May 27, 2011
May 23, 2011
Euro Price of Gold Hits Record High As "Debt Woes Spreading" Beyond Greece
The MasterMetals Blog
Mongolia is going to be a major future supplier of commodities from coal through gold to copper – and maybe even crude oil. But how soon will this landlocked country with a population of 3m really begin delivering these resources to the world in a significant, market-moving way?
While at first Mongolia seemed to be the poster child for liberalization, in the last several years that has changed as the population has demanded a larger share of the resource bonanza to come - Ivanhoe Mines and Rio Tinto's Copper-Gold behemoth, Oyu Tolgoi, being the headline project. While justifiable to a certain degree, in reality it has meant many of the mining projects on the drawing board have been delayed. The China issue remains a particularly prickly subject, as the FT notes in the article below,
Although Mongolia is located right next to its biggest customer, China, their history of rivalry makes Mongolia suspicious of its southern neighbour. And capricious politics – parliament has tried to oust Dashdorj Zorigt, minister for mineral resources and energy, twice this year – mean that economic logic is sometimes subordinate to politics or nationalism.
May 19, 2011
The banks underwriting the initial public offering, led by Citigroup, Credit Suisse and Morgan Stanley, supported Glencore’s shares in the last five minutes of trading to prevent the price dropping below the 530p level.[...]Glencore’s stock market debut left investors who had hoped for a big first day rally unimpressed, after the shares closed at the offer price of 530p. [...]Following the issue of nearly $9bn worth of new shares, including an overallotment option, the enlarged company will have a market capitalisation of $62bn
Glencore’s advisers had hoped that the shares could rally by 5 to 10 per cent on Thursday after the$11bn IPO was more than four times subscribed. [...]
“If you are genuinely four or five times oversubscribed, why is the share price flat?”
Bankers had hoped that a strong initial performance from Glencore would hearten investors and reinvigorate the sluggish market for European IPOs. [ So much for that...!]
FT.com / Commodities - Glencore debut underwhelms investors
The MasterMetals Blog
Prices in Euros per ounce and per kilo in 8 and 24 hour intervals
The MasterMetals Blog
May 18, 2011
He's not just in for the short term trade. He's in for all the right reasons, and knows there is still much more to go..
For Paulson, Gold Still GlittersNYTimes.comBY AZAM AHMED
You can’t accuse the hedge fund manager John A. Paulson of lacking loyalty.
Even as big-name investors like George Soros peel back their bets on gold, helping to send prices falling, Mr. Paulson, who heads the $37.5 billion hedge fund Paulson & Company, has chosen to stay the course, according to recent regulatory filings that indicate he actually increased his bets on certain companies exposed to gold.
Gold, to be sure, has treated him well. Mr. Paulson netted $5 billion in personal gains last year thanks to his heavy bet. The hedge fund manager doubled down on the precious metal in recent years, believing that the dollar would lose value.
To implement that long-term bet, he created a gold fund, which invests in gold-exposed investments like mining companies, as well as a class of shares in all of his other funds denominated in the precious metal.
The last few months may have tested his resolve.
Through April, his Advantage Fund, the largest at $18.3 billion, is down 1.2 percent in the regular share class and up 5.6 percent in the gold share class, according to an investor who spoke on condition of anonymity because the information was not public.
Figures through May were not available. A spokesman for Mr. Paulson declined to comment.
At a recent investor conference in Las Vegas, Mr. Paulson reiterated his belief that gold was not a bubble, according to notes from an investor who attended the conference. Mr. Paulson said owning gold would add to returns while also protecting against inflation. He said his funds were ready for such inflation, which he sees over the next three to five years, thanks in part to the quantitative easingpolicy of the Federal Reserve.
Mr. Paulson recently acquired more shares in AngloGold Ashanti, according to his most recent 13F filings, which reflect Paulson & Company holdings through the end of March. Mr. Paulson told investors that AngloGold Ashanti – the third-largest gold producer in the world and the largest single holding in his Advantage Fund – was the best managed gold company in the world.
At the conference, Mr. Paulson warned the 200 investors and potential clients gathered that they better be prepared to accept higher volatility for now. Mr. Paulson, who rose to fame after making billions betting against the subprime mortgage market, told them he did not see the housing market normalizing until 2013.
