Gold will be the last man standing - Lou Paquette

Newsletter writer and commentator Lou Paquette believes that as people finally begin to realize that gold is the only asset we can count on any more, the bull market will "come out of its shell." He shares some of his favorite mining companies that are well-positioned to ride out these turbulent times. Interview with The Gold Report.

Author: The Gold Report
Posted:  Monday , 23 Feb 2009 

VANCOUVER, BC, CANADA - 

The Gold Report: Lou, you have indicated that you think the bailout plan will be really good for people who own gold. Can you give us your overview of what's happening and how it's going to help those who hold gold?

Lou Paquette: You know, sometimes, it's the simple answers that are the right answers, and it's becoming obvious that the printing presses are going to get turned on and they're not going to stop. They're going to keep going 24 hours a day.

At the beginning of the gold market, it was the hard-core gold bugs that were getting bullish. And then it started to spread out to other investors who liked alternative investments, but now mainstream banks are recommending gold-banks that you never heard talk about gold before.

So, it's really spreading out to the common person right now; everybody's hearing that about the only thing we can count on anymore is gold as an asset. So, the bull market is just coming out of its shell.

TGR: The U.S. is not the only country printing money at this point; there are many countries that are doing rescue packages, also inflating their currencies. If every country in the world is inflating its currency, doesn't that kind of neutralize it all?

LP: It sort of negates the argument, yes; it's kind of like the race to the bottom. Who's going to devalue their currency faster? In any case, though, the last man standing will be gold. You know, 500 years ago you could buy a decent suit with an ounce of gold. Guess what? Today you can buy a decent suit with an ounce of gold. But you cannot say that about every other currency.

They're all racing to the bottom, but the same answer comes out which is, if you want to protect yourself from it, have some exposure in gold.

TGR: You mentioned in your Emerging Growth Stocks newsletter that you're big on gold mining and exploration. So, should investors be looking at physical gold and mining exploration or are you really bullish on just the mining and exploration?

LP: All of the above. You want to spread it across everything. In the beginning of the bull market, the first thing I did was buy 1 oz. bars and Canadian Maple Leaf 1 oz. coins. So, the bullion is what I started with. I am not buying bullion anymore today. I have a nice position in that.

The first thing that moves the most-and where the leverage is-is in the stocks, because there's profit leverage. For instance, a mining company that's actually producing-let's say the gold price is around $900-and then let's say it doubles to $1,800. But the profitability of that mining company will triple or more. So, the bottom line will improve much more than just by holding the raw gold.

You see this with these swings with the equities as opposed to the metal price, and the rule of thumb that I had always gone by is. . .expect the gold stocks to move up from the beginning of a bull market to the end; expect them to move anywhere from three to five times more than the price of bullion itself.

Let's back-test that. Let's look at what happened. At the beginning of the bull market in the year 2000, gold had bottomed at around $250. Last March, it hit a $1,033. Roughly, it was up four times; it was up 300% in seven or eight years. If you want to measure the stock, compare the stock in 2000-the HUI index (the index of senior producing gold mining companies) was roughly around 50. That's where it bottomed. Last March, it got up to just above 500. It went up 10 times in value, roughly 900%. That's three times more than the bullion price percent.

So, sure enough, you back-test this and it works. So, yes, there's a lot more leverage with the stocks, and that's why that's what I'm playing now.

The last thing to move is the exploration stocks. The producers will move right away; the senior producers, then the junior producers, and then the last thing to move is the juniors that don't produce anything-the exploration puppies. But they have the biggest percentage move of all; they will move from 10 cents to a dollar or maybe $10 if they make a big, big discovery.

So that's where the greatest leverage is, but the greatest risk as well. The answer is, own them all and have a nice cross-section.

TGR: Given the cost of capital in today's environment, the projection is that many exploration companies just won't survive. Is it time to look at exploration or do you wait and sort of let things fall by the wayside and maybe invest in six months or a year?

LP: That's a good question. That's a real consideration, and that's what investors should be asking these companies-how much money have you got? What did you raise it at? At what price? And what's your burn rate? How long is it going to last? I'm going to feature a junior that is about to start receiving a royalty from Yamana Gold in my next issue. So that even if it gets tough to finance as it did last fall-they will have revenue and be able to carry forward.

But to answer the question of timing-is this a good time? What I find is there is a strong seasonal element to the gold stocks, especially the juniors. What happens is they follow the seasonality of gold itself, which tends to bottom near the time when the Indian wedding season has not been on for a long time, and that's August. In the summertime, they're not having any weddings. In September, the buyers come back and they start to fill their inventories in advance of the Indian wedding season.

Now this hasn't worked all that well the last year or two because we have had this economic tsunami, and gold was one thing you could sell last September or October and get something for it to cover your losses. So, the seasonality has been thrown off a little bit, but it looks like it's back on track.

