GLD Biggest ETF
In August, gold supporters scored another telling victory over the remaining doubting crowd.
The giant gold- exchange traded fund, SPDR Gold Shares, grew to be the leading exchange traded fund, by assets, surpassing the SPDR S&P 500 ETF, which tracks the Standard & Poor’s 500-stock index. The GLD fund passed the S&P fund, SPY on Friday, August 19, when it closed with $76.7 billion in assets, surpassing SPY’s 74.4 billion.
Then on the following Monday, GLD added $1.2 billion in assets to reach a total of 77.9 billion as gold
prices climbed 2%.
Since it was launched in 2004, GLD has grown into a market power attracting legions of small and large investors including big-name hedge fund managers.
Source: The Wall Street Journal
Why Gold and Silver Will Rise
The primary and overarching reason for having a significant percentage of investable assets and wealth in precious metals, according to some, is simple: to protect your real purchasing power.
The US dollar has lost 31% of its real purchasing power since 2000 and 72% since 1990. Since the US was taken off the gold standard in 1971, the dollar has lost a staggering 82% of its value.
Source: SeekingAlph.com
Ancient Mines Get 2nd Life
An ancient gold mining region in northern Spain, that had supplied the Roman Empire 2,000 years ago, is being developed again.
This will be Europe’s largest gold mine, according to Orvana Minerals, a Toronto-based company, which also owns a gold mine in Bolivia. The company is tunneling into a mountainside, in the rugged terrain of Asturias, to mine a deposit expected to yield 100,000 ounces of gold a year, by 2012. Operating costs are expected to be about $450 an ounce according to the company. This isn’t the only historic goldmining
region getting a new look. The Sukari gold mine mined by the Romans near the Red Sea in Egypt, resumed operations under Australian management.
Source: Bloomberg Business Week
Morgan Stanley Positive on Gold
Gold’s “perfect storm” is expected to continue on renewed investor demand for haven assets, according to Morgan Stanley, noting the potential for driving the metal to its 1980 inflation-adjusted record. The firm retains a positive view on gold for its role as portfolio insurance against formidable challenges. Bullion
now has an estimated 85 percent probability of trading between $1819 per ounce and $2,085 an ounce next year, according to Morgan Stanley’s analysts report. With a likely “extended period of negative interest rates in the developed world, the forecast risk in gold is skewed firmly to the upside.”
The firm’s “base case” calls for gold to average $1,511 an ounce this year and $1,624 an ounce in 2012. Immediate delivery gold, which reached a record $1,921.15 an ounce in early September, has average $1,523 this year.
Source: Bloomberg Business Week
Spikes to New High
Gold rose to fresh highs last month as more investors sought the safety of the precious metal to escape the threat of unresolved tensions in the global economy. The spot price of gold hit $1,921.15 an ounce.
Jeremy Cook, chief economist at foreign exchange brokers, World First, said: “Gold is a rocket ship at the moment and there are many factors that make us expect further gains.”
Markets are already factoring more quantitative easing by Ben Bernanke, the chairman of the US Federal Reserve, when he hosts his annual gathering of central bankers at Jackson Hole, Wyoming.
Source: www.telegaph.co.uk
Silver Nears “Sweet Spot”
The period of seasonal strength in silver is approaching. Equityclock.com notes that the period of seasonal strength for silver during the past 20 years has been from Sept. 16 to April 11. The “sweet spot” is from the end of October to the end of February. The trade has been profitable in 14 of the past 16
periods including 10 of the past 10 periods.
Supply of silver from mine production also continues to grow. Analysts are projecting a 10% increase in 2011. Demand for silver is expected to exceed supply in 2011 and beyond because of investment demand.
Source: Financial Post
More Dollars on Silver
During the past six months, several of the largest bullion dealers have reported selling more dollars worth of silver than gold. Gold costs 45 times more than gold, but more cash is being spent on silver than gold.
The historical gold/silver price ratio is 16 -1, but the current gold to silver ratio is above 43-to-1. If an investor was considering buying fractional gold ounces, even a 1/10th ounce of gold would be close to $200, and premiums on fractional amounts of gold increases exponentially, the smaller the size. An
increase in silver inventory – reduced by industrial uses – may well impact the future ratio.
