MasterMetals on Twitter

December 29, 2011

For Metals, Buying Chance Coming, But Still Months Away - CNBC.com

The key in the coming months will be to be selective in which metals and other commodities one is exposed to. 

Those commodities most related to industrial production will have the harder time in this global recessionary environment. 

 For Metals, Buying Chance Coming, But Still Months Away

The four-month slump in gold and other metals by nature is setting up a buying opportunity somewhere, but it could be months before a solid entry point materializes.

Full Story:
http://www.cnbc.com/id/45816423

Cyprus gas find boosts country’s energy hopes - FT.com


Cyprus gas find boosts country's energy hopes
Cyprus Flag

NICOSIA – Cyprus said on Wednesday that an offshore prospect where exploratory drilling is under way contains an estimated 5tn-8tn cubic feet (tcf) of natural gas, a first for the island which could make it self-sufficient in the commodity for decades.

Based on the exploratory drill by US-based Noble Energy, the prospect, which lies south of the island, contains a gross mean of 7 tcf of gas, Cypriot president Demetris Christofias said in a statement.

"The discovery of natural gas in the exclusive economic zone of our country opens great potential for Cyprus and its people, which with prudence and in a spirit of collectiveness we will utilise in the service of public interest," Mr Christofias said.

"New favourable economic prospects have opened for the future of the country," Christofias added.

It was an auspicious end to a traumatic year for Cyprus, which was hammered by rating agencies for fiscal slippage, shut out of international capital markets and hit by a large munitions blast that destroyed its largest power station.

Its northern neighbour and old rival Turkey has challenged Cyprus's bid to search for hydrocarbons, saying the island has no jurisdiction. The island was split in a Turkish invasion in 1974 after a brief Greek-inspired coup, and Ankara supports a breakaway state in northern Cyprus.

The island, which is run by an internationally recognised Greek Cypriot government, says estranged Turkish Cypriots can benefit from hydrocarbon finds in the context of a political settlement ending decades of division.

Turkey says it plans to conduct its own hydrocarbon surveys off Cyprus. When Noble started its exploratory drilling in September, it sent its own survey vessel to the area.

"We call upon Turkey to show a spirit of peace and reconciliation [and to] avoid any adventurous acts and provocations which cause problems to [peace] talks and also tension in the eastern Mediterranean," Mr Christofias said.

Greek and Turkish Cypriot sides have been engaged in peace talks under UN auspices for decades. The latest round of talks began in 2008.

Turkish Cypriots reacted coolly to the announcement.

"In our view the Greek Cypriots should be investing more in the negotiations, and not in things that cause further disputes," said Kudret Ozersay, chief aide to Turkish Cypriot leader Dervis Eroglu in peace talks.

The Cypriot block, known as Block 12, covers about 40 square miles and will require additional appraisal drilling prior to development.

It was a "significant" discovery, Noble Energy chairman and CEO Charles Davidson said in a statement. Noble has also reported significant natural gas discoveries off neighbouring Israel.

"This is the fifth consecutive natural gas field discovery for Noble Energy and our partners in the greater Levant basin, with total gross mean resources for the five discoveries currently estimated to be over 33 tcf," Mr Davidson said. "This latest discovery in Cyprus further highlights the quality and significance of this world-class basin."

The gross mean resource range of 5 tcf to 8 tcf could be a conservative estimate, US-based brokerage Sterne Agee said.

"If we use prior news releases on the Tamar and Leviathan discoveries as a guide, we believe that today's initial resource report by Noble is likely to be conservative, and we would not be surprised to see significant upward revisions in the next couple of years as the project nears production," analyst Michael McAllister said in a note. Leviathan and Tamar are two fields off Israel.

Proved discoveries could make Cyprus, which now relies almost exclusively on imported and expensive fuel oil to fire its energy grids, self-sufficient for decades. The island has estimated needs in gas of 1bn cubic metres per year.

December 22, 2011

Sprott expands on call for silver miners to hold back metal - SILVER NEWS | Mineweb

Sprott expands on call for silver miners to hold back metal
SILVER NEWS

The Gold Report asks Eric Sprott and silver insiders what impact limiting sales of newly mined silver could have in one of the most volatile subsets of the resource sector.

In an open letter to silver producers at the end of November, Sprott Inc. Chairman Eric Sprott cited an overleveraged banking system, weakening dollar and increasing demand as reasons to hold profits in silver rather than selling all production and putting the proceeds in the bank. "Given the current environment, we see much greater risk holding cash in a bank than we do in holding precious metals," Sprott said.

Interviewed mid-December Sprott, who is a major investor in physical and silver equities, explained why he wrote his letter. "I have always liked silver because I look at the physical supply and demand metrics and they scream that silver should be higher. But the price is being kept down by paper silver traders who are abusing the market."

As proof, Sprott pointed to the day last April when silver hit $50 an ounce (oz) and then immediately dropped $6/oz in 13 minutes when almost none of the markets were open. "A billion ounces of paper silver traded that day. The mining industry only produces about 700 million ounces (Moz) a year. The major financial institutions, which had been shorting silver for a long time, refused to let silver break $50/oz so they manipulated the market to keep a lid on it," Sprott charged.

"That is why I think the physical silver producers, the miners, need to be more active participants in the market," Sprott explained. "When silver is produced for less than $15/oz and sold for $30/oz, theoretically the producer is making $15/oz. I believe it is irresponsible for companies to leave that money in the bank where it is vulnerable. It is too risky. Producers have to find something to invest in and the obvious choices are gold and silver. It seems very logical to me that silver producers should invest in silver as a monetary metal."

"I'm not trying to create a Hunt Brothers type situation," he said, referring to when Nelson and William Hunt tried to corner the silver market in the late 1970s by buying as much as a third of the world's supply, driving the price up to almost $50/oz before the market crashed on Silver Thursday. "I'm just trying to create a fair playing field. Producers should take their future into their own hands," he said.

