climb as much as 22 percent to $170 a ton by June, according to Justin Smirk of Westpac Banking Corp., who correctly predicted this year’s slump and was the most accurate industrial-metals forecaster tracked by Bloomberg.

Prices tumbled to a three-year low in September as China slowed for seven consecutive quarters, before rallying 56 percent since then on mounting confidence the nation’s growth will accelerate for at least the next six months. The rebound will boost earnings for suppliers and Vale SA, the biggest exporter, is expected to report a 19 percent increase in profit next year, analyst estimates compiled by Bloomberg show.

“We’re confident to stay bullish for now,” said Smirk, the economist at Westpac in Sydney who beat as many as 25 others in predicting metals prices for two consecutive quarters on a rolling two-year basis. “We’re seeing the recovery come through in China. They’ve made a switch to their policy adjustments from being contractionary to be more stimulatory.”

London Dry

Ore at China’s Tianjin port, a global benchmark, was last at $139.40, for an annual gain of 0.6 percent and a fourth- quarter average of $119.88. The Standard & Poor’s GSCI gauge of 24 raw materials gained 0.2 percent and the MSCI All-Country World Index of equities rose 13 percent. Treasuries returned 2 percent, a Bank of America Corp. index shows.

The Tianjin price will average $119 in the first quarter and $122 in the following three months, the medians of 14 analysts’ estimates shows. Investors can trade swaps handled by brokers including SSY Futures Ltd., London Dry Bulk Ltd., GFI Group Inc., Clarkson Plc and Freight Investor Services Ltd. The derivatives market may total as much as 150 million tons this year, from 53 million tons in 2011, The Steel Index Ltd., which publishes the Tianjin price, said last month.

Seaborne trade will climb 6 percent to 1.18 billion tons next year, the same pace as in 2012, says London-based Clarkson, the world’s biggest shipbroker. Morgan Stanley estimates that seaborne demand will exceed supply by 28 million tons next year, extending a run of deficits going back to at least 2004. Global steel output expanded about 50 percent since then, according to MEPS (International) Ltd., an industry consultant.

Lowest Level

Steel production in China, equal to 47 percent of world output in the first 11 months, will expand another 6 percent in 2013, Credit Suisse Group AG estimates. Ore inventories at Chinese ports dropped 19 percent since the end of October to 71.32 million tons, the lowest level in more than two years, according to Beijing Antaike Information Development Co., a state-backed research company. That may spur imports as steel plants restock, says UBS AG.

China’s manufacturing may expand at a faster pace in December, according to a preliminary reading on Dec. 14 by HSBC Holdings Plc and Markit Economics, adding to signs the economy is strengthening as a new leadership takes power. The government has approved projects for the construction of about 2,000 kilometers (1,250 miles) of roads, subways in 18 cities and extra spending on railways.

Steel Association

While China is rebounding, the 17-nation euro area and Japan have slipped back into recessions. They represent a combined 16 percent of global steel output, according to the Brussels-based World Steel Association. Steel production in the 27-nation European Union retreated 5.3 percent in November from a year earlier and in Japan fell 2.3 percent, the WSA estimates.

Demand also may weaken in the U.S., the third-largest steelmaker, should lawmakers fail to reach an agreement on more than $600 billion of tax increases and spending cuts that start automatically next month. The Congressional Budget Office says the lack of an accord risks sending the world’s biggest economy back into a recession. President Barack Obama is due back in Washington from vacation today, according to a White House aide, as Congress returns to continue talks on a budget agreement.

Current ore prices are more than double the average cost of production in Australia and Brazil, the two biggest exporters, and above the $100 that Chinese mining companies pay to extract every ton, according to estimates from Credit Suisse and Australia & New Zealand Banking Group Ltd. That may spur Chinese miners to raise supply, diminishing demand for imports.

Capacity Glut

Rising prices and seaborne trade won’t be enough to return ship owners to profit because of a glut of capacity. Rates for Capesizes, which carry more iron ore than any other class of vessel, slumped 82 percent this year, according to the Baltic Exchange in London, which publishes prices for 61 maritime routes. Earnings will average $12,250 a day in 2013, below the $15,500 that Pareto Securities AS says they need to break even, the mean of nine analyst estimates shows.

Chinese steel production rose 14 percent to 57.47 million tons in November from a year earlier, while the price of reinforcement bars used in construction climbed about 11 percent this month to the highest level since July on the Shanghai Futures Exchange. Ore imports were the second-highest ever in November at 65.78 million tons, customs data show.

Shares of Rio de Janeiro-based Vale rose 8.3 percent this year to 40.97 reais and will gain 20 percent to 49.02 reais in the next 12 months, according to the average of 12 analyst estimates. Net income will climb to 28.92 billion reais ($13.9 billion) next year, from 23.92 billion reais in 2012, the mean of seven analyst predictions shows.

Ore Exports

Profit at Rio Tinto Group, the second-largest exporter, will rise to $10.85 billion from $10.07 billion, according to the mean of 20 analyst estimates. Shares of the London-based company jumped 14 percent to 3,574 pence this year and will reach 3,868 in 12 months, the forecasts show.

Brazil’s ore exports fell 0.9 percent to 294.3 million tons in the first 11 months as rain curbed output, government data show. Vale plans to invest the least in three years in 2013 and will cut production to 306 million tons from 312 million tons this year, the company said Dec. 3.

India’s shipments may slump 25 percent to 38 million tons in 2013, Australia’s Bureau of Resources and Energy Economics said Dec. 12. The state of Goa, which exports more than half the country’s ore, banned all mining in September after a panel said the province lost money because of illegal work.

China’s miners may struggle to make up for any shortage in seaborne supply because they produce ore that contains about 20 percent iron, compared with 62 percent internationally, according to HSBC estimates and data compiled by Bloomberg Industries. Domestic ore output dropped 3.4 percent in the past two months, National Bureau of Statistics data show.

“It’s not a screaming bull year, it’s just a modestly bullish year,” said Tom Price, a commodities analyst at UBS in Sydney. “The next six months will be fairly active and positive for iron ore trade.”

Source:Mineweb

Antofagasta suspends its Chilean Antucoya copper mine

Chilean miner Antofagasta has halted development at its $1.7-billion copper mine Antucoya, as it reviews escalating costs of the project.

Antucoya, which was forecast to produce 80 000 t of copper cathodes a year, is one of the most capital intensive projects in the industry.

The cost of the mine was estimated at $1.7-billion by the time construction work was due to finish in 2014. The cost per ton of yearly production would have been over $21 000, analysts previously estimated.

"We remain concerned about the level of capital and operating costs in the industry," said Diego Hernandez, Antofagasta's CE, in a statement on Friday.

Antofagasta shares are listed in London and the statement came out after the market had closed.

"We believe Antucoya's decision to temporarily suspend and review the project reflects an appropriate and measured approach to addressing these concerns," added Hernandez, who took the helm at Antofagasta earlier this year.

Antofagasta approved the project last year, selling a 30% stake to Japanese trading house Marubeni to help shoulder the burden of the costs.

