Gold hit record highs near $1,200 an ounce on Tuesday as dollar weakness fueled buying of the metal as an alternative asset, while investors speculating on more gains were cheered by its recovery from last week's losses.
Spot gold hit a peak of $1,198.70 an ounce and was bid at $1,192.15 an ounce at 1506 GMT, against $1,179.10 late in New York on Monday.
Prices could push through the $1,200 an ounce level to new record highs if the dollar continued to weaken, analysts said.
Significant downside risks to the price were unlikely to be seen before January, said Michael Lewis, head of commodities research at Deutsche Bank, with seasonal factors affecting the dollar likely to drive gold higher in the short term.
"We see $1.55 in the euro-dollar, so that is where we think the main catalyst is for new highs for gold," he said. "There is normally quite a strong seasonal pattern in the dollar, (and that) will be driving a further rally in gold."
The dollar fell against a basket of six other currencies .DXY on Tuesday as waning worries about Dubai's debt, Australia's interest rate hike, and upbeat euro zone data dimmed the greenback's safe-haven appeal.
The dollar also pared gains against the yen after comments from the Bank of Japan on monetary policy.
Weakness in the U.S. unit boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Ole Hansen, senior manager at Saxo Bank, said investors had been encouraged by the strength of gold's recovery after it fell below $1,140 an ounce last week, with the fall being met with strong fund buying.
"Everyone was waiting for that correction, and the way gold recovered suggested there was a lot of buying lurking in the wings (among) people who missed the opportunity to get into the market in the first place," said Hansen.
COMMODITIES FIRM
U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange also hit a record $1,200.50 an ounce and were later up $11.10 at $1,193.40.
Other commodity prices also firmed on the back of the weaker dollar, with base metals up and oil nearly 1.5% higher to above $78 a barrel.
Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation.
Elsewhere the world's biggest gold miner, Barrick Gold Corp (ABX.TO), said on Tuesday it had completed the elimination of all of its gold hedges as planned. De-hedging has represented a significant source of demand in recent years.
In the physical market, the largest gold exchange-traded fund, the SPDR Gold Trust, said its holdings rose 2.134 tons to nearly 1,130 tons on Monday.
Indian gold offtake abated on Tuesday as prices resumed their upward trend, after a modest pick-up in recent sessions when traders stocked up ahead of wedding demand.
Sales of scrap persisted in other parts of Asia on Tuesday, cutting premiums, dealers said.
Analysts say they expect the gold market to continue taking support from fund and other investment demand, and further buying from central banks.
News in early November that India's central bank had bought 200 tons of gold, followed by acquisitions by Russia, Sri Lanka and Mauritius, sparked a 13% price rise that month.
Among other precious metals, spot silver was bid at $18.75 an ounce against $18.45. Platinum was at $1,470 an ounce against $1,452, while palladium was at $379 against $363.50.
© Thomson Reuters 2009 All rights reserved
Selasa, 01 Desember 2009
Gold can be re-triggered rise if the dollar continues to fall
De Beers actively seeking additional funding
De Beers, ranked No 1 miner of rough diamonds, has confirmed ongoing speculation that it is actively seeking additional funding, of around US$1bn, from its three shareholders. If that amount is provided, by way of loans or fresh equity, the proportional contribution would be US$450m from Anglo American, US$400m from the Oppenheimer family, and US$150m from the Botswana government. US$m 6m09 6m08 2008 2007 2006 Operating cash flow -31 455 700 844 809 Capital expenditure -86 -327 -403 -1503 -1194 Acquisitions & sales -9 -30 -39 -109 442 Net -126 98 258 -768 57 Free cash flow Operating cash flow -31 455 700 844 809 Capital expenditure -86 -327 -403 -1503 -1194 Free cash flow -117 128 297 -659 -385 Debt repaid/(raised) -804 -402 Shareholder advances 500 248 Net debt -3329 -4008 -3552 -4057 -2994 Dividends -74 -135 -358 -125 -173 Selected diamond stocks Stock From From Value price high* low* USD bn CAD 1.10 -8.3% 254.8% 0.104 CAD 0.17 -21.4% 175.0% 0.025 GBP 0.03 -42.9% 4.3% 0.003 GBP 0.01 -24.4% 126.7% 0.003 GBP 0.03 -51.1% 155.6% 0.002 GBP 0.04 -38.0% 40.9% 0.006 CAD 0.19 -47.1% 42.3% 0.006 CAD 0.09 -57.5% 88.9% 0.003 CAD 0.07 -12.5% 366.7% 0.013 AUD 0.01 -45.8% 44.4% 0.006 CAD 0.12 -52.0% 140.0% 0.007 GBP 0.15 -14.1% 238.9% 0.090 GBP 2.22 -33.6% 91.1% 0.509 CAD 0.87 -48.2% 335.0% 0.187 GBP 0.64 -29.0% 177.2% 0.194 CAD 2.42 -26.9% 231.5% 0.147 GBP 0.30 -36.6% 126.9% 0.048 GBP 0.36 -36.6% 82.1% 0.045 ZAR 0.45 -54.5% 95.7% 0.015 ZAR 3.90 -4.9% 290.0% 0.056 GBP 0.01 -55.2% 246.7% 0.038 GBP 0.35 -32.4% 130.0% 0.068 GBP 0.15 -30.6% 1080.0% 0.041 GBP 0.14 -60.0% 0.0% 0.011 CAD 0.26 -29.7% 372.7% 0.065 CAD 0.03 -76.9% 200.0% 0.007 CAD 10.13 -9.1% 362.6% 0.743 CAD 0.10 -77.3% 400.0% 0.002 ZAR 0.12 -65.7% 140.0% 0.002 CAD 0.10 -33.3% 100.0% 0.005 CAD 0.05 -23.1% 150.0% 0.019 CAD 0.33 -53.5% 407.7% 0.005 CAD 1.45 -68.8% 327.5% 0.113 CAD 0.34 -13.9% 240.0% 0.025 AUD 0.00 -55.6% 33.3% 0.008 CAD 0.20 -20.0% 300.0% 0.007 CAD 0.04 -36.4% 133.3% 0.009 CAD 0.39 -44.3% 52.9% 0.009 AUD 0.06 -23.6% 587.5% 0.100 AUD 0.02 -62.5% 66.7% 0.003 AUD 0.01 -72.0% 133.3% 0.002 Averages/Total -39.7% 209.1% 2.752 Weighted averages -31.9% 208.1% Diversifieds with diamonds GBP 26.86 -0.6% 196.5% 59.802 GBP 19.09 -0.6% 100.1% 197.857 GBP 31.89 -4.4% 288.0% 123.896 CAD 0.42 -35.4% 100.0% 0.059 AUD 0.17 -16.2% 345.9% 0.277 Market leader NA NA NA Indicator stocks USD 43.17 -2.0% 158.5% 5.358 EUR 71.16 -7.3% 82.1% 52.603 USD 56.50 -15.9% 208.0% 0.823 GBP 0.06 -62.5% 269.2% 0.032 * 12-month ** Holds 45% of unlisted De Beers
In line with most commodity prices, rough diamonds plunged into a trough around mid-2008. Most prices have recovered well by now, although it seems that diamonds remain somewhat behind the curve. At De Beers, however, a culmination of disparate factors have left what was one of the world's most influential miners on its proverbial cash flow knees.
