Of common occurrence, gold tends to breathe more easily during the summer in the northern hemisphere. However, there are some things that need attention, such as Sprott Asset Management chief investment strategist, John Embry, who believes this year may be a little different.
Embry once said, because of what happened at the big picture geopolitically, gold tends to have a great summer.
"I don't like putting numbers and dates in the same sentence because you always make yourself look bad - but I would be very surprised if it doesn't take out $1,650 this summer and maybe headed towards $1,800 over the next three months," he said.
To back up the statements, Embry points to a number of macroeconomic factors that are likely to have a bearing on gold prices over the next few months.
Firstly, much of the seasonality that is traditionally associated with the metal comes from Asia where gold purchasing is strongly related to the wedding season and, in India because much of the demand traditioanlly comes from rural areas, the sowing cycle.
"People forget," Embry said, "that the gold market is changing fairly significantly from traditional sources of demand into investment demand as an alternative to currencies... investment demand doesn't know seasons - it buys gold because it is fearful of other assets."
Fear is a dominant theme in another of this summer's big economic events - the end of quantitative easing in the U.S and worries about the country reaching its constitutionally mandated debt ceiling.
Embry says, these two events are likely to have a significant impact on the gold price, especially given the recent data that suggests, the U.S. economy could begin to recede once more.
"If you want to withdraw enormous amounts of stimulus by cutting the deficit dramatically at this point, or if QE2 actually marks the end of quantitative easing there's no question that the United States' interests rates are going to go up dramatically because from the numbers I look at, the Federal Reserve has been buying the vast majority of the all the treasuries that have been coming into the market."
"In my opinion we have reached the point of no return. We are either going to take a collapse in the dollar or a collapse in the economy depending on which direction they take. The idea that they can return to normalcy in my opinion is out of the question at this point. They are way too far off line."
The third reason for gold's likely strong performance comes from Europe. "There are an enormous number of problems in Europe, just as there are in United States and to me the conclusion one should arrive at is neither of these currencies are attractive and that to me is one of the underlying factors why I am so bullish on the gold price," he says.
" I look at the Greece situation and I see absolutely no way out that's palatable to the euro and the European banks or what have you that hold a lot of this paper. In some way the Greeks cannot afford to carry the debt load they've have got and somehow that's going to have to be addressed."
Beyond the summer, Embry continues to remain positive on the outlook for precious metals, but he does caution that it can never be only way traffic.
"You are always going to have corrections and there are people who are in this market who are using leverage that had better be careful because the corrections can be quick and violent. But having said that, for you to say that the bull market in gold is over is essentially by saying that we are going to re-establish paper currency as viable and I don't think that's going to happen - I am of the mind that before this whole mess is ended we are going to have a new monetary system and as we make our way towards that, gold and silver will be refuges."
Source
PricewaterhouseCoopers reveals that the profit margin from mining world's top 40 companies are under the historical peak in 2006 and 2007 as a result of the high cost burdened profits.
Profit margins for the world's top 40 mining companies are below the historical peaks of 2006 and 2007 as higher costs outweigh record commodity prices, PricewaterhouseCoopers said on Tuesday.
Revenues for the world's 40 largest miners by market value rose 32 percent to a record $435 billion in 2010 on higher commodity prices and a 5 percent climb in production.
However, cost pressures meant the return on equity was only 22 percent last year, compared with the highs of 31 percent and 28 percent in 2006 and 2007 respectively.
"With no sign of inflationary pressures easing, maintaining cost discipline in a volatile global and financial environment remains extremely important for the industry," PwC's global mining leader Tim Goldsmith said.
Top 40 mining companies have announced more than $300 billion of capital expenditure programmes, of which over $120 billion is planned for 2011, PwC said.
"The real challenge now is addressing ever rising costs with huge forecast capital expenditure programmes compounding already tight labour and materials supply - and increasing complexities in operations, as sourcing new supply continues to move into more remote and challenging locations."
