Showing posts with label Gold Report. Show all posts
Showing posts with label Gold Report. Show all posts

Thursday, December 19, 2013

Gold Market Report - Thurs 19 Dec

 

Fed Tapering Whacks Gold, Spooks China, "Normalization" Challenged by US Earnings

WHOLESALE London gold sank against all currencies Thursday morning, falling 1.9% vs. the Dollar to hit 6-month lows after initially trading flat overnight despite the US Fed finally reducing its $85 billion per month in asset purchases.

Cutting next month's quantitative easing of US mortgage and longer-term government bond rates to $75bn, the Fed pointed to "growing underlying strength in the broader economy."

US stockmarket indices the S&P500 and the Dow surged to new all-time closing highs, while Treasury bonds fell and spot gold fell through this week's previous low at $1230.

Besides the taper, however, the Fed revised its policy on short-term interest rates, saying it will hold the federal funds rate at zero "well past the time" that the US jobless rate falls to 6.5%, its previous line in the sand.

Overnight in Asia, Japanese shares rose but Chinese stocks fell as the People's Bank of China broke its own rules and took to Weibo, the equivalent of Twitter, to announce a "short-term liquidity operation" after Shanghai's interbank lending rate jump above 10%.

The PBoC usually waits a month before reporting such moves, says the Financial Times.

"It's very clear they want to calm down market fears," the FT quotes ANZ analyst Zhou Hao, noting the previous spike in Chinese interest rates in June, when US Fed chairman Ben Bernanke spoke about possible QE tapering.

Shanghai gold today fell 0.8% in Yuan but increased its premium over international prices from $6 to $11 per ounce.

Amongst Western investors, "More sensible minds realise," says a note from David Govett at brokers Marex, "that on the whole [the Fed news] is not a good move for the precious complex.

"With further tapering probably to come over the course of next year, the outlook remains muted. However, I don't subscribe to the theory that it's all over for the bullion market [and] would be a buyer of dips if we do manage to break below $1200."

Bids in London's wholesale market briefly dropped below that level Thursday morning, hitting a 6-month low of $1199.75 per ounce.

Priced in Sterling and Euros, wholesale gold bullion fell to its lowest since spring 2010, down 29% and 31% respectively from the start of 2013.

Silver tracked gold in Dollars, briefly falling below $19.30 per ounce – a "key level" according to technical analysts at one bullion bank.

Fed tapering "highlights the overall positive sentiment towards the macro economy," reckons UBS analyst Joni Teves.

"Equities are in fierce competition with gold for investor dollars, and this year's trend of rotation away from gold into growth assets is expected to continue into 2014."

"This is another sign of increasing normalisation for the world economy," agrees Matthew Turner at Macquarie Bank. "Gold's insurance function is less desirable in that environment."

"But if the economy is accelerating as people think," counters Albert Edwards in his latest Global Strategy Weekly for clients of French investment and London bullion bank Societe Generale, "how come Thomson Reuters has just reported the fastest pace of US earnings downgrades on record?

"If we are set for a profits-driven economic slowdown, then the low rate of core inflation will start to become a key concern. Deflationary forces are in fact stronger than even the latest [official data] suggests."

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

(c) BullionVault 2013

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.

Tuesday, March 12, 2013

Gold Market Report 12 March

Gold Breaches $1590 after Weidmann Says "Eurozone Crisis Not Over", Chinese Physical Demand "Supporting Gold Right Now"

AFTER trading sideways for several sessions, gold bullion jumped above $1590 an ounce for the first time this month Tuesday morning in London, in what analysts called a "technical" move after gold broke through a key level following remarks from Bundesbank president Jens Weidmann.

"We see support at the bottom of the sideways range at $1561 and resistance at the top at $1586," said yesterday's technical analysis note from Scotiabank.

Gold rose above that level however shortly after Weidmann told reporters that the Eurozone crisis "is not over" and said that the Eurozone has "declining inflation risks".

Weidmann was presenting the German central bank's 2012 results, which show it more than doubled the amount it holds in reserve for what Weidmann called "risk provisioning".

Silver meantime rose to $29.25 an ounce this morning, still below last week's high, as other commodities were broadly flat on the day and US Treasuries gave up earlier gains.

European stock markets were also flat, a day after US markets rallied and the Dow Jones set another new record, having beaten its 2007 nominal peak last week.

Gold in Sterling meantime hit a five-week high above £1070 an ounce as the Pound fell this morning, while gold in Euros rose to a two-week high above €1225 an ounce.

"We still doubt a sustained rebound [in gold] is warranted at this point while the market is set to remain depressed," says Andrey Kryuchenkov, analyst at VTB Capital.

"Strong physical demand in China is the main reason behind gold's resilience," one trader in Beijing told newswire Reuters this morning.

"But the overall sentiment in prices is still weak. If demand from China weakens and we continue to see good US [economic] data and a stronger Dollar, gold has the chance to test $1500 this year."

On February 18, the first trading after Lunar New Year, volumes on the Shanghai Gold Exchange for its most popular gold contract, The Au9999, set a new record of just over 22 tonnes. Since then, daily Au9999 volumes have been more than double last year's average.

China was the world's second-biggest gold consuming nation in 2012, according to the latest data from the World Gold Council.

In world number one India meantime "there is no demand [for gold right now] due to financial year closing," according to Haresh Acharya at bullion wholesaler Parker Bullion in Ahmedabad.

Holdings of bullion backing gold exchange traded funds tracked by Bloomberg meantime continued to fall yesterday, the fifteenth straight day of net outflows.

In Washington, Congressman Paul Ryan is campaigning for the support of his fellow House of Representatives Republicans for his plan to balance the federal budget in a decade. Even if the plan is passed by House however it is not expected to win a vote in the Democrat-controlled Senate.