Decisions on the suspension and review were made by the Antucoya council, with representatives from both companies.

Chile, which produces roughly a third of the world's copper, is struggling with dwindling ore grades in many of its ageing deposits.

Like many of its peers fighting over a limited pool of skilled workers and equipment, Antofagasta is also having to battle the rising cost of building projects from scratch.

Antucoya is the same size and uses the same technology as the company's existing El Tesoro mine, but will cost over $1-billion more to develop just a decade later.

The company said notices of termination for the project's construction contracts were being issued immediately.

Edited by: Creamer Media Reporter

Thursday, December 27, 2012

Gold Market Report 27 December

Precious Metals "Under Pressure" Ahead of Year-End, US "Due to Hit Debt Ceiling This Monday" says Geithner

U.S. DOLLAR gold prices traded above $1650 an ounce Thursday morning, in line with where they started the week, as the London market reopened following Christmas.

Silver meantime hovered either side of $30 an ounce, while stock markets edged higher and the Dollar fell, following news that the US Treasury is to take extraordinary measures to avoid hitting the federal debt ceiling next Monday.

"I am still friendly with the [precious metals] market, but it looks like until the new year starts, it's under pressure," says Yuichi Ikemizu at Standard Bank in Tokyo.

US president Barack Obama has flown back early from Hawaii to resume talks on the so-called fiscal cliff, the $600 million of spending cuts and tax cut expiries due to come into effect from Monday. The House of Representatives remains on vacation.

"The Senate must act first" said a statement issued Wednesday by House speaker John Boehner and senior Republican colleagues.

"The House will then consider whether to accept the bills...or to send them back to the Senate with additional amendments."

Boehner's so-called 'Plan B' for dealing with the federal deficit, which included maintaining tax cuts for anyone earning less than $1 million, failed to reach a House vote last week due to lack of support from members of Boehner's own party.

The US Treasury meantime is to take extraordinary measures to avoid hitting the statutory federal debt limit next Monday, a letter from Treasury secretary Timothy Geinther published yesterday says. 

The measures include a halt to issuing debt for the purposes of assisting state and local governments, and suspending reinvestment of maturing securities into funds for government workers and the Exchange Stabilization Fund, an emergency fund set up for the purpose of exchange rate intervention.

"These extraordinary measures...can create approximately $200 billion in headroom under the debt limit," Geithner's letter says.

"Under normal circumstances, that amount of headroom would last approximately two months.

However, given the significant uncertainty that now exists for unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures."

The measures will "postpone the date that the United States would otherwise default on its legal obligations," the letter adds.

The US Treasury has taken similar measures on a number of occasions over the last two decades, including a series of measures starting in May 2011 that ended when the debt ceiling was last extended. 

The 2011 debt ceiling negotiations lasted until August 2 of that year, the date the Treasury had said the US would hit the ceiling. Ratings agency Standard & Poor's stripped the US of its triple-A credit rating a few days later.

"Progress on the fiscal cliff will continue to affect market sentiment," Feng Liang, analyst at GF Futures, part of China's third-biggest listed brokerage, told news agency Bloomberg yesterday.

"Gold's one of the few investments with positive returns this year and it's normal to get some [year-end selling]."

The gold price at Thursday morning's London Fix was $1655.25 an ounce, 5.1% up on the final fixing of 2011.

Over in India, gold demand stayed strong Thursday, newswire Reuters reports.

"Retail demand is still weak, but jewelers are restocking for Pongal festival," says Daman Prakash Rathod, director at Chennai wholesaler MNC Bullion, referring to next month's harvest festival in the state of Tamil Nadu.

Ben Traynor

 

BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Wednesday, December 26, 2012

Xstrata ups Papua New Guinea mine cost estimate

Xstrata has raised its capital spending estimate for the undeveloped Frieda River copper mine in Papua New Guinea by $300 million to $5.6 billion, as costs to develop new mines continue to escalate.

Xstrata Copper delivered a feasibility study to minority partner Highlands Pacific (HIG.AX) on Friday that indicated the $5.6 billion capital cost estimate, Paul Gow, general manager of the Frieda River project, said in a statement.

Rising costs have forced many miners to review the spending required on greenfield copper projects as they battle over a limited pool of skilled workers and equipment, particularly in remote locations like Papua New Guinea (PNG).

Antofagasta on Friday halted development at its $1.7 billion Chilean copper mine Antucoya as it reviews escalating costs, and Xstrata put back a target to start production at the Tampakan copper-gold mine in the Philippines by three years to 2019 earlier this month.

Xstrata had estimated the Frieda River project to cost $5.3 billion when it released an earlier study two years ago.

The company, with an 81.8 percent stake in Frieda River, sees the mine yielding 304,000 tonnes of copper at an average cost of 71 U.S. cents per pound over the first five years.

Over the entire life of the operation, it sees an average yield of 204,000 tonnes annually at a cost of $1.11 per pound.

Xstrata is expected to review its pipeline of copper projects after its takeover by Glencore International (GLEN.L).

The company is following the course of other mega miners, including BHP Billiton (BHP.AX) (BLT.L) and Rio Tinto (RIO.AX) (RIO.L), in conserving capital amid uncertainty over global growth and falling commodity prices.

Earlier this year, Xstrata flagged its willingness to potentially sell all or part of its stake in Frieda River after conducting a review of its operations worldwide.

It said on Monday it had not made a decision yet on whether to divest or partially divest the project at this stage.

"Xstrata is currently assessing the interest of other investors in the project but declines to comment about potential timetables," a company spokesman said in an email.

Highlands Pacific said discussions were planned next year to determine future ownership of the project.

"During 2013 we will hold discussions with all parties, including the PNG government to determine the project's development path and the desire of the PNG government to take up a direct 30 percent equity stake in the project," it said.

Via its Petromin investment arm, PNG has invested in 17 projects, including a $19 billion liquefied natural gas field under construction by Exxon Mobil (XOM.N).

It is allowed to take up to 30 percent of mining and 22 percent of oil and gas projects, which it must then help fund.

Exxon Mobil in November said it faces a $3.3 billion spike in costs at its gas project in Papua New Guinea.

This year BHP scrapped an $80 billion spending plan, which included delaying indefinitely the expansion of its Olympic Dam copper mine in Australia, where analysts estimated costs had ballooned three-fold to more than $30 billion in just two years.

Shares in Xstrata were trading 1.1 percent higher at 1,062 pence by 1206 GMT, outperforming a flat FTSE 100 index finance/markets/index?symbol=gb%21ftse">.FTSE

(Reporting by James Regan, Victoria Thieberger and Abhishek Takle; Editing by Himani Sarkar and Mark Potter)

Gold Bull Market to Pause in 2013 – Savant

According to CPM Group’s Rohit Savant, all of the positive fundamental drivers of the metal have already been factored into the price.