So, the long answer to a short question is the timing. I would say most of these juniors have had a nice pop since November-the stronger ones, anyway. And we're getting closer to a seasonal high; the seasonal high could be anywhere from February to May, at the latest. And we're coming into that season; we're approaching it.

Whenever gold hits the seasonal high, the stocks will follow. The next ideal time to buy will be in the summertime, when everybody's on vacation and looking the other way and the gold buyers have gone away. And I'm guessing that August might be a really good time to reload-the juniors, at least.

TGR: Hasn't the seasonal buying season gone out the window this year with the bailouts and all the economic news? That's all you hear now. Wouldn't the price of gold be more of a monetary issue now than a jewelry issue?

LP: Well, that's a really good question, and we won't know the answer until we move forward a couple of years and look back. You're right, the economic considerations have kind of overridden the seasonality moves in the last year or two and that could continue. I am just saying I am not trying to predict the future, as much as that is a normal trend, and we can judge it when the time comes. In other words, if all these gold stocks are kind of weak in the summertime, then we can probably assume that seasonality may be working, and it might be an ideal time to buy. We have to play it by ear, to answer your question honestly.

TGR: So, for someone who has almost no, or only a very small amount, in gold in their portfolio, should they be looking to start buying now or wait until the August potential seasonal drop?

LP: I wouldn't. I would not be without any gold at all, definitely not right now. You could ask that question a different way: ‘Am I going to sell out all my gold stocks here where I perceive the seasonal high?' Absolutely not. I don't want to worry too much about losing 10% to 20% because I want to catch the big move; and the big move is something like $2,600 for gold an ounce by 2014, according to some of the chart readers I'm talking to.

That's the move I want to catch. You know, if I miss the little squiggly moves in-between, that's okay because of what you mentioned, the fundamental economic considerations that could override these seasonal things.

So, if someone has no gold at all, sure I would start layering in a little bit now. I'd leave some money on the table, and wait until August for what might be a seasonal low point, and just sort of average in between now and then. That's what I'd do.

TGR: Do you have some particular companies that you're following that you think would be good investments?

LP: The senior that I like is Goldcorp (TSX:G) (NYSE:GG). They have that beautiful high-grade Red Lake deposit that they're mining, they're a low-cost producer and they're in Canada. So, that's kind of a no-brainer that you want to pick up in the low of the season.

Another, smaller producer might be San Gold Corporation (TSX.V:SGR). They're located in Manitoba. Their production costs have been very high, actually; they've actually been almost mining at a loss. But, in the next month or two they're going to start hitting their higher-grade stuff. Their production is going to go up, and their costs are going to go right down. So, I think San Gold is another one, and that has had some great moves. That's moved from around 67 cents to $1.67 since November, so I think this is something to track maybe and look at in the next seasonal low.

Another one, a smaller producer from there, would be Castle Gold Corporation (TSX.V:CSG). They're going to double their production this year, trading well under a dollar; I think it's about a 40-50 cent stock. And they have a really good manager running the company. Like I said, they have a growth production profile. So it's one smaller junior that may have a bigger percentage move once gold bull market emerges further.

TGR: Castle is currently producing?

LP: Yes, yes they are. It's modest production; it was only about 25,000 ounces last year. They believe they're going to double that this year, and possibly increase it in the future. But, you know, it's a little penny stock with lots of leverage. So there are three that I like.

TGR: You're a fan of Rainy River Resources Ltd. (TSX.V:RR), too, correct?

LP: We were very lucky in that we picked that one a long time ago, maybe three to four years ago before gold had its real big move, so when it was still a penny stock. I met the president, Nelson Baker-his son invited me to come over and hear the story, and I had never heard of Rainy River before. Nelson just told me his method, his theory of where he thought the gold was, and it made sense to me. It was a good theory and we rode it up to something like 68 cents. And they just kept hitting nice long intersections. So, I have already been in and out of that one, and it's something I might look at during the seasonal low to go back into.

TGR: I think you're also following Energold Drilling Corp. (TSX.V:EGD)?

LP: Yes, Energold, as well, and that's not another gold company; it just sounds like one. It's a drilling company, a service company. They say the people who really made money in the Yukon Gold Rush were the people that serviced the miners up in the Yukon. And this drilling company was a $5 stock this past summer. It's down to $1; they've made a lot of money. They earned 23 cents a share in their first nine months of the year. It's trading at something like three times its earnings; so, a ridiculous valuation. Fred Davidson runs it as a very tight, very tight ship.

He also runs another profitable mining company, IMPACT Silver (TSX.V:IPT). So, he's a really good manager, and what they've got is a bunch of small, easy-to-move, lightweight drills that can get up into the real hard-to-reach areas, and that's what's kind of giving them an advantage. That trades around a dollar, I guess.

TGR: Being a service company related to precious metals miners, would they expect to see the same type of growth as precious metals investments?

