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- Coming Dollar Crisis = Lower Stock Prices + Much Higher Gold Prices
- Silver ishares SLV Anomolies Part 4- Guest post Video
- Juniors Update, Silver, Potash, Rare Earths
- REVERSE RAID ON THE CRIMEX - Silver Targets $37 OZ
- Silver Backwardation: Will There Be a Silver Short Squeeze?
- Capitalizing on the Rise in Silver Prices
- Anticipating a Decline in Crude Prices: Shorting Oil, Silver ETFs Should Be Profitable
- Pioneer Drilling: Good Growth Potential
- Yamana Gold: Underwhelming
- Gold on Track to Top All-Time High
- global pm demand surging, forecast to continue
- canada's rcm rationing silver maple leafs after 2010 demand surge
- Paging Blythe, 14,259 Silver contracts still standing...Houston you have a problem
- Refining question?
- Wayne Atwell: Mideast Mayhem to Drive Gold Higher
- Gold Forecaster - Why is the Dollar Falling in Gold and Currency Terms?
- Gold Adds 1% But Silver Unwinds Week-on-Week Jump as Oil Price Hit by Margin Hike…
| Coming Dollar Crisis = Lower Stock Prices + Much Higher Gold Prices Posted: 27 Feb 2011 04:38 AM PST With the U.S. dollar in decline Treasuries will also be panned. [As such,] cash is beginning to head toward real money in a flight-to-safety - and there is no way precious metals can absorb a panic-level volume of capital without a massive price adjustment. Words: 530 |
| Silver ishares SLV Anomolies Part 4- Guest post Video Posted: 27 Feb 2011 04:04 AM PST |
| Juniors Update, Silver, Potash, Rare Earths Posted: 27 Feb 2011 02:29 AM PST While we wait for the rest of the REAL OI data from the CRIMEX I would take a look again at these juniors below. I always keep the theme of diversification within my paper fiat portfolio. Read disclaimer please before proceeding. Always do your own Due Diligence. #1 pick Tinka Resources. Tickers TK.V and TKRFF Tinka is being artificially kept down right now. This is blatant Blythe style |
| REVERSE RAID ON THE CRIMEX - Silver Targets $37 OZ Posted: 27 Feb 2011 01:17 AM PST |
| Silver Backwardation: Will There Be a Silver Short Squeeze? Posted: 27 Feb 2011 12:57 AM PST Jeffry Chmielewski submits: Backwardation is a situation where the spot price of a commodity is higher than the forward futures price. Generally, the price of a commodity is more expensive in the future because of storage costs – and that situation is called Contango. Contango is the usual situation, and Backwardation is somewhat unusual, as it means that a premium is being paid to own a commodity now rather than in the future – and it often means there is a shortage of that commodity. For example, buying wheat for delivery in the future does no good if you are hungry today. You will gladly pay a premium to have the food now. Recently, Silver has gone in to backwardation. That is, the spot price of silver for immediate delivery exceeds the futures price. A common theory being thrown around is that there are shortages, and this is leading to the potential for Complete Story » |
| Capitalizing on the Rise in Silver Prices Posted: 27 Feb 2011 12:30 AM PST Avery Goodman submits: In my most recent article (on February 7, 2011), I spoke about the probability of a silver price explosion. The futures market was selling at remarkable levels of backwardation and the spot price was hovering in the range of $28 or so per troy ounce. I expected the price to rise substantially in the very short term future. That prediction was correct. Less than three weeks later, prices are now hovering in the $33 per troy ounce range, just shy of an 18% increase in price. That qualifies as incredible performance from any asset. Most astonishing about the price increase is that is hasn't done much to reduce the backwardation. The price difference has gone up to $1.17 per ounce, at its maximum, which is substantially higher than it was on February 7th. At some point, higher prices will pry physical silver loose from those holding it and stop the Complete Story » |
| Anticipating a Decline in Crude Prices: Shorting Oil, Silver ETFs Should Be Profitable Posted: 26 Feb 2011 11:51 PM PST Steven Jon Kaplan submits: There has been a lot of talk in the media regarding why crude oil prices will rise because of tension in Libya and elsewhere in the Middle East. The usual analysis will mention something about potential supply disruptions due to uncertainty about who is or who might be in charge, and what the future might hold for the region. The assumption is that, one way or the other, total supply is going to be curtailed, which will naturally lead to higher prices. However, those who are reasoning in this manner have not considered the true implications of recent developments in that region. For decades, governments in the Middle East, especially those of major oil-producing nations, have been able to conspire to keep total output restricted, in order to ensure artificially high prices. There is no question that Middle Eastern countries could increase their production of crude oil, as is evidenced Complete Story » |
| Pioneer Drilling: Good Growth Potential Posted: 26 Feb 2011 11:02 PM PST Michael Filloon submits: Commodities have seen a very fast move to the upside. Stabilization of the world economy has much to do with this, and it seems "The Great Recession" has passed. Since this has happened growth is being seen in many sectors, and as the United States has feared deflation, Bernanke and company are doing their best to do the opposite, create inflation. This seems to be with good reason, as one only has to look at Japan's battles with deflation to see what this can do to a country's economy. Complete Story » |
