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Soya bean may go down. Base metals will have some demand. Oil may go down further. We have to analyse different commodities separately one by one now.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions
 
November 11, 2013 <<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Unlike Dollars, Or Shares In Internet Companies, Metals Cannot Simply Be Created With A Keyboard Stroke
>>> Rob Davies <<<

Some academics proclaim that you never know if assets are overpriced (i.e. in a bubble), until after the bubble has burst.

Active practitioners would argue that you can make a pretty fair assessment in real time.

Anyone watching the IPO of Twitter, when the stock rose 73 per cent on its first day, has to believe that bubble conditions now exist.

There were extenuating circumstances of course.

Clearly, the issuers did not want a repeat of the Facebook flop a year ago so it was priced to go, even though Twitter does not make a profit.

Another sign that monetary conditions are too slack was the surprise jump of 204,000 in US payrolls announced on Friday, which was way in excess of what was expected.

Given these developments it was unsurprising that capital markets started to price in the start of an end to monetary incontinence.

US Treasuries sold off 4.3 per cent, taking the yield up to 2.7 per cent.

Whether the US Federal Reserve will actually announce a reduction of the cash printing programme is another matter. But that is now what the market expects.

What was not built in was the surprise cut in European interest rates last week. The reduction of 0.25 per cent to 0.25 per cent is an indication of how dire the economic situation in Europe really is.

A rating cut by S & P on French debt only served as another kick at the victim.

The problem for asset allocators is that if they think US bonds are overpriced as recovery gets underway, US equities are vulnerable to a withdrawal of monetary stimulus, and Europe just looks turgid.

So, where do you place your money?

Even gold failed to react positively to all these flashing warnings. Is it telling us that deflation is a problem in Europe and would be in the US if the printing presses were turned off?

Many authorities are desperate to create inflation but, apart from Internet valuations, it seems hard to generate

Like gold, base metals did not participate in this euphoria of capital values.

The LME index drifted off 1.5 per cent over the week despite reports that China is expected to grow 7.4 per cent in 2014, but the US only 2.6 per cent.

It might be thought that real assets to power Chinese growth might be more in demand than ethereal loss-making internet businesses.

But no. Scarcity is a powerful mechanism for pushing up prices.

Unfortunately that argument applies less to base metals now. Barclays expects copper production to increase five per cent next year and that will help generate a surplus of 193,000 tonnes of the metal in 2014.

That said, the signs of a bubble in US capital values cannot be ignored. Eventually, at some point, market participants and/or the authorities will recognise this and will take action.

Quite how it will pan out, let alone when, is anyone’s guess. When it does though the impact on all assets, including metals, will be profound.

The difference with metals is that, unlike shares in internet companies, or US dollars, they cannot simply be created by a few strokes of a keyboard.

Source >>>>>>>>> www.minesite.com
*****
 
November 16, 2013

That Was The Week That Was ... In Australia
>>> Our Man in Oz <<<


Minews. Good morning Australia. You seem to have had a busy week, but with very little movement on your market.

Oz. There were certainly plenty of news events which moved individual stocks, though collectively the good and the bad cancelled each other out. The end result was virtually no movement in the major indices, apart from the gold index which slipped 1.7 per cent lower.

The metals and mining index which we track each week was up nine points, which represents a gain of less than half-a-percentage point, while the all ordinaries was up two points, which is less than one-tenth of a percentage point.

Minews. Hard to get much flatter than that, which means we should stick with Plan A and start by looking at how news flow affected specific stocks.

Oz. One of the big movers last week was one of our old favourites, Uranex (UNX), the uranium and graphite explorer. It rocketed up by A4.1 cents (55 per cent) after reporting encouraging graphite results from drilling on its Nachu project in south-east Tanzania. The price rise meant that Uranex earned a prized “speeding” inquiry from market regulators.
...

Source >>> www.minesite.com
*****
 
>>>>> November 18, 2013

China’s Demographic Time Bomb: Will It Get Old Before It Gets Rich?
>>>>> By Rob Davies

Once again, China was in the news last week.

This time because it is starting to change its demographic policy. While heavily caveated, and already breached in many ways, China is slowly moving away from its “one child policy”.

The need to do so is driven by simple economics.

The country’s working age population - those between the ages of 15 and 64 - was expected to peak in 2015 at 1.01 billion.

In fact it peaked last year and, unless action is taken, this huge motor of growth from increasing expenditure will switch to become a drag as pensioners cease being productive.

