By Frank Holmes

Strengths

• The best performing precious metal for the week was platinum, up 2.34 percent, followed by palladium with nearly flat returns.  Platinum group metals have lifted somewhat with the anticipation of stronger industrial growth.
• Even though investors can’t seem to unload gold fast enough, coin collectors are benefitting, reports Bloomberg.  U.S. Mint gold-coin sales jumped for a fourth straight month, the longest streak since 2003. And in India, despite the fall in sales of jewelry due to demonetization, gold imports remained stable at around 100 tonnes in November (from 97 tonnes in October).
• According to Bloomberg Intelligence, the five-year average gold premium is typically around $5.50 an ounce in China, but has soared to almost $40 an ounce, as falling prices invite “bargain buying” among the Chinese. As the Financial Times reports, China has curbed gold imports as the government tries to clamp down on capital leaving the country, along with the yuan falling to its lowest against the U.S. dollar in eight years.

Weaknesses

• The worst performing precious metal for the week was gold with a loss of 0.56 percent, with silver putting in a 1.27 percent gain. Perhaps we are beginning to see somewhat of a floor develop, particularly with gold miners’ shares putting in a gain for the week too.
• As gold prices reach a 10-month low this week, gold traders are the most bearish since May, reports Bloomberg. The yellow metal is headed for its biggest monthly drop since 2013, while investors continue to pull money out of funds that are linked to the metal – holdings in gold-backed ETFs contracted 5.3 percent since November, according to Bloomberg data. Even gold put options jumped as futures continue to head down.
• Gold is headed for its fourth weekly drop, the longest down streak since May, reports Bloomberg. As seen in the chart below, the gold fund selling spree continued this week, with holdings falling for a fourteenth straight day, as of Thursday.

Opportunities

• A release from TriStar Gold highlights recent resource growth potential, specifically confirming that two step-out holes at the company’s Castelo de Sonhos gold project show gold mineralization extending at least 1.6 kilometers (km) to the southwest (and beyond the resource area defined by the company in its 2014 Technical Report). Both drill rigs have now moved to Esperanca Central and are drilling to the north of the current area, the report continues. Nick Appleyard, TriStar’s President and CEO, commented that drill results are exceeding expectations and are all “significantly higher than the average drill results that were used for the 2014 estimate in terms of grades and thicknesses.”  Drilling stopped in 2014 to conserve cash but the improved market conditions have made it possible for explorers to access capital markets.  TriStar controls a 14 km long anomalous gold in soils, with widths ranging from 350 to 850 meters at Castelo do Sonhos.  The planned drill program could confirm significant resource growth potential for TriStar Gold.

• K92 Mining announced this week the initial results of the ongoing grade control drilling program at its Kainantu Gold Mine. According to the company, the results have significantly increased both the predicted grade and contained gold ounces in the first two planned production stopes. One highlight specifically notes that the grade increased from 5.82 grams per ton of gold in the original model, to 9.21 grams per ton in the new model.  Drilling density is being improved to 15 meter centers versus earlier work at 50 meter centers.
• In a news release this week, BNY Mellon’s Pershing announced the launch of BMO Gold Deposit Receipts (GOLDRs). According to the release, the GOLDRs act as a book-entry solution for investors who want bullion in their brokerage account without experiencing the inconveniences that typically accompany purchasing and storage. GOLDRs represent ownership in one ounce of fully-allocated physical gold bullion held at the Royal Canadian Mint. “The solution is the first of its kind to allow bullion to be held in a brokerage account, providing new opportunities for advisors to offer an alternative means for their clients to invest in gold,” with options for physical deliver, should the buyer desire, the release reads.

Threats

• The combination of India’s currency recall and the potential for an increase in U.S. interest rates, Indian stocks and the rupee had their worst November performance in five years, reports Bloomberg. One anecdote from an unemployed teacher in India shines light on the currency situation. The Bloomberg story explains that the man needed money to cover emergency expenses, but was unable to get a loan since he was out of work. In August he took a 14-gram gold bangle and used it as collateral for a six-month loan of 27,500 rupees. Since then, however, the gold-loan business has gotten bumpy following Modi’s decision to invalidate 500 and 1,000 rupee notes. Now, the shortage of legal tender is hurting lenders and Indians are scrambling to get their hands on valid currency.
• According to an analyst with Centrum Wealth Management in Mumbai, Payal Pandya, demonetization will “be a blow” for the gold-loan business, Bloomberg reiterates. Pandya believes that companies might have to slash projections of loan growth for the year by 5 percent to 7 percent. A Nov. 23 report from Ambit Capital analysts notes that a shortage of cash is also putting a squeeze on India’s $40 billion jewelry market, with transactions potentially shrinking as much as 30 percent due to a shortage of notes.  Bloomberg sums up the article with the following: “India’s government wants the economy to be less resilient on cash and especially gold, which many Indians use to store their wealth.”
• Two top gold forecasters see further losses for the yellow metal in 2017, reports Bloomberg. Both Oversea-Chinese Banking Corp and ABN Amro see gold slipping to $1,100 an ounce by the end of next year. “From an investor point of view, there is little reason to own gold,” Georgette Boele, a currency and commodity analyst with ABN Amro said.

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 -- Published: Monday, 5 December 2016 | E-Mail  | Print  | Source: GoldSeek.com

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