Tanzania is the third largest producer of gold in Africa after South Africa and Ghana and is also well known for the Tanzanite gemstones. In addition to gold, the country has expansive amounts of natural resources including gas, uranium, diamonds, coal, iron ore, nickel, copper, chrome, tin, platinum, coltan, niobium, kaolin and other minerals.
Oct 19
Fed policy is creating a surge across raw material prices, not just in gold and silver…
SO MOST INVESTORS know that the Federal Reserve’s "easy money" policy is creating an enormous amount of new credit and new money, write Porter Stansberry and Braden Copeland at Stansberry & Associates.
And most people know this policy has created an explosion in the prices of gold and silver.
But most people have no idea where the bulk of the Fed’s new money is actually finding its home: in Asia. This has enormous implications for you as an investor, which I’ll show you in a moment…
According to Bill Gross, who manages the world’s largest pile of fixed-income assets at Pimco, the Federal Reserve is going to resume large-scale quantitative easing at the rate of $100 billion per month. News of this plan has been leaking out for the last two months following an important speech Bernanke gave in Jackson Hole, Wyoming this summer. He said, essentially, we needed a lot more inflation.
If the Fed does resume quantitative easing at the $100 billion-per-month range, it would be buying the equivalent of all of the new debt the US Treasury is issuing – all of it. This represents an increase of roughly 30% to the money supply in the first year…an extraordinary amount of new cash.
Trade and capital flows are transferring most of the inflation the Fed is creating to the Chinese economy. US politicians continue to stimulate consumption in the US, while most of the production to meet this demand comes from China. We borrow and spend. They produce and profit. Hopefully, you understand printing more money and buying government bonds won’t change this dynamic. It simply results in still more money being sent to China.
What will China do with the flood of capital? Lots of things. But one thing it will certainly do is build more coal-fired power plants. Coal-fired plants produce 80% of the electricity in China, and demand for electricity is growing roughly 9% a year. It’s hard to comprehend how fast demand for coal is growing in China, but consider these facts…
China is now the world’s second-largest consumer of electricity, after the United States. A decade ago, China’s installed generation base was only 315 gigawatts. Today, it’s 900 gigawatts – and 78% of its production is still coal-based.
Today, China consumes three times more coal than the US – more than three billion tons. But China only has about half of the US’s coal reserves. And that means it must import a lot of coal.
At current growth rates, China would exhaust its current reserves in only 16 years. Obviously that’s not going to happen – more mines will be dug. But just as obviously, it will take a long time to build the mines and lay the railroad infrastructure required. In the meantime, China will need a lot of coal.
Current market surveys show China will import 150 million tons of coal this year. That’s only 5% of China’s total coal demand, but it represents 15% of the total US demand. Right now, almost all of this coal comes from Australia, where China takes up about 60% of the export supply of coal.
And here’s the crucial fact: China’s coal imports doubled in the last year.
We know total power production in China is scheduled to double over the next eight years. It’s building a new coal-fired plant nearly every week. The United States has built only 12 new coal-fired power plants since 1990. Assuming China’s coal imports double again (and they will), Chinese demand will exhaust Australia’s export capacity. And when China’s import demand doubles again after that (to 600 million tons per year), it will exhaust the world’s total export supply.
China’s not the only problem…Don’t forget about India.
India’s installed power base exceeds 600 gigawatts, and demand is growing at about the same pace as in China. India also relies on coal for most of its power (70%). It currently burns 500 metric tons of coal a year, mostly from domestic sources. But Vinay Kumar Singh, the CEO of India’s Northern Coalfields, says the country will need to import at least 250 million tons of coal a year by 2020. India’s imports of coal from South Africa rose 74% last year.
It’s no exaggeration to say China and India’s demand for electricity is the future of global power. Already China’s coal production represents more than twice the amount of energy produced from all of Saudi Arabia’s oilfields.
What’s fueling all of this demand for coal-fired power plants? Huge urban populations in China and India. Consider these figures. In America, the baby boomers – the 50 million Americans born in the years after World War II – produced the demand for vast amounts of new infrastructure in America.
