OPEC Says Crude Production Rose to Three-Year High in November $ 100 Never Again

  • iraq led output gains, countering pullback in Saudi Arabia
  • Non-OPEC supply seen falling by 380,000 barrels a day in 2016

OPEC raised crude output to the highest in more than three years as it pressed on with a strategy to protect market share and pressure competing producers.

Output from the Organization of Petroleum Exporting Countries rose by 230,100 barrels a day in November to 31.695 million a day, the highest since April 2012, as surging Iraqi volumes more than offset a slight pullback in Saudi Arabia. The organization is pumping about 900,000 barrels a day more than it anticipates will be needed next year.

Benchmark Brent crude dropped to a six-year low in London this week after OPEC effectively scrapped its output ceiling at a Dec. 4 meeting as de facto leader Saudi Arabia stuck to a policy of squeezing out rival producers. Members can pump as much as they please, despite a global surplus, Iran’s Oil Minister Bijan Namdar Zanganeh said after the conference. Brent futures traded near $40 a barrel in London on Thursday.

Non-OPEC supply will fall by 380,000 barrels a day next year, averaging 57.14 million a day, with an expected contraction in the U.S. accounting for roughly half the drop, the organization said Thursday in its monthly report. It increased estimates for non-OPEC supply in 2015 by 280,000 barrels a day.

The group maintained projections for the amount of crude it will need to pump next year at 30.8 million barrels a day.

Iraqi Volumes

Iraqi production increased by 247,500 barrels a day to 4.3 million a day last month, according to external sources cited by the report, which didn’t give a reason for the gain.

Iraq has pushed output to record levels this year as international companies develop fields in the south, while the semi-autonomous Kurdish region increases independent sales in the north, according to the International Energy Agency. Production had dipped in October as storms delayed southern loadings and as flows through the northern pipeline were disrupted, according to Iraq’s Oil Ministry.

Production in Saudi Arabia slipped by 25,200 barrels a day to 10.13 million a day in November, OPEC’s report showed.

The report didn’t make any reference to how OPEC’s data will re-incorporate output from Indonesia, which rejoined the organization on Dec. 4 after an absence of seven years.

$100 never again; there’s a new normal for oil

“Oil prices could fall lower in 2016,” Gheit said. “I’m talking $2 to $3 dollars per barrel. I don’t see it dropping below $30 per barrel.”

The decline in crude has had a big impact on major oil companies. Shares of ExxonMobil (XOM), ConocoPhillips (COP), and Chevron (CVX) have crashed as the pain from lower prices spreads.

“Producers have already seen a collapse in earnings, and we expect weakness to continue into next year,” Gheit said. “Most independent oil and gas producers in the U.S. are in the red. They’re losing money.”

But it’s not all bad news. A drop in crude means lower gas prices, so Americans are not digging as deep into their wallets at the pump.

“This is a big break for the taxpayer,” Gheit said. “The average American family will save between $700 to $800 per year as a result of a drop in oil prices.”

Opko Health : One To Watch In 2016 – Motley Fool


What: After reporting an upside surprise in third-quarter earnings and the mid-month launch of its first royalty-producing drug by partner Tesaro (NASDAQ:TSRO), shares in Opko Health (NYSE:OPK) jumped 15.8% higher in November.

So what: Opko Health is run by legendary biotech leader Phillip Frost, who built up and sold IVAX to Teva Pharmaceutical for $7.4 billion in 2005 and, until recently, served as Teva Pharmaceutical’s chairman.

At Opko Health, Frost has packed the C-suite with former IVAX employees who have been busy orchestrating a flurry of acquisitions and licensing deals, including the acquisition of Bio-Reference Labs, the third largest specialty lab company, and a deal with Tesaro to develop and commercialize Opko Health’s Varubi, a medicine for the treatment of delayed onset nausea and vomiting caused by chemotherapy.

Opko Health closed on the Bio-Reference acquisition in the third quarter, and thanks in large part to a one-time tax benefit, the company reported net income of $128.2 million. Including Bio-Reference in results also led to the company’s third-quarter sales jumping to $143 million, up significantly from the $19.8 million reported in the comparable quarter last year.

