What a US$ rebound means for gold

The decline in the US$ index in 2017 has been relentless. From a high of nearly 104 at the end of 2016, the US$ index has steadily declined to as low as 93.00. While this has certainly fueled the strength in precious metals, it has not been able to lift the sector as much as typically expected. That is because Gold’s performance relative to other assets has been weak and much weaker than in 2016. Friday Gold broke above key resistance of $1260/oz but it remains below its 2017 highs as the US$ index tests support amid a very oversold condition and negative sentiment. Simply put, Gold will have to prove itself in real terms if it is going to hold its ground or breakout as the US$ begins a likely bounce.

First, let’s take a look at Gold’s relative performance by comparing it in nominal terms to Gold priced in foreign currencies (FC) and Gold against equities. While Gold held the low $1200s and rallied back to $1275, Gold/FC recently broke support and tested its December 2016 low. The Gold/equities ratio is rallying from critical support. Recent lows in Gold/FC and Gold/equities need to hold if Gold is going to hold its ground also.

The reason Gold’s relative performance is critical here and now is because the US$ is very likely to rally and very soon. The US$ index has reached strong support and amid bearish sentiment. The net speculative position (shown in the chart below) is the lowest in over three years. The daily sentiment index (not shown) hit 7% bulls a few days ago. Even if the US$ index is going to break below 92-93 eventually (which I do not expect) it figures to rally first. In any case, a rally in the greenback appears very likely.

Although there is renewed excitement and optimism about Gold, it has not made a new high and is likely to be pressured if and when the US$ index begins a rebound. Thus, Gold’s relative performance (which has been very weak this year) will be critical in determining if Gold’s 2017 rebound is merely pausing or if it will reverse course entirely. While gold bulls and bugs are getting excited, we don’t see enough evidence to merit such a stance yet. What would get us excited and bullish, would be a strong move in Gold through $1300. We’d be happy to buy into current strength at that point. We will wait for the market to tip its hat and in the meantime we will continue to try and find the best junior gold stocks for the next 12-18 months.

 

Fresnillo silver, gold output jump on San Julian ramp up, higher ores

Mexico-focused precious metals miner Fresnillo (LON:FRES) said Wednesday it’s on track to deliver 2017 guidance thanks to higher silver and gold output in the second quarter of the year.

The company, which is the world’s largest primary silver producer and Mexico’s second-largest gold miner, said silver output in the three months to the end of June was 14.5 million ounces, 12% more than in the same period last year and up 7.3% from the first quarter of 2017.

Silver production in Q2 totalled 14.5 million ounces, a 12% rise from last year, while gold output was 223,000 ounces, up 2.7% from a year earlier.

In the first six months of the year, Fresnillo saw its silver output climb by 11% to 28 million ounces.

Production of gold in the quarter rose 2.7% from a year earlier to 233,000 ounces, boosted by a combination of the start of operations at San Julian, higher ore processed at Fresnillo and higher ore grade at Cienega.

The miner said it’s confident it will produce between 58 and 61 million ounces of silver this year, while gold output is expected to be in the 870,000 to 900,000 ounces range.

The guidance is comparable to Fresnillo’s results in 2016, when it produced record silver volumes of 50 million ounces and gold volumes totalling 935,500 ounces, which exceeded its own expectations for that year.

Shares in the company were trading up 1.94% to 1,533 close to the end of Wednesday trading session in London.

Contrarian investor Rick Rule shares his winning strategies

As attendees of resource investor conferences know, Rick Rule, President and CEO of Sprott U.S. Holdings Inc., often speaks to standing room only crowds. His dynamic presentations usually go against the grain of the usual ways of looking at mining stocks. Resource World was fortunate to catch him for this interview as he is often on the road.

RESOURCE WORLDWhen you were attending the University of British Columbia, did you have a plan laid out for your career?

RICK RULE: Yes – but I didn’t follow it. I wanted to become a taxation lawyer focused on natural resources.

RWWeren’t you studying mineral economics there?

RR:         My interest was natural resource finance in mineral economics but I was in the faculty of commerce. My view was that UBC had a compound degree that gave you a Bachelor of Commerce and a law degree and so my initial idea was to become a lawyer specializing in international natural resource taxation.