There are 300 million newly urban Chinese people. And 300 million newly urban Indians. That’s 600 million people moving out of the Stone Age and into the modern world – a group 12 times bigger than the baby boomers. While it’s true these people will want to buy lots of things – from Cokes to Buicks – the thing they need most is electricity.
Americans don’t yet realize the Fed’s attempts to paper over our debts come with serious consequences. As our money loses its purchasing power, costs will rise – especially power costs. Undoubtedly, our politicians will blame "speculators" for the soaring price of coal. But the truth is, the paper that will push prices higher came from the Federal Reserve, not from any hedge fund.
Whether we realize it or not, we compete with other nations around the world for resources. Historically, our currency – as the world’s reserve currency – has given us an enormous advantage. Coal, for example, is priced in Dollars. But we stand on the verge of losing that advantage…and the consequences will be drastic. We will face higher prices for coal, among other sources of energy.
To hedge yourself from this coming Fed disaster, buy coal stocks is our advice. They’re going to go much higher in the coming years.
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Oct 11
Gold investors wanting coins and small bars might be surprised if another "crisis" hits the markets…
WE’VE GOT IT pretty easy right now, writes Jeff Clark of Doug Casey’s Gold & Resource Report.
Click or call, and you can quickly and conveniently own a Gold Coin or small bar to keep at home. But if global concerns cause another panic – or the Dollar breaks down – you could find yourself standing in a line at the local coin shop or getting a busy signal from a larger coin dealer.
Simply, for reasons I’ll discuss here, you may find it very difficult to buy physical gold when that time comes.
It’s happened before. Though there were no precious metal ETFs in 1980, the demand for physical gold was so great that you literally had to wait in line at a coin shop to buy, with plenty of occasions when you would have been turned away due to lack of inventory. And you’ll recall we saw serious shortages, unexpected delays, and soaring premiums for retail investment products in late 2008.
Given the fragile state of global affairs and the waiting-in-the-wings crisis for the US Dollar, I’ll be surprised if we don’t see another panic into physical gold. And the question is, will there be enough metal to go around when the public – 95% of which own none – wakes up and wants to buy it?
Answer: No.
Contrary to some claims, it isn’t because we’re about to run out of supply. While global mine production peaked in 1999 at 82.1 million ounces and has trended down since, take a look at the second largest source of supply – scrap. As you would expect, bad economic times and the surge in Gold Prices have triggered an increase in supplies from that source.
In fact, since 1999, as the price of gold climbed, the scrap supply nearly doubled. (Scrap comes mostly from jewelry, 75% of which derives from India, East/Southeast Asia, and the Middle East.)
So when you examine the total supply of gold coming to the market, it’s actually nudged up for three consecutive years, hitting 116.6 million ounces in 2009, a modest 8% increase over 1999. In the greater scheme of things, the total supply of gold to market has changed very little.
So what’s the problem?
First, you’d think a higher price would lead to rising mine production – but that’s not happening. From 1999 through 2009, the average annual Gold Price rose 248%, yet gold production fell 6.6%.
This means that as gold continues higher, we cannot count on miners producing more yellow metal for us to buy. This concern will become increasingly obvious as more buyers enter the market.
Second, although scrap has more than supplemented the fall in mine production, as I’ll show you in a moment, it’s still not enough to fully satisfy current demand, let alone any increase in buying.
Meanwhile, the third major source of gold supply is reversing trend. Until last year, central banks around the world had been selling gold, adding a reliable tributary to the flow of metal year after year. This has stopped. As recently as 2007, 17 million ounces came to market from central banks; last year they acquired 7 million ounces. The era of central banks as large net gold sellers has likely ended.
The conclusion we can draw from these signals is clear: known gold supply conduits will not deliver any significant new supply in the future. This will have serious repercussions. While it’s certainly bullish for the price, I think many investors have overlooked a critical angle:
If more and more people want to Buy Gold and the supply doesn’t increase, what happens to your ability to get it? You can’t turn a profit if you can’t own it. Realistically, though, how much more demand can we expect?
One way to estimate this is to compare today’s percentage of global assets in gold to the last great bull market…
While gold’s share of the global financial landscape has grown since 2001, a whopping 385% leap is needed to equal its 1980 peak.