Mr. Paulson also said during the conference that he thought the best opportunities in the market were restructured equities – or stocks in companies that are coming out of a rough period.
While Paulson & Company has long held meetings for its investors, this is the first year the hedge fund has also held meetings for investors in individual funds. The conference was held for investors in the Advantage Fund, Mr. Paulson’s largest with about $18 billion in assets.
The lavish affair included tours of the MGM Resorts and Cesar’s Entertainment — Mr. Paulson owns stakes in both. For kicks, attendees had the option to take a helicopter ride to the Grand Canyon.
During the conference, Mr. Paulson offered some details about his fund. He crowed about the alignment of interests with his investors. That’s a complicated way to say that employee capital makes up 42 percent of the money in the fund, so everyone cares deeply about returns. Mr. Paulson’s own wealth makes up a big part of that figure.
Sometimes cycles have the habit of repeating themselves, but in the case of gold, the differences between the current situation and the early 1980s are significant
Author: David LevensteinJOHANNESBURG - Mineweb
Posted: Tuesday , 17 May 2011
Gold prices were generally range bound between $1525 and $1480 during last week as the US dollar extended its recent gains. Commodities remained weak even though selling momentum eased a bit. Crude oil prices continued to slide and silver dipped to a new low. The CRB commodities index also extended recent declines and fell as low as 333.50.
Now that the price of gold has dropped by around $85 an ounce, many market participants are suggesting that gold was in a bubble just as it was in 1980 - and is headed much lower.
Firstly, I would like to mention, that while certain cycles have a habit of repeating, there is no guarantee that they will. If they did, making money in the markets would be the easiest thing in the world. All you would need to do is measure the time period between cycles and trade accordingly. And, if anyone has tried that, you will see that there is no truth in that assumption. The main reason being, in order for a cycle to repeat, all the underlying fundamentals impacting on the market should be the same as the previous cycle. In most instances it is almost impossible for the fundamentals to be exactly the same as they were previously, but when they are very similar the probability of a repeating cycle is relatively high. For, example a country defaulting on its debt will likely have the same impact on their currency as another country defaulting on their debt. Getting back to my point about the gold price now and in 1980, let me say categorically that as far as I am concerned there are no comparisons and therefore we should not expect the same conclusion.
For most of 1979 the price of gold was trading below $300 an ounce. The price of the yellow metal traded between $240 an ounce and $280 an ounce for the first five months of the year. Then, during the month of June it broke through the key resistance of $280 and by mid-July prices had hit $315 an ounce. Then, after pulling back to $280 an ounce the price had a parabolic move from $280 an ounce all the way up t0 $875 five months later. The price of gold had moved more than three times in less than 6 months. This is a parabolic move. Since 2000 when the current bull market began we have not seen one parabolic move. In fact the rises have been very gradual but consistent. This is one major difference. But, when we study the fundamentals between these two time periods we can see without absolute clarity that there is nothing similar.
The parabolic move in gold in 1980 was caused by a series of events. There was a hostage crisis involving American captives in Iran, an invasion of Afghanistan by the Soviets, oil prices were escalating almost weekly, and so were gold and silver prices, in one of the greatest currency panics ever to hit the U.S. dollar. Inflation was nearly 10% and increasing, and the worldwide perception was that the dollar was under siege.
Beginning in September 1979, the price of gold began to surge almost daily. The financial press reported frenetic trading in gold and other precious metals. . The Iran hostage crisis was a diplomatic crisis between Iran and the United States Fifty-two US citizens were held hostage for 444 days from November 4, 1979 to January 20, 1981, after a group of Islamic students and militants took over the Embassy of the United States in support of the Iranian Revolution.
Sixty-six Americans were taken captive when Iranian militants seized the U.S. Embassy in Tehran on November 4, 1979, including three who were at the Iranian Foreign Ministry. Six more Americans escaped and of the 66 who were taken hostage, 13 were released on November 19 and 20, 1979; one was released on July 11, 1980. The remaining 52 were released on January 20, 1981, at the very moment that Ronald Regan had completed his inaugural speech after having been sworn in as President of the United States to replace Jimmy Carter.
