Message: longs we will be wealthy, slglf fully owned
Robin Bromby | March 15, 2008
IT was no big surprise when it happened. It's doubtful that anyone, anywhere, popped a cork when, briefly in New York on Thursday night, gold went through the $US1000 an ounce mark.
We were expecting it. The only issue was when it would happen -- this week or next.
Now that the $US1000/oz level is done and dusted, gold bulls will already be recalibrating their expectations. Any day now there will be talk of $US1200 gold. Then $US1500. And, again, when (not if, they'll argue) those levels are reached, it will have been anticipated and talked about so much that, like this week, it will all seem faintly anticlimactic.
There'll be more joy among the miners, especially if they are not hedged. READ THAT AGAIN!!! HOW BOUT BEING FULLY OWNED!
Greater Bendigo Gold Mines is as tinny as they come.
First, it is coming to production this month. Second, it decided not to hedge that production so it -- and its shareholders -- will be getting full exposure to the spot price for the planned 20,000oz output a year.
And while the credit well is fast freezing over for sectors such as property, the stellar run by gold made it possible for Greater Bendigo to pull off a trifecta this week. ANZ loaned it $2.1 million, investors opened their wallets for a $1.07 million placement and British managed fund Pacific Capital Investment Management put up $10 million for convertible notes.
Not bad for a company whose shares have been struggling to stay above 20c and which has a market capitalisation of $19.5 million.
"I love gold," chairman Ian Smith said yesterday. And he believes he will keep on doing so. "We are not about to see an outbreak of world peace and financial stability".
Barrick Gold chief executive Greg Wilkins said in a New York television interview that he expected gold to climb a good deal further. And he ventured that the metal might find a lucrative industrial use -- replacing platinum (now more than $US2000 an ounce) in the manufacture of catalytic converters that reduce car exhaust emissions.
Why would you expect gold to stay at these levels or go much higher? Let us count the ways.
First to mind is the US dollar hitting a new record low against the euro and a 12-year low against the yen. Two days after the Federal Reserve threw another $US200 billion ($212 billion) at the sub-prime disaster there, firms including Goldman Sachs were being reported as voicing concern the Fed rescue plan would fail.
The near-collapse of US mortgage Carlyle Capital and reports of three other hedge funds being at the brink helped fuel this latest theory.
No sooner had Standard & Poor's issued a statement that the sub-prime write-downs were at an end, than London's The Times was reporting that one big US bank was near collapse and that that was why the Fed had acted.
And to show that fear is running rife not just in the US, the Bank of Canada, Bank of England, European Central Bank and Swiss National Bank also pumped liquidity into their financial systems this week.
Home prices continued to plunge in California and, with all the other terrible data coming out of the US (more foreclosures and the number of Americans receiving unemployment benefits reaching a 2.5-year high), the only surprise is that some people are still not convinced the world's biggest economy is tanking.
Toronto's Globe and Mail summed it up in what must have been the best headline of the week: "Central banks poked the bear but that just made it grumpy".
And there were reports late in the week that the sub-prime mess was spreading north into the Canadian financial system.
Yesterday the Bank of New Zealand issued a warning that the country was heading for recession. And what will happen to the US dollar if the Fed moves on Tuesday to cut interest rates a further 0.75 per cent?
If the prospect of a further exchange rate collapse by the world's reserve currency and a global slowdown are not enough to explain why gold for April delivery reached $US1001.50/oz on Thursday night -- although the contract finished at $US993.80/oz -- then how about 8.7 per cent inflation in China? The fear of higher interest rates being ordered by Beijing was enough to send Chinese stocks to an eight-month low on Thursday.
Oh, yes, there's also oil at $US111 a barrel.
But there are also physical factors affecting the gold price.
The latest figures out of South Africa, where the mining industry has been hit by power cuts, show that gold production fell in January by 12 per cent year-on-year. That country's mines are also facing falling ore grades and disruptions from safety closures at the deeper mines. Australia is no great help. Due partly to the severe dip in exploration 10 years ago, production here is static.
Meantime, demand is rising. China's demand for gold rose 26 per cent in 2007 to a record 326 tonnes, 302 tonnes of which was used to buy jewellery.
But here's the rub: China has now overtaken South Africa to become the world's top gold producer but, simultaneously, it has passed the US to rank as the second-largest consumer (after India at 722 tonnes).
China is importing 52 tonnes of gold a year to fill the gap.
That's the case for the bulls, but New York-based commodities analysts CPM Group have tried to hose down the excitement in their gold yearbook.
They say that the gold frenzy is partly being driven by many of the same factors as lifted the price to its 1980 high: roaring inflation, recession, high oil prices.
CPM argues that all these factors were eventually tamed and, by 1983, gold was heading south and demand dwindling.
Post-1980, as in the Asian currency crisis of 1997, the Russian debt default and the Long-Term Capital Management fiasco, the central banks were quick to reverse their money-flooding operations and reduce liquidity.
The implication is that, by late this year or in 2009, the central banks will no longer have to prod the bear and gold will assume its diminished and "rightful" value.
But then there's still the physical demand issue, all those Indian and Chinese women staring in jewellery store windows and unlikely to be deflected from their wants and wishes.
