Gold has traded between $1,446 and $1,477 so far today, in advance of the FMOC decision…as of 7:20 am Pacific, bullion is off $26 an ounce at $1,451…Silver has retreated 88 cents to $23.47…Copper is down a dime to $3.08…Crude Oil is down $2.46 a barrel to $91.00 while the U.S. Dollar Index is off its lows but still down over one-tenth of a point to 81.57…
U.S. Mint figures show American Eagle Gold coin sales hit a three-year high of 209,500 ounces in April, the highest since sales of 231,500 coins in December, 2009…these figures include 187,500 1-ounce American Eagle bullion coins, a massive increase over the 20,000 that were sold in April of last year…year-to-date total Gold coin sales stand at 502,000 ounces as of yesterday…American Eagle 1-ounce bullion coins sales, the most popular for investors, now stand at 434,000 ounces…meanwhile American Eagle Silver bullion coins sales for the month of April shot up nearly 169% over last year from 1,520,000 Silver ounces in April, 2012, to 4,087,00 ounces…“Year-to-date sales of 18,310,000 have never been achieved so soon in a year”, Coin News observed yesterday…“Last year sales did not top 18.3 million until July 16″…
The selling in Gold-exchange-traded funds is showing signs of slowing, according to UBS: “Gold has found some respite from ETF selling this week, as tentative signs of tapering emerged for the first time in two weeks”, the bank stated this morning…”ETF investors sold 84k oz yesterday versus an average outflow of about 350k oz over the previous 10 trading days…some alleviation of pressure from the ETF camp is a welcome development for Gold, and would further ease investor concerns…with QE (quantitative easing) fears being one of the key motivations behind the aggressive ETF selling this year, hints that potential tapering of QE would now be pushed back should see improvements in the ETF space”…
Disappointing ADP Jobs Report
Employment growth is still a major challenge in the U.S., and no doubt that will be weighing on the minds of Federal Reserve officials today…ADP reported this morning that private companies created just 119,000 new positions in April, well below expectations of 150,000…it’s also confirmation that the labor market is slowing entering the late spring and early summer…”Nearly every industry has seen slower growth since the beginning of the year”, Moody’s economist Mark Zandi told CNBC this morning…”Smaller businesses are experiencing much weaker growth”…Moody’;s Analytics conducts the survey in conjunction with ADP…on Friday, the Labor Department releases the non-farm payrolls report for April…meanwhile, other U.S. economic data was released this morning – manufacturing activity slowed slightly in April while March construction spending declined…
China Manufacturing Weakens
A gauge of China’s manufacturing activity showed fresh signs of weakness in April, undercutting hopes of a stronger rebound in demand from the world’s second-largest economy…the official Purchasing Managers’ Index came in at 50.6 in April, below expectations of a reading in line with the 50.9 recorded in March…the upturn in momentum that began in China during the fourth quarter, after weaker growth for much of last year, is still fragile as the country grapples with a sluggish global economy and less-than-robust demand at home…
Record Insider Buying In Junior Mining Stocks
Interesting article by Darcy Keith in this morning’s Globe and Mail…insider buying on the Venture Exchange is near a record high…INK Research’s Venture indicator is at 715% today, just 20 percentage points below its record peak of 735% set on October 27, 2008…that means there are more than seven stocks listed on the exchange with insider buying for every one seeing selling…it also marks a steep increase since early March, when the indicator was near 400%…as Keith noted, such a high level of buying interest among officers and directors within their own businesses in the resource sector has correctly foreshadowed a recovery in share prices in the past…
Global Met Coal Corp. (GMZ, TSX-V)
One of the advantages of the very weak market we’ve seen recently is that some companies’ share prices have been unnecessarily beaten down, creating some unique opportunities for common sense investors…the trick, of course, is to be able to separate the wheat from the chaff…one situation at the moment that we find particularly appealing is Global Met Coal (GMZ, TSX-V) because it is very close to generating cash flow as it awaits the final permit for its Black Creek Coal Property in Alabama, a resource-friendly state that mines 20 million tons of coal annually and employs nearly 10,000 people in the industry…what Global Met is blessed with is premium quality met coal that it says can be easily and cheaply mined from surface at Black Creek which is just 20 miles from two of the largest coking facilities in the United States…Global Met’s permit application with the state of Alabama has successfully passed through several reviews and the final okay is expected imminently (anytime this month), which may help explain why the stock came to life yesterday and overcame resistance at 4 cents – yes, it’s