Posted: 08 Jan 2014 09:50 AM PST

Commodities / Gold and Silver 2014 Jan 08, 2014 - 01:50 PM GMT

It's been one of the worst years for gold in a generation. A flood of outflows from gold ETFs, endless tax increases on gold imports in India, and the mirage (albeit a convincing one in the eyes of many) of a supposedly improving economy in the US have all contributed to the constant hammering gold took in 2013.

Perhaps worse has been the onslaught of negative press our favorite metal has suffered. It's felt overwhelming at times and has pushed even some die-hard goldbugs to question their beliefs… not a bad thing, by the way.

To me, a lot of it felt like piling on, especially as the negative rhetoric ratcheted up. Last year's winner was probably Goldman Sachs, calling gold a "slam-dunk sale" for 2014 (this, of course, after it's already fallen by nearly a third over a period of more than two and a half years—how daring they are).

This is why it's important to balance the one-sided message typically heard in the mainstream media with other views. Here are some of those contrarian voices, all of which have put their money where their mouth is…

Marc Faber is quick to stand up to the gold bears. "We have a lot of bearish sentiment, [and] a lot of bearish commentaries about gold, but the fact is that some countries are actually accumulating gold, notably China. They will buy this year at a rate of something like 2,600 tons, which is more than the annual production of gold. So I think that prices are probably in the process of bottoming out here, and that we will see again higher prices in the future."

Brent Johnson, CEO of Santiago Capital, told CNBC viewers to "buy gold if they believe in math… Longer term, I think gold goes to $5,000 over a number of years. If they continue to print money at the current rate, I think it could be multiples of that. I see a slow steady rise punctuated with some sharp upward moves."

Jim Rogers, billionaire and cofounder of the Soros Quantum Fund, publicly stated in November that he has never sold any gold and can't imagine ever selling gold in his life because he sees it as an insurance policy. "With all this staggering amount of currency debasement, gold has got to be a good place to be down the road once we get through this correction."

George Soros seems to be getting back into the gold miners: he recently acquired a substantial stake in the large-cap Market Vectors Gold Miners ETF (GDX) and kept his calls on Barrick Gold (ABX).

Don Coxe, a highly respected global commodities strategist, says we can expect gold to rise with an improving economy, the opposite of what many in the mainstream expect. "You need gold for insurance, but this time the payoff will come when the economy improves. In the past when everything was falling all around you, commodity prices were soaring out of sight. We had three recessions in the 1970s and gold went from $35 an ounce to $850. But this time, gold is going to appreciate when we start getting 3% GDP growth."

Jeffrey Gundlach, bond guru and not historically known for being a big fan of gold, came out with a candid endorsement of the yellow metal: "Now, I kind of like gold. It's definitely very non-correlated to other assets you may have in your portfolio, and it does seem sort of cheap. I also like the GDX."

Steve Forbes, publishing magnate and chief executive officer of Forbes magazine, publicly predicted an impending return to the gold standard in a speech in Las Vegas. "A new gold standard is crucial. The disasters that the Federal Reserve and other central banks are inflicting on us with their funny-money policies are enormous and underappreciated."

Rob McEwen, CEO of McEwen Mining and founder of Goldcorp, reiterated his bullish call for gold to someday top $5,000. "We now have governments willing to seize their citizens' assets. We now have currency controls on the table, which we haven't seen since the late 1960s/early '70s. We have continued debasement of currencies. And the economies of the Western world remain stagnant despite enormous monetary stimulation. All these facts to me are bullish for gold and make me believe the price will bounce back relatively soon."

Doug Casey says that while gold is not the giveaway it was at $250 back in 2001, it is nonetheless a bargain at current prices. "I've been buying gold for years and I continue to buy it because it is the way you save. I'm very happy to be able to buy gold at this price. All the so-called quantitative easing—money printing—by governments around the world has created a glut of freshly printed money. This glut has yet to work its way through the global economic system. As it does, it will create a bubble in gold and a super-bubble in gold stocks."