RWWhat was your first job related to the resource sector?

RR:         I had substantial success as a speculator. Owning a bar in the financial district of down-town Vancouver gave me unparalleled access to information. Building on that success, I became securities licensed.

RWI’ve heard you say to your audiences at presentations: “Be a contrarian or a victim.” Can you outline your contrarian philosophy and how investors can make it work for them?

RR:         Absolutely! There’s no business that I know of that is as cyclical as natural resources. Anybody who’s been in the business for 20 years will understand this boom and bust nature; first of all – commodity prices and then, the prices of equities that are tied to commodities.

Commodities go from boom to bust in fairly predictable cycles. When a commodity is in favour, i.e., it is expensive, two things happen. Users of the commodity find ways to conserve. They find alternatives and find more intelligent fabrication techniques. At the same time, producers, which are enjoying spectacular cash flows and have low cost of capital, find ways to expand production. Declining demand and increasing supply, of course, crash prices.

At the bottom of the cycle, the opposite thing happens. Nobody bothers to conserve. In fact they find other ways to utilize the material because it is so cheap and the utility to consumers is so high. And with the existing producers losing money on every unit of production they make, they’re in no hurry to increase production and, hence, losses. The consequence of that increasing demand with decreasing supply is that commodity prices rise. We’re in a commodity situation right now where the industry average selling price of the commodity is less than the median cost of production, meaning that the industry as a whole is losing money on every unit of production that they’re producing. This is, despite the fact that it’s currently painful, a wonderfully bullish sign for the future.

RWHow would you characterize the prevailing investor sentiment with regard to mining stocks?

RR:         The prevailing investor side of it is almost always wrong. When mining stocks have done well for two or three years, people are drawn like moths to light because of the very success that the sector has enjoyed, but it’s illusionary because the cure in a market for high prices is high prices. So people become bullish in a sector after its produced positive returns for three or four years, right at the point in time when the Bull Run is almost over. People are discouraged from the sector in periods like we’re in now where we’ve seen several years of vicious bear markets where people are afraid and they miss the sector just as it’s about to turn. You’ll notice that as an example, 2015 was a horrific year for gold and a horrific year for gold stocks. This set up year 2016 where virtually all gold stocks doubled. Once again, the cure for low prices is low prices; the cure for high prices is high prices.

RWWith a negative geopolitical event, gold often spikes and then falls back. With the heightened geopolitical tensions regarding North Korea and the possibility of a chain reaction of bad geopolitical events that could potentially keep gold prices rising, is it even possible to anticipate the future gold price?

RR:         I think if you look at the real determinant of the gold price over the last 40 years, it’s been the popularity or lack of popularity of the US dollar and, in particular, the US 10-year treasury. People use geopolitical events as a narrative to justify what they were going to do anyway. It seems to me that the most effective determinant of the gold price since 1980 has been the negative correlation between the US 10-year treasury and the price of gold. I think that’s the most important thing. I believe that the US 10-year treasury, having been in a 35-year bull market, is either at the end of that bull market or at the beginning of a bear market. If you believe, like I do, that gold trades inversely to the US 10-year treasury, with the US 10-year treasury at the end of a bull market or the beginning of a bear market, that would suggest to me, the gold price is at the end of a bear market or at the beginning of a bull market. I’m quite bullish about the gold business.

RWWhat kind of an effect has the Trump administration had on the price of gold, if any?

RR:         Virtually none. Trump has been an extremely polarizing person and Trump himself is an important narrative but he hasn’t had very much impact on the market for US 10-year treasuries. My own suggestion is that the rest of the world that holds Trump in disfavour has been irrelevant in the sense that the US dollar continues to do well against other currencies, not because of the strengths of the US economy and certainly not because Trump is held in high favour in other places, but simply because other countries’ currencies and economies are in even worse shape than our own. Our mutual friend, Doug Casey, refers to the dollar as a “I owe you nothing” and he refers to the euro as a “who owes you nothing.” It’s my belief that the strength of the dollar has nothing to do with Trump at all. It has to do with the weaknesses of competing currencies.

RWContinuing with gold, the US Mint reports sales of Gold Eagle coins is down 67% from last year. Bloomberg reports that gold exports to China from Switzerland almost doubled to 46.4 tonnes in March, up from 23.6 tonnes in February. Gold buying in India is also ramping up. Is this another example of interest in gold moving from West to East and why is this happening?

