All posts in category Silver

Silver Eruption ?

American Platinum Eagle bullion coin

American Platinum Eagle bullion coin (Photo credit: Wikipedia)

The coming silver price eruption

2012-DEC-02

Silver coins There was a degree of predictability about the knockdown in gold and silver at the US futures market (Comex) last Wednesday. The reason is that the Commercials (together the producers, processers, fabricators, bullion banks and swap dealers) have large short positions, so they have a vested interest in lower prices. This is particularly noticeable in silver, which is shown below.

Silver long-short spread

The chart is of Commercials’ shorts and longs as of Tuesday November 27. The Commercial shorts (the red line) now stand at 99,317 contracts, or 496,585,000 ounces, about two thirds of 2011’s worldwide mine production, and is the highest level of exposure since 2009. Because the longs have ticked up (the blue line), the net figure is not yet at record levels, but is only 9,212 contracts away from it.

The justification for looking at the gross short commercial position is that the shorts are mostly the bullion banks, and producers hedging future costs (whose business is channelled through the bullion banks). The

long commercials are more genuine, being manufacturers satisfying physical demand and locking in current prices to secure their margins. Swap dealers, again mostly the bullion banks, have positions both ways. The gross short position is therefore a better indicator of the futures market position of the “liquidity providers” than the net balance.

In a properly functioning market, net public demand is always long, so liquidity providers, such as market makers, or in this case the bullion banks on their own account, are always short between them in a bull market. The skill required is to make trading profits in excess of losses on the underlying position. The proviso always is that you never become so short that in an emergency you cannot cover your position. The bullion banks in the silver market are ignoring this overriding principal.

They now have a problem. Instead of having record short positions against an over-bought market, there is only moderate managed fund interest. This interest is shown in the next chart.

Silver money managers

While money managers (mostly hedge funds) have nearly doubled their longs and slashed their shorts since July, their longs are still only a little more than average: this hardly represents the overbought conditions suitable for a major bear raid.

On this evidence, the bullion banks which are short in the silver market are potentially in serious trouble, unless somewhere there is a pot of physical silver they can dip into. There isn’t, if we assume that iShares Silver Trust’s 315 million ounces is unavailable. There is no other identifiable source of silver, other perhaps than some producer supply, and there is anecdotal evidence that on every dip, cash silver migrates from

West to East, confirmed by silver being constantly in backwardation.

The odds now favour a substantial bear squeeze. And as the managed funds which lost money on their shorts in June-July sniff sweet revenge, this could rapidly escalate. At the moment, every dollar move upwards in the silver price costs the shorts nearly half a billion dollars. And there is no way it can be covered, because the cash silver simply does not exist.

When the shorts finally run for cover, the effect on the silver price is going to be spectacular.

The Gold Investor’s Handbook – click here for  investment profits and much more detail on the in’s and outs of investing in gold

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by jackbassteam on December 3, 2012  •  Permalink
Posted in forecasts, Precious Metals, Silver
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Posted by jackbassteam on December 3, 2012

http://amp2012.com/2012/12/03/silver-eruption/

Eric Sprott Sees Gold At New High Before Year-end ( Bloomberg)

English: Crystaline Gold

English: Crystaline Gold (Photo credit: Wikipedia)

July 13

Gold will climb to a record by year-end as the global economy slows from the weight of too much debt, says Eric Sprott, the founder and chairman of Canadian fund manager Sprott Inc.
“I just can’t imagine the demand for gold is going down,” he said in a July 9 interview at Bloomberg’s Toronto office. “I don’t personally see a solution to the problem that we’re in, the financial leveraging issue that we all have where everybody wants to shed debt and there’s no buyers.”

Sprott’s company manages funds investing mainly in gold, silver, and precious-metals equities. He expects bullion will rise as investors seek the safest assets while governments spend to stimulate their economies, increasing chances that inflation will accelerate.

Gold, which had advanced for 11 successive years, is little changed so far in 2012. It’s 19 percent lower than the record $1,923.70 an ounce traded on Sept. 6 in New York after investors favored buying the dollar amid Europe’s escalating debt crisis.

The metal “should go to new highs before year end, that would be my guess,” said Sprott, 67. “Gold has blown away every financial market in the world since 2000, let’s not forget that.”

Rallying to a record would mean gold climbing at least 24 percent on the Comex in New York, where bullion for August delivery fell 1.2 percent to $1,557.70 an ounce at 9:44 a.m. Gold futures gained 2.4 percent in 2012 through June, the smallest first-half increase since 2007.

Sprott declined to make a specific price prediction. Future highs are “indefinable” because they will depend on decisions by policy makers, he said.

Sprott has previously made predictions that were accurate, or largely so. He said in May 2011 that gold might rise to $2,000 that year. In March 2008 he said banking stocks would collapse. Bear Stearns Cos. was sold to JPMorgan Chase & Co. later that month and Lehman Brothers Holdings Inc. filed for bankruptcy in September.

Governments including the U.S. don’t have the resources to meet their obligations, Sprott said.

“We have a fundamental problem in the sovereign and banking system in the world,” Sprott said. “Probably nobody has any conception of how bad it is.”

Central banks can either print money, which would help lenders, or “deal with the Minsky moment,” he said. The term was named after the late U.S. economist Hyman Minsky, whose Financial Instability Hypothesis argues that capitalist economies first trigger waves of credit expansion and asset inflation and then credit contraction and asset deflation.