Many gold analysts are forecasting much higher gold prices in 2013. In this interview with The Gold Report, Rohit Savant, senior commodity analyst at the CPM Group, says he believes all of the positive gold fundamentals, such as global turmoil, are already factored into the gold price. So, in 2013, he sees the trend being flat to down a bit. He also discusses what roles India, China and central banks play in the gold price.

The Gold Report: Rohit, in a recent interview you said gold is "not a guaranteed safe haven." In your view, what are effective ways to preserve capital?

Rohit Savant: If you're talking about preserving capital, it depends a great extent on your timeframe and your risk appetite.

If you're looking at the short term and want no fluctuations in your principal, the best way to preserve it would be either certificates of deposit or T-bills and hope that inflation doesn't rise significantly.

But if you are looking at the longer term and are willing to take some ups and downs in your capital, a better way of preserving or increasing your capital would be investments in equities, real estate and gold. You could reduce the risk a bit by purchasing dividend-paying equities.

TGR: Do you believe gold is an effective way to preserve capital?

RS: Over the long term, it is. In the short term, you are going to see fluctuations in prices.

TGR: What range do you expect gold to trade in through the first half of 2013?

RS: We expect it to stay more or less in the same range that it did this year, probably between $1,550-1,800/ounce (oz) for the first half of 2013.

TGR: Are you seeing a similar path for silver?

RS: In the case of silver, we have a more bearish view. One reason is that silver prices are going to be negatively affected by increases in supply. Today silver prices are significantly higher than the average cash cost for producing silver. So we expect that a lot of fresh supply will come onstream.

Another reason is expected lower investor interest. Silver tends to be more volatile than gold, so you might see sharper declines in prices with lower investment demand.

TGR: Does that mean you prefer gold to silver right now?

RS: At this point, we definitely see gold as a better investment than silver. We don't expect any significant increases in gold prices, but we don't think that gold prices will decline substantially from where they've been this year.

TGR: Is there a possibility that 2013 will be the first year in the last 12 when the gold price finishes the year lower than when it started?

RS: Yes, it will likely be the first year to end in a lower price in over a decade.

TGR: If you met a goldbug who is unabashedly bullish on the gold price and he challenged your price position on gold, how would you respond to that person?

RS: We face this situation quite often because our view on gold has not been as bullish as a lot of other market participants. Our response to them is that we think a lot of the factors that are being cited as reasons for gold prices going up are already factored into the price of gold.

For instance, there are a lot of problems with the global economy. We're not denying that. We are just saying that these are problems that have been known now for several years and have already been factored into the price of gold. So gold prices won't skyrocket. But on the other hand, the global problems are a reason we think that gold prices will not decline sharply either.

TGR: In early December, we saw commodities including gold and silver sold off in response to concerns regarding America's "fiscal cliff." In your view, what are the three biggest downside risks to gold right now?

RS: The biggest risk to gold would be that investors lose interest. But we don't think that investors will lose interest, central banks will stop buying gold, or there will be a sudden increase in the supply of gold. These could all be potential downside risks. That said, we do not expect that any of these risks will materialize in 2013 or the near future.

The biggest risk for us is not so much that prices would go down, but that they won't rise substantially. We don't see a sharp decline in gold prices going forward. We don't see gold going up much. We see a sideways to potentially slightly lower range, but nothing significant.

TGR: What about the fiscal cliff itself? Is that a concern for the gold price?

RS: When the fiscal cliff debate intensifies as we get closer to the deadline, we may see the gold price rise in response. So the fiscal cliff could be positive for gold prices during December. I think the slight softness that we're seeing in gold prices recently is really the market—investors holding off to see if prices could decline further. Gold could potentially go down to around $1,680/oz and get some support at that level. Then you might see some investors coming back, buying gold in response to the fiscal cliff issue. Once in 2013, whatever the outcome of the fiscal cliff, it would result in softening of economic growth, which would weigh on gold prices during the first half of next year.

TGR: The World Gold Council (WGC) reports that the Indian market is showing signs of recovery in gold demand, up 9% to 223.1 tons from 204.8 tons in the third quarter of 2011. The WGC press release reads, "Indians appear to have acclimatized to recent price trends and have been buying into a rising market." What's behind that change in sentiment and do you believe it's likely to continue in 2013?

RS: The buying of gold for Indians is very deeply engrained in the culture. When a festival is coming up, or if it is marriage season, Indians are going to buy gold. It's highly unlikely that they would refrain from buying gold because of higher gold prices.

TGR: But they have cut back purchases in the past.

RS: The increase in demand in the third quarter, in a rising price environment, may have occurred because of pent-up demand. Demand from the first half of the year had been cut back by various factors.

Indians may buy a smaller amount of gold per person if the price goes up. But they're not likely to stop buying gold just because the price has increased. The demand is going to be there.

TGR: China is another culture where gold is much more prevalent in the lives of people than it is in the West. The Wall Street Journal reported this week that China, for the first time ever, will allow interbank gold trading with Shanghai as a major gold trading center. Do you expect that to have any impact on investment demand?

RS: That is something that would increase investment demand, in that China is trying to open up its markets. It's all part of China liberalizing its financial markets.

TGR: Another report says Deutsche Bank is predicting gold will rise above $2,200/oz in 2013. Part of the reason is that it believes China eventually wants the yuan to challenge the U.S. dollar as the world's reserve currency.

To do that the Chinese Central Bank is going to need to buy more gold in a big way. Right now it's currently ranked sixth in total gold reserves, at least the reported gold reserves. Does that strike you as a credible thesis or is that something that you believe is still a long way off?

RS: I'm not sure that China would want its currency to be used as a reserve currency because that would inherently push up the value, which would in turn hurt the country's exports. I don't believe it's going to happen over the next several years. It will take a number of years for any currency to challenge the U.S. dollar.

I believe the gold that China holds right now is about 1.8% or 2% of the total reserves. As for buying gold, the Chinese Central Bank does not release that information quickly. The last time it bought gold, nothing was said about it until a few years later. It could be buying gold right now and we won't know about it until China discloses that information.

I think that central bank buying is price supportive, but I don't believe that it's something that would push gold prices sharply higher. Central banks have been doing pretty much what we expect private investors to do, which is wait for gold prices to soften before they step in as buyers.

We saw that this year in March when gold prices came down. Central banks added on a net basis 2.3 million ounces (Moz) of gold to their holdings. Central banks followed the same logic again in July, when gold prices were moving sideways at the lower end of the range for 2012, adding 2.95 Moz of gold to their holdings on a net basis. This was the largest net purchase of gold by central banks for 2012.

Bottom line, central banks are not buying gold when prices are going up. Therefore, the impact of central bank gold buying is more likely to be price supportive than price positive.

TGR: At investment conferences across North America, senior gold producers are routinely making presentations about why their companies are better investments than gold exchange-traded funds (ETFs). Much of their arguments are based on the idea that gold ETFs own far less gold than they claim. What's your view?

RS: The gold that ETFs own is publicly disclosed and transparent, so I'm not sure how companies can make that claim. As far as talking up investing in their companies, that's their job—they're supposed to get investors interested in owning their stocks.