| Posted: 26 Feb 2011 08:50 PM PST Try as we may we just cannot get excited about Yamana Gold Incorporated (AUY) it is range trading at a time when gold prices are close to hitting new highs. This stock touched $14.00 in November 2009 and here we are as of Friday closing at $12.60. Still, Thursday, Yamana Gold published figures regarding its mineral reserves so we will take a quick look at the highlights. Yamana's mineral reserves and mineral resources for the year ended December 31, 2010. The Company's total proven and probable mineral gold reserves increased by 4.5 million ounces to 22.1 million ounces, which represents a 26% increase over the previous year. Measured and indicated gold resources increased by 12% from 2009 to 14.5 million ounces. Silver and copper proven and probable mineral reserves increased by 3% and 9%, respectively. Complete Story » |
| Gold on Track to Top All-Time High Posted: 26 Feb 2011 08:42 PM PST Tim Wood submits: Gold priced in a basket of commodity currencies is on track to set a new all-time inflation-adjusted monthly average high for February 2011. Commodity currency gold will top the previous all-time high set 31 years ago in January 1980. MineFund's Commodity Gold Price Index (CGX) prices gold in the most liquid "commodity currencies". The currency basket is weighted by the value of exports of ores and beneficiated ores from the issuing countries. The basket consists of the Canadian dollar, Australian dollar, South African rand, Brazilian real, and Chilean peso. click to enlarge images The new all-time high comes despite the index's heavy weighting toward the Canadian and Australian dollars which remain quite Complete Story » |
| global pm demand surging, forecast to continue Posted: 26 Feb 2011 05:39 PM PST http://www.resourceinvestor.com/News...Voracious.aspx The World Gold Council reports that the increase in investment demand is a "global phenomenon," reporting a 19% year-on-year rise across the world in its most recent report this morning. In China alone, gold investment demand jumped 70% last year as Chinese people bought gold as a store of value. Demand is projected to grow a further 40% to 50% this year and jewelry demand will expand by 8% to 10% this year. Gold imports by India, the largest buyer of gold in the world, climbed to a record of 918 metric tonnes in 2010, driven by a surge in jewelry demand with Indians continuing to buy jewelry as a store of value. Reuters quoted a leading Chinese executive from Industrial and Commercial Bank of China (ICBC), the world's largest bank by market value, as saying that demand for gold was growing at a voracious pace due to surging inflation. Zhou said that the huge increase in Chinese demand seen last year would happen again in 2011 due to a "choppy stock market" and concerns about how rising interest rates will affect property markets. Perhaps most importantly and rarely mentioned in the western media is the fact that the Chinese government is encouraging their citizens to buy physical gold and silver bullion having banned gold ownership from 1950 to 2003 (see video). "Unlike the property market, investment in the gold sector is something the government is encouraging," Zhou said. Zhou said there was also voracious demand for silver, with ICBC bank alone selling about 13 tonnes of physical silver in January alone, compared with 33 tonnes in the whole of 2010. Were that demand to continue then demand for silver from ICBC alone could be as high as 156 tonnes this year. This would be a 370% increase on 2010. Given the degree of demand for silver in China and internationally the forecast that silver could reach $36 an ounce this year, by Bloomberg analysts, is looking very conservative. Those continuing to call gold and silver "bubbles" continue to ignore the facts and the many, many extremely important developments in the gold and silver bullion markets. Gold Gold is trading at $1,377.75/oz, €1,017.01/oz and £854.68/oz Silver Silver is trading at $30.59/oz, €22.58/oz and £18.98/oz. Platinum Group Metals Platinum is trading at $1,825.50/oz, palladium at $835.00/oz and rhodium at $2,400/oz. News (Bloomberg) -- China Investment Gold Demand to Grow 40%-50% This Year, WGC Says China's gold investment demand will grow 40% to 50% this year, Wang Lixin, the China representative for the World Gold Council, said today. The country's jewelry demand will expand by 8% to 10% this year, he said. (Bloomberg) -- China's Gold Investment Demand Jumps 70%, Council Says Gold investment in China jumped 70% last year and consumption by the jewelry sector gained to a record as investors stepped up purchases of the precious metal as a store of value, said the World Gold Council. Investment demand jumped to 179.9 metric tons last year, surpassing Germany and the US, as buyers sought out gold bars and coins, according the London-based industry group. Demand from the jewelry sector was 400 tons, it said. Gold reached a record $1,431.25 an ounce on Dec. 7 and soared nearly 30% last year as the dollar dropped and investors sought a store of value amid currency debasement. China's consumer prices increased 4.9% in January from a year earlier, exceeding policy makers 4% inflation ceiling for a fourth month, data showed this week. "The main motivation behind this demand has been concern over domestic inflation pressure and poor