Even so, the dramatic changes announced are only expected to increase the number of births by five to ten per cent, or 1 to 2 million.

That won’t be enough to make a big difference to the percentage aged over 60 in the near future, currently 13.3 per cent.

There is also the crucial factor of gender. The one child policy has favoured boys, giving China 20 per cent more men than women.

That suggests that not everyone that wants a child will be able to, thus exacerbating the increase in the average age.

What worries demographers is that China will get old before it gets rich.

Some might wonder at the relevance of demography to commodities. But it is crucial.

China accounts for 40 per cent of world copper demand, and 40 per cent of that goes into its power sector.

A growing population might want electricity, but only a rich population can afford it and the white goods that use it.

So the news that investment in power plants fell 20 per cent to RMB 27.2 billion, and that investment in grid infrastructure fell 14 per cent to RMB 41.1 billion is not encouraging for the metal so vital to generating and distributing it.

Whether that accounted for the 2.2 per cent fall in the price of copper last week to US$6,967 a tonne is harder to say.

In truth, short term factors, like a stronger dollar, are probably more important.

Overall, the LME index decreased 1.5 per cent to 3,048 over the week as currency movements dominated capital markets.

Abenomics continues to weaken the yen, which fell one per cent. Anaemic growth in Europe - 0.1 per cent in the third quarter - favoured the dollar too.

In other parts of the world, emerging market currencies like the Brazilian real and the Turkish lira continue to suffer on fears that a tightening US policy will attract money back to the US.

Even that most stalwart of alternatives to the greenback, gold, has not been immune. Around 118.7 tonnes has been removed from ETFs in recent weeks.

Another commodity that usually has a negative correlation with the dollar is oil.

It has now recorded its sixth week of decline, the longest stretch in 15 years. At US$94 a barrel WTI is about US$12 a barrel cheaper than Brent and a stark demonstration of the benefits fracking has brought the world and the US economy in particular.

Lower energy prices will probably do more to help economic growth than any amount of beggar-thy-neighbour currency devaluations, because it helps everyone equally.

If nothing else it will at least help courting couples in China get together, and that has to be a good thing.

Source >>>>> www.minesite.com
*****
 
November 19, 2013

The Countervailing Forces Tugging At Gold
>>> By Alastair Ford <<<


What’s up with gold?

Lately, the pattern in the market has been that heavy selling from ETFs has been effectively countered by physical buyers sensing a bargain, and an uneasy peace has settled.

Gold has been trading at within shouting distance of US$1,300 for a good few weeks now.

But what could break this pattern?

Simple. ETFs could stop selling. Physical buyers could stop buying.

Or the price could go up or down in response to some other extraneous event – like startling news on quantitative easing, a nuclear-related escalation of tensions in the Middle East, or more bad economic or structural news from the Eurozone.

The market knows any of those - or even a combination – is possible. But when and how they come are the great imponderables.

Suppose the ETFs stop selling. Theoretically that would mean the price ought to rise as the buyers should then outnumber the sellers.

But it might also mean that all those physical buyers out of China and India no longer get a sense that bargains are on offer.

So, higher prices could actually lead to a curtailing of demand, and hence a paradoxical falling back of prices. To chess players, that’s known as a stalemate.

But it rarely works like that, for the simple reason that the extraneous events usually tip the balance one way or another.

At the moment the uneasy calm prevails ahead of Janet Yelland’s appointment. She told Congress the other day that she’s minded to continue with the quantitative easing programme currently underway under the stewardship of Fed incumbent Ben Bernanke.

That news was enough to put US$25 on to the gold price, but lo and behold, it still closed on the day at US$1,285 per ounce, comfortably close to that US$1,300 point about which the price has been dancing since September.

Janet Yelland’s pronouncements on easing are not enough to support a significant upward leg, precisely because the market has already priced in some further easing, but also because it’s now pricing in eventual tapering too.

But hang on a minute. All this talk of easing and tapering relates to the wrong commodity, surely? It’s dollars that will be in greater or lesser supply, not gold.

Better perhaps to take the likelihood of tapering as read, and get back to the commodity in question: gold.

The supply-demand situation for gold itself, as opposed to gold as measured against the US dollar supply, is interesting.

Talk is that more gold goes to China than the official figures suggest. The reasons for this aren’t surprising. The big one is that the Chinese government is building up reserves, and it has a long way to go yet before it can match the amounts of bullion held by the US government in its own vaults.