RR:         I think what’s happened is that China and India, at least in the official sense or reported sense, were nonentities in the gold business 10 or 15 years ago and they have moved to being important entities. The second part of the equation though, or really the first in the context of your question, is that physical coin sales have been a less dominant means of participating in the physical gold market in the last 15 years, relevant to the ETF (exchange trade funds). The ETF, GLD [NYSE], has seen positive net formation in the last six months, and I think what you’re seeing, is the ETF beginning to steal market share in the US market from physical sales, while in India and China, the official sector associated with individuals being able to legally own gold and silver has increased the attractiveness of those investment vehicles in those countries.

RWNewsletter writer Brien Lundin thinks 2017 will be the “peak gold” year and then global production will decline. What is your take on peak gold?

RR:         I sort of agree with Brien. I think the pattern of new discoveries has slowed up. Certainly, the cost of capital for non-investment grade gold mining companies has gone up and is a consequence of the new Basel three banking regulations and I think those two factors mean that new mine supplies will begin to decrease. It’s important to note that new mine supplies are a less important determinant of the gold price because most of the gold that’s ever been mined still constitutes supply, but I think it does have profound implications for equity pricing in the gold business; less important to the bullion price, but very important to some share prices.

RWDo you think that investors should have some precious metals in their portfolio?

RR:         Absolutely. I think it depends on the nature of the investor, of course. I own physical precious metals because I consider them to be ‘social catastrophe insurance.’ I own them in the strange hope that they don’t go up in price because a set of circumstances that would make them worth a lot of money would be deleterious to my life style. But it’s difficult for me to imagine an investor who could afford to have precious metals as part of their portfolio who doesn’t. I simply sleep better owning precious metals.

RWThere’s been almost a doubling of money raised for exploration in 2016 compared to 2015. Could a major discovery jump-start the Venture Exchange, à la Ekati or Voisey’s Bay?

RR:         If you give a good salesman like me, use of the word ‘could’; I could make anything happen. The truth is that exploration expenditures are still very low, and the exploration process is still very inefficient. The amount of money being raised is fairly insignificant relevant to exploration expenditures 10 or 15 years ago, and my experience has been that from the beginning of an exploration cycle, you can expect that cycle to bear fruit. It takes a very long period of time, so we could have some luck with money that was raised last year, but I’m reminded of the fact that, as an example, Carlin Trend exploration in Nevada began in earnest with the publication of that famous paper, Alignment of Mineral Deposits in Northeast Nevada, in the early 1970s. Those exploration expenditures really began to deliver exploration success 10 or 12 years later. Most speculators have too short a time frame in terms of their expectation of exploration success. It takes a long time and a lot of money and wears out most speculators before the real fruits of their success are enjoyed.

RWThere appears to be a great deal of interest in the metals and minerals that go into lithium ion batteries, namely lithium, graphite, manganese and cobalt. Do you think investors should consider investing in companies targeting those commodities?

RR:         I think really sophisticated investors could have considered investing in them five years ago. My own belief is that the supply bottleneck that we have in lithium is really a consequence of the processing bottleneck, not a supply bottleneck. I think there’s a lot of lithium in the world. That being said, we are aware of strategic interests by Chinese industrial groups acquiring high quality lithium deposits. So to the extent that very good world class discoveries were made, they could probably be sold. With regards to whole suite of so-called battery metals – I think they’re in a bit of a bubble right now. You have a bunch of teams exploring for them, but five years ago, couldn’t have spelled ‘lithium’ or ‘manganese’ so it’s very important if you’re considering speculating in those businesses, that you pay attention to the resumes of the teams exploring for them and find out whether or not in the last 20 years if they’ve had any success in that particular endeavour.

The metal that is the most attractive to me of the suite that you’ve mentioned is cobalt. The difficulty with cobalt is that it occurs in really big economic quantities in two countries – Russia and the DRC. Most speculators are afraid of those countries. You will certainly have area plays; stories associated with cobalt in mafic and ultramafic complexes around the world, including Canada and Australia, but my experience has been that the concentrations of cobalt, particularly in Canada, are never large enough that Canadian companies can be low on the cost curve unless they’re producing it as a by-product of nickel or some other ultramafic substances.