Source
Gold prices everyday is very fragile and easily influenced by a growing range of issues, one will be able to lead to the strengthening gold price as the currency continues to devalued.
New York closed at the weekend with gold at $1,541 and Asia plus London took the gold price higher Monday. The dollar continued to want to weaken and stood at €1: $1,4640 for much of the morning in London before strengthening slightly to €1: $1.4420 ahead of New York's opening. In the euro gold was Fixed at €1,054.66 still at the bottom of its trading range. In the dollar gold Fixed at $1,542.75 nearly the same as it was in New York on Friday.
Just after New York's opening the gold price was higher at $1,548, still not fully reflecting the fall of the dollar and in the euro at €1,058.08 slightly down on Friday's price. The dollar stood at €1: $1.4625.
Silver rose well in London to stand at $37.05 after Fixing at $36.87 as New York opened.
SILVER & GOLD PRICE DRIVERS
The week holds promise of another attempt to bailout Greece after the Greek government imposes further harsh austerity measures. One wonders how long the government can hold onto power as huge demonstrations there continue. We will be surprised if the Greek economy can bear even harsher burdens than it already has without some major reforms to bureaucracy and taxation.
In the States we are sure that the bulk of fund managers are in investment strategy meeting to re-formulate their investment policies in the light of last week's labor figures.
We look around the globe for some economic good news that will bring solid hope and can't find a significant amount. We don't think we will see economic collapse but may well see the bite of steady incomes in the face of inflation, which eats away at spending power. The developed world has been made cautious by the past four years of economic difficulties so another downturn will be quick to persuade people to pull in their spending horns even more. It does look as though the downturn will last as long as the downturn in the housing markets lasts. This is being forecast at up to four more years until the U.S. housing market is iin good condition again. By then the global investment scene will have changed dramatically.
Gold Prices in different currencies which highlight currency moves:
Swiss Franc: - Today: Sf1,293.57: 1 ounce of gold. Friday: 1,295.27: 1 ounce of gold.
U.S. $: - Today: $1,546.50: 1 ounce of gold. Friday: $1,539.15: 1 ounce of gold.
Euro: - Today: €1,058.49: 1 ounce of gold. Friday: €1,065.16: 1 ounce of gold.
India: Today: Rs. 69,247.63: 1 ounce of gold. Friday: Rs.68,984.70: 1 ounce of gold.
To read more of Julian Phillips' commentaries on the gold and silver markets go to www.goldforecaster.com and www.silverforecaster.com
News of the weak U.S. economy rocked the capital markets and also impacted on their base metals market. Copper fell to U.S. $ 9,035 per tonne, or U.S. $ 4.10 per pound, and nickel fell to U.S. $ 22,575 per ton. Zinc closed lower at U.S. $ 2,245 per ton.
Gold fared somewhat better, as investors took flight from equities, edging higher to US$1,543 per ounce. Platinum edged higher to US$1,816 per ounce and palladium also climbed higher to US$783 per ounce. However, silver retreated to US$36.23 per ounce.
The turbulent market sent many mining shares lower, although there wasn’t much company-specific newsflow about. Amongst the majors, Rio Tinto and Chinalco have formed a joint venture to explore mainland China for world-class mineral deposits. Chinalco will hold a 51 per cent interest in the joint venture and Rio will hold 49 per cent. Even so, Rio closed 3.9 per cent lower at 4,101p.
The other majors fared little better. BHP Billiton lost 3.4 per cent to close at 2,309p whilst Anglo American closed 2.2 per cent lower at 2,927p. Xstrata closed 3.7 per cent lower at 1,371p. Shares in trader Glencore closed 2.3 per cent lower at 512p as fresh concerns were raised over the group’s corporate governance.