De Beers, a private company, publishes limited financial data, but enough to show that in the past three-and-a-half years, it has generated negative free cash flow (operating cash flow less capital expenditure) aggregating at minus US$864m. Part of the explanation lies in significant capital expenditure, at US$1.2bn in 2006 and US$1.5bn in 2007, mainly dedicated to building new mines in Canada.
But over the period, while free cash flow has been negative to the tune of US$864m, De Beers has paid out a staggering sum of US$730m in cash dividends. The group's swelling cash deficits have been funded by increased bank borrowings (during 2006 and 2007), and advances from shareholders, at US$248m in 2008, and US$500m this year. Net debt, including cash, stood at negative US$3.3bn on 30 June 2009.
During the first half of 2009, group free cash flow was negative to the tune of US$117m, leaving the group in a quandary as it faced the refinancing of US$1.5bn worth of debt in March 2010. Given De Beers's raising of loans from shareholders in 2008 and 2009, it can be reasonably concluded that De Beers has been unable to raise fresh debt from banks on terms acceptable to De Beers.
All this may explain persistent talk of De Beers seeking significant new injections of cash from its shareholders. But the matrix is far from complete without also considering the 5 April 2006 announcement that in South Africa De Beers had finalised a "broad based Black Economic Empowerment (BEE) transaction" which resulted in 26% of De Beers Consolidated Mines Limited - De Beers's South African assets - being sold to the Ponahalo Consortium for R3.7bn, about US$600m at the time.
The financing of the acquisition by Ponahalo Holdings was arranged by De Beers, in conjunction with Ponahalo Holdings, comprised:
* Seven-year funding of R2.9bn provided by Standard Bank of South Africa, with no recourse to De Beers South Africa;
* Seven-year funding of R800m from the same bank, "guaranteed" by De Beers South Africa, and
* Ponahalo Investments equity, provided by the business partners in Ponahalo Capital, at R10m.
While the detailed disclosure of BEE transactions in South Africa is as rare as something associated with rocking horses, it was also disclosed that the sale process involved "the arrangement of incremental financing of US$640m in revolving and term facilities and facilitation by De Beers in the form of guarantees amounting to approximately US$130m". It was further disclosed that "as a result of the sale transaction, US$473m was returned to the [De Beers] shareholders through a repayment of capital".
BEE transactions typically involve only token cash contributions from incoming partners. Debt is typically financed by dividend flows provided by the entity "selling" equity. De Beers's BEE transaction may have been badly timed, and mispriced, but clearly, undisclosed undertakings that De Beers made about the quantum of dividends it would pay continue to flock home, like dark clouds.
Sometimes, cash seems to go around in circles. Anglo American put it this way: "During the first half of 2009 the shareholders provided US$500m in additional loan funding to De Beers (the group's share being US$225m). Anglo American also reinvested US$24m of dividends received from De Beers".
De Beers
Source: market data; table compiled by Barry Sergeant
Full text..
Mining sector profits lift FTSE
London's FTSE 100 Index has climbed 1.5% as hopes grew that the Dubai debt crisis will not derail the global recovery.
Investors were reassured by government-owned Dubai World's plan to restructure half its estimated 60 billion US dollars of debt.
The latest developments in the Middle East triggered a renewed appetite for riskier assets as Asian markets improved overnight and the Footsie lifted 82 points to 5272.7 in the first hour of trading.
Miners led the revival with Xstrata up 38p at 1107p, Anglo American 87p higher at 2690p and Rio Tinto 91p stronger at 3179p.
Royal Bank of Scotland, which is seen as one of the UK banks most exposed to the Dubai debt crisis, lifted 1.1p to 34.3p.
Outside the top flight, housebuilders were on the front foot after Nationwide said house prices rose for the seventh month in a row during November.
Charles Church owner Persimmon lifted 18.3p to 431.9p, while Taylor Wimpey added 1.2p to 36.7p.
Brewer and pubs chain Greene King set the pace in the FTSE 250 Index after posting a 3% rise in half-year profits.
It also told investors that it was confident of further progress in the second half, causing shares to rise 8% or 31.8p to 433.1p.
by Press Association
Full text..
Dubai’s Crunch Is Likely To Be A Lot Less Transparent Than The USA’s By Rob Davies The news that Dubai World had asked for standstill agreement on d
The news that Dubai World had asked for standstill agreement on debt payments until the end of May next year sent capital markets into a frenzy last week. Investors had assumed that this state owned entity was backed by the government of Dubai and, in extremis, by its neighbour Abu Dhabi.
But the vagueness and confusion surrounding the statement that announced the standstill agreement depressed a number of asset classes. One market that suffered in particular was the sukuk market that trades Islamic bonds. Dubai World’s wounded Nakeel bond is one such.
However, when all’s said and done, for every down trade there is usually a positive counterparty and last week the dollar benefited significantly from positive support. It gained as much as 2.3 per cent against some currencies, although it fell to a 14 year low against the yen.
Yet, even in spite of the strength of the dollar, gold reached a new record of US$1,194 an ounce during the week, before it eased back. Also stronger, copper traded briefly over US$7,000 a tonne before closing at US$6,904, a gain of 2.1 per cent on the week.
What the events in the Gulf demonstrated was that many risks other than the risk of weakness in the dollar remain in capital markets. While the dollar receives a lot of attention because of its wide international reach and transparency, there are many other assets that have the potential to trip up investors.
The great beauty of Anglo Saxon-based investments is that investors usually have recourse to common law if they feel disadvantaged. Hedge funds holding sukuk bonds that are possibly, or possibly not, backed by governments in the Middle East, may not get very far in pressing claims in British or American courts.
Uncertainty is part and parcel of the investing world and the contents of a presentation last week from Ambrian, a junior stockbroker, represented a timely reminder of just how difficult life is for analysts. Peter Davey, a self confessed long-in-the-tooth mining analyst, was ably supported by veteran metals experts Ted Arnold, covering base metals, and Jessica Cross on precious metals and bulk commodities.
The essence of what Ted and Jessica had to say centred on the remarkable growth in Chinese demand over the last ten years, offset by the difficulty of getting much hard and reliable data from the country. There is no doubt that underlying demand is strong but it has been reinforced, says Ted, by a large amount of hoarding. This is not just at the state level in terms of bulging warehouses and piles at the dockside, but also at the individual and small company level.
