Last update: 10:07 a.m. EST Feb. 20, 2009
NEW YORK (MarketWatch) — Gold futures topped the key $1,000 mark for the first time in nearly a year on Friday, as global financial and economic worries boosted the safe-haven appeal of the precious metal.
In recent action, gold for April delivery traded at $995.30 an ounce, up $19.50, or 2%, on the day. It earlier touched a high of $1,000.30.
Stocks fell to fresh bear-market lows in early action on Wall Street, with the Dow Jones Industrial Average ($INDU:
“There is a risk here of a panic sell-off in stock markets and the next leg down in the stock bear market looks imminent, as the ills of the global financial system virulently infect the global economy,” said Mark O’Byrne, executive director at Gold and Silver Investments Limited, in a research note.
“While gold has become overbought in the short term, its medium and long term fundamentals are as sound as ever,” he said.
Gold for February delivery, the front-month contract which registered very little volume, was last up $19.30, or 2%, at $995.40 an ounce on Globex. The February contract expires on Feb. 25. Earlier, February gold hit an intraday high of $999.50 an ounce.
On Thursday, the Dow industrials finished at 7,465.95, down 89.68 points to end at the weakest level since Oct. 9, 2002.
“The price slide of U.S. equities, with the Dow Jones Industrial Average falling to its lowest level since October 2002, should result in a continued positive mood of investors on gold,” said Eugen Weinberg, an analyst at Commerzbank.
Also on Globex Friday, March silver futures rose 46 cents, or 3.3%, to $14.39 an ounce, and April platinum futures gained $12.50, or 1%, to $1,089.00 an ounce.
March palladium futures gained 40 cents, while March copper futures fell 5 cents, or 3.5%, to $1.42 a pound. 
Polya Lesova is a New York-based reporter for MarketWatch.
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Gold was, at the time of writing, close to $1,000 again. It would seem this level is inevitable sooner rather than later and this time the yellow metal may spend rather more time in the four figure area.
Author: Lawrence Williams
Posted: Friday , 20 Feb 2009
LONDON –
As this article was commenced, the gold price was at $997 and seemingly inexorably headed towards breaching the US$1,000 level once again. Indeed by the time you read this it may well already have done so. April futures had already marginally gone through the $1,000 level.
The big question is, assuming spot gold does push through $1,000, will this be third time lucky for the gold bugs? Gold has breached $1,000 twice beforehand and on each occasion its climb into the four figure level was shortlived. This time it may well be a different situation with the likelihood that the price is poised to go higher still – and maintain its position above $1,000 for some little time to come.
Gold’s dollar high of $1,033.90 was achieved seemingly a very long eleven months ago but only remained at this exalted level for a few days , before crashing back. Indeed as stock markets began to collapse and then plunged in the second half of the year, much confidence was lost in gold as an ‘insurance policy’ as it fell back to the high $600s at one stage, but the realisation came about that the main reason for the price decline was that funds and institutions were having to liquidate any tradable assets to meet their commitments, and gold s nothing if not tradable at any price.
Gold soon recovered and started a steady run back up to current levels despite rising markets and a strong dollar – usually both signs of a likely weakness in the gold price. Indeed gold broke new price records in virtually all currencies other than the US dollar and now it looks highly likely to do so in terms of the now not-so-mighty greenback itself. Meanwhile stock markets in general have started to fall back again as the world realises that the various stimulus packages worked out by clutching-at-straw governments are unlikely to improve matters drastically and much of the world heads for depression – or something approaching one. There is no doubt we are already in recession in the West and depression is just the next, and infinitely more dangerous, phase of the current reality.
Gordon Brown has certainly not saved the world, and Barack Obama’s deification status is already tarnished after only a few days in office. It is becoming apparent that what the politicians and economists with clout feel could be remedies to what is facing us ahead are nothing but untried and unproven stopgaps which patently are not working – or not at least yet.
Meanwhile banks are digging themselves further and further into the mire with more collapses and nationalisations likely, countries will default on their commitments and matters will continue to deteriorate unless some financial miracle happens.
Indeed the only world saviour may yet be China, but at what cost? There are indications that the Chinese may have been in part responsible for the depth of the fall in commodity prices by halting industrial plants and infrastructure spending ahead of the Olympic Games and not resurrecting it afterwards as it could see an advantage in keeping prices down. But the Chinese did not foresee the collapse in the western financial system exacerbating the situation dramatically and the global downturn came back to bite the Chinese in the bum as its exports crashed and huge numbers of people were thrown out of work – a potential cause of serious unrest.
