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.
Overnight we saw Asian demand take the gold price from New York’s close at $1,404 to $1,411, before London steadily took it higher to Fix at $1,415.50 and €1,004.54 confirming that the gold price is recovering fast. The agreement by the G7 group of nations to intervene in the Yen by selling yen had the effect of taking it down to trade at Y81.46, the euro at $1.4089 and other leading currencies strong.
The news overnight of the ‘no-fly-zone plus’ agreement at the U.N. will extend the Libyan conflict and keep oil supplies down to almost a trickle. The heavy handed approach to the Bahrain demonstrations may well cause more problems than it cures. If those troubles extend the oil price will become lively, very lively! Overall the day has seen the global financial climate worsen.
Gold had moved up to trade at $1,420.65 and €1.004.99 and the dollar at $1,421.36 just ahead of New York’s opening.
Gold – Very Short-term
Repeat: Gold should continue to re-bound as the dollar is falling again. We expect the gold price to be positive in New York today.
Silver – Very Short-term
Repeat: After Fixing at $34.47 yesterday, the silver price is now trading at $34.80. The recovery will continue, so we expect a positive day in New York today, for silver.
Gold Price Drivers
With the U.N. agreeing a ‘no-fly zone plus actions necessary to protect civilian lives’ the Middle East scene has changed dramatically. As we point out this year is a year of consequences. The Democratic West is now going to intervene in a government they have supported for a long time. We see the conflict leading to a protraction of Libya’s oil shortages. The Shi’ite protesters are certainly taking heart at what they perceive as support, so might protestors in other Arab nations, such as Bahrain. We await the decrees from the Saudi King with interest to see what line he will take.
More directly pertinent to the gold price is the rising premium in Tokyo for gold bars now up to $2, whereas there is usually no premium. The stronger Yen sparked rising demand for gold domestically. Had they bought with the Yen around 75 to the dollar, they have gained through a 5% fall in the yen and the re-bounding gold price of $10 since yesterday. Japanese investors are therefore buyers not sellers of gold in their crisis. With the G7 not just the Bank of Japan now intervening in the yen markets now we expect the Yen to hold above 80 to the dollar.
Physical demand is robust in Turkey, a large jewelry manufacturer and exporter Middle eastern demand looks vigorous. Indian demand is still strong and we continue to see good physical demand for gold and silver in China. The rest of the emerging world is also showing good demand for gold and silver.
While Hedge Fund selling of gold is being offset by the above demand, we are seeing interest in gold from a broad spectrum of investors.
[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].