performance of alternative investments, combined with expectations of further gold price gains," the council's report said. Bullion gained 0.3% to $1,379.50 at 3:34 p.m. in Shanghai. Consumption in China, the second-largest buyer, may gain 15% in the first half, fueled by growing demand for alternative investments and a hedge against inflation, the China Gold Association's deputy chairman Zhang Bingnan said last month. China displaced South Africa as the world's biggest gold producer in 2007. Imports through October rose almost fivefold from the total shipped in the previous year to 209 tons, according to the Shanghai Gold Exchange. Mine output reached a record 340 tons last year, the China Gold Association said. The Industrial and Commercial Bank of China Ltd, the world's biggest lender by market value, started physical-gold linked savings accounts in December in an initiative with the World Gold Council. Account openings surpassed 1 million with over 12 tons of gold stored on behalf of investors, it has said. (Bloomberg) -- Gold, Silver 'Appealing' as Long-Term Investments, Burns Says Gold and silver look "extremely appealing" for long-term investments as world currencies struggle to maintain their value, Pan American Silver Corp. Chief Executive Officer Geoff Burns said. Pan American expects Argentina's Chubut province to overturn a ban on open-pit mining this year to be able to develop the company's Navidad silver deposit, Burns said today on a conference call. (Bloomberg) -- Pan American Silver Shifts Assets to Canadian Dollars Pan American Silver Corp., the world's fourth-largest silver producer, said it's shifting its currency holdings into Canadian dollars, betting the US dollar may fall further. The world's reserve currencies are struggling to maintain their value amid "ridiculous" debt levels, Chief Executive Officer Geoffrey Burns said today on a conference call with analysts. Gold and silver look "extremely appealing" as alternative long-term investments, he said. "We diversified some of our currency holdings into Canadian dollars away from US dollars to provide more stability in the event we do see continued weakness in the US dollar," Burns said. "It's not just the US dollar -- the euro, the Japanese yen are going to have extreme difficulty hanging onto their long-term values as a commodity of trade." The dollar fell against most of its major counterparts today, while gold rose to the highest price in almost five weeks on speculation that the accelerating pace of inflation will boost demand for the precious metal as an investment hedge. Wholesale prices rose for a seventh straight month in the US, led by higher prices for fuel. Gold futures for April delivery rose $1, or 0.1%, to settle at $1,375.10 an ounce at 1:34 p.m. on the Comex in New York. Silver futures for March delivery fell 6.7 cents, or 0.2%, to $30.629 an ounce. Vancouver-based Pan American expects Argentina's Chubut province to overturn a ban on open-pit mining after local elections in March, allowing the company to develop its Navidad silver deposit, Burns said. The company's silver output will fall to 23 million ounces this year from 24 million ounces in 2010, he said. Industria Penoles SA, BHP Billiton Ltd. and KGMH Polska Miedz SA are the world's largest silver producers. (FT) -- Investors look for a silver lining The mint ratio, which shows how many ounces of silver it takes to buy an ounce of gold, is close to its lowest levels since 1998, currently about 45. Why? With gold near a record high the simple explanation is that silver has been performing even better of late, driven by increased demand rather than any supply contraction. Silver tends to hang on to gold's coat tails when gold is stronger, during periods of inflation or political turmoil, perhaps. But gold's recent gains have come at a time of improving economic fundamentals, so silver, which has a tight industrial demand correlation, has enjoyed extra impetus. Another boost has come from retail investors who would rather spend their $200 on roughly five 1-ounce American Eagle silver coins, than one 10th-of-an-ounce gold coin. Doubtless the "penny-share syndrome" also applies a bit here too – when smaller priced assets are perceived as providing better opportunity for gains. This is possibly why the US mint sold a record 6.4m Eagle silver coins in January, a 78% increase on the previous year, when silver was more than 40% cheaper. Gold sales were up 57% over that period. (Bloomberg) -- Impala Platinum Sees 2011 Palladium Deficit of 560,000 Ounces Impala Platinum Holdings Ltd. said global palladium demand may outstrip supply by about 560,000 ounces this year. Platinum supplies may exceed demand by about 20,000 ounces in 2011 while the rhodium market may have a 55,000 ounces surplus, Impala said in a copy of a presentation posted on its website today. (Bloomberg) -- Gold Jewelry Demand Is 'Still Very Strong,' Council's Grubb Says Gold jewelry demand is "still very strong," after rising last year, World Gold Council managing director Marcus Grubb said on Bloomberg TV today. "I certainly think we will see another very strong year for gold" this year, he said. (Bloomberg) -- Gold Jewelry Demand in India is Strong, World Gold Council Says Gold demand in India for jewelry is "outstanding" and high prices are no longer "a barrier" for consumers in the world's largest user of bullion, according to Ajay Mitra, managing director of the World Gold Council for India and the Middle East. Demand will