Beijing has since taken steps to resurrect its infrastructure programmes. Projects which were lying idle are at full swing again, but this is too little too late for much of the rest of the world. It may serve to keep China itself out of recession – and perhaps throw a lifeline to commodity producers to help them maintain output and support prices, but it’s definitely too late for much of the rest of the global economy which is in a frightening downward spiral.
But – with regards to securing commodity supplies and controlling future markets we are seeing China, with its huge funding capabilities, tieing up supplies, making major strategic investments in mining and metallurgical companies – and also in some other important western entities – and also providing loans to enable what they see as potential strategic partners stay in business. But again, as we saw in yesterday’s European Nickel announcement on finance, there are China-benefiting clauses in most of these ‘strategic’ agreements.
It was Alfred Lord Tennyson in one of his Arthurian epic poems who used the phrase “The old order changeth, yielding place to new” and that is extremely apposite phraseology for what is happening now. US economic imperialism has started to be replaced by a Chinese version.
But what has this to do with the gold price? Because the Chinese were perhaps too late in re-implementing their own stimulus, which could have mitigated the global downturn at an earlier stage and possibly eased its speed, depth and perception, the realisation that gold could actually be the best way of protecting one’s assets began to filter through to previous unbelievers in the yellow metal.
This has shown itself in the unprecedented inflow into metal purchases and ETF holdings which seem to be accelerating as the crisis deepens. Never mind the fall-off in Eastern investment grade jewellery demand and the big rise in gold scrap sales. ETFs are picking all this up (and global gold production is falling anyway). But no matter, investment strength is always driven perhaps more by perception than by fundamentals (at least in full-scale bull or bear markets) and the current thought seems to be gaining more and more ground that gold is about the only serious safe haven out there. The dollar may have proved to be a good bet of late, but everyone knows that pumping out money will ultimately be inflationary – and gold is traditionally a great inflation hedge too.
Indeed what gold is doing now is demonstrating that all western currencies are weak, rather perhaps than that gold fundamentals are strong, and the currencies are all devaluing against gold which is regaining its position as ultimate money – a position which believers say has never gone away!
So what of the performance of gold while this article was being written. Well the price pulled back a little from the brink of bursting up through the $1,000 level and is, at the time of writing, sitting at $994 again, but the overall upwards drive for the moment seems unstoppable as financial news elsewhere continues to deteriorate. Once gold goes through $1,000 this time it is not unreasonable to suggest it should perhaps stay there for a lot longer than last time – and maybe there is the prospect of a far higher peak. Gold metal, ETFs, stocks and funds could have a way to run yet.
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Have A Great Day! – Good Investing! – jschulmansr
Catch the New Bull! – Buy Gold Online – Get 1 gram free just for opening account!, no minimums – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com
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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor/s, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investing decisions and/or investments. – jschulmansr
Gold has a ‘true bull run’
This ‘bubble is still being blown up,’ analyst says
Jonathan Ratner, Financial Post Published: Thursday, February 19, 2009
Safe-haven demand and a lack of investment alternatives continue to help gold break from its traditional trading relationships, rising toward a new record, despite a strong U. S. dollar and weak crude oil prices.
In fact, analysts at Genuity Capital Markets noted that gold has been trading more than US$200 per ounce above its normal value relative to the greenback. The firm also pointed out that the opportunity cost of holding bullion has diminished, with treasury yields at record lows and demand fundamentals deteriorating in the broader commodity and equity markets.
“Gold’s run since autumn, 2008, has been a true bull run, rising despite the strength of the U. S. dollar and outperforming virtually every other commodity and currency class,” said Canaccord Adams analyst Steven Butler. He told clients that bullion has set recent new highs in euros, pounds and Canadian dollar currency terms, among others.
Canaccord raised its peak gold price by another US$150, to US$1,100, now that gold has broken through the firm’s previous target of US$950.
“It is fair enough that gold may be in a bubble, but we think the bubble is still being blown up,” Mr. Butler said.
While credit risk has fallen from its recent highs, he noted that it is as elevated as during gold’s first peak last March, which coincided with the collapse of Bear Stearns. However, gold is still below the US$1,003 high set about a year ago.
Meanwhile, inflation may not be registering yet in terms of near-term expectations, but Canaccord believes that it and a general devaluation of paper currencies will be the result of the concerted monetary and fiscal policies to reflate the global economy.
Gold is known as a measure of real assets value because of its ability to preserve value during inflationary times. However, during disinflationary times like these, the current global growth and demand landscape also supports the notion of too many dollars chasing too few gold ounces, according to Ashraf Laidi, chief market strategist at CMC Markets in London.