What might be useful in the cobalt cycle, and I don’t want to sound cynical, but I am, would be the teams use the cobalt story to do mafic and ultramafic exploration in places like the Canadian Shield in hopes that they can actually find nickel and copper. That would be very bullish indeed.

RWThe newsletters I receive are now being cautiously optimistic on uranium prices. What is your present take on uranium and uranium stocks?

RR:         We had a melt up in the uranium stocks early this year that I think was very interesting and was indicative of market psychology. What happened in 2015 and 2016 was that we wore out the sellers of the junior uranium stocks. You will probably remember that when those stocks began to move up in price, they moved up on very very low volume. Ironically, once the junior uranium stocks had doubled, the volume picked up. In other words, as a consequence of price actions, the stocks were half as attractive but because they doubled, people piled in and then we wore them out.

Two comments here: the first is that the uranium price of US $25 a lb is substantially less than the global cost of production. The industry is losing money on every pound it produces. The uranium price is going to have to go up for these juniors to have any chance of developing the projects. The sole determinant, in the near term, and by near term, I mean by two or three years, as to whether the uranium price goes up, is simply the pace of Japanese reactor restarts. If we begin to see an increasing pace of Japanese reactor restarts, the gain will truly and really be one. If we don’t, we’re going to have to shake out and disappoint another group of uranium speculators. The people who came into the uranium juniors in the first quarter of this year; we’re going to have to disappoint them again before we can move off another depressed base.

RWWhat do you look for in a junior mining stock?

RR:         I begin with people. I look for guys – and now gals – who have been serially successful in endeavors that are related directly to the task in hand. In other words, if someone is looking directly for copper, I want them to have found copper before. You’ve had some people who have been serially successful and then you have, what is for want of a better word, mostly the great unwashed. I want a big deposit or I want the opportunity to find a big deposit.

Too many management teams dream of boot strapping and finding a small high-grade deposit and using that cash flow to build a company. It’s a wonderful dream but it almost never works. If you’re going to take the risk of inheriting a mine, you better make sure that the reward is consistent with the risk. In other words, it better be big!

And I also look at value for money. When people tell me what could happen, I have to ask them what does happen. What’s your market cap? If it’s $25 million, say OK, I see you have $3 million in the treasury; that explains the first $3 million. How do you explain the other $22 million? Don’t tell me just where it’s going to go. Tell me what my downside is by describing to me the difference between what the company is selling for and what it’s actually worth when liquidated.

RWLooking at the world as a whole, would you say that the combination of infrastructure building and population growth will generate a significant demand for mineral commodities in the medium future?

RR:         If you define the medium future as five years from now and out, the answer is yes. In the nearer term – no. In the nearer term, what is going to drive commodity prices will be supply destruction. The prices of commodities have been lower than the cost to produce them for a substantial period of time and the longer that goes on, the higher the probability that the productive capacity comes offline and we drive production up by meeting supply and demand at a lower level. When that happens, and the price spikes, the spike can’t be dampened in the near term by supply increase because the productive capacity has already been destroyed. This is a very important point.

RWIs there any particular commodity that investors should target with a related mining stock?

RR:         Well, the easiest one to target from my point of view would probably be copper because it’s a big market. There are a lot of people that know how to find it. In fact, I joke that over 40 years of my business, people have raised most of their money on gold and made most of their money on copper. Uranium, certainly with the caveats that we discussed, needs to go up. I continue to be attracted to platinum and palladium, although the very soft global economy has constrained demand for them more than I foresaw. I am looking in the agricultural mineral sector because it bores everybody else to tears and I like to write cheques when I have no competition. I also think people need to pay attention to gold and silver because I think there’s going to be some surprises in the commodity price with regards to those metals.

RWDo you think that many of the mainstream stocks are now fully valued or overvalued and due for a correction?