stay "robust" this year, he told reporters in Mumbai today. (Bloomberg) -- Gold Imports by India Reach Record on Jewelry Sales Gold imports by India, the largest user, climbed to a record in 2010, driven by a surge in jewelry demand and amid expectations that the 10-year rally in prices would extend, according to the World Gold Council. Purchases totaled 918 metric tons, according to provisional data released by the producer-funded group today. That exceeds the projection of about 800 tons made last month by Ajay Mitra, the group's managing director for India and the Middle East. Bullion advanced 30% last year, reaching a record $1,431.25 an ounce on Dec. 7, as investors bought the metal as a protector of wealth. Jewelry demand in India jumped 69% in the year to the highest ever, helping drive global demand to a 10-year peak, according to the council. "India was the strongest growth market in 2010," said the report. "The rising price of gold, particularly in the latter half of the year, created a 'virtuous circle' of higher price expectations among Indian consumers, which fuelled purchases, thereby further driving up local prices." Fourth-quarter imports rose to 265 tons from 204 tons a year earlier, the group said. Jewelry demand gained 47% to 210.5 tons and investment demand grew 15% to 74.40 tons. Total demand in the period climbed 37% to 284.9 tons, according to the report. Consumer demand for bullion in India rallied 66% in 2010 to 963.1 tons by volume from a year earlier and more than doubled in value to $38.2 billion, the council said. (Reuters) -- China gold demand growing at "explosive" pace: ICBC Demand in China for physical gold and gold-related investments is growing at an "explosive" pace and its appetite for the yellow metal is poised to remain robust amid inflation concerns, said an Industrial and Commercial Bank of China (ICBC) executive. ICBC (1398.HK)(601398.SS), the world's largest bank by market value, sold about seven tonnes of physical gold in January this year, nearly half the 15 tonnes of bullion sold in the whole of 2010, said Zhou Ming, deputy head of the bank's precious metals department on Wednesday. "We are seeing explosive demand for gold. As Chinese get wealthy, they look to diversify their investments and gold stands out as a good hedge against inflation," Zhou told Reuters. "There is also frantic demand for non-physical gold investments. We issued 1 billion yuan worth of gold-price-linked term deposits in 2010, but we managed to sell the same amount over just a few days in January this year," Zhou said, adding that such deposits would easily exceed 5 billion yuan ($759 million) this year. Gold imports into China soared in 2010, turning the country, already the largest bullion miner, into a major overseas buyer for the first time. The surge, which comes as Chinese investors look for insurance against rising inflation and currency appreciation, puts the country on track to overtake India as the world's top gold consumer and a significant force in global gold prices. Gold prices jumped 30% in 2010 and struck an all-time high of $1430.95. Spot silver surged 83% last year and is currently hovering at around $30 per ounce. Zhou said China's gold demand could grow at a stronger pace this year compared with 2010, as a choppy stock market and moves by Beijing to rein in property speculation and purchases means more investors will pile their cash in bullion investments. "Unlike the property market, investment in the gold sector is something the government is encouraging," he said. Beijing has encouraged retail consumption and announced last August measures to promote and regulate the local gold market, including expanding the number of banks allowed to import bullion. "China has a centuries-long cultural attraction to gold and because we have started at such a low base, I think demand growth will likely stay strong for quite some time," he said. Zhou said there was also voracious demand for silver, with the bank selling about 13 tonnes of physical silver in January alone, compared with 33 tonnes in the whole of 2010. The scale of China's gold demand, which has increased on average at a double-digit clip over the past decade, has caught the market by surprise. Data showed China imported 209 tonnes of gold the first 10 months of last year, versus 333 tonnes by India for the whole year. The bank on Tuesday launched its second physical gold investment product, which sells gold bars to investors, which can be resold for cash through ICBC based on real-time gold prices. The WGC said ICBC's introduction of this gold investment could lift China's gold retail investment by 10 to 15% in 2011 from about 170 tonnes last year. (Bloomberg) -- US Mint's Silver Suppliers Treasure Precious Metal's Rally The value of contracts for supplying silver to the US Mint has surged along with the precious metal's rise in the world market, according to data compiled by Bloomberg. The federal agency that makes coins for circulation and investment paid at least $693.1 million to two of its main silver suppliers in the 2010 fiscal year, a 66% increase over 2009, the data show. "For a small company, the government's a good long-term customer to have," Tom Power, chief executive officer of Sunshine Minting Inc., said in a Feb. 4 telephone interview. The Coeur d'Alene, Idaho-based company is the Mint's primary supplier of silver blanks for bullion coins, which are sold to investors. The increase in payments to Sunshine Minting and Stern