In some cases businessmen have armed guards patrolling outside houses and offices containing hundreds of tonnes of nickel. The fear that lies behind such hoarding is that inflation will take off in the future and raw material prices will rocket.
In such a large industry there is a huge amount of information to digest but Peter Davey provided a neat summary. In his view the best performance in the mining and metals space - a sector that will do well as a whole - will come from three commodities: iron ore, copper and platinum, the commodities the Chinese will be hungriest for over time.
Perhaps someone should tell the kingdom of Dubai to forget grandiose plans to build massive hotels on artificial islands. They should just issue bonds to buy a whole load of these three commodities instead.
more information read minesite.com
Full text..
Senin, 30 November 2009
London markets review
The FTSE 100 miners were quiet too, though Antofagasta (LSE: ANTO) released a solid set of production results for the third quarter. Lonmin (LSE: LMI) was the best of the bunch, putting in a 5.3 per cent rise, whiles Fresnillo (LSE: FRES) was the worst performer, with a fall of 3.3 per cent.
First Quantum Minerals (LSE: FQM) joined the M&A feeding frenzy with the announcement that it has agreed to acquire Kiwara (AIM: KIW) in a deal that will give Kiwara shareholders a mix of cash and FQM stock. The deal valued Kiwara at £157 million or 75p per share which was a 41.5 per cent premium to the previous day’s close. Holders controlling some 76 per cent of the shares have already committed to the deal so the end result would seem to be a foregone conclusion. Completion is expected by the end of January 2010. Kiwara’s principal asset is the Kalumbila copper project in north-western Zambia, where a pre-feasibility study is in progress. Kalumbila is close to First Quantum's flagship Kansanshi mine, and so there may be opportunities for synergies. In addition to Kalumbila, Kiwara has several other exploration licences within which lie the Kawako nickel deposit and the Kawanga uranium deposit. This deal looks like a win/win. Kiwara’s shareholders will be able to take their money off the table, while First Quantum gains a potentially robust project that could fill the gap in the growth programme following the legal problems over its Kolwezi tailings project in the DR Congo. Kiwara was the week's best performer, putting in a gain of 36.8 per cent to close at 72.5p. First Quantum gained 11.6 per cent to finish at 4717p.
Petra Diamonds (AIM: PDL) has sold one of the very large diamonds that it recently found at its Cullinan mine in South Africa. The 168 carat stone was sold for US$6.28 million, equivalent to approximately US$37,380 per carat. The company is still holding on to the largest stone of the group, a 507.55 carat white diamond, whilst is works out the best option for maximising value. Whilst the sale was good news for Petra, it gives little indication of the health of the wider diamond market, and so was largely discounted by shareholders. Petra’s shares actually fell by 4.6 per cent to end at 62.5p, though, given the problems in Dubai, this may have more to do with concerns about the financial stability of its major shareholder, a Middle Eastern investment house.
Staying with Africa, Strategic Natural Resources (AIM: SNRP) announced that it has more than doubled the size of its prospecting rights in the Eastern Cape coalfield in South Africa. The company plans to build a coal mine in the area to service a planned power station, and also possibly the export markets. The stock rose by 12.1 per cent to finish at 16.25p.
The week's second highest rise was enjoyed by Mariana Resources (AIM: MARL), which put in a 28.1 per cent rise to close at 19.375p, though there was no news. Possibly the market is anticipating further consolidation in the sector, with the recent discovery at the company’s Dos Calandrias project in southern Argentina as the prize?
Moving to Europe, Beowulf ((AIM: BEM) has been adding to its exploration portfolio in Sweden. It has just been granted an exploration licence that includes the largest molybdenum project so far discovered in Sweden. The Munka deposit was extensively drilled in the 1970s and a resource, although not compliant with modern reporting standards, of 1.7 million tonnes grading 0.156 per cent molybdenum was outlined. Most of the old drill core has been located and Beowulf is confident that it can rapidly upgrade the resource to comply with current JORC standards. The company’s shares rose 17.9 per cent to end the week at 4.125p.
Galantas Gold (AIM: GAL), which operates a small gold mine in Northern Ireland, chose to wait until after the market had closed on Friday before releasing results for the third quarter. Traditionally, Friday afternoon releases tend to contain bad news and this was no exception. The company recorded a loss for the quarter, quite an achievement given the record high gold prices. Gold production was well below plan, apparently because machinery had to be diverted to strip overburden in order to gain access to the next mining area. This is, of course, normal practice in all open pit mines but most manage to keep the stripping ahead of the actual ore mining. However, Galantas admits that it does not have the working capital for this. Looking back through the accounts, the company has been profitable in only one quarter out of the last eight, and that was now more than a year ago. Galantas admits that, unless it can raise some more money in the near future, it may not be able to meet its obligations. The stock closed down by 14.3 per cent at 3p.
Several other companies are also having a tough time, including some in the Former Soviet Union. Orsu Metals (AIM: OSU) had a busy week with a 1 for 10 stock consolidation and also the settlement of a class action case, but this presumably was not what investors were looking for as the stock fell by 17.8 per cent to end at 38p. Orsu has had a difficult time in recent months, culminating in the sale of its Varvarinskoye gold-copper project to OJSC Polymetal. The company is currently focussed on exploring for gold in Kyrghystan in joint venture with Gold Fields.
Anglo Asian (AIM: AAZ) continues to struggle with the commissioning of its Gedabek gold mine in Azerbaijan. It has had to cut its production forecast for the year to June 2010 from 50,000 ounces of gold to 25,000 ounces after encountering various technical problems which limited the quantity of ore that could be placed on the leach pads. The company has bought some additional equipment that it claims should fix the problems, which seem to centre on the capacity to crush and stack the ore. The production shortfall is significant as it effectively displaces almost US$30 million of revenue, while costs will be almost unchanged. As a result, the company has borrowed an additional US$3 million from the International Bank of Azerbaijan to provide working capital. However, there may still be a funding gap as the company is working on contingency plans which may involve a substantial issue of equity. Understandably, the stock fell by 8 per cent to close at 11.5p.
Looking forward, next week is all about Mines and Money, with the usual mad flurry of meetings, presentations, and socialising. It will be interesting to gauge the mood as the best description for the mood was surely "shell-shocked".
(c)minesite.com
Full text..
Diposkan oleh Noer di 21:57
Label: Commodities, Company, Market, News
Australian market progress over past week
More like a speed bump so far, but a sovereign default, even of a small Middle East country, is a reminder of the high level of residual risk in the global economy after last year’s failure of the banking system in the USA and Europe. Overall, the Australian market, as measured by the all ordinaries index, ended the week down 2.3 per cent, mainly thanks to some sharp falls from the banks. Mining stocks ended the week down by just 0.5 per cent, with the gold sector holding up best of all and posting a gain of 1.5 per cent. As you would expect, most of the damage was done on Friday after Dubai confessed to its debt problems, with all eyes now on Monday’s opening to see whether the default spreads to other emerging markets.
