It is the time of the year again that we all are making up our good hopes, intentions, plans, promises and predictions for the New Year. Whether they will come true remains to be seen; it is quite better that we don’t know the outcome. As I stated in my previous Editorial, the world of 2017 will have to get used to some changes, even more so than usually is the case when the year changes. This time it feels that we may have a quite new future to face. The forthcoming change of the Presidency of the United States is likely to become so much more than just a change of political signature. It will likely be setting the clock or rather the calendar back in many respects. As we have seen Donald Trump in his Presidential campaign, he turned out to be more of a street fight than that of a candidate that wanted to win on serious plans and promises to the voters. Whatever we think of him, we have to grant him that he obviously changed in the way he handled the next steps. He almost instantly turned into a politician and although the choices of his cabinet members may certainly make some eyebrows go up, he is not forming a team of dummies, that is quite clear. But whether those mostly intelligent and certainly wealthy cabinet members will turn out to be the politicians who will be able or maybe better, will be willing to make the changes the USA and the world need, is at least questionable. And maybe also dangerous: their conservatism and over-self confidence could make some of the international negotiations very difficult and cause serious conflicts, economically and politically.
I ended my previous Editorial with questioning whether the new Trump administration will have the guts to tackle the issue of the ridiculous levels of the money supply we have got into over the years. With the already loudly touted plans of Donald Trump to build roads, houses, schools, support industries bring their foreign activities and productions back to the USA, create jobs etc., etc. “to make America great again”, economists and analysts have already put a price tag of $1 trillion over 10 years of rebuilding the nations infrastructure, according to Kitco’s Neils Christensen. On top of that it is likely that the spending will be further fuelled by $500 billion to $1 trillion to boost U.S. military spending. Trump already called for 90,000 more Army soldiers, a 350-ship Navy, 100 more fighters, and strengthened nuclear and missile defenses. I am sure that the money that is needed to realize all that will certainly not be coming from the deep pockets and bank accounts of the new cabinet members. But…..they are used to think in frightfully large amounts and they have never protested to the vast increases of the budgets and government spending. So why be more Roman than the Pope and tighten some belts now……..? It is not likely to happen. On the contrary, it will not be pressing their conscience to accelerate the Trump spending parade. What the heck, one Virginia-class submarine is costing ‘only’ $2 billion a piece at least, so why not buy another 11 more?
Some effects of the economic stimulating frenzy caused by the not-even-yet-in-place Trump administration spending are already visible: on this first new working day of this year, the Bitcoin already jumped up to a $1,000 price level (I just cannot call it ‘value’….), reflecting the international craziness of paper money, paper gold, unheard-of debt levels and the like. But inflation? No we have no inflation yet, we build our future on a broad economic recovery, in the USA and also in Europe….. Why did I, in making a choice of the usual illustration for my Editorial, think of….
Gold, let’s jump to gold now. Although as I mentioned above, the paper gold markets would qualify to fit into this category easily, gold itself is not. Far from it. Gold is real, has an ancient history and despite what some bankers often like to think and say, has a future. There is no doubt in my mind about that. And to be even more explicit, I am sure that there will be a great future for gold. We may even be at a point now that could prove to be a turning point. As I did last year, I already posted my guidance for the gold price in 2017, saying
reflecting my confidence in a possible strong performance of gold in the coming year. Of course, I am sure you will ask me for my reasons to make such an outspoken statement. Well, it is a mix of factors that made me come to say this. A mix of both negative and positive assumptions, mainly coming from the many uncertainties about how the Trump team will tackle the most urgent and nasty tentacles of the political world spectrum. But really nobody in the world has the ability or foresight to predict how things will develop. At the best, some educated guess can be made. On the other side, when I take a pure look at gold, my reasoning is not too difficult to comprehend.
I belong to those who say that GOLD IS THE ONLY REAL VALUE IN THE WORLD. Not because of its beauty, its shine or its magic attraction, which are also valuable qualities. The main reason is that GOLD CANNOT BE MADE BY HUMAN HANDS. And nature has made sure that GOLD IS NOT EASY TO FIND. It is an old story but most people do still not realize that ALL THE GOLD IN THE WORLD COULD BE PUT TOGETHER IN A CUBE OF 20X20X20 METERS. That really shows that GOLD IS EXTREMELY SCARCE. In contrast to what politicians often say GOLD HAS UNIQUE QUALITIES, the applications are often unknown but do vastly outnumber the function that we mostly know, putting the bars in the vaults of Central Banks and other wise safe hands.
So, why do I think gold could show a dramatically positive performance in the coming year? Also here, nothing new. Government budgets, debts and money supplies have already grown to ridiculous and incomprehensible levels. We often hear “this cannot go on” but we have heard that already for so many years and despite we all know that is true, thing not only go on but we see it even accelerating. To get an idea of this, you better watch the Trump administration in the forthcoming months!
Is there a solution which could reverse this despicable trend? Well, there might be…….! One of the first remarkable things that Donald Trump did after he was elected as President-elect was having a meeting with John Allison, previously CEO of BB&T Bank and, more recently, President and CEO of the Libertarian think tank known as the Cato Institute. Like other believers in honest money, he is a strong believer in the idea of reinstituting the gold standard. Which, if done in a modern 2017 version, in my view would be a very wise thing to do. The meeting resulted in a flow of rumours that John Allison would become a prime candidate for the position of U.S. Treasury Secretary but that did not happen. Instead, another banker was to nominated, Steve Mnuchin, known as a world-class financier, banker and businessman who played a key role in developing the “plans to build a dynamic, booming economy that will create millions of job”. Also uncertainty here, it could be that they succeed in restoring that economic growth but the consequences cannot come without a tremendous influx of money. And if they won’t succeed with their plans, most of that money will be spent anyway. In both scenarios gold could come forward as the saving commodity.
Have you already recovered from the surprise? We don’t have much choice, have we? The outcome of the U.S. Presidential elections must have come as a shock to almost everyone. Who would ever expect that anyone could win the elections after having dared to show us such a below-the-belt campaign as Donald Trump did? It was a real streetfighter’s campaign, mean, vicious, dirty and I could think of several other words too. Amazing, offending and unworthy would be a few of them. But…… it turned out to be surprising and surprisingly effective. The people have spoken, they say. But have the people weighed Trump’s words? I think they just consumed them like they consume their beers and their junk food. Without thinking and without thinking much about their own good.
I decided to wait a while before writing this Editorial. Firstly, to let my thoughts settle a bit and secondly, to see the first escapades of the President-elect. Well, Donald Trump surprised me even more with the way he almost changed overnight after he knew he had won the election. He turned out to be not only a drastic campaigner, he also turned out to be the same as a true politician. He changed his attitude as swiftly and completely as a wind that starts blowing from the opposite direction. I wondered how this came across to all the people that voted for him. But he who would deserve credits, should get them. Although the choices that he made for his coming ministerial team would not particularly be mine, he succeeded in convincing some very high caliber individuals to enter his political arena and tackle the issues he considers to be the most urgent to “make America great again”. The only thing that I and all the other people in the world to whom the outcome of the election came as a surprise (to say it mildly), is to give him the benefit of the doubt.
At this point I have to add that the election of Donald Trump has been confirmed by the members of the United States Electoral College so that we will have to accept the USA having a new President as from his inauguration on January 20, 2017.
So I will take a little more time to include my expectations for the metal markets for the new year. The first weeks after the election have been quite disappointing for gold so far. Where the share prices on Wall Street reached new highs after new highs, reflecting the vast optimism about a true impact of Trump’s plans and policies on the US economics and corporate results, and the price of copper was stimulated by a possible influx of construction activities, gold and the other precious metals declined and stayed below everybody’s expectation. The reaction to that was not so surprising. The metal traders and speculators saw possibilities to play their known favour for short positions and it was again very remarkable how you could see their joy in the daily charts of the gold price. Every day there came one or two moments that some parties were knocking the gold price down. And at the same time that it became known that the silver markets were rigged, the gold markets did not want to recognize that they were victimized by the traders and speculators like we have regularly seen in the last five years. It really is time that something needs to be done about the virtual paper gold market trading which has grown out of every proportion and is built on just hot air. Just the same as the economy is running on the ridiculous levels of the money supply and the national debts. It will be interesting if the new Trump administration will have the guts to tackle that issue too……….
As to my views on gold and the other precious metals for the New Year 2017, you will be able to read about that in my next Editorial which will be coming in the first days of the New Year.
Until then, I am wishing you a
09 NOV 16
GOLD AFTER THE ELECTIONS
The American voters have spoken. And how! I am sure they have made it quite clear that they want a change. Whether it was their true belief
that their government should do things differently or it was Donald Trump’s consistent way of campaigning, appealing to their underlying
feelings of discomfort or concern, or it was the effect of Trump’s relentless attacks on Hillary Clinton’s past performance and trustworthiness,
we will never know. For sure, the quite unexpectedly strong performance of Trump during the elections was as impressive as it was remarkable.
It was certainly also remarkable how his victory speech was this morning. It was showing another side of the man, expressing his respect to
his opponent and saying sweet words to pacify and unite the American population “to be the President for all Americans” and
“work together” in “making America great again”.
But whether or not we like the outcome of these elections, the principle of democracy worked although one can seriously question the complicated
electoral system the U.S. is still using to determine the eventual winner. The win of incoming President Donald Trump delivered a serious
and hard blow to Hillary Clinton but certainly also to outgoing President Barack Obama. It is highly probable that the Republican supremacy
in the White House, the House and the Senate for the forthcoming four years will be used to undo several of Obama’s accomplishments
such as his Obamacare, abortion liberty, fire arms control and possibly the legalization of medical weed, which strangely enough
was adopted by many states during these same elections.
For us Europeans and the people in other parts of the world, it remains to be seen how the coming Trump administration will give room for
Trump’s plans to change the U.S. support of NATO, the relationship to Russia, the drastic handling of ISIS, the crusade to isolate Iran,
the complications in the Middle East and some other cases. Questions nobody can answer at this early time. We will see how all
these issues will be handled in the Republican way. I have some serious concerns about that.
In my Editorial below, I painted a little scenario about how gold would react to the outcome of the elections. That a victory of Donald Trump
would result in a kind of flight into gold, seemed partly to be the case. In the nightly hours when a Trump victory became more imminent,
there was a strong demand for gold as opposed to a strong drop for the stock markets. Gold jumped from $1270 to almost $1340
but this move was short-lived to come back to settle just over $1300 as of now.
As the dust of the elections will settle between now and January 20 when Donald Trump will be inaugurated as the next President
of the USA, I would not be surprised the gold price will continue to remain at these levels or go a little higher. A lot will depend
on what we hear from Trump and his followers about their plans and the formation of their new government. Issues as the upcoming
nomination of a new Federal Judge, no doubt to be a very conservative one, and the appointments of new government officials,
most likely including some well-known hard-line Republicans, can have quite an impact.
Under these circumstances, I am sure there will be an increasing number of investors contemplating to add some gold or gold-related instruments
to their portfolios, just in case……….. In my view, that would be a smart move. We have an interesting future coming to us! ***
Tomorrow is a very important day, the day of the Presidential elections in the U.S.A. that could have a dramatic influence of how the world will turn over the next four years. It is sure that it will turn, regardless of whether Hillary Clinton or Donald Trump will win, but it will undoubtedly make an enormous difference which way it will turn, more than in any previous election I have witnessed. Why? Simply because it looks like the choice of the American public is not only a choice for a politician, it will be a choice for how the U.S. will be run, not only internally but in particular in its relationships to the rest of the world.
With Hillary Clinton as President, she would be the first female President of the U.S.A. ever, we may likely look forward to a continuation of how President Obama set America to a more social way of administration, not always understood and liked by every U.S. citizen and continuously obstructed by the non-coöperative Republicans. In the campaign Donald Trump has left no opportunity unused to tell the Americans how devastating he thought the Obama administration had been for the country. Doing so, he clearly demonstrated what he is standing for and what we may expect, should he be elected as the new President. I have to say at this point that I am really not in favour of both candidates, for different reasons. I really think that the U.S. could have done a lot better than finding a candidate that would be rather uniting the population and the Democrats and Republican politicians. That really would have resulted in a chance to “make America great again”.
Instead, whether we would get Clinton or Trump as the new leader, I am not at ease about the situation either of them will have to face. The recent campaign was a shame where both sides showed no dignity for the office they were seeking, no dignity for the population as a whole, and no dignity for the democracy of a nation where everybody has a right to say what he or she wants. The way Trump was conducting his street fights forced Clinton to keep away from joining him at his chosen level, thus restricting her from talking about sensible and far more serious issues. The result is that the American electorate is being left with frustration, confusion and even anger. More than ever it will be important to see if and how both sides will find each other again to come to a mutually satisfactory level of acceptance and living with each other, for the benefit of all. So, enough to look forward to.
It is interesting to elaborate on what the outcome will be and what kind of impact it will have on the world in general and for all those of us, who are seeing the valuation of gold as one of the leading barometers of how our planet is faring, what influence it will have on the price development of our favourite yellow precious metal.
I think that gold is likely to show a strong performance in either scenario,
albeit for different reasons.