amazing GMZ has drifted this low but in markets like this, common sense often gets thrown out the window…it appears Global Met already has a buyer (or buyers) lined up for its product as it has stated that coal can be uncovered and sold within 1 month of receiving the permit…they expect to be able to start at 10,000 tons a month and gradually ramp up production to as much as 30,000 tons a month…this would be a contracted out, turnkey operation which at 10,000 tons per month would generate monthly revenue of approximately $1.5 million…at a nickel, Global Met’s market cap is just $2.5 million…what we also like about this situation is that Chairman, CEO and President George Heard has successful previous experience in bringing situations like this into production – he has managed projects in the U.S., Canada, Mexico, Brazil, Africa and Indonesia…there are always risks in mining but Black Creek has a certain simplicity to it, and to find a company with a $2.5 million market cap that’s on the verge of generating that much in revenue over just two months is rare…as always, perform your own due diligence…
Yamana Gold Inc. (YRI, TSX) Reports Q1 Net Earnings
Yamana Gold Inc. (YRI, TSX) has reported a 4% increase in production during the first quarter over the same period last year, but a 39% decline in profits as Q1 net earnings came in at 14 cents per share ($102.1 million) vs. 23 cents per share in Q1 2012…Q1 revenue was $535 million…according to Thomson Reuters, analysts were expecting Q1 earnings of 18 cents per share on total revenue of $565 million…the company aims to sharply reduce its all-in sustaining costs this year ($856 for the first quarter) as the growing Canadian Gold producer adjusts to a recent drop in bullion prices, CEO Peter Marrone said yesterday…”As we’ve seen the metal prices come down, we’re going to reclaim some of that lost margin”, Marrone told Reuters…”We anticipate that we should be able to get at least an improvement of $100 per ounce by mid-year and trending toward $150 per ounce by the end of the year”…Yamana plans to cut sustaining capital, reduce head count, revamp how it manages inventories, and improve its equipment maintenance cycle…New Gold Inc. (NGD, TSX) reports its Q1 earnings after the market close today…
U.S. Dollar Index Chart Update
The U.S. Dollar Index continues to show weakness and the trend is clearly bearish…what this means at the moment is hard to say, but what we do know is that a rising U.S. Dollar is generally not a good omen for the Venture Exchange…the latest example of this was the run to the upside in the dollar that began at the beginning of February when the Venture broke below important support…below is a 6-month daily U.S. Dollar Index chart from John…
Today’s Equity Markets
Japan’s Nikkei average slipped 62 points overnight to 13799 on the weaker-than-expected Chinese PMI data…China’s Shanghai Composite, meanwhile, re-opens tomorrow after the 3-day Golden Week holiday…the Index closed last Friday at 2178…while there are some positive indications in this chart from John, including a supporting 200-day moving average (SMA) at 2175, the downsloping channel since February is a concern…we’d feel better about the outlook for commodities and global growth if the Shanghai were able to surge higher and move decisively above the channel resistance…
European markets are mixed in late trading overseas…in North America, the Dow is down 75 points at 14765 as of 7:30 am Pacific…the TSX has slipped 101 points through the first hour of trading while the Venture Exchange is down 6 at 960…
Colorado Resources (CXO, TSX-V)
Technical analysis is challenging for a very fluid, fast-moving discovery play, subject to potentially volatile price swings based on drill results, but it does serve as a useful guide in determining support and resistance areas we should be watching closely…such is the case with Colorado Resources (CXO, TSX-V) which reported a stellar first hole (Cu, Au) last week at its North ROK Property north of Stewart…this is certainly a discovery of significance, though it’s still very early in the game…below is a 2.5-year weekly chart from John that shows RSI(14) at 87, clearly in overbought territory…this doesn’t mean it can’t become more overbought…CXO reported a great hole and more drilling is being lined up…the company is also flush with cash ($8 million) and in no need of doing a financing at the moment to advance this project…at 75 cents, the market cap is $29 million, leaving plenty of room for a higher valuation if additional drilling is successful…this area should garner more interest in the coming weeks and at least two companies to keep an eye on in this regard are Victory Ventures Inc. (VVN, TSX-V) and Firesteel Resources (FTR, TSX-V)…as always, perform your own due diligence – these of course are highly speculative opportunities, including CXO…technically at the moment, CXO has strong support between 56 and 68 cents with resistance between 80 and 90 cents…
Focus Graphite Inc. (FMS, TSX-V) Chart Update
Note: John Terry do not hold share positions in FMS, GMZ, CXO, VVN or FTR. Jon holds share positions in GMZ, CXO and VVN.
