|
Silver
and particularly gold rose sharply on the release of the higher than expected
UK inflation data. It showed that UK inflation quickened to 26 month highs at
4.0%. Currency debasement and higher food and energy prices are leading to an
inflation surge in both developed and emerging markets.
 
Gold
in British Pounds - 1 Day (Tick)
The extent of the surge is being masked as the figures in the UK and
internationally underestimate real inflation. Increasingly many economists
are concerned that official statistics are misleading and hide the true
increase in the cost of living (see ‘Official statistics
hide true increase in cost of living' in News today). A
double-digit jump in food prices pushed China's inflation higher in January -
seeing consumer prices rise 4.9 percent, driven by the 10.3 percent jump in
food costs.
The
Chinese inflation data appears to be even more misleading and manipulated
than that in western economies. Many governments are attempting to manage
consumers perceptions regarding the significant increase in the cost of
living as fiat currencies are debased.
Silver
is now less than 2% from its 30 year nominal high of $31.25/oz seen at the
start of the year and looks set to challenge and surpass this level in the
coming days due to continued robust physical demand (both investment and
industrial) and the fact that the futures market is seeing some big money go
long again after the recent correction.
Silver
remains in backwardation with spot trading at $30.68/oz while the July 11
contract trades at $30.55/oz and the December 14 at $30.40/oz.
Gold
Gold
is trading at $1,372.60/oz, €1,013.66/oz and £851.08/oz.
Silver
Silver
is trading at $30.67/oz, €22.65/oz and £19.01/oz.
Platinum
Group Metals
Platinum
is trading at $1,832.00/oz, palladium at $833.00/oz and rhodium at $2,400/oz.
News
(Bloomberg)
-- Soros Cuts Stake in Monsanto, Leaves Gold Shares Unchanged
Billionaire
investor George Soross hedge fund cut its stake in Monsanto Co. and left its
bet in gold unchanged, according to a quarterly filing with the Securities
and Exchange Commission.
The
$27 billion Soros Fund Management, based in New York, cut its shares in the
St. Louis, Missouri-based agricultural company to 3.29 million shares from
6.52 million in the previous quarter, according to the regulatory filing. As
of Dec. 31, the shares were worth $229 million.
Soros,
who called gold "the ultimate asset bubble," left his gold bet
little changed.
(Bloomberg)
-- Paulsons SPDR Gold Holdings Unchanged at 31.5 Million Shares
Paulson &
Co.s SPDR gold holdings were unchanged at 31.5 million shares as of Dec. 31
compared with three months earlier, according to a U.S. Securities and
Exchange Commission filing.
(Bloomberg)
-- Soros Raises SPDR Gold Holding 0.5% in Fourth Quarter (Update2)
Investor
George Soros increased his SPDR Gold Trust share holding by 0.5 percent in
the fourth quarter and John Paulson kept his investment unchanged, filings
with the U.S. Securities and Exchange Commission show.
Soros
Fund Management LLC held 4,721,808 SPDR Gold Trust shares as of Dec. 31,
compared with 4,697,008 shares at the end of the third quarter, according to
the filing. Soross call options on 705,000 shares in the trust as of Sept. 30
were not listed in the latest report. Paulson & Co.s holding, the largest
in the SPDR fund, was 31.5 million shares.
A decade-long
surge in gold has attracted investors seeking better returns than equities or
bonds, and helped boost holdings in exchange-traded products backed by the
metal to a record in December. The metals climb last year to an all-time high
was more than triple the gain in global equities, and bullion beat shares in
five of the past six years.
"Investment
demand remains the most important driver for the gold market," said
Daniel Brebner, an analyst at Deutsche Bank AG in London. "The entrance
or exit of large funds in and out of exchange-traded products can give an
idea of the conviction by these investors as to the prospects for
gold."
Investors
in 10 gold-backed exchange traded products own metal valued at $88.6 billion
as of yesterday, according to Bloomberg calculations, even after cutting
assets in tons by 4.5 percent since Dec. 20 when holdings peaked.
Immediate-delivery gold traded at an all-time high of $1,431.25 an ounce on
Dec. 7 and erased more than 4 percent since then to $1,365.47 today.
Soros,
Paulson
Michael Vachon, a spokesman for Soros, declined to comment on gold
investments and the filing, when asked before its release. Armel Leslie, a
Paulson spokesman, declined to comment.