But perhaps even more important is the retail interest. Why does your average Chinese person want gold? Because in China gold is about as far from a barbarous relic as it’s possible to get.

Holding a currency that’s controlled and manipulated by an unaccountable, unelected communist government is never going to going to appeal to hard-working people looking to store wealth.

Currency manipulation is like any other vice: it’s as old as time, and those who are already corrupt get the most out of it. The general populace in China know this as well as anyone.

But gold is gold. It can’t be made worthless at the stroke of a pen or a keyboard. And as long as the communists remain in power in China, gold will remain the ultimate hedge against their currency.

Meanwhile, China is continuing to get richer. That means exponentially increasing demand for gold.

In support of this view, broker SP Angel reported today that official figures from China suggest that 826 tonnes was imported in to China in the first nine months of this year. But that’s not the whole story.

“We suspect unofficial imports into China, eg smuggled and unreported gold add significantly to the official figure indicating that Chinese demand is far greater than mainstream estimates suggest”, continued the broker.

On this line of thinking, demand may well hold up even if ETF selling does dry up and the price goes higher.

That would bode well for the raft of gold equities that are now suffering the iniquities of multi-year lows. Because if demand holds up, that will combine with the recent drought in the capital markets to put a squeeze on supply.

And that could send the price higher still. And if Janet Yelland’s extension of QE and likely subsequent tapering is already priced in, the drag on that upward momentum is likely to be minimal.

At 864.6 tonnes, SPDR’s gold holdings are at their lowest since February 2009, when the price was at less than US$1,000 an ounce. The difference between that price and the current US$1,275 is interesting and open to interpretation.

But the obvious one would be that over the last five years physical demand has increased significantly to the point where it will now support a price more than 25 per cent higher when investment demand is constant.

What investors will want to know now is: if investment demand continues to fall, will that percentage increase? Or alternatively, there a possibility that that physical demand may actually pull the ETFs back into the market.

Source >>> www.minesite.com
*****
 
>>>>>>>>>>>>>>>>>> November 23, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz


Minews. Good morning Australia. Another flat week but one with flashes of interest for investors.

Oz. Much like we’ve seen over the past month or so with gold stocks once again singled out for a hammering, much like the England batsmen in the first test at the Gabba.

Minews. I wondered how long it would take for you to mention cricket.

Oz. Sorry, but after the drubbing we took in the last few Ashes series it was a rare pleasure to see Australia on top.

Minews. At least Stuart Broad was on form. But moving quickly on, while secretly praying for rain in Brisbane, we’ll follow the new formula of an early focus on stocks that performed well, or moved against the tide.

Oz. There were a few noteworthy price moves in a market which lacked a firm trend, confirming what we said last week about the early onset of Christmas torpor.

Overall, the Australian market slipped 1.2 per cent lower, as measured by both the all ordinaries and metals and mining index. The gold index was the big loser, dropping an alarming 10.6 per cent and closing below the 2,000 point mark for the first time in many years.

Minews. Gold is certainly the sick man of mining as the financial world heads into a period of change, likely to be caused by an end to the era of easy money. Let’s hear about the exceptional movers.

Oz. Some of the stocks which caught the eye last week have never been mentioned here before and, I suspect, never mentioned anywhere.

Stonewall Resources (SWJ), a company which only puts its assets in the appendix of its presentation, announced the sale of a South African project to a Chinese investor which lifted its share price by A8 cents (66 per cent) to A20 cents.

Archer Exploration (AXE) put graphite back in the news with a report that said graphene, the material which has excited science over the past few years, could be easily extracted from its Campoona graphite deposit in South Australia. That news boosted the stock by A5.5 cents (35 per cent) to A21 cents.

Volta Mining (VTM), a new player in the iron ore sector and a company with close ties to local Aboriginal groups, said it was acquiring a well-placed tenement near BHP Billiton’s Mt Newman mine. On the market, Volta more than doubled with a rise of A4 cents (133 per cent) to A7 cents.

Surprisingly, a number of small gold exploration stocks defied the downward trend in the gold price. Northern Mining (NMI), which is exploring near Kalgoorlie, rose by A1.1 cents (73 per cent) to A2.6 cents, earning a speeding inquiry from corporate regulators.