Certainly some of that percentage could result from a decrease in the value of other assets. For example, residential and commercial real estate values will continue to fall as bad loans are unwound, and stock markets will adjust lower as global economies slow from cutbacks in government spending. But the gap is so enormous that investment in gold could easily increase significantly before this bull market is over.
Another way to measure potential future demand for Gold Investment is to look at today’s bar and coin demand compared to the last bull market. The following chart first looks at what portion investment in gold comprises of the total uses for gold (i.e., including jewelry and industrial uses). Then we look at the percentage coin buying represents today vs. the peak in 1979. The point is to see if we’ve already reached high investment levels in gold similar to the last bull market peak – or if there’s room for more.
When Gold Investment demand – whether for physical metal or bank buying etc – peaked in 1979, it represented 54% of all uses for gold that year, a far cry from last year’s 32%.
Of course, this is just arithmetic; lower jewelry demand could make investment demand look bigger as a share of total demand. But this data makes clear that an increase in investors wanting more gold could rise dramatically.
The picture is more striking when we look at Gold Coin demand. Coin buyers represented 36% of all gold investments in 1979; today it’s barely 14%. Coin demand would have to grow by 157% to match the last bull market peak. Yes, gold ETFs have and will continue to replace some of the demand for physical metal, but this shows there remains tremendous room for growth for investors wanting more Gold Coins.
Based on this data, I believe that despite the strong demand for gold investments we see today, it can go much, much higher in the coming years.
Here are some examples of coin demand straining current supply that you may find surprising…
- The Rand Refinery in South Africa, the world’s largest, forecasts it’ll sell 1 million Krugerrands this year. Sounds like a lot – until you consider that from 1974 to 1984, they sold 2.6 million ounces per year. And that was when the world’s population was roughly 35% lower than today;
- The US Mint has had difficulty meeting heightened demand when annual sales are only slightly above historical averages;
- So far this year, Gold Mining production in world No.1 China is up 5%, but demand for physical gold in the world’s No.2 market is up 30%;
- During two tense weeks of the Greek crisis in April/May, the Austrian Mint, one of the world’s five largest, sold a quarter-million ounces, an amount that exceeded all of first-quarter sales. And Pro-Aurum, one of Europe’s largest online precious metals traders, had to temporarily suspend sales due to a backlog of orders and insufficient supply. If Greek-style sovereign debt fears spread to other nations – something looking all but assured – rolling bullion shortages could resurface.
While all this is bullish for the price of gold, it’s alarming what it suggests might happen to the availability of physical gold.
So my question is this: if the Dollar is collapsing and gold is screaming to $5,000 an ounce, will you feel like you own enough?
Better get some now while you still can.
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Sep 24
Australia is home to approximately 10 percent of world economic gold resources and is ranked third after South Africa and the USA. It is also the world’s third largest producer.
Aug 22
Physical gold looks like the best option according to this:
Gold Mining stocks face a slow, long-term decline in output…
PORTFOLIO Joe Foster calls himself a “stock picker”, says the Gold Report – and he’s pretty good at it.
Class A shareholders in Van Eck Global‘s International Investors Gold Fund have seen an average return of almost 25% for 10 straight years under his care. “I’m looking for the gold companies that are going to outperform the indexes, my peers and gold,” Joe says in this exclusive interview with The Gold Report…
The Gold Report: Joe, in your view, what are the catalysts that will push gold to the next level?
Joe Foster: Well, there could be a range of catalysts, any one of which could rear its ugly head.
TGR: Which ones are most likely?
Joe Foster: The financial system has not yet recovered from the shock of the credit crisis. We’re in the midst of a historic credit contraction that could turn into a deflationary credit contraction. As the Fed and the economy deal with this, there is a range of possibilities that could create a catalyst.
One would be further implementation of quantitative easing, where the Fed steps in and buys securities in order to prop up the financial system. A second is the housing market, which looks like it’s weakening again. If we see a double dip in the housing market, it could create the financial stress that provides a catalyst.
The sovereign debt issues are something that, to me, will be on the table for quite some time. They could flare up again in Europe and elsewhere. State and municipalities’ finances are in very difficult shape right now. We could see some form of stress in the municipal bond market that could cause some sort of a catalyst for gold, as well.