To those who compare his call for silver producers to act in concert to the methods of an oil cartel, Sprott said he agreed with the business model. "OPEC [Organization of the Petroleum Exporting Countries] was right that the price of oil was ridiculously cheap. Coming together to control supply was probably one of the more responsible things oil producers did. They were being disadvantaged and they took appropriate action. I think that's what the silver industry should do," he said.

As a major silver owner, Sprott could profit if holding silver reduces supply and results in a higher silver price, but so would other equity holders, he said. "Silver producers and their shareholders are the ones who are most effected and yet they aren't even involved in a pair of lawsuits against J.P. Morgan Chase and HSBC Holdings Inc. for silver market manipulation going back to 2008. Producers have to get themselves in it. They have to understand what's happening in the game. How can we let some guy manipulate the price of silver down and stand back and do nothing?" he asked rhetorically. "This [letter] was born out of frustration with the paper market and doubts about the banking system. Having money at a bank is taking on inordinate risk because when things start to implode, capital can be eaten away in no time."

Holding back a little can make a big difference, Sprott suggested. "It just takes a bit of a groundswell. When I look at the supply/demand for silver, it's a very, very tight market. It wouldn't take many ounces to have an impact. The COMEX [Commodity Exchange Inc.] has about 30 Moz or $1 billion of deliverable silver. That is not a lot of money in this day and age for all of the producers," he said. He estimated that if the silver producers put 15% of their cash balances back into silver it would reduce the silver supply by 21%; that would result in a shortage of supply for industry purposes, let alone investing, and drive up the price. "If you are in the silver business, put your money into silver and stop the paper guys from knocking the price around," he said.

"The key thing is just to get a momentum change," Sprott said. "I would like the CEOs of silver companies to think about the silver market. Let's not just think about tons and grade and recovery. Let's deal with what is going on in the market in a rational way."

Sprott says he has had some positive responses to his letter from major producers. "I know it's under consideration by a lot of people," he said.

Endeavour Silver Corp.'s Chairman and CEO Bradford Cooke said he appreciated Sprott's call to action. He predicted that the silver price is on the way up regardless, although the sector could be "sloppy" for the next nine months while global uncertainty works its way out. "Gold and silver will be the first sectors to start moving in 2012," he said.

The move up will probably not be driven by anything silver producers do, however, Cooke said. "I don't think producers have enough cash to impact the price of silver enough to make a difference globally," he said. "We can make an impact to individual balance sheets," he added.

Silver Investor Publisher David Morgan also said he liked the idea of companies investing in their own product, but didn't think they could impact the price of the metal materially unless every mine in the world participated. "It has been tried before," he said. The challenge, according to Morgan, is that the market is controlled by big players, most of which are not exclusively silver producers since as much as 70% of production is the result of byproducts from mining for other metals. "What the practice can do," Morgan said, "is add value for investors and differentiate companies by creating a premium for their share price."

Even if producers holding silver don't push up the price, Sprott is convinced companies that hold silver will benefit from delaying the sale of the metal because geo-economic forces will increase silver's attractiveness anyway. He cited rising demand for silver from an additional 4.3 billion people in Asia and South America. This increasing hunger for the metal for industrial and investment purposes was demonstrated in September's historic sale of physical silver coins and China's importation of 7.7 Moz of silver that same month. "Silver will go up on its own. But the silver industry could aid and abet the situation. Then companies will be double winners. The stock will go up because silver is going up and the company will make more money because it was not in a bank.

"I think the price should already be substantially higher," Sprott said. "The trade should be 16:1 gold:silver ratio. That implies that at $1,600/oz gold, silver should be $100/oz. At $3,200/oz gold, silver should be $200/oz. The outlook for gold is phenomenal and silver is going to go up even faster. That is why I think that this next decade will be the decade for silver," Sprott predicted.

Article published courtesy of The Gold Report - www.theaureport.com

December 14, 2011

Uranium industry alive and well: David Talbot - WHATS NEW | Mineweb

Uranium industry alive and well: David Talbot, Dundee Securities
Mineweb.com - The world's premier mining and mining investment website


DT: Yes. I would say China is definitely the dominant growth driver. Along with India and Russia, China is going to account for about half of the new build in the world. While China has temporarily suspended approvals pending stress tests and further review in light of Fukushima, and rightly so, the country maintains strong support for nuclear power. The country is up to 15 reactors in operation from 11 just one year ago, and it has another 26 under construction, 51 planned and 120 proposed. So China is definitely leading the way.

TER: And utilities are in the game now.

DT: I think the Asian utilities are going to go out of their way to either purchase uranium in the markets through long-term contracts, but probably and most importantly, buy some of those large uranium mines around the world. This, potentially, leaves less uranium for the next country.

Read the whole interview here: Mineweb.com - Uranium industry alive and well: David Talbot - WHATS NEW | Mineweb

The MasterMetals Blog

First U.S. gold coin sold for record $7.4 million - GOLD NEWS | Mineweb

First U.S. gold coin sold for record $7.4 million -
GOLD NEWS Mineweb.com - The world's premier mining and mining investment website

The coin concerned is known as the "Brasher Doubloon" with the punch on the breast, this rare numismatic treasure is considered America's first and most important gold coin. Tthe transaction is the single highest price ever paid for a coin in a private transaction. The coin is thought to be truly unique as there is only one known example.

"Not only is this the highest-valued gold coin in the world, but it is also one of the most iconic pieces in all of numismatics," says John Albanese, widely considered one of America's leading numismatists. "It is not a stretch to call this the holy grail of all collectible gold coins."

According to the Blanchard release, the gold coin in question was originally minted in 1787 by Ephraim Brasher, a silversmith and goldsmith in New York City, and it contained $15 worth of gold at the time of its minting. At 26.4 grams of 22 carat gold this would now be worth perhaps around $1275 in its gold content today.  It was called a doubloon because it was similar in weight to the Spanish gold coins with that designation.  Brasher made a small number of gold coins that historians today believe were intended for public circulation.

While Brasher worked as a regulator with the New York Chamber of Commerce certifying the weight and value of foreign gold pieces he established a solid reputation for his expertise, and his "E.B" hallmark counter stamp was esteemed in the area. He also stamped his own doubloons with his personal hallmark on the obverse, and this is the single-known piece of his making that includes the stamp at the centre of the eagle's breast rather than on its wing.  There are believed to be six examples of the coin stamped by Brasher on the eagle's wing.