He noted that the equity/ gold ratio has fallen about 85% from its 1999 peak, which occurred when gold stood at 20-year lows and equities reached their highs at the top of the dot-com bubble. Just as the equity/gold ratio stands at 18-year lows, the ratio of total financial assets to physical gold is near the low end of its historical range.
Mr. Ashraf also pointed out that the world’s available gold stock stands at only 5% to 6% of total global stock and bond market valuation.
Sustained investor interest in gold throughout 2008 helped push U. S. dollar demand for bullion to US$102-billion, a 29% annual increase, according to the World Gold Council. Its Gold Demand Trends report said identifiable investment demand for gold, which incorporates exchange-traded funds (ETFs), bars and coins, rose 64% last year. This is equivalent to an additional inflow of US$15-billion.
Genuity noted that holdings of the largest gold ETF, SPDR Gold Trust (GLD/NYSE), have increased by 26% since the beginning of 2009. So while bullion held in depositories on behalf of gold ETFs continues to grow from record levels, price volatility is an important consequence on both the upside and downside.
The ease of investing in gold via ETFs is matched by the ease of disinvestment, said Jeffrey Nichols, managing director of American Precious Metals Advisors.
“Just as quickly as gold-ETF depository holdings have grown, so might they shrink when sentiment changes,” he told clients.
This has already contributed to short-term volatility and may do the same for the long term, given that gold’s ultimate peak could be much higher than many had expected.
jratner@nationalpost.com
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Gold stocks are flavour of the month again amongst major analysts – MineWeb
Source: MineWeb.com
The recent strong performance of the gold price vis a vis weak stock markets in general is again making gold stocks attractive to institutional and individual investors.
Author: Steve James and Euan Rocha – Analysis
Posted: Friday , 20 Feb 2009
NEW YORK (Reuters) –
The prospects for equity markets and numerous sector indexes have dimmed during the global recession, but gold and the companies that mine it have not lost their luster.
With gold prices nudging their all-time high and energy and other costs falling, mining company profit margins are widening, making their shares attractive, analysts said on Thursday.
“Within the next year, we will see the gold stocks sell at significant premiums to traditional earnings measures or net asset value measures,” said Robert Lutts, chief investment officer of Cabot Money Management in Salem, Massachusetts, which manages $400 million of client assets.
“I have owned Barrick Gold for one reason only — because it has the biggest pile of gold in the ground,” Lutts said of the world’s biggest gold producer, Canada’s Barrick Gold (ABX.N Quote)(ABX.TO: Quote).
“New interest continues in this increasingly attractive sector,” JPMorgan analyst John Bridges wrote in a note. “We feel all funds should have a core long position in the metal or the equities.”
Moreover, analysts expect acquisitions in the gold sector to accelerate, as larger players pounce on their cash-strapped smaller colleagues, in a bid to grow their asset base.
“I believe in investing in both bullion and stocks,” said Jeffrey Nichols, managing director of American Precious Metals Advisors. “Large companies with strong cash positions are in a good position to take advantage” of a higher gold price.
Lower fuel, raw materials and equipment costs, combined with weaker Canadian and Australian dollars and a flight to gold as a safe haven, have spurred gold miners’ stocks recently.
The gold and silver index , which comprises major U.S. and Canadian gold mining stocks, has more than doubled over the last four months. Spot gold was selling for $978.80 per ounce in New York on Thursday, closing in on its all-time high of $1,030.80 from last March 17.
“At these levels, we’d encourage new investors to begin by buying a little Newmont,” Bridges wrote, after Newmont Mining Corp (NEM.N: Quote), the world’s No. 2 gold producer, reported better- than-expected fourth quarter results.
Since most major gold players no longer hedge production, they stand to gain from the recent run-up in gold prices.
Nichols touts Barrick and its Canadian peer, Goldcorp Inc (G.TO: Quote). “In general, I like Barrick and Goldcorp because they are well managed, with management you can trust, providing a good return on investment.”
Credit Suisse analyst David Gagliano saw Newmont as an attractive investment after its solid fourth-quarter results.
“Newmont is entering the sweet spot,” he wrote in a research note noting higher production, lower costs and lower capital expenditures due to the proposed start-up of Boddington, which will be Australia’s biggest gold mine.
“Add to this the favorable gold backdrop and declining raw material costs, and we believe Newmont is set up nicely for a strong 2009,” wrote Gagliano.
