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.
After the bad news from the U.S. on the housing and employment front most financial markets fell heavily. Falls of 5% were not uncommon in Europe. Amazing what computer programs and stop losses will do in a falling market. Gold was less volatile than other markets and recovered in Asia overnight. It Fixed in London at $1,210.50 this morning and $1,201.50 this p.m.
Please note this fall in gold prices is not about gold, equities or any investment per se. It is about investors running from potential losses and cutting leveraged positions. 2007 saw most of structural leveraging reduced and since then investors have in general been more cautious, so de-leveraging will be quicker, but far less than 2007. Now at $1,205 gold seems to be holding ahead of next week.”
Gold – Very Short-term
We saw a softer New York yesterday taking the gold price down from $1,240. Such was the steepness of the fall that we could see a lower bias next week. But from here on down, you should see bargains.
Be ready for vigorous precious metal markets.
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Silver – Very Short-term
Silver did well to fall only to $17.80. This is in line with the fall in the gold price. We do expect it to fall further than the gold price on a pullback, but on a recovery expect a more vigorous rise too.
We will be addressing the issue of “Is Silver de-coupling from gold” shortly, in the Silver Forecaster newsletter.
Gold Price Drivers
As in 2007 investors of all kind, in the face of deflation sell in order to raise cash Stop loss and trader selling pushes prices down to trigger even more selling. Gold and silver, alongside equities, suffer as a result. As this slows we find bargain hunters moving in. In this market, any gold that comes to the market finds happy buyers trying to build up gold holdings. Central banks are at the forefront of this buying, but as we see in the gold Exchange Traded Funds other large institutions are joining the fray. If this selling is sending good volumes of gold into the market, it will be absorbed quickly, even as gold prices fall below $1,200.
This market has sidelined jewelry and retail demand by keeping prices high. The fundamentals sending gold higher have not changed at all. Once the protective selling is complete, money crises, such as sovereign debt problems will grab market attention again.
It seems the clouds are very dark for financial markets.
Be ready for next week!
Regards,
Julian D.W. Phillips
