The Gold investor’s Handbook
Posted: June 21, 2014 Filed under: Gold | Tags: Gold, gold books, gold portfolio, gold portfolio. Jack A. Bass, The gold Investor's Handbook Leave a comment
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Barclays Fined For Manipulating Price Of Gold For A Decade
Posted: May 25, 2014 Filed under: Central Banks, Gold | Tags: Gold, gold price setting, price manipulation Leave a commentBarclays Fined For Manipulating Price Of
Gold For A Decade;
Sending “Bursts” Of Sell Orders
It was almost inevitable: a week after we wrote “From Rothschild To Koch Industries: Meet The People Who “Fix” The Price Of Gold” and days after “Barclays’ Head Of Gold Trading, And Gold “Fixer”, Is Leaving The Bank“, earlier today the UK Financial Conduct Authority finally formalized what most in the “tin-foil” hat community had known for years, when it announced that it fined Barclays £26 million for manipulating “the setting of the price of gold in order to avoid paying out on a client order.” Furthermore, the FCA confirmed that those inexplicable gold raids which come as if out of nowhere, and slam gold with a vicious force so strong sometime they halt the entire market, had a very specific source: Barclays, whose trader Daniel James Plunkett, born 1976, “sent out a burst of orders aimed at moving the price of the yellow metal.”
This took place for a decade. As the FT reports:
The FCA said Barclays had failed to “adequately manage conflicts of interest between itself and its customers as well as systems and controls failings, in relation to the gold fixing” between 2004 and 2013.
Some further details on Plunkett’s preferred means of manipulating the gold price.
The FCA said Mr Plunkett had manipulated the market by placing, withdrawing and re-placing a large sell order for between 40,000 oz and 60,000 oz of gold bars.
He did this in an attempt to pull off a “mini puke”, which the FCA took to mean a sharp fall in the price of gold. As a result, the bank was not obliged to make a $3.9m payment to the customer under an option contract.
Which is precisely what we have shown many times here for example in “Vicious Gold Slamdown Breaks Gold Market For 20 Seconds“, when a sell order so aggressive comes in it not only takes out the entire bid stack with an intent not for “best execution” but solely to reprice the market lower. Recall from September:
There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as “banging the close.” It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night’s slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!
To summarize: a humble block of 2000 gold futs (GC) taking out the bid stack, and slamming the price of gold, managed to halt the gold market: one of the largest “asset” markets in the world in terms of total notional, for 20 seconds.
And Mr. Plunkett in action:
To be sure Barclays was truly sorry, and pinky swears that having been caught manipulating the gold market for ten years it will never do it again:
The news is also a fresh blow to Barclays’ chief executive Antony Jenkins as he tries to overhaul the culture of the London-based lender. Mr Jenkins took over 18 months ago after his predecessor, Bob Diamond, stepped down amid the Libor scandal.
Analysts said the fine reflected badly on the industry – as well as the hard-charging, revenue-focused business model that Barclays had previously been operating.
Mr Jenkins said in a statement on Friday: “We very much regret the situation that led to this settlement . . . These situations strengthen our resolve to improve.” The bank discovered the misconduct after the client complained. It then reported the incident to the regulator, for which it received a 30 per cent discount on its fine for co-operation.
Ian Gordon, analyst at Investec, said that in pure financial terms, the fine was “utterly inconsequential, both in a group context, and in relation to the quantum of other conduct costs”. He was referring specifically to the bank’s provisions for the mis-selling of payment protection insurance and interest rate hedging products
So a wrist slap, we get that. One wouldn’t expect more – after all the banks run the show. And yet, one wonders: is this just a case of “Fab Tourre-ing” the scandal, and redirecting all attention to just one (preferably junior) person? To be sure, this one trader made handsome profits from gold manipulation…
Mr Plunkett boosted his trading book by $1.8m at the expense of a customer, who was later compensated. He has now been banned from “performing any function in relation to any regulated activity” and fined £95,600. At the time, Barclays was one of five banks that set the price of the precious metal twice a day. Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “A firm’s lack of controls and a trader’s disregard for a customer’s interests have allowed the financial services industry’s reputation to be sullied again.”
… but is this just an attempt by the FCA to pass this off as the proverbial “only cockroach”, especially when as we reported earlier this week, none other than Barclays head of trading Marc Booker quietly left dodge?