And then there's the people who should know most about how sound the world's various types of paper money are: central banks. As a group, they have added tonnes of bullion to their reserves last year…

Turkey added 13 tonnes (417,959 troy ounces) of gold in November 2013. Overall, it has added 143.6 tonnes (4,616,847 troy ounces) so far this year, up 22.5% from a year ago, in part thanks to the adoption of a new policy to accept gold in its reserve requirements from commercial banks.

Russia bought 19.1 tonnes (614,079 troy ounces) in July and August alone. With the year-to-date addition of 57.37 tonnes—second only to Turkey—Russia's gold reserves now total 1,015 tonnes. It now holds the eighth-largest national stash in the world.

South Korea added a whopping 20 tonnes (643,014 troy ounces) of gold in February, and now carries 23.7% more gold on its balance sheet than at the end of 2012."Gold is a real safe asset that can help (us) respond to tail risks from global financial situations effectively and boosts the reliability of our foreign reserves holdings," said central bank officials.

Kazakhstan has been buying gold every month, at an average of 2.4 tonnes (77,161 troy ounces) through October. As a result, the country's reserves have seen a 21% increase to 139.5 tonnes from a year ago.

Azerbaijan has taken advantage of a slump in gold prices and has gone from having virtually no gold to 16 tonnes (514,411 ounces).

Sri Lanka and Ukraine added 5.5 (176,829 troy ounces) and 6.22 tonnes (199,977 troy ounces) respectively over the past year.

China, of course, is the 800-pound gorilla that mainstream analysts seem determined to ignore. Though nothing official has been announced by China's central bank, the chart below provides some perspective into the country's consumer buying habits.

China ended 2013 officially as the largest gold consumer in the world. Chinese sentiment towards gold is well echoed in a statement made by Liu Zhongbo of the Agricultural Bank of China: "Because gold has capabilities to absorb external economic shocks, growth of its use in the international monetary system will be imminent."

And those commercial banks that have been verbally slamming gold—it turns out many are not as negative as it might seem…

Goldman Sachs proved itself to be one of the biggest hypocrites: while advising clients to sell gold and buy Treasuries in Q2 2013, it bought a stunning (and record) 3.7 million shares of GLD. And when Venezuela decided to raise cash by pawning its gold, guess who jumped in to handle the transaction? Yes, they claim the price will fall this year, but with such a slippery track record, it's important to watch what they do and not what they say.

Société Générale Strategist Albert Edwards says gold will top $10,000 per ounce (with the S&P 500 Index tumbling to 450 and Treasuries yielding less than 1%).

JPMorgan Chase went on record in August recommending clients "position for a short-term bounce in gold." Gold's price resistance to Paulson & Co. cutting its gold exposure, along with growing physical gold demand in Asia, were cited among the main reasons.

ScotiaMocatta's Sunil Kashyap said that despite the selloff, there's still significant physical demand for gold, especially from India and China, which "supports prices."

Commerzbank calls for the gold price to enter a boom period this year. Based on investment demand from Asian countries—China and India in particular—the bank predicted the yellow metal will rise to $1,400 by the end of 2014.

Bank of America Merrill Lynch, in spite of lower price forecasts for gold this year, reiterated they remain "longer-term bulls."

Citibank's top technical analyst Tom Fitzpatrick stated gold could head to $3,500. "We believe we are back into that track where gold is the hard currency of choice, and we expect for this trend to accelerate going forward."

None of these parties thinks the gold bull market is over. What they care about is safety in this uncertain environment, as well as what they see as enormous potential upside.

In the end, the much ridiculed goldbugs will have had the last laugh.

We can speculate about when the next uptrend in gold will set in, but the action for today is to take advantage of price weakness. Learn about the best gold producers to invest in—now at bargain-basement prices. Try BIG GOLD for 3 months, risk-free, with 100% money-back guarantee. Click here to get started.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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Gold Price Has Bottomed :: The Market Oracle :: Financial Markets ...

