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Wednesday, July 31, 2013

Gold Fields Prepared for Gold Rebound

Gold Fields (GFI) is one of the most prepared gold miners to face the volatile realities now inherent in the sector, and it has taken the right steps and incorporates the right outlook, whether the price of gold falls or rises.
To that end the company has spun off some of its assets in South Africa, continued to cut all-in production costs, is targeting higher ore grade areas, lowering the size and costs of potential acquisition targets, and is looking to diversify into other commodities to spread the risk.
Price of Gold
If the price of gold rebounds in the near future, the company is prepared to take advantage of that in the weak market, which presents it with some good and inexpensive opportunities. On the other hand, if the price of gold remains below $1,300 and plummets, it is ready to cut back on projects that will no longer make economic sense.
As to the price of gold, I see the $1,300 mark as important. If gold is able to hang around that number and find support there, I think we'll see a breakout to the upper side. If it isn't able to break through and hold, I see the opposite happening, where it could plunge closer to the $1,000 per ounce to $1,100 per ounce range.
In the current environment Gold Fields has focused on shuttering marginal production projects, which resulted in attributable gold production falling from 534,000 ounces in fourth quarter of 2012 to 477,000 ounces in first quarter of 2013.
Gold Fields CEO, Nick Holland, has stated consistently that this is the direction the company will be taking in response to low gold prices. It also appears it's the strategy of the future for the company as well, as potential acquisitions are being looked at in a way that it's considered better by Gold Fields to buy smaller projects with lower production costs, than to acquire huge resources that come with higher production costs.
With that strategy in mind, I really like what Gold Fields is doing and its realistic outlook for the industry and the company. It will depend on how shareholders view the decision to lower production to better handle costs as to how it will impact the share price. Those understanding the gold market should take it as a big positive, as I believe in the near future the number of ounces mined will be far less important than the costs to mine them. With more visibility in all-in costs emerging, Gold Fields is positioned strongly to benefit from that.
So if gold prices do jump, I see Gold Fields moving up nicely from its current price level of $5.40 a share in the short term. The price of gold has jumped almost $40.00 per ounce as I write, which has brought the share price of Gold Fields up over 5 percent to $5.82 a share. With its focus on cutting costs and acquiring lower-cost projects, over the long term the miner should have no trouble returning to levels between $11.00 per share and $12.00 per share. When the price of gold takes off again, we'll see it test the $15.00 per share and $16.00 per share mark. If gold price continue to fall in the near term, Gold Fields will probably test the $4.00 per share mark, and possibly lower, depending on the depth of the drop in price.
Since Gold Fields and Nick Holland have among the more accurate understanding and outlook for the industry, I believe they'll be able to operate sustainably at these higher levels when the gold price rebounds.
My major concern is its exposure to South Africa, which has some of the highest cost mines in the world, largely because of higher wages. For example, the Western African projects include only 10 percent of labor in their costs, while in South Africa labor accounts for 40 percent of overall costs for Gold Fields, and that's about to rise.
Fortunately, it did spin off its KDC and Beatrix operations in South Africa into a separately listed company, Sibanye Gold, earlier in 2013. The company retains South Deep in South Africa, which has started to operate under a new model, which is too early to ascertain the results.
South Deep produced 63,000 ounces of the 477,000 ounces of gold produced in the first quarter by Gold Fields.
 source: StockCharts
Latest Earnings Report
Net earnings in the first quarter came in at $27 million, down from $49 million in the first quarter of 2012, and down $41 million from the fourth quarter of 2012. A lot of that was from the spin-off of some of its South African assets, as well as the drop in gold prices and lower production. Again, a strike also affected the numbers.
None of this should be considered negative, as it's the drop in production was largely planned because the company continues to tackle high production costs. Cash costs for the quarter rose from $798 an ounce to $819 an ounce.
When taking into account what Gold Fields calls notional cash expenditure (NCE), which includes the capitalized costs for projects in its growth portfolio, and is the real cost of its gold production, it was able to lower that number by 2 percent in the first quarter from $1,355 an ounce to $1,291 an ounce. That's not insignificant, as any cost taken out of the equation is extremely important in this gold price environment. It's still a little high, but it's headed in the right direction.
Gold miners can't assume an upward move in gold will bail them out. They must continue to lower costs every way they can. I look for cutting costs first when analyzing gold miners, before production and acquisitions, as all that could do is exasperate a problem if production is increasing and each new ounce results in a loss, or at best, breaking even.
Part of the lower costs for Gold Fields in the first quarter was a reduction in capital expenditure. That's not to say the company isn't working on growing. While it is cutting back on greenfields and near-mine exploration, it's doing so to concentrate on smaller areas that have higher grades, which are less expensive to work. Greenfields expenditure was cut from $130 million in 2012 to $80 million in 2013. Near-mine expenditure was lowered from $65 million in 2012 to about $28 million in 2013.
This coincides with its acquisition strategy, which is to target smaller projects with higher ore grades and lower costs. The company is looking at projects valued at about $200 million to $250 million, although is open to as high as $500 million if it meets its existing criteria. Being a mid-tier company, it isn't looking at acquisitions in the $1 billion range.
Gold Fields will continue to keep cash in a range of $500 million to $600 million.
 Source: Yahoo
Mining Strategy
We've touched a little on the mining strategy of Gold Fields, let's dig a little deeper into its plans, as all of the miners will have to incorporate a similar strategy in order to survive, let alone be profitable.
To understand gold mining in the years ahead, it must be recognized that there will be a lot lower production. Many projects that never should have been mined in the first place will be shuttered, as it will be impossible to profitably mine them. Projects will be smaller in the future, and that is part of the mining strategy of Gold Fields, according to CEO Nick Holland.
Another focus will be on higher ore grades. While this may seem obvious, it's likely a lot of the lower grade areas of a project will be abandoned unless the price of gold soars.