RR:         With the caveat that I’m not a general securities analyst, when I look at the mainstream stocks that are an example of S&P components of the United States, I think they are probably at the high end of fairly valued. I’m not one of those that believe we’re in a real bubble at least with regards with the large cap US stocks. These are very fine companies, they’re globally competitive and have maintained their sales in the face of a very strong US dollar which has made their goods more expensive overseas. They learned their lessons in 2008 with regards to excessive leverage and by and large have very good balance sheets, and so I think yes, they’re expensive because part of their sales has been driven by very low interest rates. Their cost of capital is a function partly of low interest rates and part of the implicit share price is a function of the fact that investors have looked at equities for dividends rather than bonds for yield because the bond market is so expensive. I don’t see the overvaluation in many of the large stocks that some of the natural resource newsletter writers are reciting. In fact, my own experience is the most overvalued sector in the market at all times is the junior exploration sector because 80% of that sector is always valueless at any commodity price point.

RWDo you try to time the market or do you like to take a longer view?

RR:         I believe you have to take a longer view. I time the market in the sense that when I find a commodity where the selling price is less than the cost of production, in other words, an industry that’s in liquidation, I know that either the material becomes unavailable or the price goes up and the longer the situation lasts, the more dramatic the response will be. If that type of fundamental analysis is market timing, then I’m a market timer but most of the money that I have made in junior stocks has come about as a consequence of answering unanswered questions, either through process improvement or through exploration and that’s a very long term gain. So my own expectation is that my minimum holding period is going to be 18 months and my ideal holding period is probably five to six years.

RWWould you care to reveal any stocks that you are following?

RR:         Well, certainly I’m closely identified in the public markets with Ivanhoe Mines where I’m still a very large shareholder. I’m a very large shareholder of the company I work for, Sprott Inc., and of its recently refinanced private merchant banks, Sprott Resource Holdings where I am now Chief Investment Officer. But the truth is, that I am quite bullish in my outlook for natural resource commodities, and the consequence of that is we’re actively trying to increase our positions in a fair number of companies, most of which I wouldn’t want to talk about because I know how broadly read you are and I wouldn’t want any competition from your readers (chuckle).

VIA: http://resourceworld.com/index.php/contrarian-investor-rick-rule-shares-winning-strategies/ 

India imports more gold in H1 than all of 2016

Gold is once again pouring into India following the cratering of physical demand for the precious metal last year to a seven-year low.

A collapse in demand from India, the backbone of the global physical trade for decades, was behind the weakness, but Chinese appetite for gold also waned significantly in 2016; strength in the US dollar also crimped demand.

Quoting data from GFMS Thomson Reuters, Business Standard reports that India imported 521 tonnes of gold between January and June, versus 510 tonnes in all of 2016. 

However, physical demand for gold has been surging in India since January, following a plan by the Indian government last November to “demonetize” the equivalent of US$220 billion in large Indian bank notes – an astounding 86% of the circulating currency – which had a disastrous effect on the gold trade, and other sectors of the Indian economy that are reliant on cash transactions.

Quoting data from GFMS Thomson Reuters, Business Standard reports that India imported 521 tonnes of gold between January and June, versus 510 tonnes in all of 2016.

Value-wise, the H1 figure for gold imports was $22.2 billion versus $23 billion for 2016. If those numbers hold up, the annual total could surpass 900 tonnes, or $40 billion, which would be the strongest year since 2012, according to Business Standard. Over the past five years, the average amount of gold imported to India was 709 tonnes.

Business Standard cites lower gold prices and retailers stocking gold in preparation of a new good and services tax (GST), as the main reasons behind the pickup in gold demand. The long-awaited GST is India’s biggest tax overhaul since independence in 1947, and will replace a slew of federal and state levies when it’s rolled out in July. But the tax could be tough for small gold retailers to handle.

Gold imports in April, during the annual Hindu and Jain holy festival of Akshaya Tritiya, more than doubled from a year ago to 75 tonnes during a festival that prompts gold jewellery purchases, Reuters reported in May.

In 2015 Economic Times reported that the Indian public hold 20,000 tonnes of the yellow metal in jewellery, coins and gold bars.

VIA: http://www.mining.com/india-imports-gold-h1-2016/ 

The Next Bull Market for Gold May Have Just Begun

With stocks pricey and investors getting valuation jitters, precious metals may be just the thing to add a little luster to your portfolio.

For starters, there are reasons to believe that a bull market for gold and silver might be beginning.

