-- Posted Wednesday, 25 April 2007 | Digg This Article
Harmony Gold of South Africa began the major gold mining company reporting for the quarter this AM and showed some decent earnings, but more importantly for the market, lower production figures (-30,000 oz.) than the past quarter and they did a small hedge book reduction of 42,000 oz.
While not really a gold company post Phelps Dodge merger, Freeport McMoRan Copper and Gold reported results this AM and after a great quarter for gold production of 955k ounces, production for the balance of the year is expected to be much lower with only another 950k ounces being produced the remaining three quarters.
These are small numbers taken by themselves, but in the context of a sliding global production profile, 40,000 oz here and 30,000 oz there will certainly begin to add up over time.
UBS released a note this morning cutting back their silver price predictions over the short term citing a lack of investor follow through and general market disinterest. We would argue that silver has performed quite well over the last few months, especially in the face of a short position on the COMEX that dwarfs a corresponding short position in any other commodity (hard or soft). The silver market is continuing to tighten while the chance for a massive short squeeze is becoming more and more likely in the near future. Once the short squeeze in the silver market begins, all bets are off in our opinion as we expect price to potentially jump dollars at a time as the enormously outsized COMEX short position is closed out.
There seems to be a great deal of concern on the lack of follow through from investors at present and is being used as the reason for the inability to vault past the $700 price level. We would argue that the huge influx of Central Bank gold into the market is the only thing keeping prices from visiting these levels and highlight that prices holding up in the face of these significant sales increases has been nothing short of remarkable. The sales will abate and the $700 will be achieved. We stated last week that we though that could happen in 10 days. We still believe that will happen.
Below is part of a WSJ article quoting a Chinese Central Banker on the addition of gold to Chinese bank reserves. The Chinese will telegraph no moves in the gold market after watching the blunders of the Bank of England and Gordon Browne in the late 1990s, but even the potential that their central bank could add some to reserves can continue to support prices. More than likely should it ever happen, the Chinese will do an off market transaction with an ECB central bank or the IMF to absorb a large holding that would have otherwise been sold into the market.
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Chinese central banker urges diversifying into gold, oil, metals
The Wall Street Journal Wednesday, April 25, 2007
SHANGHAI, China -- China should "appropriately" increase its gold reserves and buy strategic resources such as oil and metals in order to broaden the investment channels for its huge foreign-exchange reserves, said People's Bank of China Vice Governor Xiang Junbo.
Mr. Xiang's comments yesterday come amid increasing discussion about how China will choose to invest its foreign-exchange reserves, the world's largest at $1.2 trillion as of the end of March. He said his comments, made in a speech at Fudan University in Shanghai, represent his personal views and don't necessarily reflect the stance of the central bank.
Blanchard and Company, Inc. is the largest and most respected retailer of American rare coins and precious metals in the United States, serving more than 450,000 people with expert consultation and assistance in the acquisition of American numismatic rarities and gold, silver and platinum bullion. The Blanchard Economic Research Unit is a key source of precious metals market analysis and continues to be an important resource for financial and consumer media throughout the United States. Blanchard and its predecessor companies have called the New Orleans area home for more than 30 years. For more information about the company, visit BlanchardGold.com or call the company toll free at 1-800-880-4653.
-- Posted Wednesday, 25 April 2007 | Digg This Article
