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 ball is firmly in the London court, where gold Fixed this morning at $1,178 two Dollars less than in Asia. Thereafter, it drifted down three Dollars before trying to climb back through to the opening of New York.
The important environment for gold this week will be the market attitude to the developed world economy and the U.S. consumer. Friday’s news was bad for the U.S. economy, where we saw the consumer spending less and moving into the desperation area where hope dwindles and thrift is the way of thinking for so many levels of society. Structural unemployment, a far more devastating phenomenon than temporary unemployment, is increasing fears on the ground. GDP growth was at 1.7% with the growth that there was coming from inventory stocking and machinery replacement, not what recoveries are made of! Where the consumer spent it was on imports, further sapping internal U.S. economic activity, and boosting countries like China. All this news certainly points to a double-dip recession as the political will to spend more supporting housing and the unemployed dwindles. When such figures come out we should remember that these are what has just happened and right now matters are getting worse.
The impact on gold will be for a slow continuation of leveraged positions to be trimmed where they still exist. With 2007 having taught investors caution, the vulnerability of the gold price to a sharp, de-leveraging inspired pullback, will be limited. Indeed, the current consolidation is an expression of today’s de-leveraging. Please note that the gold price is not dependent on the developed world, but is a globally priced precious metal.
Gold – Very Short-term
Gold has bounced off support at $1,160 then run to $1,180, before turning down again, giving us a very narrow trading range. Today’s action will reflect that.
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Silver – Very Short-term
Silver gave us a good showing today, holding and rising above $18, currently sitting at $18.15. Bear in mind it can sprint 2.8% either way in very quick time. With the London Fix at $18.11 London appears to be leading the way for silver, so expect a more vigorous performance when gold rises than when it falls.
Gold Price Drivers
As unwilling as the establishment is to confirm that the recovery is evaporating, the data on the damaged and reticent consumer is moving strongly that way. With the U.S. economy dependent on the consumer [for the economy is 70% driven by them] and the political will to stimulate further dissipating too, gold investors globally realize that the globe is going to face considerably more economic turmoil than it has seen in the last decade, the decade that took gold from $275 to $1.250.
The numbers coming out in the gold world shows that the east is being economically empowered at a rapid rate and loves gold. The three most populous regions of the world are China, India and Indonesia. Add peripheral regions and you have more than half the world’s population getting richer by the day! We attempt to keep on top of these in our newsletters, to which you are invited to subscribe through www.GoldForecaster.com and www.SilverForecaster.com
Regards,
Julian D.W. Phillips