Not long ago, gold and silver prices went through a rough patch. In September 2011 the price for gold hit nearly $1,900 an ounce before plummeting to $1,050 in December 2015, according to data from the London Bullion Market Association. Since then prices have risen slowly, with gold trading recently at about $1,250. Silver prices followed a similar pattern.

The uptick in prices could continue because gold has a long history as the asset that investors flock to when everything else seems risky. And for some investors, the stock market is flashing a yellow warning light now.

 

“This is not a really good time to be buying equities,” says Don Coxe, chairman of Coxe Advisors LLC in Chicago, given their high price-earnings ratios.

A case in point is the cyclically adjusted price-earnings ratio, or CAPE, which is at 29.77, the highest it’s been since 2002. Indeed, in the past when the CAPE was this high, periods of much lower stock prices followed.

“You want to be buying the assets that are not equities, or the financial antimatter,” Coxe says. By financial antimatter, he means gold. Coxe worries that central banks, such as the Federal Reserve, have been printing so much money that inflation will rise, destabilizing the stock market.

Coxe likes gold because it has a limited supply. Although it doesn’t pay a dividend the way many stocks do, gold tends to hold its value over time.

Other experts also see gold’s potential to shine as signs of a slowing economy emerge.

“There is a huge divergence between soft and hard data,” says Ronald-Peter Stoeferle, managing partner and fund manager at boutique firm Incrementum AG in Lichtenstein.

Soft data, which reflect how investors or consumers feel about the economy, can be hard to quantify. Hard data, on the other hand, refer to quantifiable economic readings based on dollars or output.

For example, consider the discrepancy between consumer confidence (soft data) and auto sales (hard data). Despite dipping slightly in May, the Conference Board’s Consumer Confidence Index, which tends to bounce around a lot, is at levels not seen since just before the financial crisis. The index measures how people feel about the economy. Apparently, their optimism is running much higher than a few years ago.

Meanwhile, auto sales have declined steadily every month this year. Another hard data point: Sales of durable goods, such as dishwashers and refrigerators, have stayed stubbornly stagnant. Neither indicator points to a strong economy.

Worse, a sudden shock in the form of a trade war or a sizable increase in borrowing costs could plunge the economy into recession. That, at least, is a scenario Stoeferle considers plausible.

Which brings us back to gold.

“Recessions are a great environment for gold,” he says.

During the last two recessions, gold prices increased while the economy contracted, according to the MacroTrends website. When the U.S. entered a recession in March 2001, gold cost $263 a troy ounce. By November 2001, when the recession had ended, gold was $276. The price gain was even greater during the Great Recession. In December 2007, gold traded at $803, but by June 2009, when the recession ended, gold prices had risen to $935. So if Coxe and Stoeferle are right, owning some gold should pay off.

 

How much to buy. Because their prices aren’t correlated with stocks or bonds, precious metals can reduce a portfolio’s overall volatility or risk. That’s why many smart investors suggest holding 5 to 15 percent of a portfolio in gold and other precious metals, with some people believing that number should be higher.

The optimal amount of gold to hold has fluctuated between 27 and 30 percent since the late 1960s, says Jeff Christian, managing partner and founder of specialty commodities consulting firm CPM Group in New York. He estimates that total global gold holdings today amount to around 0.7 percent of assets, which means the world is massively underinvested in gold. If, collectively, investors upped their allocation to gold just a little, its price would jump.

Ways to invest. The SPDR Gold Shares exchange-traded fund (ticker: GLD), which holds bars of solid gold bullion, is the largest and most liquid of all the gold exchange-traded funds. Its annual expenses are 0.4 percent, or $40 dollars per $10,000 invested. For silver, the iShares Silver Trust (SLV) has annual expenses of 0.5 percent, or $50 dollars per $10,000 invested. For other ETFs and mutual funds with exposure to gold and silver, see U.S. News Best Funds rankings for equity precious metals.

Investors can also buy physical gold, such as coins. The trick is to buy coins that are priced based on their precious metals content rather than those that have value based on their condition. The latter are known as numismatic coins, the former bullion coins.

 

American Eagles, in both gold and silver, are usually considered bullion coins. They are made by the U.S. Mint and distributed through coin dealers. Buyers should expect to pay a premium of a few percentage points above the gold price.