Senate Democrats meantime, who are expected to unveil an alternative budget plan this week, yesterday put forward plans to prevent a so-called government shutdown currently scheduled for 27 March, Reuters reports

The bill contains adjustments to spending aimed at ensuring government agencies are funded to the end of September, but does not seek to make up for the $85 billion in government spending cuts known as the sequester that came into effect March 1 and was originally agreed as part of the 2011 debt ceiling deal.

Across the Atlantic, UK manufacturing production fell 3% in the year to January, more than analysts were expecting, according to official data published Tuesday.

"Unless we have a stellar performance from the services sector, we're almost certainly in a triple dip [recession]," says London-based Scotiabank economist Alan Clarke.

Sterling fell to a fresh low against the Dollar this morning, touching $1.4831, its lowest level since July 2010.

The Bank of England's Funding for Lending scheme, which seeks to lend to banks at low rates so that they can provide credit to small and medium enterprises, should be put "on steroids" according to Britain's deputy prime minister Nick Clegg.

Ben Traynor

(c) BullionVault 2013

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, January 31, 2013

Gold Market Report 31 January

Investors "In Great Danger" If They Don't Own Gold, Warns Faber, as GDP Drop Sees US Fed Press On with QE

 

The PRICE of GOLD held onto most of yesterday's $15 jump at $1676 per ounce Thursday morning in London, ticking back as Asian and European stock markets fell after Wednesday's surprise drop in US economic output figures.

Silver also eased back, but held at 1-week highs above $32 per ounce after rising yesterday in gold's "slipstream" as one bullion-bank analyst put it.

"This Friday's [non-farm US payroll] report remains crucial," says a note from Swiss bank UBS – currently
encouraging its institutional clients to buy gold
outright rather than as a credit-risk deposit.

"Some adjustments to [gold] positioning are likely to emerge" after Wednesday's 'no change' decision from the US Federal Reserve on zero interest rates and quantitative easing.

"But overall, the gold market should resume subdued trading," says UBS, "as is typical ahead of a key event" such as the monthly jobs report.

Russia's foreign ministry meantime condemned a reported Israeli air-strike on a military research unit inside Syria, saying Thursday that – if confirmed – this "unprovoked attack [would] blatantly violate the UN Charter."

Shares in Italy's struggling Banca Monte dei Paschi di Siena – founded in 1472 – steadied as the Italian central bank weighed MPS's second bail-out request in four years after it hid losses of €500 million on a 2008 derivatives deal.

German banking giant Deutsche Bank lost €2.2bn ($3.0bn) for the last 3 months of 2012, it said today.

"A year ago, the mood in Europe was horrible and nobody could see how on earth stocks could go up," says Gloom, Boom & Doom author and money-manager Marc Faber, who
urged CNBC anchor Maria Bartiromo
to buy gold earlier this week.

"Now since May 2012, less than a year ago, Portugal, Spain, Italy, France, are up between 30 and 40% and Greece has doubled...!"

Factory-gate prices across France and Italy fell in December from November, new data showed today.

House prices in the year to October fell 2.5% across the 17-nation Eurozone, with Spain's home-price drop accelerating to 15.2%.

"For the first time in four years," Faber continued Wednesday, pointing to the US stock market, "since the lows in March 2009, I love this market. Because the higher it goes the more likely we will have a nice crash, a big time crash.

"You are in great danger if you don't own any gold," Faber had earlier told Bartiromo.

Near-term, reckons Deutsche Bank analyst Xiao Fu – and despite Wednesday's $15 rise on poor US growth data and the Federal Reserve's no-change decision on zero rates and QE – "Gold lacks a convincing catalyst near term to take it convincingly higher and instead remains susceptible to opportunistic selling."

But "Any thought given to reining in some of the Fed's buying power will now be shelved," counters Ed Meir in his daily note for INTL FCStone.

"[Wednesday's] GDP number clearly shows that the US economy is still far from capable to muster its own momentum without key fiscal and monetary stimulus.

"In the least, this should provide an element of support to the precious metals group, at least over the short term."

After creating and spending first $1.4 trillion on mortgage and Treasury bonds in 2008, and then a further $600 of T-bonds starting in 2010, the US Fed will likely acquire a further $1.1 trillion of US government debt with its current program of quantitative easing, according to a Bloomberg survey of analysts.

"Given the sluggish [US] economy," says precious metals strategist Eugen Weinberg at Commerzbank, "it would be premature to discuss [the Fed] abandoning the quantitative easing programme.

"Despite the noticeably higher risk appetite displayed by market players of late, gold demand is thus unlikely to ebb away completely. On the contrary, high sales of US gold coins in January, and renewed inflows into the gold
ETFs
recently, point to relatively robust demand for gold."

Over in India – most likely the world's #2 gold consumer market in 2012 behind China – the economic affairs secretary contradicted the finance minister yesterday over plans to
raise gold import duties again
, in a bid to curb household appetite to buy gold, widely blamed for India's yawning trade deficit.

Two days after Palaniappan Chidambaram told the Financial Times that New Delhi is considering "some other steps to moderate the import of gold" further, Arvind Mayaram told Reuters that "I don't think there is any plan as of now."

 

Adrian Ash

 

(c) BullionVault 2013

 

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.

 

 

Friday, January 25, 2013

Asian markets mixed, Tokyo surges on yen tumble

HONG KONG: Asian markets were mixed on Friday, with Tokyo's Nikkei surging on the back of a weaker yen, while Wall Street provided an uneven lead.

The yen resumed its downtrend after a brief rally as the country's vice finance minister indicated the new hawkish government would step in to stop the currency from returning to record highs against the dollar.

Tokyo surged 2.14 percent, Hong Kong added 0.11 percent and Sydney was 0.42 percent higher while Shanghai climbed 0.10 percent but Seoul lost 0.69 percent.

Takehiko Nakao said the government was closely watching the yen's movements in currency markets, adding that "appropriate action" would be taken if it got too strong.

His comments in an interview with the Wall Street Journal sent the yen tumbling Thursday in New York.