Amongst junior precious metals miners, Arian Silver admitted that it faces a number of operational challenges at its Mexican operations. In particular issues regarding the mill and plant, which were not specifically designed for treating ore from its San Jose mine, need to be addressed. Those problems resulted in a small loss for the mining operation in the first quarter, but were compounded by thefts of silver-bearing concentrate from the mill, which lead to lower-than-expected recoveries. Nevertheless, Arian plans to update the silver resource at San Jose in the coming months and to start another drilling programme. What’s more, the company reckons it will be able to fund operations, including ongoing exploration, from working capital and production cash flow. Arian’s shares slipped 7.3 per cent to 30p.
Vatukoula Gold Mines also had a tough time of it, as it announced increased production from its Fiji operations to 29,743 ounces of gold in the six months to 28th February. The higher gold price helped lift gross profit from £4.5 million to £5 million. However, the market had been expecting annualised production to be pushing towards 100,000 ounces and the shares tumbled 22.7 per cent to 110p.
Elsewhere, several juniors upgraded mineral resources during the week. Producer Highland Gold Mining announced that the Kyrgyz government had signed off on the company’s latest resource of 1.38 million ounces of gold at its Unkurtash project in Kyrgyzstan. The approval will facilitate the granting of a mining license and represents an important step towards mine development of the Unkurtash project. The shares edged 0.8 per cent higher to 151p.
Also on the up was Pan African Resources, which increased the total mineral resource at its Barberton gold mine in South Africa by seven per cent to 2.55 million ounces of gold. There was also a significant increase in grade, which improved by 33 per cent to 8.35 grammes per tonne. The shares climbed 4.9 per cent to 10.75p.
Elsewhere on the continent, African Consolidated Resources increased the resource at its Gadzema gold project in Zimbabwe to 912,000 ounces, as a result of ongoing drilling. The company’s total gold resource now exceeds 1.4 million ounces. But it’s not easy doing business in the land of Uncle Bob, and the shares slipped 9.4 per cent to 6p.
Much worse, though, was the performance across the way in Mozambique, from Noventa. Noventa’s never been a Minesite favourite, but the company must have lost a few other friends too this week after its shares dropped from just over 170p to a meagre 55.5p in the space of a couple of days. The reason was an announcement that delays in construction and development at the company’s Marropino tantalum mine meant that it would need to seek new funds.
Elsewhere in Africa, copper developer Discovery Metals announced a doubling of the mineralised depth of the Plutus deposit that forms part of its Boseto project in Botswana. The grades and mineralised thickness compare favourably with those at the nearby Zeta deposit and indicate that Plutus may also have potential for underground mining. The shares climbed 4.7 per cent to 83.25p.
In southern Cameroon, Afferro Mining has been encouraged by high-grade intercepts at its Nkout iron ore project, which the company believes warrant additional drilling to evaluate the potential for a direct shipping operation, which would offer accelerated cash flow. The company plans to release an updated mineral resource for Nkout later this month. The shares slipped 2.4 per cent to 104p.
It wasn’t all about the mining and resources though. There was also some corporate activity on the cards. Sylvania and Aquarius Platinum have agreed jointly to assess the Everest North UG2 platinum deposit in South Africa. Under the terms of the agreement ore will be processed through Aquarius’s Everest South metallurgical plant, and the resulting concentrate is likely to be sold to Impala Refining Services. Sylvania closed 6.6 per cent lower at 40.63p whilst Aquarius strengthened 0.9 per cent to 337p.
Meanwhile, Turkey-focused Ariana Resources has acquired four gold exploration licences in western Turkey from fellow junior Kefi Minerals. The licences include high-grade veins where previous assay results have returned up to 152 grammes per tonne of gold and 1,320 grammes per tonne of silver. Ariana slipped 2.9 per cent to 4.25p while Kefi closed 5.6 per cent lower at 6.75p.