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“Minsky said that if you expand your economy by increasing debt, there comes a point where the productive engine can’t deal with the debt,” Sprott said. “I’ve thought that there will be many, many Minsky moments for many banks and countries.”

Sprott is a qualified accountant who started his investment career as an analyst at Merrill Lynch & Co. He founded his current company before selling Sprott Securities, now Cormark Securities Inc., to its employees in 2002. He owns 55 percent of Sprott Inc. according to data compiled by Bloomberg.

His company, which also offers wealth-management and consulting services, had C$9.7 billion ($9.5 billion) under management as of March 31, mostly through its Sprott Asset Management unit.

Sprott Inc. rose 0.2 percent to C$4.85 in Toronto yesterday, valuing it at C$822.8 million. The company has declined 52 percent since its May 2008 initial public offering.

Sprott has lauded gold and gold stocks since at least 2001. The company began offering its own products for investors who want to own bullion in March 2009. Sprott Inc.’s Sprott Hedge Fund has returned about 391 percent since its inception in 2000, according to data compiled by Bloomberg.

Gold equities, which have lagged behind gains in the metal, will probably “do well” when gold prices rise, Sprott said. The stocks “can’t get a sustained recovery until gold has a sustained recovery,” he said.

The NYSE Arca Gold BUGS Index, which comprises 16 gold mining companies, has fallen 27 percent in the past 12 months, compared with a 0.3 percent decline in gold in New York. Toronto-based Barrick Gold Corp. and Vancouver-based Goldcorp Inc., the world’s two most valuable miners of the metal, have dropped 23 percent and 35 percent respectively in the period.

To be sure, gold-mine production is increasing, which will be negative for prices, said Pawel Rajszel, a Toronto-based investment analyst at Veritas Investment Research.

“Supply is growing faster than demand can keep up with, and as a result you are going to see prices slowly but gradually fall,” Rajszel said. “Obviously there’s a bunch of short-term fluctuations that can happen, but I think over the long term you will see gold prices fall.”

The metal averaged $1,613 in the second quarter. It will average $1,721 in the third quarter and $1,802 in the fourth, according to the average of 23 analysts’ estimates compiled by Bloomberg.

The debt crisis “should be incredible for gold,” said Sprott. He said the world may eventually return to the gold standard.

“Ultimately, if there’s a currency crisis, which one could argue we are in the throes of it right now, how do sovereigns and banks back things up? What do you back it up with?” he said. “I can imagine that the most logical thing is gold.”

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by jackbassteam on July 13, 2012  •  Permalink
Posted in Eric Sprott, euro, Europe, Federal Reserve, Gold, Silver
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Posted by jackbassteam on July 13, 2012

http://amp2012.com/2012/07/13/eric-sprott-sees-gold-at-new-high-before-year-end-bloomberg/

John Embry of Sprott Asset Management – Interview re: The Gold Standard and central banks

Description: Newspaper clipping USA, Woodrow W...

Description: Newspaper clipping USA, Woodrow Wilson signs creation of the Federal Reserve. Source: Date: 24 December 1913 (Photo credit: Wikipedia)

The Hera Research Newsletter is pleased to present the following insightful interview with John Embry, chief investment strategist of Sprott Asset Management LP, where he plays an instrumental role in the corporate and investment policy of the firm.  Mr. Embry, who is a world renowned expert on the gold market and on gold and precious metals mining shares, currently focuses on the Sprott Gold and Precious Minerals Fund.  Mr. Embry has researched the gold sector since 1963 and has more than thirty years of industry experience as a portfolio management specialist. 

HRN: (Is) the basic problem is too much debt and leverage? 

John Embry: The over the counter (OTC) derivatives situation is so surreal I can’t begin to express it.  Correctly calculated, the notional value of all OTC derivatives is in excess of one quadrillion dollars globally.  The vast majority are related to interest rates. Central banks have to keep creating liquidity to prevent these instruments from collapsing. 

HRN: What can the Federal Reserve and other central banks do?

 John Embry: They’re lost either way. They’re running a massive lab experiment with monetary policy and don’t have a clue what the outcome is going to be. 

HRN: Do you think the U.S. economy can grow its way out of debt? 

John Embry: When I was a kid back in the 1950’s, most women didn’t work. Americans maintained their standard of living by putting a second person to work.  When that was expended they made up the difference by going into debt and, eventually, they used their homes as cash machines.  Now student loans total more than $1 trillion. I just don’t see where the consumer demand is going to come from going forward.  You can’t get blood out of a stone. 

HRN: What do you think the outcome is going be? 

John Embry: I believe that before this is over we’ll have a new currency system, probably backed by gold. 

HRN: Do you support the gold standard?

HRN: But the gold standard doesn’t prevent financial panics.

 John Embry: There are always going to be financial panics, but, under the gold standard they tend to be short term.  If we had had a gold standard, there would have been a number of cleansing periods where excess debt was eliminated.  The Federal Reserve allowed the build up of debt that led to the stock market bubble and crash of 1929 and to the Great Depression, which was followed by World War II.  It took about a decade to build up the debt and more than a decade to deal with the fallout.  It’s taken more than 40 years to build up the debt we have today and I don’t know how long it’s going to take to correct it.

 HRN: What does this mean for the average person? 

John Embry: I think living standards of most people in the world, particularly in the West are going to decline precipitously.  The Federal Reserve recently reported that the net worth of the median American family has fallen nearly 40% since 2007 after adjusting for inflation.  Before this all plays out, I think the percentages are going to be far larger.

HRN: Do you foresee any wider impact on society? 