Then, on December 23, 1979, Soviet military units occupied Kabul, the capital of Afghanistan and by December 28th, the Soviet Union seized control of Afghanistan. The initial Soviet deployment of the 40th Army in Afghanistan began on December 24, 1979 under Soviet premier Leonid Brezhnev. The final troop withdrawal started on May 15, 1988, and ended on February 15, 1989 under the last Soviet leader Mikhail Gorbachev.
Inflation in the US had been on the rise in the late 1970s and had risen to an all-time high of around 15% by January 1980. Gold prices had been rising with inflation as measured by CPI though the rise in inflation wasn't the primary reason for the gold price spike in Jan 1980.
In an attempt to curb inflation, Paul Volcker, the Federal Reserve Bank Chairman at the time, increased interest rates from around 13% to 20%. The federal funds rate, which had averaged 11.2% in 1979, was raised by Volcker to a peak of 20% in June 1981. The prime rate rose to 21.5% in '81.
In those years, currency trading was not what it was today and the euro had not been conceived. The way people communicated in those years was completely different. There was no internet, and, in fact, the fax machine had not been invented. All communications were done telephonically and or by telex, something that today's generation have probably never heard of. And, not many people knew anything about China.
In the current bull market, things are completely different. The price of gold has been driven higher mainly due to the declining values of the major currencies in particular the US dollar. But, the other major currencies such as the euro, the Yen and sterling don't look all that healthy either. Budget deficits are spiralling out of control and government debit is simply exploding. As governments continue with their loose monetary policies they simply continue to debase their currencies. This is not the first time they have done this, but this time around, the size of debt is just unimaginable. And, gold is simply fulfilling one of its traditional roles as a hedge against the declining values of fiat currencies.
Today the currency market has become the largest market in the world. Anyone can participate and trading can be done instantaneously so long as one has access to the internet. China has become the second largest economy in the world from being number eleven in 1980. It has also become the largest the producer of gold in the world and soon it will be the largest consumer of gold in the world. Numerous central banks are adding gold to the reserves and at the same time diversifying away from gold.
If you think the gold price is a bubble and headed lower, then you obviously believe that the dollar as well as the other major currencies are going to strengthen and that there are no monetary problems in the world. And, you believe that global government debt as well as burgeoning budget deficits are completely overstated. You also do not see the value of gold in such times and will probably invest in US Treasuries as a safe haven asset. I say good luck to you. I am sticking with the precious metals in particular gold and silver.
"Don't be fooled, this gold cycle is not the same as 1980"- Mineweb
The price of gold is approaching the support level of the upward trend as well as the support of the medium-term 50 day MA. A flat Elliot Wave ABC correction would see support at around $1470. With all these technical indicators converging at the $1470/$1480 level, I expect to see a rebound in prices relatively soon.
About the author
David Levenstein began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients. www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.
May 17, 2011
May 16, 2011
By Sarah Turner
SYDNEY (MarketWatch) -- Citigroup Australian equity strategists said Tuesday that they recommend investors reduce exposure to the resource sector in order to cut risk. They cut miners to a small overweight in their portfolio and moved to underweight in energy stocks. At the same time, they lifted their positioning in defensive sectors of the market, by raising healthcare firms to index level and upping weightings in banks and other industrials. 'While resources have underperformed by about 5% recently, this only reverses gains a month earlier, and the sector could fall further,' they said.
Citigroup recommends reducing resources exposure - MarketWatch
May 13, 2011
Widowmaker' Oil Trade Lives Up to Its Name
May 9, 2011
- Estimates for U.S. onshore oil production growth are continually revised up
- In Asia, Chinese oil demand continues to beat expectations
- With floating inventories of crude and products continuing to whittle away, oil fundamentals appear to be tightening. Onshore commercial inventories would be the next to draw, which should be supportive to oil spreads in general.
- Ethanol shortages in 2011 look increasingly possible, which would be supportive for gasoline, particularly in Brazil and the U.S.
- Gas is expected to remain in a competitive position versus Coal all winter long and throughout 2011.
- Germany will reach 2008 level by the end of 2011 if current growth trend is sustained.
Read more: http://www.businessinsider.com/check-out-what-clive-capital-was-saying-about-commodities-before-the-annilhilation-2011-5#ixzz1LrXHGfGX
-- The MasterFeeds