So there’s a range of catalysts that could come into the market over the next year or two that drive it higher.
TGR: The Fed may look at more quantitative easing, but it doesn’t really have a lot of room to operate as far as interest rates go. What sort of economic policy does America need at this point?
Joe Foster: I think our monetary system needs an overhaul. I guess some sort of stimulus, whether it be quantitative easing or some more fiscal stimulus, might be necessary to keep the economy from going into a deeper recession. But I think plans to create a more sound monetary system would go a long way toward boosting confidence in the government’s ability to handle these crises in the future or to prevent them from happening.
TGR: Do you think what is happening now will ultimately result in a new currency down the road? Perhaps even a global currency?
Joe Foster: A global currency would be very difficult. Just to have a sound Dollar again would create a lot of stability around the world. Many other countries still peg their currencies to the Dollar, so proper management of the Dollar would, in effect, create a sound global currency. The Dollar is still the world’s reserve currency. I’m calling for some sound money policies that we haven’t seen since the Dollar was floated back in the 1970s.
TGR: In a June commentary on gold you said, “states across the country are undertaking austerity measures to counter gapping budget deficits.” Could a state, or states, defaulting on loans or even declaring bankruptcy be the next leg down that turns the recession into something worse?
Joe Foster: Well, I doubt it would go as far as a state actually declaring bankruptcy. Congress looks like it’s going to approve another round of state aid to keep the states afloat. I think you would see the federal government step in before we saw a bankruptcy. But states like New York and California and others around the country are in serious financial trouble. We’ll have to see if the austerity measures that they’re implementing will keep them out of bankruptcy. I think this is more of a slow burn. I don’t see it as being the catalyst for the next leg in the gold market. I think we’ll reach the next leg in the gold market before any state reaches such a desperate situation.
TGR: How high do you see gold getting by the end of this year and through the end of 2011?
Joe Foster: I’m looking for it to make new highs as we trend into 2011, moving through the fall of 2010. The high was around $1,265 in June. We’ve been on a steady trend higher. There’s a lot of volatility in the gold market, but I would expect that trend to continue. It wouldn’t surprise me if it moved through the $1,400 level sometime during 2011.
TGR: You said that you believe that the government would step in and prevent a state from declaring bankruptcy or becoming insolvent. Do you believe the government is, to some extent, manipulating the gold market?
Joe Foster: I think that’s speculation. I haven’t seen solid evidence that the government is manipulating the gold market one way or the other. Even if they are, I think the market will determine where the Gold Price goes in the longer term.
TGR: You have managed assets for investors since 1998. In the post-2008 era, are you managing your gold fund the same way you did in the pre-2008 era?
Joe Foster: Well, we’re using the same strategies or similar strategies now that we have since this bull market began in 2001. Relative to our peers, we’re probably overweight in juniors and mid-cap companies and underweight in the large-cap companies. Some of the fundamental strategies that we use remain in place.
I would say that the big difference is that, prior to the credit crisis, we spent a lot of time explaining to investors why they should invest in gold as a hedge against financial stress. Since the credit crisis we don’t spend much time explaining why you should invest in gold because investors get it. Everybody gets it now that gold functions as a sound currency and as a financial hedge in times of turmoil.
I spend more time describing how we construct our portfolio and manage the fund because investors are now asking: “How do I invest in gold? Do I want Gold Bullion? Do I want a Gold ETF? Do I want a managed fund? Do I want an equity ETF?” Those are the questions that investors are asking now that we weren’t hearing prior to the crisis.
TGR: That’s noteworthy. But your asset allocation must’ve changed some since the crisis. You said it’s heavier than your competitors on juniors and mid caps.
Joe Foster: I’ve got an entire range. I’ve got companies from juniors all the way up to the largest producers in the fund. We play the whole spectrum of gold companies. It’s just that I’ve got a higher weighting in juniors and midtiers than I do in the large-cap companies. We’re stock pickers, we’re bottom-up, fundamentals-driven stock pickers. I’m looking for the gold companies that are going to outperform the indexes, my peers and gold.
TGR: You’ve certainly done a good job. Over the last 10 years, Class A shares in your International Investors Gold Fund are up almost 25%. Does gold’s steady climb upward provide a greater margin for error in gold fund management?