Peter Spina, who operates Goldseek.com, a website for investors, said now is the time to invest in gold miners.
“I think mining companies are looking a lot better,” he said. “With costs down, the profit margins are expanding and people are saying: ‘Where should I invest in this market?’ The gold mining companies are the place to be.”
Spina noted that capital markets appear to be opening up.
“We are now seeing more competition for capital where three months ago it was impossible,” he added.
Spina likes the junior players, such as Denver-based Gold Resource Corp (GORO.OB: Quote), which is developing projects in Mexico.
Genuity analyst Tony Lesiak expects larger gold players to swoop in on some of the smaller miners.
“Merger and acquisition activity in the gold sector could be poised to accelerate,” Lesiak said.
He cited the improved outlook for precious metals, the disconnect between larger companies and cash-starved juniors, and a paucity of internally available quality growth projects.
Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier, favored unhedged miners.
“Most producers have an unhedged book, but rising production, such as at Goldcorp and Kinross (Gold Corp (KGC.N: Quote)(K.TO: Quote,) are what come to mind,” he said.
(Reporting by Steve James, Euan Rocha and Frank Tang in New York and Cameron French in Toronto; Editing by Andre Grenon)
© Thomson Reuters 2008. All rights reserved.
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In a previous post I gave you a partial list of Tier 1, Tier 2, and Tier 3 mining companies and their websites. Then in another post I gave you questions you should ask when you are doing your due diligence before making any investment in the stocks of these companies and those mentioned in today’s post. Clicks on the links to view.- jschulmansr
Catch the New Bull! – Buy Gold Online – Get 1 gram free just for opening account!, no minimums – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com
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Gold Sector: Mergers and Acquisitions Set to Soar – Seeking Alpha
Source: FP Trading Desk
The gold sector could see a flurry of takeover activity in the coming months, according to Genuity Capital Markets analysts Tony Lesiak, Christine Healy and Michael Gray. With that backdrop, they have broken down a number of potential targets.
They believe that 2009 could be a big year for gold M&A for a number of reasons: rising bullion prices, the growing valuation disconnect between juniors and seniors, recent financings by the seniors, and a shortage of internal growth projects for the seniors.
So who could get bought? The analysts ranked 10 junior gold producers and 20 junior development companies on the unusual measure of estimated total acquisition cost per attributable, recoverable ounce.
On that basis, the top three producer targets are Allied Nevada Gold Corp., Mineral Deposits Ltd., and Kirkland Lake Gold Inc. (KGLIF.PK), while the top junior development targets are Andean Resources Ltd. (ANDPF.PK), Colossus Minerals Inc. (CSIMF.PK), Comaplex Minerals Corp. (CXMLF.PK), Gabriel Resources Ltd. (GBRRF.PK), and Osisko Mining Corp. (OSKFF.PK).
“We recommend a basket approach to investing in any of these names given the speculative and single-asset nature of the companies,” they wrote in a note to clients.
With the exception of Gabriel, these are all companies that are often considered takeover targets. Gabriel has problems with NGO opposition in Europe, but the analysts figure that if the company can ever get government approval for its Rosia Montana project, it would be a logical target for Newmont Mining Corp. (NEM).
The most likely North American buyers in this market include Newmont, Barrick Gold Corp. (ABX), Kinross Gold Corp. (KGC), Eldorado Gold Corp. (EGO), and Alamos Gold Inc. (AGIGF.PK), they wrote.
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Decoding What Gold is Telling Us – Seeking Alpha
By: Simit Patel of Informed Trades.com
Well, gold bugs around the world have been having a good chuckle of late, as the market is re-affirming the often eccentric and practically religious views of gold bugs: gold is up over 11% for the year in US dollars, and up over 4% over just the past five trading days. Which begs the question: why? There are a few possible answers to this question:
1. Deflation. This crisis is global, and everyone is flying to safe stores of wealth. Over the big picture of human history, gold has served as the best store of wealth — and thus gold is rising. In many ways this is the classic “gold is money” argument, one typically championed by Austrian economists. Robert Blumen has offered an excellent explanation of this argument.
2. Inflation. Gold is typically a hedge against inflation concerns, and as the US federal government continues to aggressively “stimulate” the economy, the rally in gold may be a reflection of increased concerns regarding inflation.
So which one is it?