Why is it significant? Recent research has established that the Brasher Punch-on-Breast Doubloon is the first American-made gold coin that had a denomination in dollars and that was struck to the same standard that was later adopted for all U.S. gold coins, making it what is today considered the first truly American gold coin. No other U.S. Colonial or Federal coin can make that claim, putting Brasher's first New York-style Doubloon in a class by itself.


Mineweb.com - The world's premier mining and mining investment website First U.S. gold coin sold for record $7.4 million - GOLD NEWS | Mineweb

The MasterMetals Blog

December 13, 2011

As China Goes, So Go Commodities - WSJ.com

As China Goes, So Go Commodities

The outlook for global prices depends heavily on whether the country maintains its voracious appetite for oil, copper and other products

You want to know where the global commodities markets are heading in the coming years? Then it's probably best that you remember a single word: China.

As the biggest and one of the fastest-growing of the world's developing economies, China has become a voracious consumer of industrial and agricultural commodities. Its shifting needs are now the most important driver in the prices of many of those goods. Producers often base massive capital investments largely on their expectations for Chinese demand for their products. Investors often make similar calculations before buying or selling commodities contracts or related securities.

That's why no single factor is likely to have a more far-reaching impact on commodities markets over the next few years than how Chinese demand changes as the country's economy evolves. "That's the big question," says Richard Adkerson, chief executive of Freeport-McMoRan Copper & Gold Inc.

So what's the answer? Here are three possible economic scenarios, and what each would mean for global commodities markets.

Full Speed Ahead

If China's consumption of commodities continues to grow at the rate it has over the past 10 years, this is what the world would have to do to meet that demand in 2020, assuming that the rest of the world's collective appetite doesn't change at all:

[CHINAonline] Craig Frazier

• Pump almost as much additional crude oil as Saudi Arabia now provides per year.

• Grow more than three times as many soybeans as currently come out of Iowa, which alone provides 5% of global output.

• Extract nearly three times as much new copper as the current annual production from Chile, which mines about four times as much as any other nation.

And that's just for starters. Vast increases in supply would be needed for all sorts of other commodities as well.

Prices that rocketed to record heights in recent years on Chinese buying could fly even higher. That would be good news for companies that produce those commodities and investors who have placed bets on them—unless high prices abruptly choke off demand or spur the Chinese and other buyers of commodities to seek alternative goods.

CHINAstats

Materials in tight supply or at risk of significant constraint, like crude oil, copper and palladium, could be vulnerable to sharp price increases. Their prices shot up 50%, 106% and 207%, respectively, in the five years through 2010. By contrast, aluminum is plentiful, cotton production is rising sharply and nickel output is climbing—at least for the moment—which can make them less vulnerable. It's also easier to produce some commodities in greater quantity when needed, which can limit price shocks. It takes less time, for example, to grow more corn than it does to find new oil beneath the ocean floor.

Many analysts consider the fast-growth scenario improbable. The consensus is that China is headed for slower economic growth than it experienced from 2001 to 2010, when its annual rate of expansion ranged from 8.3% to 14.2% and reached double digits six times, according to the World Bank. If the consensus is right, the question becomes how much China's growth will slow.

The Hard Landing

A growth rate of 4% to 6% would be a big leap forward for the U.S. economy and plenty of others. But not for China.

That's the range of growth expected for the Chinese economy by around 2013 or 2014 by Roubini Global Economics LLC, a New York-based research and consulting firm. Shelley Goldberg, the firm's director of global resources and commodity strategy, calls that a "hard landing" after the far more rapid expansion of the past decade. "Obviously, it doesn't bode well for commodities," Ms. Goldberg says.


Demand for steel, copper and other industrial metals could drop significantly if China does stall, because those materials are heavily used in construction—which would be at risk from weakness in the Chinese real-estate market—and because China often accounts for some 40% of global demand for those materials. Coal demand could also tumble, she says, because the fuel is heavily used in China to generate power.

Some commodities could take a hit not because China uses more of them than anyone else but because it has been providing much of the growth in their markets. For instance, while China accounts for just 11% of global oil demand, according to Barclays Capital, it provides 60% of the growth in that demand.

Similarly, a hard landing might hurt the soybean market more than the corn market, because China is a huge importer of soybeans but produces almost all the corn it needs at home, says Kevin Norrish, managing director for commodities research at Barclays Capital.

Slower but Steady

For many China watchers, including Barclays, the most probable scenario is an economy that keeps expanding strongly but at a less blistering pace, with annual GDP growth rates in the high single digits. That would mean continued upward pressure on most commodities prices, with some possibly rising substantially, but in most cases not the soaring prices that a red-hot economy would produce.

"We still see loads of reasons why growth is going to continue, but the rate of growth is going to slow over time," says Jim Lennon, who specializes in Chinese commodity markets as an analyst at Macquarie Group Ltd., one of the leading financiers for commodities producers. The first half of the current decade will see more rapid growth than the second half, in Mr. Lennon's view, as the main engine of the Chinese economy over time switches from massive infrastructure projects to consumer demand for durable goods.

The result will be a tamer increase in consumption of base metals and other commodities, he says. Between 2000 and 2010, Chinese consumption of copper, aluminum, zinc, nickel and lead grew at compound annual rates ranging from 13.9% to 24.4%, according to a presentation Mr. Lennon delivered in October. For 2010 to 2020, the projected growth range is 5.3% to 9.3%, the presentation said.

Even in a slower-but-steady world, demand—and prices—could shoot up for some commodities. For instance, China uses less natural gas per capita than many other countries, notes Neil Beveridge, a Hong Kong-based senior oil analyst for investment bank Sanford C. Bernstein. That will change, he says, as more people use the fuel to heat or cool their homes and greater volumes are consumed by industry. In 2010, China imported about 1.6 billion cubic feet of natural gas per day, according to the U.S. Energy Information Administration. Mr. Beveridge expects China's imports to grow to 10 billion cubic feet per day by 2015 and 20 billion by 2020, more than any other nation's at that point.