Leach Co. of Attleboro, Massachusetts, a unit of London-based Cookson Group Plc, has coincided with silver's rally as investors bought precious metals in the economic decline and to protect against Europe's financial crisis. Spot silver has more than tripled to $30.785 an ounce through Feb. 15 from $8.967 on Nov. 20, 2008, its lowest settlement in the last five years. Over the past 11 years, the US Mint has spent at least $2.1 billion on contracts with its two main suppliers of silver blanks, or unstamped coins, according to data compiled by Bloomberg. About 80% of that was paid to Sunshine Minting. Little Competition Sunshine Minting works on five-year rolling competitive-bid contracts with the Mint, said Power. All 58 unique contracts the agency exercised in fiscal year 2010 to buy silver from the Idaho company were open to competition, according to the Federal Procurement Data System. In 24 cases, Sunshine was the only bidder, the data show. "The production of blanks for the Mint is not easy, so there's not a lot of competition," Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois, said in a telephone interview Feb. 10. "It's only two or three companies that have the equipment to do this and are willing to jump through all the loops that the US Mint wants," such as product specifications and payment schedules, he said. The Mint purchases silver on the open market "at prevailing prices" to produce bullion, Mint spokesman Michael White said in an e-mail Feb. 8. "The volume of bullion coins, gold and silver, produced and sold by the US Mint are at peak levels since 2008," White said. "As the price of gold and silver fluctuate, the value of blanks orders reflects that fluctuation." The Mint sold 35.8 million ounces of gold and silver bullion coins last year, up 30% from 2009, according to the agency's annual report. Sunshine's Rise Sunshine Minting's sales to the Mint totaled $10.2 million in fiscal year 2000, the start of a rapid escalation in federal contracts that reached $579.1 million last year, according to the data compiled by Bloomberg. Stern Leach, another major silver supplier to the Mint, experienced a similar upswing in sales to the federal government. The company's contracts totaled $114 million last year compared with $70.4 million in 2009 and $10.7 million in 2005. A spokesman for Stern Leach in Attleboro, Massachusetts, who refused to be identified, said Feb. 3 it is company policy to decline interviews with the news media. Bullion Boom The Mint's sales of silver bullion coins jumped 77% to $660 million in fiscal year 2010, according to the annual report. Bullion products made of gold brought in $2.2 billion last year, up 69% from the previous year. "They try to balance their supply and demand, and demand has been very, very strong, so of course they buy more," Kaplan said. "Right now they're making a fortune." White said the Mint is required by law to pass its metals costs onto the buyers of products such as bullion coins so that it can operate at no net cost to taxpayers. "By law, the US Mint must sell silver bullion coins at a price equal to the bullion value of the coin at the time of the sale, plus production costs," White said. The agency's more public role is to produce coins and sell them to the Federal Reserve's district banks at face value, yielding a so-called seigniorage profit that is sent back to the Treasury's general fund. Higher metal costs and a shift to production of less profitable, lower denomination coins brought the Mint's seigniorage from circulation down 30% in fiscal year 2010, from $428 million to $301 million, according to its annual report. |
| canada's rcm rationing silver maple leafs after 2010 demand surge Posted: 26 Feb 2011 05:19 PM PST http://www.bloomberg.com/news/2011-0...mint-says.html Sales of 1-ounce Maple Leaf silver coins may have touched a record in 2010, according to the Royal Canadian Mint. About 10.3 million ounces were sold in 2009, and the mint is "on pace" to surpass that level for 2010, Alex Reeves, the agency's communications manager, said yesterday. Last year's sales data will be released in late March, Reeves said. "Demand has exceeded supply, and we are trying to be fair to all our customers by putting caps on the size of the orders," Reeves said. "We are not going to sell all of our silver to one distributor." Reeves declined to comment on the specifics of the caps. Silver has almost doubled in the past 12 months, touching a 30-year high of $31.79 an ounce in New York this week. The U.S. Mint sold 6.4 million ounces of silver in January, the highest monthly total since sales began in 1986. |
| Paging Blythe, 14,259 Silver contracts still standing...Houston you have a problem Posted: 26 Feb 2011 04:04 PM PST Its late. Its 1 am. Was out all day and night at my child baptism. We still have 14, 259 contracts standing. The prelim CRIMEX reports are a joke. 4187 is NOT whats left standing, don't listen to MORONS who cant read a CRIMEX report like user 'iFlash.' I will report back on Sunday afternoon with the latest and greatest. Although I doubt we will have enough standing to break the bank, I can |
| Posted: 26 Feb 2011 07:58 AM PST Let's say you have a 40% silver 1965 - 1969 Kennedy half dollar and you wanted to end up with just the silver. How does the refiner get the other 60% out of the mix to create a .999 ingot out of these? I guess that question could apply to just about any coin. I can easily see how you turn 24k gold or .999 silver into 90% or 40% coin blanks (just melt and add in the other metals to make the desired alloy), but I can't get my head around how you reverse the process? Is it different melting points? Maybe melt, then a centrifuge? Addition of chemicals to leach out the PM? Other process? Thanks. |