The US dollar jumped to 90.40 yen from 88.56 yen a day earlier, while the euro climbed 120.91 yen from 118.00 yen.

In early Japanese trade the dollar stood at 90.42 yen and the euro bought 120.87 yen. The single currency fetched $1.3371, from $1.3376 in New York.

"Nakao's comments serve as a stark reminder of the government's unrelenting drive to pursue a weaker currency in an attempt to resuscitate the economy," Chris Gore, currency analyst at Go Markets said in a note to clients, according to Dow Jones Newswires.

The comments also capped a rise in the yen that began on Tuesday as dealers were left disappointed by the Bank of Japan's plan, which had been widely expected, to set an inflation target to beat deflation, and pursue unlimited monetary easing.

Highlighting the work ahead, official data Friday showed the economy remained stuck in a deflationary rut, with core consumer prices slipping 0.1 percent in 2012, the fourth annual decline.

While traders took heart from another rise on the Dow, which ended 0.33 percent higher after figures were released showing weekly US jobless claims fell for a second straight week, Wall Street's other two major indexes fared less well.

The S&P 500 was flat and the tech-rich Nasdaq fell 0.74 percent, dragged by a 12 percent plunge in Apple after the iPhone maker's latest earnings report fell short of expectations.

Seoul, which fell on weak economic growth figures Thursday, took another hit on Friday after index giant Samsung Electronics posted below-forecast results for the October-December fourth quarter.

Oil prices fell, with New York's main contract, light sweet crude for delivery in March dropping eight cents to $95.87 a barrel and Brent North Sea crude for March delivery shedding 18 cents to $113.10.

Gold was at $1,667.10 at 0200 GMT compared with $1,677.37 late Thursday.

Source: AFP

Thursday, January 17, 2013

Gold Market Report 17 January

German Gold Story Distracts from Supply & Demand Data, $1900 Forecast by July

DOLLAR gold prices were little changed in London on Thursday morning, holding above $1682 per ounce as world stock markets, commodities and bonds were little changed.
Silver also held in its tight 2-day range, trading just shy of $31.50 per ounce.

Priced in Euros, the gold price edged 0.5% lower as the single currency rose.
"Amazingly," says Thursday's note from the commodity team at Commerzbank in Frankfurt, "the German Bundesbank's [statement on] the future storage of its gold reserves attracted more attention yesterday than the latest data from Thomson Reuters GFMS – the research institute, which specializes in analysing precious metals."

"Criminal masterminds and Hollywood scriptwriters have been put on notice," says the Financial Times today, calling Germany's 7-year plan to move 674 tonnes of gold from New York and Paris to Frankfurt "one of the biggest publicly announced shipments of the precious metal on record."

But "given that this is not a question of buying or selling, it has no direct impact on the gold price," notes Commerzbank.
Full-year 2012 gold data from Thomson Reuters GFMS yesterday estimated gold demand from all central banks, as a group, at a half-century high of 536 tonnes, up 17% from 2011.

The Swiss National Bank today said it expects to report a full-year 2012 profit of US$6.4 billion thanks to a rise in both the gold price and the Euro –  which the SNB printed Swiss Francs to buy in a bid to depress its own currency in 2011.

Gold demand from Chinese jewelry manufacturers meantime showed the first drop in 9 years, according to GFMS, while household demand in India – the world's #1 consumers – also fell.
Global gold mining supply hit a new annual record, albeit only 0.2% higher from 2011 and barely 8% above the level of 2001.
Since then, the gold price has risen by more than 515%.

"Although there is now growing speculation around the structure and longevity of the US Federal Reserve's QE programme, policies of ultra-low interest rates across the Western economies will persist in 2013," said Philip Klapwijk, global head of the consultancy, and one of London's top 10 gold price forecasters eight times in the last decade.

"This will continue to support investor interest in gold in the absence of low risk investments that can offer acceptable yields," Klapwijk believes, forecasting a rise in the gold price to $1900 per ounce by July, with investment demand surging by one fifth.

"The run-up to the debt ceiling crisis-point at the end of February," agrees Credit Suisse analyst Tom Kendall, quoted by Reuters today, "is going to be supportive of gold.
"Talks of downgrades from the major rating agencies will be part of it. This focuses people's attention on the longer-term stability of the US debt [and] the longer-term value of the US Dollar.

"[That] benefits gold."
Pegging "resistance" in gold at $1694 short term, "Wednesday marked the 8th consecutive day of higher lows" for gold, notes the latest technical analysis from Scotia Mocatta.

"Gold in particular has been lifted by a stronger Euro this morning," says Standard Bank in London.

"Physical gold demand is also strong, as it has been since last Friday. While Chinese buying has been relatively subdued, buying interest from South East Asia and India has more than taken up the slack."

As earnings season got underway on the stock market, shares in London-listed gold miner Petropavlovsk Plc today gained 5% after it reported a 13% rise in full-year output.

African Barrick Gold – whose shares dropped by more than a fifth the day it said takeover talks with a Chinese-state owned gold miner had failed this month – ticked lower again after it reported a drop in full-year output.

Other corporate news saw Rio Tinto's CEO Tom Albanese stood down as the mining giant booked $14 billion of write-downs from what analysts have called its "disastrous" takeover of aluminum business Alcan.

Goldman Sachs said its quarterly profit tripled to a 3-year record of $2.8 billion after it cut bankers' pay by 11%, aided by job cuts.

Rival investment-bank J.P.Morgan netted $2.2bn in the last 3 months of 2012, but CEO Jamie Dimon saw his bonus halved to $10m after letting the "London Whale" run up trading losses of $6bn.

Adrian Ash

(c) BullionVault 2013

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.

Tuesday, January 15, 2013

Gold Market Report 15 January

Negative Real Interest Rates "Keeping Gold on Investors' Shopping Lists", Bundesbank Looking to Take Gold Back to Germany

SPOT MARKET prices for gold bullion rose to a two-week high above $1680 an ounce Tuesday morning in London, before dipping back to just below that level before lunchtime, while stocks and commodities were slightly down on the day and the US Dollar ticked higher, with US policymakers continuing to disagree on fiscal matters.