LP: Right now the market is betting that the demand is going to go down and the companies won't be able to finance, and they're going to have to eliminate their drilling programs. That's what the market's betting; so, it's kind of a contrary bet.

When I last talked to the company, they said they were still busy; they had a good order backlog, and everything seemed pretty strong going forward. Expect a little flattening maybe in earnings, but I don't think they're going away. That's for sure.

I look at EnerGold as a combination value and growth play. If you look back, they've been growing their earnings every single year for the last five years. And yet, they're trading at less than a P/E of five.

So, it's a super value, and yet it's a growth company. Now, they might have a little flak period coming up here because, let's face it, some companies are going to have trouble financing. We might see some drilling programs that are being cancelled, but still-yes, it's just a really good value play-strong earnings, building the balance sheet.

TGR: Can you compare investing in silver as a commodity hedge or a finance hedge compared to gold. Do you like it?

LP: I do like it; I guess gold I like the most because it's really considered money. Now, we do have silver coins, but silver is also considered somewhat of an industrial metal. So, in a recessionary time, some people may say well demand for silver may ebb a little bit, whereas if there is a panic in the financial markets it may go up for gold. So, my first preference is gold, but silver seems to have more volatility. You know if you do catch the bottom, it seems to have a bigger percentage move. So, it's a good thing to be in as well. And, yes, sure I would have some exposure to silver as well.

TGR: And would you have any silver producers that you recommend?

LP: Again, Impact Silver. I think Fred is such a good manager

TGR: I read your overview on your website, and some of the other sectors that you're currently looking at would be uranium, renewable, and oil and gas. Let's get your thoughts on uranium, mostly because uranium had so much buzz and a huge run up in 2007, and went through a huge crash when the market crashed. Is it really making a comeback or is it just going to kind of limp along here with all the other stocks?

LP: It's kind of a flip of the coin. If you look at just uranium itself, I am told, and my understanding is, that the supply and demand fundamentals going forward are very positive, that there's going to be more demand than there is supply in the coming years. But on top of that you have to put the price of oil. It seems like with the renewables, with the green stocks and with uranium, there seems to be a pretty strong correlation. When oil goes way up, you find that uranium kind of follows. So, you've got to take that into account as well.

It just so happens that oil looks like it's kind of flattening out, too. So, I kind of like uranium play here now. I've been very fortunate with uranium. I did play on the way up, and just not that far from the market high, I dumped everything. I just decided we've had great gains with these uranium stocks. I am going to get out and raise a bunch of cash, and that has worked out really well.

And so since then, we've just started to get back into one or two exploration stocks in the last, say, eight months or so. So, we're starting to nibble on the sector again.

TGR: And are there any specific exploration stocks that are intriguing in the uranium area?

LP: Yes, I will mention one in uranium that we're following; we've been following for a while, and I wouldn't be surprised if you've heard of this one. I would consider this the top uranium discovery, and that's Hathor Exploration Inc. (TSX.V:HAT).

I'm also taking a look at their partners as well, Terra Ventures Inc. (TSX.V:TAS). They have a 10% carried interest in the play. The reason we like that is they have hit multi-meter intersections of 5%, 10% uranium. Most uranium plays if you read them, they're lucky to get .01% of uranium.

TGR: What's the play with Terra Ventures?

LP: Terra has a 10% carried interest with Hathor. So, they don't need to pay any money for drilling or anything. They just get a free ride now. Hathor has multiple drills going for months, and they're also drilling a very prospective area. And if they come out with what some are expecting, we could see a major addition to their resource this year.

Terra's a penny stock trading up to the 40-50 cent area. And they have some other plays of their own, too.

TGR: If someone were reallocating their portfolio right now, what percentage of the portfolio would you recommend being in gold, in oil and gas, uranium, and renewables?

LP: That's a really good question; you know I can't tell people how they should do it; they have to make up their own minds what feels good for them, but I can tell you what I'm doing. And that is about a third in gold, okay, about a third in energy, and then within that third, and about two-thirds in oil and gas, and the rest of it in uranium and renewables.

So that's two-thirds of my holdings, and then another third everything else-cash and that sort of thing.

I don't know if you've heard of an author from a long time ago; his name was Harry Browne ("How You Can Profit From the Coming Devaluation", 1970, and "You Can Profit from a Monetary Crisis", 1974). He was known for his "Permanent Portfolio." A quarter in long bonds, a quarter of your assets in gold, cash, and stocks, and then you re-balance once a year. I am doing that, but taking out the long bonds-I am actually short long bonds.

In the last issue, I recommended an ETF, an inverse ETF that will go up when long bonds go down in price. And sure enough, it's had a really nice gain since we've recommended it. I wish I had more of it. You know people were talking about long bonds might be in a bubble, that might be the next bubble, and sure enough they have come off in price, and people are starting to sense that we're going to have inflation from all this printing of money that's been happening.

So, I have no exposure to long bonds, and about a third in cash, a third in gold, and a third in energy.