Meanwhile, Tesaro won FDA approval for Varubi in September and began marketing the drug in November. The approval and sales could benefit Opko Health investors via both milestone payments, which could total another roughly $110 million and royalties, which will run in the low teens to low-20% range.

Now what:  Previously, I highlighted what I think Opko Health investors ought to a royalty model for Varubi, and while my prediction of $50 million to $100 million isn’t chump change, Opko Health’s other irons in the fire could result in revenue that’s significantly higher.

One of those irons is Rayaldee, a therapy that boosts vitamin D in chronic kidney disease patients. The FDA is expected to make a decision on approving Rayaldee on March 29, and if the agency gives the company the green light, then sales could be substantial.

Current treatments for vitamin D deficiency in CKD patients are arguably lacking and the addressable patient population is big and includes over 20 million patients with stage 3, 4, or 5 kidney disease that could conceivably benefit from Rayaldee.

Opko Health’s financials could also benefit from a pick-up in sales for its 4K prostate cancer test now that the latter is included in national guidelines, and Opko Health has a deal with Pfizer on a promising human growth hormone that could move the needle down the road, too.

Overall, Opko Health’s penchant for deal-making has saddled it with a fair amount of debt, but Phillip Frost’s track record and a number of potential revenue-generating catalysts hitting in 2016 could make this a name worth including in a portfolio.

NOTE: Our managed accounts sold out in the teens and we now contemplate reentering the stock at these levels.

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Kinder Morgan : Update – Dividend Slashed


What’s next for Kinder Morgan (KMI) now that it has slashed its dividend? Investors are likely hoping that the company doesn’t follow in Boardwalk Pipeline’s (BWP) footsteps.

Late Tuesday, Kinder Morgan announced that it was going to cut its dividend by 75% to $0.12 per share from $0.51. The move mirrors Boardwalk Pipeline’s own distribution cut from 2014 in which investors were paid $0.10 instead of $0.53. Shares of Boardwalk Pipeline’s stock were nearly halved overnight on the news and the company is still trading around $11.50 instead of in the mid-$20 range it was trading at prior to the cut.

Investors are surely hoping Kinder Morgan won’t repeat Boardwalk Pipeline’s fate. In after-hours trading, shares of Kinder Morgan are down about 6%, which is certainly nothing an investor wants to see, but it is no worse than declines the stock has seen in recent days.

“The way the stock is reacting it’s almost as though KMI already cut its dividend,” Shneur Gershuni of UBS Securities wrote in a note Friday. “Our experience suggests there could be some initial downside should Kinder Morgan cut its dividend.” As of Friday, Gershuni had a Buy rating on Kinder Morgan and a price target of $21.

Gershuni’s note was in response to a press release Kinder Morgan posted Friday in which it said it would be revising its financing plans and dividend policy with the goal of maintaining its investment grade rating. At the time, the company stressed that it had sufficient cash flows to support dividend growth in the range of 6% to 10%. Optimistic investors hoped that the outcome of Kinder Morgan’s board deliberations would be a cut to its dividend growth guidance. Instead, shareholders will be getting an actual cut to their dividend.

Sounding an optimistic note, Gershuni wrote that after the dust settles, Kinder Morgan could find itself as “the fastest growing C-corp with a much improved balance sheet.” Furthermore, if Kinder Morgan’s plans resulted in maintaining its investment-grade weighting and no longer having a Negative outlook by Moody’s, Gershuni sees additional upside to Kinder Morgan’s price target.

With respect to Kinder Morgan’s credit, Larry McDonald of Societe Generale said on CNBC’s “Fast Money” that the price Kinder Morgan’s bonds could get a nice bounce on the news. The upward tick in bond pricing could be what investors noticed yesterday.

In these situations, creditors will often lobby the CFO to cut the dividend, McDonald said, but he added that it is not clear if those conversations were happening at Kinder Morgan.

Either way, Kinder Morgan is due for a hectic day at tomorrow’s open.