In case Donald Trump will be elected, I expect quite a period of havoc, both in political circles where his supporters will blatantly and braggingly celebrate their victory, and among the overall population where the non-Trump minded will hold their breath about what possibly could be coming. Also internationally, there will be a lot of concern about how a Trump leadership will evolve. It will be highly unpredictable how Trump would be facing the world and meet and get along with the international leaders. There will be general discomfort (to say it nicely) about what we can expect. A reaction could very well be that many investors will come to decide that putting their money into paper investments and banks would not be the way to feel safe. So they may elect to put it into gold and gold-related investments.
In case Hillary Clinton will be elected, I expect more a period of relief, although the disappointments of the Trump voters could be causing quite a period of unrest. Yet, she will make clear that she would be making every effort to normalize the recent period of tension and fear and transfer it in a period of building the confidence that she can govern the country in a way where every citizen would feel comfortable (with the exception of the true diehards of course) and that she will have the support of international leaders and hopefully tackle some highly urgent issues that need to be addressed and solved. There will be more chances she can pick up comfortably where Obama will leave off and investors would express their relief and confidence in a higher acceptance of gold as a preferrable investment.
We will see how this whole election circus will finally develop and unfold. For sure it will be one of the most exciting days and nights coming ahead for everybody that is interested in this political game and in the end, in the fate of not only the United States but of the whole world.
On Wednesday, November 9, when we will know the outcome of the elections, I will add my comment to this Editorial. I can hardly wait…….
For us gold watchers it has been a bit of a frustrating period since I wrote my previous Editorial. Gold had broken the $1,300 level and I said that it was looking for more. I truly did. The gold price marched on to a first top on June 24 $1,340 but apparently had second thoughts to close at $1,315 that same day. But not for long. On July 6 it closed at $1,363 but instead of going straight on to the $1,400 level, it dwindled down again to close at $1,313 on July 20.
Then, July 27 seemed to be a turning point. The gold market changed its hesitating and quite erratic pattern at the beginning of the U.S. markets when a really eye-opening piece of information was released. It was not the news from the Fed about the interesting rates that is expected later today, it was not the non-impressive development of the German economy, neither the Japanese plan to stimulate its economy or the continuing news on the Chinese economy. No, it was the report that
the U.S. imported more gold from Switzerland in the month of May
than they did every year for several decades!
But as happens so often these days, even the most exciting news doesn’t get the eyes it deserves or does’t have the impact you would expect. Whereas most of the gold watchers are eager to give their comments every few minutes on the latest developments, they seem not to care too much about longer term trends, fundamentals and information that really is having dramatic importance. Like the above charts that we do not see every day, do we?
Of course, a big question is indeed what I wrote in the heading of this Editorial: “is this a one time event or the beginning of a trend?” But that is not the only question that comes to mind.The charts above reflect the figures as per May 16. I am very curious how the figures will be as per June 15 and July 15. They will tell us more. Yet, what we know now is remarkable enough to evaluate. The scenario is worth following very closely over the next few months. We may get some highly vital answers to infringing questions such as
Why are the U.S. importing this amazing quantity of gold so suddenly?
Are they replacing the gold that is supposed to be in Fort Knox which has been repeatedly been doubted?
Are they preparing for the Big Reset that Jim Rickards and Willem Middelkoop have been writing about?
Was it the Fed that has bought all this gold or if not, who were these big buyers?
Where did all this gold come from, who have been filling this amazing U.S. demand?
I find this last question of particular interest. It could be that the Swiss National Bank has been the main provider of the gold that was imported by the U.S.. That would be interesting to find out. Because it would be revealing information that may have a great impact on the markets of resource shares. Why? Because most investors in the U.S. and all over the world are still believing in the regular share markets, based on their belief that the U.S. economy will recover. But even if that recovery will continue to the levels they want us to believe, it will never be enough to heal all other issues such as the stunningly growing deficits of the budgets and the even more hilariously expanding money supplies, not only in the U.S. and actually in the whole world.
As history has shown before, it may be the Swiss who may turn out the most clever of us all. It was known that the Swiss National Bank began accumulating gold and silver mining shares in early 2013. That was when the markets of gold and resource shares had come down considerably from their all time highs in Autumn 2011. As per June 30, 2013, they reported their holdings of gold and silver mining shares to be $495,520,544. Just recently, the report came that as per June 30, 2016, their portfolio had increased, actually doubled to $987,660,428! If you want to see in which resource companies this almost $1 billion is invested, click here.
My followers do know that I have been advocating since long that in the end, mining shares are the better way to invest in gold. Not only because of the leverage advantage that resource shares have over physical gold, but also because resources shares are more easily affordable than gold itself.
We gold watchers are always too early as investors are always too late.
At this time, I want to urge my followers not to be too late this time. The markets are still hesitating which is not so strange in itself. As we gold watchers know too well, not many investors are believing us in the beginning. The are being too misguided by the continuous ‘positive’ sounds of the establishment, such as governments, central banks and commercial banks that are preaching for their own parish.
As I said, it is not too late to take your measures to protect your savings and investments to what may be coming to us in the foreseeable future. Act like the wise Swiss bankers, build your own mining share portfolio. But be very selective, the Featured and Favoured Companies on this site reflect my choices.
“DEUTSCHE BANK DISCLOSES $2 BILLION
GOLD AND SILVER MINING SHARE PORTFOLIO”
Yesterday’s posting of my above Editorial was followed by similar news that not only confirms the increased interests of European banks in resource shares but even shows the Swiss Central Bank was not the only smart investor. Judging from the amount that the Deutsche Bank invested in mining companies shows that they were at least twice as smart, or rather they translated their choice for the mining sector in a portfolio twice as big as the Swiss one.
For everyone in the gold and silver sector, this should be the most comforting news that we can want. Or let me say, the second most comforting news. On the number One spot of wishes remains the worldwide recognition of the merits of gold and silver and gold and silver-based investments in the companies that produce these metals (and include the pgm’s as well) or will be producing them in the foreseeable future.
I will continue to follow these companies for you and inform you of the news that you may need to take your own wise decisions. Generally, I have not such a high regard for the choices and policies of banks and bankers, mainly caused by my lack of confidence in their judgement and mentality, but this time I am wholeheartedly endorsing their choices to invest heavily in the resource sector. If it is good for them, it will be good for you and me!
It took a bit longer than some gold watchers expected but breaking the $1,300 level was not easy. A few times gold came close but every time it had to retreat. The main reason was that the Federal Reserve Board and some wiseacres around them had been spreading some hawkish noises in the last two weeks, indicating a possible interest rate increase. Nevertheless, the underlying strength that we have seen in the last few months turned eventually strong enough to do it.
Now the question is, will it sustain? I think it will! And even more so. There are good reasons to believe that gold is in a new major upward trend, most probably leading to much higher price levels. In times like this, the predictions are coming out of the closet like they do not cost anything. Actually, they don’t. Predictions made today are mostly forgotten in a few days, weeks, months, years. What is not forgotten is the fact that we saw gold above $1,900, twice in August 2011, I remind you with this chart:
Not surprisingly, we have seen the first predictions gold is on its way to surpass this former high. Although we have also seen much higher predictions in the last few weeks, talking about $3,000, $5,000 and even $10,000, I prefer to be realistic: a $1,900 gold price is good enough for me for the time being. Once we reach that, we will see again. Yet, those predictions ,or rather guesses that we hear every now and then when gold is on the move, could very well come true. In the last few years, I have repeatedly been saying that in my view gold is awfully cheap and that much higher prices should be justified. My reasoning finds its base on the good-old economic laws of supply and demand and the relationship between the existing quantity of gold in the world, the yearly annual production of new gold on one side and the world money supply on the other side.
About the incredible growth of the money supply in the world you could have read many articles in the world press, ranging from concern to outright scares and worries about this ongoing trend of printing more money. Almost every country denies that they are printing but what they can’t deny is the fast growth of their debts and deficits. It has been said many times, this cannot possibly go on (although it always has been going on). Politicians always say that they will reduce their deficits and debts, and sometimes they do by a mere 1 or 2%, but fact is that in the end those debts and deficits will continue to grow. Some highly intelligent writers have published books, studies and articles in which they describe the one and only possible solution for this problemsome situation: a new start, a reset, a new monetary system. In all of these reasonings, sweet memories are going back to the time that gold was the basic value behind the money. The gold standard which secured common sense to the supply of money. The illustration below shows how the gold standard proceeded in history.
The gold standard ended in 1971, when the fiat currency entered the scene, a system where money is not backed by any precious metal or other commodity. It was the beginning of the era where the money supply has been increasing and got out of hand ever more. As said, this should not go on for very much longer. If the politicians of the world come to realize this, is doubtful and dubious. With this likely scenario to unfold in the next few years, it is not surprising that more and more investors come to realize that gold and gold-related investments are the only true preferable values that could protect them against forthcoming consequences of economic and monetary failures, collapses and bursting bubbles. To that effect, I refer you to the two articles that I posted earlier on the HOME page, click below. And finally, I would like to emphasize that these two articles and also this Editorial comment are not meant to frighten you. On the contrary, they are meant to make you wiser.
28 APR 16
Since my previous Editorial, it was not easy (as if it ever is easy…..) to know in which the gold price would go. A few times gold moved from $1220 to $1250-$1270 which did make expectations flare up that the $1300 level could be broken soon. But as ‘easy’ as it moved up to $1270, as ‘easy’ did it fall back again. As usual, several market commentators expressed their concern that the newest gold bull market was not a real one and predicted that gold was ready for a considerable set-back. It confirmed what I wrote in the heading of my last month’ comment that the higher gold price was not trusted by everybody. It still is not! There is no sign of a wide-spread confidence in the market of gold despite the fact that more and more sources are daring to speak openly about their positive attitudes and expectations about the gold price.
This week many market participants were holding their breath awaiting the Fed’s meeting and their possible decision to raise the interest rates. They did not although the consumer goods prices looked good. However, a closer look showed that the increases were only due to the higher deliveries of the defence industry, reflecting the world’s stronger concern about our safety. Without the impact of defence spending, the consumer prices would have been lower. So no increase in interest rates and apparently more confidence in gold. I have written before that all those seemingly automatic interrelations between the price of gold and other indicators such as stock markets, oil price, interest rates, job figures and all kinds of other factors, can no longer be explained by common sense. Rather than reacting to short and even ultra-short term impulses, it would be wiser to take a more philosophical attitude and analyze the underlying strength of certain developments. We just cannot comprehend the complexity of modern life in which we seem to find these ludicrous levels of government spending and debts normal and if you seriously look at the crazy paper gold markets, who can sensibly explain them. They have nothing to do with fundamentals, they have been built and exist on fantasy. Simplifying, I sometimes say “what ever has happened to good-old as supply and demand?” The demand for gold is undeniably on the rise, even several Central Banks are back on the buy side, and is the supply of gold increasing? Not really! Not now and not in the coming years!
I have no idea how these amazing situations can be maintained or will be solved in the future. But some day something is bound to happen, there cannot be any doubt about that. Now, don’t be afraid, I am not going to be preaching doom. Neither am I going to advocate gold as the only solution. I don’t want to associate an investment in gold as a safe haven. But what I want to do here now is to draw your attention that the still modest increase of the gold price of the last few months has demonstrated that one other famous quality of gold-related investing is still true, i.e.
MINING SHARES PROVIDE LEVERAGE TO THE GOLD PRICE.
I will save you many words to explain why mining shares offer much more leverage to the gold price than physical gold. But as illustration to the recent performance of resource shares in general, take a look at how the share prices of our
have done since the beginning of the year. Below you see the charts of the share prices of the gold producing companies I write about, reflected as they trade on the Toronto Stock Exchange:
Have you seen similarly rising prices in the shares that you own in your portfolio? I am rather confident that you have not. And I am evenly confident that this trend is likely to continue during the remainder of this year. Although it is too early to say that gold is in an obvious new bull market, this indeed could be the early stage of such a bull market. I see an underlying strength in the gold markets, and evenly so in the similar markets of silver, platinum and palladium, that will build further momentum over the next few months. In fact, I believe that the markets are quite ready to be looking at a next leg in the cycle that will take gold over and beyond the $1300 level. If this really turns out to be the first stage of the next bull market, these gold, silver and pgm’s markets may very well surprise the skeptics!
07 MAR 16
held in Toronto, Canada this week. It is the 84th version of this event where mining and exploration companies, their management executives, their technical staffs, prospectors and developers and delegations of mining countries meet with international media and investors from all over the world. To give you an idea of how big this event is, I give you some statistics of the 2015 version last year: total number of convention attendees: 23,578, percentage of international attendees: 25%, outside of Canada the largest number of attendees came from: USA, Australia, Peru, England, Mexico, Chile, China, Argentina, Brazil, South Africa, Germany, number of countries represented: 116, number of student attendees: 1280, number of accredited media: 240, total number of booths: 1450, total number of exhibiting organizations: 1050, number of governments exhibiting: 66, total number of corporate presentations for investors: 120, total number of speakers 492, and more…… Quite impressive numbers, especially considering that at the time of last year, the gold price was in a down-trend from the January 2015 high of $1,300 to $1200 at the beginning of the event in early March 2015 and sentiments about metal prices being on the negative side. This year’s event, coming after a remarkable recovery from the $1040 low of December 2015 to a healthy and firm $1260+ price level, should be happening in much more confident and optimistic atmosphere.