And Crater (CGN) reported rich gold assays from drilling in Papua New Guinea, but saw an initial share-price rush up to A13 cents peter out as the gold price fell, closing down A0.2 of a cent at A8.4 cents.

The other significant event on the Australian market was the long list of stocks which are now trading at 12-month share price lows. On Friday, companies such as Newcrest (NCM), Ampella (AMX), Kingsgate (KCN), Perseus (PRU), Resolute (RSG), St Barbara (SBM), Tanami (TAM) and Troy (TRY) hit new lows, and in some cases closed at their low point.

Minews. Rather obviously, all are gold stocks. Let’s move to the calling of the card and get gold out of the way early before moving across the board.

Oz. As you would expect, especially given the list of gold stocks hitting 12-month share price lows, there isn’t much good news from that sector.

Among the few gold companies that rose was Reed Resources (RDR), which crept up by two-tenths of a cent to A3.1 cents as it repairs its damaged business base.

Intrepid (IAU), quite remarkably, added A1 cent to A28 cents despite being in gold and in Indonesia during a diplomatic spat over telephone bugging, a topic you’re familiar with in the U.K.

Most other moves were down, some substantially. Troy lost A16 cents to close at A$1.12 after setting a fresh low of A$1.10. Newcrest fell by A$1.10 to close at A$8.50 after setting its new low of A$8.49. Kingsgate dropped by A19 cents to close at a new low of A$1.20.

Perseus was down A10 cents to close at A29 cents with its new low set at A28.5 cents, and Resolute closed at A51 cents, down A7.5 cents, but up a few cents from its new low of A48.7 cents.

Minews. I think we get the gold story, let’s shuffle across to the base metals next, please.
...

Source >>>>>>>>>>>>>> www.minesite.com
*****
 
>>>>> November 25, 2013

A False Warning Signal
By Rob Davies

Gold isn’t really a commodity; it’s more of a currency. It occupies a strange diaphanous world between the two asset classes. Nevertheless, many regard it as a lead indicator for commodities in general and the fact that it seems to be heading for its first annual loss in 13 years has persuaded some momentum driven investors that commodities are played out. A further decline of 3.2 per cent last week in the gold price to US$1,246 an ounce was not matched by base metals. They edged up 0.5 per cent to take the LME index to 3,063. Indeed, the weakness in gold reflects rising confidence in the US economy and, by extension, the dollar. A stronger US economy is good news for raw materials.

There is one exception to that which, happily, is good for the mining sector. Over most of the last twenty three years the price of oil in the US, usually referenced to the WTI benchmark has traded at the same price as oil in Europe normally published as Brent. Since early 2011 the gap between the two has gradually widened to such an extent that now American oil is about US$13 a barrel cheaper. The reason of course is the widespread use of fracking in the New World that has opened up lots of new fields and supply. It promises to make the US energy independent in the future. This price disparity does create all sorts of issues in the oil, and especially in the refining industry, but it has two important implications for the mining sector.

Firstly, given the weight of oil in most commodity indices, it has the effect of depressing these benchmarks and encourages investors to reduce their allocation to all commodities. This was a major factor in the underperformance of mining stocks earlier in the year even though metal prices did not decline that much.

The second effect of lower oil prices is to reduce operating cost across large chunks of the economy, particularly in mining and also for consumers. While the reduction in fuel costs won’t transform the mining industry, at least not on the scale seen so far, it will help to ameliorate the impact of declining revenues. More importantly it will help to boost consumer spending across the world and that can only boost economic growth and hence demand for metals.

So far few economists seem to have factored in lower oil prices into their growth forecasts. It is of course conceivable that it won’t actually happen. But if it does though the impact could be quite significant and act to compensate for the removal of the US$85 billion injection from the US Federal Reserve every month.

Lower oil prices won’t be so warmly welcomed in places like the Middle East, Russia or Venezuela, which is probably no bad thing. It will also continue to have a depressing impact on commodity indices. While that may encourage some capital allocation away from commodities to equities mining stocks, being pro-growth, may not be so badly affected.

Whether all these disparate threads are fully captured by the changes in the gold price is anyone’s guess. But if gold is measure of “economic worry” then a falling price is no bad thing for everyone else.

Source >>>>> www.minesite.com
*************************
 
>>> November 30, 2013

That Was The Week That Was... In Australia

>>> By Our Man in Oz

...

Minews. All interesting, now for the sectors, perhaps starting with gold to see if any other stocks enjoyed a similar spot of counter-cyclical investing which seems to have benefited Oceana.

