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Obama Wins; Gold And Silver Jump 2 and 3 Percent

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Published : November 07th, 2012
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Category : Market Analysis





Today’s AM fix was USD 1,730.50, EUR 1,345.86, and GBP 1,080.75 per ounce.
Yesterday’s AM fix was USD 1,691.75, EUR 1,321.58, and GBP 1,058.80 per ounce.

Silver is trading at $32.01/oz, €25.18/oz and £20.12/oz. Platinum is trading at $1,559.50/oz, palladium at $614.00/oz and rhodium at $1,120/oz.

Gold soared $32.10 or 1.91% in New York yesterday and closed at $1,716.20. Silver surged to a high of $32.25 and finished with a gain of 2.76%.

Gold in USD – Gold’s Performance in the First 4 Years of Obama’s Presidency

Gold fell slightly in Asia prior to eking out further gains and rising above $1,730/oz in early European trading after President Obama was confirmed as the next President of the U.S.A.

Obama’s election means that quantitative easing, ultra loose monetary policies and currency debasement are set to continue in the world’s number one economy which is bullish for gold – and indeed silver.

Precious Metals Performance in USD in the First 4 Years of Obama’s Presidency

The scale of the economic, fiscal and monetary challenges in the U.S. are so great that whether Obama or Romney was elected, gold and silver were set to continue in their bull markets.

However, some market participants believe that Romney would have been more conservative - fiscally and monetarily.

Romney may have talked a good game rhetorically but there may not have been a whole lot of difference in the fiscal and monetary approaches of both men and any differences would likely be a matter of degree.

U.S. and global economic data suggests that we are on the brink of a severe global recession and or Depression and there is a real sense of rearranging the chairs on the Titanic about the U.S. election.

Chart via SmartKnowledgeU via Gold Seek (see Commentary)

US Consumer Credit numbers for September are released at 2000 GMT and expected at $10.6 billion.

Eurozone contagion risk remains real as seen in both Spain and Greece. The general strike continues in Greece as MP’s debate and are set to vote this evening on the 13.5 billion euro austerity plan.

November ushers in the festival season in India with Diwali and during this time many weddings are planned. Physical buying in Asia is expected to pick up due to the consumer demand in India and as China again begins to stock up for Christmas and the Chinese New Year.

Chart via SmartKnowledgeU via Gold Seek (see Commentary)

Investors should prepare for rising prices and more expansionary monetary policy now that President Barack Obama has won re-election, investor Jim Rogers told CNBC on news of the election.

The co-founder with George Soros of the Quantum Fund said he expected Obama’s policies to drive up commodities and drive down the U.S. dollar.

As the Federal Reserve moves to ‘stimulate’ a stalled economy through debt purchases, Rogers says markets should expect the status quo to remain the same.

“If Obama wins, it’s going to be more inflation, more money printing, more debt, more spending.” Rogers told CNBC, saying he expected to sell U.S. government debt and buy precious metals, such as silver and gold.

“It’s not going to be good for you me or anybody else.”

“It looks to me like the money printing is going to run amok now, and spending is going to run amok now,” Rogers stated. “I have to invest based on what’s happening and not what I would like.”

Rogers said that he didn’t vote for either Romney or Obama, saying that “they’re both evil as far as I’m concerned.”

With the re-election of Obama absolutely nothing has changed and we are likely to see precious metals perform as they did in Obama’s first term – gold rose 136% and silver 223% (see chart and table). Much of those gains were seen in the first 2 months, November and December 2008, after Obama was elected and prior to him taking office and we may see that again given the strong seasonal factors and very strong fundamentals today.

With regard to the economy, Obama is strong on hope which he has yet to deliver.

As ever we believe it is best to hope for the best but be prepared for less benign scenarios.

Cross Currency Table – (Bloomberg)

Moscow (AP) -- Divers Find Sunken Russian Ship Carrying Gold Ore
Divers have found a Russian ship carrying 700 tons of gold ore that sank off the Pacific coast last month. The freighter Amurskaya had been missing since Oct. 28 when it sent a distress call from the Sea of Okhotsk, an arm of the Pacific.

A statement from the Transportation Ministry said its 11 crew members remain unaccounted for.

The ship was found by divers in about 75 meters (230 feet) of water on Wednesday, the ITAR-Tass news agency reported. Police have lodged criminal charges against the ship's owner, who also is director of the Nikolaevsk-on-Amur port, where the ship is registered, for allegedly instructing the ship to sail despite bad weather and improper cargo procedures.

No details on how much gold the ore could contain have been released.

(Bloomberg) -- Pentagon Challenges Chinese Monopoly on Rare Earths: Commodities
The Pentagon and Toyota Motor Corp. are trying to crack China’s global monopoly on mining the most valuable rare earths used in unmanned military drones and electric-car motors.

The U.S. Department of Defense and Asia’s biggest carmaker are working with Canada’s Ucore Rare Metals Inc. and Matamec Explorations Inc., which are developing North American mines that would boost supplies of so-called heavy rare earths. Those are the less-abundant members of a group of 17 chemically similar elements critical to make a host of products from wind turbines to high-performance magnets for cars and weapons.