Iron Ore in $30s Seen Near Tipping Point for Largest Miners

  • Big Four’s highest-cost mines pressured: Capital Economics
  • Miners’ shares retreat, with BHP sliding to lowest in 10 years

Iron ore’s tumble into the $30s threatens the world’s biggest miners as prices approach break-even costs, according to Capital Economics Ltd. BHP Billiton Ltd. shares slumped to the lowest in 10 years and Rio Tinto Group dropped to the lowest since 2009.

The most expensive operations at the four largest suppliers are on the verge of making losses at rates below $40 a metric ton, said John Kovacs, senior commodities economist at Capital Economics in London, who estimates their break-even levels at $28 to $39, taking into account freight and other costs. While these producers will keep output strong, they’ll be constrained by low prices, he said by e-mail on Monday.

Iron ore’s plunge below $40 comes as producers including Vale SA in Brazil and Rio and BHP in Australia press on with expansions to cut costs and defend market share just as demand from the largest consumer China slows. They’re the world’s biggest suppliers along with Fortescue Metals Group Ltd. Prices of the raw material have lost 45 percent this year and have plunged 80 percent from their peak in 2011.

“The big four will find it hard to maintain output at below $40,” Kovacs said in response to questions. “If prices remain weak, output from the highest-cost mines of the big four will be under pressure.”

Price Sinks

Ore with 62 percent content delivered to Qingdao sank 1.1 percent to $38.65 a dry ton on Monday, a record low in daily prices compiled by Metal Bulletin Ltd. dating back to May 2009. The raw material peaked at $191.70 in 2011.

Kovacs said that while rates will stay low over the next year, he doesn’t believe they’ll remain below $40 for a significant length of time. He expects prices to recover slowly because demand won’t fall much further and the biggest miners will find it difficult to keep up output at these levels.

Mining company shares retreated. BHP declined 5.2 percent to A$17.05 in Sydney, the lowest since 2005. Rio dropped 4.3 percent to the lowest in more than six years and Fortescue closed 3 percent lower. Top producer Vale closed at an 11-year low in Sao Paulo on Monday.

UBS Group AG estimates that of the four biggest producers, Fortescue has the highest break-even cost of $40 and Vale’s is $34 in terms of ore landed in China with 62 percent content including interest. BHP’s break-even level is $29 and Rio’s $30, the bank’s data show.

“There is not much production outside of the big four that can make money at these levels — eventually, we should see the juniors be forced to cut production,” said Jeremy Sussman, a New York-based analyst at Clarksons Platou Securities Inc. “It can also take some time for uneconomic production to come offline.”

Miners’ View

The top mining companies have justified their strategy. In response to questions on Tuesday, Rio Tinto referred to comments last week in Perth by Andrew Harding, head of its iron ore business, who told reporters the unit was “set up to deal with long-term price outcomes, and deliver great margins over the long period of time.”

BHP said Chief Executive Officer Andrew Mackenzie set out the company’s view last week, saying the producer remains “relatively bearish about the long-term projections for prices,” of steel and its raw materials, including iron ore.

“Fortescue has worked hard to ensure we can respond to market conditions,” CEO Nev Power said in an e-mail. “As one of the lowest cost iron ore producers in the world, we will continue to drive productivity, efficiency and cost improvements to maintain our strong financial position.”

Luciano Siani, Vale’s chief financial officer, said last week the company will continue to lower its break-even costs so it can deliver cash flows no matter where prices may be.

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Kinder Morgan ( KMI) / Shipping Sector/ Natural Gas – Why Chase Stocks Down ? – plenty of reasons to watch and wait

There was a recent video / interview of Jim Cramer saying his industry sector guru called $ 20.00 as the bottom but Cramer saw the stock in free fall and just did not know.


Kinder Morgan, Inc. (KMI)

Analysts have been split on whether Kinder Morgan’s dividends are sustainable as the pipeline industry’s ability to tap equity and debt markets to finance growth dimmed. The company’s stock has slumped 27 percent this week to $17.47 as of 12:34 p.m. in New York. Moody’s Investors Service warned on Tuesday that Kinder Morgan’s bonds were on the verge of tipping into junk.

