Apr 30

Klondex Mines PEA Highlights Low Cash Costs

Gold Price Comments Off on Klondex Mines PEA Highlights Low Cash Costs

Klondex Mines released a PEA for the Fire Creek project in Nevada. That’s an important step in the de-risking of Fire Creek and an encouraging milestone for the company.

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Apr 30

CME Group Mulls Daily Limits on Gold, Silver Price Moves

Gold Price Comments Off on CME Group Mulls Daily Limits on Gold, Silver Price Moves

Reuters reported that CME Group Inc. (NASDAQ:CME), a major options and futures exchange, is thinking of introducing daily limits on gold and silver price moves in an effort to curb volatility.

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Apr 30

Parkside Resources Appoints Richard Goldman as Chief Executive Officer

Gold Price Comments Off on Parkside Resources Appoints Richard Goldman as Chief Executive Officer

Parkside Resources Corporation (TSXV:PKS) has announced the appointment of Richard Goldman as president and chief executive officer. Since February 2011, Richard has been Parkside’s chief financial officer, and has been instrumental in guiding Parkside’s strategic direction over the past three years. Marie-Josée Audet, an employee of Marrelli Support Services Inc., has been appointed as CFO for Parkside Resources.

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Apr 30

Gold Falls to $1,287 an Ounce on Positive Economic Data

Gold Price Comments Off on Gold Falls to $1,287 an Ounce on Positive Economic Data

Gold was down 0.7 percent or $9.01 to $1,287 an ounce, according to Reuters.

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Apr 30

China Gold Supplies "Ample", Imports "May Extend" 25% Drop

Gold Price Comments Off on China Gold Supplies "Ample", Imports "May Extend" 25% Drop
March data still show near-record net inflows of gold to China through Hong Kong…
 

CHINA GOLD stockpiles remain “ample” according to bullion bank analysts and traders, with weakness in the Yuan currency further deterring a rise in gold imports to the world’s No.1 consumer nation.
 
“Hong Kong and Switzerland trade data show slowing gold shipments to China,” says ANZ Bank commodity strategist Victor Thianpiriya in Singapore, with March’s net flow to the mainland through Hong Kong dropped 25% from February’s near-record monthly figure of 111 tonnes.
 
“The Swiss gold trade data showed that exports to other Asian destinations remained relatively robust,” Thianpiriya adds, with India’s intake rising 10% month-on-month “in contrast to the slower Chinese market.”
 
Reflecting this slowdown in China’s gold demand – overtaking India as the world’s heaviest in 2013 – prices in Shanghai last month traded at a discount to the world’s benchmark of London quotes.
 
ANZ’s analysis says the bank expects China gold imports “were also weak in April, as the spread between the two markets remained negative for most of the month.”
 
shanghai-gold-imports-premium
 
Gold trading volumes on the main Shanghai exchange – the only legal entry point for refined metal into China’s private sector – “was the poorest since October,” adds Swiss bank UBS’s strategist Edel Tully.
 
Thanks to a lull in festive and holiday demand, “Shanghai volumes in May, while not the lowest, are usually quite moderate,” Dr.Tully goes on, concluding that “current gold prices are in excess of where physical demand lies, and local supplies remain ample.”
 
“The expectation is gold orders into China will be lower in the next few months,” agrees Jeremy East, global head of metals trading at Standard Chartered – who moved his bank’s operations from London to Hong Kong in June 2013, the better to address China’s gold market.
 
Driving the drop in Shanghai prices relative to London, and so removing the “arbitrage” profits to be made from importing metal from Europe, is the “exchange-rate move” in the Chinese Yuan, says East, speaking last weekend to Bloomberg.
 
“We’re waiting to see whether it will have impact on total demand for gold from China for this year.”
 
ANZ’s Thianpiriya agrees, saying that “The weak Shanghai-London price differential, largely due to a depreciating local currency, seems to be a key catalyst for the sluggishness” in China gold imports.
 