| Wayne Atwell: Mideast Mayhem to Drive Gold Higher Posted: 26 Feb 2011 07:48 AM PST Source: Brian Sylvester of The Gold Report 02/25/2011 The Gold Report: In a recent interview with Bloomberg you said, "Gold's gotten stronger because it's no longer weak." Can you explain that concept to our readers? Wayne Atwell: Commodities and securities tend to trade on momentum. Gold had been exceptionally strong, but a lot of investors became nervous because gold appeared too strong and people started taking profits. Then the dollar strengthened and we received some more good economic news, which drove gold down again. Gold has corrected about 7% from its high late last year. Once it breaks through its support level, it could go meaningfully lower. It was in a negative technical pattern and once there is a certain technical pattern on the charts investors start dumping gold and go short. Some people don't believe it, but many people invest based on charts and technical patterns. If enough people invest enough money, then it works. Gold was on the verge of breaking down further when the Middle East uprisings began and investors became a bit anxious. So far, the citizens of two Arab countries have overthrown their governments. It's been relatively peaceful, which is great, but you can envision a scenario in which it wouldn't be peaceful. Saudi Arabia is likely to have some difficulties that may or may not result in a change of government, and now we're hearing about protests in Iran. The probability is high that both those countries are going to have additional issues. They may not, but unrest in the Middle East has turned the gold price around. TGR: That parallels what you've described in the past as an "event-driven market" for gold. Would further unrest in Arab countries push the gold price back above $1,400/oz.? WA: I tend to think so, I guess it depends on what form that unrest takes. Obviously, the government changes in Egypt and Tunisia were relatively peaceful. But the uprising has already spread to Yemen and Saudi Arabia—and now there's talk of revolts in Jordan and Iran. Saudi Arabia, as you're probably aware, is responsible for about 11%–12% of global oil production. God forbid that country has a problem—that could cause a real crisis. Fighting in the Middle East is certainly an event that could push gold meaningfully higher. You will remember what happened in October 1973 when the Arabs cut off oil to the West and the oil price went through the roof. It caused massive anxiety and a very serious recession. TGR: What are some other events that you anticipate could move the gold price this year? WA: In terms of events, I'm worried about the sovereign debt situation in Europe. The European Union (EU) has dealt with liquidity issues for both Iceland and Greece into 2013, but it hasn't solved the underlying problem; it's just dealt with the short-term issue. Unless these countries start balancing their budgets, which is unlikely—come 2013, the same problem will resurface. A sovereign default in Europe is highly probable. Spain has an unemployment rate of +20%, which is just huge. That's an issue, too. In the U.S. a number of municipal governments are very deeply in the red. They haven't funded their pensions and healthcare for their municipal workers. There's a reasonably high chance that one or more of these municipalities could fail, which would cause a high degree of anxiety and force investors to dump municipal bonds, which again would result in investors' flight to gold as a safe haven. TGR: In an interview with BNN, you talked about the Chinese and American economies "laying the groundwork for inflation." How are these countries doing that and what do you believe is the timeframe for dramatic inflation increases in both countries? WA: I've been going to China for 30 years and I have seen a phenomenal change. I'll just throw out a few numbers to put the country in perspective. China consumed about 3%–4% of the world's commodities in 1985 and now consumes 35%–45% of global commodities, which is astounding. To put that in context, from 2000–2010, global steel consumption grew at a rate of 5% a year. Chinese steel consumption has grown at a compound rate of 17%. So, in 2000, China actually produced 127 million tons (Mt.) of steel; in 2010, it produced 626 Mt. of steel. Basically, the country grew its steel industry by 500 Mt. in 10 years, providing the bulk of global growth. On average, commodity-consumption growth averages 2.5%, yet here we have steel growing at 5% over a 10-year period and China's steel consumption growing at 17%. It's unprecedented. That, in turn, has caused a shortage of metallurgical coal. Met coal is breaking out and will probably reach a new high shortly because China has gone from being an exporter to an importer. Iron ore is now within about $10 of its all-time high. About 10 years ago, China was about 70% self-sufficient in terms of iron ore; now it's 30% self-sufficient, so China is driving up the iron ore price, as well. TGR: It's a similar story with copper. WA: Yes, copper made a new high last week and China consumes 38% of the world's copper; it's only 15% self-sufficient, so 85% of its copper comes from offshore. The rapid growth in China