TGR: Very good, Lou. Thanks for your time.

Louis Paquette launched Emerging Growth Stocks (emerginggrowthstocks.ca) in 1995 to provide investors and speculators with a unique alternative to what he saw was a growing problem with corporate governance and conflict of interest on Wall Street. Lou posts a 15-minute audio interview, "Week in Review with Lou," most Fridays on his Emerging Growth Stocks website, along with "Charts of the Week," featuring his technical analysis and some political rants as well. He also has a blog,www.emerginggrowthstocks.blogspot.com, which features a wide variety of interviews and articles.Lou also offers a Market/Management Psychology Investment newsletter that doesn't marry one sector but rotates with the tide of the market.

Published with the kind permission of The Gold Report - www.theaureport.com  via mineweb.com

posted by JB

The Gold Rush: Don't Get Burned

With the yellow metal near $1,000 per ounce, investors are clamoring for coins and bullion. But buying gold in its physical form can be tricky

By David Bogoslaw

If you had any doubt that the prime motivation for investors has shifted from greed to fear, look at the price of gold. The spot price for the yellow metal reached $992.43 an ounce on Feb. 20, its highest level since hitting $1,002.70 on Mar. 17, 2008, the day that Bear Stearns collapsed. The spot price has climbed more than 39% from a near-term low of $712.30 on Nov. 12, 2008.

Demand for physical gold has exploded as the deepeningfinancial crisis and ongoing slide in stock prices has pushed nervous investors into safe-haven investments. But new investors need to be careful about who they buy from, since inexperienced people seeking to take advantage of opportunities in the market are opening coin dealerships without being aware of the financial risks or legal compliance issues involved.

HOW TO CHOOSE A DEALER

"These days, with everything going on with the [Bernard] Madoff scandal and now the [Allen] Stanford scandal, you have to know exactly who you're dealing with," says David Beahm, vice-president at Blanchard & Co., a leading retail dealer of gold coins and other precious-metals products based in New Orleans. The best way to ensure the quality of what you're buying is to do your due diligence when choosing a dealer, he says. The Better Business Bureau is a good place to start, at least to be able to see whether a certain dealer's clients are satisfied or not. And the Internet makes due diligence that much easier. For instance, you can check whether a dealer belongs to the Professional Numismatists Guild (PNG), a nationwide association based in Fallbrook, Calif., on the PNG Web site.

Be wary of incoming cold calls from dealers unless it's someone with whom you have a long-standing relationship, advises Diane Piret, industry affairs director at the Industry Council for Tangible Assets (ICTA), the national trade association for rare coin and precious-metals dealers. Investors are better off seeking out dealers on their own. It's a good idea to look for companies whose dealers are members of the PNG, which requires dealers to have five years of experience as numismatists, have a net financial worth of at least $250,000, and be elected to the guild by a majority of the present members. PNG members must abide by guild rules, which include an arbitration process to resolve any dispute over product quality between buyers and sellers.

It's treacherous to enter the bullion market with no understanding of how tight the margins are and how rapidly investors can lose their shirts, given the volatility in gold prices, says Piret. Although she has received five or six inquiries recently from people asking which laws they need to comply with in order to establish a dealership, she doubts many of them have subsequently opened a business. "A dealer who buys and sells over $50,000 with all [his] customers of bullion-related products…needs to be compliant with section 352 of the Patriot Act and have a compliance officer," she says. "Cash reporting laws and money laundering laws are very serious."

KEEP CLOSE TO THE SPOT PRICE

New investors in the yellow metal also need to keep an eye on the spot price of gold to ensure they're not being charged too high a premium for gold coins. It's common these days for dealers to sell gold coins at 8% or 9% above the spot price, and that's not necessarily bad, given the supply constraints for the retail product due to higher demand, says Dave Meger, managing director of metals services at Alaron Trading in Chicago. His firm has had to turn away orders occasionally in recent months when it hasn't received fresh product from the U.S. Mint.

During the fourth quarter of 2008, U.S. consumer demand for gold coins and bars jumped to nearly five times the amount from a year earlier, to 34.8 metric tons, according to the World Gold Council. Between Sept. 15 and early December, Blanchard sold more gold than it had in the prior three years, despite the Mint's 45-day suspension of sales of one-ounce American gold eagle coins after the collapse of Lehman Brothers. Blanchard had to sell "whatever product we could get our hands on"—Canadian maples or South African krugerrands—until supply of American eagles resumed, says Beahm. "At that particular time, nobody really cared what they had as long as they had gold."

To keep the premium they pay over the spot price to a minimum, Meger at Alaron recommends investors buy from one of the four authorized distributors that buy directly from the U.S. Mint. The Mint charges premiums of 3% on one-ounce gold coins, 5% on half-ounce coins, and 7% on quarter-ounce coins when it sells to authorized purchasers, which in turn mark up prices to dealers and individual investors. While Alaron can't buy directly from the Mint, it benefits from having a partnership with a firm that is an authorized purchaser.