Meanwhile, demand is likely to continue growing for some food commodities but shrink for others, says Scott Rozelle, a professor at Stanford University who studies Chinese agriculture. As China's growing middle class consumes more meat, animal feed such as soybeans and corn will continue to be in increasing demand, he says. But "the demand for wheat and rice will fall" as diets continue to evolve, Mr. Rozelle says, and China may occasionally even export some of those less-coveted staples, as it has over the past 10 years.

One thing to keep in mind is that China is such a big market now that any increase in consumption—even in a slower but steady economic expansion—can create a big chunk of fresh demand, and push prices up accordingly. As Ms. Goldberg notes, "They still are 1.3 billion people."

Mr. Pleven is a staff reporter in The Wall Street Journal's New York bureau. He can be reached at liam.pleven@wsj.com.

Meanwhile, Other Emerging Nations Bear Watching

CHINASIDE

China is the key to the outlook for commodities markets, but it isn't the only factor. Commodities prices could face upward pressure over the next 10 years if other countries start to consume anything like China did over the past decade.

Take India. Compared with China, India consumes a small fraction of the world's commodities—for instance, 3% of the copper, compared with China's 37%, according to Barclays Capital—despite having nearly as many citizens. But that could change, because India is less developed than China, meaning it still has a vast amount of work to do on improving its infrastructure, particularly upgrading its power grid.

It also wants to boost manufacturing, says Deepak Lalwani, director for India at Lalcap Ltd., a London-based consulting firm. He expects India's gross domestic product to increase fourfold by 2020.

The list is long of other, smaller countries that consume fewer raw materials per capita than the developed world, leaving lots of room for global demand to grow. While some have been ratcheting up consumption, they haven't been doing so as fast as China, suggesting their appetites could get even bigger.

For instance, between 2000 and 2010, copper consumption in Brazil, Indonesia, Russia and Turkey increased between 36% in Brazil and 172% in Indonesia, according to data from the International Copper Study Group, an intergovernmental organization. Over the same period, China's consumption nearly quadrupled.

"The one trend that's clear to me is that people in undeveloped countries around the world want to live a better life," says Richard Adkerson, chief executive of Freeport-McMoRan Copper & Gold Inc. "The longer-term growth story goes beyond China, and hasn't really been scratched yet."

Liam Pleven


As China Goes, So Go Commodities - WSJ.com

Announcements for S&P/TSX and Market Vector (GDXJ) Indices

Index: Announcements for S&P/TSX and Market Vector (GDXJ)

S&P/TSX and Market Vector (GDXJ) have announced their results. 
 
S&P/TSX Composite: 3 adds, 4 deletes (match forecasts)
 
Adds
Algonquin Power                             AQN
Fortuna Silver Mines Inc.              FVI
Parkland Fuel Corporation           PKI
 
 
Deletes
Air Canada                          AC.B
GMP Capital Inc.               GMP
Ivanhoe Energy Inc.        IE
Yellow Media Inc.            YLO
 
 
GDXJ – Jr Gold Miners ETF ( 7 adds, 3 deletes)
 
Adds
Alexco Resource (Canada)
AXR
Intrepid Mines (Australia)
IAU
Midway Gold (Canada)
MDW
Richmont Mines (Canada)
RIC
Sabina Gold & Silver (Canada)
SBB
Saracen Mineral Holdings (Australia)
SAR
Scorpio Mining (Canada)
SPM
Deletions
AuRico Gold (Canada)
AUQ
Real Gold Mining (China)
246 HK
Sino Prosper State Gold Resources (Hong kong)
SSOCF
 

December 12, 2011

Gold is being used as collateral in the search for cash by Euro banks

Gold is being used as collateral in the search for cash by Euro banks

Make your own (collateralised) gold standard

We know the gold bug/Austrian case.

When the United States broke away from the gold standard in the 1970s it allowed for unchecked credit creation, beyond what could  realistically be supported by economic growth.

Given this scenario, what should gold bugs make of the market's move towards re-collateralisation in all funding areas? A move not dictated by regulators or authorities, but the markets themselves?

After all, the latest trend towards gold collateralised bank loans shows in some ways that the market is demanding the recollateralision of credit with gold.

Banks don't need gold as much as they need cash. They use the gold to get cash. Cash is once again being backed by gold. In the interim, there is less demand for gold as a buy-and-hold asset, and more demand for its use as a funding instrument: collateral.

As the FT reported last week:

A dash for cash by European banks in a little watched corner of the gold market has accelerated this week, highlighting the continued scarcity of dollar funding even after a co-ordinated intervention in the market by the world's largest central banks.

Gold dealers said that banks – primarily based in France and Italy – had been actively lending gold in the market in exchange for dollars in the past week.

Naturally, this recollateralisation of credit with gold has very important implications for the gold price.

While gold could previously generate an income from being loaned out — the result of gold producers's hedging needs in an environment where gold demand was uncertain — it no longer can. Gold is now reflecting a negative lease rate, otherwise known as a repo rate. It means there is more demand for using the asset to obtain credit, than there is demand for asset, using credit. Or, for that matter, demand for hedging the asset.

The more it's used as collateral, the more you can consider it to be on par with something like a zero-coupon Treasury bond or bill. Gold begins to determine the cost of money. What's more, if gold begins to exchange hands as collateral more often than government bonds, it might even begin to reflect a greater velocity in its use as a monetary instrument than a government security.

If you consider that the velocity of traditional collateral such as government bonds is deteriorating, that opens the question to whether or not gold is switching places with Treasuries as the ultimate form of collateral?

In that context, the move in lease rates could be considered pretty significant. Think of them as a reflection of the cost of funding with gold. The more negative the rate, the higher the cost of funding using the collateral. And just like in the bond markets, it seems there's been a move towards funding over short durations rather than long — meaning even gold is not enough of a guarantee to secure 12-month funds, while it used to be just a few months ago.