is being driven by the need to move people from the country into the cities, and the country consumes a lot of material when it constructs new buildings, rail lines, power facilities, bridges and ports. China is transforming from an agrarian to an urban society, having moved about 15 million people per year into cities over the last 15 years. It'll likely have to do that for another 10, maybe 20 years. China is only 43% urban but it will likely become at least 60%, maybe even 70% urban within 20 years. This is putting a strain on the global supply of industrial materials—prices for many of which are at or close to all-time highs, which is inflationary. The mining industry has a pattern of looking for new mines and developing new properties but when you grow at a rate that's faster than the historical norm, it puts extra strain on the industry. We're not going to run out of these materials but we must go look in more remote locations to find the materials. TGR: What about inflation in the U.S.? WA: Here in the U.S., the government is out of control. Our government spending is frightening. Last year, we had a $1.6 trillion deficit. It's coming down a bit this year, but it's still going to be very high. The deficit is about 10% of GDP; historically, it peaked at 4%. Government spending is about 25% of GDP. We haven't seen these numbers since the end World War II. We're in uncharted territory—the government is spending too large a share of our GDP. The interest on our debt, as forecast by government budget office, is going to go from $350 billion this year to $900 billion within five years. Forget healthcare, social security, Medicare or Medicaid—we're going to add +$500 billion to the interest expense. This will drive the dollar down and result in serious inflation. In the case of China, industrial demand is pushing up commodity prices and creating inflation. As far as the U.S. is concerned, you can't have this pattern of government spending in the reserve currency of the world without causing serious problems. There is every reason for investors to go into the gold market to put a certain percentage of their assets in gold for protection against super inflation. TGR: Do you think these factors will push gold to an all-time nominal high in 2011? WA: Gold made a new high late last year. It has made a new high 10 years in a row. We think it will make a new high of $1,600 this year and $2,000 within the next one to three years. We suggest buying on a correction; it probably won't go much lower. We believe holding 5%–10% of one's assets in gold makes sense. TGR: Among other financial services, Casimir Capital puts together financings for companies, many of which are junior miners. Why does Casimir focus on the junior mining segment of the market? WA: I wrote a piece on the junior gold industry recently, which makes a number of points. One is that the denominator is obviously much smaller for the gold juniors. If both Newmont Mining Corp. (NYSE:NEM) and a junior gold exploration company find a 1 million-ounce (Moz.) gold deposit, it's going to have a much more significant impact on the junior explorer's share price. Both Newmont and Barrick Gold Corporation (TSX:ABX; NYSE:ABX) produce 5–7 Moz. gold annually, so only about 5 out of every 100 exploration discoveries is really of interest to them because most of the very large gold properties have already been found. It's extremely difficult to find an exciting new gold property. So, if you're spending money on gold exploration, the probability is you're going to find a small gold deposit. But in many cases, the gold majors are prospecting for new exploration properties in their corporate finance department. They're looking at and frequently buying intermediate or small gold companies with substantial gold deposits that the majors can develop themselves. TGR: Yes, the gold majors essentially use the junior explorers as their exploration arm. WA: Exactly. It's like their exploration department. Gold deposits will be in production anywhere from 5–20 years. They're generally small. Majors have to replace their depleting resources, plus people expect growth. It's very expensive for a major to go out and find, and then develop gold properties. If, however, a junior develops a 0.5 Moz. deposit, it doesn't have to build as much infrastructure. Developing a property as a junior is just a lot less expensive than it is as a major. TGR: But they're selling the gold for the same price. WA: Exactly. The index we put together last year showed the juniors appreciated about 49% in 2010, whereas the majors were up roughly 27%. TGR: Could you tell us about some of the companies you've recently helped finance? There are a number of promising gold companies on that list. WA: Eastmain Resources Inc. (TSX:ER) is a name that we cover. None of us owns it, as it's a banking client. The company's located up in Canada and has 12 different deposits. It's going to spend maybe $9 million on exploration this year. Eastmain published some data late last week on its drill results, which was exciting. The company's been a little slow to announce new resources, but it's due to provide an NI 43-101 here shortly. When you look at what the company's announced and connect the dots, it's likely that several of these deposits will turn into something pretty exciting. Eastmain's goal is to find a resource, start the environmental permit application process and sell; it's not going to develop these deposits. It'll simply define, develop