March’s net inflows from Hong Kong, however, reported at 85 tonnes, were only just shy of 2013’s monthly average.
 
Full-year net imports through Hong Kong to China rose one-third by weight to more than 1,100 tonnes, extending the 95% rise of 2012.
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Apr 30

Bye-Bye to Our Piggy Leaders

Gold Price Comments Off on Bye-Bye to Our Piggy Leaders
Banking sector have led the S&P’s five-year boom. But now…?
 

ALONG with the highly publicized loss of leadership from big tech stocks, the US equity market is now in danger of losing another, and possibly more important leader, writes Gary Tanashian in his Notes from the Rabbit Hole.
 
The piggies, aka the banking sector.
 
While the weekly chart of banking stocks (BKX) has not yet broken down, it is very close to doing so after sporting a negative divergence on the Relative Strength Index for the better part of the last year.
 
 
We should not jump the gun with bearish scenarios, but as always we want to be among those looking forward and ready, just like in 2007, which was the last time BKX-SPX began to roll over in earnest.
 
We have followed the BKX-SPX ratio, showing the banks’ leadership, every step of the way during the current leg of the cyclical stock bull market. Most recently we noted that BKX-SPX failed to make higher highs on two occasions. This put the ratio – and by extension the stock market – on alert as we watched for a lower low.
 
Ladies and gentlemen, let me introduce you to a lower low.
 
 
A bull rally is a series of higher highs and higher lows. The bull phase in leadership by the banks over the S&P 500 is now over. Okay great, we have expected this to happen. But it is the implications and conclusions that can be drawn from a failing BKX-SPX ratio that is important.
 
Without conclusions after all, a ratio indicator is just a neat little tool making all sorts of noise about nothing. Here are some implications.
 
First, interest rates. Because with the Utilities sector still rallying strongly (they like a low interest-rate environment)…but with the bottoming patterns we’ve been noting in 10- and 30-year Treasury bond prices…and now with the prime beneficiaries (of Fed policy) noticeably under performing the broad S&P500 index…we can begin to firm up conclusions about T-bonds and interest rates.
 
We have been noting potential bottoming patterns on 30-year bond prices for several weeks, and been targeting 3.2% or so on 30-year yields for months, ever since the ‘Continuum’ stopped right where we thought it would at its decades-old limiter, the 100 month exponential moving average (amid all kinds of rising rates hysteria I might add).
 
 
Conclusion? Interest rates are dropping toward our 3.2% target. I am personally long Treasury bonds of several durations. Aside from T-bonds as an asset, they are a risk ‘ON/OFF’ indicator. If yields continue to decline, it would not be bullish for the stock market or other markets positively correlated to the economy. It could be bullish for gold if short term yields decline faster than long term yields. If long-term yields decline faster, it would not be bullish for gold either.
 
Second, and moving onto gold prices, the shaded area below highlights the most recent phase of inverse correlation between our Bank-Stocks Ratio and gold. Bullion acted first as a refuge, as confidence in the financial system dropped during the Euro crisis (in a ‘double bottom’ echo to 2009) and was then kicked to the curb as players collected themselves and started to regain confidence at the end of 2011.
 
 
BKX-SPX is a confidence indicator after all. It had been dropping since 2006 and finally resolved in a final bottom in March of 2009. Since the bottom in 2011 the banks have been tepidly out-performing the S&P500 despite continuing Zero Interest Rate Policy (ZIRP), which is obviously beneficial (and aimed at) these first users of newly created money.
 
With a phase of sentiment reversal (toward confidence in policy making and US markets and hatred of safe havens and risk ‘OFF’ assets) nearing completion, it would appear that gold’s time in the desert is nearly done.
 
With ZIRP now nearly 5.5 years old, the Fed has been in financial and economic benefactor mode and yet the conduit to a revived economy in a system built on lending (and a willingness to extend and take on credit), AKA the banks, may be losing leadership over the stock market.
 