"Gold is still expected to stay above the $1625 January low," says Commerzbank senior technical analyst Axel Rudolph, "but looks to be short-term range bound."

"As long as the environment of negative real interest rates persists, gold will remain on the shopping list of investors," adds a note from refiner Heraeus.

Germany's central bank meantime plans to repatriate some of its gold bullion held at the Fedral Reserve Bank of New York and all of its gold vaulted in Paris, according to a report from German newspaper Handelsblatt.

Like gold, silver touched a two-week high this morning, hitting $31.39 an ounce, before it too eased lower.

The US economy "is not out of the woods" according to Federal Reserve chairman Ben Bernanke, speaking at a question and answer session at the University of Michigan Monday.

"I want to be clear that while we've made progress, there's still quite a ways to go before we'll be satisfied...we are approaching a number of other critical watersheds."

Bernanke noted that politicians are yet to agree a deal that would remove automatic spending cuts that were postponed to the start of March as part of the fiscal cliff deal, nor is there agreement on raising the $16.4 trillion debt ceiling."

"It's very, very important that Congress takes the necessary action to raise the debt ceiling to avoid a situation where our government doesn't pay its bills," Bernanke said.

"Congress should act as soon as possible," says a letter dated yesterday from Treasury secretary Timothy Geithner to Republican House of Representatives speaker John Boehner, "to extend normal borrowing authority in order to avoid the risk of default and any interruption in payments."

The letter adds that the Treasury expects its extraordinary measures designed to keep the US from hitting the debt limit will be exhausted "between mid-February and early March".

"The full faith and credit of the United States is not a bargaining chip," President Obama told a press conference yesterday.

"[The Republicans] will not collect a ransom in exchange for not crashing the American economy."

"The American people," responded Boehner after the press conference, "do not support raising the debt ceiling without reducing government spending at the same time."

"We likely will see more protracted bickering in the weeks ahead," says Ed Meir, metals analyst at INTL FCStone.

"This means that the gold market may go through a repeat of what we saw in December, namely, varying 'mood swings' that will result in directionless trading."

Here in the UK meantime, consumer price inflation held steady at 2.7% last month, according to official data published Tuesday.

German consumer price inflation was also unchanged in December, at 2.1%, figures published this morning show.

On the currency markets, the Euro rose to a 13-month high against the Swiss Franc Tuesday.

Over in Vietnam, owners of gold bars are finding it difficult to sell their bullion, local news site Tuoi Tre reports, since the central bank restricted the number of firms licensed to deal in gold under new rules that came into effect last week.

"Many customers still bring their gold bars to sell at our company," says Le Phat Vinh, director at SJC Can Tho, which now has to direct them to other firms as it no longer has a license.

"Many banks have yet to offer the gold bullion trading service, despite obtaining the licenses," Vinh added.

Vietnamese press last week reported a narrowing in the gap between local gold prices and those quoted on international markets, citing prices from the central bank-controlled Saigon Jewelry Co, which became the state brand for gold bars last year and is the country's largest producer.

Platinum is more expensive than gold again for the first time since March last year, after the price touched $1700 an ounce this morning after the world's biggest producer Anglo American Platinum (AmPlats) said it plans to close two mines in South Africa and sell a third.

The move that see 14,000 jobs cut, out of a total of 60,000 AmPlats workers. The move is not a "reprisal" for last year's industrial action, said AmPlats chief executive Chris Griffith, referring to strikes that affected several major platinum producers in South Africa.

"[AmPlats] will not be the last company to cut output," says John Meyer, partner at brokerage SP Angel in London.

"We would expect platinum miners to pull back by 25-30%, which is going to have a severe impact on prices."

Ben Traynor

(c) BullionVault 2013

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.

Monday, January 14, 2013

Gold Market Report 14 January

Gold "Still Stuck in Range", But Futures Traders "Could Provide Springboard for Sharp Rise in Price"

WHOLESALE gold bullion prices hovered just below $1670 an ounce Monday morning in London, having regained some ground after Friday's losses, while stocks and commodities also ended the morning up on the day, while the Euro and the Chinese Yuan made gains against the Dollar.

"We saw a fair amount of buying from China [this morning] after gold prices fell last Friday," says Peter Tse, Hong Kong-based director at bullion bank Scotia Mocatta.

"The Yuan hit a record high [against the Dollar], making local prices cheap...[but] gold is still range bound and I wouldn't put too much on this morning's rise."

"Gold needs to sustain the close above the $1665 area to signal a move toward the $1695 area," adds a note from Barclays Capital, whose analysts see support for gold at $1640 and resistance at $1680.

Open interest in gold futures and options on the New York Comex recovered last Tuesday compared to the previous Monday, climbing 3.4%, the weekly Commitments of Traders report from the Commodity Futures Trading Commission shows. The CFTC reported its lowest open interest in over three years for New Year's Eve.

The so-called speculative net long however fell last Tuesday to its lowest level since August. The spec net long measures the difference between the number of 'bullish' long and 'bearish' short contracts held by traders classified as 'noncommercial', such as hedge funds.

"The fact that speculative financial investors are continuing to withdraw from the gold market is doubtless partly to blame for the gold price’s failure to make any substantial recovery," says a note from Commerzbank.

"More and more 'shaky hands' are getting out of the gold market...[but] their current skepticism may offer a springboard for a sharp price rise in future were sentiment among money managers to shift again."

Like gold, silver also recovered some of Friday's losses this morning, climbing to $30.77 an ounce by the end of the morning in London.

The US Treasury will not mint a $1 trillion platinum coin as a way of getting round the federal debt ceiling, a spokesman said Saturday. 