Holland asserts that when gold was selling as high as $1,700 an ounce, the vast majority of gold miners were just making enough to "sustain the business." Now that it's trading at under $1,300 an ounce, the overall industry is under water.
Essentially if the price doesn't go up the industry will be forced to lower production. It's as simple as that. It'll also have to target high ore areas to the expense of the rest. That was a major reason Gold Fields spun off some of its South African assets.
Wages will continue to be a major issue, and there simply isn't a lot of room for improvement there. Either workers will have to settle for increases in line with CPI, or they won't have jobs. In some parts of the world wages have been awarded as high as 5 percent over CPI year after year. It's no longer realistic, but the miners have themselves to blame for caving in over and over again. Now workers and unions have come to expect that, and the result will be an increasing number of hostile negotiations and reactions to not getting what the workers have been used to getting in past years.
Over time the expectation is there will be a lot more mechanization which would lower the number of workers. That usually happens as the companies must go deeper to get the gold. Gold Fields has already been doing some of that, although safety is part of that strategy as well. If workers and unions aren't made to understand the gravity of the situation, the gold industry as we know it in those regions will cease to exist. South Africa would probably be the first nation to fall in that regard. There's literally no more room for wages to go up there, and no amount of negotiations and strikes will change that reality. Estimates by Holland are South African gold production will probably fall by about a third within five years.
The reason why it's as difficult to make money when gold sold at $1,700 an ounce as it was when it sold for $250 an ounce is the declining ore grade. It's costing a lot more to get less gold. The distances to bring the ore to the mills also increase over time, which adds significantly to the costs; both with fuel and repairs.
This is why even if gold prices rebound some, miners will continue to be under pressure because costs are going to continue to rise for the reasons mentioned above.
If there is going to be a gold industry, that means mining higher grades, getting wage increases under control, targeting smaller projects, and slowly gravitating towards using more machines to do the work. The problem with the latter is there is a lot of R&D that must be paid for, along with proven results, before that becomes a significant cost-saving tool.
One thing the gold miners do have going for them is there is only so far the price of gold can fall before they slow production. There is no way they can continue to produce at a loss. When that happens prices will have to go up if there is real demand for physical gold. If not, we'll see a huge decline in the size of the industry, as well as the many miners in it. Gold Fields already anticipates a more lean company, although will acquire a project that has high ore grade and they can get at a good price.
Balance Sheet
(click to enlarge) Source: YCharts
Diversified Mining
When asked about growing the gold industry, Holland gave an answer that which points to what could be a big change for Gold Fields. He suggested moving away from gold in and of itself and towards a number of other resources miners could produce. Among those for Gold Fields are coal, platinum, iron ore and Ferromanganese, among others.
Holland wants to produce those commodities incrementally when the right conditions are in place. That speaks to diversification, and the fact that gold doesn't appear to be a metal that can be mined profitably on its own, or even with some byproduct.
What it appears to mean is Gold Fields isn't just going to attempt to increase byproduct, but to focus on opening up new markets it will directly compete in concerning various commodities. In other words, it's probably going to go beyond byproduct to some major production with these other opportunities.
Personally, I think this is what the gold miners must do now and over the long haul to survive and compete. I don't see gold being a commodity that can be successfully mined at a profit on its own. There will have to be significant complementary commodities to balance the portfolio of a company.
There is no doubt Gold Fields will slowly move in that direction. To me the sooner it does that the better, although the existing commodity environment will make it slow going.
Conclusion
In relationship to the mining of gold, it appears Gold Fields, as it stands today, is going to become a smaller producer of the yellow metal. As Holland has stated, even at $1,600 and $1,700, companies are just able to operate sustainably. Zeroing in on high ore grades and smaller projects will help the company compete in the years ahead, even if production falls.
This is the new reality. The amount of gold production is increasingly becoming less important, while the all-in costs is the most significant factor, along with the price of gold. Gold miners may sound impressive when reporting increases in production when compared with smaller competitors in the future, but if they're doing it at break even or a loss, it won't be long before that is exposed and shareholders suffer. I don't see that with Gold Fields, as Holland has been open about the condition of the company, costs of gold, and what must be done for the gold miner and the industry to be successful in the future.
Even though Gold Fields may retain the name 'gold' in its title, we'll surely see it starting to gravitate towards being a diversified miner. The key there is being sure to bring production on line for specific commodities when it makes financial sense. This will take some time to do, but will definitely be worth the undertaking and expense. I think the days of pure gold miners are over; meaning going beyond the byproduct and growing into competitors targeting commodities outside of the usual focus of the companies. That is the stated case with Gold Fields, and we can expect to see that in the years ahead.
As for production costs, you can see from the time when gold was selling for about $250 an ounce to today, the costs continue to rise over time, and if they continue to rise at the rates of the last 10 years, $3,000 an ounce gold may not be enough to cover expenses going forward (five to ten years from now). That may sound ridiculous, but the price of gold is over 5 times what it was back in the latter part of the 1990s, and companies today struggle to generate a profit. As long as costs rise at a much slower rate this shouldn't be a problem for Gold Fields, but it does reveal the challenge faced by it and the gold mining segment in general.
One major advantage Gold Fields has over many of its competitors is it has one of the best CEOs in Nick Holland, in my opinion. There is no fooling around or being in denial with him, but a refreshingly honest and open look at the industry in general, and Gold Fields in particular. With that in mind I see Gold Fields as a bellwether of where the gold mining sector must and will go, and it is one of my favorite gold mining companies. I will like it even better when it diversifies.
GFI just recently came off of a 52-week low, but I would like to see where the price of gold goes in relationship to $1,300 an ounce before looking for an entry point, even though where it stands now is pretty good.