Although platinum and palladium are also precious metals, their markets are small and heavily influenced by the automobile industry, which uses the materials to make catalytic converters.

Source: http://money.usnews.com/investing/articles/2017-06-27/the-next-bull-market-for-gold-may-have-just-begun

Teck Resources grabs Goldcorp’s stake in Mexican project for $50 million

Canada’s largest diversified miner Teck Resources (TSX:TCK.B) (NYSE:TCK) is buying Goldcorp’s(TSX:G) (NYSE:GG) 21% minority interest in the San Nicolás copper-zinc project located in Zacatecas, Mexico for $50 million.

Once the deal is completed, which is expected to happen in the third quarter of 2017, Teck will be the sole owner of the San Nicolás project, which it aims to build as an open-pit operation with a three to four-year timeline to production.

Teck plans to make of San Nicolás an open pit copper-zinc mine, and it has given it a three to four-year timeline to production.

The news comes on the heels of the sale of Goldcorp’s Camino Rojo gold and silver project, also in Mexico, to Orla Mining (TSX-V:OLA), as part of the gold producer’s ongoing efforts to focus on highly profitable, core assets, it said in a separate statement.

Earlier this year, the world’s third largest gold producer by market value, agreed to sell Guatemalan Cerro Blanco gold-silver project to Bluestone Resources Inc. (TSX-V: BSR).

Just a day later, it also sold its Los Filos gold-and-silver mine in Mexico to Leagold Mining Corp (TSX-V: LMC-H).

Teck, which primarily mines coal, zinc and copper, posted in April earnings and revenue that lagged expectations on weakness at its zinc unit.

The division reported first quarter gross profit of $164 million on increased operating costs and a 23% output decline at Red Dog mine, due to lower grades. Zinc in concentrate production fell to 130,000 tonnes from 165,000 tonnes in the same period last year.

Teck, which is also North America’s largest producer of steelmaking coal, also lowered its 2017 zinc guidance to 590,000-615,000 tonnes from 660,000-680,000 tonnes previously.

Analysts believe that taking control of the San Nicolás project may help the Vancouver-based miner boost its zinc output down the road.

The company’s shares jump on the news and were last trading in Toronto 3.26% higher to Cdn$23.44. Goldcorp stock, instead, was down 2% to Cdn$17.03, but most gold producer were falling on Thursday too.

Teck Resources grabs Goldcorp’s stake in Mexican project for $50 million
 
SOURCE: http://www.mining.com/teck-resources-grabs-goldcorps-stake-mexican-project-50-million/ 

Muppet drops gold price to 6-week low

The gold price started the week on the back foot with an unnerving early fall following a massive sell order that sent the metal to its lowest since mid-May.

Gold futures in New York for delivery in August, the most active contract, dropped to a low of $1,236.50, down 1.5% or $20 an ounce in European trade, a six-week low.

The gold market absorbed a massive $2.2 bln in gold sales in less than a minute and during a period of illiquidity

Muppet drops gold price to 6-week low

Source: CME Group

Ross Norman, CEO of gold trader Sharps Pixley, ascribes the sharp decline to a 60 second 56 tonne (1.8m ounces) trade executed at 9am in London:

 

This bears the hallmarks of a fat finger ‘muppet’ – a trade of 18,149 ounces would be a very typical trade, but a trade of 18,149 lots of a futures contract (which is 100 times bigger) would not be… it leaves us wondering if a junior had got confused between “ounces” and “lots”… or maybe an incorrectly programmed algo ahead of options expiry on COMEX … we just don’t know.

The gold price had recovered much of the lost ground in afternoon trade in New York, exchanging hands for $1,243.60 an ounce.

Norman points out that if the trade, which may also have been carried out by a central bank or a large-scale speculator opening a short position, was indeed an error the gold price bear who made the move is nursing a $36 million loss at this point:

The big take-away though from all this is that the gold market absorbed a massive $2.2 bln in gold sales in less than a minute and during a period of illiquidity … and it ONLY moved the needle 1% lower.

More at http://www.mining.com/muppet-drops-gold-price-6-week-low/ 

Why the world’s billionaire investors buy precious metals via Mining.com

SOURCE: http://www.mining.com/web/worlds-billionaire-investors-buy-precious-metals/

There are always lessons that can be learned from the “smart money”.