John Embry: When I was growing up in the United States after World War II, I didn’t realize how remarkably fortunate we were as a society to have such a strong middle class.  Seldom in history has there been a middle class to equal what transpired in the U.S. and Canada from the 1950s to the 1980s.  We basically took it for granted because that’s all we ever knew.  The middle class in the United States is disappearing.  What happens is that you have massive poverty and a small wealthy class.  It’s one of the worst things that can happen to a society and it can lead to civil unrest.  If there’s no reason to buy into the system, people will act up. 

HRN: Do you view gold and silver as commodities? 

John Embry: I view gold and silver as monetary metals.  The mainstream news media conflates gold and silver with industrial commodities, but they’re really a competitor to the currency system.  Gold is the antithesis of paper money. 

HRN: I’ve read that central banks are buying gold. 

John Embry: Confidence in currencies is misplaced.  There is a strong flow of gold from West to East.  The Chinese, Indians, Russians and Vietnamese know perfectly well what’s going on with the US dollar and the Euro.  They are buying physical gold and the West has been stupid enough to sell it to them. 

HRN: What’s your view on China? 

John Embry: I’m not optimistic on China in the short run.  The People’s Bank of China (PBoC) recently cut bank reserve requirements by 150 basis points to stimulate 1.2 trillion yuan ($190 billion) of new lending because they don’t want growth to fall from around 8% to 7%.  As I see it, they’ve dined out on Western profligacy for 20 years and have become the most unbalanced economy in the world.  An inordinate amount of China’s economic activity is generated by exports and by all manner of capital spending on manufacturing, real estate, infrastructure and more.  The slowdown in the world economy has revealed massive overcapacity in many sectors. 

HRN: Can China develop a consumer-driven economy? 

John Embry: The idea that China’s economy can morph into a consumer-driven economy is preposterous.  The very same consumers are employed in sectors like manufacturing where there is massive overcapacity.  If the world slides into another global recession, which is not beyond the realm of possibility, I don’t see how China stays out of it and if they don’t then there’s no engine of growth left in the world. 

HRN: So, even with a rising middle class, China remains dependent on exports? 

John Embry: The fact is that China has become the world’s manufacturer but the ability of their two largest customers, Europe and the United States, to consume is being constrained.  China is not going to be able to keep selling more year over year.  The HSBC manufacturing index has fallen to recessionary levels. 

HRN: It has been predicted that China will become the world’s largest economy.  Do you think that’s true? 

John Embry: I think China will probably dominate the 21st century.  The U.S. dominated the 20th century but it went through some very tough times in the first half of the century. 

HRN: With a slowdown in China, what’s your view on commodities like copper or crude oil? 

John Embry: In the short term, I’m worried about commodities.  In a deep global recession, I expect there will be extreme monetary debasement, which will hold up the nominal prices of commodities more than supply and demand factors would suggest. 

HRN: Do you foresee a bear market in commodities? 

John Embry: We are in a short-term bear market that will be arrested by monetary debasement. 

John Embry: The only things I’m comfortable holding are precious metals and, because they are so cheap now, precious metals mining shares. 

HRN: Where do you think the price of gold will end up? 

John Embry: I’m more concerned with how many ounces I own than with how many U.S. dollars I can get for them at any given point in time.  Gold and paper money are going in opposite directions

 John Embry: One of the greatest periods of wealth creation was when we had a gold standard in the second half of the 19th century.  It’s hard to believe that it’s going to be 41 years since there has been gold backing for any of the major currencies in the world.  That is what has allowed the massive build up of debt that we have today.  If there had been a gold standard, we wouldn’t be in the position we are in.  Western governments don’t want the gold standard because it restricts their ability to dole out favors.

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by jackbassteam on July 2, 2012  •  Permalink
Posted in China, euro, Europe, Federal Reserve, forecasts, Gold, inflation, Investments, Precious Metals, Silver, The Fed
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Posted by jackbassteam on July 2, 2012

http://amp2012.com/2012/07/02/john-embry-of-sprott-asset-management-interview-re-the-gold-standard-and-central-banks/

Alexco Resources Corp. Silver Spec Target $8.50

English: Silver :: Locality: Lucky Queen mine,...

English: Silver :: Locality: Lucky Queen mine, Keno Hill, Mayo Mining District, Yukon Territory, Canada (Locality at mindat.org) :: An old-time, classic, nearly pure specimen of fine silver wires from an uncommon Canadian locality in the Yukon, the Lucky Queen Mine. Ex Richard Hauck Collection. 5.1 x 4.2 x 3.8 cm Deutsch: Silber :: Fundort: Lucky Queen mine, Keno Hill, Distrikt Mayo Mining, Yukon , Kanada (Fundort bei mindat.org) (Photo credit: Wikipedia)

Note : I learned of Alexco just this week – doing the research for my new book AMP Gold and Precious Metals Portfolio.

I have a good list of senior miners .If you have favorite juniors that may be unknown please email the names and a brief description – to jackabass@gmail.com

July 1

Alexco Resource Corp. 

 AXR : TSX : C$4.29 | Speculative Buy , Target C$8.50

 Flame & Moth and Bermingham deposits: 19.9 million ounces of silver;

Investment recommendation

SPECULATIVE BUY recommendation on the shares of Alexco Resources with a target price of C$8.50

Investment highlights 

Alexco reported initial resource estimates for the Flame & Moth and Bermingham deposits.