Saturday, June 1, 2013

Goldcorp's Penasquito Challenges

The management of water resources at Goldcorp's (GG) Penasquito mine in Mexico is far from the only challenge facing the company at the mine, as a court in the Mexican state of Zacatecas has voided the lease on some of the land, while "ordering the territory be returned to the farmers."

Of the 23,000 acres included in the gold mine, approximately 1,483 acres have been ordered to be returned to the farmers.

continue reading ...

Most Hated Asset Class About to Rebound?

The last time gold was as hated as it is today was in October 2008, and it was thought at that time by investors we were unlikely to see an opportunity to buy gold stocks like that again in our lifetimes. We were wrong. Gold today is more undervalued than it was at that time, a time when 12 months later gold stocks had jumped 200 percent.

In John Doody's May 1 issue of his Gold Stock Analyst letter, it was noted that gold stocks were undervalued by 44 percent. They've fallen even more since that time, making them even further undervalued.

continue reading ...

Thursday, May 9, 2013

Battle for Gold Floor Continues On

There are a lot of theories floating around out there making a case for or against the price movement of gold. Recently I made the case for the robust demand for physical gold in the form of jewelry and coins, as well as by central banks - especially central banks in China and other Asian countries - providing price support for the precious metal.
While that is real and is part of the equation, other elements are in play which could pressure the price of gold down even further. In other words, we may not have found a floor yet, even with the robust demand for physical gold.
continue reading on the downside risk for gold
 

Tuesday, May 7, 2013

Can Physical Gold Demand Support a Floor?