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From here you can use the Social Web links to save Why gold had to hit $US1000 to a social bookmarking site. LONGS WE WILL BE WEALTHY
IT was no big surprise when it happened. It's doubtful that anyone, anywhere, popped a cork when, briefly in New York on Thursday night, gold went through the $US1000 an ounce mark.
We were expecting it. The only issue was when it would happen -- this week or next.
Now that the $US1000/oz level is done and dusted, gold bulls will already be recalibrating their expectations. Any day now there will be talk of $US1200 gold. Then $US1500. And, again, when (not if, they'll argue) those levels are reached, it will have been anticipated and talked about so much that, like this week, it will all seem faintly anticlimactic.
There'll be more joy among the miners, especially if they are not hedged. READ THAT AGAIN!!! HOW BOUT BEING FULLY OWNED!
Greater Bendigo Gold Mines is as tinny as they come.
First, it is coming to production this month. Second, it decided not to hedge that production so it -- and its shareholders -- will be getting full exposure to the spot price for the planned 20,000oz output a year.
And while the credit well is fast freezing over for sectors such as property, the stellar run by gold made it possible for Greater Bendigo to pull off a trifecta this week. ANZ loaned it $2.1 million, investors opened their wallets for a $1.07 million placement and British managed fund Pacific Capital Investment Management put up $10 million for convertible notes.
Not bad for a company whose shares have been struggling to stay above 20c and which has a market capitalisation of $19.5 million.
"I love gold," chairman Ian Smith said yesterday. And he believes he will keep on doing so. "We are not about to see an outbreak of world peace and financial stability".
Barrick Gold chief executive Greg Wilkins said in a New York television interview that he expected gold to climb a good deal further. And he ventured that the metal might find a lucrative industrial use -- replacing platinum (now more than $US2000 an ounce) in the manufacture of catalytic converters that reduce car exhaust emissions.
Why would you expect gold to stay at these levels or go much higher? Let us count the ways.
First to mind is the US dollar hitting a new record low against the euro and a 12-year low against the yen. Two days after the Federal Reserve threw another $US200 billion ($212 billion) at the sub-prime disaster there, firms including Goldman Sachs were being reported as voicing concern the Fed rescue plan would fail.
The near-collapse of US mortgage Carlyle Capital and reports of three other hedge funds being at the brink helped fuel this latest theory.
No sooner had Standard & Poor's issued a statement that the sub-prime write-downs were at an end, than London's The Times was reporting that one big US bank was near collapse and that that was why the Fed had acted.
And to show that fear is running rife not just in the US, the Bank of Canada, Bank of England, European Central Bank and Swiss National Bank also pumped liquidity into their financial systems this week.
Home prices continued to plunge in California and, with all the other terrible data coming out of the US (more foreclosures and the number of Americans receiving unemployment benefits reaching a 2.5-year high), the only surprise is that some people are still not convinced the world's biggest economy is tanking.
Toronto's Globe and Mail summed it up in what must have been the best headline of the week: "Central banks poked the bear but that just made it grumpy".
And there were reports late in the week that the sub-prime mess was spreading north into the Canadian financial system.
Yesterday the Bank of New Zealand issued a warning that the country was heading for recession. And what will happen to the US dollar if the Fed moves on Tuesday to cut interest rates a further 0.75 per cent?
If the prospect of a further exchange rate collapse by the world's reserve currency and a global slowdown are not enough to explain why gold for April delivery reached $US1001.50/oz on Thursday night -- although the contract finished at $US993.80/oz -- then how about 8.7 per cent inflation in China? The fear of higher interest rates being ordered by Beijing was enough to send Chinese stocks to an eight-month low on Thursday.
Oh, yes, there's also oil at $US111 a barrel.
But there are also physical factors affecting the gold price.
The latest figures out of South Africa, where the mining industry has been hit by power cuts, show that gold production fell in January by 12 per cent year-on-year. That country's mines are also facing falling ore grades and disruptions from safety closures at the deeper mines. Australia is no great help. Due partly to the severe dip in exploration 10 years ago, production here is static.
Meantime, demand is rising. China's demand for gold rose 26 per cent in 2007 to a record 326 tonnes, 302 tonnes of which was used to buy jewellery.
But here's the rub: China has now overtaken South Africa to become the world's top gold producer but, simultaneously, it has passed the US to rank as the second-largest consumer (after India at 722 tonnes).
China is importing 52 tonnes of gold a year to fill the gap.
That's the case for the bulls, but New York-based commodities analysts CPM Group have tried to hose down the excitement in their gold yearbook.
They say that the gold frenzy is partly being driven by many of the same factors as lifted the price to its 1980 high: roaring inflation, recession, high oil prices.
CPM argues that all these factors were eventually tamed and, by 1983, gold was heading south and demand dwindling.
Post-1980, as in the Asian currency crisis of 1997, the Russian debt default and the Long-Term Capital Management fiasco, the central banks were quick to reverse their money-flooding operations and reduce liquidity.
The implication is that, by late this year or in 2009, the central banks will no longer have to prod the bear and gold will assume its diminished and "rightful" value.
But then there's still the physical demand issue, all those Indian and Chinese women staring in jewellery store windows and unlikely to be deflected from their wants and wishes.
Story Tools
* Share This Article
* Email To A Friend
Share This Article
From here you can use the Social Web links to save Why gold had to hit $US1000 to a social bookmarking site. LONGS WE WILL BE WEALTHY
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