TGR: Does CPM have any analysis on ETFs versus senior gold producers? Performance-related data comparing those two?

RS: We haven't done any specific analysis. But gold ETFs basically track the gold price, so it's really a question of whether you are invested in physical gold or whether you want to invest in equities.

Equities do have the advantage of performing better for the most part over the long term. But in recent months, we've actually seen gold equities get slammed for various reasons. One of the biggest reasons is that their costs are getting out of hand.

TGR: If the gold price remains range bound near current levels, does that make gold producers more appealing?

RS: Only if gold producers are able to control their costs. If producers can prove to the markets that they can control costs, then equities would be a good investment compared to gold. Also, if gold prices remain range bound, and that prompts miners to shift their focus to higher-grade gold, that could potentially reduce costs and again make them more attractive as an investment. So it depends on how the mining companies deal with it. If they let their costs escalate and the price of gold stays sideways, their margins will get squeezed, so that will make them a bad investment.

TGR: Is there is a particular jurisdiction or jurisdictions that CPM Group sees as being more appealing for gold production?

RS: For gold production, there is a jurisdiction that is not appealing. South Africa is not very appealing at this point. The atmosphere surrounding the mining industry in South Africa at the moment is pretty complicated.

A lot of factors are at play. The country has deep-level mining, which makes it difficult for miners to control costs. You also have additional problems related to labor and infrastructure and government policies. All of those things collectively make South Africa a fairly difficult environment to mine in.

TGR: Is your near-term forecast for other precious metals like platinum, palladium and rhodium more encouraging than it is for gold and certainly for silver?

RS: The PGMs definitely have some promising fundamentals. The supply side is constrained because a lot of supply comes from South Africa. Those mines are facing the same problems as the gold mining industry in that country. So the potential is there for supply to possibly decline.

Then you have the fabrication demand side where there is little substitution for PGMs. For example, in the case of auto catalysts, any other combination of metals used would not reduce emissions at the same level of efficiency as the PGMs do. So you have expectations of heavy fabrication demand and the potential for constraint supplies that are both supportive and positive for the PGMs.

TGR: What advice can you give to precious metals investors in general that they can put to good use in 2013?

RS: It's about doing your homework. When you're looking at equities, you need to look at a number of factors besides metal prices. For example, investors need to look at the management, specific country risk, and within country risk you have government policies, infrastructure. There's also the mining grades of the deposits and the costs to get the metal out of the ground. Costs are especially important to pay attention to in the current environment where mining cash costs almost across the board are rising pretty substantially.

TGR: Are you predicting cash costs among gold miners are going to rise in 2013?

RS: We do think gold mining cash costs will continue to rise. One of the problems is the rising gold price itself. That has been encouraging miners to mine lower-grade ore, which in turn pushes cash costs up. Another problem is mining regions, such as South Africa, where all these other additional factors are pushing cash costs up. So, yes, we do think the costs for gold mining will continue to rise in 2013.

We have data going through the second quarter of this year. What we saw is a peak in the profit margins in mid-2011 when gold prices were high. What we saw in the second half of 2011 and the first half of 2012 is the slight decline in gold prices and a continued increase in the costs. So companies' profit margins got squeezed. We think this will continue if mining companies don't curb their cost increases. This is the biggest problem or threat to the gold mining industry.

TGR: What are the biggest inputs into those rising costs for miners?

RS: The biggest input cost is labor, which represents about 50% of total cash costs for gold mining. We keep hearing of strikes and shut downs and those kind of problems. That is not good for the largest component of costs, labor. Fuel, for instance, only accounts for about 8% to 9% of costs. And about the same amount for utility costs, such as electricity and water.

TGR: Were fuel costs 8% or 9% five years ago or were they a smaller percentage? It's a number in a vacuum otherwise.

RS: Fuel costs were a little bit less than 8% or 9% five years ago. Fuel costs haven't been the biggest issue for cash costs. It's labor costs. The inflation in labor costs is what's pushing up the whole cash cost curve.

TGR: Are there any parting thoughts you have for our readers?

RS: A lot of times our gold outlook comes out sounding bearish when it's not. I just want to say that we do think gold prices will stay high. We just don't think that they're going to skyrocket.

TGR: Where was CPM Group in its forecast for 2012?

RS: We had an annual average of $1,620/oz at the beginning of the year. The average price for gold so far in 2012 is about $1,670/oz. So we were lower than the average. We did do well compared to 85–90% of the other analysts whose price forecasts are way, way higher.

TGR: Thanks for your insights.

Rohit Savant is a senior commodity analyst at CPM Group and joined CPM Group in 2005. Savant is the lead analyst for CPM Group's Precious Metals Long-Term Market Outlooks, Precious Metals Yearbooks and Precious Metals Advisory. These publications include in-depth analysis on gold, silver, platinum, palladium and rhodium markets. Savant provides consulting services for all of the precious metals on an ongoing basis to various hedge funds, individual traders, producers and end users.

This is an edited version of the original and is published here courtesy of The Gold Report

Tuesday, December 25, 2012

India continuing to drive steel production

If all planned capacity expansion projects become operational in India, the country could become the world’s second largest steel producer by 2015

Author: Shivom Seth

Demand for steel in India is rising. Global steel production grew by 5.1% in November to 121.6 million tonnes. India's contribution was 6.4 million tonnes, with most experts insisting that the country's steel demand is set to rise in the new year.

Though China tends to be the focus of the steel market given its status as the world’s largest producer, India could soon take over the mantle as the fastest growing producer of the metal within the next few years, if one goes by the opinion of its steel producers.

Somdeb Banerjee, Tata Steel’s executive for South Africa said India’s steel capacity could almost triple between 2010 and 2020 to reach 179 million tonnes a year. He was speaking at the Coaltrans Mozambique conference in Maputo.

In 2011, India became the fourth largest steel producing nation in the world with production of over 74 million tonnes. However, the country has a very low per capita consumption of steel of around 59 kilos as against an average of 215 kilos in the world.
 


This wide gap in relative steel consumption indicates the potential ahead for India to raise its steel consumption, maintain experts.

C S Verma, chairman of Steel Authority of India (SAIL) notes that India's steel demand could swell in the new year. To cater to the demand, he added, SAIL's plants were running at over 100% capacity utilisation.

In October, India's steel consumption was estimated to have risen over 1% to 6.12 million tonnes as compared to 6.08 million tonnes in September.

In November, India's production increased by 6.6%, as compared to the same month last year. India had produced 6 million tonnes of steel in November 2011.

``The country's per capita consumption of steel has risen by nearly 25% during the past five years to 57 kilo during 2011, as compared to 45.8 kilo during 2007.
In 2011, India's net steel consumption stood at 67.8 million tonnes, and has risen from 64.9 million tonnes a year ago,'' said Parul Kotakh, metal analyst.

He added that for the steel industry in India, volume growth would be visible in the years to come, largely due to the continuation of infrastructure spending, including housing and strong demand from the automobile sector.
 

