Gold Market Radar (January 14, 2013)

Gold Market Radar (January 14, 2013)

For the week, spot gold closed at $1,662.80, up 7.15 per ounce, or .43 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, gained 0.23 percent. The U.S. Trade-Weighted Dollar Index had a loss of 1.19 percent for the week.

Strengths

• The U.S. Mint sold a massive 3.9 million ounces of silver in the first few days of 2013, already surpassing the entire December total of 1.64 million ounces.
• Chinese gold imports from Hong Kong almost doubled in November on a month-over- month basis as expectations of an economic recovery and more attractive prices spurred gold purchases. Mainland China purchased 90,764 kilograms, including scrap and coins, compared with 47,478 kilograms in October.
• Goldcorp expects 2013 gold production to grow by 10 percent and Yamana expects gold equivalent production to increase by 20 percent this year. Both companies have updated their cost calculations to reflect something closer to an all-in cost—not a true total cost, as development capital is missing—but an improvement nonetheless.

Weaknesses

• On Tuesday, African Union chairman Thomas Boni Yayi said NATO should send forces to Mali to fight the Islamist militants, calling the Malian conflict a “global crisis” requiring NATO intervention, as in Afghanistan. His requests were followed by interim Malian President Dioncounda Traore’s requests to the United Nations and France for assistance. A large percentage of Randgold’s assets are in Mali, though thankfully far from the present area of conflict. By Friday, French President Francois Hollande announced his nation’s military support for the Malian army—apparently only in the form of airstrikes at present—with further details forthcoming over the weekend.
• AngloGold Ashanti announced this week that CEO Mark Cutifani will be leaving AngloGold to replace troubled CEO Cynthia Carroll of Anglo American Plc. AngloGold’s stock dropped immediately upon confirmation of the news, making new 52-week lows this week. As analyst Des Kilalea of RBC explained, “[C]learly Anglo[American]’s gain is AngloGold’s loss.”
• RBC’s Global Mining Best Ideas Portfolio this week reflected an upgrade to Overweight of base metals, paring back precious metals to market weight

Opportunities

• A recent London Bullion Market Association poll of traders and analysts showed an expectation that gold may climb as much as 14 percent this year, with poll respondents expecting an average $1,753 an ounce in 2013.
• According to a recent Goldman Sachs report, nine out of ten hedge funds failed to beat the S&P 500 last year, and the price of gold has likely been kept down, at least in part, by redemptions over the past several weeks. Such redemptions should end soon as we move into the New Year, and the price of gold may get a lift as pressure is removed.
• In the new normal—according to Dave Rosenberg—a taxpayer-supported Federal Reserve is allowed to run its book like a hedge fund, and record $89 billion in profits, which it sent right back to the Treasury in 2012. Given such financial shenanigans, in his latest Breakfast with Dave, Mr. Rosenberg points out that he has “no clue why anyone would resist the notion that the gold price is going to ultimately conclude its secular bull market somewhere north of $3,000 an ounce.

Threats

• Harmony’s Kusasalethu Mine has been closed since December after labor unrest, and Harmony is saying that it could permanently shut the mine down following receipt of death threats and shootings at police. The Kusasalethu Mine accounted for 18 percent of the company’s production profit in the September-ended quarter.
• The Gold Anti-Trust Action Committee and other advocates who argue the quantity of gold held by the world’s central banks, international bullion banks, and future exchanges is overstated, are backing a petition demanding an assayed public audit of the U.S. gold reserve. As of the end of December 2012, the U.S. Treasury claims to hold 261 million ounces of gold at Denver, Fort Knox, West Point and at the Federal Reserve Bank of New York. This bullion was last subjected to a full physical audit in 1953.
• High gold prices are pushing India’s farmers toward silver, Mineweb.com reports. Though gold remains alluring to farmers, broadening interests in silver and real estate are rising.