I said “should be” but will that indeed be the case? The recent uptick in the gold price was not particularly caused by supportive and stimulating news from the mining companies. They primarily restricted themselves to their daily business routines and refrained from making positive statements of better expectations of a gold market recovery. Very illustrative was what David Harquail, CEO of Franco-Nevada Corporation, one of the largest gold royalty and streaming companies, stated about why the recent rally hasn’t gotten enough attention with investors when asked by Kitco’s Daniela Cambone at the Gold Stock Analyst 2016 Investor Day, held last week in Fort Lauderdale, Florida, USA. He said ‘It hasn’t made enough of the front pages yet. I don’t think it has really gotten the attention outside of the normal followers of the industry’. He continued ‘We are seeing some life in the industry and some of the major gold camps in Australia and Canada. I am much more optimistic now but in fact, I am quite disappointed to come at this conference where it feels like preaching a church, a lot of empty chairs and lots of grey hairs and everybody is praying still. They shouldn’t be praying, they should go out there……and do as the diehard followers of the industry, they picked up on it and those are the ones that changed the prices so far….’. You can listen to the interview by clicking on the item on the HOME page and hear more about ‘we invested $2 billion over the last 18 months…..’ and learn more about Franco-Nevada’s royalty and streaming portfolios. Outright impressive and a good reason to add Franco-Nevada to my group of FAVOURED COMPANIES (replacing Lake Shore Gold which is in the process of taken over) and a perfect example of the gold mining industry as a very viable and prospective environment for investors.
Talking about some more significant statements on gold and the mining industry, I just posted some videos from the BMO Conference, also held last week in Hollywood, Florida and also covered by Daniela Gambone, who knows how to make notorious mining executives, market analysts and commentators speak out and give very useful directions and ideas for investors. Special attention for what BMO’s gold analyst Andrew Kaip says about market sentiments and that ‘a global recession may not be necessary to be constructive on the price of gold’ an interesting statement although I cannot agree with BMO’s gold price estimate for 2016; also tune in on what Randgold’s CEO Mark Bristow, one of my favourite mining executives and speakers, and Stephen Alfers, CEO of gold-producer-in-the-making Pershing Gold say about their vision on the industry in their interviews on the HOME page. They give you the best possible insights in what is currently going on in the industry, insights that are the basis for my own confidence in the future of gold, the gold price and the resource industry. As I told you before, I do feel that we have turned the corner and that we can look ahead of a further positive period for the markets of especially gold and silver markets and companies.
I would like to make an observation on what David Harquail said about the lack of enthusiasm he felt when he came to the GSA Investor Day. It made me think of my own experiences I had in the last few months. Several times, I wrote that a bottom of the market was near. I called the bottom at $1080 and that was still too early because the gold price apparently needed to go down to $1040 before finding a base to start looking and moving upward. I decided to add a new category of FAVOURED COMPANIES to this and my other website as a gesture of my confidence in the progress I saw at those and other companies. Also, this was meant to be a gesture to my loyal audience who have continued to follow me in my comments in worse times, a gesture to offer them a wider choice of investment candidates whereby I only shared my choices with them, only providing my favoured companies and access to their websites. Quite frankly, the reactions from the selected companies were quite tame and not sharing my enthusiasm. This obviously causing the same feelings of ‘preaching a church’ that David experienced or, as I prefer to call it ‘blowing against the wind’. With the better markets and hopefully a stimulative impact of a successful PDAC, I do wish that I can convince more of the companies on the site that my full coverage of their developments will indeed be to their benefit in attracting investors for their shares. At the same time, it will considerably enhance the attraction of the site as “the” platform for investors who look for quality information and quality resource companies.
It would be wise for you to visit this website quite regularly in the next few weeks because there will be more actual postings from the PDAC in Toronto, the FEATURED COMPANIES and also the FAVOURED COMPANIES and previews of some of the MINING INVESTMENT EVENTS that are scheduled to be held in Geneva and Zurich in March and April, where you can meet many of the companies that I follow. As I wrote on the MINING INVESTMENT EVENTS PAGE, these events are your chance to meet the wide range of people that make this fascinating industry tick!
08 FEB 16
It is just a few weeks ago that I started the new years with my usual best wishes, this time with the very outspoken wish for
This wish reflected my confidence that in 2016 we would see the beginning of a long-hoped for recovery of the gold price and as a consequence, a rebound of the share prices of all those resource companies that have been seeing the gold price coming awfully close to the levels where mining gold would not be as profitable as it used to be. In several cases, the gold prices below the $1,100 level were nearing the marginal levels where gold mining would no longer be profitable for the companies operating in the higher categories of all-in sustainable costs of production. I can easily imagine that several of you may have been quite sceptical about my so clear new year’s wishes. Wishes often turn out to be nothing more than wishful thinking. Yet, I repeatedly stated in my comments that I was not a believer in all the negative scenarios of several commentators and so-called experts from high-reputation financial institutions had been releasing, some of them even expecting that gold would further drop to levels of $900, $800, $700 and even $600 per ounce, levels where virtually all gold producers would face the decision to stopping their production. I kept my confidence and since November 2014, I have been saying that things about gold were not as bad as many observers thought and that it would be wise if investors would seek their best protection against any possible further negative scenario by restricting themselves to only investing in gold, silver, pgm’s and diamond companies that were either in production and or advancing towards production . That is why since then, I only paid attention to these companies in these two categories.
Looking at the markets as they have been acting since January 1, it is not difficult to say that the gold price has developed very favourably and is quite encouraging for the rest of the year, despite the mocking of those who are still not convinced about the sustainability of the recovering prices of gold and mining shares. Of course, having come away from the $1,040-1,080 to the $1,180 we are seeing now, gold is finally making us feel better, a lot better I may say. The big question is “will this higher price sustain?” Some of the most negative commentators are joyously embracing these higher prices but keep warning that another price crisis is about to become visible soon. On the other hand, the positive comments of many gold watchers are increasingly coming to us, not only from known gold lovers such as Jim Rickards, Peter Schiff, James Turk, Frank Holmes, Egon von Greyerz, Lawrie Williams, Dan Popescu and others but also from several others. Just listen to the interview that Gold Switzerland had last week with my friend Ronnie Stoeferle, one of the most intelligent gold watchers in the business (use the link on the HOME page). And the positive thinking is not only restricted to gold, it certainly also counts for the outlook of silver, which is more undervalued than ever before in relation to the gold price. Reading the opinions the top man of one of the most remarkable silver producers, Keith Neumeyer of First Majestic Silver, in his recent interview with Seeking Alpha’s Mike Gleason is highly recommended reading (see link in the left column of this page)!
So, to come back to the big question I posted before, “will this higher price sustain?”, I have no hesitations to say “Yes, I firmly believe so!” with the addition that like in any market, it will most likely not be in one straight line up. A market without fluctuations is no market…… To illustrate that my positivism does not date from last week, this is what I released on this site and in the Social Media last December
and I really stand by what I said then. Even more so because we now know what the Fed did with its long-expected reinstatement of its interest rate and the increasing belief that the Fed shot itself in their feet with that now that becomes more and more imminent that the widely touted economic recovery is really based on very thin and very expensive ice. I don’t think we may expect that the Fed will withdraw their interest rate measure now but the recent developments make further increases of the interest rates in the course of this year increasingly unlikely. Add to that all the cruel developments in the world, such as the rapidly changing of the political and population situation within Europe, caused by the growing influx of ‘new inhabitants’ from the Middle East and Africa and the questionable and outright dangerously growing tension around Mr. Putin’s government, and it may be clear that there are more than one reasons for gold to continue behaving like it already is.
In light thereof, and in an effort to attract more new following for this website I have decided, like I already did on the Mining in Mexico and Mining in Europe sites and will do soon on the also coming Mining in Africa, to add a selection of companies that I find worthwhile to follow because of they have the right substance and characteristics for investors to benefit from the good markets that I expect in the remainder of this year. Different from the FEATURED COMPANIES, these FAVOURED COMPANIES have in no way committed to be covered on my sites. Adding the company logos of these companies to my site(s) may only be seen as a complimentary gesture to my followers and new visitors to the sites with the objective to arouse their general interest in and wet their appetite for getting comfortably involved in investing in resource shares. At the same time, I will be implementing some new ways to increase the coverage of the FEATURED COMPANIES, among other things by regularly informing my audience about when NEW CORPORATE PRESENTATIONS are being posted on the company websites and alerting which companies will be presenting or present at the MINING EVENTS that are posted on the sites. I can gladly say that I am very much looking forward to see the better markets develop and I already enjoy the idea of presenting more attractive companies to my still expanding audience.
This week will be a decisive one for everybody that is in any way related to gold, ranging from the mining and exploration workers who sweat to take the yellow metal out of the ground all the way to the most sophisticated gold investor who sits back and determines his fortune by a phone call to his brokers. This week, the Fed has set its meetings for December 15 and 16 (today and tomorrow) and will come with a decision to either leave the U.S. interest rate unchanged at 0% to 0.25% or increase the rate for the first time since the current rate was instituted in June 2006.
Most observers are expecting that the Fed will announce an increase of 0.25% to be followed by some more increases over the next few months to a targeted rate of 1.00% to 1.25% by the end of next year. To justify such a further increase, the U.S. economy has to prove that there is indeed a recovery worth talking about people. That is where for me the first doubts come in. A real recovery is one that is inflicted from within the economy itself. In my view, any recovery that we have seen so far, has been made possible by the huge capital injections from the Fed’s Quantitative Easing programs. A “bought” recovery as I call this artificially inflicted impulse. It remains to be seen whether these programs indeed turn out to be the starting engine of a real recovery that is driven by a continued public’s demand for products and services. Another factor that I think should be taken into account is the enormous “cost” of the QE programs over the last few years. It just amazes me that all the so wise economists largely neglect this factor. A comparison of the gains that the recent recovery has brought so far with the figures of the hugely increased U.S. money supply, would show that those gains are more than totally overshadowed by the influx of the newly created money. And no, we don’t have inflation, they say…..
The consequences of the forthcoming Fed decision can go two ways for gold. Scenario 1 is that the Fed will leave the interest rates unchanged. Not many gold observers find it likely that this will happen. But if it does, gold may regain its breath and head for higher and safer levels. Nobody knows but tomorrow we will.
Scenario 2 is that the Fed indeed will increase the interest rate. The general expectation is if this scenario unfolds, gold will go further down and in light of possible further increases in the future, some comments predict that gold could go down well below the $1,000 level and as I have signalled before, some believe that gold will dwindle even more to $900, $800, $700 and yes, even lower. The pessimism was further ignited by some of the largest financial institutions in the world. ABN Amro for instance, issued their expectation for gold to fall towards $900 and silver to $13.50 in 2016, adding that their analysts don’t expect to see prices pick up until mid-2017. Well, I can only say that everybody in the world of gold knows that throughout the years, banks have not been particularly known as friends of gold. They always stayed mostly at the side lines of the developments, yet nibbling on the gold markets with a mentality that is known in history as Jekyll and Hide.
Fortunately, there are also some more positive notes. Bank of America Merrill Lynch sounds like one of the more reasonable houses, seeing gold prices to average around $1,088 in 2016 with a averages of $950 in Q1, $1,050 in Q2, $1,100 in Q3 and $1,250 in Q4. Then, UBS said that they see an elevated potential for a ‘dramatic’ short-covering rally in gold. Several other comments stressed the role of the Central Banks as a supporting factor for gold. They said that those banks will continue to expand their gold reserves in light of financial risks that are imminent all over the world. That sounds nice but I am not so sure whether the Central Banks are indeed so supportive. The only banks that are openly saying that they are continuously adding to their gold reserves are actually Russia and in particular China. There are even suggestions that Russia and China are teaming up in their gold expansion policies in order to eventually reach their known desire to replace the United States as the supremacy nation of the world. I would like to add that there are increasing sounds that China is facing serious issues as to the strength of their economy. In this respect, I memorize that Wells Fargo recently issued their view on China and mentioned to see their GDP growth to moderate to 6.3%. Let’s be real, we can hardly call that a recession……..
Back to the possible scenarios, there may be even a Scenario 3: the Fed increases the interest rates and gold does not go down, on the contrary, gold will even go up. In a very interesting article, coming from Zeal Intelligence’s Adam Hamilton, he analyzed how gold behaved after interest rate hikes in previous times. His analysis is the most intelligently written piece of research I came across recently. His reasoning makes sense and his findings are most remarkable. We know that in many cases, history repeats itself but we also know that success in the past does not offer any guarantee the same success in the future. But, if I could wish for a scenario that we will see develop over the next few weeks, this would be the one I would like to see most. Have a look at the charts, read his final sentences below and go read Adam’s full essay via the link below.
“History overwhelmingly proves this, with gold rallying in the majority of Fed-rate-hike cycles to enjoy very large average gains. And given the radical underinvestment in gold today and record extreme gold-futures shorting by speculators on the false premise that Fed rates hikes are gold’s nemesis, gold’s upleg in this next Fed-rate-hike cycle should prove exceptionally large. Frenzied short covering will initially fuel it.”
It may be wishful thinking to see this happen but what is wrong with a sincere and sensible wish, if it is based on intelligence, common sense and a firm belief in fundamentals, rather than just cycles……..
