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.
The gold price has barely moved in Asia overnight, in London this morning and ahead of the opening in New York. It Fixed in London this morning at $1,291.50 after yesterday afternoon’s Fix of $1,293.50. It is clear that the London Fix is the biggest influence on the gold price right now. Buyers and sellers at the Fix are professional and institutional buyers with the emphasis on long term investors.
As the steady drip of bad economic and international news discourages the U.S. recovery the gold and silver prices is moving steadily up in a restrained but solid set of moves. Equity markets are not rising but tending lower. Europe is now seeing sharp falls in production after what appeared to be a stronger economy than in the U.S. What this does for precious metals investors is to show them that weakened economies don’t have the underlying strength to move to growth. Like a car, the greatest amount of power is needed as it starts to move forward. Once momentum is established speed picks up quickly. But the slower the car goes, the greater level of power is needed to pick up momentum to where it was. So it is with an economy. The developed world’s economies are losing momentum. This week shows the power, driving potential growth, is dissipating. How fast it will slow from hereon remains to be seen. We are all worried that the accelerator is not being pressed down hard enough.
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Gold – Very Short-term
Gold is pausing ahead of $1,300 and may do so to build strength. We expect a steady day to day.
Silver – Very Short-term
Silver is holding $21 and will see a steady to positive day in New York.
Gold Price Drivers
Private and U.S. investors are cautious not to be the one to pay the highest price over $1,300. Again the gold and silver prices are inclined to harden, but holding back, leaving the market to the foreign, institutional, physical buyers. Until private and U.S. institutional demand comes in as buyers [prompted by more bad economic news] we do not expect a further run up in the gold price until they are seen in the market. After all, the gold price has never been here. Buyers who first bought gold after it crossed the $1,200 mark have to wait a long time before making profits. They would like to see someone else take the gold price over $1,300. How long will this pause last? It is impossible to give you a number on this caution, but we know it will not be long.
By the end of next week we will know if the U.S. is going to label China a currency manipulator. If they are going to do this, we see the event as the start of a ‘currency war’ which will be extremely gold positive.
Regards,
Julian D.W. Phillips