Various commentators, including Nobel Prize-winning economist Paul Krugman, have proposed in recent weeks that the Treasury could use an existing law, designed to allow flexibility in supply to meet demand from platinum coin collectors, to produce such a coin without needing to seek the approval of Congress. The coin could then be deposited with the Federal Reserve, according to the proposal, and its face value credited to the Treasury's account.

"Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit," said Saturday's statement from Treasury spokesman Anthony Coley.

"Congress can pay its bills or they can fail to act and put the nation into default," added White House spokesman Jay Carney.

"When congressional Republicans played politics with this issue last time, putting us at the edge of default, it was a blow to our economic recovery, causing our nation's credit rating to be downgraded."

The Euro meantime touched its highest level against the Dollar in almost eleven months Monday when it briefly traded above $1.34.

German finance minister Wolfgang Schaeuble said Friday that the Eurozone is "over the worst of the crisis", a day after European Central Bank president Mario Draghi said confidence in financial markets has "significantly improved".

Elsewhere on the currency markets, the Yen fell to its lowest level against the Dollar since June 2010 this morning, after Japan's prime minister prime minister Shinzo Abe said he wanted the next Bank of Japan governor to be someone "who can push through bold monetary policy".

Following his election victory last month, Abe said his government and the central bank will issue a joint statement ahead of its policy meeting later this month, in which they will set a 2% inflation target – double the current targeted rate. The most recent data show Japanese inflation running below zero, indicating price deflation.

China's State Administration of Foreign Exchange (SAFE) announced Monday that it has created a new unit tasked with finding new investments to diversify China's $3.31 trillion reserves, though it did not add what such investments might be.

Ben Traynor

(c) BullionVault 2013

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.

Friday, January 11, 2013

Gold Market Report 11 January

"Campaign Against Gold Has Failed" Says Central Bank Think-Tank, Rally fades in Gold and Silver

WHOLESALE gold bullion prices dipped back below $1670 an ounce Friday morning in London, 0.9% up on where it started the week, after jumping 1% yesterday following the European Central Bank's decision to leave interest rates on hold, which was also followed by gains for the Euro.

Silver meantime drifted back below $30.70 an ounce this morning, while stock markets were little changed and commodities edged lower along with US Treasury bond prices.

Gold bullion could form part of "an immensely important phase in the history of world money," according to a report published today by the World Gold Council and produced by the Official Monetary and Financial Institutions Forum.

"Western economies have attempted to dismantle gold's monetary role," the report says,"[but] this has failed."

In the US, the Federal Reserve's policy of holding interest rates at near-zero for a prolonged period "may substantially increase the risks of future financial imbalances," said Federal Reserve Bank of Kansas president Esther George yesterday, adding that it could also "hamper attainment" of the Fed's 2% inflation target.

The Fed has targeted a Federal Funds Rate of 0.25% or lower since December 2008, and last month said its policymakers expect this rate will remain appropriate until unemployment falls to 6.5%. 

In recent months the Fed has also committed to buying $85 billion of US Treasuries and agency mortgage back securities each month "to support a stronger economic recovery", although these purchases have not as yet been linked to any target variable.

"Attempts to also put thresholds on the timing of asset purchases may be a bridge too far," St Louis Fed president James Bullard said Thursday.

Bullard and George are both voting members of the Federal Open Market Committee this year.

"Both these [policymakers'] comments suggest that the Fed may be getting close to preparing the markets for at least a partial withdrawal from its aggressive asset purchasing program, a likely negative for gold," says Ed Meir, metals analyst at brokerage INTL FCStone.

"However, we have yet to hear from the main man himself, Chairman Ben Bernanke, who will soon have to clarify where the Fed stands going forward and how much more money it is willing to throw into the system."

"With little sign that core FOMC members such as Bernanke and Yellen are shifting," adds a note from Standard Bank, "the Fed's QE is likely to continue for as far as the eye can see."

In Europe meantime, the Eurozone economy "should gradually recover" from recession later in 2013, European Central Bank president Mario Draghi told a press conference Thursday.

"Our accommodative monetary policy stance, together with significantly improved financial market confidence and reduced fragmentation, should work its way through to the economy, and global demand should strengthen," said Draghi, though he acknowledged that it is "too early to claim success".

"It is hard to see that the ECB could invent anything similar to an OMT for the real economy," argues ING economist Carsten Brzeski, referring to the ECB's Outright Monetary Transactions program announced last September, through which it would buy the bonds of governments that agree to the conditions of a bailout program, with a view to lowering their market borrowing costs.

"The ECB will secretly keep its fingers crossed, hoping that better financial-market conditions and structural reforms eventually really lead to an economic recovery."

The ECB left its main policy rate on hold at 0.75% yesterday, confounding those who had predicted a rate cut. 

"[We expect] the ECB is likely leave rates on hold for the remainder of the year," says HSBC analyst James Steel. 

"If the threat of further monetary easing is reduced and the Euro continues to strengthen as a result, then gold prices are likely to benefit, we believe."

The Euro jumped two cents against the Dollar to over $1.32 following the decision, while gold in Dollars rallied 1%.

Gold in Euros by contrast fell, hitting €40,422 per kilo (€1257 per ounce) this morning, down 0.8% on the week.

Over in China, consumer price inflation rose to 2.5% in December, higher than analysts were expecting and up from 2.0% a month earlier, official data published Friday show.

Japan's new prime minister Shinzo Abe announced a ¥10.3 trillion ($116 billion) stimulus package earlier today.

The package "will create wealth through economic growth," said Abe.

Japan's economy is currently in its fifth recession in fifteen years, while its debt-to-GDP ratio is around 220%, the Financial Times reports.

In India meantime, gold buying has "fizzled" since earlier in the week, when premiums over London prices hit two-month highs amid expectations of a hike in gold import duties.

"People are not interested in stocking up at these levels as prices have been in the same range for three or four days," one dealer at a private bullion importing bank told newswire Reuters this morning.