Soros
Fund Management LLC manages about $27 billion. The companys SPDR Gold Trust
holding was worth $655 million as of Dec. 31, the filing showed, representing
8.5 percent of the $7.7 billion total in the SEC filing.
The
firms holdings in the iShares Gold Trust of 5 million shares, also backed by
the metal, remained unchanged as of Dec. 31 from the preceding quarter.
Soros
described gold at the World Economic Forums meeting in Davos, Switzerland, in
January last year as "the ultimate asset bubble." In a Nov. 15
speech in Toronto the 80-year-old said conditions for the metal to keep
rising were "pretty ideal" and at this years Davos forum he said
the boom in commodities may last "a couple of years" longer.
Platinum
Investment
The firms holdings of Platinum Group Metals Ltd., a Vancouver-based miner,
jumped to 12.7 million shares worth $34 million as of Dec. 31, from 1.5
million shares as of Sept. 30, filings showed. Platinum Group Metals said
Feb. 9 it began developing a mine in northern South Africa with first
production scheduled to start in 2013. The mine will produce platinum,
palladium, rhodium and gold.
Palladium
jumped 42 percent in the fourth quarter and platinum gained 6.8
percent.
Eric
Mindichs Eton Park Capital Management LP added 5 million put options on the
SPDR Gold Trust as of Dec. 31 to bring the total to 8 million, its filings
show. The company owned 4.5 million shares in the trust at the end of the
year.
A put
option gives the holder the right to sell the security at a set price and
date. Bullion has declined 3.9 percent this year as signs the global economy
is strengthening curbed demand for the metal.
Touradji
Capital
Touradji Capital Management LP, founded by Paul Touradji, held 173,000 shares
in the SPDR Gold Trust as of Dec. 31, according to an SEC filing. There was
no holding listed in the filing as of Sept. 30.
Money
managers who oversee more than $100 million in equities must file a Form 13F
with the Securities and Exchange Commission within 45 days of each quarters
end to show their U.S.-listed stocks, options and convertible bonds. The filings
dont show non-U.S. securities or how much cash the firms hold.
(Bloomberg)
-- Gold Advances in Asia as Chinas Inflation Fuels Hedge Demand
Gold advanced
in Asia on speculation rising inflation across the globe will fan demand for
the metal as a store of value after Chinas consumer prices exceeded the
governments 2011 target for a fourth month.
Immediate-delivery
bullion rose 0.3 percent to $1,365.43 an ounce at 1:46 p.m. Singapore time
after falling as much as 0.2 percent. Gold for April delivery was little
changed at $1,365.70 after weakening as much as 0.3 percent to $1,361.30 an
ounce.
"The
market is directionless given that theres no immediate incentive to influence
traders," said Paul Yamamura, Tokyo-based trader with Sumitomo Corp.
"Gold prices may gain steam after some consolidation on inflation
fears."
China
last week joined India, Indonesia, Thailand and South Korea in boosting
interest rates as Asian policy makers sought to cool the economies leading a
global rebound. Chinese consumer prices advanced 4.9 percent in January from
a year earlier after a 4.6 percent gain in December, todays report
showed.
Asian
stocks were little changed after yesterdays biggest jump in more than two
months and the Dollar Index, a six- currency gauge of the dollars value, fell
0.2 percent after rising for three days. Gold usually moves counter to the
dollar.
Assets
in gold-backed exchange traded products stood at 2,020.19 metric tons,
snapping six-day decline, according to data compiled by Bloomberg from 10
providers. Holdings have shrunk 4.5 percent from the record 2,114.6 tons on
Dec. 20.
Platinum
for immediate delivery rose 0.4 percent to $1,836.25 an ounce and spot
palladium increased 0.2 percent to $836.30 an ounce. Silver was little changed
at $30.64 an ounce.
(Financial
Times) -- Largest bond fund cuts US government holdings
The worlds
largest bond fund sharply cut its exposure to US government-related debt in
January, before US bond yields rose this month to their highest level in
almost a year.
Pimcos
Total Return Fund, run by Bill Gross, a founder of Pimco, reported that its
holdings of US government-related securities fell from 22 per cent in
December to 12 per cent in January.
The
proportion of US government-related holdings, which includes US Treasuries,
is at the lowest level held by the $239bn fund since January 2009 when it
held 15 per cent of its assets in the category.