“Dividend growth is unrealistic,” Vivek Pal, a managing director at Jefferies LLC in New York, said in a note to clients before the announcement. The company needs a 50 percent dividend cut to avoid being downgraded to junk, he said.

Prior to today’s announcement, Kinder Morgan had been expected to lift its 2016 dividend to $2.14, according to Bloomberg Dividend Forecasts. Companies across the oil and gas industry have been slashing or freezing dividends to conserve cash as plunging energy prices choked off money needed to drill wells, pay debts and purchase drilling rights.

Transocean Ltd., Chesapeake Energy Corp. and Linn Energy LLC are among those whose investors have seen payouts halted amid the crunch that began 18 months ago. Kinder Morgan’s $40 billion-plus debt burden exceeds the economic output of entire nations, including Bolivia and Bahrain.

We have no oil / gas stocks in the managed accounts.Braggin ‘ Rights – out of Chesapeake at $22

Chesapeake Energy Corporation (CHK)

We have no shipping stocks – Summary from Seeking Alpha

Dry bulk shipping unlikely to recover before 2017, consultant says
Dec 3 2015, 19:15 ET | By: Carl Surran, SA News Editor Contact this editor with comments or a news tip
Dry bulk shipping faces at least another year of pain, according to a new report from Drewry Shipping Consultants, which says companies in the industry will not return to profitability until at least 2017.Drewry says its dry bulk freight rate index fell 14.5% in September from August, and rates have fallen another 13.8% between September and November, although numbers for the full Q4 will not be available until early next year.”Demand has almost dried up,” Drewry’s lead analyst says. “China’s iron ore imports have stagnated, China’s coal imports have come down massively and India’s coal import growth has also slowed down.”Drewry forecasts demand for iron ore growing at 3%-4% over the next few years, but says demand for coal, especially in China, will not rebound any time soon.Related tickers: DRYS, SBLK, SALT, DSX, PRGN, EGLE, NM, NMM, SB, SINO, SHIP, FREE

Safe Bulkers Inc. (SB) – NYSE
$1.04-0.17(-13.64%)12:26 PM, 12/04 

Safe Bulkers Inc. stock chart
52wk high:4.92
52wk low:1.03
PE (ttm):N/A
Div Rate:0.04
Market Cap:$101.02m

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The key is to give yourself options. They may not love any of the scenarios, but providing choices usually leads clients to eventually embrace one.

Despite solid advice, some clients just spend too much. Others, like the married couple we’ll call Matthew and Elizabeth, diligently save but still run into retirement-planning problems.

Matthew and Elizabeth became clients of Jack A. Bass Managed Accounts a few years back, looking to manage their portfolio and put a retirement game plan in place. At 66, Matthew was considering retiring. Elizabeth could finally travel now that she was no longer the primary caregiver of her mother, who had passed the year prior. Together, we looked at their joint financial picture and analyzed the situation.

Then came some bad news: They wouldn’t be able to confidently cover living expenses if Matthew stopped working. They were shocked, because they’d done so much correctly—worked hard, lived within their means and consistently saved for retirement, putting away $2.3 million between retirement and non-qualified investments. Matthew even ran some preliminary retirement numbers online over the years to make sure they were on track.

Part of the problem was that Matthew’s planning assumptions were too rosy. He didn’t assume he’d have any variability on his portfolio returns, he didn’t assume he’d have health-care costs once Medicare kicked in, and he didn’t assume that retirement could last more than 20 years.

We projected that if Matthew retired at 66, the couple would only have about a 70 percent chance of being able to cover lifestyle expenses without having to make adjustments to spending over time; if either of them experienced a modest long-term care event that ate into their resources, they would achieve only a 65 percent success rate.

Their miscalculations aside, the other part of Matthew’s and Elizabeth’s retirement problem was that they, like many other people, put others’ needs before their own, in traditional “sandwich generation” style.

When their kids asked for help with down payments on houses, they obliged. When Elizabeth’s mom needed in-home help for a few years prior to her moving in with them, they covered it. Consequently, these unforeseen events ultimately put their retirement in jeopardy.