Joe Foster: Not really. When you look at Gold Mining, gold production peaked in 2001 and it’s been on a slow decline ever since. In an industry that’s in decline, you know you’re going to have winners and losers. The market likes companies that can provide growth. But in a declining industry those types of companies become fewer and farther between. And there are lots of gold companies that have underperformed gold in this cycle. So stock picking becomes very important. It’s not always easy to outperform gold in this type of an industry environment.
TGR: How do you go about picking stocks? What are you looking for?
Joe Foster: We look for growth. Companies that can develop properties at reasonable cost and that can increase their margins. The best kind of growth is organic growth, where companies discover deposits and develop them. That’s the first thing we look for, organic growth. The second thing would be growth through acquisitions. We look for management that can identify creative acquisitions and grow that way.
TGR: Is it still cheaper for companies to go out and raise money and drill for organic growth versus acquiring assets through M&A?
Joe Foster: It’s very difficult to do. For most of the industry, it’s almost impossible. The reason gold production isn’t increasing globally is that all the easy stuff has already been found. The prolific gold fields of South Africa, Nevada and Western Australia are all mature areas that are in decline. The industry hasn’t found another prolific gold area like Nevada. Instead, they have to look all over the world and into remote areas. There are new discoveries being made; it’s just not at the pace that we saw 20 years ago when Nevada and Western Australia were emerging.
TGR: You mentioned Nevada. When I was looking at your fact sheet on the International Investors Gold Fund, only about 10% of your holdings are based in the US Does America need more gold mines?
Joe Foster: The US is still one among the top-five gold producers in the world. It’s still a substantial gold producer. I don’t know if we need more gold mines. It’s a function of geology. Probably 90% of the gold production in the US comes out of Nevada. As I said earlier, Nevada is past its prime; it’s a region wherein production is in decline.
TGR: But California has banned new Gold Mining projects, and Montana has banned heap leaching as a form of gold extraction. We’re seeing some exploration success in places like Wyoming and Idaho. The US is still the fourth-largest country in the world by area, so you would think there are lots of areas that remain unexplored.
Joe Foster: Well, if the United States was more mining friendly, there’s no doubt it could be a much larger gold producer than it is; but, in all practicality, that’s not going to happen. Mining is such a miniscule part of the US economy that it’s not politically feasible to revise the mining laws in states like California and Oregon. It’s a bit much to ask in places like that.
TGR: Do you have some parting thoughts for us?
Joe Foster: Well, we talked about the gold market more in the near term, but this gold market’s been in bull mode for almost 10 years now. As far as we can tell, it could go on for another 10 years. Who knows? I think the actions we’re seeing among the monetary and fiscal authorities around the world are setting up a situation wherein we could see another inflationary cycle once we get through this credit contraction. I think in the longer term, the risk of an inflationary cycle is going to be with us for quite some time. That’s going to be the ultimate driver of this gold bull market.
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Aug 20
Gold jewelery in India might be bouncing back despite record high prices.
Several celebrities have been spotted at India International Jewellery Week (IIJW), which continues to display a large range of gold jewellery.
The five-day event, which is being held for the first time ever, saw Bollywood actress Neena Gupta and her daughter attend the third day of the show.
One of the brands showing its wares at the exhibition was Intergem Exports, which is based in Indore.
It had its new Slices collection on display, which is made from 18-c gold.
Kashi Jewellers, which has been exporting to the UK, US, Middle East and South Africa since 1979, also had several pieces for visitors to look at.
Its collections featured both modern and traditional design influences to give each piece a unique appeal.
Organised by the Gem and Jewellery Export Promotion Council of India, more than 30 jewellery designers will have presentations at IIJW and it is held at Hotel Grand Hyatt in Mumbai from August 15th to 19th.
The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.
Aug 18
Looks like the Word Cup helped gold coin sales.
This year's World Cup saw sales of gold coins soar, according to the South African Gold Coin Exchange.
Executive chairman of the organisation Alan Demby told World Coin News that its Scoin retail outlets in South Africa recorded a significant increase in transactions involving gold coins and medallions.
The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.