Here, for example, the one-month lease rate:

Here's the three month rate:

And here, finally, is the 12-month rate (firmly in positive territory):

With more demand for gold as collateral — and with gold arguably influencing the cost of money — it's natural that central banks should behave in gold markets like they have been used to behaving in bond markets, i.e. for executing rate policy.

When repo rates fall below the policy rate, the central bank usually intervenes by providing more collateral to alleviate collateral squeezes, lifting rates as it goes. When repo rates rise above the policy rate, the central bank can intervene by absorbing collateral from the system, making it more desirable (since there is less of it) lowering rates as it goes.

Apply that to the current market where gold 'repo rates' are rising, that should call for central banks to absorb gold collateral to hold rates at bay. Unless, of course, 'repo rates' are rising because central banks have started flooding the system with gold for use as collateral — so as to ease the funding squeezes elsewhere. While unconfirmed, it's definitely something that's been on the market radar this week.

The more unencumbered gold in the system, the more likely banks will use it for funding — and/or for covering shorts.

You can think of it as the ultimate QE. Or 'printing gold' to ease the collateral crunch.

With surplus gold being put into the system, the price of gold has no choice but to stall. Especially as those 'squeezes' get eliminated.

Related links:
Why gold forward rate inversion is important
– FT Alphaville
Cash for gold, financial market edition
- FT Alphaville
Cash is king – FT Alphaville
HSBC Sues MF Global Over $850,000 of Gold – Bloomberg
SocGen and the hand of GOFO
– FT Alphaville

This entry was posted by Izabella Kaminska on Monday, December 12th, 2011 at 17:40 and is filed under Capital markets, Commodities. Tagged with , , .

December 9, 2011

Gold Bullion The Place To Be In 2012 - Forbes

Gold Bullion The Place To Be In 2012
Tyler McKee, Forbes Staff
 
I recently checked in with Curtis Hesler, editor of Professional Timing Service, for his thoughts on gold, which is now trading above $1,700.

Below is his take on the commodity and his recommendation on how to best play gold:

Gold usually hits a low during the fourth quarter and launches into a strong rally that culminates late in the first quarter of the New Year. I have been accumulating positions over the last several months with this expectation in mind.

Looking at gold from a purely technical perspective confirms my bullish outlook. Plus, with European debt problems destined to evolve to a full blown crisis next year, the U.S. banking system will be drenched in its wake. The future for gold looks bullish from a fundamental viewpoint as well.

Gold bullion topped out in September above $1,900, and it has been consolidating since. Bullion is currently trading above $1,700; but soon, we will likely be looking back at sub-$1,800 gold as a fond memory.

Iamgold has held up very well during this corrective phase in bullion, which in itself is a positive technical sign.

Special Offer: Curtis Hesler recommended Silver Wheaton (SLW) at $8. The stock now trades above $32. His readers have also been in gold all the way from $250 to $1,700. Is Hesler still bullish on either metal? Click here for important portfolio updates in Professional Timing Service.

In order to take advantage of weakness and diversify our holdings, I have been recommending Iamgold (IAG).
It is an up and comer with exciting growth prospects. Third quarter revenue came in strong with a respectable 222,000 ounces of production. Cash flow is up more than 100%, and it increased its dividend over 200% to $0.20 per share. That only amounts to a bit over 1% and is modest, but I do like companies that will share the wealth. Consider that 1% is better than you can get for a one-year CD these days.

Iamgold has several projects in the works that promise to increase its production down the road. IAG is not as mature as some of the major producers on our list and, thus, should be considered more speculative. However, a few shares for diversification should fit well in your precious metals portfolio.

If you prefer to invest in exchange-traded funds instead of individual stocks, Market Vectors Gold Miners (GDX) and PowerShares Active Alpha Multi-Cap Fund (PQZ) both hold Iamgold.


Gold Bullion The Place To Be In 2012 - Forbes

December 7, 2011

Paulson’s Biggest Funds Keep Losing In Nov.; Gold Fund Gains - Focus on Funds - Barrons.com

Paulson’s Biggest Funds Keep Losing In Nov.; Gold Fund Gains

By Murray Coleman
Barrons.com

Hedge fund manager John Paulson, whose prowess earned heady profits of upwards of $15 billion when markets tumbled during the financial crisis, continues to see his fortunes sink in 2011.

Sources tell the Deal Journal that Paulson & Co.’s Advantage Fund was down 3% in November, raising its losses this year to around 32%. At the same time, Paulson’s Advantage Plus Fund — which uses similar strategies but applies leverage — fell 3.6% last month. It’s reportedly off by 46% for the year. By comparison, the S&P 500 traded flat on the month.

But it wasn’t all negative for Paulson’s investors in November. His bets on gold proved beneficial as the firm’s Gold Fund rose 1.3% in the month, leaving it ahead by 11% in 2011. By comparison, the SPDR Gold ETF (GLD) entered today’s session with a return of more than 23% on the year.

Paulson has bet big on a relatively quick economic turnaround, losing so far this year on financials such as Citigroup (C), Bank of America (BAC) and China’s Sino-Forest (SNOFF), a forestry firm accused of overstating its holdings by short-seller Carson Block.

In a third-quarter letter to investors, Paulson acknowledged that his performance was “the worst in the firm’s 17-year history.” The letter also stated that “we are disappointed and apologize.”

The European sovereign-debt crisis, slowing economic growth and disagreement over the debt ceiling in the U.S. combined to pressure fund performance, Paulson explained. “As the year progressed our assumptions proved overly optimistic and net equity exposure too great,” he added.

Paulson has reportedly dramatically slashed his equities exposure in key hedge funds. The net exposure in his main hedge fund is believed to have been cut to around 30% — about half what it was just four months ago.

Paulson sold stakes in several of his lagging positions in the third-quarter. Those included Citigroup and SunTrust Banks (STI). The hedgie also reported no shares in previous holdings NYSE Euronext (NYX) and J.P. Morgan (JPM).