An article at CNBC was recently run suggesting gold may have hit a floor, citing HSBC, which offers three reasons why that may be the case, including retail demand from India and China, slowdown in exchange-traded fund (ETF) gold liquidation, and continued acquisition of gold by central banks around the world.

In-depth look at how physical gold will affect prices.

Thursday, March 21, 2013

Swiss People's Party (SVP) Forces Gold Referendum

The conservative Swiss People's Party (SVP) has garnered enough signatures concerning a ban on the selling of gold reserves in the country to force a referendum on the issue.

Called "Save our Swiss Gold," the proposal would disallow the central bank of Switzerland from selling any of the gold it holds in reserve, as well as keeping a minimum of 20 percent of its assets in gold.

"Gold reserves aren't speculative objects for the SNB or politicians. They belong to the people," said SVP politician Luzi Stamm.

During 2007 through 2008 the Swiss National Bank (SNB) sold about 250 tons of gold, resulting in an outcry from citizens. While promising it won't sell any more of its gold holdings (laughter in the background), it still is threatened by the idea of rules being put into place which would hinder it from taking steps in shaping the monetary policy of the nation.

SNB spokesman Walter Meier said this: "The SNB has considerable concerns, in particular of a monetary policy nature, about the initiative's demands."

Of course if the SNB had no intention of reneging on its promise, it makes one wonder why it is it's concerned about the demands of the SVP.

Near the close of 2012 the SNB had a total of 1,040 tons of gold in reserve. That equaled about 50.8 billion ($54 billion) Swiss francs at the time.

Another provision of the initiative is that the Swiss National Bank must store all of its gold reserves within the borders of the country.

At this time it is alleged most Swiss gold is stored in the country, although some is stored in other parts of the world in light of crisis scenarios envisioned by the bank.

I wonder if Swiss citizens look at Germany's demand for the repatriation of its gold from America, which it'll have to wait years to get.

Saturday, March 9, 2013

Gold Investors Have No Fear, Job Numbers Skewed

In what was undoubtedly a plant in the latest notes from the Fed meeting, along with the so-called big beat in jobs creation, it makes you wonder why the price of gold, and silver for that matter, shrugged off the news and not only held steady, but moved up a little.

The obvious reason is investors know that this is a bunch of nonsense. The Federal Reserve isn't going to stop printing money, and the jobs number were so fudged it's almost a certainty that they will be downwardly revised; probably in a big way.

Concerning the Fed notes, that was an attempt to keep investors in gold and silver at bay while the central bank kept its loose money policy in play. While those in the know understand the ploy, the mainstream financial media are now using the comments in the notes as talking points, repeating the mantra of the possibility of the Fed stopping its stimulus strategy. This is all orchestrated, again, for the purpose of planting uncertainty in the minds of investors, whom the Fed and government want to have believe the economy is growing at a strong pace.

Part of this is for the reason of manipulating commodity prices so inflation doesn't overwhelm the country in an obvious way, in which even the uninitiated could be confused as to whether or not it was economic weakness and the consequences of the failing Keynesian monetary policy implemented by the central bank.

So hopefully most of you reading this won't believe for a moment that the Fed is going to stop stimulating. It's not going to happen any time soon, and that can be absolutely counted on, no matter what tactics are used and what the mainstream media reports. Neither can be trusted in these matters.

As for the jobless numbers, they're somewhat laughable.

Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, and one of a number of experts who put the numbers in perspective, said, "Today’s report showed the so-called participation rate, or the percentage of working-age people in the labor force, slipped to 63.5 percent, the lowest since 1981."

Another say this:

 
According to the household survey (on which the unemployment rate is based) the economy added a healthy 170,000 jobs. However, a whopping 446,000 of those jobs were part-time jobs. Simply put, the economy shed 276,000 full-time jobs.
The BLS labeled those 446,000 part-time jobs as "voluntary". I am not so sure.
A Gallup Survey yesterday on Jobs show the percentage of workers working part time but wanting full-time work was 10.1% in February, an increase from 9.6% in January, and the highest rate measured since January 2012.
Gallup notes "Although fewer people are unemployed now than a year ago, they are not migrating to full-time jobs for an employer. In fact, fewer Americans are working full-time for an employer than were doing so a year ago, and more Americans are working part time. Although part-time work is clearly better than no work at all, these are not the types of good jobs that millions of Americans are still searching for."