The speculation is further heightened when one considers that Plunkett had left Barclays nearly two years ago in October 2012!
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Gold a buy under $1,000; why it could get there: Jim Rogers
Posted: May 14, 2014 Filed under: Gold | Tags: Gold, Gold forecast, Gold Prices, Jim Rogers, Lauren Lyster Leave a commentGold is traditionally an investment of choice when inflation is rising or global tensions are growing. But this year, despite the conflict between Russia and the Ukraine, gold prices haven’t moved much, and inflation in much of the developed world is muted.
“I’m not buying gold at the moment,” international investor Jim Rogers tells The Daily Ticker. “But if the opportunity comes along — and it will in the next year or two — I will buy more.”
When The Daily Ticker’s anchor Lauren Lyster asked Rogers what such an opportunity might look like, Rogers said that a 50% decline in gold prices, to under $1,000 an ounce would justify buying the precious metal. (That’s a 50% decline from its record high just under $2,000 an ounce in August 2011.) But Rogers also says, “if America goes to war with Iran,” he’d be “begging to buy at $1,600 an ounce.”
As of mid-day Wednesday gold futures were trading at $1,300 an ounce, or about 8% higher than the 2013 year-end close of $1,202. Gold prices fell a whopping 28% in 2013,but Rogers says a 50% correction every three or four or five years is more normal for an asset class, and therefore, a reason prices could fall from here.
Gold Forecast Update April 2014
Posted: April 18, 2014 Filed under: Forecasts, Gold | Tags: AKG, Gold, Gold forecast, Gold price, gold price curve, GQM, Midway Gold Corp, ROG Leave a commentGold price curve unchanged with a LT price of US$1,445 per oz
Our last revision in our commodity prices and foreign exchange rates was published in late
February 2014 (“Rising gold price environment prompts target revisions”) where we raised our
gold price curve up 4-5% to a long-term price of US$1,445. In an effort to keep our targets and
recommendations relevant in the face of a changing market environment, we revised our forecasts for the gold price and CAD:USD rate. However, despite the market volatility in the market, our gold price forward curve forecast remains unchanged.
Only one recommendation change with several negative target impacts from model revisions
The impact of our model revisions combined with recent share price performance has led us to
only one change in recommendation as we have upgraded Midway Gold (MDW : TSX | Speculative Buy rated by Joe Mazumdar) to a SPECULATIVE BUY from a Hold. Midway Gold Corp. has underperformed the GDXJ (5% versus 14%) in 2014 year to date and our current target (C$1.40), which remains unchanged, represents a 54% implied return.
Negative target changes were applied
to Castle Mountain Mining Co. Ltd. (CMM : TSX-V | Speculative Buy rated by Joe Mazumdar, down 8% or C$0.10 to C$1.20), Asanko Gold (AKG : TSX | Speculative Buy rated by Joe Mazumdar, down 6% or C$0.20 to C$3.30, and Premier Gold Mines Ltd. (PG : TSX |
Speculative Buy rated by John Kratochwil, down 5% or C$0.20 to C$4.10, Canaccord Genuity
Focus List); however, all retain their Speculative Buy recommendations as returns to the target
price from current levels range from 30% to 116%.
We continue to favor / selections which include AKG, DNA and PG.
Year to date returns range up to ~130% in our coverage universe (GQM, CMM and ROG best YTD)
A number of companies under our junior mining coverage universe have outperformed the GDXJ benchmark which is up 14% year to date in 2014. They include Golden Queen Mining Co. Ltd. (GQM : TSX | Hold rated by Joe Mazumdar, up ~130% ytd), Castle Mountain Mining Co. Ltd. (up 90% ytd) and Roxgold Inc. (ROG : TSX | Speculative Buy rated by Joe Mazumdar, up 44% ytd).
Goldman Keeps To Gold At $1000
Posted: March 9, 2014 Filed under: Forecasts, Gold, Hedge fund | Tags: Gold, Gold forecast, gold price forecast, Goldman Sachs Leave a commentGold is getting more attractive to hedge-fund managers even as Goldman Sachs Group Inc. says the metal’s surprising rally this year will soon fizzle.
Hedge funds and other speculators expanded bets on higher prices for a fourth week in New York futures and are now the most bullish since December 2012, government data show. While gold is off to its best start in six years after topping $1,350 an ounce, Goldman’s Jeffrey Currie says chances are increasing that prices will slump to $1,000 for the first time since 2009.