HEDGING GOLD PURCHASES

Meger also suggests buying from a dealer who is linked to a brokerage firm with a reputable name in the commodities industry and who sells only exchange-approved brands, hallmarked bars, and reputable mint coins.

"We can offer clients the ability to hedge their purchases with options or futures contracts," he says. A buy-and-hold investor who expects to see gold prices pull back in the short term isn't likely to go to the trouble of taking gold out of the warehouse to sell it, but might think it advantageous to hedge his position by selling a futures contract. "It's nice to be able to deal with a brokerage firm that offers you that ability," he says.

Only a few of the 30 or so refiners whose brands are listed on the New York Mercantile Exchange's Web site sell gold bars in retail sizes of one, five, and 10 ounces. Until about a month ago, those smaller retail forms of gold were in short supply, but now that refiners realize they can get significantly higher premiums for them, they are starting to shift resources from jewelry and other industrial fabrication to increase production of the smaller retail forms, says Meger.

When ordering coins from a dealer, it's best to send your money in as quickly as possible, since dealers will only lock in prices once they've received "good funds" in the form of a bank wire transfer or cash. "The price could change from the time you contact us until the funds are good," says Beahm.

ALTERNATIVES TO BULLION

From a cost perspective, there are far more efficient ways to buy gold than coins or bars, where uncertainty about the size of markups is compounded by shipping costs, says Leonard Kaplan, president of Prospector Asset Management in Evanston, Ill. "The alternatives are so much better and so much safer. You can either buy futures or ETFs. Then you're dealing with regulated industries, known quantities, not Joe Schmo coin dealer who's been around for two weeks," he says.

Gold investors have to pay shipping and storage costs on top of the hefty premiums they're already paying above the spot price. "Is it worth $6,000 to $8,000 on 100 ounces of gold to have it in your hand, and to lose liquidity, and to pay storage? I don't think so," Kaplan says.

Some strategists suggest waiting for a pullback in gold prices, to around $950, before buying more. But $992 may prove to be cheap a few months from now if things break the gold bulls' way. Beahm at Blanchard believes spot gold is poised to reach at least $1,500 by the end of this year, in view of all the liquidity the government is putting into the economy, which will eventually boost inflation.

Right now, the fundamentals look good for gold. But remember that the yellow metal has tripped up smart investors in years past, and will likely do so in the current boom.

Bogoslaw is a reporter for BusinessWeek's Investing channel.

