Indian gold premiums hit another record, driven by low supplies to meet firm demand for the upcoming wedding and festival season, which runs through May. Local prices spiked dramatically to $150 to $160 per ounce higher than London’s prices, compared to $125 an ounce higher earlier in the week, traders said in a Reuters report. Plus, Chinese New Year is on Jan. 31 and will also mark a period of strong seasonal demand.
The latest Commitment of Traders (CoT) and Banker’s Participation Report (BPR) is one for the ages. This is one to put into the economic textbooks to illustrate just how extreme speculators and slingers can get in a market. Starting with the monthly change in the BRC: The big four U.S. banks (of which the largest by far is JPM) added an additional 767,400 ounces net long, to bring their position up to 5.741 million ounces (71,897-14,489).
Gold was once again single handedly offered special treatment over the ISM report, the GDP report, etc., etc. This can only be called peak bogus economic reports, and it goes hand in hand with peak Pinocchio taper rumblings and slingers’ naked short attacks. You would think we are in a strong economy until you see that half of the GDP report came from inventory building. Inventory build grew from the Q2 level of 0.83% to an 1.68% in the current revision. Personal consumption declined, from 1.24% of GDP in Q2 to 1.04% in the first revision, to just 0.96% in the final Q3 revision.
Lately we’ve been seeing some yahoo holes being reported that have been ignored by the “market.” We saw them Tuesday with Midas Gold (24.9% held by Vista), and we got them from another firm with a solid deposit under its belt: Almaden (AAU). At its 100% held Ixtaca project, the company hit 30.9m at an 8 g/t Au Eq grade two weeks ago. It then announced 101m of Au Eq at 4.2 g/t on Nov. 28. It is increasingly apparent that Almaden is picking up higher grade but shallow depth dykes in the formation.
I just cannot believe the extent to which the U.S., and even Europe to some degree, has been denutted its foreign policy in the last year or so. That’s what happens when they start handing out the “Rogue Nation” buttons. U.S. policy in Central and Southwest Asia is a disaster. Russia, India and China are running rings around the U.S. Although it isn’t going without a fight, it appears the West just lost the Ukraine economically to Russia. U.S. reactions are desperate because the Petrodollar is going down. Example: Flying a B-52 over Chinese airspace.
Vista (VGZ) owns 24.9% of Midas (MDRPF). The “market” currently values VGZ’s share of MAX at $20 million U.S. (@63 cents). Midas reported outstanding step-out drilling results Tuesday. Given the proximity to the surface, these would have to be considered yahoo holes. The “market” totally ignored this drilling report. The story on Midas — a very large Idaho deposit called Golden Meadows – can be gleaned here and the project economics are shown on the second chart.
Travesty- n: “a false, absurd, or distorted representation of something.”
Despite the knot in my stomach, I’m proceeding directly to the available Comex forensics. The gold and silver Commitment of Traders report is highly revealing. The data is for Tuesday, Nov. 26, when gold was trading at 1,243.
The settlement price on Monday was 1,222. The managed money boyz, (aka Slingers) have now ramped up their biggest short position since early July’s low at 77,658 contracts (7.766 million ounces). With this week’s net managed money long position down to 15,961 contracts from 34,531, we can see from the report that about a third of this was reduced longs, perhaps from stop hunting. But once again, two-thirds of this week’s operation was raw naked short selling.
One of the old and ongoing offside carry trades that can no longer be swept under the rug is borrowing cheap in euros, and to some degree Swiss francs, in order to effect carry trade or real estate speculation in non-euro countries in central and eastern Europe (CEE).
The following chart shows that the great majority of loans made to the non-banking sector in a half dozen of those countries were euro carry trades. This makes paying off these loans very problematic when the euro appreciates against the local currency. Yes, gente, those rotting fish loans are still around, a lot like the old HELOCs loans in the U.S. that will be reset [see "Billions of HELOCs to Reset"].
On of the most stunning stories I’ve seen yet is the revelation about lending in China and the size of the repo market there. Bank “assets” (loans, etc.) have climbed to an astonishing $24 trillion. Of this, $15.4 trillion has been in the last five years alone. Much of this has been misallocated into pie-in-the-sky projects and constitutes bad loans.
Russ Winter note: On the issue of costs in the current environment versus 2 to 3 years ago when feasibility studies were done on these late stage development projects, I would argue that these are coming down. Firms now have pick of the liter on contractors, and expert engineering. As I have written elsewhere material costs on equipment, input goods are lower now not higher. The surcharges seen in 2010 no longer exist. Also I am particularly bullish about the mining byproduct, zinc, and wrote here about new conditions in that market.
Finally I feel the catalysts Itinerant mentions are a much higher probability events than the market is pricing for. Silver Wheaton’s 14.4% ownership will also incentivize getting someone deep pocketed in to develop Corani, thus avoiding the bootstrap being a few million short issue that is blowing up mining developers at the last minute. I would like to see a major develop this and for it to be sold.
Bear Creek Mining (OTCPK:BCEKF) is a junior exploration company controlling two primary silver deposits in Peru. Feasibility studies have been completed for both projects showing robust economics in both cases.
We strongly believe that important catalysts will occur for the Corani project in coming months and possibly also for the Santa Ana project which we believe will lead to a re-rating of the company’s share price. We believe that the share price may well double within a year.