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.
Yesterday just over 2 tonnes of gold was sold out of the SPDR gold ETF in the States. This did not affect the gold price significantly, which held over $1,361. After London opened today the gold price slipped until it was Fixed at $1,358.75 before slipping slightly to $1,357.5 before New York opened. The dollar slipped to $1.37 before recovering to $1.3642 ahead of the New York opening. Most of these moves were compensations by the dollar to the euro price which Fixed yesterday afternoon at €996.35 then this morning at €995.35. These moves tell us that the gold price is close to the top of its trading range and in the process of continuing to attack it.
So far today no news of significance to the gold price has appeared today. We are hearing reports that Chinese buying remains strong and does so irrespective of the Chinese New Year. This bodes well for its continuation for the rest of the year. In the developed world there is no news that encourages us to believe that gold is likely to face a large fall.
Gold – Very Short-term
Gold has room to fall without affecting the consolidation process, as it is sitting at the top of its trading range. We expect the gold price to continue to attack overhead resistance with an upward bias in New York today.
Silver – Very Short-term
Silver Fixed at $29.8 this morning down from over $30 yesterday and is trading at $29.75 ahead of New York’s opening. We expect little movement today, but if there is it is likely to be on the downside.
Gold Price Drivers
The main driving force behind the remarkable resilience of the gold price is Asian physical demand. However, we would like to emphasize that by saying that 340 tonnes was produced in China and 210 tonnes imported last year. Any additional demand will have to come from the international market, so imports stand a very good chance of doubling or more. When one considers how much of the developed world invests in physical gold compared to gold derivatives such as the shares of gold mining companies and futures and options [only 5% of futures results in a movement of physical gold], Indian and other Asian demand does not have as far to go as many think before it dominates the gold price.
An influence that did not feed through to the gold price yesterday was a further sale of 2+ tonnes worth of shares in the SPDR gold ETF. Should sales from this source increase and continue we do expect a downward influence to be exerted on the gold price, provided that it is greater than total Asian demand. Reports from Asia of continuing premiums on physical immediate delivery continue to highlight the fact that supplies remain tight.
Currently, we are presenting in the Gold Forecaster, a series called “Financial Earthquakes”, covering the main crisis areas in the financial world and what they could lead to.
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