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Today’s AM fix was USD 1,756.75, EUR 1,344.31 and GBP
1,081.81 per ounce.
Yesterday’s AM fix was USD 1,767.25, EUR 1,349.36 and GBP 1,089.42 per ounce.
Silver is trading at $34.16/oz,
€26.24/oz and £21.10/oz. Platinum is trading at
$1,662.00/oz, palladium at $673.60/oz and rhodium at $1,350/oz.
Gold fell $14.00 or 0.79% in New York yesterday and
closed at $1,757.60. Silver dropped to as low as $33.806 before it rebounded
back higher, and finished trading with a loss of 1.76%.
Cross Currency Table – (Bloomberg)
Gold inched lower in quiet volatile trade on Tuesday
after equity and commodity markets pulled back overnight and investors booked
profits from the recent rally created by the US Fed’s QE3 launch.
However the current monetary climate of central bank
money printing will cause inflation and this is increasing the appeal of gold
for investors.
Platinum also fell, as news announced about Japanese closures
of car plants in China due to the escalating territorial dispute between the
two nations.
The China Japanese tensions have been simmering for
some time and this largely unacknowledged geopolitical risk is a real risk to
markets.
The tensions have led to protests and attacks on
Japanese companies such as car makers Toyota Motor Corp and Honda Motor,
forcing them to cease operations and there have been hints of trade
sanctions.
Platinum is used as an auto catalyst and is necessary
part for production in the automotive industry.
Central banks are pursuing quantitative easing, in
effect, printing and electronically creating money which is extremely easy
for central bankers to do.
Conversely, gold is called a ‘precious metal’ for a
reason. Gold remains very precious, finite and very rare. All the gold in the
world if made into one large gold bar (0.9999 pure) would be 21 metres cubed and would fit on the centre
court of Wimbledon.
Gold needs to be extracted from the bowels of the earth
in a gold mine. It needs to be found and it needs much capital and technology
and specialist labour to get small amounts of gold
out of the ground.
Lessons of QE: Printing Money Is Easy, Mining Gold Is
Not
The process of development can take a very long time
and many gold mining companies become insolvent and are not successful in
producing even one ounce of gold. When companies are successful, it is often
only many years later that one ounce of gold is produced.
This difficult task means that while U.S. money supply
in the form of M2 has risen by 30% since June 2008, gold production has
fallen by 1.7%, despite rising gold prices.
While the concept of “peak oil” has been widely debated
in markets, that of “peak gold” is less well known.
This will change in the coming years.
Cash Costs Are Rising for Gold Miners as Grades Are
Declining
Rising cash costs have been fuelled by declining ore
grades and higher raw material costs – especially with regard to higher oil
and energy costs. Mining remains a very energy intensive business.
Ore grades have declined 8% annually, while cash costs
have had a 14.1% CAGR since 2005 for senior producers.
Cost inflation has been driven by fuel, labour and key consumables, which have only been
partially mitigated by the rising gold price.
Gold Production Stable Amid Decade-Long Price Surge
Global gold production remains at its level of the late
'90s, even though prices have risen to over $1,700 per ounce from $252 per
ounce in 1999 or roughly 16% per annum in dollar terms.
Only Rio Tinto and Ivanhoe's Oyu
Tolgoi mine in Mongolia stand out as a major new
gold mines expected to begin production in the near future.
Bulls note that global production has remained
impervious to the price of gold. This may continue to be the case due to the
increasingly obvious geological constraints being seen in the gold mining
sector.
Resource nationalism is beginning to become an
important factor again. This will also almost certainly affect supply at a
time when demand is increasing from people throughout the world and many
hedge funds, pension funds and central banks’ due to geopolitical, systemic
and monetary risks.
The lesson of QE is that fiat currencies increasingly
grow on trees. Gold does not.
This is the primary reason that gold will continue to
protect investors in the coming months.
Charts and data courtesy of Bloomberg Industries
Kenneth Hoffman and the Precious Metal Mining Team
NEWSWIRE
(Bloomberg) -- Gold ETP Holdings Climb to Record for 10th Straight Session
Gold holdings in exchange-traded products backed by the metal rose to a
record for the 10th straight session.
The amount increased 2.69 metric tons, or 0.1 percent,
to 2,506.29 tons, data tracked by Bloomberg showed.
(Bloomberg) -- South Africa’s ANC, Unions Blame Mine
Owners for Violence
South Africa’s ruling party and biggest labor group blamed mining companies
for labor unrest that has crippled the world’s biggest platinum industry,
saying they failed to pay their employees enough.
Workers at shafts owned by Lonmin
Plc, Anglo American Platinum Ltd. and Gold Fields Ltd. have embarked on a
series of illegal strikes over the past month. At least 45 people have died
at Lonmin’s Marikana
mine, 34 of them killed by police on Aug. 16 when they opened fire on
protesters.
“The socio-economic conditions of the mine workers at Marikana and other areas are part of what led to the
human tragedy that continues to haunt our nation,” the African National
Congress’ National Executive Committee, the party’s top leadership structure,
said in an e-mailed statement today. “Mining remains the bedrock of the South
African economy and yet the abject poverty and squalor surrounding mining
areas remains a matter of deep concern.”
The ANC has ruled South Africa since all-race elections
in 1994 in alliance with the Congress of South African Trade Unions and the
South African Communist Party. While the striking workers have accused the Cosatu-affiliated National Union of Mineworkers of
failing to represent their interests, the rival Association of Mineworkers
and Construction Union has gained recruits.
Lonmin has blamed union rivalry for igniting tension at
Marikana.
Lost Revenue
The strikes at gold and platinum mines this year have cost the economy 4.5
billion rand ($547 million), President Jacob Zuma,
who is also leader of the ANC, told unionists in Johannesburg today. The
government has lost 3.1 billion rand in revenue as a result of the labor
unrest, he said.