Is Dubai that important in Australia?
Any sovereign default flows across borders, and we’re not immune to doubts about the strength of the recovery. Most of the countries in our region fall into the emerging market category and defaults have a habit of becoming contagious as we have seen in the previous cases of Argentina and Russia. The major immediate issue for Australia is whether the Reserve Bank raises interest rates for a third consecutive month when it meets on Tuesday. If it does ratchet rates up by another 0.25 per cent it will be the first time ever that our central bank has raised over three consecutive months.
Enough of the big picture stuff let’s have some prices, please, starting with gold.
A good choice, because gold and iron ore were once again the sectors favoured by investors last week. Adding to the gold market was a slide in the value of the Australian dollar against the US dollar. A few weeks ago the Aussie dollar was trading around US94 cents and was on track to achieve parity by Christmas. On Friday it closed at US90.6 cents. That decline combined with a US dollar gold price holding above US$1,170 delivered a 5.5 per cent rise in the Australian dollar gold price last week.
The twin benefits of global demand for gold, and the currency effect - which might be tested in the weeks ahead if we get a fresh outbreak of market turmoil – meant that most Australian gold stocks gained ground, although the best work was negated by the Friday sell off. The gold index added 4.2 per cent between Monday and Thursday, before dropping by 2.7 per cent on Friday.
Best of the gold stocks included Resolute (RSG), which we took a squiz at on Friday. It added A11 cents over the week to close at A$1.17, which was just half a cent below its 12 month high set on Thursday. OceanaGold (OGC), the New Zealand gold specialist, put on a star turn with a rise of A39 cents to A$1.92. CGA Gold (CGX), which has been reporting record ore throughput and gold production at its Mabate mine in the Philippines, shot up to a 12 month high of A2.23 on Thursday, before easing back to end the week at A$2.21, a gain of A29 cents. Also better off, Kingsgate (KCN) cracked the A$10 barrier on Monday, setting a fresh high of A$10.07, before trailing away to close on Friday at A$9.73 for a gain over the week of just A13 cents.
Elsewhere, in a sector which remains in robust health, Silver Lake (SLR), rose by A14 cents to A$1.18 over the week, and closed slightly off an all-time high of A$1.26 reached on Wednesday. Meanwhile, Troy (TRY), where peace reigns after a tumultuous year, added A6 cents to A$2.64, but was as high as A$2.79 on Thursday. Also on the up, Avoca (AVO) rose by A6 cents to A$2.03, while Catalpa (CAH) added half a cent after announcing the final legal steps in its complex merger with Lion Selection. A few gold stocks swam against the trend, but not severely. Eleckra (EKM) slipped half a cent lower to A11 cents. Andean (AND) lost A2 cents to A$2.52, and Ampella (AMX) eased back by A1.5 cents to A62.5 cents.
Iron ore now, please?
There was strong interest again in iron ore stocks, though not quite as strong overall as in gold. Iron Ore Holdings (IOH), which has generated considerable interest in your part of the world, added another A15 cents to A$1.62 over the week, but dropped back from an all-time high of A$1.83 reached on Tuesday. Golden West (GWR) was another star, continuing a powerful revival which started a few weeks ago after a year in the sin bin. It rose by A26 cents to A87 cents, but did get as high as A$1.06 on Thursday, which is three-times its price of three weeks ago. Red Hill Iron (RHI), which rarely gets a mention anywhere, stood out with a rise of A53 cents to A$3.53 as it moves closer to developing its West Pilbara project in conjunction with Aquila Resources (AQA). Aquila itself was up A67 cents to A$9.77. Meanwhile, Giralia (GIR) put on A8 cents to A$1.22, and IMX (IXR) added A4 cents to A33 cents. Going down among the iron ore stocks Fortescue (FMG) dropped A21 cents to A$4.01, and Northern Iron (NFE) continued a losing streak, off another A5 cents at A$1.53. Atlas (AGO) shed A4 cents to A$1.84, and BC Iron (BCI) lost A6 cents to close the week as A$1.05.
Let’s switch across to base metals.
Not much joy there after Friday’s sell-off. Syndicated Metals (SMD) was the only copper stock to rise over the week, putting in a very modest gain of A1 cent to A21 cents. After that it was all red ink. Blackthorn (BTR), despite our optimistic assessment early last week, closed down half a cent at A64.5 cents with all of the damage done on Friday. Until the sell orders hit the market Blackthorn had been as high as A72.5 cents. Sandfire (SFR) continued to report strong results from its Doolgunna project but slipped A18 cents to A$3.76. Talisman (TLM) lost A7 cents to A89 cents. OZ (OZL) fell by A9 cents to A$1.18, and CuDeco (CDU) dropped sharply with a loss of A62 cents to A$5.25. Nickel stocks were generally weaker. Western Areas (WSA) dropped A11 cents to A$5.07. Minara (MRE) eased back by A4.5 cents to A81 cents, and Panoramic (PAN) fell A14 cents to A$2.36. Mincor (MCR) held its ground to close steady at A1.99 and Independence (IGO) added an eye-catching A27 cents to A$4.69, but was stronger mainly because of its gold interests. Zinc stocks did little. Terramin (TZN) rose by A4 cents to A75 cents. CBH (CBH) fell A1.2 cents to A9.8 cents, and Perilya (PEM) added A3.5 cents to A51 cents.
Uranium, coal and specials to finish, please.
Like the base metals sector it was hard to find a uranium or coal stock moving higher. Mantra (MRU) fell A28 cents to A$4.16, and Manhattan (MHC) ran out of puff after a strong upward month, shedding A21 cents to A$1.16. Extract (EXT), another recent uranium favourite, fell A17 cents to A$7.77. The only coal stock to rise was Riversdale (RIV), which added A48 cents to A$6.23 after news that a Brazilian company has acquired a stake in it from Australia’s Macarthur Coal (MCC). Macarthur itself slipped A1 cent to A$9.20. Coal of Africa (CZA) fell A16 cents to A$1.73, but might be worth a fresh look next week as it is getting closer to some major changes.
Two specials worth noting were Nkwe Platinum (NKP), which has been holding a round-Australian roadshow, an event which helps explain a rise of A8 cents to A43 cents, and Mineral Resources (MIN), a very aggressive mine services outfit which has been busy bidding for construction work, launching takeover bids, and has emerged as a leader in the latest attempt to revive the mothballed Windimurra vanadium plant. It added A2 cents last week to close at A$7.15, but did hit a 12 month high of A$7.59 on Tuesday.
(c)minesite.com
Full text..