Conclusion? If the breakdown in BKX-SPX continues, expect gold to find a bottom within the next several weeks or few months. NFTRH continues to manage the process from a shorter term perspective.
 
Thirdly, let’s turn to the US economy and inflation. Because of course, “it’s the economy, stupid”.
 
All of the inflation that has been promoted since 2008′s liquidation of the previous inflation (Greenspan’s) has been in service to reviving the economy, just as Greenspan’s commercial credit bubble was. What has actually happened, despite some recent improvements in the economy (as foreshadowed by the Semiconductor ‘up’ cycle well over a year ago) and business lending, is that ZIRP and various permutations of QE have barely kept things lukewarm.
 
This has been a bubble in official or governmental credit and the Fed balance sheet vs. the previous commercial credit bubble. On this cycle the ‘pigs’ are living up to their unofficial name as they appear to have learned the lessons of 2003-2007 and have mostly fed at the trough of beneficial policy, but undertaken far less risk than official entities have.
 
Conclusion? Risk has merely shifted from commercial lenders to the public by way of its ever expanding Treasury debt, which is being used to fund both the economy and the inflationary operation now under way.
 
Sure, the much publicized QE ‘taper’ is under way, but as we have noted all along, that operation should be incentivizing the banks to get even more in the game due to the implied profit motive of a ‘borrow at ZERO, lend long at higher yields’ carry trade. Yet BKX-SPX under performs.
 
What happens if the piggy leadership of the BKX-SPX really does break down despite all the cards beings stacked in favor of the banks? One result would be a massive loss of the confidence that has so systematically been rebuilt by policy over the last few years.
 
Tired of paint-by-numbers analysis? Ready to do a little work? Subscribe to NFTRH
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Apr 30

Oil Trumps Environment (and the Dollar)

Gold Price Comments Off on Oil Trumps Environment (and the Dollar)
And the winner of Obama’s secret pipeline is…
 

ISN’T IT odd that an 800-mile pipeline that runs across environmentally sensitive land has been permitted without any mention in the media? writes Marin Katusa for Doug Casey’s Energy Report.
 
Not a word about it from President Obama either.
 
Obama’s Secret Pipeline will be built over land that’s much more sensitive than that of the Keystone XL pipeline, which gets nothing but front-page coverage. It will actually be 17% (six inches) larger in diameter than Keystone XL (36 inches) and it will transport natural gas, not oil.
 
The Senate of Alaska, the state in which the pipeline will be built, has just passed Bill 138, which makes the state a partner of three of the world’s largest oil companies, including one that has a horrible environmental track record on US soil. In a nutshell, Alaska’s government is now partners with BP, ExxonMobil, and ConocoPhillips.
 
Only one more signature is required – Governor Sean Parnell’s – and it’s expected that he will sign the deal.
 
For more than 100 years, the US government has been receiving a royalty and tax revenue paid on the amount of oil or natural gas produced on American soil – a fee that is paid in US Dollars. Bill 138 has changed this forever.
 
Instead of Alaska receiving its dues in US Dollars, the state legislature has decreed through Bill 138 that the state will be paid “in kind”. In other words, the state will be getting its share of royalty and tax revenue in natural gas instead of US Dollars.
 
For the record, this is the first time ever that a US state has entered into a partnership like this. Essentially, Alaska is now a 25% equity partner with BP, ExxonMobil, and ConocoPhillips – which also requires the state to cough up cold, hard cash to build the entire project, including the 800-mile-long, 42-inch-wide pipeline.
 
Overall, the project is currently estimated to cost north of $50 billion, and we expect that when all the capital expense overruns and government inefficiencies are accounted for, the whole project will come in at more than $75 billion, using the total costs of similar projects for comparison.
 