Working toward a solution

Matthew and Elizabeth weren’t happy to hear they weren’t on track to retire, but they appreciated having a framework from which to choose their solution.

Ultimately, Matthew chose to work 30 hours per week so that his company could continue to pick up their health-care costs (saving them about $1,000 a month in Medicare-related costs). The part-time work allowed him to take off every Friday, and that gave him the added benefit of “test driving” retirement.

He and Elizabeth also decided to downsize their home and buy long-term care coverage. The LTC insurance assured that their children wouldn’t be faced with the possibility of someday having to assist them financially.

As with all best-laid plans and good intentions, sometimes things go awry with retirement planning. However, by exploring alternative saving tactics, you can still achieve your goal.

Investment Management

Offered by Jack A. Bass Managed Accounts

We can administer your account via the internet so that you can track your returns and only you can transfer funds from that account.

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( minimum 6 % annual return)  Or You Don’t Pay

Our stock market letter :  www.amp2012.com


Information must proceed action and that is why we offer a no cost / no obligation inquiry service.

Email info@ jackbassteam.com or

Call Jack direct at 604-858-3202 – Pacific Time 10:00 – 4;00 Monday to Friday

( same time zone as Los Angeles)

The main intention of our website is to provide objective and independent information that will help the potential investor to make his own decisions in an informed manner. To this effect we try to explain in a simple language the different processes and the most important figures involved in offshore business and to show the different alternatives that exist, evaluating their pros and cons.

On the other hand we intend – in terms of  offshore finance, bringing these products to the average citizen.

Do something to help yourself – contact Jack A. Bass now !

A final word of advice – information without action will produce nothing in the way of improved investment returns.

The US Energy Sector on the Verge of a Cataclysmic Default


The U.S. E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the U.S. economy, according to Paul Merolli, a senior editor and correspondent for Energy Intelligence, an energy sector news and analysis aggregator. Merolli’s report calls out the over-leveraged, under-hedged U.S. E&P sector, which has been trying to keep up appearances over the past 12 months by slashing operating costs and capex to keep production costs lower than oil prices.

But experts believe that lower costs and improving efficiency won’t be enough for the sector as it grapples with some $200 billion-plus in high-yield debt, which the U.S. E&P sector used to finance the shale oil boom. According to Standard and Poor’s, there have already been 19 U.S. energy sector defaults so far in 2015, while another 15 companies have filed for bankruptcy. The default category also includes companies that have entered into “distressed exchanges” with their creditors.

Moreover, a Nov. 24 report from S&P Capital IQ titled “A Cautionary Climate” shows that the total assets and liabilities of U.S. energy companies filing for bankruptcy protection have grown in each quarter of 2015, and the third quarter was no exception with assets totaling more than $6.2 billion and liabilities totaling more than $8.9 billion. Each quarter of 2015 was larger than the total for all U.S. energy bankruptcies in 2014.

Also see: Oil Patch Bankruptcies Total $13.1 Billion So Far This Year

U.S. E&P Sector: Junk rating

According to Energy Intelligence, Standard & Poor’s applies ratings to around 100 E&P firms. Of these, 77% now have high-yield or “junk” ratings of BB+ or lower, 63% are rated B+ or worse, and 31% or 51 companies are rated below B-. Companies rated B- or below are effectively on life support, while those rated C+ are “maybe looking at a year, year-and-a-half before they default or file for bankruptcy,” according to Thomas Watters, managing director of S&P’s oil and gas ratings, speaking to Energy Intelligence.

High-yield E&Ps are expected to see negative free cash flow of $10 billion during 2016, even after all the recent capex cuts and efficiency measures. Unfortunately, capital markets are closing rapidly to new E&P debt issues. Last year, the U.S. E&P sector raised $29 billion from 44 issuances of public debt in 2014, but this year only $13 billion has been raised across 23 issuances, almost all of which occurred during the first half of the year.

What’s more, the U.S. E&P sector is woefully under-hedged. Energy Intelligence’s data shows that small producers have 27% of their oil production hedged at an average price of $77/bbl, mid-sized firms have 26% hedged at $69, and large producers have just 4% hedged at $63.