 The Flame & Moth deposit is host to a global resource of 1.1 million tonnes grading 405 g/t Ag, 0.35 g/t Au, and 7.53% combined Pb/Zn, containing 14.9 million ounces of silver. 

Bermingham is host to 359,000 tonnes grading 435 g/t Ag and 3.8% combined Pb/Zn, containing 5.0 million ounces of silver. 

The initial resource for Bermingham is lower than what was  expected; however, we view the initial resource at Flame & Moth positively. The Flame & Moth deposit is particularly significant for the future development of the Keno Hill district as it hosts significantly wider zones of mineralization compared with the Bellekeno, Lucky Queen, Onek, and Bermingham deposits.

Its development is expected to allow for Alexco to significantly increase the throughput and production from the Keno Hill district over the next three years.

Valuation

Value the Flame & Moth and Bermingham deposits based on an in situ valuation. After adjusting our model, our peak silver NAVPS (5%, US$35/oz

Ag) estimate has decreased to C$8.51, down from C$8.79. We  value the shares of Alexco based on a 1.0x multiple to our peak silver price NAVPS

estimate (5%, US$35/oz Ag).

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by jackbassteam on July 2, 2012  •  Permalink
Posted in AMP, AMP Book, Precious Metals, Silver
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Posted by jackbassteam on July 2, 2012

http://amp2012.com/2012/07/02/alexco-resources-corp-silver-spec-target-8-50/

Gold Pause – Before Next Move ( Reuters Story)

English: Various Euro bills.

English: Various Euro bills. (Photo credit: Wikipedia)

June 29

LONDON (Reuters) – Gold prices rose on Friday along with the euro after leaders at a European Union summit struck a deal to cut borrowing costs for Spain and Italy, but stayed on track for their biggest quarterly drop in eight years after a dire performance in May and June.

The metal has fallen 5.87 percent since the end of March, its worst quarter since the three months to June 2004, as the dollar benefited from safe-haven flows and hopes faded that the Federal Reserve would launch another round of U.S. quantitative easing.

After a widely celebrated eleven-year bull run, which took gold prices to a record $1,920.30 an ounce last September, it is now little better than flat on the year and has averaged just over $1,650 an ounce in the first half.

“After 11 years it is only natural that gold stops and pauses for breath before taking the next step higher,” Saxo Bank vice president Ole Hansen said. “The worry is obviously that momentum has been completely lost and leveraged players (such a hedge funds) have left the building.”

“They will come back, but the market needs to reassert itself before that happens, as they are more followers than instigators of trends.”

“The event that could trigger the spark that put some life back into gold is however difficult to find at the moment, so before we move higher, there is a risk that we need to clear the table which could be triggered by a move below $1,500.”

Spot gold was up 1.3 percent at $1,570.20 an ounce at 1003 GMT, while U.S. gold futures for August delivery were up $20.20 an ounce at $1,570.60.

Financial markets have rebounded strongly from Thursday’s losses. The Euro STOXX 50 volatility index, Europe’s main gauge of anxiety, sank 10 percent to a one-week low of 25.25 as investors’ appetite for risky assets recovered following a deal at the EU summit.

Euro zone leaders agreed to take emergency action to bring down Italy’s and Spain’s spiralling borrowing costs and to create a single supervisory body for euro zone banks by the end of this year, a first step towards a European banking union.

Physical gold buying in major consumer India picked up a little on Friday as prices fell. Weakness in Indian demand has undermined spot prices this year, with Indian gold prices currently near record highs due to rupee weakness.

Traders in India are waiting for monsoon rains to pick up, which is vital to farm productivity and profits. Rural areas contribute to about 60 percent of gold imports.

Quarterly sales of gold American Eagle coins by the U.S. Mint also fell to their lowest in four years at 127,500 ounces, down more than 39 percent from the previous quarter and by more than half year-on-year.

Among other precious metals, silver was up 1.8 percent at $26.82 an ounce.

Its outperformance helped pull the gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, back from its highs of the year to 58.5.

Spot platinum was up 1.5 percent at $1,404.75 an ounce, while spot palladium was up 1.2 percent at $567.57 an ounce. Both metals have fallen to their lowest this year in recent days, at $1,378 and $556 respectively.

“There were no obvious catalysts,” UBS said in a note. “If anything U.S. data prints should have been marginally helpful.”

The Richardson/ Bass Quant forecasts gold at $2000 before 12 months.

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by jackbassteam on June 29, 2012  •  Permalink
Posted in Banks, euro, Europe, Federal Reserve, Gold, Precious Metals, Silver
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Posted by jackbassteam on June 29, 2012

http://amp2012.com/2012/06/29/gold-pause-before-next-move-reuters-story/

Belo Sun Mining Corp – Junior Gold AMP AdditionTarget $ 2.00

Pôr do Sol no Belo - Manaus, Brazil

Pôr do Sol no Belo – Manaus, Brazil (Photo credit: whl.travel)

Belo Sun is a selection in the NEW AMP Gold and Precious Metals Portfolio – October 1 Publication

If you have precious metal stocks you want to see included – email me at jackabass@gmail.com ( Please note  NO OTC or Pink Sheet listings )

BSX : TSX : C$1.24 Speculative Buy , Target C$2.00

THESIS: Uncommon combination of good grades and scale in a stable jurisdiction;

12-month target price of C$2.00 based on 0.9x our 10%/diluted peak NAVPS estimate of US$2.17/share, assuming US$/C$ parity. Belo Sun is currently focused on advancing its 100%-owned Volta Grande gold project in Brazil. Our rating is based on: 

Potentially robust project in a favourable jurisdiction:

 A relatively large, highgrade  

global resource of 5.17 Moz grading 1.74 g/t,

location in a politically stable jurisdiction,

access to grid power, seemingly straightforward metallurgy, and

the potential to produce over 300,000 oz per year could potentially have a favourable impact on project economics at Volta Grande, possibly driving robust returns and  

positioning the company as a compelling M&A target.