India's trade deficit meantime narrowed to $21.4 billion last month, down from $19.3 billion a month earlier, despite a 1.9% year-on-year drop in exports, a trade ministry official said Friday.

India's central bank last week proposed measures to curb gold bullion imports due to their role in exacerbating India's current account deficit.

Ben Traynor

(c) BullionVault 2013

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, January 10, 2013

Yamana Gold reports record gold production, adopts all-in cost measure

Yamana Gold says this year it will embrace the “all-in sustaining cash cost” measure advocated by the World Gold Council.

Author: Dorothy Kosich

Yamana Gold Wednesday reported record total production of 1.2 million gold equivalent ounces (consisting of 1.02 million ounces of gold and 9 million ounces of silver) for 2012, a 9% increase from 2011 and within guidance.

Total 2012 copper production was reported at 150 million pounds.

Full year 2012 cash costs were approximately $240 per GEO.

Yamana reported record fourth quarter preliminary production of 322,800 GEO and 40 million pounds of copper.

The company expects this year’s production to be in the range of 1.44 million to 1.6 million GEO with a target of more than 1.48 GEO, an increase of at least 20% over last year. 

Silver production is expected to remain consistent at between 8 million and 9 million ounces in both 2013 and 2014. Silver production is reported as a gold equivalent.

Estimated cash costs for 2013 are forecast to be below $365 per GEO. In 2013, anticipated cost increases will be driven by fewer copper by-product credits with high gold production, along with inflationary impacts in the nations in which Yamana operates.

Yamana’s all-in sustaining cash costs for 2013 are projected to be below $800 per GEO.

Sunday, January 6, 2013

Gold sector clean out expected in 2013 – Cook

The Gold Report: Brent, 2012 was difficult for many gold investors, and you paint a pretty bleak picture for certain junior mining companies in 2013 as well.

Brent Cook: We've actually had two pretty tough years on the TSX Venture Exchange. It is off about 30% from its peak in 2012 and around 20% for the year. That comes on top of a 35% decline in 2011. I do think much of the froth is washed out and we will see some opportunities in 2013.

During the most recent boom years, 2009 and 2010, roughly $11 billion ($11B) was raised on the Venture Exchange. Most of that has been spent without much success. Going by John Kaiser's database of about 1,800 Venture Exchange listed companies, there are around 600 that now have less than $200,000 in the bank and a full 62% of the 1,800 companies have a median working capital of only $1.1 million ($1.1M) or less. These companies are trading at less than $0.20/share, which means that unless things improve dramatically in the next year, many of these companies are going out of business or will push excessive dilution on current shareholders just to stay alive. The Venture Exchange will truly be the land of the walking dead.

This coming year will be a cleaning-out process that in the long run is good for the sector.

Thursday, January 3, 2013

Gold Market Report 3 January

Gold, Silver Tick Lower as "Euphoria" of Fiscal Cliff Deal Fades, India Proposes Policies to Reduce Gold Imports

WHOLESALE gold bullion prices drifted lower to $1680 an ounce by the end of Thursday morning in London, having rallied to a two-week high yesterday following news of the deal to avert the so-called fiscal cliff in the US.

"Precious metals, including gold, [were] able to profit from the euphoria among market players in the wake of the compromise reached in the US budgetary dispute," says today's commodities note from Commerzbank.

Silver also ticked lower this morning, dropping back below $31 an ounce, while other commodities also dipped and the US Dollar gained.

India's central bank meantime has announced a series of policy proposals aimed at curbing Indian gold imports.

After yesterday's rally in stocks, European indexes eased lower Thursday morning.

US president Barack Obama yesterday signed into law the bill to avoid the so-called fiscal cliff of spending cuts and tax cut expiries, after it was approved by the House of Representatives on New Year's Day.

"We see yesterday's jump in risk assets as a one-off response to the US budget vote and expect consolidation today," said a note from Credit Agricole this morning.

The fiscal cliff deal postponed planned spending cuts for two months, meaning these will still need to be debated, as will the issue of raising the government's $16.4 trillion debt ceiling.

"The fact that Congress has left so many key items up in the air will likely provide a measure of support for gold," reckons Ed Meir, metals analyst at brokerage INTL FCStone.

"It reinforces the general notion – now evident practically the world over – that politicians are losing control of their monetary base. This only makes the case for owning gold as an alternative 'shadow' currency all the more stronger."

"Central bankers everywhere continue to debase their currencies and the financial markets prove treacherous," adds Byron Wien, chairman of Blackstone Group, writing in his annual '10 Surprises' list, which predicts gold will reach $1900 an ounce.

Over in India, traditionally the world's biggest gold buyer, the central bank has published a draft report from its Working Group on gold, set up to examine the impact of gold imports on India's economy.

"Large gold imports are adversely impacting the current account deficit," says the report from the Reserve Bank of India's Working Group.

"There is a need to moderate the demand for gold imports."

Among the Working Group's suggestions is raising the loan-to-value limit for gold loan companies from 60%, which the RBI brought in last year, to 75%. Shares in gold loan companies Muthoot and Manappuram rallied earlier today following the report's publications.

Other policies suggested by the report include encouraging people to invest in gold-backed financial instruments rather than buy gold itself, as well as "fiscal measures" to reduce gold imports. 

On Wednesday, India's finance minister said the government is considering raising the import duty on gold bullion.

"Fiscal initiatives may be appropriate, but they have to be implemented very carefully," said C Rangarajan, economic advisor to India's prime minister, in an interview with Indian television Thursday.

"We need to calibrate it in such a way that it does not result in an increase in the smuggling of gold... part of the reason for the high level of imports is the high level of inflation...if inflation rates start coming down, I expect gold imports to also come down."

Indian gold dealers and jewelers meantime expect gold demand to rise by up to 15% in the first quarter of 2013 compared to the final three months of last year, the Economic Times reports.

"Farmers are expecting better [harvest] returns this year," says Bachhraj Bamalwa, chairman of the All-India Gem & Jewellery Trade Federation.