Foreign buyers are being driven to find alternative producers after China slashed exports in 2010, partly to conserve material for its own industries. The Asian nation today supplies about 95 percent of global demand, triple its market share of 1990, presenting a risk for foreign makers of the next generation of wind turbines and environmentally friendly lighting technology.

“People won’t make a decision on manufacturing something if they don’t know their supply is reliable,” said Jack Lifton, a senior fellow at the Institute for the Analysis of Global Security, which studies the links between energy and security. “If you had a reliable American supply of heavy rare earths, General Electric might decide to make magnets in the U.S.”

‘Incredibly Complex’
Of more than 400 proposed rare-earth mines around the world that are tracked by Technology Metals Research LLC, only five or six have enough heavy rare earths and are sufficiently advanced in their development to have a shot at making it into production, said Gareth Hatch, a co-founder of the Carpentersville, Illinois-based firm.

“The race is which deposit will be first at the finish line,” said Andre Gauthier, chief executive officer of Montreal-based Matamec.

There are risks in early-stage mining projects like those planned by Matamec and Ucore. Development requires raising hundreds of millions of dollars of funding. Mining rare earths is “incredibly complex,” said Chris Berry, founder of New York-based researcher House Mountain Partners LLC.

“The major risk is the understanding of the metallurgy and successfully separating each of the rare-earth elements,” he said.

Price Volatility
Rare-earth prices and stocks have been volatile over the past two years. The commodities have slumped since mid-2011, having surged as much 10-fold following Chinese export curbs. Molycorp Inc., which plans to produce rare earths in California, quintupled in less than a year after a July 2010 initial public offering. The Greenwood Village, Colorado-based company now trades below its IPO price. Australian producer Lynas Corp. tripled in 2010 and since then has dropped 65 percent.

That hasn’t stopped exploration companies outside of China touting their potential for producing heavy rare earths such as dysprosium and terbium, all of which are harder to find and therefore pricier than so-called light rare earths.

Toyota Tsusho, Toyota’s trading unit, has a 49 percent stake in a joint venture with Matamec and is funding the feasibility study at the Kipawa project in Quebec. Toyota will harvest dysprosium from the mine, while other deposits on the same property also could be developed, Gauthier said.

Kipawa’s initial heavy rare-earth output will be about 2,000 metric tons and may rise with further exploration on the property. Matamec is operating a pilot plant at the site. Estimated capital expenditure will be about $315 million, according to Edward Otto, an analyst at Toronto-based Cormark Securities Inc.

Alaska Mine
“We think there are places for two to four heavy rare- earth deposits in the world outside China,” Gauthier said in a telephone interview on Oct. 26. “The first can reach better agreements with end-users.”

Ucore’s Bokan Mountain deposit in Alaska may produce about 3,000 tons a year of rare earths by 2016, including enough dysprosium to meet domestic needs, CEO Jim McKenzie said.

The project will likely get the permits it needs as Alaska is a mine-friendly state and the project has the backing of Senator Lisa Murkowski and Governor Sean Parnell, said House Mountain’s Berry, who has previously consulted for Ucore. The mine will cost about $150 million to build, according to Jon Hykawy, an analyst for Toronto-based Byron Capital Markets Ltd.

Pentagon Accords
The U.S. Department of Defense may already be forming a nascent non-Chinese supply chain for high-performance magnets used in weapons systems that require heavy rare earths, said Jeff Green, president of Washington-based lobbying firm J.A. Green & Co.

Ucore said in October that the department initiated an exploratory partnership. Also last month, Canadian magnet maker Great Western Minerals Group said it was chosen by the department to study the supply of yttrium oxide, which is used in jet engines, while closely held U.S. magnet maker Thomas & Skinner Inc. said the Pentagon will invest in a study of neodymium-iron-boron magnets.

Green lobbied the Pentagon on behalf of the three companies. Hitachi Ltd.’s patents for the magnets expire in 2014, he said in an interview.

“The floodgates should open then,” Green said.

China consumes two-thirds of global rare earths supply, while the U.S. consumes about 10 percent, data from Technology Metals Research shows. Demand for dysprosium, yttrium and terbium will exceed supply, according to the firm. Heavy rare- earth production has remained almost unchanged over the past five years at around 1,700 tons a year, Lifton said.

Auto Demand
“There will never be enough heavy rare earths, and the prices are going to be strong,” Lifton said. “That’s where we’re stuck.”

The Matamec and Ucore mines may lead non-Chinese projects in expanding production of heavy rare earths by 60 percent by the end of the decade, according to Byron’s Hykawy.

The growth will be needed to satisfy expanding demand from cars and consumer electronics in emerging markets, according to Lifton. Ucore’s McKenzie says the biggest demand for heavy rare earths will come from the automotive and aerospace industries.

China hasn’t identified new rare-earth resources and could exhaust its own in five to 30 years, while non-Chinese rare- earth supply is projected to increase fivefold to 31 percent in 2016, Lifton said.

“China’s demand is going to be rapacious, and if the U.S. has these materials, China could be a net importer,” McKenzie said. “The U.S. can turn the tables now.”



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Mark O'Byrne is executive and research director of which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth.
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