Diposkan oleh Noer di 15:50
Label: Commodities, Company, Market, News
Canadian markets review over the past week
Despite the holiday-shortened trading week in the United States, the Canadian bourses were abuzz with activity as a bevy of takeover proposals came in, and a legal bombshell involving a property in Colombia was dropped. Once all the trading was done, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had lost a modest 0.14 of a per cent, while the TSX Gold Index had dropped 1.3 per cent.
The big news of the week was that market darling Ventana Gold is facing a legal hurdle regarding its La Bodega property in Colombia. Sociedad Minera La Bodega Ltda., the owner of the mineral rights to the property is seeking arbitration in relation to Ventana’s option agreement. The vendor is claiming that the option agreement fails to comply with applicable Colombian law.
What does that mean?
Without seeing the agreement it is hard to say, but Ventana has increased the value of the project significantly, and that very fact may have some bearing on the case. Ventana attempted to make its final US$3 million cash payment and 250,000 shares but the Gelvez family, which owns the private Colombian company, refused to accept it.
Ventana also stated that it is in advanced talks with a third party about being acquired.
It just gets more interesting doesn’t it? As Ventana has a market value of over one billion dollars, the potential suitor must be one of the big boys. That said, with the tenement issue now on the table those advanced discussions are probably on hold. Ventana ended the week down C$2.38 at C$9.76.
We need to watch this one closely. How did the other Colombian explorers fair?
Ventana’s neigbours Greystar Resources dropped C$0.28 to close at C$5.94, while Galway Resources lost C$0.33 to close at C$1.13.
Onto definitive takeover offers. Atomredmetzoloto JSC has offered up C$0.65 per share in cash for all the shares of Khan Resources. The Russian company thinks the bid is adequate, given the considerable political risks on developing the Dornod uranium property in Mongolia. Khan ended the week up C$0.29 at C$0.61.
And, as we mentioned last week, Noront Resources has made a hostile takeover offer for Freewest Resources. Freewest has now found a white knight in the form of Cliffs Natural Resources. Cliffs has stepped up to the plate and is offering a fixed value of C$0.55 plus one share of a new company, to be appropriately called Freewest Resources.
Cliffs is the world's largest iron ore pellet supplier and the major obviously believes that Freewest's share in the high-grade Black Thor, Black Label and Big Daddy chromite deposits in the so-called "Ring of Fire" district of northern Ontario has significant value.
Yes, the company believes it can deliver a relatively low-cost open-pit mine. For its part Noront, which has offered 0.25 of a Noront share and 0.01 cents in cash for each Freewest share, is reviewing the situation. Freewest ended the week up C$0.09 at C$0.64, while Noront dropped C$0.04 to close at C$2.25.
In a more friendly scenario, privately-owned Argonaut Gold is a step closer to completing its takeover of Castle Gold, thanks to the closing of a C$150 million financing. Castle ended the week up C$0.04 at C$1.32.
Elsewhere, American Bonanza Gold got news that the United States Department of the Interior's Bureau of Land Management has accepted as complete its mining plan for the Copperstone gold project in Arizona. American ended the week up C$0.025 at C$0.17.
Over to the drill bit where it was a good week for shareholders of Mirasol Resources. The junior’s joint venture partner, Coeur d'Alene Mines tagged 25 metres grading 1,164 grams silver per tonne and 0.21 gram gold per tonne at the Joaquin project in Argentina. Coeur d'Alene has an option to earn up to a 71 per cent interest in Joaquin. Mirasol closed at C$1.26 for a C$0.61 gain.
Not to be outdone, shares of U3O8 Corp. added C$0.265 to close at C$0.63 after the company reported a 2.3 metre intercept running 0.551% U308 at its Aricheng West target in Guyana.
And finally, back to politics. This week Barrick Gold, Goldcorp and Kinross Gold all spoke up against a proposed bill that if made into law would allow anyone, from any country where Canadian mining companies are operating, to bring complaints before the ministry of foreign affairs and international trade. Proposed Bill C-300 was introduced by Liberal MP John McKay back in February and was based on recommendations from a multi-stakeholder advisory group, including NGOs. It’s interesting to consider how the Canadian government idly watched the hollowing out of Canada’s mining giants by allowing foreign companies to buy out the likes of Inco. This bill would essentially force those that are left to set up headquarters in countries other than Canada. We will see what next week’s trading has in store.
more detail on minesite.com
Full text..
Diposkan oleh Noer di 09:44
Label: Commodities, Company, Market, News
Sabtu, 28 November 2009
Dubai Default Causes Contagion Concerns
Gold reached new record highs at $1,195/oz yesterday but has experienced the much anticipated correction overnight. Gold is currently trading at $1,157/oz and in Euro and GBP terms, gold is trading at €777/oz and £706/oz respectively. Gold is down some 3% and the correction is likely due to a combination of factors.
After gold's recent sharp gains, a much needed correction and consolidation was expected and profit taking was due also. The primary factor in gold's sell off is not risk aversion per se, rather the speculative leveraged players going to cash in the very short term due to turmoil in equity markets due to the uncertainty created in the light of the Dubai default. Sell offs like this have been common when international equity markets sell off sharply. Gold becomes correlated with equities in the very short term but what has happened so far in this bull market and will likely continue (as long as gold remains in a bull market) is that gold generally falls by less in the sell off and then bounces back quicker in the aftermath of the sell off.
Ironically the panic sown from the Dubai default is likely to lead to even more investment demand for gold. Especially as Dubai is just one country confronted by the growing international debt crisis - others include Greece, Spain, Hungary, and Latvia. The potential risk of contagion (particularly in the sovereign debt market) will likely mean that gold's sell off is again just one more correction in an ongoing bull market.
Silver
Silver was as high as $18.45/oz overnight. Silver has fallen by 3.6% and is currently trading at $18.00/oz, €12.07/oz and £10. 97/oz.
Platinum Group Metals
Platinum is trading at $1,430/oz and palladium is currently trading at $360/oz. While rhodium is at $2,800/oz.
Full text..
Gold price dynamics
Spot gold prices are up over 40 percent year on year. Yet, according to the World Gold Council, demand for gold in the third quarter of 2009, dropped by 34 percent year on year. Of course, demand in the third quarter of 2008 was exceptionally high due to the financial crisis. As well, relative to the third quarter average of the five years to 2007, demand for gold in Q3 2009 was down 4 percent.
When confronted with the ferocity of the rally in gold, the fact that the third quarter demand for gold was below the seasonal average is surprising. The dynamic between price and demand suggests some fall in supply perhaps led by increased hoarding.
According to the council mining supply is fairly inelastic.
Supply of recycled gold generally helps stabilise the price, in recent years this has been 28 percent of annual supply. Between 2003 and 2008 central bank sales represented the third biggest source of supply.
It remains unclear what the recent gold purchases from the Central Bank of India means for the demand/supply dynamic of gold going forward.