This year’s 11 percent rally came amid signs of weakening U.S. economic growth and Russia’s incursion into Ukraine. Investors who shunned the metal in 2013 are once more buying the biggest exchange-traded product backed by gold, with holdings poised for the first quarterly gain in a year. Hedge funds also are adding to bullish wagers on sugar, corn and coffee, driving combined wagers on a commodity rally to a record.
“The gains have been impressive,” said Chad Morganlander, a fund manager with Stifel Nicolaus & Co Inc. in New Jersey, which oversees about $150 billion of assets. “There’s been a perfect storm of geopolitical uncertainty as well as growth scares here in the U.S.”
Weekly Gains
Gold futures in New York climbed 1.3 percent last week, the eighth advance this year. The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 0.6 percent, while the MSCI All-Country World index of equities increased 0.3 percent. The Bloomberg Dollar Index, a gauge against 10 major trading partners, slipped less than 0.1 percent and the Bloomberg Treasury Bond Index dropped 0.7 percent.
The net-long position in gold climbed 3.8 percent to 118,241 futures and options in the week ended March 4, U.S. Commodity Futures Trading Commission data show. Short holdings declined 15 percent to 26,321, the lowest since October. Net-bullish holdings across 18 U.S.-traded commodities rose 9.7 percent to 1.59 million contracts, the most since the data begins in June 2006.
U.S. service industries, which range from health care to finance and make up almost 90 percent of the economy, grew last month at the slowest pace in four years, data from the Institute for Supply Management showed March 5. Holdings through gold ETPs rose in February for the first time since 2012. Assets in the SPDR (GLD) Gold Trust, the biggest such fund, are up 0.9 percent in 2014 after a 41 percent plunge last year that wiped $41.8 billion in value.
Billionaire Paulson
Billionaire hedge-fund manager John Paulson, who holds the biggest stake in SPDR, posted gains in his firm’s main strategies in February partly as bets on gold paid off.
Russia said it may cut off Ukraine’s gas supplies, and the U.S. has threatened more sanctions after authorizing financial restrictions last week. The escalating tension also drove up prices for energy and grains amid concern that supplies would be disrupted.
The turmoil in Ukraine doesn’t change Goldman’s bearish view on gold, and the recent weakness in the U.S. economy is probably weather driven, not “real deterioration,” said Currie, the bank’s head of commodities research. Lower mining costs mean it’s more probable than it was six months ago that prices will drop below $1,000, he said in an interview.
February Payrolls
American employers added more workers than projected in February, indicating the U.S. economy is starting to shake off the effects of the severe winter weather, government data showed March 7. The China Gold Association says demand in the nation is poised to drop to 250 metric tons this quarter, down 17 percent from a year earlier.
“Some kind of middle-ground solution in Ukraine is probably the case at some point,” said Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which oversees $115 billion. “For the two big commodities, oil and gold, we’ve probably seen relative highs for the next month. Once this geopolitical risk premium ebbs, I don’t see a lot of fundamental speculative support to push gold a lot higher.”
Bullish bets on crude oil rose 2.2 percent to 346,469 contracts as of March 4, the most ever in records going back to June 2006, government data show. West Texas Intermediate reached $105.22 a barrel in
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New York March 3, the highest since September. Russia is the biggest energy exporter.
Belo Sun Mining Corp.
Posted: March 3, 2014 Filed under: Exploration Companies, Gold, Speculative | Tags: Belo Sun Mining Corp., Brazil, BSX, exploration, Gold, speculative Leave a commentBSX : TSX : C$0.44
SPECULATIVE BUY
Target: C$1.00
COMPANY DESCRIPTION: Belo Sun Mining Corp is a gold exploration and development company currently focused on expanding and advancing its 100% owned Volta Grande Project located in Para State, Brazil.
All amounts in US$ unless otherwise noted.
COMPANY DESCRIPTION:
Belo Sun Mining Corp is a gold exploration and development company currently focused on expanding and advancing its 100% owned Volta Grande Project located in Para State, Brazil.
All amounts in US$ unless otherwise noted.