I have been quiet in the last few weeks, not updating my views on where gold would go. In the first days of October I wrote the tentative heading above for my editorial, intending to write a quite positive article on the positive feeling I had at the time. But I was hesitating despite seeing the gold price making a start to reach higher levels. Nicely and steady, it increased some $70 dollars to the $1.180 level. Several positive reports came to the market, and it really looked like the market would continue its rise to above the $1,200 per ounce, a level that we had not seen since quite a while. Yet, I did not trust it. Reason to get into a wait-and-see attitude and not feeling comfortable to put my thoughts on paper. Unfortunately, my thoughts of hesitation and doubts turned out to be right. Gold retreated to the $1,100 level and now, since yesterday, it has broken the $1,080 level in downward direction. So maybe, I have to change my heading for this editorial into
As was clear again in the last few weeks, the manipulation of the gold price, directed to keep the gold price low has gone on and now seems to want the gold price to go even lower. As has been apparent in the last two years, there are parties in the gold markets that take pleasure in hitting the market down one or two times a day. Sudden drops in the gold price from mostly around $10 in a short but heavy fall, and sometimes even more than that. As I have written before, this always has looked strange to me because the rumours about manipulation of the gold price have always been denied and yet, the patterns were so easily visible. Maybe one day, we will find out whether the misdemeanours that resulted in huge fines for several of the top elite of the world’s banking and investment community included manipulation of the gold price…….. Fines that apparently were happily paid without difficulties just to avoid legal prosecutions, meaning that the real trespassing of those financial houses remained under the blankets……with business continuing as usual.
So where are we now? Will the former low of $1,080 be regained soon and show another advancement to the $1,180-$1,200 level to settle there? Or will it continue its downfall to the levels that some have been predicting? Like the Martin Armstrong adepts who believe in the scenario developed by his whether-or-not-existing Socrates computer, calling for a major collapse to the next major resistance point of $929 per ounce with possibilities to a further fall to the $900, $800, $700, $600+ levels? Granted, the Armstrong scenario calls for a real major upturn thereafter to the few thousands $ level. But as I have written before, can you imagine what the gold producing sector will look like if those low levels would indeed occur? The foreseen upturn should really be coming from the ashes of a completely destroyed and burnt industry. In whose interest would that really be? I have really tried my best to understand the reasoning of the Armstrong theory, just not to ignore these extremely negative expectations, but I cannot see any justification for it. However, to my regret I have to add that any theory has to be taken seriously. The world that we have gotten into over the last two years is not the same world as before. With further changes to come in the fundamentals and values of our living circumstances worldwide. We have to include all possibilities in our evaluations, whether we like it or not.
A more concrete issue that we have to face in the next few weeks that is to unfold before the end of the year is the widely discussed possibility that the Fed will come to the decision to resume increasing interest rates in December. Would that indeed happen, we would have to see whether the current fall of the gold price reflects and discounts that possibility or will be only a prelude of what will be coming after such decision. Personally, I don’t believe that the Fed would indeed take that decision now but also here, we have to be realistic. Nobody knows at this time and the rationale behind a change of policy is difficult to evaluate.
Not to be only negative and pessimistic, what I usually not am and actually still not at this time, I mention some of the headlines that I have seen in the media in the last few weeks:
“J.P. Morgan just called a bottom for gold”
“I would not be surprised to see gold at $1,600/ounce ($1,600/oz) before the end of the first half of 2016”
“the junior miners are even cheaper than they were in the late 1990s, when gold was below $275/oz. This could be a once-in-a-lifetime value proposition that may not last much longer”
“The Fed will not kill gold”
“Paulson maintains gold stake as prices touch five-year low”
Those of you that really would like to dig into the more positive views on gold, should google the above headlines and find the news coverage of these statements. It may give you a better feeling to know that not all is bad in our world of gold and that there are still believers in a better future for the yellow metal. I continue to be one of them…
Monday July 20 has gone on record as a memorable day, actually one of the most remarkable ones that the world of gold will remember for a long time, if not forever. As it turned out, the gold price suffered from a series of market actions in the Far East that were never seen before and took everybody in Europe and North America by surprise while the financial communities were still asleep. Of course, the immediate reactions were all resembling astonishment but at the same time, the curiosity about the causes started to come to surface. Not surprisingly, the first ones to react were those who had been negative on gold for some time already. And sure enough, they were telling us “we told you so” and predicted that gold would now go straight down to the magic $1,000 level and then continue onto its further demise to $900, $800, $700, $600 and even lower. What I found remarkable, although I have seen it before, is that there were quite a number of negative predictions coming from people that I never heard about gold before. On earlier occasions, I have labelled them as “career hunters”, seeking their claim to fame for “having been right” if and when their predictions would be coming true.
The recognized gold commentators were wise enough to ventilate their comments right away and observe the developments after the 20th. Rather understandable because the real causes of the gold break-in became not clear immediately. The first days were filled with several speculations about who where behind the sudden fall of the gold price. The most fingers pointed to China supposing they wanted a substantially lower gold price to take advantage of to increase their gold holdings. Not an unlogic reasoning because a) China wanted to step up their gold buying after the comments on the recently disclosed ‘disappointing’ new gold holdings figure of 53.32 million ounces, b) China wanted to divert attention from the four-week drop of its stock market prices, c) China saw the value of its currency weakening as a result of lower economic indices. A little later, the World Gold Council issued a special publication on what happened on that particular Monday, which included the revealing news that on that day 4.7 tonnes of gold was off-loaded on the Shanghai Gold Exchange. In comparison, normal daily trading on the SGE amount to around 40 tonnes……. In addition to the off-load at the SGE, volumes of trading on the COMEX showed remarkable peaks at around the same time. (In case you did not notice yet, the link to the revealing information from the World Gold Council, was and still is posted above on the HOME page of this site. In addition to this, an interview that Kitco’s Daniela Cambone recently had with WGC’s director of investment research Juan Carlos Artigas was posted there today). Then, a few days later, China announced that it had bought over 600,000 ounces of gold at the end of July and announced an official devaluation of the yuan. With a scenario like this, it is not really strange that the already since long appearing talks about gold manipulation have been gaining more attention.
As I have mentioned in several of my previous editorials, it is very understandable that investors in gold and gold mining shares have been quite confused by all the recent developments and the news that has been brought with it. In the last week we could read one major research house saying that gold could indeed go considerably lower and on the same day another major investment banker saying that gold would hold and recover to the $1,200 level in the foreseeable future. And if you would be following the markets and the comments as closely as I do, you would know that there are many more contradictory publications coming out every day. What is wisdom and how do you make up your mind as an investor? I reiterate the opinion that I have expressed earlier: I cannot find any solid or convincing reason why the gold markets would dwindle much more lower than the current levels. It could very well be that the recent $1,080 level will turn out to be the resistance point from which a recovery can be build over time.
Since long, I have stated that I did and do not understand the reasons why some financial-economic commentators were so negative on gold. On several occasions, I explained that I am a believer in the fundamental role and value of gold, not so much as money but rather as the only liquid asset. And then I don’t mean liquid as is showing in the picture above……. But kidding set aside, I just do not see the reasons why gold should be going to below $1,000 per ounce, let alone to levels that some of the wizards have been mentioning, like $939, $700 and even $600. It just escapes me how they think. And certainly also how they envision the state of the gold mining industry under circumstance like that. No company can survive economically at price levels like that.
Anyway, we have to face the facts and when the markets closed last Friday, the prices were still above $1130. But this morning in early Asian trading hours, gold dropped to its lowest levels in the last five years. So what happened. Did Greece go bankrupt? Did the European Union collapse? Did China sell its gold? Nothing like that and nothing close to it. Nevertheless, gold hit a low of $1088 per ounce after the market digested a billion dollars’ worth of gold dumped in a matter of minutes.
Well, it is obvious that under these circumstances, it will not be easy to be keeping our confidence in faith in gold. However, there are many different ways to look at these things. Of course, we all know about the glass that is half full and at the same time half empty. Also with the gold price, there are two ways to look at it:
GOLD DROPPED FROM $1,920 IN 2011 TO $1,110 NOW
GOLD ROSE FROM $250 IN 2001 TO $1,110 NOW
Like I said in the heading above, it is wise to keep the heads cool and let this situation settle. I am sure that common sense will return. Hopefully, these negative developments will not turn into a frenzy of senseless losses of value. Undoub tedly, the media will be full of all kinds of opinions, visions ranging from utter negativism to hopes to new buying opportunities. I will follow every possible article and comment in order to come to my own interpretation of the events and facts to eventually come to a sensible conclusion how to go forward from here. Given the developments in the markets, I will be keeping you informed more regularly as I keep my fingers on the pulse of gold.
Those who understand how and why the gold price is behaving like it does, are invited to send me their explanation. Fact is that the reaction of gold not to react after the results of the Greek referendum turned out to be OXI (=NO) was not what most people expected. It was generally supposed that gold would increase in value with an outcome like this and that gold would keep lingering on at theses low levels if the Greek voters would have welcomed the EU rescue support programs. But as life is mostly unpredictable, so was gold.
The reason that I find the most likely one is that investors have become quite tired and confused from the intricate chess game chess game -maybe a game of bluff poker was a better name- that both the EU and the Greek government have been playing. And after the referendum of OXI or NAI, the game is likely to go on without a clear end in sight. Yes, I know, the EU has again given the Greeks another LAST CHANCE to come with their final proposal of reforms and other sacrifices this week. But how many more last chances will we still see?
Nobody seems to know how this precarious situation will end, neither when. The internet is full of all kinds of articles, studies, comments, opinions, speculations, assumptions and theories. In the INFORMATION SECTION of this website, see the scroller in the right column here, you can find the comments of several of the GUEST COMMENTATORS.
I would also like to refer you to a truly outstanding article that I received a few days ago from one of the Guest Commentators, my friend and highly valued colleague, Taki Tsaklanos of GoldSilverWorlds. The article appeared on the Secular Investor website and shows what I highlighted in the subtitle of this Editorial:
SEVERAL MARKETS AT CRITICAL POINTS SIMULTANEOUSLY
It analyzes the current situation at the EuroDollar spread, the stockmarket represented by the S&P 500 Large Cap Index, the US Dollar Index, Copper seen as the indicator of the health of the global economy, Gold as monetary commodity, Silver, and the 30-Year US Treasury Bond Price index against their historical perspectives. For all these markets, the conclusion is similar at this point:
At a time like this, it is wise to sit back and think about how far we have come in our modern and so advanced world where on one side we are capable to make remarkable progress in many of the sciences that we have seen develop, both over the ages and in the strikingly amazing last 100 or 50 years, and on the other side, we have not succeeded in establishing a world without poverty and hunger and bring a halt to the apparently unstoppable population growth with all characteristics and consequences of that. The featured article above, reading of which I strongly recommend, does not give solutions but signals the crucial point that we are nearing.
It will be very interesting to see how the OXI or NAI GREXIT will develop in the next few days, weeks, months or even years. Like I said in the title of the previous EDITORIAL:
“grexit seems to be next catalyst,
grexit could trigger a series of political and monetary changes”.
I can’t help thinking back to last year when I found myself on a crossway of directions which eventually resulted in concentrating my focus on gold, silver, pgm’s and precious stones in general and in particular on resource companies that have reached the status of producing these natural resources and/or the status of being on their way advancing towards production in the foreseeable future. Given the above signalled evaluations, I feel quite comfortable with the decision that I came to then as I feel evenly comfortable with the path that I have since been following and will continue to do so.
The last few weeks, it seems that the gold price is only determined by the interest rates, or more in particular the Fed policy on them. The long pending expectation that interest rates in the USA are in for a considerable rise had kind of paralyzed the gold price, awaiting the Fed meeting of this week. The commentators had a ball with their assumptions and speculations, clearly expressing their insecurity and fear to be wrong. It looked like the interest rates are the only leading factor for the gold price. I thought that the world really has many other issues on hand that could have a significant impact on the gold price. They are all so obvious that I think it makes no sense to mention them all to you again.
I always have had difficulty in automatically accepting the supposed correlations between gold and some other criteria such as U.S. dollar, oil prices, other metals, economic figures and what have you. All those indicators may have merit but in my view, gold has earned the reputation of being a stand-alone asset throughout the ages because of its unique characteristics and qualities. It deserves to be its own boss and to be regarded as a truly very rare symbol of value, without automatic influences of and relations to other factors.
In this respect, I have been regularly making comparisons with the prices of both classic and contemporary art objects achieved at international auctions over the last few months. Prices turned out to be having no limits whatsoever as did the availability of money. It reflected that ‘uniqueness’ and ‘scarcity’ represent value, big value indeed. On the other hand, as a fervent lover of (contemporary) art, I look at those prices as having gone through the roof and beyond any sense. Taking the ‘uniqueness’ and ‘scarcity’ of gold into consideration, today’s price of gold looks as a joke to me, proving that the value of gold is still not recognized as it should be. The other side of the coin is that at these current prices, gold is still readily available for large circles of people with money to accumulate value. In light of all the issues that our world is facing, I am confident that within the next few years, that availability of gold as a store of value and real liquid asset will become a lot less than today.
Closely following the gold markets every day, it also amazes me, as I signalled before, how the daily comments on the gold price seem to know the exact reasons why the gold price was up or down. Of course, in this era of limitless communication our perception of “time” has changed considerably. ‘Short term’ used to be 2 year and ‘long term’ 5 years or more. Now, these definitions of time and term have come down enormously. Short term seems to be tomorrow and next week, a couple of months already are rather long term. This has greatly increased our hunger for information, our greed for explanation. So we want to know how and why everything happens, preferably right at the very moment. The media have understood that well and are giving us opinions, views, assumptions and interpretations of news that can change every day, every hour, almost every minute. The world has gone on a very fast track and is still accelerating.