Paulson’s Biggest Funds Keep Losing In Nov.; Gold Fund Gains - Focus on Funds - Barrons.com

November 30, 2011

Vast majority of mining projects experience steeper cost over-runs - MINING FINANCE / INVESTMENT | Mineweb

MINING FINANCE / INVESTMENT

Vast majority of mining projects experience steeper cost over-runs

Mining companies need to admit that a 10% cost overrun for mining projects has become an anachronism as more and more projects are coming in way over budget.

Author: Dorothy Kosich
Posted:  Wednesday , 30 Nov 2011

RENO, NV - 

Mining companies which only factor in a 10% cost over-run for mining projects are asking for trouble, warned experts in mining financing Tuesday during a session at the Northwest Mining Association convention in Reno.

Resource Capital Funds' Jasper Bertisen said the "vast majority" of mining projects have been coming in "way over budget" for the past couple of decades. As a result, RCF now automatically factors in an average cost overrun of 25% when it considers the cost of mining projects.

RMB Resources' Alvaro Belevan said the traditional 10% overrun contingency has been insufficient in recent years. Worse yet, the magnitude of mining project cost overruns are greater nowadays, he added.

"Cost over-runs means the economics of your projects has changed, and changed for the worst," Belevan warned.

Unexpected cost overrun often complicates arranging additional project funding, he observed. Delays in obtaining additional funding may compound the problem in an inflationary cost environment; throw-off procurement schedules causing significant delays; and increase the costs of debt/equity and decrease project returns.

"Management must set up a Cost Overrun Provision (COP) when project development begins," Belevan advised. "These are readily available funds held in reserve specifically available for cost overruns."

A COP may be funded from equity and/or a Cost Overrun Facility (COF). A COF is most advantageous to emerging producers, single-assets companies, and companies with multiple development assets who wish to limit cross-subsidies, he suggested.

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com


Read the story on Mineweb: http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=140690&sn=Detail&pid=102055

November 29, 2011

Jim Rogers Says Gold Due for Correction; Owns Dollar

News Headlines

US News


Jim Rogers Says Gold Due for Correction; Owns Dollar

CNBC.com | November 29, 2011 | 06:13 AM EST

The price of gold is due for a correction and this could be used as an entry point by investors eager to get exposure to the precious metal, while the dollar is likely to strengthen as there has been too much pessimism about it, famous investor Jim Rogers told CNBC Tuesday.

Gold [ XAU= 1712.09  +1.50 (+0.09%) ] hit record after record high this year as investors scared by central banks printing money around the world and by the protracted debt crisis in the euro zone sought refuge in precious metals.

"I own gold and I'm not selling my gold," Rogers said, but pointed out that the price of the commodity has been up for 11 years in a row.

He advised that a drop in price wouldn't be such a bad thing. "Somewhere down the line gold will have a correction. Gold will continue to do what gold does best. Just give it a chance."

If the gold price retreats towards $1,200 per ounce, Rogers said he would get "extremely excited."

"I'd probably get more interested at $1,600. At $1,710 or whatever it is today I'm not buying gold, I'm just watching. And likewise for silver[ XAG= 31.85  -0.22 (-0.69%) ] ," he said.

"If I had to buy one today, I would buy silver just because silver is 40 percent below its all time high, gold is 20 percent near its all time high. But I'm not buying any of the four precious metals today."

On currencies, Rogers explained why he bought the US dollar[ .DXY 78.90  -0.36 (-0.45%) ] .

"I own the dollar, I own some other currencies as well," he said. "A year ago everybody was pessimistic about the dollar, including me…when everybody is on the same side of the boat, you go to the other side of the boat for a while."

  • Click Here to Watch Part I of Jim Rogers' Interview
  • But Rogers warned against piling into one currency. "If you have all of your money in anything, be very careful. Some are going to totally disappear."

    Rogers said he also owns the Chinese renminbi [ CNY=X 6.3769  -0.007 (-0.11%) ]and the Japanese yen [ JPY=X 77.78  -0.20 (-0.26%) ] and criticized governments for their ongoing drive to print money and inability to cut debt.

    "Governments around the world continue to print money. Paper money everywhere is being debased. If the US dollar turns into confetti, there is no high for the price of gold, because the dollar will become worthless," he warned.

    Europe Getting 'Out of Control'

    Rogers also said that no solution would be found for the ongoing crisis as long as European powers remained so heavily debt burdened.

    "The solution to too much spending and too much debt is not more spending and more debt. Nobody shows debt going down," he said.

    "This situation in Europe is getting out of control. It already is out of control in the US. You're going to have to take your pain sometime. If you did it now, you could ring-fence everybody; the system would survive. Right now governments have some credibility left…if you wait a year or two or five, when the market forces you to deal with reality, then the markets and the banks have no credibility."

    "I'd rather take the pain now, rather than the markets force us to take the pain. And that could be the end of the system," he said.

    Rogers pointed to the Scandinavian banking crisis of the early 1990s, saying that difficult policies enacted at the time to allow some banks to fail went on to save the long-term future of the region.

    "It was a horrible two or three years, but since then Scandinavia – especially Sweden - has had a wonderful rise for the last 15 years or so. And Sweden is one of the most stable and solvent countries in the world."

    "The world is full of risk right now. I own Scandinavian currencies because they are probably less risky," he said.

  • Click Here to Watch Part II of Jim Rogers' Interview
  • Rogers is still optimistic on commodities and said it was understandable that in the wake of major financial derivatives broker MF Global's recent bankruptcy there would be some uncertainty.

    "When a huge player goes bankrupt, it has a lot of ramifications. Once this is past, I would suspect that commodities would continue to go higher and that you would continue to see more inflation. I own all commodities; I especially own food and precious metals," he said.

    What is Rogers' tip for a high performing asset class over the next three to six months?

    "I am wildly bullish on Myanmar, if I could find a way to put all of my money into Myanmar, I probably would. It is at the place where China was in late 1978; they are opening up, they've changed. They've got 60 million people, they are right there between China and India," he explained.

    "I cannot think of anything in the world about which I'm more bullish than Myanmar."