In my opinion, both. With that said, I view inflation as the larger concern, as I have said many times before. If the environment were truly deflationary, Treasury bonds would be the true recipients of flight to quality, as well as dollar holdings in FDIC insured banks. Instead, 20+ year Treasury bonds have fallen by more than 13% thus far (as measured by TLT). Negative correlation between TLT and precious metals suggests inflation, not deflation. The chart below illustrates.
click to enlarge
Deflationists will point to the fact that the US dollar may be strengthening relative to other fiat currencies — although this is not necessarily a reflection of deflation, as it could simply be interpreted as weakness of all global currencies, all of which are falling against gold. More relevant may be the rise in PPI and energy prices in January of 2009. While one month alone does not provide sufficient evidence for a substantive reversal in macroeconomic trends, it is not consistent with deflation, and may suggest that the Fed’s inflationary actions in the second half of 2008 may be kicking in.
Conclusions for Trading
The recent activity in the market has led me to make the following revisions:
1. The forex market is increasingly a trader’s environment, perhaps even a daytrader’s environment.
2. Gold and silver may retrace, perhaps even by several hundred dollars, though I would view it as an opportunity to buy on dips. The global economy is getting worse and conditions are being aggravated by the actions of central bankers. As a result, the fundamental case for gold and silver will get stronger.
3. Counterparty risk is rising — this strengthens the argument for increasing the physical delivery portion of one’s precious metals portfolio.
4. Because of inflation concerns, my bias is against short positions in all asset classes. If I were a trader of stocks or commodities, I might look into shorting positions relative to a broader index (i.e. short a particular stock while going long the sector ETF, under the rationale that the stock will do worse than the entire sector).
5. Oil’s behavior has been quite peculiar; I’ve yet to find a convincing explanation for why it’s moving the way it is. As it escapes my fundamental analysis, and as I find it less appealing than currencies from a technical analysis perspective, I’ll stay away from oil.
6. As gold becomes too expensive for many, silver will grow in appeal. And as silver fell more than gold during the second half of 2008, it may be set for a larger rally.
Disclosure: Long gold and silver.
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Short Stories: Anglo American, Rio Tinto, Xstrata, Alcoa – Seeking Alpha
By: Jessica Johnson of Short Stories
Anglo American (AAUK), the mining and natural resource company, presents its results today and according to the Financial Times, its CEO, Cynthia Carroll, may face some tough questions. Falling platinum, diamond and copper prices have taken their toll on Anglo’s profit margins, and analysts will be looking for signs of progress from Ms. Carroll’s cost-cutting drive.
As you can see from this graph of Anglo’s shares outstanding on loan (%SOOL), there has been a recent increase in the short position of the stock, which, over the last ten weeks, is up from 1% to 2.2%. However, this is still a small percentage, compared to Xstrata (XSRAF.PK) (for example), which has just under 10% of its SOOL. Xstrata and Anglo’s other rival Rio Tinto [RIO/LSE] (RTP) have recently used a rights issue and a cash injection from China to shore up their balance sheets, whereas Anglo has manageable debt levels. RIO currently has 1.5% SOOL, which is up from 0.7% in January and down from 2.7% in December.
Anglo American:
click to enlarge
Xstrata:
click to enlarge
Rio Tinto (UK Listing)
click to enlarge
The S&P 500-listed stock Alcoa Inc. (AA), which produces aluminum (partly through the mining industry), has seen a rise in its %SOOL. It is up from 2% in October, but down from 8% ten days ago and currently stands at to 6%. This is in line with a fall in its share price, which over the last six months has fallen from $30 to $7. A particularly severe fall in price occurred between September and October when the stock fell from $30 to $10. Since that time, short investors have continued to take profits as the price ebbs around the $10 mark.
click to enlarge
Disclosure: None
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My Note: With the exception of Alcoa, I think some of these Short traders are going to lose their shirts especially as Gold continues it’s Bull Stampede!- jschulmansr
Catch the New Bull! – Buy Gold Online – Get 1 gram free just for opening account!, no minimums – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com
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Third time lucky for gold – the ultimate money? – MineWeb
Dow Jones Industrial Average ![]()
S&P 500 Index![]()
$INDU 7,336.68, -129.27, -1.7%) off more than 100 points, or 1.5%, at 7,357, and the broad S&P 500 index ($SPX: $SPX 764.48, -14.46, -1.9%) down 10 points, or 1.4%, at 768.
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Adam Hewison
“As we saw the gold price attack the $1,000 level for the second time, but with far more force, institutional investment demand continued to drive the gold price, forcing the closure of ‘short’ positions [selling when the seller doesn’t have the gold] on COMEX and stunting both jewelry and Indian demand, where higher prices have at least temporarily sidelined these buyers.
“
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