 Key de-risking catalysts expected in the near-medium term:

We expect a number of catalysts to de-risk the project over the next 12 months, including the completion of the pre-feasibility study (Q3/12E), potential receipt of the Preliminary Licence (Q4/12E), completion of the Definitive Feasibility Study, and construction decision (Q2/13E).

 Compelling exploration upside potential: Resource growth has been rapid under the current management team, highlighted by a 146% increase in the global resource and a 74% increase in grade in just over two years, and with finding costs averaging only $12/oz. All deposits remain open for expansion along strike and at depth. Regional exploration potential also appears attractive on the company’s extensive landholdings, which cover an area of approximately 181,000 ha extending over the majority of the Tres Palmeiras Greenstone Belt, and include 16 known gold occurrences.

 Attractive valuation with room for re-rating:

 On an EV/oz (total resources) basis, the stock currently trades at US$47/oz, largely in line with the explorer/developer average trading multiple. However, we believe that a premium multiple is warranted based on the low geo-political risk profile and relatively high grades.

 Belo Sun currently trades at 0.44x P/NAV (5%/Spot gold, fully diluted) or 0.29x P/NAV (5%/Spot gold, undiluted) vs. the junior producer average of 0.66x, the difference in our view representing re-rating potential, as the Volta Grande project is de-risked through the feasibility, permitting, and development stages.

 

 

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by jackbassteam on June 28, 2012  •  Permalink
Posted in AMP, AMP Book, Gold, Silver
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Posted by jackbassteam on June 28, 2012

http://amp2012.com/2012/06/28/belo-sun-mining-corp-junior-gold-amp-additiontarget-2-00/

Eric Sprott – Update On Gold

Polski: Sztabka złota ważąca 12,5 kg. Własność...

Polski: Sztabka złota ważąca 12,5 kg. Własność Narodowego Banku Polskiego. (Photo credit: Wikipedia)

from Sprott asset Management  June

There have been key developments in the physical gold market over the last few weeks which we feel are worth highlighting:

1) The Chinese gold imports from Hong Kong in April, 2012 surged almost 1300% on a YoY basis. Total gross imports for the month of April were 103.6 tonnes and the net imports were 66.3 tonnes1. It is not the data for April alone which has caught our eye. There has been a stunning increase of gold imports through Hong Kong for export into China over the past 2 years. Between May 2010 and April 2011, China imported a net 66 tonnes of physical gold through Hong Kong. Between May 2011 and April 2012, that number jumped to 489 tonnes. This represents an increase of 640%.

HONG KONG GOLD EXPORTS TO CHINA (KG)gold-alert-june8.gif
Source: Census and Statistics Department of Hong Kong 

2) Central banks from around the world bought over 70 tonnes of gold in April, 2012. Data from the IMF showed developing countries such as the Philippines, Turkey, Mexico and Sri Lanka were significant buyers of gold as prices dipped2.

3) Iran purchased $1.2B worth of gold in April, 2012 through Turkey. As the developed nations continue devaluing their currency at the expense of developing nations, countries such as Iran, China and Mexico are forced to look at alternative stores of value3.

4) After twenty years of lackluster returns and stagnant bond yields, Japanese pension funds have finally discovered the value of investing in gold. The $500M Okayama Metal and Machinery pension fund placed 1.5% of its assets into gold bullion-backed ETFs in April in order to “escape sovereign risk”4.

5) Bill Gross writes5, “Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors. Both the lower quality and lower yields of previously sacrosanct debt therefore represent a potential breaking point in our now 40-year-old global monetary system. […] As they (investors) question the value of much of the $200 trillion which comprises our current system, they move marginally elsewhere – to real assets such as land, gold and tangible things, or to cash and a figurative mattress where at least their money is readily accessible”. Is the bond king recommending gold? YES, YES YES!

6) The Gold Mining ETF, GDX, has seen strong inflows in the past 3 months. The number of units outstanding have increased from 162.5M6 to roughly 187M7 between March 1, 2012 and May 31, 2012. This represents an increase in assets of almost $1.2B in a span of 3 months. It is worth pointing out that for a majority of this three months period, GDX, and by extension the gold mining companies were experiencing significant declines in their market values.

We believe there has been a material change in the gold investing landscape. The HUI, which is the Gold Bugs Index, is now up over 20% from its lows since May 16th, 2012. The slide in gold equities seems to be subsiding as a foundation for a strong move upwards is set. New buyers, represented by the Chinese, central banks, Japanese pension funds and the Iranians, bought almost 140 tonnes of gold in April alone. To put this into perspective, the annual gold production is approximately 2600 tonnes8. China and Russia produce around 500 tonnes of gold annually, which never makes it to the open market. This leaves about 2100 tonnes of gold production annually for the rest of the world.

When buyers representing 140 tonnes of new demand enter a market which only has 175 tonnes of monthly supply, we are left wondering about two things:

1) In a balanced market, where is the source of supply to the new buyers going to come from?

2) How can a new buyer of size get into the gold market, which is already balanced, without significantly impacting the price of gold?

