Commodities

I'm having a debate with The Daily Bell over their assertion that "physical gold and its delivery will cost you up toward US$2,000" in the comments to this article of theirs. Readers of this blog I think will find it interesting, as well as the diversion into questions about the Germany repatriation and central bank transparency. I also questioned their view that the London Fix was not a free market in the comments to this article.The thing about The Daily Bell is that they track and look behind memes. Their reaction to my questioning made me ask this question in my latest comment:You, DB, should know more about memes and their propagation than anyone else. Your willingness to look behind dominant social themes and ask who benefits is one reason why I was first attracted to, and continue to read, this site. I would suggest that you consider the possibility that memes also exist in the precious metals world. Many, like the Willie $2,000 story, don't have any malicious creator and come about from misunderstandings of how the market operates or exaggeration of a fact, mostly with the intent to just sell newsletters or product.However, I would also suggest you consider that some may originate from the monetary or power elite you watch. The objective? To divert attention away from how the gold market really works and avoid probing questions by creating dumbed down comic book-style stories, that has the bonus of making gold investors look like nutters to the mainstream and which dissuade the mainstream from thinking about investing in gold.I'm interested in your views on the above idea as well as from any The Daily Bell readers as to whether you think they have a blind spot in respect of precious metal memes.

Name That Black Swan By Jeff Clark, Editor of BIG GOLD Is there a potential event that could negatively impact your world so much that it's imperative you insure against it? Of course. That's why you carry fire insurance on your home, for example. The odds of your house burning to the ground are very low – but the outcome would be so financially devastating that you need to have insurance to protect against the loss. The same could be said of life insurance, auto insurance, etc. What about an economic or monetary event that, in spite of you being prudent with your money,

The South African rand fell to four-year lows today, as automakers join mineworkers in wildcat strikes. Additionally, the nation’s largest mining union unveiled its demand for a 60% wage increase for entry level gold and coal mine workers and a 15% wage increase for all other workers. The National Union of Mineworkers presented their claims to the Chamber of Mines as labor negotiations are set to start this month. The proposal calls for strip mine workers to get a minimum monthly wage of R7,000 ($750), and underground miners to get R8,000 a month. The current pay scale is R4,700 and R5,000, respectively. Representatives of gold mining companies have cited declining precious metals prices and escalating expenses as reasons that the union’s demands cannot be met. Platinum prices have fallen nearly 20% in two years, and gold is down almost 20% just since January. Mining companies have given workers raises above inflation for the last ten years, and say that with the collapse in metal prices, many mines are now running at a loss. Leaders of the Association of Mineworkers and Construction Union (Amcu), which is in a power struggle with NUM, has threatened to “bring the country to a standstill” if their as-yet unrevealed demands are not met in this month’s labor negotiations. More than 50 people died in 2012 in violence between the two unions, with at least 34 being killed by police firing into rioting workers. Anglo American Platinum (Amplats) recorded its first-ever loss last year due to labor violence and work stoppages hampering production amid falling platinum prices. In order to regain profitability, it proposed laying off 14,000 workers and shutting down two mine shafts. Outrage from the labor unions prompted the South African government to order Amplats to reduce the layoffs to less than half that number – 6,000 workers. Amcu has threatened to strike at all Amplats mines if any workers are laid off. Adding another poker to the fire, some union officials are calling for the government to nationalize all mines in the country, or at least seize those mines idled by mining companies. Rhetoric like this, combined with the recent strikes and rising expenses, are stifling economic investment in the country, and devaluing the rand, according to pro-business analysts. Filed under: Market News Tagged: company mines, labor unrest, miners, South Africa

This Wall St Journal video reports on the fact that many gold mines in South Africa are not able to operate with gold prices at or below recent levels. As we recently recounted here on the blog, labor unrest and demands from the mining unions in South Africa for the government to forbid the mining companies to lay off workers are running headlong into a very difficult economic reality. To exacerbate the situation, now some labor leaders are calling for nationalization of platinum and gold mines. Many gold and platinum mines in South Africa may soon be idle. The question is, will the stoppage be voluntary or not. Filed under: Market News Tagged: company mines, gold market, gold production, labor unrest, South Africa

wikimedia commons Popular Science has an article on the accidental discovery of a new method for extracting gold from ore that uses cornstarch instead of the cyanide salts presently used in production: Researchers at Northwestern University recently stumbled upon a solution that uses cornstarch instead. It involves some complex chemistry, but it’s cheap, biologically friendly and nasty-ingredient-free. Led by Sir Fraser Stoddart, a chemistry professor at Northwestern, the team discovered this method by accident when looking for something else. A postdoc named Zhichang Liu was trying to make three-dimensional cubes out of gold and starch, aiming to use them as storage containers for gases and small molecules. But a liquid mixture of dissolved gold-bromide salts and a starch-derived sugar didn’t form cubes, it formed needles. This was strange, so the team decided to try to replicate it and tested different forms of sugars. The team has already perfected a process to safely reclaim gold from metal scraps and jewelry, and is working on commercially viable methods to extract the precious yellow metal from ore. Filed under: Uncategorized Tagged: environmental concerns, gold production