But it will be 2015 before the final negotiations and the specific details of the partnership are agreed on, and remember, the devil is in the details. Who do you think will get the better end of the deal – a bunch of government bureaucrats with zero oil and gas experience, or the world’s top oil- and gas-producing companies? I know whom I’m betting on.
 
We already know which company will be building and operating Obama’s Secret Pipeline. The company I’m talking about has a lower price-to-earnings (P/E) ratio and a better yield than all of its peers. That’s good, because shareholders get paid a monthly yield for owning the stock while sitting back and watching the share price rise as well.
 
Think of it this way: this company charges the world’s most powerful oil and gas producers for every barrel of oil that passes through its “road network,” and now it can also charge the state of Alaska. Regardless of the price of oil or natural gas, this company gets its fee.
 
It’s a low-risk way to benefit from a high-risk enterprise. This company is a current Buy in our Casey Energy Dividends portfolio. The Energy team is currently working hard on the upcoming issue, which will in detail cover the company that’s bound to gain big from Obama’s Secret Pipeline.
 
I know you haven’t heard about this pipeline yet, but you will soon enough.
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Apr 30

No Substitute for Gold. But the Dollar?

Gold Price Comments Off on No Substitute for Gold. But the Dollar?
Technological use is rising, alongside China’s underlying gold demand…
 

LAST YEAR saw China’s private-sector demand for gold reach a record level of 1,132 tonnes, writes Frank Holmes at US Global Investors, citing data from market-development organization the World Gold Council.
 
The Asian nation could easily dominate the gold market once again, as the World Gold Council predicts demand growing 20% by 2017.
 
This updated projection confirms what I’ve written about previously: China’s love for the precious metal remains robust. We are witnessing this country transform into an economic powerhouse, and now, the world’s largest gold market! I think it’s important for investors to recognize the main drivers behind this tremendous growth.
 
1. A new middle class has more money to spend
Despite all the grandiose numbers we see in China’s gold market, the Asian nation hasn’t always been the “golden goose” of the game. The WGC points out in its recent report, China’s Gold Market: Progress and Prospects, that only in the last several years has China seen an emerging middle class supported by higher incomes. For example, Shenzhen is currently a city with over 10 million people, accounting for 70% of China’s jewelry fabrication. Just 30 years ago however, it was only a small town of around 330,000 people, meaning consumer demand for gold at that time was minimal at best.
 
Over the last 10 years however, a new middle class has emerged and consumers have been enjoying their new wealth. As GDP began to rise, people started buying more gold jewelry and coins. In addition to increased spending on these items, the investment demand for the yellow metal progressed as the population sought a hedge against inflation.
 
2. Jewelry is still the top demand driver
The World Gold Council’s report also reaffirms the ongoing power of the Love Trade. The Love Trade, one of the two main drivers of gold along with the Fear Trade, relates to the cultural affinity for the precious metal particularly in Asia, India and the Middle East. Consumers continue to purchase gold jewelry and coins year-after-year, and demand rises in synch with gift giving for religious holidays and celebrations.
 
As you can see in the chart below, since 2004 the volume of gold jewelry consumed in China has tripled. What’s more, China surpassed India as the world’s largest consumer and manufacturer of jewelry in 2013. According to a recent Reuters’ article, gold jewelry sales in India slowed by 10% since import restrictions were imposed on the country last year – a likely factor placing China in the top spot.
 
 
3. Industrial demand is increasingly important
Though not nearly as strong as the gold jewelry demand in China, the country’s rise in GDP has also increased industrial demand for gold. The World Gold Council says that electronics are the dominant source of this industrial demand. Gold is used in cellphones, computers, circuit boards and recently the automobile industry has seen an increased demand for the metal.
 
Gold may seem like an expensive option to choose from to build cellphone parts or airbag connectors in vehicles, but as the report states, “Although manufacturers are always trying to reduce the cost of components and substitute gold with lower cost alternatives, this cannot be done where optimum performance and, especially, safety concerns are to the fore.”
 