``This,'' added Santanu Shah of Crisil Research, a division of a ratings agency, ``could help in driving demand for value added steel products like cold roll steel and exports.''
 

From 2006-07, demand grew at a robust 9% CAGR, spurred by rising investments in infrastructure and construction, and strong growth in capital goods and automobile sales. However, the slowdown in the global economy may spiral India’s steel demand trajectory.

Research firm Frost and Sullivan is, however, bullish. If all planned capacity expansion projects become operational in India, the country could become the world’s second largest producer by 2015, said Venkatesan Subramanian, director at Frost and Sullivan.

He added that non ferrous metals like aluminium, copper and zinc would grow at a similar pace as that of ferrous metals, given the high demand from the automobile sector.

Buoyed by India's demand scenario, SAIL is currently undergoing a round of expansion that will take its production capacity to 18 million tonnes from the existing 14 million tonnes by the end of current financial year.

The company would also be commissioning a new cold rolling mill at the Bokaro plant by the fiscal end. SAIL has spent about $7.0 billion (Rs 390 billion) so far on capacity expansion. Its targeted investment plan is $13 billion (Rs 720 billion).

Source: Mineweb

Monday, December 24, 2012

Gold Market Report 24 December

Gold Regains Some Ground, "Good Demand" for Gold from India

ON THE FINAL day before Christmas, gold prices edged higher Monday morning, climbing to $1665 per ounce and recovering some of the ground lost last week.

Friday afternoon's London gold fix was $1651.50 an ounce, a 2.6% weekly fall and the biggest weekly drop since June.

"[Gold's fall] opens up a move to the next major support, which are the lows in the $1520s," says Friday's technical analysis note from Scotiabank.

On the physical bullion market, gold demand from traditional world number one India picked up Monday, dealers reported.

"Demand is good," one dealer at a state-run bank in Mumbai told newswire Reuters earlier today.

"Buyers are placing orders for limited stocks with banks. They know the supply situation will remain tight for the next few days. Overseas suppliers are going on leave."

Silver meantime rallied to $30.39 an ounce before easing slightly, like gold regaining a little of the

Stocks and commodities were broadly flat Monday morning, while the Euro gained against the Dollar but remained below last week's seven-month high.

In New York, the so-called speculative net long position of gold futures and options traders – the difference between bullish and bearish contracts held – fell to its lowest level since August in the week ended last Tuesday, weekly data published by the Commodity Futures Trading Commission show.

Elsewhere in the US, politicians negotiating over how to deal with the government's deficit have left Washington for Christmas without any deal being agreed. The US economy is due to hit the so-called fiscal cliff of around $600 billion of spending cuts and tax cut expiries, starting next Monday, if Congress does not agree new legislation.

Here in Europe, current Italian prime minister Mario Monti said Saturday that he will not run in February's parliamentary elections. He added however that he would consider being prime minister if nominated to the post by an elected coalition that would back what he called "the Monti agenda" of economic reforms.

"While he may not have thrown his hat into the ring," says Nicholas Spiro, managing director at consultancy Spiro Sovereign Strategy, "Il Professore has become Il Politico whether he likes it or not...[Monti] has made it crystal clear where his political allegiances lie and that he's ready to head

Italy's next government."

Ben Traynor

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Anglo American says last Minas-Rio injunction lifted

Global miner Anglo American said on Friday an injunction blocking installation of an electricity transmission line at its Minas-Rio iron-ore project, in Brazil has been lifted, clearing the final hurdle for the project.

A Brazilian court removed two injunctions in September, letting the company restart construction at the mine site, which has a capacity of 26.5-million tons a year.

The removal of the final injunction on Friday will allow the company to install a 90 km electricity transmission line.

The project has faced a series of delays and cost overruns since it was bought for $5.5-billion from Brazilian billionaire Eike Batista's MMX Mineracao e Metais in 2008. Criticism of the project soured the relationship between Anglo American's former CE, Cynthia Carroll, who championed the purchase, and leading shareholders. Carroll resigned in October.

The company raised the estimated cost of the Minas Rio project last month, saying it was unlikely to cost less than $8-billion.

Anglo American shares fell 0.48% to 1 855.48p in London.

Edited by: Creamer Media Reporter

Saturday, December 22, 2012

Gold in Doesn't-Beat-Stocks Shocker!

Gold in 2012 is set to underperform the US stock market for the first time since 2004...


SO the WORLD DIDN'T END on the shortest day of 2012, as forecast by no-one beyond lazy journalists and internet frauds.

But the long bull market gold has choked its last. Or so some soothsayers claim.


Bloomberg: "Gold, [enjoying] its longest winning streak in at least nine decades, is poised to enter a bear market..."

Interactive Investor:
"Is gold's bull market over? Market commentators [are] citing a tumultuous economic environment. Others say it has simply been over-bought, and as with each bull market, inevitably reach[ed] a point of resistance..."

MarketWatch:
"Gold bugs are finally throwing in the towel. Over the last two weeks [they] have become even more discouraged than they were at the end of November. And that’s saying something..."

Okay, we were kidding. These 3 stories in fact came at the end of 2011. But with the big top of summer last year now a distant memory, and with prices this week unwinding all of 2012's gains for Euro and Sterling investors, you could book your path to the
US Treasury, running Italy, or getting a $400,000 annual housing allowance
from the Bank of England by saying gold is spent today.

"Goldman Sachs...are among those calling the end of the gold bull market," reports
Portfolio Adviser
, "having recently trimmed their 2013 forecasts to $1800/oz."

Whatever the reality ahead, gold has certainly done an odd thing in 2012. Odd for the last 13 years at least. Because it failed to beat the US stock market's annual gain – the first such failing since 2004, and only the third time since 1999.

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What to make of this underperformance? Well, if you missed all of that 14.8% capital gain in the S&P500, then a measly 7.9% return on your gold might be scant comfort. But it does continue a broader trend, dating back a whole decade.
 
Gold and the stock market both rose together this year. Only twice has that failed in the last decade, once when stocks sank (2008), and once when they were flat (2011).

clip_image002[6]
 
What gives? Isn't gold supposed to rise when stock markets plunge, and vice versa? But really, that's such a 20th century idea!

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Go back 20 years, and flip the price of gold upside down. As US stocks rose, the gold price fell, all through the mid-to-late '90s. It wasn't early 2001 that gold found its floor – shown as the second peak on our inverted chart.

And from there, the Tech Stock Crash came right alongside the start of gold's now 12-year rise...a rise which stocks joined again just as soon as near-zero interest rates were applied in 2003.

Yes, the common link we believe has been cheap money. On the one hand it has driven investors back into stocks (and back again thanks to truly free cash and quantitative easing since 2009). On the other, it has driven a small but growing band of people worldwide to abandon a chunk of their cash, swapping it for a lump of metal instead. And overall, gold has outperformed by not sinking in the middle.