Source: Sockhouse.com
Jewellery Sales Give Industry Heart
When central banks stopped becoming net buyers of gold 40 years ago, the industry has become more dependent on jewellery, prompting the World Gold Council to seek new pastures. But, unlike diamonds or platinum, gold miners have traditionally shown little interest in the end user.
Source: Financial Times
Production Slows
Even with the price of gold going up over the last 10 years, there has hardly been any significant growth in gold production. In fact, over the last 20 years, from, 1990 to 2010, gold production has grown by only 0.7% per year. By comparison, gold production grew at a rate of 1.9% per year between 1900 and 1990. A major reason for the drop in the growth rate, has been the decline of South Africa as a producer of gold produced about 1,000 tonnes in 1970, but below 200 tonnes last year.
Source: Standard Chartered
Time For Fear or Greed?
Gold has been the star performer of the past decade, rising in value by 606% since the stock market peaked in 1999. Those canny enough to have bought a few gold bars as the stock market started to slip in 2000 are now sitting on substantial gains. As long as equity markets remain in turmoil the price of gold is
likely to remain high – but most experts warn that at some point there will be a sharp correction. Commodity prices, though, continue to be fueled by demand from rapidly industrializing emerging markets, in particular China, India, Brazil and Russia.
Source: www.telegaph.co.uk
Buy The Miners
“The reason to buy a gold mining company is the discrepancy in value,” says Darren Pollock of Cheviot Value Management, referring to a 30% gap between the gains in gold bullion and the stock price of mining companies that produce it. It’s certainly not a new problem for the miners but is one that Pollock thinks is about to change. It’s a call that gold will stay higher and that miners are not being fairly compensated.
Case in point: Newmont Mining (NEM). It’s not only Pollock’s largest position but a stock that he says has sat at $60 a share since January at a time when gold rose 25%. And if you go back five years, he says, you’ll still see Newmont sitting at $60, but the price of gold was $500 then, less then a third of what it is now.
What’s worse, Pollock says, is that Newmont’s production and reserves have continually grown while its costs to extract gold from the ground has gone down. “Newmont Mining’s cash costs are about $600 an ounce, so we’re looking at huge gross margins right now,” he says. “It’s pure profit going forward.”
Source: Yahoo Finance
ETF’s Builds Demand
Silver, like gold moves higher when financial markets are uncertain, inflation is rising and geopolitical tensions are increasing. A surge in demand for investment purposes began in May 2006 when the first exchange-traded fund backed by physical bullion was launched. Since then, about 500,000 ounces of silver have been placed in inventory to back a series of exchange-traded funds that have been launched around the world.
Source: Financial Post
When Will Bubble Burst?
Gold has surged, as most other commodities have fallen sharply in a world increasingly worried by slowing growth – asserting its unique monetary/currency characteristics and role as a store of value against fickle paper currencies.
While gold mining stocks held up well in the stock market weakness of recent months, they have dramatically underperformed the spectacular progress of the metal in 2011. This divergence
between gold and gold mining equities has been one of the big challenges for many gold investors in 2011. However, gold shares may well be the best investment avenue for those seeking to maintain gold exposure but cautious about the pace of bullion’s recent rise. For most investors contemplating gold, the big issues today are: Is gold a bubble? If so, when will it burst?
Gold’s rise is about the falling confidence in paper currencies and the financial system. If you can tell me when developed country governments (especially the US) are going to get their fiscal houses in order, when interest rates are going to offer a real return in those countries, and when currency debasement
and inflation is not seen as desirable economic policy, then maybe you can develop some (vague) idea when the gold bull market boom will end.
Source: Money Management
24% of World’s Demand
Asurge in investor demand in 2011 – unexpected by many observers – has sent silver prices soaring. Prices are rising despite oversupply and a lackluster recovery in industrial demand. This is
almost entirely about investment, says Stephen Briggs, senior metals strategist at BNP Paribas.