The answer is fairly obvious. When demand outstrips supply, prices move higher. These significant macro changes in the supplydemand dynamic of the gold market should propel the price of gold to new highs. 

 

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by jackbassteam on June 27, 2012  •  Permalink
Posted in Gold, Mining, Silver
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Posted by jackbassteam on June 27, 2012

http://amp2012.com/2012/06/27/eric-sprott-update-on-gold/

MAG Silver – Precious Metal Double – Update

Silver :: Locality: Fresnillo de Gonzalez Eche...

Silver :: Locality: Fresnillo de Gonzalez Echeverria (Fresnillo), Municipio de Fresnillo, Zacatecas, Mexico (Locality at mindat.org) :: Size: 8.2 x 6.5 x 3.6 cm. :: Silver wires are nicely scattered with sulfides and a bit of calcite on the RICH silver ore specimen from Fresnillo, Mexico. A highly representative ore specimen from this famous silver camp. Ex. Bob Byers Collection. Rarely do you see matrix of the silver ore hosting good silver crystals…usually it’s one or the other. (Photo credit: Wikipedia)

MAG Silver Corp.

 June 15 2012 

MAG : TSX : C$8.89 | Speculative Buy , Target C$16.00

 Investment highlights  

MAG Silver reported the updated PEA for the 44%-owned Juanicipio project in Mexico. The study outlined an underground operation capable of producing an average of 10.3 million ounces of silver per year at a cash cost of negative $0.03 per ounce of silver produced (net of by-product credits).

For years 1-6, the operation is expected to produce an average of 15.1 million ounces of   silver per year with peak production of 19.3 million ounces of silver in year 6.  

Cost creep was evident in both capex and opex; capex is estimated at US$302 million with an additional US$267 million of life-of-mine sustaining capex (58% higher on a combined basis). Operating costs are estimated at US$65.56/tonne processed (15% higher than our forecast). We note that the capital costs incorporated no synergies associated with Fresnillo’s existing infrastructure in the area.

 Despite higher costs, we believe the project possesses significant economic potential. Based on a US$20/oz Ag and US$1075/oz Au, the project has an after-tax NPV (5%) of US$976 million (100%). At near spot prices (US$30/oz Ag and US$1612/oz Au), the after-tax NPV (5%) increases to US$1,734 million (100%).

 Valuation

The updated PEA demonstrates that the Juanicipio project remains one of the most robust silver projects on the planet. After adjusting our model for the PEA, our peak silver NAVPS (5%, US$35/oz Ag) has dropped to C$18.71, down from C$22.31. With the PEA completed, the JV can now move forward with permitting, likely to begin construction in 2013.

We move our valuation to a 0.85x multiple to our peak silver estimate of NAVPS (5% US$35/oz Ag), up from a 0.80x multiple. 

 MAG Silver is a likely acquisition target in the junior silver space.

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by jackbassteam on June 15, 2012  •  Permalink
Posted in Gold, Mining, Silver
Tagged , , , , , , ,

Posted by jackbassteam on June 15, 2012

http://amp2012.com/2012/06/15/mag-silver-precious-metal-double-update/

Morgan Stanley’s Commodities Forecast

English: Logo of Morgan Stanley

English: Logo of Morgan Stanley (Photo credit: Wikipedia)

June 9 2012

1) OIL

In a bull case Brent crude oil prices could rise to $125 per barrel

 

2012 average year price:
$105.00 / barrel

2013 average year price:
N/A

Oil prices are being weighed down by new sovereign debt issues in Europe and easing global tensions on oil supply. If OPEC production continues at the current rate supply

 

2) NATURAL GAS

Natural gas is expected to be oversupplied in 2012 and will pressure prices

2012 average year price:
$2.40 / million BTUs

2013 average year price:
$3.95 / million BTUs

Natural gas will likely be over-supplied in 2012 despite a slowdown in production. Slowing demand is however likely to build higher year-over-year inventories which will impact prices.

Slowing gas-directed drilling may help tighten balances towards the end of the year. aluminum because of the supply overhang

 

3) ALUMINUM

Morgan Stanley analysts are bearish on aluminum because of the supply overhang

 

Morgan Stanley analysts are bearish on aluminum because of the supply overhang

2012 average year price:
$2,300.00 / tonne

2013 average year price:
$2,400.00 / tonne

There is surplus aluminum but high cost producers are closing capacity and because prices are lower than marginal cost.

4)Copper 

 

 expected to outperform base metals

2012 average year price:
$8,400.00 / tonne

2013 average year price:
$9,000.00 / tonne

Copper prices are expected to remain high because of supply side difficulties. Prices will continue to remain high until the global inventory pipeline is replenished most likely after 2014.

 

5 )Nickel

Nickel prices depend on Chinese steel production and the success of major laterite projects

 

Nickel prices depend on Chinese steel production and the success of major laterite projects

2012 average year price:
$20,100.00 / tonne

2013 average year price:
$21,800.00 / tonne

Nickel prices are linked with Chinese stainless steel production and exports, which are at risk because of a decline in industrial production. The outlook for nickel is also tied to the success of four major laterite (iron and aluminum rich oil) projects and two projects in Brazil.

Zinc prices will only improve if China changes policy to boost construction

 

Zinc prices will only improve if China changes policy to boost construction

2012 average year price:
$2,100.00 / tonne

2013 average year price:
$2,200.00 / tonne

Zinc refinery production growth is slowing but it will be a few quarters before the inventories are cleared at current demand rates. The global zinc market is oversupplied and has been so since the first quarter of 2008 and there is unlikely to be a reprieve this year.