There are a couple of conclusions to come to. The data are correct and the job market is robust, or there are a growing number of people have their hours slashed because of Obamacare parameters, and are going out to get a second job. At this time it appears the latter of these two scenarios is the reality.

That tremendously skews the jobs numbers, which will will a certainty result in a significant downwardly revised report.

Wednesday, March 6, 2013

Gold Price and Propaganda

The propaganda has turned openly laughable. On the popular major financial news networks, the recent decline in the so-called Gold price has prompted quite the parade of clowns on the ship of fools to trumpet nonsense.

The widely published and posted Gold price is dominated by futures contracts, and thus as corrupted as meaningless. The entire global financial structure is crumbling before our eyes.

The gang of central bankers has applied their monetary policy for four and a half years since the implosion of Lehman, Fannie Mae, and AIG. The first is dead, while the second has transformed into a sanctioned subprime lender again, and the latter is a sinkhole.

continue reading ...

Thursday, February 28, 2013

Gold and Silver Now Legal Tender in Arizona

Arizona state senators voted to allow gold and silver to be used as legal tender in the state.

Privately minted gold and silver will now be given the same authority and status as paper money in Arizona. That means the residents of Arizona will be able to pay their bills within the state boundaries using the two precious metals.

Along with Arizona, other states have already implemented or are looking into similar proposals. While the constitution doesn't allow states to create their own currencies, there is nothing to suggest a state can't allow coins minted by private companies to be used as legal tender.

There was some additional drama in the process of confirming the bill, which came of course from a Democrat, this one being someone named Sen. Steve Farley from Tucson,

I will hand him this, he got it right on when he attacked the approval of the proposal, seeing how it makes the failing U.S. dollar look. Farley said, "I believe the bill itself ridicules our financial system." Right you are Steve. It does all of that for sure.

What he's of course referring to is the implementation of an alternative underscores the disastrous and monstrous policies of the Federal Reserve and Ben Bernanke, where they work together to debase the currency in the name of saving the economy.

The inclusion of gold and silver as a currency, every day points to these failed policies and teaches those willing to listen that Keynesianism is dead, and printing or digitizing endless amounts of dollars to prop up an economic system that should be allowed to flush itself out so it can be really healed, is what people like this Farley oppose.

In order to work out the details of the initiative, the effective date to implement gold and silver as legal tender in Arizona was pushed out till after the 2014 legislative session.

Wednesday, February 27, 2013

Gold Futures Drop as Investors Take Profits

After a couple of days of gold futures surging, investors decided to take some profits off of the table, as gold for April delivery dropped $19.80, or 1.2 percent, to close at $1,595.70 an ounce on the Comex division of the New York Mercantile Exchange.

Some media outlets suggested it was positive macroeconomic data out of the U.S. and Europe that resulted in the downturn, but that's doubtful after Federal Reserve Chairman Ben Bernanke stated he has no intention of stopping stimulus measures, which of course confirms the extreme fragile global and American economy.

Another thing is any investor that believes in any way that Europe has anything positive economically to base an investing decision upon, is setting themselves up for failure, as Europe is and will continue to be an economic basket case no matter what positive spin the financial media attempt to put on it.

For example, some news reports said gold futures fell because Italian political parties are starting to work on the possibility of forming a government. So what? Italy is working on forming a government. That's meaningless. Italy is going to have a government no matter what the news reports say. So the idea is put forward that they are working on it is considered news and a reason for gold investors to sell. That would mean gold investors bought gold because there were concerns over whether or not Italy would form a government. It's irrelevant of course.

Britain also continues to be an economically challenged area, where its economy contracted by 0.3 percent from the last quarter.

The only positive economic news in the United States continues to be the housing sector, where pending home sales in January were up a little more than expected. Other than that, most of the economic news in America is dismal.

Durable goods orders were reported as having fallen in January, a nod towards extremely weak manufacturing sector. Durable goods orders in the U.S. plunged 5.2 percent last month, where economists were looking for a drop of about 4.0 percent.