What is clear, is that the gold rally has been exacerbated by dollar weakness, but this only offers a partial explanation. The dollar index is at 15-month lows. In August 2008, gold traded at an average rate of $836.84. Other factors that have chased gold prices higher include the lack of return on cash and fear of inflation. The former will almost certainly support gold in the coming months, but the inflation argument has no legs.
Following a year packed with fiscal spending and the introduction of Quantitative Easing, Fed chief Bernanke recently said “inflation seems likely to remain subdued for some time”. If high unemployment and rising savings rates are insufficient evidence of subdued price pressures, lessened availability of credit at a consumer level should drive home the point.
Tightening the availability of credit on Main Street has been an inevitable and necessary consequence of the subprime crisis. Not only should this ensure that consumer activity going forward stays relatively subdued but is also implies that firms will have less pricing power.
Rather the causing domestic inflation, cheap money provided by the Fed and other central banks can be linked with speculator inflows into high yielding markets. Some asset prices in Hong Kong, China and Singapore are arguably seeing the beginnings of bubbles and this talk alone is supporting gold.
The Fed could hinder this by hiking rates so the dollar was no longer an attractive funding currency but it is unlikely to do so when its domestic economy is weak and expectations for domestic inflation are low. Like the Bank of Japan in the 1990s, it is possible that the Fed’s ability to create inflation domestically may be lessened in the post crisis era.
While it is difficult to find signs of inflation in the US, Eurozone or UK, near zero interest rates are clearly providing a significant support for gold. Speculation in general is being fuelled by cheap USDs but in addition, conservative and retail investors are being forced to look outside cash deposits for positive return. Also, retail investors cannot be blamed for enjoying the intrinsic quality of gold following last year’s banking crisis.
Assuming the Fed starts to hike rates in the second half of 2010 the dollar could see a cyclical recovery on a 6 month view. Anticipation of higher Fed rates and a stronger dollar should reverse some of this year’s flows into gold. While this suggests that the gold rally may yet run for another 6 months , the third quarter demand data for gold implies the rally may tire as soon as the first quarter.
(c)Reuters
Full text..
Rossing can produce uranium at current levels until 2023
Reports from Namibia suggest, perhaps hardly surprisingly, that mining giant Rio Tinto is very keen to purchase the Rossing South project from Australian explorer, Extract Resources and develop it in conjunction with its existing major mining operation some 7 km to the north.
Rio already owns 14.7% of Extract directly and also has 14.1% of Kalahari Minerals which in turn owns 40% of Extract - which perhaps puts it in the driving seat with respect to taking on what is turning out to be one of the world's great uranium deposits - and given the proximity of its own operation, this would seem to make sense. But perhaps Rio has missed the boat in picking up the project at a reasonable price as Extract and Kalahari stock has soared as more and more good grade uranium is turned up by Extract's exploration team. The current total resource for Rossing South is put at 267 million lbs U3O8 at 488ppm with almost definitely much more to come. Indeed Kalahari puts the anticipated potential at over 500 million lbs.
Jerome Mutumba, Rossing Uranium's manager of corporate communications and external relations, has been reported as telling Namibia Economist "Rio Tinto and Rössing see great potential for Rössing South to be developed and operated together with Rössing as this will provide value to both Rössing and Extract Resources.... the mines could share significant infrastructure... Rössing Uranium remains interested in discussing with the board of Extract how it might maximise value for all shareholders in both Extract and our Rössing mine.... Rössing produces 8% of global primary uranium production and is already a world class mine. Rössing South has the potential to be a similar scale."
Other shareholders in Extract and Kalahari may well be holding out for a higher price than Rio may be prepared to pay though. A significant player in this is Stephen Dattels who, through Polo Resources and various other companies with which he is associated is believed to have built up a significant stake in both Kalahari and Extract. Dattels, and his associates are perhaps best known for the huge sale of Uramin, which has the Trekkopje uranium mine, also in Namibia, to French nuclear giant Areva for over $2 billion in 2007. He is very much a believer in Namibian uranium and has already made a fortune backing this belief.
Meanwhile Rossing itself, which had been looking at running operations down only three years or so ago, now reckons it can maintain its annual production rate of 4,000 tonnes of U3O8 a year until 2023 - indeed it should be able to increase it by 500 tonnes a year if it builds a new heap leach facility for which a feasibility study will be completed early next year. Rossing Uranium is owned as to 68.6% by Rio Tinto.
The mine is also exploring around its own operation and reckons its potential for expanding its own resource remains, although the Rossing South resource has very obvious attractions. But, the very fact that the mine can continue operating for another 10 years or more at its current rate, even without finding new ore on its own ground, means that it may not be in a rush to pay a high premium for Rossing South. It is still very much the obvious developer for the project and its big shareholding in Extract and Kalahari may mean it can successfully prevent its sale to other parties and hold out for a deal which satisfies all parties.
(c)mineweb.com
Full text..