In periods like this, I am often missing healthy, intelligent and interesting long-term views on gold with a sensible analysis and conclusion. With gold below or above $1200 (yes, yesterday it finally was a positive day for gold again!), I cannot take the predictions ranging from $600 up to $25,000 per ounce gold very serious. In most of those cases, it is wishful thinking that drives the mind to make those statements which predominantly do confuse the serious investors. However, considering the explosive nature that news can have these days, it is very difficult if not impossible to evaluate the impact of some of the serious political, economic, human problems that are currently pending.The case of Greece Going Grexit Or Greinit is one of the next stops. Depending on the outcome, it could trigger a series of political and monetary changes that are yet impossible to measure.
As a little contribution to good thinking this time, the interviews that Kitco’s Daniela Cambone has made with some of the speakers with different backgrounds and views at the International Precious Metals Institute (IPMI) 2015 Conference, held this week in San Antonio, Texas, USA, may shed some light. Very worthwhile to listen to and reason for me to put the links to the interviews in the HOME section above with my thanks to KITCO, the leading site in our business, and Daniela Cambone who really has developed into an excellent interviewer, able to lead her guests to make sensible statements in a few minutes. I strongly suggest you spend some time to digest these conversations and enjoy them as food for thoughts.
For those of you who do feel that the price of gold is primarily related to interest rates, I thought it was a good idea to close my Editorial with the link to the article that has been featured on the HOME page in during the last two weeks, contributed by Boris Gerjovic from Maribor, Slovenia and his publisher Stephen Bogner of Rockstone Research, and my Introduction to it:
It doesn’t happen every day that I receive an article that originates from Slovenia and surely not an article that addresses the subject of gold. Stephen Bogner of Rockstone Research sent me one and it is a very worthwhile one, written by Boris Gerjovĭc from Maribor, Slovenia. The study sheds light on one of the most often asked questions related to gold. Although the report originally dates from November 2014, it is of actual importance, now that Federal Reserve Chairwoman Janet Yellen announced just a few days ago that the central bank is likely to be on track to raise interest rates this year. It is widely assumed that raising interest rates is negative to the price of gold so it is highly interesting to read what Mr. Gerjovĭc says about. As I believe his findings could be of great benefit to my audience, I am very pleased to present them, of course with thanks to the writer and his publisher.
I am not so surprised that gold doesn’t seem to know where it should go. There are several different kinds of news coming to us that are not giving overly clear signals and are certainly not easy to understand for everybody. The investment public are may have difficulty understanding what the eventual impact will be of all those, often contradicting news items. It is also obvious that most private investors are suffering from doubts and mixed sentiments, it is as if they seem to be afraid to recognize and realize what the news is telling them. Thus, fear and hesitation still win it from optimism, challenge and opportunity. The mostly very cautious goldprice predictions that banks and brokers are maintaining have more impact on the moods of the investors than the more openly positive sounds that come from what I call the intelligent newsletter writers. Yet, in the last few weeks we have seen some sparks to the upside which pushed prices to the $1220 level but it didn’t sustain, despite there was enough news in the last week that should have justified the gold price to go to higher and dryer grounds.
As you can see in the HOME section above, I found several news items that should be of great value to everybody who follows gold and related investments:
■ to begin with, the video of HSBC Chief Economist Stephen King who issues a warning on the global economy. What he says represents an outright bullish call on gold;
■ a very special report resulting from an extensive study that Boris Gerjovic did on the impact of interest rates on the price of gold; his conclusion should be comforting to the idea that the Federal Reserve may start increasing interest rates later in the year;
■ an impressive document from Nicholas Larking for Bloomberg on the rise and fall of gold;
■ two articles from Casey Research, one by Laurynas Vegys on the possible forthcoming update of China’s gold reserves figures and one by Jeff Clark who feels that history shows a gold bull market is fast approaching;
■ and an article from Zero Hedge that I left online because it is deals with the cornering of the silver market by JP Morgan.
I strongly advise you to spend some time on these articles and let their content sink into your minds. I am pretty confident that the events that we will see developing over the next few months will bring many parts of what you read, back into your memory.
Another news item that I would like to highlight in my comment is the news release that I signalled last week in the News Scroller here on site and in the Social Media when
reported their latest drill results from the Fire Creek project in Nevada, USA. Grades of • 13.5 oz/t (461.6 g/t) AuEq over 11.5 ft (3.5 m), • 5.1 oz/t (174.3 g/t) AuEq over 3.2 ft (1.0 m), • 64.0 oz/t (2,194.7 g/t) AuEq over 1.1 ft (0.3 m), • 1.5 oz/t (52.7 g/t) AuEq over 12.3 ft (3.7 m), and • 2.1 oz/t (72.0 g/t) AuEq over 4.4 ft (1.3m) have become pretty rare these days. They do clearly demonstrate the high grade nature of the deposit which is growing into a significant second source of feed to the mill at their Midas Mine. Drilling is continuing with results expected to be released in the second half of this year. It also confirms that Klondex is a winner, beating the trend of the gold markets. A stock to own!
Much lesser nice was the major news that came from the U.S. Justice Department, when U.S. Attorney General Loretta Lynch announced that five of the world’s major financial firms have agreed to plead guilty to felony anti-trust violations for their role in a currency manipulation scandal. It came not really as a surprise because it was widely believed that these and probably many other banks were involved in forex schemes and manipulations. The surprise is more that these fraudulent bank activities are now openly confirmed. A sixth bank followed a few days later with the confession that they violated interest rate regulations and policies.
The scale of the manipulations is reflected by the fines that the guilty banks will have to pay. The six banks together received fines to a total of $5.8 billion! And I am sure that this is not all the bad news. Several other investigations are still going on to the banks behaviours, more scandals will come out in the open and criminal charges may very well come forward. Nevertheless, I am afraid that the banks will just pay their fines and get away with it. After all, if the banks will get into financial trouble by these levied fines, they have a pretty good chance that the same governments that fined them will bail them out (again). I can’t help it but since the news confirmation came out, one more question has been nagging me: will there also be an investigation coming that could result in confirmation that these and/or other banks have been actively involved in the manipulation of the gold markets? Let’s wait and see……
Governments have always played a significant role in the world of gold. For a long time this role was merely a passive one. Their gold was accumulated over many years of history and safely stored in their safe and very-well-armed and guarded vaults. The function of the gold was to provide value and stability for the countries’ currencies. A comforting but not really an exciting function. Also because the price of gold had been pegged at US$ 35 an ounce, the price at which people could convert their US$ bills into gold. That all changed in 1971 when President Richard Nixon decided to end the convertibility of US dollars into gold and a to implement wage/price controls. The reason for that historical action was to prevent an internationally looming run on gold and to halt an apparent increase of inflation. Looking back, that year was the year that “paper money” was born, the relic that we are faced with today, in particular in regard to its incredible increase in quantity and its dramatic decrease of quality and value.
Over the years, many books have been written about ‘government and gold’ and in those books we can find the often amazing stories about how the gold holdings were handled by the respective series of Finance Ministers and Central Bank Presidents. I am pretty sure that in the next few years, several new books will be written because what is likely to happen to gold in the future years will most probably exceed everybody’s expectations. Yet, there seems to be no panic among international investors in the general sense. Only a relatively small group of gold commentators, financial visionaries and others are ventilating their warnings and views into the media. But…….as so often, they are mostly ignored by the established authorities, such as governments, central banks, politicians, financial institutions and stock and commodity exchange officials, sometimes even ridiculed by them.
In my previous Editorials, I have stated several times that the current scenarios around gold are highly amazing. They are dominated by the whims of the managers and traders of the computer trading programs that we see almost every day with their downwards actions in the markets. They only react to graphics and computer arithmetics and apparently have little or no morals as to the consequences of their actions. They just don’t care about gold, the gold price, the gold mining industry and the dramatic losses that the owners of gold have to digest. All they are interested in is delivering fat profits to the institutions they work for and their subsequent fat bonuses. It is just sad to see this all happen……..
Recently, we have seen several governments becoming more active in the gold markets, a trend that seems to become more and more popular , although for different reasons. On the positive side, the continuing interest of China, Russia and India to accumulate gold is still strong. As to China, it is expected that it will not take too long before their current gold holdings will be announced again, which they usually do only once every five years. Several commentators and articles have been expressing their anxiety to see how much gold China owns and whether it is more than everybody thinks. As I mentioned last month, it is China’s first aim to reach the 4,000 tons level of Germany and thus become the no. 2 gold nation of the world and thereafter to go for the 8,500 tonnes target, thereby surpassing no.1 United States (at least if all the gold they say there is also really is…….).
Then last week, Venezuela surprised many by announcing that they agreed to a gold swap with Citibank to fight soaring inflation, a shrinking economy and depressed oil revenues. The transaction looked like what Ecuador did last year when they sent 466,000 ounces of gold to Goldman Sachs for a three-year repayment term. The Ecuador government defended the deal by “Gold that was not generating returns in vaults, causing storage costs, now becomes a productive asset that will generate profits”. Of course that is……..if and when Ecuador can reimburse Goldman Sachs in three years…….. Another announcement came last week when IMF data revealed that El Salvador sold 5.412 tonnes of gold, about 80% (!) of its holdings for $ 206 million in March. An official of the Central Bank said that the sale was to help diversify its risk and take advantage of appreciating gold prices…….. I wonder which appreciating gold prices they are talking about…….
In very simple words, I would like to reiterate what I said before: this situation cannot and should not go on for too long. A further erosion of the gold price, as a result of the scary and insatiable hunger for trading profits that continually pester the markets ànd the industry. However, as I have been explaining in my previous editorial, there are also ample positive developments going on. As I stated, not all is bad and there are more good things happening than you may think. I would not be surprised if we would see some further turns for the better over the next few months. In that respect, I refer to the two highly actual articles that I signalled in the HOME section of this site, one written by the very appreciated Jeff Clark of Casey Research, alerting on the impact of three developments on new mine supply and the other written by Vladimir Basov of MINING.com, elaborating on the lack of local reserves of main mineral commodities in China. You may see these articles as SIGNS ON THE WALL, as is also the article about JP Morgan cornering the silver bullion market.
ONE OF THE INGREDIENTS THAT CONTRIBUTE TO MY CONFIDENCE
It was good to be in Zurich last week. Two days of presentations of several big gold and silver producers, lectures of renowned investment specialist and more presentations of companies that are in development and/or advanced stages of exploration with their projects, spread over the whole world. And, not less useful and pleasant, meeting the executives of resource companies and the representatives of a large number of financial and investment institutions. It was not so surprising that the spirit of those different groups was as diversified as the people themselves and the organizations that they represented. It was obvious that the volatile and hesitant performance of the markets still dominates the atmosphere and moods. Therefore, it is quite understandable that the average investor, who is usually following the markets from more distance than his advisor/bank/broker/portfolio manager, is more influenced by the daily general news and the disappointing stock market prices than by the available flow of the positive news from the better companies that are determining the success of the industry. I have said several times before that “things are not as bad as most people think” and “that these markets offer solid opportunities for the intelligent investors”. My two days in Zurich confirmed that fully.
As to the presenting companies, I was very content with what “my” companies told and showed the audience.
elaborated about their most recent accomplishments and what the progress that they are making with their companies and projects. The good listeners should now know what to expect and have seen that these companies fully deserve their attention and their investment decision. I would not be surprised that the companies have made some new friends who may in due course turn into very satisfied shareholders. The same counts for a company that I have been writing about for years in the past and that you may have read about in the HOME section of this site. I am very pleased that
has decided to re-activate our previous relationship by joining this site so that I can proudly welcome and start covering their further progress as a silver producer at their Avino Mine in Mexico, the oldest mine of the country and once described by the Spaniards as “a mountain of silver” and soon again as an actual gold producer at their recently acquired Bralorne Mine in British Columbia, Canada. Just recently, they announced a 101% increase in their silver equivalent ounces production figures which clearly demonstrates the kind of development they are going through. And without hesitation I can assure that there is more to come………
In my previous Editorial (still available in the Previous Editorials), I mentioned several other companies that I like and value. In almost all cases, my impressions were confirmed by their presentations and personal appearances. Some more than the other but that is nothing new. But I can tell you that I will do my best to convince my most favourite companies that they should come and join this website too. In these markets, the companies are still very selective with spending money for marketing and communication, but you as my loyal and attentive audience deserve to hear about the best there are.
In the actual developments of the financial world as far as they are relevant to the resource industry and investments therein, there are a few remarkable things happening. So remarkable that they could have a vital impact on the markets, sooner or later. Such as the further interest from several countries to join China’s Asian Infrastructure Investment Bank (AIIB) initiative, aimed to find an alternative for the U.S. dollar as the world’s leading payment currency for international infrastructure and possibly other transactions.