"Moreover, the wedding season will be in full swing from January. This will give a fillip to rural demand." 

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, January 2, 2013

Gold Market Report 2 January

Gold and Silver Gain Along with Stocks, "Chaotic and Unsatisfactory" Fiscal Deal "Could See Another US Downgrade"

SPOT MARKET gold prices started the year by touching a two-week high above $1680 per ounce Wednesday morning, as European stock markets also gained following news of a deal in Washington to avoid the so-called fiscal cliff.

Gold in Euros and Sterling by contrast were little changed on the day by late morning in London, recovering losses following a slight dip during Asian trading.

Silver meantime rose to $30.89 an ounce – also a two week high – as other commodities also gained.

On the currency markets, the Dollar fell sharply against the Euro as Asia opened, before recovering some ground later in the day.

The EuroStoxx 50 index, which tracks blue-chip Eurozone stocks, rose to its highest level since August 2011, while prices for US Treasury bonds fell after Congress passed a deal to avoid tax rises and spending cuts that were scheduled to start today.

The House of Representatives passed a bill, agreed a day earlier in the Senate, that will extend tax cuts for all Americans except those in the top 1% of earners – defined as individuals earning more than $400,000 a year and families earning more than $450,000.

"Today's agreement enshrines a principle into law that the deficit must be reduced in a way that is balanced," US president Barack Obama said Tuesday.

"Everyone pays their fair share. Everyone does their part."

The deal is expected to generate $620 billion in tax revenues over ten years, while the value of spending cuts in the deal over that period is $12 billion. The so-called sequester of cuts to military spending and programs such as Medicare was postponed for two months. The sequester, which was due to come into effect today, was agreed in 2011 when Congress last raised the debt ceiling limit on federal borrowing. 

"The fiscal cliff was in many ways a self-made deadline to make [politicians] face the hard choices," says Maya MacGuineas, president of campaign group the Committee for a Responsible Federal Budget.

"They once again managed to duck all of them."

"The process was so chaotic and the outcome so unsatisfactory," says a note from Citi fixed-income strategist Steven Englander, "that we are likely to see a further US downgrade at some point."

"The colossal failure of political will to get America's fiscal house in order should provide fodder for the gold bugs to bid prices higher," adds Edward Meir, metals analyst at brokerage INTL FCStone.

"We suspect gold will likely do better over the next few weeks."

Ratings agency Standard & Poor's stripped the US of its triple-A rating in August 2011, shortly after the debt ceiling was raised to $16.4 trillion following weeks of political negotiation. The US Treasury said last week that the government has now reached that limit, and is undertaking extraordinary measures aimed at keeping government debt from hitting the limit for another two months.

If the US hits the debt, the government would be forced to "default on its legal obligations", the Treasury says.

Over in Europe, Germany's manufacturing sector contracted at a slightly sharper rate in December compared to a month earlier, according to purchasing managers index data published Wednesday.

Contraction also accelerated for the Eurozone as a whole, although UK manufacturing moved back into growth territory, PMI figures indicate. 

China's official manufacturing PMI meantime held steady at 50.6, with a PMI above 50 indicating sector expansion. Similar December data for the US are due to be published later today.

India, traditionally the world's biggest source of private gold demand, is considering raising the cost of importing bullion, the country's finance minister P. Chidambaram said Wednesday, adding that he expects the value of gold imports in the current fiscal year to be down 31% at $40 billion. 

"This could dent demand for gold further," said Gnanasekar Thiagarajan, director at Commtrendz Research in Mumbai.

"Because of inflationary fears, the government is not increasing duty on other essential commodities. Since this does not affect the common man, government could be encouraged to increase duty further to curb imports."

The Indian government twice raised import duties last year, with the authorities citing gold imports as a major contributing factor the India's trade deficit.

Ben Traynor

(c) BullionVault 2013

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

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

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.

clip_image001[5]

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!

clip_image003[6]

 
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.

Wednesday, December 19, 2012

Why Gold MUST Go Higher

Ooops! Just when everyone said gold must go higher – immediately...!

MARKETS are made of opinions, some better than others.

There are always plenty of opinions about gold. And right now they're clearly making the market. Just not in the way you would think.


"There are too many bulls, including me," warned hedge-fund and commodities legend Jim Rogers to

CNBC overnight. He advises caution if you're buying gold on this drop. Unlike most everyone else.

 
Swiss bank UBS last week kept its 2013 forecast for gold to average $1900 per ounce – a rise of 14% from the 2012 average so far – while fellow London market-maker Barclays now sees gold averaging $1815 next year, a snip off its previous 2013 forecast.

Investment bank Morgan Stanley takes "a bullish view", as does Bank of America. It thinks gold will average $2,000 next year, rising to $2,400 in 2014. Whereas Capital Economics (who have an opinion on pretty much anything and everything) predict a peak of $2,200 in late-2013, some 10% above their previous guesstimate.

Never mind that
2013 used to mean
$2,500 per ounce for the London-based consultancy. That was back in 2011. And like many a gold bull right now, Capital Economics reckons the treatment of gold under the world's banking rules – aka, Basel III – could "provide an important psychological lift to the market."

How come? "European regulators appear increasingly willing to recognise gold as a high quality liquid asset," explains today's note from Julian Jessop, head of commodities research, pointing to a much-discussed – but little understand – change in banking regulation.

 

"Others are likely to follow. Increased demand for gold to meet the tougher liquidity requirements could then go some way towards mitigating what might otherwise have been a large downside risk when the authorities do eventually take away the exceptional liquidity they have provided to the banking system."

 

You can find the same opinion – only with less understanding, subtlety or caveating – pretty much across the internet. Beware any "analyst" who says gold is about to become a "Tier 1" asset (that refers to capital reserves, not liquidity). Also beware if they claim it's about to happen, like immediately, starting on New Year's Day!