Jon u only quote gold news from the mainstream media, the scum doing the stealing and manipulating!! Why not search out the truth. Here’s a start for you
The Global “Fractional” Paper Bullion Market Is Collapsing – 1 May 2013
Posted by lucas2012infos
I wrote last week that there was a scramble going on globally by entities seeking to take physical possession of the gold on which they have a legal claim, most of which is sitting either in alleged “allocated” big bank bullion vaults or in alleged “allocated” accounts in Comex custodial warehouse vaults.
I also demonstrated mathematically, using the reported numbers on the CME website for precious metals futures open interest and warehouse gold/silver stocks, that the amount of gold represented by Comex futures open interest far exceeds the amount of deliverable gold on the Comex (the analysis is even more extreme for silver). In fact, if less than just 10% of the buyers of June gold contracts demand delivery, the Comex won’t have enough gold to cover the legal claims. For silver (July silver) it’s even more extreme.
This is a global problem and not just endemic to the Comex. Globally, the legal claim of ownership on physical gold far exceeds the amount of gold represented by paper futures, LMBA forward contracts, leased gold and vault receipts. The latter – vault receipts – is where the big banks in London have the most severe problem, as gold this is supposed to be sitting in “allocated” accounts under the name of the legal owner who bought and paid for those bars has been largely leased out. I’ll get to that in a minute.
I have not seen in my 35 years in precious metals such a determined and strong global physical demand for gold. The UAE physical markets have been cleared out by buyers from all walks of life. The premiums, which have been asked for and which have been paid have been the cornerstone of the gold price recovery. It is very rare that physical markets can have a serious impact on market prices, which are normally driven solely by derivatives and futures contracts…
I did speak during the week with several refineries in the world, of course including the UAE refineries, and the waiting period for 995 kilo bars is easily 2-3 weeks and goes into June in some cases. A large portion of the 995 kilo bars in the UAE goes normally into the Indian market, but a lot of the available 995 kilo bars are destined for Turkey, at this time. We heard that premiums paid in Turkey have reached anything between US $ 20 and US $ 35 per ounce.
The price hit of two weeks ago has triggered a serious scramble for physical gold and silver. Reports like the above comment have been flooding from Europe, the Comex has had about 30% of its gold bars literally drained from the customer accounts of the Comex bank custodian vaults and the U.S. mint is running way behind on demand for silver eagles and some weights of gold eagles. Ditto for the Canadian mint.
And then I get a call from a close friend in NYC last Friday. His career has been in private wealth management in the private bank department of the Too Big To Fail banks. He’s been looking for work and chats with old colleagues all the time. He called my Friday and told me he just got off the phone with a very high level private banker from a big Euro-based TBTF bullion bank, but who was at JP Morgan until about six months ago.
This guy told my friend that there is a scramble by many very wealthy European families/entities to get their 400 oz bars out of the big bank vaults. He knows this personally, for a fact. He said the private banker community is small over there and the big wealthy families all talk to each other and act on the same rumors/sentiment. The Bundesbank/Fed and the ABN/Amro situations triggered this move. He knows for a fact JPM tried to calm fears about 3 months ago by sending a letter to it’s very wealthy clients assuring them their bars were safe, in allocated accounts. He said right now those same families are walking into the big banks like JPM and demanding delivery of their bars or threatening to take their $100′s of millions in investment portfolios to competitors. His wording was “these people are putting a gun to the heads of private banks and demanding their gold.”