Diposkan oleh Noer di 03:29
Label: Commodities, Company, News, Uranium
Gold stock on the weekend
Freeport-McMoRan, which has long ranked as the world's biggest publicly traded copper miner, continues to thunder back to life on recovering metal prices, as again shown in its third-quarter 2009 results. One of the most intriguing aspects of Freeport is the manner in which its stock market valuation shows just how overvalued gold stocks are, and the extent to which base metal stocks - good ones - are undervalued. USD m 9m09 9m08 2008 2007 Total Free cash flow Operating cash flow 2,850.0 3,169.0 3,370.0 6,225.0 12,445.0 Capital expenditure -1,138.0 -1,929.0 -2,708.0 -1,755.0 -5,601.0 Free cash flow 1,712.0 1,240.0 662.0 4,470.0 6,844.0 Equity raised 740.0 -500.0 -500.0 2,816.0 3,056.0 Dividends -181.0 -695.0 -948.0 -596.0 -1,725.0 EIGHT GOLD MAJORS* Free cash flow Operating cash flow 7,403.1 5,313.6 7,068.6 4,740.6 19,212.3 Capital expenditure -6,265.1 -6,551.2 -9,078.5 -7,062.1 -22,405.7 Free cash flow 1,138.0 -1,237.6 -2,009.9 -2,321.5 -3,193.4 Equity raised 5,993.8 1,990.1 2,264.4 1,816.5 10,074.7 Dividends -744.3 -800.8 -995.2 -916.3 -2,655.8 MARKET VALUES USD bn 15.937 41.314 30.612 25.385 9.628 13.254 4.653 10.772 Total 151.553 35.800 100 selected copper stocks Includes diversifieds with copper interests Stock From From Value price high* low* USD bn CAD 0.86 1.2% 309.5% 0.049 AUD 2.21 -0.9% 132.6% 0.569 CAD 3.39 -3.1% 406.0% 0.923 GBP 18.47 -3.8% 93.6% 189.700 USD 28.37 -4.6% 222.0% 150.049 USD 83.28 -4.7% 430.4% 35.800 GBP 25.68 -4.9% 183.4% 56.636 GBP 8.97 -5.3% 165.4% 14.515 GBP 10.67 -5.4% 269.5% 51.396 USD 34.42 -5.4% 219.3% 29.257 PLN 104.90 -5.6% 301.1% 7.498 GBP 0.198 -6.0% 934.0% 0.933 GBP 0.70 -6.3% 440.4% 0.228 CAD 79.71 -6.5% 512.7% 5.866 ZAR 98.00 -6.6% 133.3% 0.634 CAD 4.61 -7.1% 568.1% 2.504 GBP 22.89 -7.3% 366.2% 10.258 USD 33.65 -7.5% 1189.3% 19.494 AUD 0.43 -7.5% 309.5% 0.557 INR 132.85 -8.0% 261.5% 4.843 GBP 30.64 -8.1% 272.8% 118.279 CAD 1.01 -8.2% 134.9% 0.109 GBP 12.28 -8.2% 555.6% 10.794 AUD 0.50 -8.3% 541.0% 1.327 CAD 7.75 -8.3% 106.7% 0.083 CAD 3.87 -8.3% 303.1% 2.556 AUD 0.65 -8.5% 154.9% 0.048 GBP 0.32 -8.7% 404.0% 0.031 CAD 2.82 -9.0% 1609.1% 0.107 USD 17.53 -9.5% 314.4% 14.731 CAD 9.46 -9.9% 370.6% 0.285 PHP 18.00 -10.0% 442.2% 1.865 CAD 3.22 -10.3% 373.5% 0.355 AUD 1.18 -10.9% 195.0% 3.334 CAD 3.21 -11.1% 386.4% 0.549 CAD 62.84 -11.3% 417.2% 3.304 AUD 3.62 -11.7% 2313.3% 1.027 CAD 0.95 -12.0% 137.5% 0.065 CAD 0.99 -12.4% 65.0% 0.052 CAD 13.49 -13.0% 574.5% 3.458 USD 13.23 -13.4% 276.9% 25.220 CAD 4.46 -13.6% 126.4% 0.497 CAD 1.03 -14.2% 255.2% 0.102 AUD 0.21 -14.3% 100.0% 0.040 AUD 3.76 -14.4% 7733.3% 0.339 CAD 0.33 -14.5% 400.0% 0.020 CAD 12.52 -14.7% 454.0% 4.983 CAD 2.81 -14.8% 307.2% 0.517 CAD 1.82 -15.3% 506.7% 0.220 AUD 0.48 -15.8% 317.4% 0.097 AUD 0.34 -16.0% 672.7% 0.203 CAD 0.32 -17.1% 350.0% 0.024 CNY 21.68 -17.3% 228.5% 4.110 CAD 7.88 -17.9% 158.4% 0.687 GBP 0.02 -19.0% 70.0% 0.008 CAD 0.50 -19.4% 100.0% 0.158 CNY 41.02 -19.7% 313.9% 9.824 AUD 5.25 -20.3% 356.5% 0.656 CAD 3.78 -20.6% 302.1% 1.373 CNY 30.57 -20.9% 287.0% 5.626 AUD 1.30 -21.2% 1254.2% 0.369 AUD 1.04 -21.6% 350.0% 0.630 CAD 1.75 -22.2% 753.7% 0.126 GBP 0.14 -22.5% 450.0% 0.090 CNY 4.21 -24.4% 184.5% 0.412 CAD 6.26 -24.5% 136.2% 0.442 CAD 26.79 -24.5% 163.7% 0.944 AUD 0.09 -25.0% 221.4% 0.005 CAD 0.74 -25.3% 131.3% 0.181 CAD 12.55 -25.5% 537.1% 1.168 AUD 1.61 -25.6% 152.4% 0.357 AUD 1.61 -25.6% 152.4% 0.357 CAD 0.15 -25.6% 383.3% 0.010 CAD 2.64 -26.1% 340.0% 0.344 CAD 0.61 -26.5% 149.0% 0.076 AUD 0.17 -26.7% 135.7% 0.060 GBP 0.12 -27.0% 240.7% 0.045 ZAR 2.99 -28.5% 160.0% 0.298 CAD 1.28 -28.9% 1119.0% 0.136 CAD 0.53 -29.3% 253.3% 0.029 CAD 0.67 -29.5% 204.5% 0.032 CNY 15.80 -29.5% 172.0% 1.478 CAD 2.22 -30.8% 665.5% 0.371 CAD 0.67 -30.9% 362.1% 0.090 CAD 0.40 -31.0% 700.0% 0.026 AUD 0.17 -31.3% 312.5% 0.074 USD 2.48 -31.3% 535.9% 0.220 AUD 0.24 -32.9% 273.0% 0.108 CAD 1.76 -33.1% 49.2% 0.130 PHP 11.00 -33.3% 126.8% 0.022 AUD 0.03 -35.6% 383.3% 0.008 CAD 0.15 -37.5% 150.0% 0.010 CAD 0.42 -38.2% 223.1% 0.032 AUD 1.11 -40.1% 700.7% 0.067 CAD 0.31 -40.2% 281.3% 0.094 AUD 0.16 -40.4% 269.0% 0.010 CAD 0.69 -44.0% 227.5% 1.226 CAD 0.23 -47.1% 76.9% 0.012 CAD 0.10 -47.4% 185.7% 0.004 GBP 0.06 -60.5% 775.0% 0.083 GBP 0.04 -65.0% 288.9% 0.021 Averages/total -11.0% 105.9% 808.969 Weighted averages -6.8% 203.1% * 12-month
Freeport is, of course, much more than a copper miner, the world's No 2 after Chile's state-owned Codelco. By its own estimates, Freeport's sales for 2009 are expected to be around 4.0bn pounds of copper, 2.5m ounces of gold and 56m pounds of molybdenum. Freeport thus ranks, technically, as a global Tier I gold miner (only three full-time gold diggers produce more than Freeport), the biggest miner of molybdenum, and, in due course, one of the biggest miners of cobalt, a byproduct at the relatively new Tenke Fungurume operation in the Democratic Republic of the Congo.
With this suite of metals, Freeport leaves major gold miners in the dust, in a number of ways. Taking financial results published from the beginning of 2007, Freeport has generated positive free cash flow (operating cash flow less cash spent on capital expenditure) of USD 6.8bn, compared to an aggregated negative free cash flow of USD 3.2bn from eight of the world's gold majors, in the form of Barrick, AngloGold Ashanti, Goldcorp, Newmont, Yamana, Kinross, Harmony, and Gold Fields.