Because most of the developed world struggled to implementing Basel II – the last set of agreed principles. Putting Basel III into place by 2013 is now an "ambition" most national regulators have delayed and deferred well into the never-never. And gold's new status under those rules is still very far from certain. It may perhaps be valued at 50% of its price when regulators count up the liquid reserves a bank holds. Or it might yet get carried at 100% of market-price, causing a headache for the beancounters as the price moves up (or down – shhhh!) minute by minute.

Still, the possible re-assessment of gold as "a high quality liquid asset" would mark a significant step after 12 years of annual price gains. It would mark gold's "growing use as collateral", as Capital Economics say. That would mark a new stage in gold's return to the banking system from hated, under-priced and un-holdable relic. Not dissimilar, perhaps to gold's return as an investable asset for US citizens on New Year's Day 1975.

For more than three decades gold bullion had been illegal to own in the United States. Gerald Ford's executive order to remove that block clearly helped the long 1970s' bull market run on towards its big 1980 top. US savers had already missed out on a five-fold gain. Now the wealthiest savings market in the world could participate in the inflation-fuelled gold bull market at last!

But ooops...

image
"Gold rose 600% in the 1970s," said
Jim Rogers back in 2007. "Then gold went down nearly every month for two years. Most people gave up."

You can't blame investors who quit the gold market between 1975 and 1977. The gold price fell very nearly in half after all. But that is simply "what happens in bull markets," said Rogers. And between 1977 and 1980, "gold went up another 850%."

Fast forward to end-2012, and "Gold is having a correction," said Jim Rogers last night. "It's been correcting for 15-16 months now, which is normal in my view, and it's possible that [the] correction is going to continue for a while longer."

And just in time for the much-hyped entry of new commercial bank buyers, too. Or so says this opinion.

 

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.

Tuesday, December 18, 2012

Gold Market Report 18 December

Gold Dips Back Below $1700 with Investors "Wary of Thin Markets", Signs of Progress on Fiscal Cliff

U.S. DOLLAR gold prices fell back below $1700 an ounce Tuesday morning, having briefly risen above that level following news of possible progress in the ongoing fiscal cliff negotiations in Washington.

"Investors [are] seemingly wary of taking positions in a time of thin liquidity and still waiting to see whether legislators will avert the automatic spending cuts and tax hikes in the US," says a note from Swiss precious metals group MKS.

Silver also eased lower after trading above $32.50 an ounce, while European stock markets were up slightly on the day by lunchtime.

On the commodities markets, oil prices edged higher while copper fell slightly. The Euro meantime held near seven-month highs against the Dollar above $1.31.

US president Barack Obama has said he is willing to extend tax cuts currently due to expire at the end of this month for those earning $400,000 or less a year, raising his previous threshold of $250,000. Obama is now looking to raise an additional $1.2 trillion in tax revenues over the next decade, press reports say, down from the $1.4 trillion he was previously seeking.

Over the weekend, Republican House of Representatives speaker John Boehner dropped his outright opposition to tax increases, saying he would consider allowing tax cuts to expire for those earning more than $1 million annually.

Obama has also said he will settle for a two-year increase in the US federal debt ceiling, rather than ask for the power to raise it to be transferred from Congress to the Oval Office, the Financial Times reports. The US is expected to hit its $16.4 trillion borrowing limit in February.

"[The White House is] talking about how close Obama's position is to what Boehner is willing to accept," points out Brad DeLong, professor of economics at Berkeley.

"They are not talking about how close Obama's position is to what [House majority leader Eric] Cantor and the right wing of the House Republican caucus are willing to accept...If Obama makes a deal with Boehner, the next stage is for Boehner to say that while the deal is fine with him, he cannot control his members, and that Obama needs to make additional concessions."

"It is all very tight and it is still possible that [the fiscal cliff issue] runs into next year," says Steve Barrow, head of G10 research at Standard Bank.

"But what does seem clear is that some sort of deal will be done and that's clearly helping to support markets, although the optimism is quite guarded."

"We expect subdued gold-trading action until the market is clear on the fiscal cliff negotiations," says VTB Capital analyst Andrey Kryuchenkov.

"We see US lawmakers striking an uneasy late deal over spending reductions and tax hikes."

UK inflation meantime held steady at 2.7% last month, according to consumer price index data published Tuesday.

"Although unchanged overall...there were significant upward and downward pressures on CPI annual inflation between October and November," the Office for National Statistics says, adding that prices for food, nonalcoholic beverages and domestic energy rose while the cost of items such as motor fuel and furniture fell.

The Bank of England's Quarterly Bulletin published this morning says that "early signs have been encouraging" that its Funding for Lending Scheme is boosting the amount of credit provided to the economy, although it adds that "given the usual lags from credit being offered to loans being made, the FLS is unlikely to materially affect lending volumes until 2013".

"Easier access to bank credit should boost consumption and investment by households and businesses," the bulletin says.

"In turn, increased economic activity should raise incomes."

The FLS was launched back in July with the aim of providing funds to banks and building societies for the specific purpose of being used to provide credit to households and non-financial businesses.

Over in China, the world's second-biggest gold buying nation in the third quarter, a growing number of China's bankers expect to see looser monetary policy, according to a quarterly survey published by China's central bank Tuesday.

Although 75% of respondents said they believe the current policy stance is the right one, 19.8% said they expect to see some form of easing in the first quarter of 2013. By contrast, only 5.9% of respondents to the Q3 2012 survey said they expected to see monetary easing in Q4.

India's central bank meantime left its main policy interest rate on hold at 8% today.

"The inflation picture is still not comforting enough for the central bank to let down its inflation guard," says HSBC chief India and Southeast Asia economist Leif Eskesen in Singapore.

Indian inflation as measured by its wholesale price index fell to 7.24% last month, down from 7.45% in October. India's central bank has said it wants to see inflation fall to 5%.

India is traditionally the world's biggest gold buying nation.

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.