Near record shorts could set up huge Fed gold price surprise

Near record shorts could set up huge Fed gold price surprise
Surprise resignations from Barrick board
North American rare earth stocks jump on Lynas woes
$78bn fall in gold assets leads record investor exit from commodities
2013 a 'remarkably successful' year for Kennady Diamonds, CEO says
South Portland approves six-month oil sands moratorium

Posted: 17 Dec 2013 04:53 PM PST

The gold price suffered a mini-selloff on Tuesday, a day before a decision by the US Federal Reserve on whether to start tapering its economic stimulus program.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery last traded at $1,233.10 an ounce after falling by more than $14 during the regular trading session.

The Federal Open Market Committee on Wednesday could announce a reduction in purchases of $10 billion – $20 billion under its quantitative easing program at the conclusion of a two-day meeting that started today.

The Fed has been reviewing QE and is eager to throttle back asset purchases running at $85 billion a month that has pumped $4 trillion of easy money into the US economy since the program kicked off in December 2008, when gold was trading at $830 an ounce.

Forecasts of the Fed's timetable and size of cutbacks vary widely with a Reuters poll showing only 12 out of 60 economists predict a taper this week and a small majority believing cuts will only come in March.

While some observers believe the impact on the gold market of the eventual QE taper announcement would be minimal as the news is already baked into the price, others see a rally if the taper is delayed further or a fall to 2013 lows below $1,200 if Ben Bernanke and co surprise the market.

A wildcard for price action in gold is the near record number of large investors holding short positions – bets that the price will decline.

While short positions held by managed money fell by more than 6% to 74,312 lots in the week to December 10 according to Commodity Futures Trading Commission data released Friday they remain within shouting distance of the more than 7-year high above 80,000 lots reached the week before.

So many big players short of gold could translate into further upside for the metal as commercial traders are forced to cover their positions ahead of year-end closeouts if the gold price should react positively to the Fed announcement.

Surprise resignations from Barrick board

Posted: 17 Dec 2013 04:32 PM PST

Barrick Gold's (NYSE:ABX) boardroom will be getting some fresh faces.

The company announced on Tuesday that long-time directors Donald Carty and Robert Franklin had resigned with immediate effect.

Both men were directors of Placer Dome and joined Barrick when the mining giant acquired the firm in 2006.

Chairman of Barrick Gold, Peter Munk, thanked Carty and Franklin for their service in a statement released Tuesday.

This boardroom shake-up isn't the first this month. Munk, who founded the company in 1983, is also leaving Barrick, as reported at the begining of December. When Munk announced his retirement Barrick also notified shareholders of the departures of directors Brian Mulroney – a former Canadian prime minister – and Howard Beck.

North American rare earth stocks jump on Lynas woes

Posted: 17 Dec 2013 02:59 PM PST

Lynas Corp (ASX:LYC) on Tuesday lost another 3% bringing its losses since news of a fatality at its plant in Malaysia to over 7%.

Opponents of the Australian company's operations in Kuantan, Malaysia — known as the Lynas Advance Material Plant (LAMP) — are now calling for the facility to be shut down pending an official investigation into the death of an engineer.

Shares in the company on the Sydney stock exchange gave up 3.6% on Tuesday in heavy volumes of more than 8.5 million shares traded. The counter ended at A$0.265, just half a cent off a fresh 52-week low struck earlier in the day affording it a market capitalization of $519 million.

Lynas stock is down 55.8% this year and is now trading at levels last seen in March 2009. Lynas's value peaked at close to $5 billion in April 2011.

Lynas began initial production at LAMP last November and shipped its first batch of 144 tonnes of rare earth oxide (REO) equivalents in the June quarter.

Raw material are transported to Malaysia from the company's Mt. Weld mine in Western Australia. Lynas announced in June it would limit production to 11,000 tonnes per year at Mt. Weld — one of the world's richest deposit of rare earth — due to low demand and depressed rare earth oxide prices.

Government permitting delays and legal challenges from environmental groups and local residents dogged the project for several years and LAMP still only has a temporary operating licence from Malaysian authorities.

In contrast to the besieged Australian firm (and maybe because of its troubles), North American companies in the rare earth sector were enjoying a particularly positive day.

US producer Molycorp (NYSE:MCP) which together with Lynas produce the bulk of rare earths outside China, surged more than 6%, lifting its market value to $1.15 billion.

The Colorado-based company's outgoing CEO recently remarked that for light rare earths Molycorp and Lynas and perhaps one other smaller player outside China would be enough and as for heavy rare earths, "one or two projects" outside of China would be sufficient to meet demand.

Canadian juniors locked in a race to build the country's first rare earth mine all made strides. Rare Element Resources (TSE:RES) and Avalon Rare Metals (TSE:AVL) were up 7.5% and 5.3% respectively. Gains for Quest Rare Minerals (TSX:QRM) were more modest at 2.3%.

China, which produces close to 90% of the world's REOs, recently allocated a total of 15,110 tonnes of export quotas for the first half of 2014, little changed from previous years.