U.S. E&P sector: a final lifeline

It is believed that the U.S. E&P sector will really start to cave in April when banks are due to start their next review of borrowing bases. Borrowing bases are redeterminedevery six months, and banks use market oil prices to calculate the value of company oil reserves, which companies are then able to borrow against.

Haynes and Boone’s Borrowing Base Survey is predicting an average cut of 39% to borrowing bases when the next round of revaluations take place. In September, The Financial Times reported on a research note from Bank of America which pointed out that only a fifth of “higher-quality” energy companies had used up more than half of their borrowing base capacity. For junk-rated companies, however, it’s a different picture. Citi points out that only 21% of the junk-rated energy companies it covers have any borrowing base capacity left at all.

So with borrowing bases set to fall at the beginning of next year and capital market access drying up, it looks as if many oil companies are going to find their liquidity deteriorating significantly going forward. Another source of concern for E&Ps and their lenders are price-related impairments and asset write-downs which have already amounted to $70.1 billion so far this year, compared to the $94.3 billion total for the previous 10-year period of 2005-14. And there could be further write-downs on the horizon:

“Year-to-date, there has been $70.1 billion in asset write-downs in 2015, approaching the $94.3 billion total for the previous 10-year period of 2005-14, according to Stuart Glickman, head of S&P Capital’s oil equities research. And he expects even more write-downs and impairments to emerge at year-end. “Companies are putting this off for a long as they can. You don’t want to be negotiating in capital markets with a weakened hand,”

“Chesapeake Energy, one of the largest US independent producers, shocked earlier this month by indicating a $13 billion reduction in the so-called PV-10, or “present value,” of its oil and gas reserves to $7 billion. Had Chesapeake used 12-month futures strip prices — instead of Securities and Exchange Commission-mandated trailing 12-month prices for PV values — the value would’ve fallen to $4 billion.” — Source: Energy Intelligence, “Is Debt Bomb About to Blow Up US Shale?

This conclusion is also supported by research from S&P Capital IQ:

“Using data from SNL Financial, we looked at natural gas-focused companies across the value chain to see whether there is a relationship between their level of revolver usage and their forward multiples. Within this subset of companies, exploration and production (E&P) companies have the greatest usage of their revolving credit facilities — 57% on average, excluding those with either no revolving credit or no usage on their revolving credit lines. As of late September 2015, this sub-industry also had a forward EBITDA multiple of about 6.2x.” — Source: S&P Capital IQ, “A Cautionary Climate.”

E&P sector waiting for a bailout

All in all, it looks as if the U.S. E&P sector has a rough year ahead of it, but for strong companies with investment-grade credit ratings, next year could become an “M&A playland” according to Energy Intelligence. The six-largest integrated majors together hold a war chest of some $500 billion, and there’s a further $100 billion in private equity sitting on the sidelines.

Whatever happens, it looks as if the U.S. E&P sector is about to undergo a period of significant change.

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Tax Planning  International Services  



Gold price falls due to stronger dollar and rates speculation

Industry analysts predict further drops in the run-up to next month’s meeting of the Federal Reserve

Half of Gold Output May Not Be ‘Viable’ as Price Sags: Randgold



USD/t oz. 1,056.40 -13.30 -1.24% FEB 16 11:20:11
JPY/g 4,148.00

Gold prices fell yesterday in response to the dollar’s bounce after healthy US economic data raised expectations of an interest rate rise next month.

Prices hovered just above their lowest level in nearly six years, as spot gold fell 0.4 per cent to $1,070.46 an ounce, perilously close to the near-six-year low of $1,064.95 it hit last week.

The latest drop came after it was announced that manufacturing output rose well above economists’ expectations last month. A gauge of business investment plans in America also painted an optimistic picture.

“The orders number is surprisingly positive and that’s what’s weighing on the market,” Rob Haworth, the senior investment strategist for US Bank Wealth Management in Seattle, told Reuters.

Gold has been put under pressure by increasing speculation that the Federal Reserve will raise US rates next month for the first time in nearly a decade. Such a move would increase the cost of holding non-yielding bullion, having a knock-on effect on prices.