Scarce and incorruptible, unlike common stock, gold has thus acted as a great hedge for stock market bulls, rising both with and despite the action in equities. But being rare and indestructible, gold has yet to find its true calling in the early 21st century we predict, squinting into the future just like ancient Mayans didn't.

We think gold looks good insurance against that other all-rising bull market, the all-inflating credit bubble that is the 32-year non-stop bull market in US and other Western government bonds.

 

Adrian Ash

 

(c) BullionVault 2012

 

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Minera IRL gets community nod for Peru gold project

Following the approval by the Ollachea community general assembly of the environmental impact assessment (EIA) for Minera IRL’s Ollachea gold project, in Peru, the company on Friday said it has now submitted the EIA to Peruvian authorities for assessment.

Minera IRL said it based the EIA on its recently completed Ollachea feasibility study and expects to receive a development permit by the middle of 2013.

"We have received outstanding support from the Ollachea community with a general assembly unanimously approving the EIA thus fulfilling the first requirement of the permitting process,” Minera IRL executive chairperson Courtney Chamberlain said.

The project involves a 1.1-million ton a year underground mine and conventional gold processing plant to produce an average of 113 000 oz of gold a year at full capacity. Building the project would carry a price tag of $177.5-million and a life-of-mine cash operating cost of $499/oz.

Operations are scheduled to start early in 2015.

The company has completed comprehensive environmental baseline studies over the past three years and the information gleaned from these was incorporated into the details of the projected mine, processing and infrastructure plans to evaluate the environmental impact of the operation.

The Ollachea mine would be an underground mine with reduced surface disturbance and impact. The process tailings will be filtered and dry-stacked, further reducing the environment footprint and rehabilitation will blend with the local environment.

A water treatment plant will ensure that all water releases comply with the rigorous Peruvian standards and the company added that careful attention has been given to the key aspect of socio-economic impacts, including planned sustainable development projects.

The project developer said it had used, internationally recognised environmental guidelines in all scenarios to reduce impacts.

The company’s Toronto-listed stock traded at 82 Canadian cents apiece on Friday afternoon.

Edited by: Creamer Media Reporter

Bolivia mining exports seen falling 20%

Bolivia’s mining exports will likely decline by 20% this year, partly as a result of reduced private investments amidst regulatory uncertainty, experts say.

“The value of Bolivian mining exports will probably fall around 20% in 2012,” says Henry Oporto, a leading expert on Bolivian mining and the co-author of a new book Los dilemas de la minería (The dilemmas of mining). The mining sector as a whole fell 6.7% during the first half of the year.

“The decrease is due to a fall in production by private mining companies, small mining companies and state mining companies,” Oporto says. The decrease in each sector ranges from 8% to 10%.

At the same time, the international prices of most of the mining products exported by Bolivia have declined, with gold being the exception.

Another worrisome trend is that the share of private companies is falling – from 60% of total mining exports in 2011 to 48.7% during the first half of the year and a further decline expected, Oporto says. “The prospects are bleak,” he says.

Apart from the falling prices on key minerals, the sector is seeing reduced investments owing to the constrictions imposed on the private mining companies through nationalisation and expropriation; occupation of mines; the unilateral cancellation of exploration and exploitation contracts and, the uncertainty and lack of guarantees for mining investors, Oporto argues.

Mining officials also complain about the tax system. “The actual tax regime in Bolivia is the highest in the region compared with Peru, Chile and Argentina,” Minera San Cristobal spokesperson Javier Diez de Medina said. Minera San Cristobal is the largest mining company in Bolivia and a unit of Japan-based Sumitomo Corporation.

“That takes out some competitiveness of the mining sector in Bolivia.”

The government of President Evo Morales is planning to implement a new mining law, which could improve the outlook for the sector if it can abolish the constitutional mandates such as the required transfer of concessions for contracts, the ban on listing awarded mining deposits on stock exchanges, the required prior consultation with local indigenous populations, the tax regime and other restrictions on the private sector, Oporto says.

However, the signals from the government are not positive, he points out. They include possible plans to increase taxes further, increasing royalty fees from today’s level of 6% and doubling the dividend tax from today’s level of 12.5%. All in all, the government takes a whopping 67%, according to estimates by Oporto.

“If taxes rise above this level, you put at risk the continuity of the mining operations and it will be very difficult to attract new investments for mining projects,” he says.

The new mining law and a separate one on investment that also will impact the mining sector are still under discussion and it is unclear how they will end up and when they will be implemented.  “Without the new rules, it’s difficult to be thinking about the future,” Diez de Medina says. “We expect a year of plenty of challenges.”

Edited by: Creamer Media Reporter

Friday, December 21, 2012

Gold Market Report 21 December

Gold and Silver Head for 4th Straight Weekly Drop But "Indian and Chinese Demand Jumps" as Prices Come Down

WHOLESALE gold bullion prices hovered around $1650 an ounce Friday morning in London, having earlier hit fresh four-month lows, while stocks edged lower and US Treasuries gained despite little evident progress in Washington to avoid the so-called fiscal cliff.

Silver traded either side of $30 an ounce meantime, having yesterday dipped below that level for the first time since August, while oil prices dipped slightly and copper ticked higher.

"Precious metals continued to stall overnight," says a note from refiner MKS.

"Sentiment has clearly...as a result of a number of key support levels being tested or coming into play...[although] gold did not decline any further overnight buoyed by physical bids from both Europe and Asia...there is still a strong drive by the speculative side of the market to short and is evident by the heavy selling into rallies on Comex."

Heading into the weekend, gold looked set for its biggest weekly loss since June by Friday lunchtime in London, and its fourth in a row, with gold trading 2.7% below last Friday afternoon's London Fix price.

Earlier in the day, gold and silver hit four-month lows, extending yesterday's losses that followed news of an upward revision to US GDP growth for the third quarter.

Silver meantime looked set for its biggest weekly drop since September 2011, down 7.7% on the week.

Gold in Sterling is below where it started 2012, trading as low as £1006 an ounce this morning, while gold in Euros is also below where it was by the first week of January, despite setting a new all-time high as recently as October.

Over in Asia however, "China and especially Indian demand has jumped," said a senior Swiss logistics executive, speaking to BullionVault late Thursday.

Indian importers, he said, after shipping relatively low volumes of gold and silver bullion around Diwali – typically the busiest season for the world's #1 consumers – are using the drop in prices to help wholesalers replenish their stockpiles, slowly run down over 2012. 

The Chinese New Year falls in 2013 on 10 February. "This feels like the jump in demand we got in 2010/2011," our Swiss contact says, pointing to the supply-chain problems of January last year, when strong Chinese demand met New Year holidays at the leading Swiss suppliers.

Indian gold demand improved Friday, newswire Reuters reports, while the Shanghai Gold Exchange had one of its busiest days of 2012 in terms of volumes traded.

In Washington meantime there was no House of Representatives vote on speaker John Boehner's so-called 'Plan B' for dealing with the US deficit and thus avoiding the so-called fiscal cliff of tax cut expiries and spending cuts, worth around $600 billion, currently due to begin at the end of this month.