Posted by JB

Investor gold rush ‘offsets’ slower jewel demand: WGC

Investor gold rush ‘offsets’ slower jewel demand: WGC

DUBAI, Feb 24, (RTRS): Voracious hunger for gold-backed securities from investors looking for a shelter from recession should more than compensate slower jewellery buying from hard-up consumers, a World Gold Council (WGC) executive said on Monday. Gold bullion topped $1,000 an ounce on Friday for the first time in nearly a year and has outperformed other asset classes as investors favour the precious metal as an asset likely to hold value during the downturn. “While all this uncertainty is out there, investment demand by all accounts is going to sustain gold demand,” Rozanna Wozniak, investment research manager at the WGC, told Reuters on Monday. “Even as you would expect global economic growth to continue to weigh on industrial jewellery demand.” Investor demand for gold coins, bars and exchange-traded funds continued to surge after posting big gains in the second half of 2008 , Wozniak said. “Bar, coin and ETF demand has remained extremely strong so far in the first quarter,” she said. Gold ETF’s are listed and traded like equities, giving investors exposure to the gold market without taking physical delivery. ETFs currently hold record amounts of physical gold. ETF demand for gold helped gold’s return to $1,000 an ounce. WGC-sponsored ETF’s account for about 85 percent of the market, holding around 1,200 tonnes of gold worth about $38 billion, said the WGC’s Owen Rees, who was also present at the interview. Growth has been rapid since the WGC launched its first gold ETF in 2003. Investors have allocated only a tiny amount of their portfolios to gold, and as risk appetite continues to shrink there is room for bigger flows into ETFs, bars and coins, Wozniak said. Policy “Gold is just a sliver of the global investment pie,” she said. “It’s appropriate for investors to put a bit more into gold as an insurance policy against economic contingencies.” Wozniak estimated only 1-2 percent of global investment portfolios were in gold. Investors were also attracted to gold amid concern about the potential for inflation as central banks finance bailouts and economic stimulus packages, Wozniak said. “One of the big uncertainties we’re facing is what is going to happen now that many government are running such large debt levels,” Wozniak said. “They are undertaking quantitative easing and printing money to get out of it. Gold tends to perform well during periods of high inflation.” Wozniak and Rees declined to comment on the delayed launch of a gold ETF in Dubai. The WGC planned to launch the first such ETF in the Middle East before the end of last year. Even though consumers hard-hit by the recession have cut back on the volume of gold purchased, the value of jewellery demand only fell in two countries last year, Wozniak said. Those were the United States and Britain. “That’s not a bad result given everything that has happened in the global economy,” she said. “...(It) is not just perceived as a luxury item. Jewellery buying has a store of value motive to it, too.” In the Middle East, Egyptian demand grew in 2008 while others saw demand fall. The country has a culture of using high-quality jewellery to store value, Wozniak said. A sharia-compliant tradeable security backed by gold will be launched in Dubai next week, sources familiar with the plan said on Tuesday.  Investors have rushed into gold as a haven from the global economic storm and as insurance against potential future inflation. The price of gold rose above $1,000 an ounce for the first time in almost a year last week.  The Dubai gold security would comply with Islamic investment principles and offer regional investors a way to diversify into gold without actually buying the metal, sources said.  “It’s a tradeable security,” said one source. He and others familiar with the plans declined to give further details ahead of the launch, citing regulatory restrictions.  Launch The head of the World Gold Council (WGC), the chief executive of Nasdaq Dubai and senior officials from the Dubai Multi Commodities Centre (DMCC) would be present at the launch on March 2, the sources said.  The WGC sponsors a number of gold-backed exchange traded funds (ETF) worldwide, accounting for about 85 percent of the market. ETFs are listed and traded like equities, giving investors exposure to the gold market without taking physical delivery. Sponsors buy the gold and store it.  The WGC has long planned the launch of a gold ETF in Dubai, and had hoped to start it before the end of last year. The WGC is a trade group funded by gold mining companies to promote the precious metal.  Dubai has a long-established market for gold bullion and jewellery fuelled by strong demand from the Arab world and India. Dubai also hosts gold futures trading at the Dubai Gold and Commodities Exchange (DGCX). The state-run DMCC holds a majority stake in the DGCX.  State-owned Borse Dubai owns two thirds of Nasdaq Dubai, the smaller of two stock exchanges in the emirate. The Nasdaq OMX Group Inc owns the rest.  Gold production in South Africa slumped by 13.6 percent in 2008 to the lowest level since 1922, South Africa’s Chamber of Mines said Tuesday. The trade group says South Africa, a global leader in the gold industry, produced only 220,127 kilograms (484,279 pounds) last year. The chamber blames an energy crisis that forced mines to shut for a week in January, the first time the mines had closed since the Anglo-Boer war that lasted from 1900 to 1902. The chamber also cites the many mines forced to close temporarily because of miners’ deaths and the fact that lower grade ore is being mined as additional reasons for the production fall. South Africa has the world’s deepest mines. This causes more accidents and makes production the most expensive in the world. China and the United States overtook South Africa as the world’s leading gold producers in 2007 and 2008.

Gold is a currency, not a commodity!

via Gold Prices Today

The world gold market price is hovering at $1000 per ounce of gold.  Many investors are concerned about the equity markets and the currency market.  In times of financial uncertainty the world gold market price tends to increase due to investors wanting to protect their assets from currency devaluation and inflation.

One of the leading experts on the world gold market price is Jim Sinclair.  Here is a great interview with Jim Sinclair on Bloomberg News regarding the world gold market price and the need for returning to the gold standard.

Here is the Jim Sinclair interview on Jim Bloomberg News.  I hope you enjoy Jim Sinclair’s opinion on the price of gold and the gold market in general.

World Gold Supply Update

Global markets remained under pressure. Locally the Anglo American annual results disappointed investors with the suspension of the dividend. The price fell almost 16%. This dragged the local JSE down. The one area that remained firm on the local market was gold, which moved close to the $1000/oz level – currently around $996/oz.

We discussed the demand side of gold yesterday. Let’s look at the supply side.

The World Gold Council reckons that the best estimate of gold mined over history is approximately 158 000 tonnes, of which around 66% has been mined since 1950’s. As can be seen from the table below annual mine production is coming in at around 2500 tonnes per annum.

While gold is mined on every continent, South Africa has been the dominant producing country in the world, producing 1000 tonnes per annum in the 1970’s. This has steadily declined. Until 2006 SA was the world top producer. China overtook SA in 2007 and it looks like USA overtook SA in 2008.

SA produced 247,2t in 2007 and the 2008 number was down 16%.

The statistics from the WGC reflect global mine production slowing to 2476 tonnes in 2007 and an annualised 2388 tonnes in 2008. From this they subtract producer hedging (i.e. gold sold forward in previous years) to arrive at mine supply.

Central banks and government sponsored organisations hold around 1/5 of global above ground stock of gold as a reserve asset. This percentage is decreasing steadily. These are largely owned by central banks in Europe and US.

Central Banks have been net sellers in recent years and from 1999 the bulk of these sales were covered under the Central Bank Agreement on Gold, which put a cap on the annual total sales by central banks. There does appear to be a slowdown in the sales from this sector, even as the price gains ground.