In our slideshow, The Many Uses of Gold, we explain other ways gold is used; not only for industrial needs, but for medical and technological advances as well.
 
4. China is diversifying away from the US Dollar
When it comes to foreign exchange reserves, China’s totalled $3.8 trillion US Dollars in 2013, a sharp increase from the mid-90s as you can see in the chart below. There are several challenges facing the Asian nation’s monetary system too; the multi-currency system which includes the renminbi and the Dollar is no easy task to manage.
 
But how are China’s foreign exchange reserves and monetary troubles a driver for gold bullion demand?
 
 
For starters, according to the World Gold Council, the majority of growth in China’s reserves (implied specifically by the country’s current account surplus) has been in US Dollars. China used the Dollar to buy American debt securities, but upon the global financial crisis and the start of quantitative easing (QE), China has been pulling away from exposure to the Dollar.
 
In a recent article from Casey Research, chief economist Bud Conrad even comments on the decline of the Dollar’s reserve status in foreign countries such as China.
“In 2000, the Dollar accounted for 55% of all foreign exchange reserves. In 14 short years, that number has dropped to 33%. By 2020, I project, it will drop to 20%. At that point, other large economies of the world won’t need Dollars nearly as much for international trade.”
I believe that government policy is a precursor to change, so as fiscal and geopolitical challenges rise between the two countries, it’s no wonder China wants to back away from the Dollar and thus, diversify to gold. Gold is a hard asset, making it a prime currency choice for China.
 
In regards to gold, the World Gold Council report even states that, “Gold cannot be created out of thin air at the whim of central banks. Nor can it be manipulated for the benefit of its issuer.”
 
So what is China up to now? Perhaps the People’s Bank of China is amping up its gold reserves to diversify away from the US, but one question remains. Exactly how much gold does China have?
 
As Mineweb reported last week, China has deemed Beijing as an additional import city for gold, a clear indicator even more of the precious metal will find its way into the country. China does not release any official numbers about its gold imports, so Beijing will be another source of unpublished data.
 
Rather than reporting its own gold traffic, other countries report their gold export data to China. Hong Kong provides insight into China’s gold holdings and in February I wrote how Switzerland released its gold trade data this year for the first time since 1980. Only through these alternate reports can we infer the amount of gold China truly holds.
 
No matter the exact amount of gold that China has, this country is a good example that the demand drivers for gold remained the same. People around the world react with concern over government policies that can devalue currencies, thus making gold attractive. Similarly, as economies flourish and people have money, they will spend it on gold. The Love Trade will also continue; consumers will purchase gold as gifts as long as cultural celebrations and religious traditions carry on.
 
It’s important to follow the money, or in this case the gold, to see how people around the world react to this rare commodity. Looking forward, stay curious as an investor and you’ll see if China can keep the key to the gold market.
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Apr 30

Klondex Mines PEA Results: All-In Sustaining Cash Costs of $636/oz Gold, $157.3 mm after-tax cash flow

Gold Price Comments Off on Klondex Mines PEA Results: All-In Sustaining Cash Costs of $636/oz Gold, $157.3 mm after-tax cash flow

Klondex Mines Ltd. (TSX:KDX,OTCQX:KLNDF) announced its Preliminary Economic Assessment for the Fire Creek Exploration Project near Elko, Nevada: total production of 280k ozs Au; 139k oz Ag, with an estimated $157.3 mm after-tax cash flow, a $141.5mm after-tax net present value at a 5% discount rate and a $128.3 mm after-tax NPV at a 10% discount rate.

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Apr 30

Mountain Lake Looking For JV Partner for Glover Island Gold Project

Gold Price Comments Off on Mountain Lake Looking For JV Partner for Glover Island Gold Project

Mountain Lake Minerals Inc. (CNSX:MLK) reported that it has paid the annual rental for the Mining Lease ML190A (7588M) on its Glover Island Gold Property, and is pursuing the right option and/or joint venture for said property.

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