But Commerzbank analyst Daniel Briesemann said geo-political issues had played a part and predicted further falls for the precious metal. “The Turkey-Russia tension has only had a limited impact and now gold is back on its downward trend mainly due to the dollar and rate hike expectations,” he said.

“Uncertainty before the next Fed meeting will remain high and prices could head even lower in the next couple of weeks.”

Traders said dealings were relatively quiet ahead of America’s Thanksgiving holiday today.

Gold price resumes downward trend

23 November

With speculation mounting over a possible Federal Reserve interest rate rise over the next few weeks, the gold price has resumed its downward trend after a brief rally at the end of last week.

Having fallen as low as $1,062 an ounce during trading last Wednesday, gold rallied on Thursday and was at one point a few dollars above $1,080. But after a dip back to below this level on Friday, the precious metal dropped again to below $1,070 in Asia overnight, where it remains rooted this morning.

Gold has fallen for 13 consecutive trading days out of 16 in Asia, while for each of the last five weeks in both London and New York it has closed lower than it started. The precious metal’s short-lived recovery last week now appears to be little more than a relief rally in a bear market.

The latest fall follows comments on Saturday from San Francisco Federal Reserve chief John Williams, who the Wall Street Journal reckons is a good barometer of wider monetary policy opinion. Williams says that if nothing happens to derail current economic trends, “there’s a strong case to be made in December to raise rates”.

Rate rises hurt gold and other non-yielding commodities relative to income-generating assets. More importantly, Williams’s statement has boosted the dollar – against which gold is typically held as a hedge – to a seven-month high.

Where is the gold price likely to go from here? OCBC Bank analyst Barnabas Gan has told Reuters that the current price ­– in fact any price around $1,080 – indicates that investors are “sitting on the fence as they await the [Fed] meeting in December”. As a result, he believes the downward trend in the price of gold is likely to persist over the next couple of weeks.

Almost all traders appear to be united in their view that the gold price will fall further if the Fed does decide to raise rates in the forthcoming weeks. Even Jason Hamlin, a self-designated “gold stock bull” who reckons that gold is currently “oversold”, writes on Seeking Alpha, the financial website, that the recent price drop is a sign that the metal “will test $1,000 in the near future”.

Hamlin says that if support for gold holds up in the event that the Fed decides to keep rates as they are – or makes it clear that the rates rise is a “one and done” increase (i.e. a modest rise that will be the last for some time) – then it is not unthinkable that a rally could push gold towards a substantially higher price of $1,200 an ounce.

Rangold Update

The more we continue to produce unprofitable gold, the more pressure we put on the gold price,” said Randgold Resources Ltd. Chief Executive Officer Mark Bristow. “In the medium term, it’s a very bullish outlook for the gold industry. The question is, how long are we going to supply it with unprofitable gold?”

Gold fell to a five-year low on Friday as a rising dollar and speculation that U.S. policy makers will boost interest rates next month curbed the appeal of bullion as a store of value. While industrial metal producers have promised output cuts, “we don’t have that psyche in the gold industry, we just send it off our mine and somebody buys it,” Bristow said in an interview in Toronto.

Gold miners buffeted by the drop in prices are shortening the life of mines by focusing only on the best quality ore, a practice known as high grading, which will restrict future output and support higher prices, according to Bristow. He said in a presentation to bankers in Toronto that the industry life span is down to about five years because companies have been aggressively high grading at the expense of future production.

“The industry has moved away from looking at optimal life of mines because everyone is trying to demonstrate short-term delivery,” he said. “Where is all this value that people promised in the gold industry? It’s not there.”

Traditionally, the industry would address this through “survival consolidation and mergers,” Bristow said.

He said earlier this month that Randgold continues to look for projects to buy, but has been frustrated by companies excessively pricing assets.

London-listed Randgold’s 10-year annualized return of 19 percent is the best performance among major producers tracked by Bloomberg.

Gold futures for February delivery declined 1.2 percent to $1,056.60 at 10:12 a.m. on the Comex in New York. Earlier, the price fell to $1,051.60 an ounce, the lowest since February 2010.



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