Investors, from the U.S. to China, turned to “hard assets” in part as a hedge against inflation and
economic unease. Silver benefits from a dual role as industrial commodity and precious metal. Exchange-
traded funds backed with silver have made it easier for investors to invest in a market that traditionally
was difficult to participate in.
This year investors are expected to pile a record $4.5 billion into the silver market, accounting for 24%
of the world’s total demand, says GFMS Ltd.
Source: WSJ.com
BNPP Ups Forecast
French bank BNP Paribas SA increased its price forecast and expects gold to average $2,080 a troy ounce in 2012, up from $1,600 previously forecast.
The bank also increased its average price forecast for 2011 to $1,635 an ounce, up from $1,510 an ounce. The bank didn’t see a significant decline in price in the next two years, predicting the metal will average $2,200 an ounce in 2013, citing several gold supportive factors, including high debt levels in developed countries and increased uncertainty within the international monetary system.
Source: MarketWatch
Bank Buying Boosts Price
Even at prices of less than $300, gold accounted for 30% of the euro zone’s central bank reserves at the start of 2000, compared with a world average of 12%. From 1989 to 2008, the world’s central banks, especially the European banks, had been selling gold. Since 2008 the banks have bought back gold
— at some three times the price. Even though they now have less physical gold, price appreciation now means gold accounts for 61% of European reserves.
World-wide 6.7 million ounces have been added to official reserves this year, according to the World Gold Council. With the demand for gold –excluding official reserves – dropped by 3.2 million ounces in the first six months of 2011, central bank buying has been crucial to boosting prices.
Source: Wall Street Journal
Production Pushed Up
Overall, silver production has been rising in the past five years. Most of the growth is coming from new mines in Mexico, Latin America and Australia. Goldcorp expects to more than triple output at is Penasquito mine in Mexico, to produce 10 million ounces of silver in 2011. Coeur d’Alene Mines’ Palmarejo silver and gold mine is ramping up to produce 9 million ounces annually.
BHP Billiton’s Cannington mine in Australia, one of the largest silver mines in the world, also is looking to increase production. And junior miners are digging in to open new sites and closed mines, now profitable, in the wake of rising metal prices.
In Silver Valley, Idaho, for example, the Crescent Silver Mine, closed more than 12 years ago when silver dipped to $5 to $6 is being reopened.
Source: WSJ.com
Chartist: “Moving Higher”
Is it too late to buy gold? Or, is this a prudent time to take some profits? From the view of a chart analyst,
technical analyst Peter Lee of UBS, “gold is headed higher. Gold is a great call. We don’t think its speculative at current levels.”
Discounting for inflation, Lee sees the most precious metal heading into the $2,000’s. “Historically the last move up on a commodity based rally is a parabolic move.”
Gold has moved away from it’s trendline and moving average, but hasn’t done anything resembling the spectacular spike silver made in April. Gold has repeatedly tested its uptrends and moving averages and held every time, leading to ever rising moves.
Silver is consolidating its multi-year move in a range from the mid-30’s to low-40’s. The long term outlook is a big move higher, eventually climbing to $100/oz.
Source: Yahoo Finance
Gold Pays the Rent
Gold is as good as – or perhaps better than - cash. At least on Wall Street. Especially if your renting from Donald Trump. A new tenant put down the security deposit to close the lease deal at 40 Wall Street by handing over three gold bars. No dollars changed hands – just three 32-ounce bars of gold, each about the size of a television remote control, used to pay the security of about $176,000.
The new tenant was precious metals dealer Apmex. They signed a 10 year lease for the 50th floor in the 70 floor Wall Street tower, at a rate of about $50 a square foot. Payment in bullion was a natural for Apmex. The company is promoting the use of gold as a replacement for cash in some situations.
“I thought, Trump is a smart guy,” Michael Haynes, Apmex chief executive said, “he’ll realize that taking gold is a better idea than taking cash.”
Source: The Wall Street Journal
Precious Metals Outlook
Commenting on the impact on a possible stimulus impact on the junior resource sector, and the current economy, Jason Burack, an investor and creator of Wall Street for Main Street said established producers of gold and silver have humongous cash flow, and they will want to add near-term producers. The
juniors are where the majority of wealth is going to be created.
