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.
Gold drifted lower on Tuesday touching an eight-week low of $1,271 an ounce in subdued afternoon trade. The metal is now trading more than $80 below its 2017 peak hit early September.
Adding to the list of geopolitical hot spots (apart from North Korea) we now have European political uncertainty following the Catalan referendum and Middle East concerns following the Kurdish vote for independence in Northern Iraq
Fading geopolitical tensions, a stronger dollar and higher yields on US bonds are being blamed for the softness. Large-scale investors are pulling money from the gold market in favour of equities which are once again setting new highs thanks to renewed optimism about the possibility of a huge tax cut in the US.
In the run-up to gold’s intra-day high of $1,362 on September 8, hedge funds speculating in gold futures and options built up long positions – bets on a rising price – for nine straight weeks.
At the time among money managers, gold price bulls vastly outnumbered bears with the ratio between long and short futures positions on the Comex market in New York reaching a five-year high at 20 longs per 1 short. That ratio is now back to 10 as money managers cut back bullish positions across the precious metals complex.
While speculators are looking elsewhere for action, retail investors in gold (and some hedge funds) continued to pour money into gold-backed ETFs. Vaults now hold around 2,155 tonnes after three straight quarter of net inflows.
US president Trump’s actions and geopolitical worries coming back to the fore could determine where gold finds support argues Ole Hansen, chief commodity strategist at Saxo Bank in another trenchant note from www.TradingFloor.com:
Trump’s rating recovered following last month’s deal on the debt ceiling and the Harvey/Irma response. However the late Puerto Rico response, accusations of tax reform tailored to the rich, and now the potential of a new gun control debate have seen the administration’s ratings slide once again. With that comes the risk of irrational behavior and ill-considered remarks – factors that have proved supportive in the past.
Adding to the list of geopolitical hot spots (apart from North Korea) we now have European political uncertainty following the Catalan referendum and Middle East concerns following the Kurdish vote for independence in Northern Iraq.
World’s largest hedge fund says buy gold as price rally nears $1,300 https://t.co/1HQIs2JvOu pic.twitter.com/gjh4Ih2Ntp
— MINING.com (@mining) August 10, 2017
5 Comments
Alex
Usually we would have seen gold prices react positively to news such as whats going on in North Korea, the Catalan
referendum etc. Instead gold prices have been unusually passive to such news recently. As former PIMCO CEO Mohamed El-Erian stated, the flow of investment capital into Bitcoin has been biting away at gold’s safe-haven appeal. http://www.kitco.com/news/2017-09-14/Bitcoin-Is-Bitting-Away-At-Gold-s-Safe-haven-Appeal-Mohamed-El-Erian.html
However I am not sure that Bitcoin or other cryptocurrencies are the main issue here…I find that even today its still not very clear to newcomers how to get started and even how to buy virtual currencies directly via credit card on sites such as http://bit.ly/CoinmamaAbout etc….its just still not that widely known to public that it could have had such an effect.
What do you guys think?
Reuvensure
My guess is complacency. People are so convinced that the general equities market will just keep going up, that they are blind to all that is going on. But of course that will change sooner rather than later, and then it’s off to the races for precious metals and their stocks.
Kenneth Viney
I agree but sooner could be in mid 2018. I see both crude and gold rebounding next year. Bitcoin penny competitors may do better than Bitcoin.
Kenneth Viney
The quotes from Oli Hansen is entirely poor journalism. Trump is a lot more rational then most of the floor traders I have met. A progressive like Oli should never be quoted in this venue.
Gary
Even If President Trump raised someone from the dead there would be complaints from the left