As for currencies, the euro U.S. dollar rose to $1.3101. The dollar index, which measures the U.S. dollar against a basket of currencies, was also down on the day.

Monday, February 25, 2013

Gold May be About to Break Out, Here's Why

Gold could be about to soar after recent heavy downward pressure, based upon the probability the huge number of shorts will be forced to cover their positions, resulting in a huge, upward move in the yellow metal.

Gene Arensberg, editor of the Got Gold Report, noted this in an email:

“The producer merchants, the category that includes the natural hedgers, are at their lowest net short position since 2008 at the same time that the managed money traders, the funds, are record short and at their lowest net long position since Nov. 18, 2008.

“I have not seen the COT ‘rubber bands’ so over-stretched in opposite directions as they are now,” Arensberg said, noting that extreme lows for the managed money net long positions are “usually associated with important bottoms for the price of gold.”

Arensberg added that together, funds have slashed their long gold positions by almost 36 percent to a 42,810 contract net long position.

It is also thought the short position is much larger because this data only represents Tuesday of last week.

Gold for April delivery settled Monday at $1,586.60 an ounce  on the Comex division of the New York Mercantile Exchange, up $13.80, or 0.9%. That's the largest one-day move for gold futures in February.

Thursday, February 21, 2013

SPDR Gold Trust (GLD) Rocked with Biggest One Day Outflow

SPDR Gold Trust (GLD) reported it experienced its biggest gold outflow of gold for one day since August 2011. Gold bullion held by the ETF fell by 20.77 tons on Wednesday when the market made a big correction.

Much of this was the result of the orchestrated move by the Federal Reserve to allow the appearance some of its members are questioning whether it should continue with its quantitative easing policy even if it doesn't reach its unemployment target.

A hedge fund rumor floated throughout the day that one had to sell a lot of gold to cover itself. That proved to be unfounded, although combined with the Fed minutes and uncertain economic outlook made for the perfect storm to drive the market and price of gold down.

After the outflow of gold, SPDR currently holds about 1,300 tons of gold. The highest amount it has held as in the last month of 2012, when the total reached 1,353 tons.

Most of this is benign, but it did plant the concern in some investor's heads that the bull gold run may be nearing an end; undoubtedly one of the reasons the Fed released the minutes.

SPDR Gold Shares closed Thursday at $152.62, gaining $1.18, or 0.78 percent.

Will Gold Jump Soon, or Do We Have to Wait a Little Longer?

The little games being played by the Federal Reserve in having comments alleging it may quit printing before it reaches its unemployment goal, is a hoax of course, as since the latest round of endless stimulus, nothing at all has improved in that regard, making it not only unlikely to happen, but points towards the Fed trying to manipulate the markets because it knows the response it would have to the minutes from the meeting they fed us.

With that in mind, it's possible in regard to the price movement of gold, that the usual move it has made over the last several years may not happen as quickly this year. Normally the weakest gold has been from 2010 through 2012 has been during the months of February to April, which by that time it has started to gather strength.

That could definitely happen again this year, but there has been so much money thrown into the economy, that it could result in it taking a little longer to transpire in 2013.

So while there are some that are pushing investors to put their money in industrial metals, it could pose some danger over the long haul, but could be a good move in the short term.

The problem is the sentiment could quickly turn over the next several months, and to get caught when it turns negative could cause some painful downturns. At this time we're already seeing some cracks in the economic dam after the robust beginning of the year, and it appears there is nothing that will change that any time soon.

No matter what the Fed says, there is no way in this weak economic climate it's going to stop making funny money.

What the minutes of the Fed probably are meant to do is try to shore up the dollar while helping consumers by trying to push down prices. The effect won't last for long.

The bottom line is gold prices could jump as they have over the last several years sometime in the next month or so, or it may be on pause for a little longer. Either way, the price of gold will go higher, as all the fundamentals remain in place for it to do so.

Wednesday, February 20, 2013

Gold: U.S. Audit of New York Fed isn't U.S. Gold

The alleged audit of gold in the Federal Reserve Bank of New York is a hoax, based upon the fact that the gold held in the Federal Reserve Bank of New York isn't held on behalf of the U.S., but mostly on behalf of foreign governments.

U.S. gold reserves are reportedly held at Fort Knox, which has never been audited. So the question becomes, why did the U.S. go through this meaningless exercise? The answer is to confuse the general public as to the real gold reserves held by the U.S. and to take pressure off of the Fed and the government.

