Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
When 2.5 tonnes worth of gold shares in the SPDR gold ETF in the States were bought, there was a flurry of short covering that took the gold price to a daily high of $1,355, breaking the downward trend. Asia did not follow through and the price slipped to $1,350 as the Chinese New Year [Year of the Rabbit] really got underway. The euro slipped back as interest rates in Europe were left unchanged, and gold moved up in that currency as a result.
Political brinkmanship in the U.S.A. is threatening to delay an increase in the limit the U.S. can borrow [currently $14.3 trillion]. It’s a pity politics precedes finance in this instance, because markets will assume that the increase won’t come on time precipitating a default situation on U.S. Sovereign debt. Mr. B. Bernanke is quite right when he says that, “”Beyond a certain point … the United States would be forced into a position of defaulting on its debt. And the implications of that on our financial system, our fiscal policy and our economy would be catastrophic.” Consequently, although gold leapt in the dollar, it jumped even more in the euro to €994 up from €966 yesterday.
In the U.S. dollar, gold Fixed this morning in London at $1,347.50. This was nearly $20 up from yesterday afternoon.
Gold – Very Short-term
It was not a ‘quiet day in New York’ that we expected, but a robust day with the consolidation trading range jump by $20. It remains in consolidation but we expect an upside bias in New York today.
Silver – Very Short-term
Silver was Fixed in London this morning at $28.91 up 64 cents on the back of gold’s rise. We expect a it to continue to consolidate but with an upside bias in New York today.
Gold Price Drivers
The worst is yet to come in Egypt. Watching the dynamics of the Egyptian revolution and Mr. Soliman the new Vice President [ex-head of intelligence], we see the next move in Egypt something that will horrify us all, giving him the excuse to unleash the army. If that does not happen, history tells us that any revolution based on crowds gets messy as someone tries to fill the power vacuum. Because of the communications revolution to date the spirit of revolution is contagious. The sowing of the winds of change could become a whirlwind! But this is not an influence on the gold price today.
The cessation of gold ETF shares and the turn to the long side triggered the turn upwards. We will produce an article or two on whether this is the time to sell gold & silver or not.
A far greater influence on gold are the warnings from Mr. B. Bernanke, Fed Chairman and Mr. T. Geithner, Treasury Secretary, of a catastrophic situation if the question of raising the U.S.’ borrowing limit becomes a political football. A U.S. sovereign debt crisis would make the Eurozone debt crisis ‘pale into insignificance’.
Currently, we are presenting in the Gold Forecaster, a series called “Financial Earthquakes”, covering the main crisis areas in the financial world and what they could lead to, as well as our gold forecast for 2011.
[Apart from covering the gold and silver markets Gold Forecaster and Silver Forecaster are structured in a way that gives perspective to macro-economic factors, from oil to currencies, covering the pertinent global gold and silver market influences that directly affect the gold and silver prices. It is a “must-read” for all who want to understand why the gold and silver prices are moving as they are and why.]
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