South Africa is the world’s biggest producer of
platinum , chrome and manganese and mines gold and coal. Anglo American
Platinum Ltd., AngloGold Ashanti Ltd. and Xstrata Plc operate in the country.
“Workers in the mines are rising against their
continued exploitation by employers,” Cosatu
President S’Dumo Dlamini
said in an e-mailed copy of a speech he was to deliver today at the
federation’s annual congress in Johannesburg. “The problem in Marikana is not rivalry between unions nor can it simply
be put as being a widening gap between leaders and members.”
Dlamini accused a “right-wing clique” of seeking to
destroy the alliance and undermine its efforts to redistribute wealth and
create jobs.
Julius Malema
“We need a response that will draw everybody’s attention and energy on the
total restructuring of our economy, so that it can be placed on a
labor-absorbing trajectory,” he said. “We need a response that will focus the
country on the distribution of wealth and nationalization of the commanding
heights of the economy, and as well as for effective land redistribution.”
Cosatu has blamed Julius Malema,
the youth leader who was expelled from the ANC this year, for inciting some
of the illegal strikes. Police today prevented Malema,
31, from entering a stadium near Marikana where
striking workers had gathered. That comes two days after the government
deployed army personnel to assist police in seizing weapons from striking
miners in Marikana.
(Bloomberg) -- Roads Barricaded by Protesters Near Lonmin
Trenches were dug and large rocks were laid down on the dirt roads leading
into the shantytown bordering Lonmin Plc’s Marikana mine after South African police raided the area
and confiscated spears and knives.
The barriers were put up less than a kilometer (0.6
miles) from Wonderkop hill, where 34 people were
shot and killed by South African police on Aug. 16.
(Bloomberg) -- Rhodium Climbs to Highest Since May on
Mine Production Concern
Rhodium climbed to the highest price in 16 weeks on concern unrest in South
Africa’s mining industry will cut production and as the Federal Reserve said
it will expand monetary stimulus.
Strikes over pay and working conditions in South
Africa, the biggest rhodium producer, shut down operations at Anglo American
Platinum Ltd., Impala Platinum Holdings Ltd., Lonmin
Plc and Gold Fields Ltd. Other precious metals jumped to the highest levels
since at least March last week after the Fed said it will buy more debt to
bolster the labor market.
Rhodium, usually found alongside platinum and
palladium, and mainly used in catalytic converters, fell 87 percent since
reaching a record $10,100 an ounce in 2008 as carmakers cut the amount used
in each autocatalyst and increased recycling to
reduce costs. The surplus will drop 62 percent to 52,900 ounces this year,
the least since 2008, Morgan Stanley estimates.
“The riots in South Africa led to an increase,” Hanau,
Germany-based trader Heraeus Metallhandelsgesellschaft
mbH said in a report e-mailed today.
Rhodium gained a third day, climbing 4 percent to
$1,300 by 11:12 a.m. in London. That’s the highest since May 28, according to
London-based Johnson Matthey Plc, the maker of one in three autocatalysts. Prices fell to $1,100 last month, the
lowest since January 2009, and are down 7.1 percent this year.
South Africa deployed about 150 army personnel to help
police quell violent protests at Lonmin’s Marikana mine as the government pledged to crack down on
illegal strikes. The month- long standoff between police and thousands of
strikers at the Lonmin mine has left at least 45
people dead, including 34 miners shot by police on Aug. 16.
The Fed said Sept. 13 it will buy $40 billion a month
of mortgage debt to bolster the labor market and probably hold the federal
funds rate near zero until at least the middle of 2015.
Rhodium is used in canisters with honeycomb-like
surfaces that transform car emissions. Global sales of cars and light
commercial vehicles will rise 5.5 percent to a record 81.1 million units this
year, according to LMC Automotive Ltd., a research company in Oxford,
England.
(Bloomberg) -- Gold-Borrowing Costs Decline to Lowest
in Six Months in London
The cost of borrowing gold fell to a six-month low in London at a time when
prices neared the highest since February and holdings in bullion-backed
exchange- traded products climbed to a record.
The three-month lease rate fell to minus 0.0559 percent
yesterday, the lowest level since March 14, from minus 0.0547 percent on
Sept. 14, according to data compiled by Bloomberg. The rate is derived by
subtracting the gold forward offered rate from the London Interbank Offered
Rate. A negative reading means banks have to pay to have their gold deposits
lent.
“Plentiful availability of metal for leasing usually
implies low lease rates,” according to the London Bullion Market
Association’s guide to precious metals markets on its website. “A sudden
increase in the supply of gold liquidity to the market will push lease rates
down.”
The six-month lease rate for the metal increased to
0.1669 percent yesterday from 0.1662 percent on Sept. 14, when it fell to the
lowest level since March 15.
“Lease rates are an indication only of bank-to-bank
borrowing charges,” analysts at Hyderabad, India-based Karvy
Comtrade Ltd. wrote yesterday in a report. “The
degree to which lease rates may be displayed as negative, would suggest the
degree to which there is a lack of demand to borrow the metal.”
For breaking news and commentary on financial markets and gold, follow us on Twitter.
NEWS
Why Gold May Hit $2000 by Christmas -
Bloomberg
Gold slips after commodities sell-off, off
seven-month high - Reuters
South Africa: $563 Million lost in gold, platinum
production – Business Week
Ghost warehouse stocks haunt China's steel sector
- Reuters
COMMENTARY
Global Crisis and Long Slump Catching Up With China
– The Telegraph
All Signs Pointing to Gold - GoldSeek
Silver Bull Seasonals
– SilverSeek
Mark
O’Byrne
Goldcore
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