I know this information is good because I know my friend’s background and when he tells me his source is plugged in, the guy is plugged in. Not only that, my friend’s source said that there’s no doubt that someone like a John Paulson, not necessarily specifically him, but entities like him or it may include him, have held a gun to GLD and demanded delivery of physical in exchange for their shares.
Regarding the Bundesbank/Fed situation, recall that the Bundesbank asked to have some portion of its gold sitting – supposedly – in the NY Fed vault in NYC sent back Germany. The total amount is 1800 tonnes. After behind the scenes negotiations, the Fed agreed to ship 300 tonnes back over seven years. To this day, the time required for that shipment has never been explained. Venezuela demanded the return of its 200 tonnes held in London, NYC and Switzerland and received it all within about four months.
And regarding the ABN/Amro situation. ABN/Amro offered a gold investment account product that offered physical delivery of the gold in the investment account when the investor cashes out. About a week before the gold price smash, ABN sent a letter to its clients informing that the physical delivery of the bullion was no longer available and that all accounts would be settled with cash at redemption.
I believe it was these two events that triggered the big scramble for physical gold by wealthy families/entities who were suspicious of the integrity of their bank vault custodial arrangement anyway.
In fact, what we are now seeing is the final stages of the paper gold/silver bullion market, which has grown at a parabolic rate over that last 13 years, and includes Comex futures, LMBA forward contracts, OTC derivatives – which is an even bigger paper market than the Comex – leased gold claims/contracts and warehouse receipts.
At some point there will be an even bigger “run on the bank” by those looking for delivery of the physical gold/silver that they have been “assured” is sitting in their “trusty” bank custodian vault. I know for myself that I have seen enough from the JPM’s of the world to not trust anything they do or say. I think a lot more people are finally coming to that same conclusion. At some point there will be a complete collapse of trust in the paper monetary system and the price of gold/silver will really go parabolic, as the masses realize all at once – and far too late I might add – that everything that was rumored over the last 13 years about paper gold, gold leasing, etc is actually true.
Comment by Heath — May 1, 2013 @ 6:29 am
Great post Heath. Everything I read (which is a lot) from numerous long time gold analysts basically are all saying the same thing. If these guys who understand the gold and financial systems inside and out are all saying the same thing. A prudent man should listen.
Comment by Rob — May 1, 2013 @ 7:29 am
Heath… all info is good… as I posted the link to the INK research on yesterday’s blog comments. all we can do is help.
some main stream… some not is always good…
the truth…. will still be hard to find!!
Comment by JeremY — May 1, 2013 @ 10:44 am
Global Met Coal is just too good an opportunity to pass up. I already took a position and am looking for some big things from them. Thanks Jon for the added information! By the way Jon, are you planning on doing an interview with Andre Audet and/or Frank Basa any time soon?
Comment by Steven — May 1, 2013 @ 12:50 pm
GMZ looks very interesting. Also INT moving up nicely Thanks BMR
Comment by Greg j — May 1, 2013 @ 12:55 pm
Thanks for the post, Heath.
Comment by Carl — May 1, 2013 @ 2:30 pm
BMR turns bearish at the bottom. Way to go guys.
Comment by sean — May 2, 2013 @ 3:47 am
It’s funny I also thought it was strange that Germany wanted their gold returned to Germany but was going to take x amount of years to deliver. I thought to myself do they have to wait for the gold to come out of the ground before they can return Germany’s gold – well I guess its futures
Comment by dan — May 2, 2013 @ 4:38 am
Right on Heath, the paper ponzi is coming to a sad conclusion soon enough. you shouldnt bash poor ole Jon and John, these guys are mining nerds and they provide valuable information about explorers. Its not thier fault the entire market for miners has been shorted into oblivion. Not many saw the gradual eroding of gold miners diverging for what feels like forever to the price of gold. They will return.
Comment by Hugh — May 2, 2013 @ 6:22 am