Zinc prices are only expected to perform better if China changes policy to boost construction, and if demand from Europe increases.

Gold prices are expected to be supported by low interest rates and unconventional monetary policies

 

Gold prices are expected to be supported by low interest rates and unconventional monetary policies

 

2012 average year price:
$1,825.00 / ounce

2013 average year price:
$2,175.00 / ounce

Investor demand for gold as a safe haven is likely to keep gold prices elevated. A low interest rate environment, unconventional monetary policies in the U.S. and Europe, and political tensions in the Middle East will also boost prices.

Morgan Stanley analysts expect gold to continue to be volatile.

Silver continues to be an attractive safe haven but is volatile

 

2012 average year price:
$35.00 / ounce

2013 average year price:
$42.00 / ounce

Investment demand in the silver market has waned of late but but negative real interest rates in the U.S. are likely to be behind investment demand for silver even without another round of QE.

After a sharp correction in Q2 2011 silver continues to be an attractive safe haven when compared with gold. But silver is volatile, vulnerable to weakening industrial demand and weaker supply all of which make it a less supported market than gold. The key risks for silver are that a weaker economic outlook in 2012 and 2013 will cut fabrication demand (manipulation of metal from one state to another), but not enough to deter production.

The slowdown in the global economy and decline in discretionary spending puts platinum demand at risk

 

The slowdown in the global economy and decline in discretionary spending puts platinum demand at risk

2012 average year price:
$1,687.00 / ounce

2013 average year price:
$1,836.00 / ounce

Morgan Stanley analysts are less bullish on platinum since it lacks the safe have status associated with gold and silver and has limited investment demand.

Jewelry and the automotive industry act as key end markets for platinum and in a weaker economic environment where consumers tend to be more judicious about spending, demand for platinum is at risk.

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by jackbassteam on June 9, 2012  •  Permalink
Posted in China, Copper, Economic Recovery, Energy, Europe, forecasts, Gold, Mining, Natural Gas, Oil, Silver
Tagged , , , , , , ,

Posted by jackbassteam on June 9, 2012

http://amp2012.com/2012/06/09/morgan-stanleys-commodities-forecast/

Gold May ” Go Ballistic” – Bill Murray of The Gold Anti-Trust Action Committee

Deutsch: Hauptverwaltung des Internationalen W...

Deutsch: Hauptverwaltung des Internationalen Währungsfonds in Washington DC English: IMF Headquarters, Washington, DC. (Photo credit: Wikipedia)

Q: The JPMorgan scandal follows the recent scandal at MF Global. When you take them together, what do they suggest about the security of investors’ funds?

A: What it suggests is that the whole thing could blow up. The MF Global thing is almost beyond comprehension. And Morgan was involved in tha too, which makes this worse and which maybe why the Justice Department is getting involved. You can’t have $1.2 billion disappear and not know within 10 minutes who did what, and here we are these many months later, and no one’s been charged with anything. The CME is a joke; they pride themselves on never having a customer default, and yet all these farmers and ranchers and other investors have lost all their money. Then we find out about $200 million of MF Global money going to JP Morgan, and now we have this latest scandal. It goes back to what GATA’s has been saying all along about these people. Goldman Sachs is no longer involved in the gold market; they were the ringleader up until three years ago. My nickname for them is Hannibal Lector, but the whole crew is Hannibal Lector at this point.

Q: If we’re going to have zero interest rates forever, how are the banks supposed to make money without speculation?

A: There are better experts on this than me, but I would say because of the true inflation rate in the United States seniors and others living on interest income, which they were previously able to do, are getting squeezed now, and it’s creating a big problem.

Q: The IMF is supposedly a big buyer of gold lately. Do you think it’s possible that the IMF and sovereign nations have been depressing gold so they can buy it cheap?

A: No, the IMF rumour has been disavowed, but the central banks are buying  and the big money players are buying it at the dips down from $1,630, $1,635. The open interest went way up in a stunning reversal. The gold cartel is still doing their thing, playing the price suppression scheme because gold is such a small market compared with the bond market, the real-estate market, the investment market, the deal-making market, and they’re going to be on this until it blows up.

Q: Reuters has continued to report that the reason for the fall of gold from $1900 and especially over the last couple of months is explained by the situation in Greece and by the Eurozone — instability in Europe is supposedly bad news for gold. What do you think of that argument?

A: Horse manure. Price action makes market commentary. The gold cartel knows just what it’s doing: how to elicit commentary, how to affect other traders. If you were Rip Van Winkle, and you woke up to all this instability and things falling apart, you’d expect to see gold exploding. But the cartel had trained the markets to think in a certain way — at least until Thursday. That’s what they do. They’ve been doing it forever in what GATA calls a managed retreat. Gold is up 12 years in a row. That’s a big deal, and it’s getting ready at some point — none of us knows exactly when — to go into explosive mode. Europe is falling apart, America is falling apart; and California has a $16-billion shortfall; we’re broke. With elections coming up, the government is ready to fire the money guns, and there’s no telling what the prices of gold and silver could do in the upside in the months ahead. What happened on Thursday could be a game changer.

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Q: It’s been reported that a “disorderly” exit of Greece from the Eurozone will cost $1 trillion. This means more quantitative easing in Europe, right?