China always has been determined to be a world-leading nation and since WWII they have emerged as a true economic and military super-power. These days their economic growth is often down-played by Western commentators, pointing out that the percentage of growth has been sliding, but their growth is still amazing, certainly related to their enormous population and the economic stagnations in the rest of the world. Over the last couple of years, China has been accumulating gold in order to bring their gold reserves more in line with other world nations, according to Jim Rickards’ scenario with the kind help of the United States. Yet, nobody knows how much gold is now held by China.; it is widely suspected that they do own more than most western estimates. In this respect, I quote Mr. Song Xin, Party Secretary and President of the China Gold Association: “If the RMB wants to achieve international status, it must have popular acceptance and a stable value. To this end, other than having assurance from the issuing nation, it is very important to have enough gold as the foundation, raising the ‘gold content’ of the RMB. Therefore, to China, the meaning and mission of gold is to support the RMB to become an internationally accepted currency and make China an economic powerhouse. That is why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US.” This quote was not made today, what we are witnessing in the markets today is that this Chinese wish is already in the process of making it happen.
Who said that gold is no longer playing a vital role in the world’s monetary system? It could very well be that several Western Central Banks will come to regret that they sold huge quantities of their gold holdings in the last 10-15 years and that they change their ‘arrogant’ attitude towards the yellow metal. In the meantime, the low market evaluation of gold is already threatening an impact on the world’s actual gold supply. Any sudden increase in demand, which may come forward once we know how much gold China is holding, will lead to higher prices. It is the old law of supply and demand…….
The sub-headlines of my previous Editorial read “intelligent investors are those who take advantage of current markets” and “looking at the good companies shows that things are not all so bad as you may think”. I said that because that is what I feel after having thoroughly analyzing the markets of the last two years. I shared with you that what I heard at the John Tumazos Very Independent Research Conference in New York confirmed my personal views and I am sure that also in the coming week, I will be hearing a lot of good news. In my next Editorial you will be reading about my experiences at the European Gold Forum.
Of the companies that I cover on this website, Caledonia Mining, Klondex Mines, Orvana Minerals, SilverCrest Mines and Timmins Gold will be presenting. For me, what they will say will probably not bring too many surprises because I am monitoring their developments very closely. But it is always good to hear the company leaders talk about their projects and plans. And to meet them in the socializing hours are often even more informative and confirmative. I can ask them specific questions as their answers gives me a more specific insight in their views and thinking. For those of you who will not be attending the sessions in Zurich, I do recommend to you to spend some time to follow the webcasts of the presentations via the Forum’s website and via the company websites on April 14 and 15. In the HOME section above, I have provided the links to make those webcasts available to you so that you can in mind join me.
In order to be a kind of your travel guide, let me begin with elaborating briefly on the companies that I will surely meet at the Forum. Of course firstly, the companies that must be sounding familiar to you because they are covered by this site:
■ Caledonia Mining just reported their production figures over Q1 2015, showing that they are on line with their target to produce ~42,000 ounces of gold at their Blanket Mine in Zimbabwe. Their financials over full 2014 and Q1 2015 can be expected next month. They continuously demonstrate that it can be very worthwhile to operate a 49%-owned mine in one of the most disputed countries of Africa successfully and profitably. Extra interesting is that they are currently in the process of extensive infrastructure work which will allow them to start mining the higher grade ores from below the 650m level from early 2016, significantly increasing their production potential;
■ Klondex Mines has turned out to be a very remarkable performer since they started production from their newly acquired Midas Mine in Nevada, USA in Q1 2014, reporting C$121.7 million from 88,352 gold equivalent ounces revenues for 2014 to which also the bulk sampling program at their nearby Fire Creek project contributed. With the Midas and Fire Creek, Klondex is estimating to produce ~120,000-125,000 gold equivalent ounces in 2015 at an all-in-sustainable-cost of US$800-$850. Klondex is an old company with a remarkable young spirit, it is a company on the move and I would not be surprised if management would recognize and make use of some of the opportunities that these markets do offer;
■ Orvana Minerals has used 2014 to take some steps to reorganize its company base, enabled thereto by reaching their production targets at the El Valle-Boinás/Carlés gold-copper mines in northern Spain and the copper-gold-silver Don Mario mine in Bolivia, and the sale of their Copperwood project in Michigan, USA for up to $25 million. They used their financial influx by repaying US$64 million in long-term-debt, thus significantly strengthening their balance sheet. For 2015, Orvana targets to produce 82,000-94,000 ounces of gold, 20,000-23,000 lbs copper and 550,000-680,000 ounces of silver at a cash cost of $700-$770 and AISC of $1,000-$1,100 per ounce gold (by-product). Plans are to further expand in the Americas and Europe;
■ SilverCrest Mines that has all the characteristics for investors that make it hard not to like the company. Very solid management, money raising abilities and built-growth with their pipeline of projects. The 100%-owned Santa Elena mine in Mexico is operating very successfully and has a large potential for further discovery and development. In 2014, 1,157,021 ounces of silver and 27,609 ounces of gold were produced, accounting for 2,813,559 silver equivalent ounces, produced at all-in sustaining cash cost of $12.01 per ounce. For 2015, SilverCrest expects production to increase significantly to 4.0-4.4 million ounces of silver equivalent ounces;
■ Timmins Gold too is a company that deserves to be embraced by investors. In the past, I have said about the company and its management ‘they do what they promise’, meaning that they have delivered what they planned. And more than that. Aside from their success record of past gold production growth at its San Francisco mine in Mexico, the company has recently taken some expansive actions by acquiring the Caballo Blanco, an advanced stage open pit heap leach gold project and an arrangement with Newstrike Capital which adds the Ana Paula gold project to the expansion potential. For 2015, the company has projected production of 115,000-125,000 ounces of gold at a cash cost of $800-$850 per ounce.
Then, there will be ~65 other companies presenting. It will be just impossible to attend all presentations but I will try to attend as many as I can. Without aspiring to be complete, I will mention the ones that I do follow and that I very much would like to be reporting and commenting on to you. You may see them as the companies that are on my ‘wish list’ because they do fit into the categories that I have chosen to specialize on and their status, quality of management and projects, accomplishments and prospects match the criteria that I like and value:
■ in the category ‘production companies’ I like AuRico Gold –successful gold producer in Mexico and Canada-, Avino Silver & Gold -operating the oldest known silver mine in Mexico and preparing producing gold from the Bralorne mine in Canada, both long-time clients in the past-, Doray Minerals – an Australian high grade gold producer-, Endeavour Mining –an extremely well-managed gold producer with mines in Mali, Ghana, Burkina Faso and Côte d’Ivoire-, Endeavour Silver –operating three silver mines in Mexico-, First Majestic Silver –producing silver from five mines in Mexico-, G-Resources –an Asia focused gold producer in Indonesia with very ambitious plans to expand into other Asian countries-, Kirkland Lake Gold –since 2005 producing gold from their Macassa mine in Canada-, Lake Shore Gold –producing gold from its three multi-million ounce gold projects in the Timmins gold camp in Canada-, Scorpio Mining –producing silver from its mines in Mexico and Idaho, USA-, Wesdome –already producing gold 25 years but still not very well known-;
■ in the category ‘development and exploration companies likely to come to production’ in the next few years, I find the following companies interesting: Amara Mining, Asanko Gold, Aureus Mining, Calibre Mining, Columbus Gold, Dalradian Resources, Kaminak Gold, Kootenay Silver, MAG Silver, Midas Gold, Orezone Gold, Pershing Gold, Premier Gold, Pretium Resources, Torex Gold.
I am looking forward to having a very busy week with two-and-a-half days in Zurich, loaded with meetings and encounters, not only with companies but also with many friends and colleagues. I am sure I have left you with enough names and ideas to evaluate and think about. I do wish you pay attention to the webcasts and that you are already interested to read my next Editorial with my findings and impressions from the European Gold Forum.
The headlines of this editorial comment don’t only find their origin in the date that they will be posted. They are more the result of a thought I had when I was thinking about what to write this time. To gold investors this April Fools’ Day does not stand alone, they must have had the feeling of being fooled, or not believing the things they saw happening in the markets of metals and resource shares in the last 18 or so months. And despite the recent ‘peak’ of $1,200+ gold, the fooling may not be over yet. There are so many different issues on hand that could have their influences on the price of gold and consequently on the performance of the markets for resource shares. Nevertheless, I cannot accept the negative expectations and attitudes about gold and the prices of mining shares that I experience, hear and read every day. Sometimes it looks like investors do not know what to believe, what to think and what to do with the shares they are holding.
That is where the second line of the heading could hold some truth. Every day, so many visions and opinions flock the internet and mailboxes but they are all so different that it is not easy for the average investor to determine a meaningful policy in making their portfolio successful in these markets. The best advice that I can give is to try and come to your opinion, based on common sense and facts. Because like I say in the subtitle of this April Fool’s Day editorial: these markets are not all bad, on the contrary, these markets do offer enormous opportunities to restructure your portfolio. The prices of mining shares are all low, even lower than they have been for a long time. And what I find remarkable is that the prices of the companies that have substance and are doing well with their projects are selling evenly low as the many companies that have very little to offer. So, as I said in the beginning of the year, this is a good time to sell the bad stocks at no matter what price, take your losses and give yourself a chance, put your money in companies that offer quality and substance, giving you the best value for your money and the best chances to benefit from better times. And be sure that those good times will come. Maybe even sooner than you may think!
My positive attitude does not only come from being an optimist, it is mainly based on applying common sense and historical experience from all those years I have been following the metals and resource shares markets. Keeping track of the developments of the companies that I cover on this website and I can assure you, many more than those, gives me the confidence that I need to have a good feeling about the future. There are enough companies making amazingly positive progress with their projects that fully deserve the attention from investors and should have a place in their portfolios.
I can assure you that despite my quite critical look at the markets and in doing my research to find the companies that stand out from the crowd, I get a lot of confirmation in my belief that the markets deserve to be approached with a willing and entrepreneurial attitude. Just at the beginning of this week, I found enough ground to confirm my confidence when I had a long session behind my computer, following the webcast of the John Tumazos Very Independent Research Conference in New York, where a large number of mining and exploration companies were presenting their projects, accomplishments and progress to a highly qualified audience. Listening to the company executives unfolding the scenarios of their projects acknowledged my vision: there is a whole next generation of gold and silver producers in the making. Not in promises and wishful thinking, but based on facts and figures resulting from extensive exploration programs with on top of that, highly qualified expertise to channel their projects through the challenging and capital-intensive phases of development towards production decisions and actual production over the next few years.
In the next few weeks, I will be hearing more of those positive cases when about 70 international resource companies with projects over the whole world will come to the next major event, the European Gold Forum, to be held in Zurich in a few weeks time, on 14 and 15 April to be precise (see the banner above and click to go to the event’s website). Also there, a prime selection of gold and silver producers and companies advancing to make it to the next generation of producers will be presenting their cases. As these are the companies that I have chosen to focus on on this website, I will inhale as many presentations as I possibly can and use the social parts to meet many of the companies’ executives, old friends and making new ones. You will hear more about my impressions in one of my next editorials.
Recent developments indicate that we are going to see some dramatic fundamental changes in the world of international payments. Changes that will move rocks and pave the way for a quite different financial landscape. Even to the extent that we can hardly imagine at this time. We better get used to the idea that the U.S. dollar is not the world’s leading currency although we have been warned already often and from different sides that the confidence in the so familiar greenback is not so justified as we think. It sure feels odd that we in the western world have to start thinking in the Chinese renminbi or yuan as the most desirable currency. Yet, I would not be surprised if that is what we will have to face in a not too far future.
First let me clear the confusion about what is a renminbi and what is a yuan. They are the same, the same word for the same currency. Renminbi, also described as RMB or RMB¥, literally means “People’s Currency” and is mostly used in the sense of Chinese legal tender where Yuan is the name for the actual
money, the unit of payments. To make it extra confusing, the ISO code, the internationally recognized standard of currency, for the Renminbi/Yuan is CNY such as USD is used for the U.S. $.
Why do we have to know more about the Chinese currency? Because China seems determined to pursue its previously announced plans to introduce a China International Payment Platform (CIPS), an international clearing system. Earlier this month, China announced that it is now ready with the development of the system and that it could be launched as early as September or October this year. The general idea is to make international payments of yuan transactions less complicated than they are now, internationalizing the yuan as a widely recognized leading currency, setting its level of acceptance in the same order as the U.S. dollar. Upon implementation, international yuan payments can be processed smoothly by cutting processing times and transaction costs. China has selected 20 banks to do the testing, including 7 subsidiaries of international banks.
These plans and the resulting larger impact of China on the rest of the world certainly give food for further thoughts. We have already seen articles that reported about plans of China and Russia to join forces in building a new monetary system, suggestions that China may be preparing a new kind of gold standard to back up their currency, possible economic and monetary associations between China and India and of course, the scenario of THE BIG RESET allegedly prepared by China and the United States to re-value America’s gold when China has completed to establish itself as one of the world’s largest gold holders. With all these different possibilities, plus the one that we have not heard about yet, it will be interesting to see how things develop over the next few years. Fact is, in my view that is, that the current financial fundamentals of the world have come to some ridiculous proportions, with an incredible level of debts, a staggeringly increasing money supply and still, an insolvable problem: all debts cannot and will not ever be repaid. There is no backing of any real value. But as long as money can be created by using and printing more paper, the current situation can be maintained and prolonged for some unknown more time. There is no one saying that it is enough.
These days, HOUSE OF CARDS is one of the most popular series on TV, dealing with the intricate manipulations that seem to be usual in today’s politics. Wouldn’t this title have been even more applicable for a series about international finance, featuring the roles of treasury departments, the government banks, the commercial banks and the prominent investment houses? I am sure it would be an enormous success too, if only it would not be so scary…….and, unfortunately, so realistic.