Unlike regular investors, billionaire money managers like Ray Dalio and Stan Druckenmiller are professional investors. They have entire institutional teams at their disposal, dive deep into the nuances and complexities of the market, and spend every waking moment of their lives thinking about how to get more from their investments.

They want to make money – but they also want to execute on strategies that will protect their wealth and build robust portfolios that can withstand any type of macro event.

TURNING TO GOLD

In recent months, some of these elite investors have turned to precious metals like gold as a part of their overall investment strategies.

In the following infographic from Sprott Physical Bullion Trusts, we explain why these investors are adding precious metals to their portfolios, the underlying tactics, and the best quotes each investor has on assessing today’s market.

Courtesy of: Visual Capitalist

Why are these billionaires buying precious metals?

Their cited reasons can basically be summed up with six categories: wealth preservation, store of value, inflation hedge, portfolio diversification, future upside, and investment fundamentals.

WHAT BILLIONAIRE INVESTORS ARE DOING

1. Lord Jacob Rothschild
In late summer 2016, Rothschild announced changes to the RIT Partners portfolio because he was worried about very low interest rates, negative yields, and quantitative easing, saying they are part of the “greatest monetary experiment in monetary policy in the history of the world”.

His solution? Buy gold to help preserve wealth, and as a store of value for the future.

2. David Einhorn
Einhorn has a similar assessment. He believes that monetary policy is becoming increasingly adventurous, and that this – along with the policies of the Trump administration – will eventually lead to large amounts of inflation.

In February 2017, he shorted sovereigns, and bought gold.

3. Ray Dalio
Ray Dalio is the founder of the world’s top hedge fund, Bridgewater Associates, but he’s also no stranger to gold.

“If you don’t own gold, you know neither history nor economics.”

– Ray Dalio, Bridgewater Associates

More recently, in 2016, Dalio is quoted as telling investors to own a well-diversified portfolio that is 5-10% gold.

4. Stanley Druckenmiller
Druckenmiller, some people argue, is the best money manager of all time.

Lately, he’s placed his bets on gold as well, but for different reasons than the above managers. Druckenmiller has always placed big trades with lots of conviction, and in February 2017 he put his money in gold because “no country wants its currency to strengthen”.

Gold price leaps to 10-month high

Heavy buying saw the price of gold jump on Monday reverting to levels last seen before Donald Trump’s election as the dollar weakens and hopes for faster economic growth in the world’s largest economy begin to fade.

Gold for delivery in December, the most active contract on the Comex market in New York with nearly 30m ounces traded by early afternoon, was exchanging hands for $1,317.10 an ounce. That a 1.5% gain from Friday’s close and brings gold’s year-to-date gains to over 14% or $165 an ounce.

Hedge funds which abandoned the gold market for equities and other yield-producing investments in what became known as the Trump trade, are now jumping back in

Gold is now at its the highest since the beginning of November. The metal touched a high of $1,338 on election night when results showed a likely Trump victory, but the rally in record volumes for the Comex market, soon evaporated and by mid-December gold was languishing at $1,150.

Gold bears had been making big bets that Trump’s plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates and a more robust dollar. All bad news for the gold price.

That narrative has now run its course. Global uncertainty and geopolitical worries including North Korea, the wobble on equity markets, the dollar at the cheapest since January 2015 and continued loose monetary policy have seen the return of the safe haven buyer.

Hedge funds or so-called managed money investors in gold futures and options which abandoned the market for equities and other yield-producing investments in what became known as the Trump trade, are now jumping back in.

Suki Cooper, an analyst at Standard Chartered in New York, quoted by the Financial Timesestimated that investors bought a record 474 tonnes worth more than $19 billion over the past five weeks on the Comex market. “Buying only came close to such levels in Comex futures after the vote for Brexit,” according to Cooper.

Hedge funds added to their exposure to the yellow metal for the fifth straight week according to trader positioning data supplied by the government. Net longs – bets that gold will be more expensive in the future – rose 9% to the equivalent of 19.6m ounces (610 tonnes), the highest since October. That’s well below the mid-2016 record high, but marks a sharp reversal from the negative sentiment that prevailed for a good part of the summer.

Gold price jumps to 10-month high

Source: www.tradingfloor.com