Elsewhere, Herencia Resources has entered into an agreement to acquire a 51 per cent interest in the Guamanga project, a new copper-gold opportunity in Chile that lies approximately 750 kilometres north of Santiago. The project has potential for iron oxide, copper, and gold. The market wanted more, though, and the shares closed 15 per cent lower at 2.65p.
One deal that seems to be taking forever to conclude is Shandong Iron & Steel’s investment in the huge Tonkolili iron ore project being developed by African Minerals in Sierra Leone. African Minerals announced further progress in its discussions with Shandong over the Chinese group’s proposed investment, although finalisation of the deal remains elusive. African Minerals climbed 9.2 per cent to 545p.
Source
Although some sectors are harder hit than others. Nickel companies suffered more than most, and a glimpse at the five-year nickel price chart reveals several reasons why the depth. Back in mid-2006 nickel color sold under U.S. $ 10 per pound. Today, this color is more than U.S. $ 10 per pound. Prices, however, is only part of the problem for Australian nickel miner. They have also been hit by higher costs felt in the mining industry, and exchange rates rise.
With a real squeeze on profits.
A very nasty squeeze actually, which can be measured using the exchange rate alone. Back in June, 2006, the Aussie dollar exchange rate against its US cousin was US74 cents. Today, it’s US$1.06. To put it another way, the Australian dollar price of nickel five years ago was around A$13.50 per pound. Today, it is A$9.40, a real decline of around 30 per cent for a miner with costs in Australian dollars, and perhaps a lot more after cost inflation is factored in.
Well, thanks for that piece of news - it’s just what we didn’t need to hear.
Sorry for bearing bad tidings, but that background explains why a number of nickel companies hit 12 month share price lows last week. Mincor (MCR) dropped to A98.5 cents on Friday, before closing the week at A99 cents for a loss of A10 cents. At this time last year Mincor was trading above A$2.00. Panoramic (PAN) lost A9 cents to close the week at a new low of A$1.83. Last October it traded as high as A$2.97.
Before running through more prices, perhaps a big picture snapshot.
Overall, both the base metals and the gold markets weakened by around 1.5 per cent. That was a better performance, moderately, than that delivered by the all ordinaries index on the ASX, which lost two per cent. And for our superstitious readers we have a few numbers which might send a chill through their spines. The all ordinaries index closed on Friday at 4666.6, which is the Devil’s triple 6, plus an extra 6 for good measure. And, if that doesn’t catch your eye the official exchange rate on Friday, as published by the country’s central bank, the Reserve Bank of Australia, was 1.0666.
Let’s leave all that sort of stuff for someone else to worry about, and focus on share prices.
Certainly, but you must admit it was an interesting coincidence. Still, moving on, and given that the trend was down across most sectors, it might lighten our readers’ days to hear first about companies which did not fall. There were a few interesting upward moves too that are worth talking about, thanks largely to discovery and production news.
Top of the list was Navarre Minerals (NML), a company not mentioned here before. The company seems to have drilled through a few gold nuggets at its Bendigo North project in Victoria, sending the gold bugs in its home state into a frenzy. The official rise over the week was a gain of A20 cents to A31.5 cents, which translates to a rise of 173 per cent, though that tells only part of the story. On Friday alone, after a management requested trading suspension, Navarre rose by A17.5 cents, or 125 per cent on the day, with 17 million shares exchanged out of an issued capital of 25 million shares. Put another way, 68 per cent of the shares in issue were swapped in a trading flurry on a single day.
Even so, and interesting as those market numbers are, it is worth pointing out that at its Friday closing price Navarre is still only capitalised at A$7.9 million, and while the top assay of 161.2 grams a tonne looks fabulous, the historic Bendigo goldfield is rich in nuggets, which will make it hard to ever prove a resource that satisfies modern banking or reporting requirements.
That really is a rather silly state of affairs, isn’t it?
Could not agree more. The gold is obviously there, but it’s in nuggets which do not fit comfortably into the code constructed by the Joint Ore Reserves Committee (JORC).
