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.
Friday was a lackluster day until almost the end of the day. Through the weekend and on Asia’s Monday we saw gold take off. The afternoon Fix on Friday afternoon was at $1427 after the morning Fix of $1,418.00. In the euro the gold price’s upward move reflected the weakness of the dollar and was Fixed in the morning at €1,014.74 and in the afternoon at €1,019.29. The dollar gave up its support at $1.3864 and tumbled over the weekend to stand ahead of New York’s opening at $1.4020. We repeat what we said on Friday, “We do expect central banks to come in to take the steam out of the market soon. But this time it is likely to prove a costly exercise.” The London morning Fix was set at $1,437.00 and in the euro at €1,025.26 not a spectacular price at all, bearing in mind its recent high was at €1,065. But it is hitting record highs in the dollar and was trading ahead of New York at $1,441.55. Clearly the dollar will fall until it finds new support first from the central banks and then from the market.
We feel for the revolutionaries in Libya as they now face the mounting assaults from Colonel Gadhafi’s forces who are well-armed and organized, in stark contrast to the rebels, who just aren’t a match for his power base. We are probably looking at close to the highest prices you will see in oil now. With increased supplies going into the market and the inexorable crushing of opposition there, we are seeing the reasons for the high oil prices dissipating.
Gold – Very Short-term
The weekend saw gold being given a shot of hormones which sent it roaring up to new highs in the dollar. Essentially gold is now in a currency play reflecting the dollar’s moves. We expect it today to either consolidate around these levels or to rise further in New York.
Silver – Very Short-term
After Fixing at $34.43 silver is now trading at $36.66 a new high. Today we expect to see consolidation or new highs in New York today.
Gold Price Drivers
Today’s main price driver for both gold and silver is the U.S. dollar which has seen support fade away. Central banks don’t mind it moving either way but they do not want to see ‘brutal’ moves in the dollar. We believe that a much lower dollar against all currencies is inevitable because of its fundamentals. We may well see the euro accelerate and catch up with it again as the euro crisis re-emarges, But against other less important but better measures of exchange rates, such as the Swiss Franc, you will see both eventually sag [If the Swiss don’t step in to lower their currency].
We do not believe that the Middle East or the oil price is affecting gold at the moment except perhaps to deter selling. Gold is rising on different factors. We feel it important to note this because the rises in the gold and silver prices are not short-term in nature. If they were short-term, then you could expect the gold price to fall back way below $1,400 and €1,000. We don’t think that likely with therse factors driving it.
We give more clarity on the ‘big’ picture in our newsletters.
[The Gold Forecaster and Silver Forecaster are a “must-read” for all who want to understand why the gold and silver prices are moving as they are and why.] Subscribe at www.GoldForecaster.com or for silver at www.SilverForecaster.com].