Chris Marchese, portfolio strategist for a hedge fund under Vishni Capital said “it’s going to be more this time around. With gold at $1,800/ounce, it is taking the reserve status from the dollar, and with the announcement of Quantative Easing 3, we could see $2,599 or $3,000 gold very quickly.”
Source: Oakshire Financial
Silver Futures on HKME
Dollar-denominated Chinese silver futures began trading on the Hong Kong Mercantile Exchange
in mid-August. This development grants Chinese and other Asian investors direct access to the
metal and blunts the U.S. dominance in silver-bullion trading – and a move seen as bullish for
long-term silver prices.
Historically, investors in these markets had to purchase Chicago Mercantile Exchange (CME) -
based contracts that are standardized and traded through the Hong Kong Futures Exchange – in accordance with the CME. The new HKFE silver-futures contract provides for 1,000 troy ounces,
with delivery at specified depository facilities in Hong Kong – considerably smaller than the 5,000 troy-ounce contract traded on the CME, meaning it could be more liquid.
Source: NuWireInvestor.com
The Gold Standard?
On 15 August 1971, with the US public finances stressed by the cost of the war in Vietnam, Richard Nixon cut the link between the US dollar and gold. Until then, the US Treasury was duty bound to exchange an ounce of gold with central banks willing to pay them $35. It was one of those seminal moments whose significance has only gradually become apparent, obscured as it was at the time by Vietnam and then Watergate. But the more one examines economic history, the more obvious it is
that this was one of the most important policy decisions in modern history.
Source: www.telegaph.co.uk
Battle Over Proposed Pit
A political battle is underway over plans for one of the world’s largest open pit mines at Bristol Bay in southwest Alaska. Proposed by the Pebble Partnership, which includes Northern Dynasty Minerals and Anglo American, the open pit project – reported to be up to two miles wide and 1,700 feet deep —
would capitalize on one of the world’s largest concentrations of gold, copper, silver and molybdenum, and could extract more than 107 million ounces of gold and 80 billion pounds of copper from a 150 square-mile area.
Opponents, who include Washington Senator Maria Cantwell, say the mine would have devastating impact on wildlife, and dump up to 10 billion tons of toxic waste in the Bristol Bay watershed.
The project is supported by Alaska Rep. Don Young, who has introduced a bill that would strip the EPA of its authority to halt the project.
Source: McClatchy Newspapers
Explores in Indonesia
Green Technology Solutions, Inc., a clean energy and rare earth elements company, based in San Jose, California, has signed an agreement with mining company, New World Energy, to explore and develop gold in Indonesia, one of the world’s leading gold producers. The upswing in gold prices has filled
projects one thought to be unfeasible with the potential for enormous profits, said GTSO CEO John Shearer.
Source: Enhanced News Online
Banks Take Possession of Au
The Financial Times (London) reported that central banks around the world pulled 635 ounces of gold from the Bank for International Settlements so far this year, that represents the largest withdrawal in more than 10 yrs. Last year, central banks added to deposits of gold at the BIS (a Bank for central banks), as opposed to lending it directly to the private sector amid growing concerns over counter party risk.
The Big Q: Why are central banks now taking possession of their gold now?
The Big A: Central banks are unimpressed with the low interest rates for lending their gold, and perhaps they see more economic troubles ahead.
After several years of being net sellers of gold, central banks are now net buyers.
Source: Live Trading News
Sees $3,000 in 2013
Gold will rise to $3,000 by March of 2013, driven by currency devaluation and central banks buying the metal, John Brownlie, CEO of Oro Mining. Ltd., told Bloomberg’s Business Week. “People got over the sticker shock of paying $1,000, people got over the sticker shock of $1500,” Brownlie said in the interview. “Once they cross the $2,000 sticker price, it can get significantly higher.”
Brownlie said gold will fall to $1,750 by the end of 2011, and climb in 2012. Now head of Oro’s mining developments in Mexico, has developed mines in Mexico, South Africa and Uzbekistan. Based in Vancouver, Oro Mining expects to begin production in 2013, with operating costs of $300 to $400, Brownlie said.
Source: Bloomberg’s Business Week