    November 28, 2011

    Venezuela Repatriates ‘People’s Gold’ Due to Gold’s ‘Historic’, ‘Symbolic’ & ‘Financial’ Value

    Populism at its best!!!
    … but then again, Chavez may prefer to have the gold closer to home before some court puts its eyes/hands on it, in order to guarantee payment for one of the many suits Chavez's Bolivarian Kleptocracy faces overseas (Exxon, Conoco, etc.)

    Venezuela Repatriates 'People's Gold' Due to Gold's 'Historic', 'Symbolic' & 'Financial' Value



    From GoldCore
    Venezuela Repatriates 'People's Gold' Due to Gold's 'Historic', 'Symbolic' & 'Financial' Value
    Gold is trading at USD 1,712.30, EUR 1,280.80, GBP 1,100.00, CHF 1,574.70 and JPY 133,080 per ounce. 
    Gold's London AM fix this morning was USD 1,714.00, GBP 1,100.41, and EUR 1,280.06 per ounce.
    Friday's AM fix was USD 1,676.00, GBP 1,084.02, and EUR 1,263.86 per ounce.
    Cross Currency Rates
    Gold is higher in most currencies today. Gold is higher due to the dollar coming under pressure and oil prices (WTI) have surged over 3%. 
    Stock markets are also higher on fresh hopes Europe will unveil yet another set of measures to tackle the deepening contagion in the Eurozone.  
    Monetary and systemic risks remain and should see gold well supported at the $1,700/oz level. Indeed, gold could have bottomed on options expiry last week – as is often the case.
    Western physical buyers continue to accumulate due to currency concerns. While, demand is robust, there is no panic buying or mass "flocking to gold".
    Physical buyers of gold in India, the world's biggest consumer of bullion, remain on the sidelines even though traders offered discounts of up to $5 per ounce to global prices, according to Reuters.
    Chinese New Year buying should commence soon which will be supportive of prices and make up for the expected decline in Indian demand.
    The currency war meme continues as seen in wild scenes of celebration in Caracas on Friday when Venezuelan citizens partied in the streets as their gold reserves were repatriated.
    Reuters reports the first shipment of gold bars arrived home in Venezuela on Friday "amid wild celebrations."
    Excited crowds lined the roadside waving big Venezuelan flags and chanting "It's returned! It's returned!" as a convoy of soldiers and armored cars carried the gold ingots from Maiquetia airport to the central bank in Caracas.
    The President of the central bank, Nelson Merentes traveled into the city at the head of the convoy. He did not say how much gold bullion was brought back in Friday's shipment but said the bullion came from several European countries.
    "Our gold is being stored in the vaults," Merentes told the cheering crowds, sporting a baseball cap that read "The Central Bank of Venezuela with the People." 
    "It has historic value. It has symbolic value. And it has financial value," bank chief Merentes said about the first shipment.
    "Each box of gold weighs 500 kilograms and is worth about $30 million," Merentes said before cheering crowds. "We'll bring the rest back little by little."
    Merentes is in favor of the move and said, "The country's finances will be backed by autonomous wealth, so we are not subject to pressure from anyone," UPI reported.
    "This guarantees that if there are financial problems in the international markets our gold will be safe here at home," Merentes said.
    Drums and sirens sounded out across the square as many in the crowd sang "Forward comandante!" in support of the president. Some waved homemade signs that said: "The gold has returned thanks to Chavez!" and "Long live our sovereignty!"
    Chavez addressed the nation on local television last week with the Council of Ministers, the Executive Cabinet and representatives of the Venezuelan Central Bank, including bank chief, Nelson Merentes.
    Speaking from the Miraflores presidential palace Chavez said the move was giving back the country's, "Body and soul," and went on to say the return of the gold gave Venezuela more independence from what he described as imperialist powers. While brandishing a copy of the constitution he explained that the Central Bank would carry out the repatriation.
    Chavez said the central bank would now be independent of foreign powers and subject only to the national constitution. 
    Chavez announced the repatriation in August as a "sovereign" step that would help protect Venezuela's foreign reserves from economic turmoil in the United States and Europe. Most of Venezuela's gold held abroad is in London.
    "They say Chavez is going to take the gold to Miraflores (presidential palace) and is going to give it to Cuba as a gift," the president chuckled on Friday, mocking political rivals who accuse him of planning to sell the ingots to fill his electoral war chest ahead of next year's election.
    "The gold is returning to where it was always meant to be: The vaults of the Central Bank of Venezuela."
    "It's our gold. It's the economic reserve for our kids. It's growing and its going to keep growing, both gold and economic reserves," said Chavez. "Venezuela is going to become an economic power, not for the bourgeois or capitalism, but for the Venezuelan people."
    A central bank report released in August showed that Venezuela held gold reserves with the Bank of England, JPMorgan Chase & Co., Barclays Plc and Standard Chartered Plc among other banks.
    Merentes said in August that Venezuela will look to deposit some of its $6.3 billion of cash reserves in emerging-market financial institutions in Russia, China and Brazil.
    Like most of those gathered outside the bank, 62-year-old university professor Jose Escalona wholeheartedly agreed.
    "There was no reason for it to be in England," he said. "This gold belongs to all Venezuelans," he told Reuters.
    A senior government source involved in transporting the bars, which amount to 90% of Venezuela's gold held abroad, has told Reuters they will be shipped in several cargo flights that will be completed before the end of the year.
    The total cost of the operation will be no more than $9 million, the source said, without elaborating.
    Chavez often accuses previous presidents of selling off Venezuelans' national assets, including by storing most of the country's gold reserves with Western banks in the mid-1980s.
    Chavez is worried about Venezuela's foreign reserves being frozen by sanctions.
    By repatriating the bullion, he also reduces the risk of any seizure of assets related to arbitration cases, including those linked to the nationalization of multibillion-dollar oil projects run by US multinationals.
    Critics have suggested that Mr Chavez is acting out of fears Venezuela's overseas assets could one day be frozen by sanctions, as happened to his friend and ally, the late Libyan leader Col Muammar Gaddafi.