"The House did not take up the tax measure today because it did not have sufficient support from our members to pass," said Boehner last night.

"Now it is up to the president to work with Senator [Harry] Reid [Democrat Senate majority leader] on legislation to avert the fiscal cliff."

Boehner's proposal included allowing tax cuts to expire for anyone earning more than $1 million a year. Obama, who initially called for the cuts to expire for anyone earning more than $250,000, has said he wants the threshold to be at $400,000.

In the UK meantime, third quarter GDP growth was revised lower this morning, from 1.0% over the three months to end September to 0.9%.

UK public sector net borrowing meantime was  £17.5 billion in November, 7.4% up from a year earlier, official figures published Friday show.

"The disappointing November public finance data fuel mounting expectations that at least one of the credit rating agencies will strip the UK of its triple A rating in 2013," Howard Archer, economist at research firm IHS Global Insight, told the Financial Times this morning.

Brazil added 14.7 tonnes to its gold bullion reserves last month, the third month running it has bought gold, data published Thursday by the International Monetary Fund show. Brazil's gold reserves now stand at 67.2 tonnes, double their level back in August.

Belarus, Russia and South Korea  were also among those countries that added gold to official reserves last month, the IMF data show, while Iraq's gold reserves quadrupled to over 31 tonnes between August and October.

"The central banks in emerging economies have thus been continuing their policy of diversifying their currency reserves," says today's commodities note from Commerzbank.

"In our view this trend is likely to continue next year, meaning that central banks will play a considerable part in the price increase we envisage in 2013."

Ben Traynor

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Thursday, December 20, 2012

Gold market seen moving forward in 2013

A new report by auditing house PricewaterhouseCoopers (PwC) has found the gold price is expected to increase in 2013, driving increased spending on exploration and merger and acquisitions (M&A).

The ‘2013 global gold price report’ found more than 80% of gold executives expect to see a rise in the price of gold, and an analysis of the 46 largest TSX- listed gold mining companies pointed to more than 20 of these gold companies having cash reserves greater than $500-million.

"Gold miners are adamant about proving to the market that they're once again a good investment - not just for the interim, but for the long-term. Receiving investors' approval will involve establishing cost-effective management strategies, increasing dividend payments and responsibly investing in production growth - all on the back of a strong gold price," PwC mining leader for Canada and the Americas John Gravelle said.
He added there has been a shift in focus with gold executives concentrating on the bottom line – specifically focusing on the rate of return for every ounce produced.

According to the report, the long-term price of gold used by gold miners has increased by 6% from last year and 29% from two years ago, to $1 400/oz.

The report found all of the senior gold companies used cash for development and exploration spending and they plan to do the same for the upcoming year. Further, 89% of mid-tier gold companies will use cash for project development and 83% will use cash to fund exploration activity in 2013.

"Larger mining companies may be more watchful with their spending, but they haven't forgotten about their exploration budgets. Expect increased exploration spending next year by senior and mid-tier miners, and well-funded juniors," says Gravelle.

"While senior gold producers will use their cash to fund recently increased dividend commitments, they will carefully invest in projects that will produce superior rates of return," he said.
Some senior gold miners may also use their cash for strategic M&A activity. Twenty percent of senior gold companies plan to spend their money on acquisition related activities in 2013, while 33% of junior/mid-tier companies expect to spend their cash on acquisitions – this is double the number of companies that spent money on M&A activity during this year (14%).

"The equity market for junior gold companies appears to have finally reached the point where there is more upside than downside. Junior gold miners should therefore anticipate increased M&As," says Gravelle.

Meanwhile, while Canada tops the list with the most active gold buys this year, with 243 transactions worth $4.8-billion, the report found China continues to keep an eye out for gold mines to acquire.

In 2011, four of the top gold deals were acquired by Chinese buyers. This year, China was again responsible for four out of the top ten gold deals announced.

"Chinese state owned entities remain interested in expanding their gold mining assets outside of China to secure steady access to gold in the future," says Gravelle.

In the last few years, China has heavily invested in the African mining industry. "There are a number of examples of controlling investments by Chinese and Indian companies into gold, coal, and other commodity projects in Africa. Chinese investors come with significant financial support, facilitating the development of capital intensive mines," Gravelle said.

Edited by: Creamer Media Reporter

EU regulators drop Rio Tinto antitrust case

European Union regulators dropped an investigation into metals company Rio Tinto Alcan on Thursday, saying they were satisfied with commitments made by the firm to ensure it does not favour subsidiaries when purchasing supplies.

The ruling means the European Commission, the EU's antitrust authority, will impose no penalty against the firm.

"Rio Tinto Alcan's commitments will open up the market for equipment used in aluminium smelters. As a result, the customers of aluminium technology and equipment will have more choice," EU competition commissioner Joaquin Almunia said in a statement.

The EU launched its investigation into the unit of Anglo-Australian mining group Rio Tinto over concerns that its tying of sales of its own smelting technology to plans to buy speciality equipment may have breached EU rules.

Rio Tinto Alcan offered to provide flexible licensing terms to rivals to end the investigation and avert a possible fine.

Edited by: Creamer Media Reporter

Gold Market Report 20 December

Washington Debate "Holding Investors Hostage", But Gold "Sees Downward Momentum Slowing"

U.S. DOLLAR gold prices climbed back above $1670 an ounce Thursday lunchtime in London, following two days of losses that saw gold in Dollars fall to its lowest level since August, while stocks and commodities were little changed on the day and US Treasuries gained.

"The downward momentum [in precious metals] does appear to be slowing, with gold [on Wednesday] holding above the previous day's low of $1660 an ounce," says today's commodities note from Standard Bank.

Silver also ticked higher after spending most of this morning hovering just above $31 an ounce.

"A break below this key technical and psychological level could spell a swift move lower given the excessive length in the futures market," says Ground.

In Washington, the Republican-controlled House of Representatives is expected to hold a vote later today on the so-called 'Plan B' for dealing with deficit. The bill, advocated by Republican House speaker John Boehner, would extend tax cuts currently due to expire at the end of the month for anyone earning less than $1 million. 

President Obama has argued the threshold should be lower – initially calling for it to be $250,000 before raising that to $400,000.

The White House has said it would veto 'Plan B' if it were passed by Congress, with Obama telling Republicans yesterday they should "peel off the partisan war paint".

"It seems investors are being held hostage by Washington politics and what is making things more difficult to figure out, is the fact that we have not been in such a predicament before," says INTL FCStone analyst Ed Meir, adding that optimism earlier this week that a deal might be done to avoid the so-called fiscal cliff as been replaced by "a distinct tone of acrimony and pessimism".

"Unfortunately for the gold bugs," says Meir, "neither scenario seems to be helping their cause much."

Greece meantime "still face[s] the possibility of bankruptcy" in 2013 despite the success of its recent bond buyback program and the release of €34.3 billion in bailout funding, the country's finance minister Yannis Stournaras told the Financial Times Wednesday.

"What we have done so far is necessary but not sufficient to achieve a permanent solution for Greece," Stournaras said.