In today’s teaser for the next episode of the Coin Explorer, I talk about one real-life inspiration for the “Pirates of the Caribbean” movies. Find out more in my review of the REAL Pirates of the Caribbean colorized silver coin set next Monday. Until then, remember- It’s all about the shinies! by The Coin Explorer Filed under: Gold & Silver at Gainesville Coins Tagged: Gainesville Coins, Real Pirates of the Caribbean, The Coin Explorer

With some people on popular cable shows once again predicting gold to drop to $1,100 an ounce or even lower, I thought this may be a good time to inject some real world numbers into the conversation by looking at what it actually costs to get the gold out of the ground. Seeking Alpha had a wonderful series of articles by their contributor from Hebba Investments on the “all-in” costs of gold mining. Mining companies until recently only used part of their expenses in calculating cost-per-ounce, ignoring capital expenditures, etc. Looking at the 2012 financials for the top 12 gold mining companies, we find that costs per ounce range from $1,057 for Alamos Gold to $1,423 for Kinross Gold (all numbers excluding writedowns.) If spot gold were selling at $1,100 an ounce, only Alamos and GoldCorp would be making a profit, and only barely. Obviously, a price of $1,100 is unsustainable. Some may point out that there are other sources of gold, such as recycling. Jewelry is a major source of scrap gold, which traditionally provides as much as 1/3 of global gold supply. However, TD Securities predicts that 2013 will see the lowest level in four years of gold sales for scrap by the public worldwide. The global shortage of jewelry, bars and coins at the retail level for the last month points to a new appreciation around the world by the average citizen who is looking ahead at what currency debasement and unbridled quantitative easing will eventually bring. by David Peterson Filed under: Market News Tagged: gold market, gold mine, gold production, physical gold

The U.S. dollar set a new 52-week record this morning, with the DXY hitting 84.3100. This is a hammer blow to all commodities, including precious metals. Gold is down for the seventh day of trading, and briefly hit a four-week low of $1.363.90 before bouncing back. Most of the action today is speculators rotating from long positions and adding to shorts. News yesterday that George Soros cut his gold ETF holdings by 12% in the first quarter, to 530,900 shares, as well as some larger funds cutting gold ETF holding in half, helped depress gold prices yesterday, and continues to be talked about today. This is mainly psychological, as the the ETF outflows were reported back when they happened – it’s just that no one knew who was selling until the CFTC report. This week’s anemic inflation numbers was seen to give the Fed more elbow room in continuing to implement its purchases of $85 billion a month in bond and mortgage-backed securities. Since hedging against inflation is a major property of gold, the reduced risk of seeing inflation in the near future is enticing more investors to dump the metal to chase yield in the red-hot stock market. Speaking of U.S. stocks, Fed officials were out in force yesterday, intimating that the Fed may soon “take away the punch bowl” and end the party on Wall St., by tapering or stopping its quantitative easing. This led the S&P 500 to have its worst day in almost three weeks. However, if the Fed was really thinking about tapering or ending QE, there would be plenty of official warnings. Stockbrokers would be rioting and calling for Bernanke’s head if the Fed’s QE program scaled back with no warning. There is a possibility that the Fed is using these unofficial statements to curb “irrational exuberance” in the stock market. by David Peterson Filed under: Market News Tagged: ETFs, Fed, inflation, quantitative easing, U.S. dollar, U.S. economy

Precious metals saw more selling in early morning trading, as yesterday’s gold close under the psychologically important $1,400 level spooked speculators. Looking at a 6th straight day of declines, those weak long positions that weren’t pushed out yesterday decided to jump. New economic numbers showing inflation well below the Fed’s target level of 2% have dampened any concerns that the government’s quantitative easing program will be ending. The Consumer Price Index was down 0.4%, the largest decline since December 2008. The year over year consumer inflation rate is 1.1%, mostly from a huge drop in gasoline prices. Core inflation, which removes energy and food prices, stands at 1.7%. Since gold is seen as a hedge against inflation, falling inflation numbers entice investors to dump gold for equities, especially as Wall St is regularly setting records lately. The U.S. dollar has been on a rampage lately, with the dollar index touching 84 yesterday. This is bad news for all commodities

WASHINGTON - The United States Mint will open sales for the 2013 American Buffalo Gold Proof Coin on May 23, at noon Eastern Time (ET). Pricing for the .9999 fine, 24-karat gold coin will be based on the bureau's pricing policy for numismatic products containing precious metals located at http://catalog.usmint.gov/wcsstore/ConsumerDirect/images/catalog/en_US/PMPricingGrid.pdf