There were some other eye-catching moves in gold too. Northern Star (NST), a company we will be hearing more about at our June 23rd forum, closed A10 cents higher at A50 cents, a 12 month high. Gold Road (GOR), which we took a closer look at last week, rose by A4 cents to A64 cents, but did get as high as A71 cents early in the week. And Kingsrose (KRM) recovered recently lost ground by adding A5 cents to A$1.43. Resolute (RSG) put on A6 cents to A$1.11.
Best of the copper companies was Sandfire (SFR) which released a very positive feasibility study, adding A11 cents A$7.20. Metro Coal (MTE) was the strongest among the coal companies, putting in a rise of A12.5 cents to A63 cents. Alkane (ALK) led the way among the rare earth stocks with a gain of A21 cents to A$2.05.
Time to call the card, starting with gold, and then roam across the other sectors, as you please.
Notwithstanding the risers in gold that we’ve already mentioned, the trend was weaker. Among the handful of other companies that rose was Gryphon, up A4 cents to A$1.61, and Troy (TRY), up A1 cent higher to A$3.47. The fallers included Medusa (MML), down A17 cents to A$8.07, Integra (IGR), down A2.5 cents to A42.5 cents, Focus (FML), down A0.6 of a cent to A6.7 cents, Silver Lake (SLR), down A16 cents to A$1.71, and Kingsgate (KCN), down A27 cents to A$7.67. Beadell (BDR) was also weaker, down A4.5 cents to A78.5 cents, despite announcing a decision to mine its Tucano project in Brazil.
After Sandfire, the best of the copper companies was OZ Minerals (OZLDA), which rose by A6 cents to A$13.61. Incidentally, the new code is a result of its recent one-for-10 share consolidation. Metminco (MNC) climbed a modest A1 cent to A36.5 cents, and Hot Chili (HCH) also managed a rise of A1 cent to A60 cents. Then came a long list of small fallers. Among them were Marengo (MGO), down half a cent to A29.5 cents, Horseshoe Metals (HOR), down half a cent to A24 cents, and Rex (RXM), down by A1 cent to A$2.66.
Nickel companies were weaker across the board, as we’ve said. Only Mirabela (MBN) managed to rise, adding A4 cents to A$2.05. It was a mixed picture in the zinc space. Perilya (PEM) rose A5.5 cents to A64.5 cents. And Terramin (TZN) rose by A3.5 cents to A33.5 cents on news of a boardroom spill and speculation that former Normandy Mining boss, Rob de Crespigny, might be mixed up in the fracas.
Iron and coal next, please.
It was generally down in both of those areas. BC Iron (BCI) was the best of the iron ore companies, putting in a rise of A14 cents to A$3.00. Fortescue Metals (FMG) added A6 cents to A$6.46 after its founder, Andrew Forrest, shuffled the deck chairs and swapped the chief executive’s office for the chairman’s suite, in what most observers down this way see as a spot of window dressing ahead of a final legal decision on his future as a director. Among the fallers were Atlas (AGO), down A2 cents to A$3.58, Mt Gibson (MGX), down A7 cents to A$1.78, and Murchison (MMX), down A4 cents to A95 cents.
In coal, Metro was the star, as we’ve said, but also on the rise were Carabella (CLR) and Aston (AZT). Carabella rose A6 cents to A$2.04 and Aston rose A10 cents A$10.00. Fallers included Macarthur (MCC), down A41 cents to A$11.25, Coal of Africa (CZA), down A1 cent to A$1.17, and Stanmore (SMR), down A13 cents to A$1.14.
Uranium and minor metals to close.
It takes a lot of finding, but there was one uranium company in the black. Extract (EXT) added A4 cents to A$7.76, even as it awaits the next instalment of its takeover travails. Berkeley (BKY) continued its slide, losing another A9.5 cents to A39 cents. Manhattan (MHC) dropped A15 cents lower to A42 cents, and Paladin (PDN) shed A18 cents to A$3.03.