and sell the property. One scenario could be that Eastmain gets acquired, spins many of its assets into another company and starts all over again. TGR: Much like Virginia Mines Inc. (TSX:VGQ) did a few years ago when it sold the Eleonore gold deposit in north-central Quebec to Goldcorp Inc. (TSX:G; NYSE:GG). WA: Exactly. TGR: What are some other companies you cover? WA: Golden Predator Corp. (TSX:GPD) is pretty interesting. Again, it's a banking client and none of us owns it. It's a very exciting company with a number of deposits in the Yukon, which is a rather new territory for gold exploration in the sense that the Yukon has not had the money spent on it that a lot of the places in North and Central America have. I don't want to say it's virgin territory but, to some extent, it's undiscovered. In the Yukon, there's a lot of what we refer to as "placer gold." If you have a gold deposit and it gets worn and weathered, the flakes and pebbles roll into the creeks and rivers. Then miners and prospectors mine the gold out of the creeks. The point is that if it's in the streams it came from somewhere else. So, they follow the riverbeds and find out where the gold stops being attractive and chances are that's pretty close to where it came from. A lot of deposits are being "reversed engineered" by virtue of the gold in the streams. Golden Predator has uncovered some very exciting properties but it's early days for the company. It's got some huge properties that have a great deal of potential. Golden Predator is a pretty exciting company. TGR: Golden Predator has some royalties, too. WA: Right. Golden Predator has a number of properties that it's sold or made available to other miners on which GPD gets paid a royalty. That's going to provide some nice value for the company, as well. TGR: What are some other names you cover that you believe have some promise? WA: We think Richmont Mines Inc. (TSX:RIC; NYSE.A:RIC) up in Canada is pretty interesting. It's not a banking client; it's an older company that's been mining gold since the 1990s. The former management wasn't very aggressive, so growth was modest at best. The story wasn't too exciting. The company now has new management and some pretty interesting drill results. It has about three or four irons in the fire. It's just put out some numbers on one property called Wasamac that look pretty interesting. With Wasamac, we think Richmont could add meaningfully to its resource base. If it could double or triple the resource, we think it'll put that into production. It's a pretty small company with 85,000 oz. (Koz.) of production. With the Wasamac discoveries, there's a reasonably good chance the company could ramp-up to 150 Koz. And Richmont's board has set a goal of adding a 100 Koz./year acquisition. So, here's a sleepy company that hadn't been setting the world on fire but now has new, more aggressive management and numerous irons in the fire. We think one or two of those will turn into something pretty exciting. It's quite a good story that hasn't gotten a lot of attention. TGR: Before we let you go, could you give us your outlook for gold over the next few months? WA: Let's go back to the event-driven motivation for moving the gold price. The events we don't yet know about will likely determine the direction of the gold price. The underlying momentum is positive when you look at the U.S. budget, government spending and Europe's sovereign debt problems. And the problems that governments have created will only get worse as populations age and Social Security obligations become greater—that's certainly a problem. We're all aware of those slower-moving issues, but I think what drives gold in the short term are events in the Middle East and any sovereign debt default. Unless there's a major unexpected event, we'll probably see the gold price break out to a new high in the second quarter. We're roughly halfway through the first quarter now, so we look for the gold price to be rangebound the next two to six weeks before breaking out in the second quarter. But it's subject to material impact by unexpected events, which always have a way of happening. TGR: Thank you for talking with us today, Wayne. Mr. Atwell has more than 35 years of experience in the field of investment analysis for the metals and mining industries. He currently serves as a managing director of Casimir Capital L.P. From 1991–2006, Mr. Atwell was a managing director at Morgan Stanley where he was the Global Group Team leader in equity research and built and managed a 12-member global metal and mining team of analysts. From 1983–1991, Mr. Atwell was a VP at Goldman Sachs covering the metals and mining industries. He was also a VP and principal in the privately held Davis Skaggs, a regional research firm, from 1977–1983. And from 1969–1977, he worked for Merrill Lynch as a senior metals and mining analyst. Mr. Atwell has toured 200 mines and 300 steel mills on six continents. He was selected as one of the 10 best buy-side stock pickers by Institutional Investor magazine several times and was rated as one of the top analysts in metals and mining by Institutional Investor and Greenwich Associates for more than 20 years. Mr. Atwell graduated from Pennsylvania State University in 1969 with a degree in mineral economics. He earned his MBA from the Stern School of Business at New York University in 1974. Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page. DISCLOSURE:
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