Yields on 10-Year Greek government bonds have fallen sharply in recent weeks, dropping to 22-month lows below 12% Thursday after the European Central Bank yesterday announced that it will again accept Greek debt as collateral.

The ECB's announcement followed the decision by ratings agency Standard & Poor's Tuesday to upgrade Greece's debt from 'selective default' to 'junk' status.

The Euro touched $1.33 yesterday for the first time since early April, while the Euro gold price looks set to record its biggest quarterly loss since the single currency launched in 1999.

The Bank of Japan extended its asset purchase and loan program for the third time in four months Thursday, adding a further ¥10 trillion to take the total to ¥101 trillion, while leaving its main policy interest rate at 0.1%.

His campaign leading up to last Sunday's election, Japan's next prime minister Shinzo Abe talked of the need for an "unlimited Yen" policy from the central bank as a way of fighting deflation.

"I take it as that the BoJ is carrying out what we sought during the election step-by-step," Abe said following the monetary policy announcement.

"The next step is [higher] inflation targeting," reckons Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo.

"Abe is not even prime minister yet. If you look at how the BoJ is behaving, you could argue this is a loss of independence."

Following his victory on Sunday, Abe said that after he has formed his government it will issue a joint statement with the BoJ increasing the inflation target from 1% to 2%.

"The ultra-loose monetary policy of major central banks is an important cornerstone of the increase we expect to see in the price of gold next year," say precious metals analysts at Commerzbank in a note this morning.

"We do not therefore believe that today’s low gold prices are sustainable. Long-term ETF investors, for instance, remain loyal to gold and are not selling their holdings. What is more, the fact that the gold price in Indian rupees is also lower should help boost physical demand for gold during the ongoing wedding season in India."

"We saw very, very good demand on the physical front [on Thursday], mainly from the two centers in India and China, " Afshin Nabavi, senior vice president at precious metals refiner MKS, told news agency Bloomberg this morning.

Ben Traynor

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Wednesday, December 19, 2012

Gold prices expected to rise in 2013; could hit $2,200

Gold price targets of $2,000 an ounce and even higher are in sight as the global financial crisis and geopolitical concerns continue to foster short and long-term demand for precious metals.

Author: Roy Friedman

Gold prices have advanced every year in the last decade and are poised for their eleventh straight year of gains in 2012.  Next year, gold prices could reach $2,000 an ounce for the first time ever. 

As we look forward to 2013 and beyond, I see signs that gold and the entire precious metals complex will remain key components in portfolios of small and large investors alike. Rising volume and open interest on the futures exchanges, ETF markets and over the counter physical market continue to indicate that investment demand for precious metals has never been greater. 

In data released by the U.S. Mint, sales of gold and silver Eagle coins swelled in the past five years, versus the five-year period before that. In addition demand for physical gold in data compiled by the International Monetary Fund shows that central banks around the globe have been net buyers of gold since 2010.

The global financial crisis and geopolitical concerns will continue to foster short and long-term demand for precious metals. Thorny economic issues in the European Union, particularly in Greece and Spain, will be with us for the foreseeable future.

Add to that the weak U.S. economy and our fiscal cliff, with government leaders and political parties failing to agree on much of anything, and it's possible that the next four years will look very much like the last four. Historically low interest rates here and abroad are likely to persist, keeping the U.S. dollar weak and providing support for precious metals prices.

No one wants to see tensions between nations arise, but real threats exist and escalating Middle East or Korean hostilities could send precious metals prices much higher. 

Precious metals and gold in particular have always been considered and used as a hedge against inflation, but precious metals prices have risen over the past 10 years during a period of subdued inflation which shows gold's dual role as a hedge in times of both inflation and deflation. 

As we have seen in the U.S and throughout the E.U. economies as gauged by Gross Domestic Product (GDP) do not grow every year and markets do not rise without setbacks here and there. Economies and markets clearly go through cycles.

The current environment will eventually shift to one of economic expansion, higher interest rates and inflation.  When that happens, precious metals will of course provide a hedge against inflation and will play a significant role in portfolio allocations. 

In 2013, we expect precious metals, and gold in particular, to follow the recent trend of chalking up double-digit gains over the previous year. While the market will remain volatile and sell-offs at times will create anxiety.  We expect gold to break above $2,000 in 2013. In fact, a spike to $2,200 would not surprise us. 

Roy Friedman is Executive Vice President of Dillon Gage Metals –

Gold Market Report 19 December

Jim Roger Sees "Overdue Correction" Hitting Gold as Unleveraged Money Buys at 3-Month Lows

 

PRICES to buy gold with Dollars rallied from their lowest levels since late August on Wednesday morning in London, recovering 0.7% from yesterday's drop to $1662 per ounce.

The drop came as Greece was upgraded Tuesday by the S&P ratings agency from "selective default" to "junk" status, following payment of the latest €34.3 billion in new loans from Greece's Eurozone partners.


Versus the Dollar the Euro leapt to its highest level since May. The gold price for Eurozone investors sank to €1255 per ounce – a 6-month low almost 10% beneath October's new record high.

"Gold on any kind of historic market basis is overdue for a nice correction," CNBC was told by investment author and commodities-fund manager Jim Rogers overnight.

"It's been correcting for 15-16 months now, which is normal in my view. It's possible that gold's correction is going to continue for a while longer."

Tuesday saw a switch from January to February contracts in a large number of short (ie, bearish) bets on the gold price held by leveraged speculators in the US derivatives market.

Holdings at physically-backed gold trust funds traded on the stock market rose to new all-time records, according to Bloomberg.

Users of
BullionVault also moved to buy the drop in prices, with previously quiet trade growing strong as gold fell Tuesday.

"Good support is seen at $1672.50 [and then] $1661.64," says Commerzbank's Axel Rudolph in Frankfurt in his weekly chart analysis.

"Failure at [those levels] would push the June high at $1641.01 back to the fore and neutralise our bullish outlook.

Silver prices meantime bounced off a 6-week low at $31.40 per ounce Wednesday morning, as world stock markets reached 17-month highs on Reuters' data.

Long-dated US bonds also ticked higher, nudging 30-year Treasury yields back below 3.00% per year.


US Republican speaker Boehner meantime referred to a "Plan B" for $1-million earners in the ongoing argument over 2013's looming fiscal cliff.

A blog on
The Economist
website says Democrat president Obama has agreed to switch the Consumer Price Inflation index tracked by Social Security payments to a lower measure, resulting in slower benefit rises.

Over in Japan, a small but growing number of pension funds are buying gold as a hedge against zero-bond yields and the long-term decline in equities, says a report in today's Wall Street Journal.

"By diversifying currencies, we aim to reduce risks associated with them," the WSJ quotes Yoshi Kiguchi, chief investment officer at Okayama Metal & Machinery Pension Fund.

It began investing in gold this March on behalf of the 260 small and mid-sized company pension schemes it runs.


Adrian Ash

. 

(c) BullionVault 2012

 

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.