Oz. There were a handful of gold stocks to gain ground but the trend, as you might expect, was down.

Going against the tide were stocks that included: Kingsrose (KRM) up A2 cents to A39 cents. PVI (PVM), up A3.5 cents to A30 cents. Predictive Discovery (PDI), up A0.3 of a cent to A2 cents. Azumah (AZM), up half-a-cent to A2.9 cents. Norton (NGF), also up half-a-cent to A13 cents, and Lachlan Star (LSA), which joined the half-cent rising brigade to close at A20 cents.

Gold stocks to suffer a fresh bout of selling included: Troy (TRY), down A12.5 cents to A99.5 cents. Papillon (PIR), down A14.5 cents to A94.5 cents. Silver Lake (SLR), down A9.5 cents to A46.5 cents. Kingsgate (KCN), down A16 cents to A$1.04. Orbis (OBS), down A7 cents to A25 cents. Scotgold (SGZ), down half-a-cent to A1.3 cents, and Northern Star (NST), down A1 cent to A68 cents.
...

Source >>> www.minesite.com
 
>>>>> December 01, 2013

Unless The Developed World Gets Its Act Together, It Risks Being Eclipsed By Newcomers
>>>>> By Rob Davies


The claim that the UK is currently the fastest growing developed economy might be good news for some politicians, but it probably says more about the weakness of the peer group than the vigour of Albion.

Third quarter growth of 0.8 per cent is not bad after so many years of poor performance.

The trouble is that isn’t actually that high and it just reminds us how difficult life is in the rest of the world.

The UK, and London in particular, has always been a bit of special case.

London’s property market seems to be in a world of its own. It has been described as less an asset class and more a money-laundering operation.

Flight capital from all over the world has decided that London property is about the safest asset class there is, to the detriment of the gold price which languishes at US$1,254 an ounce and is set for its first annual decline in 13 years.

Anaemic growth in the developed world and over-expansion of capacity is continuing to depress the aluminium price, which last week dipped below US$1,700 a tonne before recovering a little to close just above that level at US$1,710.

It is still constrained by a large overhang of inventory - current LME stocks stand at nearly 5.5 million tonnes.

It is good for the industry, though not for the individuals involved, that Rio Tinto decided on Friday to close alumina production at Gove. It cited low alumina prices and a high Australian exchange rate as reasons for the cut.

Another company that looks likely to take drastic action is Vale, the Brazilian iron ore miner. It is expected to announce a large reduction in its capital expenditure budget from US$16.3 billion to US$14.5 billion.

The process of bringing supply into line with weaker than expected demand is always painful.

Vale’s shares are down 20 per cent this year, making the lacklustre performance of the UK majors look good by comparison.

Aluminium is probably the metal facing the biggest challenges in getting its market back into balance.

Even zinc can now point to falling inventories - they now stand at 962,250 tonnes - as evidence that it is no longer in surplus. Despite that help the zinc price remains lacklustre at US$1,858 a tonne.

Bears can easily argue that while these numbers may be valid, much of the growth that is evident in the developed world is largely a product of money printing on a prodigious scale.

The most high profile one of late is Japan.

Japan is working furiously to remove deflation and create inflation by a process known as “Abenomics”. It is working.

Inflation rose in October to 0.9 per cent from 0.7 per cent. While this has stimulated the stock market it has depressed the currency, pushing it down to ¥102 against the dollar.

Complaints from the US against this policy will be given short shrift while the US continues its never-ending quantitative easing.

Similarly in Europe the ECB is doing all it can to weaken the euro despite grumbles from Germany.

As a major exporter, Germany has benefitted hugely from the imposition of a pan-European co-prosperity zone on aspiring competitors. This gives it a relatively weaker currency and its peers a relatively higher, and uneconomic one.

While everyone knows that is not sustainable, the alternatives are even worse, for the time being.

World growth still relies more on the so-called undeveloped nations than the supposedly developed ones.

The risk is that economic tension between these two groups will translate into military tension if the disparity continues and widens.

China’s needling of Japan about islands in the South China Sea is one obvious flash point.

Growing economies want to be taken seriously and stagnating ones are reluctant to acknowledge their diminished status.

Unless the developed world gets its act together it risks being eclipsed by the newcomers as they take their turn in the spotlight.

Source >>>>> www.minesite.com
*****
 

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