Privately-held SRE Minerals earlier this month announced the discovery in North Korea of what is believed to be the largest deposit of rare earth elements anywhere in the world, holding more than 200 million tonnes of REO.

$78bn fall in gold assets leads record investor exit from commodities

Posted: 17 Dec 2013 02:35 PM PST

Data released by Barclays Capital on Tuesday showed that total global commodity asset values fell by a record $88 billion to $332 billion in the first 11 months of the year.

The UK investment bank said $88 billion headline decline in commodity assets under management is the largest on record as is the net $36.3 billion withdrawal of funds from the sector by investors.

Barclays said the overall decline was mainly as a result of price falls and investors abandoning the precious metals sector, particularly gold.

The value of precious metals assets under management fell by $78 billion compared to last year, after a $6 billion of outflows and value declines over just the last month brought total assets to $119 billion.

By comparison base metal assets were largely static over last year and up slightly from the second quarter. Energy assets under management have also remained flat at around $130 billion.

Commodity-backed exchange trader products (commonly referred to as ETPs or ETFs) are now at their lowest level since June 2010 and for gold-backed ETFs the declines are even more startling.

The holdings of the world's largest gold ETF has dropped some 26 tonnes just this month, falling to the lowest level since January 2009.

SPDR Gold Shares (NYSE: GLD) has experienced year-to-date outflows of 534 tonnes to 816.8 tonnes, down nearly 40% from the start of the year.

The price of gold is down some 26% in 2013 and is set to break its 12-year bull run that took it from around $270 an ounce at the end of 2000 to today's trading level of $,230 an ounce.

Silver is down 33% since the start of the year to $19.80 from above $30 an ounce at the start of the year.

"We view 2014 as likely to be another difficult year for commodity investors," Barclays said, adding that it expects base metals to outperform oil and precious metals in early 2014, and advocating a bullish position in nickel.

2013 a 'remarkably successful' year for Kennady Diamonds, CEO says

Posted: 17 Dec 2013 01:56 PM PST

Exploring Canada's forbidding Northwest Territories has paid off for Canadian junior Kennady Diamonds (TSX-V:KDI): The company announced on Monday that this year's drilling at the Kennady North project produced results which "far exceeded" the miner's expectations.

CEO Patrick Evans said 2013 has been a "remarkably successful" year.

Two drilling programs on the company's Kelvin kimberlite recovered 4.3 tonnes of kimberlite containing more than 16,000 microdiamonds of which 474 are commerical-sized.

The average sample grade from summertime drilling was 4.56 carats per tonne. The winter drilling program returned a sample grade 8.13 carats per tonne.

"These are amongst the highest kimberlite sample grades ever recorded and confirm that the Kelvin kimberlite has both a coarse diamond size distribution as well as the potential to host a high grade diamond resource," the company said in a statement released this week.

Some of the largest diamonds recovered from the Kelvin 2013 summer drill program include a 1.06 off-white, transparent rock. The winter program's highlight was a 2.47 carat diamond.

About 60% of the gems recovered this year are classified as white and transparent, and about 2% are classified as yellow and transparent.

Both the summer and winter sessions provided approximately one commercial size diamond for every nine kilograms of kimberlite, showing a "high degree of consistency," the company noted.

Kennady is now preparing for the 2014 winter exploration program which will include targets beyond the Kelvin kimberlite. The company also plans to publish a maiden resource statement for the Kennady North project during the fourth quarter of 2014.

Kennady controls 100% of Kennady North which is made up of 13 leases and land claims. The project neighbours the Gahcho Kue joint venture between De Beers Canada and Mountain Province.

Despite the news, Kennady's share price was down nearly 5% on Tuesday, trading at $5.00 per share.

South Portland approves six-month oil sands moratorium

Posted: 17 Dec 2013 12:44 PM PST

The east-coast city of South Portland has started a war with the petroleum industry: For at least the next six months, Canadian oil sands won't be allowed to travel from the city's port.

City councillors voted on Monday six to one in favour of a six-month moratorium on oil sands. All applications pertaining to oil sands will be halted during that time and oil sands exports will be banned.

City Council now has until May to debate whether to allow the product on its waterfront. During that time officials will draft a bill that would ban the product permanently.

The American Petroleum Institute has threatened to sue the city, calling the moratorium unconstitutional, according to Press Herald. A representative of PPLC told a local news station that the vote sends an "anti-business message."

The company most affected by the ban will be the Portland Pipe Line Corporation (PPLC) which operates tanker facilities in South Portland and a pipeline from South Portland to Montreal, Quebec.

The moratorium stems from a citizen-initiated 'Waterfront Protection Ordinance' which was defeated in early November.

The motion to pass the moratorium was met with an eruption of cheers in South Portland's city council, as reported by WGME. City councillors told the news outlet that the public is in favour of the bill.

However, one city councillor who voted against the legislation said the move was "one-sided" and that the "oil companies couldn't do anything."

Near record shorts could set up huge Fed gold price surprise

Near record shorts could set up huge Fed gold price surprise

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