Those critics of the Fed will now probably believe there has been a full audit of gold held by the U.S., when in fact only gold held in New York was audited, with the real alleged U.S. gold reserves held in Fort Knox receiving no attention; it isn't even allowed to be seen.

The other issue is this is an audit by the government. There should have been an independent auditing firm brought in.

Finally, the audit didn't include any claims that are made against the gold, which is another way of saying there wasn't a full audit done at all.

All of this speaks to the fact this was all done for the purpose of public consumption, which now will largely believe the gold reserves of the U.S. have been audited, while the real gold in New York was gold held by other countries.

Thursday, February 14, 2013

Paulson Holds Gold, Soros, Robertson Sell

Hedge fund managers were cautious in the latest quarter in reference to their gold investments, with John Paulson holding onto his gold investments, while George Soros sold some of his and Julian Robertson sold all of his fund's stake in Market Vectors Gold Miners ETF.

Paulson didn't sell any of Paulson & Co.'s 21.8 million shares in SPDR Gold Trust, of which the fund is the biggest shareholder in.

With the price of gold dropping, that obviously had a negative impact on the value of Paulson's stake in SPDR, as it fell from a value of $3.75 billion to $3.54 billion in the fourth quarter. During the fourth quarter spot gold prices dropped about $100 an ounce, or close to five percent.

Paulson also held onto stakes in major gold miners AngloGold Ashanti and Barrick Gold (ABX), among a number of others.

George Soros cut his position in SPDR Gold by over 50 percent from the 1.32 million he held in the third quarter to 600,000 shares in the fourth quarter.

Via Tiger Management, Julian Robertson held onto his stake in the Junior Gold Miners ETF.

All of this isn't entirely unexpected, as it was thought that gold could drop in the short term while rebounding as the year goes on.

This should be the case, with gold and other commodities jumping once the equities market begins to correct.

At this time gold is pressing down towards the $1,600 an ounce mark, with some believing it'll go below that in the not-too-distant future.

Thursday, February 7, 2013

Gold Drops on Draghi's Comments

For better or worse, what comes out of the mouth of European Central Bank (ECB) President Mario Draghi can move the markets, and that's the case Thursday with gold, the euro, and the U.S. dollar.

The euro zone has foolishly been kept in the back of minds of many investors, as the mainstream media has been extremely lax in its understanding and reporting on the condition of the region. Much of that is based upon the desire for social engineering by radicals and the Obama Administration, which is trying hard to take the focus off the dangerously weak global economy and on many irrelevant side issues, which are starting to look circus-like in nature in comparison to the challenges we economically face.

What drove most of the response from the market were the comments that there are more negative risks in Europe than there are positive ones. That resulted in the euro plummeting almost 1 percent against the U.S. dollar.

Even though Draghi said he thinks economic activity will be stronger in the latter part of 2013, that largely fell on deaf ears because it's far less likely because of the negative risks he sees.

Another comment from a different source, this time Federal Reserve official Jeremy Stein, concerning the fact that low interest rates could produce risks to financial stability, also weighed on gold and silver.

Gold futures for April delivery settled at $1,671.30 an ounce, dropping $7.50 an ounce.

Monday, February 4, 2013

Gold Will Rally in 2013 with or without Inflation says Analyst

Senior economist at Longview Economics, Harry Colvin, said gold will rally from $300 to $400 an ounce in 2013 whether inflation comes or not.

Colvin said this in an interview on CNBC:

Everyone is always bearish at the lows, that's the time to buy it, we're going to get a good rally this year I think.


When challenged on there not being much in the way of inflation by Bob Parker, senior advisor at Credit Suisse, Colvin responded with this:
We don't need inflation  for a gold price rally. We haven't had inflationary pressures in recent years. The only inflationary pressures we have is from QE pushing commodity prices up.

Gold's gone sideways for sixteen months, that's because the balance sheet in the Fed has gone sideways for the last sixteen months. The balance sheet is about to expand rapidly. And with that we're going to get a rally in the gold price, it's going to go hard this year and probably into the next.


If he's correct, we'll see gold approaching the $2,000 an ounce mark this year.