(Financial
Times) -- Silver miners start hedging on price falls
For a decade,
hedging has been a dirty word among precious metals miners.
After
committing to sell much of their future gold production at fixed prices when
the market was in the doldrums, some of the largest gold miners have since
spent billions of dollars buying their hedges back.
"I
am pleased I will never have to answer another question about the hedge book
again," said AngloGolds chief executive, Mark Cutifani, when he
completed the process of closing the companys legacy hedges last
autumn.
Not so
fast. Hedging has made a comeback.
In the
past two months, at least five miners have executed silver hedges to protect
against a fall in prices, bankers say.
Deutsche
Bank estimates that in excess of 100m ounces may have been hedged. That is
several times the size of total outstanding hedges in late 2010, estimated at
about 20m ounces, and 15 per cent of annual silver production.
Does
the rash of activity herald a return to widespread hedging for precious
metals miners?
That
question is of critical importance for investors in gold and silver, as well
as the miners own shareholders.
Large-scale
gold and silver hedging would be a bearish signal for the precious metals,
because it directly increases selling pressure in the market and indicates a
lack of confidence in the sustainability of prices.
Advisers
and bankers have been warming to the idea of hedging.
Editor's
note: This is misleading. A minority of advisers and bankers are warming to
the idea
Amid a growing consensus that a more positive economic outlook and rising
interest rates in developed economies will damp investment demand for
precious metals, some are counselling miners to start looking for
cover.
Editor's
note: The is a very questionable non evidence based assertion
"Id certainly advocate gold and silver miners doing some prudent hedging
at these higher prices," Nick Moore, head of commodity strategy at RBS,
says.
A
return to hedging may seem to be a natural shift in the cycle.
The
number of gold and silver hedges outstanding - called the global "hedge
book" - has been in decline for years as miners bought back unprofitable
hedges.
That
activity, known as "de-hedging", has been one driver of golds
stellar performance over the last decade, since the buy-backs have
effectively added to gold demand.
Last
year, though, de-hedging came to an end, with AngloGold the last major gold
miner to close out its hedge book.
However,
the hedging activity seen in recent months has been limited in two important
ways.
First,
it has been confined to the silver market.
Second,
only those miners who produce silver as a by-product have been seen in the
hedging.
Bankers
say large-scale hedging remains some way off for miners who produce gold and
silver as their main product (called "primary producers") such as
Barrick Gold, AngloGold and Newmont in gold and Fresnillo, Pan American
Silver and Hochschild in silver.
The
reason? Shareholders remain resolutely opposed, burnt by years of bitter
experience in which mining equities underperformed gold and silver prices
because of bad hedging.
William
Tankard, senior analyst at precious metals consultancy GFMS, says investors
in primary gold and silver producers are "often looking for a leveraged
play" on price increases in the metals and so would "face a great
deal of pressure not to hedge from their shareholders".
Evy
Hambro, co-head of natural resources at BlackRock, one of the largest
institutional investors in the mining sector, confirms that view.
"With
regards to hedging we as a general rule do not like companies doing it as we
can do it ourselves," he says.
Bankers
and consultants say gold and silver miners are aware that, when prices make a
decisive move south, they will need to think again about hedging.
But
until then, their hands are tied.
"Miners
are under pressure to not hedge, which in the good times is fair
enough," says David Wilson, metals analyst at Société
Générale.
"But
to all intents and purposes, shareholders are not letting mining companies
manage a mining company as they see fit."
For
the time being, the bulk of hedging is likely to come from miners that
produce precious metals as a by-product, bankers say.
The
implication is bearish for silver, since 70 per cent of the metal is produced
in conjunction with other metals.
Raymond
Key, head of metals trading at Deutsche Bank, says: "Given that most
silver is produced as a by-product and where the price is, the whole theme of
by-product hedging is definitely back."
Editor's
note: This article is quite selective and ignores the primary economic
fundamentals of the silver market especially concerning supply and demand
with huge demand, both industrial and investment, being seen in China, wider
Asia and internationally. Mines that hedge their silver production forward
(by selling in the futures market) are at risk of incurring sharp losses
should the silver price rise to its 1980 nominal high of $50/oz or higher.
The nominal high of more than 30 years ago will likely be reached given the
current global macroeconomic situation of geopolitical instability, rising
inflation, negative real interest rates and global currency debasement and
given the tiny size of the physical silver market.
Mark O’Byrne
Goldcore
|