Metals and Mining — Precious Metals and Minerals MANAGEABLE STAGED APPROACH, IMPROVED ECONOMICS AND HIGHER GOLD PRICES IMPROVE VALUATION
Investment recommendation We maintain our SPECULATIVE BUY rating on Belo Sun. In our view, the lower capital and improved economics under the staged development approach (as highlighted by the recent PEA) have not only increased the likelihood of the project being built, but also the company’s attractiveness as an M&A target. This (in addition to improved gold prices) has prompted us to change our valuation approach to a DCF-based methodology vs. optionality/in-situ based previously – explaining the increase in our target price.
Investment highlights
The company recently released a PEA for the Volta Grande project which highlighted a staged development approach involving the development of a 3 Mtpa operation for upfront capital of $329 million (less than half of that estimated in the May 2013 PFS) and an eventual expansion to 6 Mtpa after year 6. The PEA demonstrates better economics than the May 2013 PFS. At near spot prices of $1,300/oz, the PEA generates an NPV (5%) of $418 million and a 16.1% after-tax IRR compared to the 2013 PFS which highlighted a 5%/NPV of $240 million and 10% IRR. Under our forward curve based price deck (LT/2019E: $1,455/oz), we estimate a 5%/NPV of $618 million and IRR (after-tax of 23.8%). With a lower initial capex estimate that would likely be easier to finance, we believe the revised PEA also increases Belo Sun’s optionality as a takeover target (the staged PEA should render the project attractive to a larger set of potential suitors).
Valuation Our 12-month target price has increased to C$1.00 (from C$0.75) based on 0.35x our undiluted 5% C$2.79/share NAVPS (DCF based) estimate, or implying 0.65x our diluted 5% operating NAVPS (assuming 50% of initial capex equity financed at C$0.50/share). Our previous target price was based on an EV/oz multiple of $25/oz (total resources
The Impact of Federal Stimulus Measures on the Price of Gold
Posted: February 24, 2014 Filed under: Federal Reserve, Gold, Quantitative Easing, The Federal Reserve | Tags: Federal Reserve, Gold, Gold Prices, Gold Values, Price of Gold, Stimulus and Gold, The Federal Reserve Leave a commentThe Impact of Federal Stimulus Measures on the Price of Gold
Historically, the value of gold and fluctuations in its price have been linked directly to the wider economic performance. As a general rule, the value of gold tends to be most resolute during periods of recession, as investors look to commit their capital into physical assets that deliver genuine financial security.
The most recent statistics underline this trend, with the price of gold set the retreat from a near three-month high in the face of measured stimulus tapering in the U.S. A string of poor data releases had forced the government to initially reconsider their approach to stimulating economic growth, only for the Federal Reserve to reaffirm their commitment to restoring long-term growth.
The Facts and Figures: Gold Values in 2014
It was during the last week that the price of gold hit a three-month high, amid rising global shares and continued economic uncertainty in the U.S. While the Federal government had spoken at length during the first financial quarter about tapering their stimulus measures and laying the foundations for more sustainable, long-term growth, underperformance within the labour market has persuaded them to reconsider their stance. As a result on this, investors were encouraged to believe that the ultra-easy stimulus policy would continue for the foreseeable future.
Incoming Federal Reserve Chair Janet Yellen performed a sharp-about turn this week, however, by reiterating the U.S. Central Bank’s commitment to a measured tapering of its gold-friendly stimulus policy. While Yellen has stated that has a strong belief in the current bullion and monetary policy measures, however, the sudden drop in gold prices has forced many to question the wisdom of her decision making. More specifically, it could trigger a sudden rise in interest rates and force investors to develop a more risk-averse approach in the financial markets.
Does Gold Represent a Good Investment in 2014?
The decision to taper bullion stimulus measures will only serve to undermine the appeal of gold as an investment opportunity still further. While the presence of under-employment may have caused growth in the labour market to slow, investors have continued to disregard this and similar macroeconomic factors as being insufficient to derail the tentative global recovery. This has had a direct impact in reducing the appeal of gold, and the sudden depreciation in value will force a growing number of investors to consider alternative precious metals and commodities.
If it would be fair to say that gold holds minimal investment appeal as we approach the second financial quarter of this year, however, it is worth considering the performance of additional market options such as silver and platinum. The former, which has experienced considerable growth during the last eighteen months fell by 0.3% in the wake of recent events, while the latter gained a respectable 0.1% amid global political issues. The upshot of this appears to be that investors are likely to avoid the precious metal market for the foreseeable future, at least until the U.S. economy has adapted to its new monetary policies.