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.
Japan has injected $245 billion into their markets to keep liquidity high. We are not happy to talk of more difficulties in Japan after what they have suffered, but because the net result for Japan may be somewhat positive a comment is worth it. When a nation suffers such damage leaving the rest of the nation in good condition it is only a matter of weeks before reconstruction gets under way with tremendous vigor. This produces excellent growth in the devastated areas and stimulates the overall economy. As Japan has such horrendous debt levels, the additional injection of liquidity will undermine the Yen and see it fall substantially, making this export oriented economy far more competitive than it has been in the last few years. This will in time benefit the average Japanese family. We discuss this further below.
Gold has fallen to $1,389 and €996.08 after a Fix of $1,407.00 and €1,013.40 ahead of New York’s opening. New York saw the bottom and at the time of writing has taken it back up to $1,397 and to €1,001. The dollar has fallen to $1.3944 to the euro and looks as though it has lost support too. The falling dollar and in the days to come the falling Yen may be weak and disturbing features of the market, benefitting gold and silver.
Gold – Very Short-term
Gold is affected by the continuing fall in the dollar and global market weaknesses, so will see volatility both today and perhaps most of tomorrow will prove volatile with a weak tendency in New York. The dips may well prove short-lived.
Silver – Very Short-term
After Fixing at $33.88, the silver price is down not far short of 10% from its high. The rest of the day in New York will see volatility both today and tomorrow with the emphasis on the downside, but the dips may prove short-lived in New York today.
Gold Price Drivers
With the Japanese Nikkei index down horrendously and in the light of measures that will lower the yen heavily [Inflation may well take off too] we are of the opinion that once the fall slows to a hover, the Nikkei will recover remarkably. Hence, the fall is a buying opportunity, we feel. Should you come from a strong currency like the euro or Swiss Franc the benefits will then be muted by a fall in the Yen, but from a weak currency the full benefit will be felt. Of course, the greatest benefit will be achieved by the Japanese investor himself as he will gain from the double whammy.
Likewise the fall in the gold and silver prices is a search for liquidity and a closing of leverage positions often from the triggering of stop-losses. After 2007 leverage is nowhere near as great as it was then, so the time the dip takes will be shorter as will the subsequent recovery in the gold and silver prices.
The overreaction to the demonstrations in Bahrain may well turn that situation into a threat to peace there. We are aware that the 1.6 million barrels a day oil production in Libya is down to a trickle, so even a strike by Shi’ite oil workers across the causeway in Saudi Arabia will hit global oil spare capacity very heavily. Such an event will make oil prices ‘spike’ and hit the global economy taking gold and silver up with it.
We were of the opinion that the Middle Eastern ‘demonstrations’ would have exhausted themselves by now, particularly in Bahrain, but they are morphing into something more serious, the Arab world believes. This may spark a longer term oil crisis, if speculators pile in.
[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].