Posted: 07 Jan 2014 01:57 AM PST

Commodities / Gold and Silver 2014 Jan 07, 2014 - 04:57 AM GMT

By: Thomas_Clayton

Words by different Authors who attempt to "Pump Up" or "Talk Down" an Issue are exactly that, just Words. The ultimate results show up on Technical Charts in relation to Volume and Price Movements and which act as a Function of Mathematical Indicators involving Momentum and Rate of Change as we learned in Algebra II in H.S. and Calculus and Derivatives at U.C. Berkeley. There should be no "Mystery" in making money if these concepts are applied correctly which involve the Net Emotions of Greed and Fear and the Fundamental Values will ultimately take care of themselves. By applying correctly, Have Cash Ready until you see MACD lines crossing Up or Down at ZERO and always use Stops to Limit your losses. If you are an Intraday Trader, use 1min to 15min Charts and look for Peaks and Troughs of %B to Alert you and MACD line Crosses to Effect a Buy or Sell. If a "Long Termer", which does not exist with Volatile ETFs, use Daily Charts.Follow me and stockcharts.com and you will see. Initially use the format: "chartbook" and scroll to the issues which are of interest specifically to your style of "Investing or Speculation", and if you wish to make some good Returns for a Change as many of my Followers. Thank you for your interest

RULES: Jan 05th, 2014, Last week I Marketoracle published my Charts that Gold had Probably bottomed. This is a FollowUp to that report I never used to give much attention to MACD because the defaulted parameters given never lined up, until I substituted Fibonacci numbers 13,21,8 and multiples thereof, lined up directly PRECISELY at very peak tops and trough bottoms.

Coincide that first with Stochastic RSI above 0.2,

%B Trough,

Slow Stochastics above 20, MACD lines crossing Up, and confirmed by MACD lines crossing above Zero has given me the most ACCURATE, alert that an Issue has bottomed almost at the precise Lowest Price. A Sell signal is expressed with

Stoch RSI passing below 0.2, Slow Stoch below 20,

%B Peak,

MACD lines crossing down with confirmation of MACD lines crossing below Zero.

All these Indicators must happen or there is NO Buy or Sell Signal.

Each time frame from 1 minute to Monthly have their own characteristics, so by observation you will find the uniqueness in each Time Frame in relation to the Indicators. I repeat, BE IN CASH until you see MACD lines crossing Up or Down at ZERO and always use Stops to Limit your losses. If you are an Intraday Trader, use 1min to 15min Charts and look for Peaks and Troughs of %B to Alert you and MACD line Crosses to Effect a Buy or Sell. If a Long Termer, which does not exist with Volatile ETFs, use Daily Charts. See the Maximum and Minimum Values when the Area Between the MACD lines are at their Maximum and start to Contract and then Expand denoting a change in Direction.

Questions: stemsmexico@gmail.com skype: stemsmexico3 better than telephone and is Free.

GOLD DAILY, 6 MONTHS, courtesy of stockcharts.com. Cross Up by MACD above Zero will Confirm.

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GDX Gold Miners 15min courtesy of stockcharts.com- 15min seems to be the best for timing

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Dec 31 Buy, Red Vertical, Jan3rd, %B Peak, Stoch RSI 0.8, Slow Stoch 80, MACD Line cross Down, Peak in Price then %B Below 50. Now wait for %B to Trough for Next Cycle Up. When will that be?—We then go to the 1 minute Chart

GDX 1min—more subjective and a bit "whippy" Stand back and watch Indicators, particularly the MACD. We are now waiting for MACD lines to cross above Zero to continue the Uptrend. When MACD crosses Zero, all time frames will do in unison.You can see Indicators crossing above the "Triggers". Have Buy order for NUGT loaded and ready to strike "Buy" when Buy Signal is set off. When %B is above 50 and MACD lines above Zero, the issue is in an Uptrend.

NUGT Gold Miners x 3 , 15min Chart Pg 17 .. Be In Cash.. Do not Buy until MACD lines cross up and approaching Zero Cross. You will see the Area between the 2 MACD lines begin to Contract or Diminishing.. wait for lines to Cross Up to Trigger an Initial Buy. When the Lower MACD Histogram crosses Zero, will indicate the positive MACD line cross Up. With Histogram on Upside is a good indication. When MACD cross Up again to Establish an Uptrend watch for Surge Up.. to optimize your Buy or Call Purchase.

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DUST Bear Gold Miners x 3 . Ton confirm NUGT, its Antithesis, DUST is starting to give a Sell Signal. DUST is now in a Downtrend with %B below 50 and MACD below Zero, Up move will be muted until Uptrend well established. When MACD lines cross Zero, there will be a surge down in this case.

