Monday 19th November 2018

Resource Clips

The yellow peril

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“The other factor to watch is whether some of the major short positions in gold and silver on the COMEX now get unwound at the lower prices,” Williams pointed out. “If this happens gold and silver could both be set for a major upturn, regardless of China, as the big banks and hedge funds start to look for major profits on the upside.”

The previous day Williams noted that gold and silver prices are “currently being set by what is happening in the West—and in particular in the U.S., where there appears to be ever increasing evidence of gold price manipulation by major financial institutions, perhaps Fed-supported… But this price manipulation seems to be completely ignoring Eastern demand, and particularly that from China.”

Gold commentators on paper vs physical, West vs East, costs vs revenue

While the two largest ETFs have fallen sharply, Brien Lundin points out that their gold losses this year come to less than half of Chinese physical purchases for the same period.

Officially, Indian purchases have fallen since the country raised its import duty on gold from 5% to 8%. But Williams suspects an underground movement is reviving gold-smuggling routes. And he emphasized that not just China and India but “virtually the whole of Southeast Asia is predisposed towards holding gold as long-term wealth protection.”

Williams also referred to economist Jeffrey Nichols, who on June 18 wrote that gold bears “have a fairly provincial view and a limited understanding of gold’s increasingly bullish long-term fundamentals. By ‘provincial’ I mean they are ignoring more than half the world—the half that loves gold and will accumulate more. They seem to think not much is important to the future of gold outside the United States and Europe.”

Writing in the Financial Post on June 20, Peter Koven addressed the impact on producers. “When bullion plunged 13% in two days back in April, miners evaluated contingency plans they would [adopt] if prices continued to weaken. Those included major production cuts, dividend cuts, layoffs and mine closures.”

Although gold remains high by historic standards, Koven stated rising costs place enormous pressure on some companies. But there is hope. “Numerous companies have reported that labour and equipment are easier to access today than they have been in years. Miners are also raising the cutoff grade on their deposits, which reduces costs while shrinking the mine life.”

He quoted Dynamic Funds portfolio manager Robert Cohen, who said both energy and chemical prices have also dropped. “Costs go up with the gold price and down with the gold price,” he told the FP.

Following a slight recovery on June 21, Kitco reported a survey of 19 reps from bullion dealers, investment banks, futures traders and technical-chart analysts who offered their prognostications for the following week: “Eleven see prices down, while four see prices up and four look for sideways consolidation.”

Whether pushing gold up, down or sideways, it seems any number of events might move—or maybe be used as an excuse to manipulate—the malleable metal. On June 21 Sharps Pixley director Austin Kiddle related the following week’s agenda: “Apart from watching the physical demand response, we will also watch Germany’s June IFO business climate index on 24 June, the June U.S. consumer confidence index and the May U.S. new home sales on 25 June as well as the June Germany unemployment change, the May CPI and the industrial production in Japan on 27 June.”

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