Against the background of all this, I have no problem whatsoever to remain confident on the future of gold and the other precious metals in line. Since last week, the market has been a little better, let’s just wish that it continues the current trend…….$1,200 is in sight and still so……… incredibly cheap…
after writing my above editorial comment, I found two interesting articles that are relating to the matters I discussed. I feel you may find them of value to you too.
Gold shines and glitters, it has a magical impact on people, ranging from admiration, secret wishes to strong desires to have it, even greed. It makes people dream, at times it makes people happy, it brings people gains but the other side of the golden coin is that it puzzles people, it confuses, it disappoints, it brings people losses. Already last year, it brought me to add the following words to my europeangoldcentre Skype profile: “GOLD, the most cherished, desired, admired, despised of all, wars fought, kingdoms lost, women traded, friends killed, understood by few, misunderstood by many, it will always be there….”. I am sure that many of you will feel somewhat the same these days, especially if you have been following the markets, either because you have been investing in the metals and/or in the shares of the companies that explore for and mine them or because you have been contemplating to do so. I am sure you will be interested in what the general attitude is. Well, there is no general attitude at this time. Or, we could use the word that I have heard many times recently when I asked my friends who did make it to the recent Prospectors and Developers Annual Convention in Toronto: SUBDUED.
As always happens when the markets are so down as they are today, a lot of market watchers feel the urge to ventilate their pessimistic views. I used to call that “the wolves are coming out of the forest” as if they want us to know that they “told you so”. Also this time, for sure. Since last week I have recorded quite some opinions, views and elaborations. On the negative side, I saw the pessimists turning even more somber (my Webster’s Dictionary describes that also as “dark and shadowy”) than they already were. One of the more prominent observations was the one made by French bullion bank BNP Paribas seeing an average of $1160 for 2015 and $975 for 2016. Another long-time known bear is Martin Armstrong who has quite a group of believers in his computer, called Socrates, with a program that has been saying that gold has to go down to $939 first before it can start its drastic recovery to higher levels. I have be realistic and admit that he has been right so far. However, as one of my best friends in the business has been advocating Socrates’ wisdom to me over and over again, I tried to understand Armstrong’s reasoning. Quite honestly, I failed to come to understand what he is saying and on which grounds his negative theory is based. But in the Armstrong discussion group it is obvious that several of his followers are not understanding him either which I noticed last week when they were talking about lower levels such as $700 and even $500 per ounce, again “before it will recover drastically”……. In my humble opinion, such a recovery would have to be made with an industry that is severely damaged, but the Socrates believers do not seem to care about that at all. They better go back in history to see how Socrates came to his end. He was sentenced to death in 399BC but ended his life himself by drinking a cup of poison hemlock…….
Let’s go to the bottom of things. What is the single largest influencer on the problem some price of gold? Yes, the U.S. dollar. It has been strong, stronger and stronger but in my view, will be strongest pretty soon. I read some articles that confirmed my belief that this strong dollar is based on a lot of hot air and wishful thinking. An article that is describing what we and the world are up to I found in The Telegraph and was written by Ambrose Evans-Pritchard:
Global finance faces $9 trillion stress test as dollar soars
In coming to my own opinions and views, I do read a lot and choose to listen to a circle of people that I know and value for their intelligent thinking and viewing the markets. You may already know that one of the commentators that I value most is Jim Rickards, who has given us a very unique and very likely scenario for what is coming over the next few years in his two books “Currency Wars: the making of the next global crisis” and “The Death of Money: the coming collapse of the international monetary system”. Just a few days ago, he was quoted in article on the arabianmoney site:
Dollar top is bottom for gold prices argues Jim Rickards
Lastly, I would like to make you smile a little. I just stumbled on some videos at You Tube that clearly show how little the public know about the value of the precious metals. Please have a look and see how much confidence they still have in paper money and apparently no confidence in silver and gold……just click the silver dollar first and thereafter the maple leaf….and be surprised. Still a challenge to make the people aware of what the value of our dear precious metals is……
I realize that I am giving you some food for thought here by letting you read two articles from other writers. If you want more of that, I advise you strongly to regularly go to the INFORMATION section of this site and go to the GUEST COMMENTATORS page. A daily visit and roundtrip along their blogs and sites could prove to be one of the best ways for you to stay abreast of the developments. I am sure they will not only influence but rather benefit your investment decisions.
When I started my EDITORIAL of last week, imagining that gold was still confusing investors, I could not possibly imagine what kind of market action we could have this past week, or rather, this past Friday. Until that day, gold had already gradually slided back to the $1200 level from the $1300 interim peak we saw in January. Then Friday came, the day that the U.S. government was to release the newest figures about created jobs. The number said that 295,000 new jobs were added in February. Not bad but not so exciting either. But it certainly was not such a great news that it justified how it translated in the gold price: a hammering to initially $1175 and eventually to $1165 where after it rested until a $1168 close. Ouch!!!!! Didn’t I say last week that it is not easy to be positive on gold….?
So what now? There are several things coming to my mind. We all know that governments are good at painting the rosiest pictures that they can. Not only in the United States but also in Europe, where a growth of less than 1% is welcomed as a turn to a recovering economy and better times in general. As to the U.S. job figures, I already noticed the first report on the same Friday that the figures were announced, saying that the report was grossly overstated. Anyway, I have my reasons to have serious doubts about the so-called U.S. economic recovery on which the so jubilated rises of the Wall Street markets and the value of the U.S. $ are based.
Another thought is about the inter-relationships between the numerous economic indicators and gold. I always had problems to understand the dogmatic theories about gold and stock prices, gold and oil, gold and silver, gold and in-/stag-/deflation, gold and interest rates, gold and currencies, gold and stock market indices and now also gold and jobs and gold and whatever comes next. Why do we never hear about other ratios that would make at least as much sense as all the ones I mentioned? For instance, why is there no ratio of the world quantity of money to the existing world quantity of gold? And, maybe more easy, what about a ratio between the gold supply versus the money supply?
Then, I have to think about the growing popularity of “fair trade” and “fair competition” in the world, when it comes to the trades of food and food products, textile fabrication, labour conditions, animal treatment and the like. Why is there no “fair trade” and “fair competition” in the trading in the capital markets (stocks, bonds, commodities etc.)? When I saw the drastic market behaviour in gold of last Friday, I had to think of the appalling and seemingly unlimited trading in the paper gold markets (and other financial and commodity markets), that are going on every day. In huge quantities, volumes and values, and worse, out of sight for ‘normal’ investors, institutional and individual. You and me, who in fact and in most cases are presented with sizeable and sensitive losses.
In the last months of last year, I decided to shift gears. Not only from writing newsletters to communicating with you via the new website. Also because of the changes that I foresaw in the resource markets, I decided to primarily focus on gold, silver, pgm’s and precious stones and as to companies, to companies that are in production and to companies that are advancing to production in the next few years. The companies with substance. The companies that will give you the best protection against unwelcome losses if and when the markets would indeed go further down as some commentators predict. I am not pessimistic about the industry of our precious metals and stones. On the contrary, I share the optimistic outlook that several other commentators and company executives have. But it is highly necessary that we return to the ingredients COMMON SENSE, FUNDAMENTALS and QUALITY. These basics are grossly overlooked by reckless greed. But they still exist and are having their value. Last Friday’s gold market reiterated my choice for quality. That is what I am going for!
It is not easy to be positive on gold. Not because there are no developments to be positive about –the contrary is true-, but because the markets for precious metals continue to be erratic. And thus, frustrate everyone that feels that the prices of gold, silver and pgm’s are way too low and should be selling at much higher levels. So, I can easily imagine that these times are still very much confusing investors, both institutional and individual. When you are in the markets with your money, it is hard to digest to see prices go lower, especially after short flings of hope and encouragement occur as we have seen a few times recently. But every time that happens, selling pressure pops up and drives the prices back down again.
When you follow the market actions every day, it is obvious that this selling pressure is coming from a few big parties that somehow seem to have an interest to keep the prices of the shiny metals down. Trading patterns have been showing similarities, such as quite regular break-ins of $10 to $20 to kill any upward enthusiasm, and lately even as bad as $20 to $40. The market comments mention computer programs from major financial houses, government selling, ETF’s unloading as the most significant perpetrators, but it remains very difficult to demask the real offenders. Therefore it is good to notice several actions to investigate the manipulative and in my eyes even irresponsible behaviour of some market participants. It has turned out that banksters have issued 10 million ounces of paper gold in January and were naked short nearly 700 million ounces of silver. It was heard that the market makers cartel had to sell 3 million ounces of February gold contracts to prevent a potential run on delivery in February gold……which does not promise much good for paper gold trading with the April delivery contracts coming up next.
As you must have heard that several of my commentator colleagues are expecting real dramatic actions in the next few years that will more or less restore the historical function of gold in the financial households of Central Banks, the above painted market situation cannot go on much longer. The discrepancy between the fastly rising supply of paper money –if you want to hear the rattling of the printing presses…..– and the stored value of the gold reserves has already become so ridiculously huge that cash money is virtually worth more than the paper it is printed on. Some time ago, I referred to Jim Rickards’ books “Currency Wars” and “The Death of Money” in which he outlines the deplorable situation of the U.S. $ in the current system of world currencies but in which he also paints a most intriguing and interesting scenario how the U.S. government may implement measures “to reset the system” to give the dollar its value back (must reading for everybody interested in money and gold and worth following via the GUEST COMMENTATORS section on this site!). Well, just recently Jim signalled that he sees the January effort of the Swiss pegging their currency to gold again as “firing the first shots” in the Currency Wars of 2015 and beyond (see video below). It suggests that the scenario of his books has started and will show further impacts on the developments later this year and in the years following., eventually to a shocking change of the world’s financial system in which gold will effectuate its dramatic revenge for the irritating and highly disappointing performance since the $1900.30 high was recorded in August 2011.
Further on this positive note for gold, I was pleasantly surprised to see and hear some encouraging comments on the outlook for gold. Kitco’s Daniela Cambone, who has developed into one of my favourite reporters on mining issues, attended the 24th Global Metals & Mining Conference, held by BMO Capital Markets in Florida last week and had some worthwhile discussions with people that know what they are talking about. Two of the video’s of more that you can find on the Kitco website you can click above to hear how BMO and Newmont Mining are looking forward to the outlook of gold. I encourage you to spend some of your precious time on these precious informational items.
Then, to give you an impression and taste of what happens at the yearly PDAC, which I name “the motherlode of all mining events”, the last of the video links above takes you to a very wintery Toronto to join over 25,000 attendees and over 1,000 exhibitors from over 100 countries during four days; you will be in the good hands of Daniela Cambone who knows how to get the insiders to talk. Enjoy it all!
I am not a chartist. Charts can be an important tool as a supplement to more fundamental research activities. But for me, it goes too far to explain fluctuations in the markets just on the patterns of the charts. Even more so when it comes to anticipate and predict possible future moves of a commodity or a share. But it is worthwhile to have a look at the charts every now and then because sometimes the eye sees something that the mind did not notice yet.
Like this weekend when I was thinking about what I would write about in this Editorial. My eyes were drawn to the charts above. In particular, I noticed the similarities in the charts of SILVER and PALLADIUM, on their own individual recent price patterns and in comparison to their “big brothers” GOLD and PLATINUM. Whereas gold and platinum had to experience downward pressures again in the last weeks, it seemed that silver and palladium did not blindly follow and instead, seemed to go their own way, each showing their intention to go up. I found this a remarkable discrepancy and similarity at the same time.
Although I follow platinum and palladium as close as I do follow gold and silver, I don’t have much to say/write about platinum and palladium at this time. Just for the simple reason that there are not many resource companies active in those nevertheless fascinating and very precious metals. With silver that is quite different. Silver is still a very much in demand metal, although you may question how it still is a real precious metal or that it has become a significant industrial metal. In my view, silver is still a precious metal because the demand has continued to be strong and the supply is almost entirely been taken up by its primary users.
Already for many years, a possible silver shortage has been looming. Illustrative for that are the figures of the COMEX silver inventories: quite regularly, articles and comments with serious concerns about the content of their silver vaults do pop up (as they also do about the gold inventories). But somehow, the markets have seemingly learned to live with the supply/demand ratios and go on without the frenzy that some commentators had expected.
I do find silver companies, with the emphasis on those that are producing, highly interesting. Over the last 10 years, we have seen several companies develop into quite sizeable producers, not seldom expanding from one-mine operations to full-fledged operators of several mines at the same time. A trend that is likely to continue since the current markets are very suitable terrains for shopping, or in proper business language M&A. Why is that? Just because while the production figures of most silver producers look like those of growth companies and successful operators, the picture looks very much different when you take their net profit margins as indicator for success. The costs of mining and exploration have been rising quite steeply over the last 10 years too. The price of silver should increase at least another $1 to $5 to turn the larger silver producers into comfortable profit producers. Will that be possible? I think it is, in particular when the gold price would return to nicer levels than today’s prices. The pattern of the silver price over the last week sure is a very encouraging sign because it also suggests that silver can have a will of its own. Interesting!!!!