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NEM Newmont Mines, a component of GDX, has been the Absolute Pig Dog of 2013. To confirm GDX, NEM has given a Buy Signal on the Daily Chart, using the same Triggers. Notice Green Price bar. This was the no 1 Worst Stock Perfomer for 2013. Could be one of the Best for 2014.

Next Chart

USLV Velocity Up Silver x 3. Of course, what Gold does, Silver tags along. Notice where MACD passes below or above Zero and the "SURGE" effect. Use this for timing your Entry, Exits and purchases of Puts or Calls on any issue.

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$SPX, The S&P 500, Daily .. Preliminary Sell Signal that the StockMarket may be topping or already Topped

Next Chart

AMZN, Amazon 15min, A great company with Mr. Bezos, a man with great vision, but now overpriced

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AAPL, Apple Computer, 15min, Notice the Candle Volume Bars Steve Jobs one of the Best if not the Best CEO who ever lived.

Priceline, PCLN, 30min example of one which gave a Sell Signal a bit earlier..Follow the Triggers as I have pointed out. Most importantly, see what happens when MACD lines Crossed below Zero, the Accelerated Surge Down. The Price can continue going down eventhough the MACD is heading Up until there is a Cross above Zero will PCLN price go Up. See Dec 19th as an example. MACD above ZeroUptrend, MACD below Zero DOWNTREND as we see now.

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Next to NUGT & DUST, UVXY is an equal in Volatility, UVXY is $VIX x 3. There was a volume Buy at the close of Friday, in all indications UVXY will follow thourgh with the $SPX, DJIA, COMPQ declining. See what happens. This is a good example of what I mean with %B above Zero and MACD above Zero for Uptrend

Edit Chart

For more examples of my work, please go to stockcharts.com, to the right PublicChartLists, see me at no 11 from the Top, Easy $$, Clayton Tom—Thank you for Viewing and your interest. Clayton Tom, stemsmexico@gmail.com Skype: stemsmexico3.

Using my system at stockcharts.com, Public Chart Lists, Easy $$, by Clayton Tom, you will see the rest of my work in reference to Gold, Silver, NUGT, DUST, USLV, DSLV, etc SPX, $VIX, VXX, UVXY, etc UPRO, SPXU, ERX, ERY, DIG, DUG, FAS, FAZ, TNA, TZA, DRN, DRV and Winners of 2013, which show a Sell and should be PUT or Shorted i.e. Pg 5, AAPL, GOOG, AMZN, PCLN, NFLX, FB, HLF (Hello, Mr Ackerman) etc. You may ask me to do an Opinion based strictly on the Indicators I use. stemsmexico@gmail.com. I am an ex-broker, Asst. V.P. in Commodities with Dean Witter back in the late 1960s and early 70s and went through the exact training course as depicted in the movie, "Seeking Happyness" with Will Smith. I am also a retired Pharmacist via Cal Berkeley, U.C. School of Pharmaceutical Science and the mandatory Courses in Math has enabled me to understand the Derivation of the Indicators used to make this almost a perfect Technical means of precisely spotting Tops and Bottoms as a function of the Price Fluctuations of Stocks, ETFs, Currencies, Commodities and Financials Bond Instruments. I also lack just one semester for my MBA in Marketing at Univ. of Cal . SF State University. Retired after 25 years in Retail Pharmacy, rated as the most Competive Independent Pharmacy Chain by the trade journal Pharmacy Times, 1995. Was the first Pharmacy in the U.S. to promote Generic Drugs in the early 1970s.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

At What Gold Price Will Gold Miners Shut Down? [SPDR Gold Trust ...

Posted: 06 Jan 2014 01:25 AM PST

Will Miners Shut Down at Gold Prices Under $1,200 per ounce?

Gold prices have declined from a September 2011 high of over $1,900 to a recent price of around $1,200. In aggregate, bullion holdings in gold ETPs declined from 2,632.5 tons to 1813.3 tons over the course of last year.