A: Absolutely. What else could happen? Things are falling apart, and that the reason gold and silver have been taken down in the last couple of months is because the cartel wants precious metals off the radar screen and wants to hide what they’re really doing. What if gold is at $1,900, and they announce QE3? Gold goes to $2,200, and all the talk would be negative. So they bring down gold, so that its nowheresville compared to where it was a few months ago.

Q: The Fed’s April meeting suggests another round of quantitative easing in America. If QE3 is announced, how high will gold go?

A: I think it would go ballistic, because the gold cartel has done its thing, but Thursday proved there’s a new buying mood. We’ve been reporting for weeks now about the major-league buying on the way down, taking advantage of what the gold cartel put in motion. Its wasn’t just them, we had specs, funds going short, hedge-fund sales. It’s set up for something dramatic, because you don’t need to be Einstein to see what is going on here. The situation in Europe and the United States is dire. And Morgan could be blowing up — again, $70 trillion in derivatives, and it turns out they don’t know what they are. That’s no hedge, first of all, and second Jamie Dimon said he doesn’t understand [the $2-billion to $5-billion loss]. Well, what if he doesn’t really understand his whole derivative book? And when you look at the counterparties, you could have a chain reaction going on beyond the scenes in the derivatives world. Where would that lead? It could be horrific. I know one thing; something stinks far more than is being talked about at JPMorgan.

Q: It would take the loss of only a very small fraction of their derivatives books to wipe out the equity of all the major banks.

A: That’s correct, and that is the real scary thing. And I think that’s the real fear behind the scenes. The Dow’s going down every day now, despite the plunge protection team trying to keep it up. In one week, the loss at JPMorgan went from $2 billion to $5 billion, and if you keep going at that rate for a few weeks…

Q: After 2008, we heard all this talk that the toxic debt was going to have to be isolated and retired, and yet nothing has been done. And there is no indication that anything will be done. I find this somewhat extraordinary.

A: It is extraordinary. You’re so right. Even the attempts by so-called conservative Republicans to cut the increases in our spending and out debt are met with the shrillest reaction. We’re broke. I’ve been writing for years that the standard of living of living in the United States has to go down 35% before we can start to rectify things. Instead of two TVs, one TV, instead of two vacations, one vacation; you go out twice a week, you’ve got to go out once a week now. But people don’t want to hear this. The public has been hoodwinked by our politicians and Wall Street about what they’re entitled to. These so-called entitlements are just not there. It’s been about kick the can for a long time, but the can’s hit the wall, and it’s got nowhere to go.

Q: The received wisdom is that the US dollar is still the world’s safe haven. But I recently saw an article point out that this was the situation in 2008 — the dollar was riding high, just before the price of gold took off. Do you think the era of the US dollar as safe haven might be coming to an end?

A: You might suspect this is the case. The focus is on Europe now, but it won’t be long before the focus is on the US. Look at California. The riots in Greece will become riots in the United States when things are dealt with here. The fate of the dollar is worrying because it’s the world’s reserve currency and stands for so much. Of course this is where GATA started, with Robert Rubin when he was Treasury Secretary. He came from Goldman Sachs, where they were borrowing gold for cheap. He made the suppression of the gold price the linchpin of the strong-dollar policy. Even today, Paul Volcker says one of his biggest mistakes was not manipulating and controlling the gold price. Which they’re still doing, but they’re running out of central bank gold supply to do it. The demand is overpowering them. A few years ago, European central banks were selling four or five hundred tons a year, and now they’re buying, but what they have to suppress the price is running out. And this is what’s going to lead to the price explosion. In terms of the dollar, this is going to affect it, because like it or not the soaring gold price is going to reflect on the lousy fundamentals of the US dollar.

Q: If there is nothing that can be done about gold suppression, why should we care about it?

A: Because it’s the most important thing you can know about the gold market! When you get corrections like [Thursday's] with everyone else coming up with all this poppycock about why gold was doing what it was doing [falling in price], we said this was an orchestrated raid by the gold cartel that drew in all sorts of other people. If you know this, then you understand, and you don’t panic. You buy the dips instead of panicking. Unless someone can understand what the gold cartel does, then it’s not worth listening to them about the gold market. As far as doing something about it, GATA’s been on the case for 13 years. I think that behind the scenes, there’s a great awareness. I know that the Chinese know what we know. I’ve had three conference calls with a Chinese investment corporation. The Russian central bank has talked about GATA, and one of their top economists, Andrey Bykov, has come to two of our conferences, and they’ve been big buyers all this time. They know what GATA knows, and this is the most important thing you can know because due to the supply-demand situation the gold cartel is losing its ability to meet a deficit between supply and demand. They’re going to hit the wall, and then gold goes berserk. If you don’t need to know anything else, you need to know what GATA knows. It’s been this way for 12 years, and gold’s gone up every one of them.

Q: What will be the price of gold on the Fourth of July?

A: I go back to what I said at our Gold Rush 21 conference in Dawson City, Yukon in August 2005. The price of gold was $436, and I said it would go to $3,000 to $5,000, to clear the market, and everybody kind of rolled their eyes. Right now that seems a conservative number. I’m sure we’re going there. As for the Fourth of July, I think it’ll be much higher than it is today.

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by jackbassteam on May 22, 2012  •  Permalink
Posted in Federal Reserve, forecasts, Gold, Greece, inflation, Mining, Silver, The Fed
Tagged , , , , , , ,

Posted by jackbassteam on May 22, 2012

http://amp2012.com/2012/05/22/gold-may-go-ballistic-bill-murray-of-the-gold-anti-trust-action-committee/

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