In the last few months, I have been talking to several good quality silver producing companies. They all radiate confidence and I think for the good reasons. I am outright very positive about the quality of most managements, they have been building their companies with solid dedication, based on the insights they have. In many cases, I have known those managements for many years, seeing them develop themselves and their companies from one-project exploration companies into multi-mine producers. I am following a group of them with special interest since I believe they are the ones to benefit from the better circumstances (read: better prices) in the gold and silver markets. With every upward move of the silver price, they come closer to making very substantial and welcome profits. And isn’t that what resource investors like to see? I do feel confident that I will be able to share some of my views on those companies in the near future!
It is outright amazing! But already for years I see something happening every time one of major mining investment events is about to begin, the gold price takes a dive. Am I seeing a ghost behind every tree? Or is it just a remarkable coincidence.? Quite frankly, I don’t have the answer. But it is happening again this time.
This weekend, thousands of people, all related to the world’s mining investment industries are landing in Cape Town, South Africa to mingle with their peers, meet their old friends, make new ones, meet government officials of almost all African countries where mining is viable and all level executives of mining and exploration companies with projects in Africa. They attend all the social events around the event that larder the many sessions to gather the enormous quantity of quality information that is becoming available at the 21st edition of the
It could have been so nice to have the event taking place in an environment of a better mood about where we stand with gold. The price of gold had come up in the last three months from the $1,140 low in early November to $1,300 a week ago and still at a quite comfortable $1,270 at the start of trading last Friday. It was not to be……..some of the big players decided to spoil the party……..and drove the price of gold down to $1,230. So what I noticed several times before, again happened! And that while the world is full of problems, the currencies are quite volatile, the so-called recovery of the U.S. economy is at least questionable, Europe is facing some tough financial problems to straighten out with Greece and some other countries in the waiting room, the ‘normal’ stock markets are generally overpriced and worst of all, the value of human lives is rudely trespassed in several parts of the world.
Yet, life goes on and as it does help very little to cry over spilt milk, it makes little sense to weep over a $30-$40 loss in the gold price. I remain positive about the developments in the mining and exploration industry as I see them. In following the news releases of many companies that are on my radar screen, I see that most gold producers are reporting solid production figures and encouraging results in keeping their costs in control. Especially the ‘newer’ or ‘emerging’ producers are remarkably successful. Fortunately, they include some of the companies that I cover as Supporting Companies, like Argonaut Gold, Caledonia Mining, Klondex Mines and Orvana Minerals, most probably soon to be followed by Golden Star, SilverCrest Mines and Timmins Gold that are to report their Q4 and 2014 results in the next few weeks. And in the advancing to production category I see African Gold Group, Global Minerals, Helio Resource and Paramount Gold & Silver making good progress.
Of course, I follow a lot more companies as I have done for as long as I have been active in this fascinating and challenging sector. The section of ‘newer’ and ‘emerging’ gold producers includes quite a few very interesting companies that I would like to have involved in my activities with this website. Let me name just a few: Endeavour Mining that built their current stable of producing mines in Africa on the acquisition of my former client Etruscan Resources and just received their permit to start up another mine in Burkina Faso, Centamin producing gold in Egypt and now more active to establish mines in other African countries, Comstock Mining giving new steam to their production operations in the historic Comstock gold and silver district of Nevada and DRD Gold that has become a world leader in surface gold tailings retreatment.
I would like to share with you one other category that I am following very closely, firstly because I have been a long-time liker of silver and secondly, because I have always been writing a lot about silver companies in Mexico, which is still one of my favourite mining environments. However, the price of silver has not re-emerged enough to offset the increased costs of production of most companies. They need that silver price to go up to at least $18 to $20 per ounce and preferably even higher than that to be comfortable and profitable again. It is just a matter of time. Silver is different from gold in that the metal is much more used in all kinds of industries than gold. Whereas the gold that was mined is mostly still there (although………some doubts about that is sincerely justified) but the silver that was mined has mostly been used. So a shortage of silver has been looming already for many years. Fortunately, there are quite a few companies that have emerged in recent years as emerging and still nicely expanding silver producers. I mention my former clients Great Panther Silver, Silvercorp, Excellon Resources and Avino Silver & Gold Mines and companies like Coeur Mining which is in the process of acquiring Paramount Gold & Silver, Endeavour Silver, and First Majestic Silver. Also in the category advancing to production there are some noteworthy companies like Defiance Silver.
Enough choices to warrant looking at the future with confidence and opportunity. Just let’s wish that common sense will increasingly be applied towards making investment decisions by the big players in the gold and silver markets. In my view, there are really no reasons to be pessimistic when it comes to the future of mining and exploration for the precious metals.
So Europe is going the American way. That was my first thought when I heard the first news about the European measures to stimulate the economies of its member nations. Quantitative Easing, QE in short, is the euphemistic way to say that the printing presses will be started. Printing of money to restore the economy, where have we heard that before? Yes, most recently in the United States where billions of dollars were flocking the nation in the last few years. Has it worked? Have the American citizens been benefitting and enjoyed a more comfortable life? Not quite! The U.S. government wants us to believe that the U.S. economy is not only recovering but even starting to flourish. I always liked President Obama for his energetic leadership and have given him the benefit of the doubt but I also witnessed him fighting fights that he could not really win. The stubborn conservatives in the Republican party and the not much less conservative members of his own Democratic party have given Obama some hard times.
I simply distrust the so-called upturn of the US economy, I think it is more wishful thinking and manipulation than realistic. And if there really would be sustainable recovery, it does come at the expense of a very costly price tag. Just look at the charts of the U.S. money supply that their QE program has caused:
The economic and financial wizards in the European Union apparently could not come up with a better and more creative and effective solution than copying the American way. I was not impressed. The explanation is that the newly printed money will be mainly used to buy bonds and loans from the European banks and pension funds which in turn would use the funds to increase their lending policies to corporate and private businesses to stimulate the economies. Don’t we still remember what the European banks did with the money that was supplied to solve their financial problems a few years ago? They all restricted their lending to business! A situation that still has not get any better yet……. Yet, the ECB will sweeten the economy with 60 billion euros every month until the end of September 2016. The total sum would equivalent to €3,000 for every European citizen…… don’t count on it that you will see that money come to your benefit!
On top of all this, Europe has to face another problem since the outcome of the Greek elections this last weekend. The winning coalition is not in favour of the Greek membership of the European Union and even less in favour of repaying the loans that they so gladly accepted during the last few years. Some tough decisions are facing the European leaders. Greece cannot pay and is not willing to pay. If they would allow the Greeks to walk away with that, it would be causing serious damage. But not only that, if they would allow Greece to forget about their debts, what will they do when other financially ailing nations like Italy, Portugal, Cyprus will follow the example of Greece?
Anyway, after the huge growth in the U.S. money supply of the last few years, now also the European money supply is about to show a similar pattern. The QE will add more than 1 trillion euros to the existing money supply. And, the ECB already said that if that would not be enough by September 2016, there could be additional measures. I would like to make only one observation here: Quantitative Easing without structural reforms does not make much sense; in addition, QE is even likely to diminish the urge to accept those reforms. The ECB has missed a great possibility here to force these two factors to be combined.
The real meaning of the subtitle of this editorial is “the more paper money, the lesser its value”. A simple statement. But oh so very true. In the end, the only thing that counts is value, true value. The process of creating more money has not only been going on for many years now, it is likely to even increase further, much further. Some time ago, I watched a little video of printing money and how it was handled from printing press to the loading on the trucks to be transported to the central bank. The thought that came up in my mind was that it did not make any difference if I would be looking at the fabrication of any kind of paper. I did not see any value at all. Would I have the same thoughts if I would be looking at the pouring of gold and loading the bars on the truck? I don’t think so….
I did write my previous Editorial on the first day of this new year because I had hoped to be launching this new site on that particular day. Unfortunately, the technological preparing of the site took more time than foreseen but yesterday, it was the moment of being online. I can assure you, it felt like a great day!
Although I suggested that January 1 would not only bring a new year, a new website and a new GOLDVIEW but possibly also A NEW GOLD CYCLE, I could not suspect that the price of gold would get such an impulse as the totally unexpected Swiss measure to end the peg of its currency to the euro. It made the euro lose 20% of its value and gold could rise from the $1,190 at Jan 1 to $1,281 last Friday, with silver in its slipstream going to $17.78. As I said in my Facebook, LinkedIn and Twitter pages, these prices feel a lot more comfortable. I am sure that all precious metals companies are agreeing with me.
The big question at this moment is, will these prices sustain? Quite frankly, nobody knows. But it sure is encouraging and it does at least a little justice to the gold price which in my view, is historically seen so much undervalued compared to any other product, service and salary. Compared to historical developments of price levels in general, gold should be selling between $2,500 and $3,000 today. So we have still quite a way to go!
Yet, in these times of difficulties of all kinds in the world are omni-present, it would be wise to be careful. As I said in my previous posting, I have chosen to challenge the future but in a still safe way. In this new future of GOLDVIEW and website, I will concentrate on precious metals and minerals only and resource companies with projects that are either in production or are on their way to production in the next two or three years. I see these categories as the safest way to protect portfolios in the case that markets will not hold and possibly resume testing the lows we have seen last year. We better be prepared.
Personally, I do not see that happening. I rather see that prices are likely to go up in this year. Not only because they are historically low but also because most of the good companies will continue to do well. Many of the younger generation of producers are very well geared for further growth in production and any improvement in prices will directly benefit them. For the companies that could be the next generation of producers, the better prices will similarly improve their prospects to realize their plans. I am very pleased that the companies that have decided to support my efforts and this website (see COMPANIES section) are very good examples. If you would spend some time reading the recent and coming news releases of these companies, you will come to see that they are well on their way to further successes.
A few more words about this site. First of all, I thank you for coming to visit. I really am determined to develop this site as one of the most dedicated to the cause of resource developments in the precious metals and minerals and of the better companies in the industry. As my best recommendation is to GO FOR QUALITY, that is what I will maintain in inviting more companies to come and join this site. I will be most happy to present them to you! So I cordially welcome you to come back to this site regularly. Of course, I encourage you to use the CONTACT form to make sure you will be keeping yourselves up-to-date by signing up to receive my Update Alerts.
I can hardly explain to you how pleased I am that my European Gold Centre can enter the new year with this completely redesigned and rejuvenated new website. It comes in a time that the markets for gold and resource shares are still not knowing in which direction to go. When gold went below $1,200 in early October, I thought that could be a bottom from where a new recovery to more acceptable levels could be built. However, as the subsequent performance showed, the market was not ready for that. Continuous pressure let he price deteriorate further to first $1,160, and as if that was not enough, it continued its weakening to $1,142 on November 7. Not really a level to be happy about as it means that the $1,100 border came pretty close. I call that level a crucial one because in my view, it looks like the danger zone. Gold prices of below $1,100 will impose a serious threat to the mining industry as life and profitability becomes quite marginal. Several producing mines will be forced to seriously review their operations and take actions that we don’t like to see. But it seemed that the markets came to their senses and went back up to above $1,200, despite the outcome of the historical Swiss vote. However, It remains to be seen where it will go. Gold is back to $1,190 and silver is following the same pattern, down to below $16, not really the prices that we had hoped to see if we would have had the nice year-end rally that we had hoped for. So we are still in the twilight zone.
It is time now to be quite realistic. No more dreaming about bottoms. If the markets don’t do what we want, there is nothing we can do. You can have all the knowledge and understanding about gold but in a market like this, you just have to watch and accept what the market does. So my answer to the most asked question “how low do you think gold will go?” can only be “I don’t know!”. If the guys out there want a $900 gold price, let them have it and let’s get it over with. What I do know, is that this situation cannot and will not last and I am sure that gold will come back and with revenge too!
So what should we all do now? We all have to face the facts and use this time to reconsider a few things. While mining operators and exploration companies are doing their own homework, the investors should do that too. To me it is very clear what investors should do now. Taking action is the answer. How? Reorganize your holdings and operate like a surgeon. Don’t feel pity or sorry for the victims, don’t let serious losses hold you back.
GO FOR QUALITY ONLY!
Review your portfolio of investments and see how you can prepare for what is coming. Sell all the shares of companies that lack the ingredients that can make them survive, such as management with a realistic vision, money raising abilities, viable projects that are either having production potential, proven resources or acquisition attraction. Realize that for the same low prices that you will get selling them, you can buy back quality companies that have all it takes to survive these times. Many good companies are having share prices that are well below their actual cash value! Go for the shares of the quality companies and ride the journey with a confident feeling.
What I feel investors should do, certainly also counts for me. In the process of completing this new website over the last few months, I have decided to focus on precious metals and minerals only, and in particular on companies that are either in production and those that could become the next generation of producers. So also here, time for a reconsideration to be fully prepared for a future in which gold prices will recover to more justifiable levels and the mining industry can operate successfully and flourish without worries. If there is one industry that can maintain its vital importance and experience a continuing demand for its products, it is the industry that produces the metals and minerals that are so needed by world, in good and bad times, it is the mining industry. The beginning the new year 2015 is a good moment to make evaluations. I have made mine and I suggest that you do the same. As said before, I am convinced that this twilight zone behaviour will not last and that better times are ahead, maybe even sooner than we think. A focus on quality companies will be the safest way when the markets will bring more disappointment and the best way when the markets will finally commence their recovery. Which they will do sooner or later! And no, this is not wishful thinking, it is realistic thinking based on confidence.