With rapidly declining gold prices and record outflows from bullion held in gold (GLD) ETPs, notably the SPDR Gold Trust, many have asserted that miners will be shutting down and that a 'supply shock' will arise.

Much has been written about this prospect of a looming gold supply shortage of late.

However, while we believe this is partially right, it is mostly wrong:

Although many gold miners have all-in sustaining costs in excess of $1,200 per ounce, they will not discontinue operations unless gold prices fall substantially lower than this
Rather, gold prices less than $1,200 all-in sustaining costs will stunt the development of new gold mines, reducing future supply of gold 5-10 years down the road; an immediate supply shock is not expected
However, in the short term, gold prices must fall below the operating 'cash cost' per ounce to cause miners to cease operation (or go bankrupt, in the case of those with weak balance sheets)
It is the junior miners, rather than the senior producers, which are likely to shut down if gold prices continue to slide

Explanation Of The Rationale

'All-in sustaining costs' per ounce may be in the $1,200 to $1,400 range for many major gold producers (let's say for example $1,200), however this does not mean that gold producers will immediately discontinue operations when gold prices are below $1,200:

Rather, miners will stop developing *new* mines with projects with an anticipated all-in sustaining cost per ounce of over $1,200.

For a mine already in operation, the cash costs per ounce (i.e. COGS) is the relevant consideration. This is lower than all-in sustaining costs.

For example, if all-in sustaining costs are $1,200 per ounce, cash costs might be $800 per ounce (depends on capex)

In these cases, since the mine has already been built; the capex has already been expended, so they might as well continue to produce unless the price of gold declines to an extent to which it would actually be unprofitable to mine an incremental ounce.

At What Price Will Miners Shut Down?

Most major gold miners have cash costs between $500 and $800 per ounce:

Barrick (ABX): ~$650 and rising
Newmont (NEM): ~$750
Goldcorp (GG): ~700 (co-product basis)

Intermediate and junior producers tend to have higher cash costs (with some exceptions), and run the risk of going bankrupt in this gold price environment.

Note as well that there may be variations with how these operating or 'cash costs' are calculated, such as by-product vs co-product, and what costs are attributed directly to the operations.

What Does This Mean for Gold Miners?

Most senior gold producers enjoy lower cash costs than their smaller "junior" counterparts: Senior gold producers front-end load their cost structure by spending more money (in the form of capex) developing large, technologically complex mining projects. This leaves them with (relatively speaking) lower operating costs per ounce.

Poor capital allocation decisions which led to ballooning mine development capex costs are in the past. The mines are already built, and it makes sense to continue producing until the price of gold is less than the cash cost.

So while enduring gold prices which are less than the all-in sustaining costs for miners don't bode well for the companies, the major producers are unlikely to shut down operations until/unless gold prices fall to levels under $800 per ounce.

For smaller gold producers with marginal mines exhibiting high cash costs (sometimes in excess of $1,200), the situation is far more dire. Some of these mines have only option value in the current gold price environment.

Many of them will go bankrupt. These companies also tend to have less cash resources and less capacity to access the capital markets to raise the funds they need to maintain some level of operation (i.e. to keep the lights on, so to speak).

Summary

Most major miners will not shut down operations until gold prices are under $800 (or possibly $900, as cash costs are rising)
It is at this gold price < cash cost point at which each incremental ounce of production would create a larger loss than not producing at all (ignoring mine-closure expenses)
Gold prices under the all-in sustaining costs of $1,200 - $1,400 per ounce will curb the development of new mines, which will effect the supply of gold many years down the road
Some smaller miners and those with higher cash-costs per ounce will become unprofitable (on an operating basis) at gold prices between $800 - $1,200 per ounce (some already are)
These high-cash cost miners will be the first to shut down operations

Other Considerations

One final aside: it is also important to consider some other important factors influencing gold prices and gold supply:

Gold ETPs still contain the better part of a year's worth of global gold production: This can compensate for slowing global gold production in a falling gold price environment, because falling gold prices tend to cause gold ETP holders to sell their holdings of the ETP. The gold held on their behalf then gets sold into the market
The paper gold market (derivatives) is far larger than the physical gold market, and it can affect gold prices more than supply and demand factors, particularly in the short term

Disclosure: I am long ABX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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