In potash, Potash West (PWN) caught the attention of a few punters after it put out a positive report on its west coast exploration program. Its shares hit a 12 month high of A31 cents, before closing the week at A25.5 cents, an overall gain of A6.5 cents.
In minor metals, Metallica (MLM) released a positive report on its nickel, cobalt and scandium project, and also traded up to a A38 cents 12 month high, before closing at A37 cents for a rise on the week of A6.5 cents. Tin companies were weaker. Among the fallers was Venture (VMS), down A3.5 cents to A40.5 cents. Lithium companies also fell. Galaxy (GXY) slipped half a cent lower to A85.5 cents, and Orocobre (ORE) lost A1 cent to A2.15.
Source
Fear of nuclear energy can be guessed. Disasters in Japan on March 11, has been withholding from the momentum accelerated nuclear renaissance. Over the past few years, nuclear energy has been promoted by its supporters as an alternative energy source that is clean, efficient, reliable and safe for dirty fossil fuels, and the world agrees.
A wave of new orders from BRIC countries as well as developed nations created a nuclear renaissance. Then over the past nine months, the price of uranium began to climb. Dormant since the 2008 recession, uranium rose from $42 per pound to a 52-week high of $72.65 in February.
The spot price of uranium fell over 25 percent in the days following the earthquake and subsequent tsunami in Japan. Value investors helped the troubled commodity regain ground by buying the plunge. But the question is still on everyone’s minds: What’s going to happen from this point forward?
On Monday, Germany announced it will shut down all of its nuclear reactors by 2022. The new policy is a complete reversal to the proposal to enhance Germany’s nuclear energy established by the government only seven months prior.
German Chancellor Angela Merkel stated to reporters on Monday: “Our energy system has to be fundamentally changed, and can be fundamentally changed …. We want the electricity of the future to be safer and, at the same time, reliable and economical.”
The decision by the German government to end its dependence on nuclear energy has once again riled the uranium market, but I believe the German decision is just creating short-term noise. Once this noise is gone, uranium stocks will once again reflect earnings – and while sales to reactors in Japan and Germany may slump, the world’s other 436 reactors will be as hungry as ever for uranium fuel.
Because as people are recovering from the Japan disaster – and possibly hating nuclear power more than ever – the supply and demand fundamentals of uranium have not changed in a significant way. The bottom line is that even in the wake of the Japanese catastrophe, uranium’s supply crunch lives on.
If we look out over the next eight to 10 years, which is the amount of time it takes a nuclear power plant to become fully operational, the market is still about 400 million pounds short of projected demand. The top 10 producers, which make up almost 90 percent of the uranium market, only produced 110 million pounds of uranium in 2010. In other words, uranium producers need to produce nearly four times the amount just to meet estimated new demand. The new supply will have to come from somewhere, or the price of the existing supply will need to increase to clear the market.
For uranium miners, the market is red hot. For investors, shares of the best uranium mining stocks could represent the best energy investment opportunity in decades.
The World Nuclear Association’s chart below sums up why now is the time to get into uranium-related investments. The world will be using more uranium for years to come, and many great investment opportunities appear in the midst of a supply crunch.
The supply crunch easily has the potential to become even more strained with 63 percent (note this is not the same as the top 10 producers mentioned above) of the current uranium production coming from only 10 mines worldwide. Additionally, the global supply of mined uranium is susceptible to supply shocks if one mine floods, or stops production for other reasons.
The most direct way to profit from the coming growth in nuclear energy and the shortage in uranium is to buy shares in the most productive uranium miners in the world. As I stated over a month ago, the tragedy in Japan and subsequent fear in the market have presented us with the opportunity to invest in several well-managed and fundamentally sound uranium companies. For well-informed investors with the patience to tolerate volatility for a couple of months, I think this could potentially be the single best opportunity to buy and hold uranium stocks.
Source
