LONDON – We reported a couple of months ago that China’s gold production was heading for yet another new record and, according to the China Gold Association, this is indeed the case, having reached 340.88 tonnes in 2010 – a rise of 8.57% over the previous year’s figure. China was already the world’s largest producer of the metal before this latest increase and will thus comfortably have retained this position again.
RENO, NV – Billionaire John Paulson, who placed the bulk of his personal fortune in funds that bought securities linked to gold, made $5 billion in 2010 as gold climbed almost 30 percent last year.
The gold investments are primarily conducted through one of the largest ETFs in the world, SPDR Gold Shares, which is believed to hold near 1,230 tonnes of gold bullion. SEC filings reveal Paulson’s hedge funds own 31.5 billion shares in the SPDR Gold Trust, worth an estimated $4 billion.
JOHANNESBURG – Last week after hitting the lowest level in four months, the price of gold suddenly bounced. On Friday, news about the deteriorating situation in Egypt gave the gold price a big boost and traders who had been short, or sold, on gold’s recent pullback were suddenly covering their short positions or going long. At one time the price of gold surged by almost $40 an ounce. Personally, I do not see why the unrest in Egypt should be worth $40, but when it comes to predicting the gold price it has always been difficult to calculate the price move as determined by some geo-political crisis. In the past few months we have seen unrest in Greece, France, Tunisia and Yemen. And, only few months ago, tensions between the two Koreas had suddenly jumped to an all-time high. Yet, these events did not have the same impact on the gold price as the current situation in Egypt. It goes to show how traders react on news events and how their perspective on these events can impact on the gold market. This is one of the reasons why gold prices can be so volatile at times. Yet, the underlying fundamentals in the gold market have not changed and continue to provide an extremely bullish scenario for the yellow metal.
Recently, there was news about how a tiny hedge fund SHK Asset Management run by, Daniel Shak, has been responsible for some of the recent price action seen in gold prices. Evidently, as gold prices started falling this year, the trade, which was a combination of being long and short gold contracts started going bad. And, on Monday, January 24, he liquidated his position and is returning money to clients. As a result, the number of gold contracts on CME Group Inc.’s Comex division plunged more than 81,000, to about 500,000, the biggest single reduction ever. While his trade didn’t account for all of the contracts, it accounted for a large percent of the daily turnover which on a normal day is about 3,000 to 5,000 contracts.
BENONI – (Gold Forecaster) – Alongside the falling gold price we have watched shareholders in the U.S. gold ETF, SPDR selling nearly 100 tonnes of gold over the last few weeks. The selling of gold has come from the U.S. and mainly seen at the Fixes in London at 10.30 a.m. London time or 3.00 p.m.
When shareholders sell their shares the custodian HSBC is tasked with selling the fund’s gold holding against these sales. As one of the five members of the Gold Fixing in London, where 90% of the world’s physical gold is traded, this would be the ideal market in which to sell this gold. This is why the two daily Fixes are where the current gold price is being made. But why are U.S. gold Investors in the SPDR gold ETF selling their gold [shares]?
GRONINGEN – Copper prices rose again on Friday both in New York and London on the back of the release of US economic data that showed the country’s GDP grew at a rate of 3.2% for the fourth quarter of the year.
The data, which showed that the US economy expanded by 2.9% for the whole of 2010, the most in five years, has lent credence to the view that the US recovery is now firmly underway. And, because it is the world’s second largest user of copper, this in turn has fed into copper prices.
On the flip side of the demand coin, this week has also given rise to continued concerns about the pace of growth in China, the world’s leading consumer of copper.
Eagle Star Minerals (OTC Other: ELGSF; TSX-V: EGE) was one of three junior iron ore companies mentioned by James West, editor of the Midas Letter, in a recent video interview about the current consolidation of the iron ore industry (Cliff’s buyout of Consolidated Thompson and the takeover of Baffinland by ArcelorMittal and Nunavit Iron).
Below is a link to the interview, in which James West does a terrific job discussing the macro forces driving this sector as well as the key value drivers for Eagle Star Minerals.
Great Panther Silver (OTC Other: GPRLF; TSX: GPR) has discovered deeper mineralized silver-gold zones at its Guanajuatito Mine, which is part of the overall Guanajuato Mine Complex. The drilling program has been successful in extending silver-gold mineralization below the current level of mining on the 80 metre level, down to the 245 metre level. The new mineralization has been defined over a strike length of approximately 100 metres and for an additional 150 metres vertically.
Using information from mining the upper levels and the new drilling, two mineralized zones are interpreted from the data – the Veta Madre zone, and a slightly deeper Footwall zone. Typically, the mineralized portion of the zones pinches and swells with true widths varying from less than one metre to 4.6 metres. Typifying the above observations are Veta Madre intersections for UGG10-008 that intersected 8.52g/t gold and 1,300g/t silver over a true width of 0.61 metres and UGG10-009 that intersected 0.87g/t gold and 241g/t silver over a true width of 3.59 metres. The best and deepest (245 level) Footwall zone intersection returned 2.77g/t gold and 839g/t silver over a true width of 1.72 metres in UGG10-021.
LONDON – The latest Gold Investment Digest from the World Gold Council demonstrates that gold outperformed against equities, treasuries and commodity indices in 2010, while its price volatility fell to 16%, in line with its long-term average. The study includes a risk-adjusted chart of annualised daily return volatility against annualised returns for a selection of asset classes form the period 31 December 2009 to 31 December 2010, and, with the exception of US Treasuries, gold was the only asset that sat above the 1:1 ratio. Treasuries showed a return of almost 6% and just less than 5% volatility; gold showed a return of almost 30% against volatility of approximately 16%.
The S&P 500, by contrast, returned roughly 16% against a volatility of over 20%, while the MSCI (ex-US) returned roughly 5% and volatility of almost 20%.
TORONTO (Reuters) – The road to higher returns in the first quarter is not paved with gold, according to most Canadian investment advisers, many of whom see more value in energy and financial stocks.
The fading allure of bullion and gold stocks is tied to rising prospects for the global economy, said Howard Atkinson, the president of BetaPro Management Inc, which puts out a quarterly survey on adviser sentiment.
The latest results showed a big drop in expectations for gold following two years of consistently strong sentiment. For the first quarter, 33 percent of advisers said they were bullion bulls, down from 64 percent in the fourth quarter.
Avanti Mining (OTC Other: AVNMF; TSX-V: AVT) has entered into a letter of intent with respect to a potential acquisition by SeAH Holdings of up to a 30% interest in Kitsault. A valuation of the 30% interest will be based in large part on the final feasibility study completed in December 2010, which estimated the project’s NPV to be approximately $800 million. Let the negotiations begin as we believe this would be a very positive transaction for the Company.