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.
After the last two days of a strong gold price we are now looking at a quieter and lower day, which opened in London at around $1.424 at which it was Fixed [$1,424.25 down almost $7 – €1,029.08 up nearly €1]. To us this is a continuation of the consolidation process complicated by the exchange rate moves of the euro and the dollar. The €: $ exchange rate was lower at $1.3830 down a little.
Today we saw Spain downgraded as they are perceived not to have made adequate cuts to reach their goal of sustainable debt repayments. The Eurozone debt crisis is simply ‘on hold’ until towards the end of March when we expect an inadequate package attempting to resolve these Eurozone debt crises.
Gold – Very Short-term
Gold has slipped below the trading band of the last few days at $1,420.6 and will probably Fix in London at around that price this p.m. We expect a weak day in New York today.
Silver – Very Short-term
After Fixing at $35.19 down a dollar silver is trading slightly higher at $35.35 and is likely to hold around there in a lackluster day in New York today.
Gold Price Drivers
Analysts are always tempted to map a mathematically correct path to the future and many of us are impressed by the neatness of the exercise. For instance, many believe that the dollar will fail at a predictable point in the future, so using an actuarial approach should show when it will fail. The qualifications of those indulging in such exercises helps to convince readers that the exercise will be accurate. Unfortunately, each step of the way is attended by diversions, as structural fractures go with the process and exacerbate, unpredictably, such breakdowns.
For instance, the morphing of the sub-prime crisis into a banking crisis, which has turned into a series of Sovereign debt crisis. Now we are seeing food inflation precipitating revolutions, a civil war and, at the least, demonstrations. Such structural fractures to the system are as unpredictable as an earthquake and sometimes as sudden. But it is these fractures that are a gear shift down in the developed world economies, which alter the investment climate so dramatically.
The information we now have is sufficient to forecast gold prices in the short and medium term, but not in the long-term. There are so many consequences that can jump out that change the gold investment scene that one is never wise to be too exact.
What is overwhelmingly clear is that the present factors that are predictable, are telling us that gold will keep on rising as will silver, with volatility and corrections.
The prospect of developed world growth will not end such crises because of the present structural faults and those that are to come still. Remember that gold rose the most in percentage terms while the global economy was booming the most between 2000 and 2007. But it was clear even during that time that the future change in the investment climate was going to derail that boom, but the when and where was opaque and usually ignored.
We believe that what we can already see of the future now, will darken this climate even further.
[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].