Wednesday, January 30, 2013

Gold in a World of Failing Government

The majority of people still don't really understand the importance of gold, as they look at it primarily as an investment rather than a hedge against disaster and a protector of wealth.

This is why even in the midst of a failing global economy investors aren't buying up some physical gold as part of their financial strategy.

In some parts of the world, especially Europe, there is the very real possibility of social upheaval as the unemployment rate continues to climb in nations such as Greece, Spain, Ireland and Portugal. Young people have been hit the hardest, and of course are most likely to look for a scapegoat if things begin to unravel and a catalysts launches protest across the region. For no other reason than that people should have some physical gold on hand to protect them against the potential fallout from such a scenario that is increasingly probable.

We shouldn't pay attention to the financial media, as overall, around the world, the media has to be considered almost another arm of the government, as it prints out or reports on TV and the Internet pretty much what world leaders want to be reported on, unless the situation is so obvious there is no way it can be hidden.

Just look at recent stories of a recovery and economic healing even though the economies around the world are a disaster. You would think there was some type of economic revival going on the way most of the mainstream media asserts increasing economic health.

Whether you believe it or not (and you should), everyone that has wealth to protect should have some gold on hand because once unrest arrives or inflation begins to soar, the price of gold and silver will skyrocket, and the cost will be prohibitive for many seeking to buy some gold at that time, if it is available at all.

The major reason to own gold isn't for the purpose of building wealth, but protecting it and having something of value in case a worst-case-scenario plays itself out.

It's not a matter of if, but only where and when, as well as how widely it'll spread, concerning the surety of social unrest of some type breaking out in the world beyond the Middle East. 

Those holding gold will be positioned to ride it out better than those that are looking for equities, bonds and cash to sustain them.

Think of gold first of all as a safe haven, and only secondarily as something that can be used to grow wealth. And for physical gold, it's real value is solely in protection and little else. That must be understood if you're going to position yourself for the inevitable breakdown approaching, even if it doesn't happen in the specific country you live in.

Don't think if people storm banks and governments that you'll be spared some of the pain as far as financially goes, as now that almost everything is connected, what happens in one part of the world, especially if it were Europe or important parts of Asia, that it won't affect everyone around the world. It will. Be prepared by holding physical gold.

Tuesday, January 15, 2013

Alamos (AGI) (ABG) (CLF) (GUY) (AUY) (PAAS) (SSRI) Ratings Changes

Alamos Gold (AGI), African Barrick Gold (ABG), Cliffs Natural Resources (CLF), Guyana Goldfields (GUY), Yamana Gold (AUY), Pan American Silver Corp (PAAS) and Silver Standard Resources (SSRI) had ratings on them changed by analysts.

Investec upgraded African Barrick Gold (ABG) to a "Buy" rating.

Deutsche Bank upgraded Cliffs Natural Resources (CLF) from a "Hold" rating to a "Buy" rating. They have a price target of $48.00 on the company.

RBC Capital upgraded Guyana Goldfields (GUY) from a "Sector Perform" rating to an "Outperform" rating. They have a price target of $6.00 on the company.

Davy downgraded Yamana Gold (AUY) from an "Outperform" rating to a "Neutral" rating.

Deutsche Bank downgraded Pan American Silver (PAAS) from a "Buy" rating to a "Hold" rating. They have a price target of $20.00 on the company.

Deutsche Bank downgraded Silver Standard Resources (SSRI) from a "Hold" rating to a "Sell" rating. They have a price target of $12.50 on the company.

German Central Bank Bringing Gold Back to Country

Germany had moved much of its gold to overseas storage facilities during the years of the cold war in fears the Soviet Union may invade the country and seize all its gold. The central bank of Germany, according to a German newspaper, is beginning to bring the gold back home.

According to the Daily Handelsblatt, the Bundesbank has plans to bring home all of the 450 tons it has stored in the Bank of France in Paris, and an undisclosed portion of the 1,500 tons it has stored in the Federal Reserve in New York.

A growing number of people have openly questioned the amount of gold still on hand in New York, as well as Fort Knox in Kentucky, which the repatriation of only a portion of the 1,500 tons of gold stored in New York for Germany makes one wonder why it isn't all being brought home under the loose money policies of central banks and governments around the world.

Germany will apparently bring about $200 billion in gold back to the country as valued at today's prices.

Overall, Germany has about 3,400 tons of gold in reserve.