    Chavez, the Venezuelan central bank and some of its people clearly understand the value of gold. 
    This is in marked contrast to the majority of people in the western world who have forgotten gold's 'historic', 'symbolic' & 'financial' value.
    With increasing systemic and monetary risk, gold is reasserting itself as money and as an important safe haven monetary asset.
    SILVER 
    Silver is trading at $32.03/oz, €23.98/oz and £20.58/oz 

    PLATINUM GROUP METALS 
    Platinum is trading at $1,551.63/oz, palladium at $590.50/oz and rhodium at $1,575/oz. 


    View article...

    November 23, 2011

    SOCGEN: Dr. Copper Is Dead

    SOCGEN: Dr. #Copper Is Dead

    Interesting note from SocGen's Dr. Michael Haigh and Jesper Dannesboe regarding copper, which is famously seen as a good barometer of economic health.

    In their view, Dr. Copper is dead, not so much in that the economy is dead, but rather it's just not that good of a barometer:

    Doctor Copper is dead because copper prices will, in our view, not be leading the ongoing slowdown of the global economy. Investors who use the copper price as a leading indicator for the current business cycle downturn are likely to be disappointed as copper is likely to lag other leading indicators. The reason for this is simple: the physical copper market is tight and has tightened further over recent months. The same is true for oil. The physical crude oil market is extremely tight at present, which explains why crude oil prices have been very resilient despite the terrible newsflow coming out of Europe and fears of a global recession.


    Metals News - SOCGEN: Dr. Copper Is Dead

    The MasterMetals Blog

    Reuters - Ecuador set to sign $3 bln mining contracts

    Reuters - Ecuador set to sign $3 bln mining contracts


    INTERVIEW-Ecuador set to sign $3 bln mining contracts--gov't

    11:21 AM Nov 22, 2011
    QUITO, Nov 22 (Reuters) - Ecuador is close to signing operating contracts with Kinross <K.TO> and Ecuacorriente <CTQ.TO> for two large mining projects, deputy mining minister Federico Auquilla told Reuters on Tuesday.
    The companies would invest $3 billion in the next two and a half years, Auquilla said.
    "We're pretty much done ... we're working on the final document," he said.
    The contracts call for royalty payments in advance, although Auquilla said he would not announce how much royalty the companies will be paying until the contracts are signed.
    (Reporting by Eduardo Garcia; Editing by John Picinich)


    November 21, 2011

    Gold, Silver Slide: Is This Like 2008-2009? Palladium Seen Poised - Focus on Funds - Barrons.com

    Focus on Funds

    By Murray Coleman

    After snapping a three-week winning streak, gold and silver traders head into what promises to be a slow-trading Thanksgiving week with lowered expectations.

    The SPDR GoldTrust (GLD) was most recently off by 1.8% and the iShares Silver Trust (SLV) was down 3.5%. Still, GLD headed into Monday’s session with a year-to-date gain of more than 21% while SLV — despite a rocky three months in which its net asset value had declined by roughly 20% through last week — was ahead 4.8% in 2011.

    For those with longer-term plans to tap into growth in the group, these might be interesting times to consider as entry points. Barclays analysts are looking at gold futures possibly sliding to around $1,680 an ounce, some 1% lower.

    “We would fade any further weakness against the $1,600 area looking for a move toward the highs,” they added. For silver, Barclays told clients they “would fade any move below $30 in silver against $28 (an ounce), targeting $35.70.”

    Gold for December delivery most recently was sinking by $29.80 to $1,696.30 an ounce on the Comex. Meanwhile, December silver was down $1.57 to $30.85 an ounce in New York.

    Analysts at BNP Paribas noted Monday that economic conditions in Europe and the U.S. still seemed in a state of “heightened uncertainty” given political gridlock in Washington over deficit cutting efforts and ongoing debt worries in the euro zone. “In the near term, gold should continue to outperform the rest of the precious metals complex,” the bank wrote in a note to clients.

    Interestingly, BNP Paribas predicted that if economic fortunes improve and the “risk-on” trade returns, palladium could “take over gold’s position as the best performing precious metal.”

    Along those lines, it’s worth noting that the ETFS PHysical Palladium Shares (PALL) was falling by 2.4% at last glance. But on a relatively light day of activity so far in precious metals, PALL’s volume was notably stronger, trading already near its longer-term full-day average.

    In the past three months, PALL’s trajectory has followed SLV’s down by more than 20%.

    Analysts at Barclays and Johnson Matthey have recently predicted that palladium’s supply and demand dynamic should swing negative — meaning the market will be in a deficit situation — in 2012.

    Miners are also falling today. The Market VectorsGold Miners ETF (GDX) was off by 2.8% while the Global X Silver Miners ETF (SIL) was falling by 5.4% on the day.

    Jeb Handwerger, editor of Gold Stock Trades, noted today that the Chinese Metal Exchange has made “ominous noises” about raising the margin rate on silver. “It would seem that the bankers consistently choose to handicap silver and gold while favoring dollars and treasuries,” he added.

    GDX has again failed to move past resistance on a technical level, setting the ETF up for a possible test of recent lows at around $52 a share, Handwerger warned. It was trading recently around $55.44 a share.

    “Silver also reversed at the 50-day moving average which may indicate that late September lows may be tested,” he wrote.

    With Germany again talking tough on a potential European Central Bank bailout of troubled sovereign debt markets, gold futures figure to retest their lows while silver stocks “look vulnerable,” wrote Jordan Roy-Byrne, editor of the Gold & Silver Premium Report.

    He told clients this morning:

    “This is starting to feel similar to 2008-2009. This Euro crisis could force equities and commodities lower thereby creating the cover for China to re-stimulate, the ECB to print $3 trillion … and then the Fed can print (money) since bonds are strong and the U.S. dollar could be going (higher in the short-term).”

    But the independent precious metals analyst did point out that fundamentals remain much stronger for gold than in 2008. He sees some technical clouds forming in the near-term but that a “a breakout in 2012 will have excellent underpinnings and catalysts.”

    Read the whole story here: Gold, Silver Slide: Is This Like 2008-2009? Palladium Seen Poised - Focus on Funds - Barrons.com

    Share this|
    ________________________ The MasterBlog