Classically the Bank of England auctioned off a large portion of its gold holdings in 1999 to “Restructure the UK’s Reserve Holdings”. It did this at the bottom of the gold price.

Then gold is also supplied as recycled gold. This comes from fabricated products and is melted down, refined and reused. Most recycled gold comes from jewellery, smaller amounts from electronic components and some from investment bars and coins.

Investors pile into gold coins

Investors pile into gold coins

Johannesburg - Aware that gold is the ultimate store of value, concerned South Africans are piling into Krugerrands and Nelson Mandela gold medallions, the SA Gold Coin Exchange said on Friday.

"On the back of global financial turmoil, the ever-popular Krugerrand has soared through the R10 000 mark, handsomely rewarding investors who several months back anticipated the global financial turmoil that has driven the rand price of the yellow metal into orbit," Alan Demby, executive chairperson of the SA Gold Coin Exchange said in a statement.

Technically, the surge could be directly ascribed to a combination of an advancing dollar gold price and a weakening rand.

"Based on current demand levels, the SA Gold Coin Exchange's sales have been running at levels in excess of R100m a month.

"We have accordingly increased our 2009 sales target to an admittedly conservative R1bn," said Demby.

Reord stock market lows were translating into record highs for gold and Krugerrands, and Demby suggested that in the last six months, a large number of investors had switched from equities into gold coins.

"The smart money has carefully digested the fact that in the past six months the JSE all-share index has slumped by 30%, while the price of a Krugerrand has soared by 64% over the same period," he said.

Demby said it had to be remembered that the all-share was somewhat buffered by "a firm gold share index".

He said that British media had been carrying reports on the flight from cash to gold in the wake of concern over the safety of the banking system.

"Here the concern is more over the value of the currency than the banking system.

"Even so, widespread uncertainty is prompting investors the world over to accumulate gold as the only tried and tested safe haven."

Looking ahead, he predicted ongoing Krugerrand strength.

"Prospective investors in Krugerrands have not missed the boat.

"As the global financial crisis deepens, as it is surely bound to do, gold bullion will continue to advance," he said.

At the same time, South Africa's inflation differential and the risk perceptions attaching to emerging market economies would likely witness ongoing rand weakness, Demby said.

- Sapa

want do gain more insight into the history of gold's bull and bear markets?

A discussion of the economic factors contributing to the previous 20-year (1980-2000) bear market in gold, and the modern market conditions that make a repeat unlikely. Also discussed is the prospect of holding mortgage debt in an inflationary environment, with useful insights and guidance provided by the hyperinflationary precedent in 1923 Weimar Germany. Featuring Pete Grant and Jonathan Kosares; Feb. 4, 2009 

Thanks to Peter and Jonathan @ USAGOLD

via coinblogger

$2000 gold? Citigroup's recent price projection analyzed.

Citigroup has forecasted gold to reach $2000 in the coming year, a figure that compares closely with the inflation-adjusted high of 1980. Pete Grant and Jonathan Kosares make further comparison of the dollar-denominated price against gold as priced in many foreign currencies by which gold is currently testing all time highs. Low interest rate policy by the Fed (and other CBs), combined with massive injections of bailout liquidity and the monetizing of debt portend further currency depreciation and monumental price inflation -- not only in the U.S., but worldwide. The oil:gold and DOW:gold ratios are discussed, as well as the negative real rates of return on low-yielding Treasury bonds, all pointing the way toward a wise choice of physical gold ownership for wealth preservation.

See the above video in its original context HERE

Attention Lagards: Gold now Flavour of the month

Gold is now the flavour the month. HAHA would have been better at R6,500 a kruger no?

rise gold, rise

Click on the image to enlarge

Krugerrand sky rockets

Krugerrand Breaks the R10,500 barrier to R10,650!

Highest Price ever!

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Where does all the gold go?

World Gold Council demand stats ^ TOP

The World Gold Council (WGC) updates important statistics on the global gold market. Prices follow supply and demand, and as with any other commodity, gold has its own supply / demand dynamics. Because gold is both a commodity and a monetary asset, this makes it unique. Because it is virtually indestructible, all the gold that has ever been mined over the centuries still exists above the ground in some form or another. This means that in a mostly unfabricated form, above ground stocks are easily mobilised, which means that when prices spike upward, this is often met with the resale of above ground stock. This is perhaps one reason why the gold price is less volatile than the majority of other commodities. The annual demand for gold falls into 3 main categories: o The biggest is the jewellery market o Industrial demand – electronics and dentistry o Investment demand – mostly over the counter trading. The supply comes from mine production, recycling of metal mined in previous years. As the price of gold increases, it tends to have an immediate impact on jewellery and industrial demand. However investors tend to get more excited as prices rise and when combined with the impact that exchange traded funds have had on the market, investment demand increases as the price rises The official figures: So while demand from jewellery fell, this was more than made up by the 64% increase in identifiable investment, brining total demand up to 3659 tonnes in 2008. The investment demand for physical gold was up 87%, while demand via listed ETF’s was also above trend. The latter has been a growing cumulative source of demand as seen in this graph: Source: World Gold Council

INvesting in gold Win : Win

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Gold demand tops $100bn mark

via News24

Feb 18 2009 13:18

Johannesburg - Sustained investor interest in gold over the course of 2008 against a backdrop of the worst year on record for global stock markets and many other asset classes, helped push dollar demand for the safe haven asset to $102bn, the World Gold Council's (WGC) said on Wednesday.