Freeport's achievement is all the more remarkable given that copper prices collapsed from around USD 4.10/lb in mid-2008 to USD 1.28/lb by December 2008. Copper has moved up sharply and pretty consistently since then, to regular recent trades above USD 3.00/lb. Molybdenum and cobalt prices, which also collapsed, are also making a comeback. For dollar gold bullion, the story has been quite different, given the metal's longer-term rise since early 2002, and the mildest correction among metal prices during the so-called global credit markets crisis.
For Freeport, the devastation was seen in group free cash flow that collapsed from USD 4.5bn in 2007 to USD 662m in 2008. For the first nine months of 2009, free cash flow has recovered substantially, to USD 1.7bn, and looks destined to easily clear USD 2bn for the year. The eight gold majors mentioned have also generated positive free cash flow for the first nine months of this year, to the tune of USD 1.1bn
Freeport-McMoRan
* Barrick, Goldcorp, Kinross, Newmont, AngloGold Ashanti, Gold Fields, Harmony, Yamana
Looking beyond the operating level, Freeport in 2007 paid a net USD 13.9bn in cashfor Phelps Dodge; even so, rights issues by Freeport over the past near-three years have raised a relatively light net USD 3.1bn, compared to USD 10.1bn raised by the eight gold majors, which continue to battle in attempts to "tailor" operating cash flows to at least cover capital expenditure, even under the protection of a resilient, and seemingly ever-rising, dollar gold bullion price.
The gold majors have also been busy with a number of acquisitions, and AngloGold Ashanti and Barrick have also taken to attacking their historic hedge books, an exercise that eats hundreds of millions in cash dollars. Even so, the gold majors have continued to pay out dividends, despite negative free cash flow, paying effectively from "capital", financed from a combination of rights issues, increases in net debt, and net asset sales. Freeport, which has paid dividends more prudently, well in line with changing levels of free cash flow, recently reinstated its annual cash dividend on its common stock.
A number of gold majors also mine other metals, such as copper, but none have been able to match the quality of free cash generated by Freeport. The gold majors are also almost universally challenged by heavy ongoing capital expenditure programmes; Freeport's big new mine at Tenke Fungurume, costing close on USD 2bn, was fully commissioned earlier this year. There are certain unresolved issues over the terms of mining engagement, but the twin deposits at the mine rank as the richest in the global copper classification. Freeport's overall capital expenditure has fallen rapidly from around USD 2.7bn in 2008, to an estimated USD 1.4bn this year, and is forecast at about USD 1bn next year
Just under a year ago, Freeport's NYSE quoted stock price crashed down to just under USD 16.00 a share, where some of its many fans described it as "the buy of the century". It has recently traded well above USD 80.00 a share, and no doubt could one day again make it above USD 120.00, as seen in mid-2008. At this point, for all its class, Freeport's market value is just USD 35.8bn, compared to the aggregate USD 151.6bn for the eight gold majors mentioned. The gold miners have lots of work to do.
Source: market data; table compiled by Barry Sergeant
Full text..
Kamis, 26 November 2009
Gold prices continued to strengthen
Gold ended last week in New York on a powerful note - rising even in the face of a stronger U.S. dollar. Continuing its upward tear Monday, gold registered yet another historic high near $1,175 ( and has continued to rise since then reaching the mid-$1190s Thursday). So far this year, the yellow metal is up over 35 percent.
Looking back over the past few weeks, it is apparent that the tipping point for gold was news that India's central bank had acquired 200 tonnes of IMF gold. Subsequent announcements from two small central banks (Sri Lanka and Mauritius), from a several well-respected hedge fund managers, and news from Russia's central bank (of its latest official purchases) has reinforced bullish sentiment and attracted growing private-sector interest. Today further strength was seen on speculation that India may be bidding for the remainder of the IMF gold on offer.
Here are more details and other timely Talking Points:
Importantly to chartists, gold moved higher on Friday and Monday morning, defying a rebound in the U.S. dollar - and registering gains against the euro, British pound, Japanese yen, Chinese yuan and many other currencies. When gold moves up, not just against the dollar, but also vis-a-vis other currencies, it is often viewed as an important technical signal, confirming the bullish trend and encouraging traders and speculators to increase their long positions.
Not surprisingly, but still very important in understanding the latest gold-price action and likely direction in the month's ahead, Russia's central bank has revealed gold purchases of 15.6 tonnes (about half a million ounces) in October. This brings its total official central bank gold holdings to 606.5 tonnes - about 4.7 percent of total reserves. In the past, Russian officials have said the central bank should hold 10 percent of its official reserves in gold - so we will likely see continued buying by their central bank.
The IMF still has some 200 tonnes on offer - and this is likely to be taken up by central banks - see note on India above. New announcements of official gold purchases by one or another central bank in the weeks and months ahead are therefore quite likely. Any such announcement will promote additional private-sector gold demand and add support to the continuing rise in the metal's price.
Rising geopolitical tensions triggered by Iran's nuclear ambitions and this past week's Iranian military maneuvers are also lending support to gold. Thirty years ago, the Iranian hostage crisis contributed to gold's historic run-up to $875 an ounce in January 1980 - and some traders think the worsening crisis in Iranian relations with the West could trigger another surge in safe-haven demand for the metal.
This weekend's statements from St. Louis Fed president James Bullard (that he favored continuing Fed purchases of mortgaged-back securities beyond its current March expiration date) and Chicago Fed President Charles Evans (that the Fed funds interest rate could remain near zero until late 2010 because the job market is so weak) were just the latest indicators from the Fed that extraordinary monetary stimulus and low interest rates will remain unchanged for some time to come. News of this sort simply heightens long-term inflation fears among some investors and provides continuing support for gold as a hedge against inflation and currency depreciation.
U.S. domestic political discord is also becoming increasingly favorable toward gold. This past week, some leading members of the House and Senate called for the resignations of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner. Whatever one may think of their policies, an increasing politicization of U.S. monetary and fiscal policy would tilt the bias even further toward easy money, bigger Federal deficits, more price inflation and a weaker U.S. currency down the road.
• There's been a lot of talk lately about "asset bubbles" and the "carry trade." Professional traders and fund managers are borrowing U.S. dollars at very low interest rates in order to invest in what they expect to be higher yielding equity, real estate, and commodity markets around the world. This inflation in some asset markets so far above their fundamental values is complicating economic policy in many countries around the world. History suggests that buying mania - whether Dutch tulips, U.S. equities, or Hong Kong real estate - inevitably ends, leaving much economic carnage in its wake.
Although this "carry trade" is surely benefitting precious metals along with other markets, the surging gold price is anything but a bubble. It's built on the same fundamental factors that have supported a rising gold price in the past - easy money, low real interest rates, unbridled growth in Federal debt, diminishing faith in the U.S. dollar, rising geopolitical tensions, and global economic policy discord. And, ultimately, when the bubbles do burst, gold will benefit still more as investors seek a safe haven from turmoil in other markets.
more detil read on mineweb.com
Full text..