This is a 29% increase on year earlier levels.

According to WGC's Gold Demand Trends, identifiable gold demand in tonnage terms rose 4% on previous year levels to 3 659 tonnes.

"As shares on stock markets around the world lost an estimated $14 trillion in value, identifiable investment demand for gold, which incorporates exchange traded funds (ETFs) and bars and coins, was 64% higher in 2008 than in 2007, equivalent to an additional inflow of $15bn," WGC said.

- I-Net Bridg

Gold coin investments sought by collectors

gold.org

The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.

Tuesday, 17th February 2009 (72 views)

Gold coin collectors have been searching for items that will prove to be strong investments given the current economic climate, it has been claimed.

According to the BBC, the Midland Coin Fair held by the British Numismatic Trade Association this month saw a number of people seeking alternative ways of investing their money, particularly as low interest rates mean savings accounts may not be offering good returns.

One collector told the news source about a previously successful gold coin investment, stating: "Just over four years ago I put �30,000 into gold sovereigns, it is now worth �250,000."

Paul Revell, a dealer from Suffolk, explained which features make gold coins more valuable.

"Rarity and condition make coins collectable. The better the condition the more it will be worth," he said.

This news follows comments made yesterday by a columnist for the Times, William Rees-Mogg.

He described gold as a "unique commodity" that offers buyers a good investment.

Gold coin investments sought by collectors

The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.

Tuesday, 17th February 2009 (72 views)

Gold coin collectors have been searching for items that will prove to be strong investments given the current economic climate, it has been claimed.

According to the BBC, the Midland Coin Fair held by the British Numismatic Trade Association this month saw a number of people seeking alternative ways of investing their money, particularly as low interest rates mean savings accounts may not be offering good returns.

One collector told the news source about a previously successful gold coin investment, stating: "Just over four years ago I put �30,000 into gold sovereigns, it is now worth �250,000."

Paul Revell, a dealer from Suffolk, explained which features make gold coins more valuable.

"Rarity and condition make coins collectable. The better the condition the more it will be worth," he said.

This news follows comments made yesterday by a columnist for the Times, William Rees-Mogg.

He described gold as a "unique commodity" that offers buyers a good investment.

Kruger Price R10,560

up and up she goes... where she stops no one knows...

JB

Gold hits high for 2009

Has gold seen its 2009 high?

Feb 16 2009 10:45Joe Meyer

Johannesburg - The spot price of gold rose over two percent on Tuesday, hitting its high for 2009.

At 3.15pm, gold was trading at $963.80 a troy ounce, up over two percent.

According to local gold commentator Shaun Katz, risk-averse investors are seeking out the yellow metal as a safe haven.

"It's risk aversion - the equities markets are getting weaker, our currency is also getting weaker and the dollar is getting stronger," Katz said.

"If we continue to see pessimism surround equities markets then I see gold going to beyond $1 000," Katz said.

On Tuesday, news of Russia's central bank adding to its gold reserves also encouraged buying.

- Sapa

$152 in 18 days - Fin24 technical analysis

Has gold seen its 2009 high?

Feb 16 2009 10:45Joe Meyer

 

THERE are times when it is difficult to see the rhythm of a market. At other times, the market's heartbeat is unmissable.

From a $681 low, gold advanced to $833. This was a $152 move in 21 days. Then it pulled back and rallied from $741 to $893. This was a $152 move in 18 days.

The third advance was from $801 to $954. This was again a $152 move in 18 days. So we have three advances equal in magnitude and equal in time! This is indicated in red on the chart.

During these advances within the channel, we had three lows and three highs. The lows were at $681, $741 and $801. It is striking that these lows are all $60 apart. The three highs were at $833, $893 and $954, also $60 apart. This is also indicated on the chart.

If this does not strike you as fascinating (or at least interesting) you must be totally tone deaf! This is the rhythm gold dances to.

How should we interpret this?

Considering the fact that gold is at significant resistance and that both price and time formations peaked on Thursday 12 February, we can assign a high probability case that we have likely seen the high for the year in gold. Falling below $870 should confirm that significant downside is to follow towards our $700 and then $600 targets.

For daily updates and market analysis reports, visit Fin24.com's technical analysis page.

- Fin24.com