Summarizing latest news on gold
November 8, 2006
Here are some bullet points summarizing a lot of gold positive news over the
past several days.
Standard and Poor’s has come out with a new gold forecast and they expect
rising prices for the rest of 2006 and 2007.
“The factors that fueled the escalation in gold prices will likely persist
through 2006 and 2007, thereby underpinning prices,” according to S&P. “Production
is declining as output from mature mines in Australia, North America, and South
Africa drops. In addition, there are too few projects that could reverse the
expected decline in production because permitting and building new mines usually
takes several years.”
European Central Bank gold sales reporting has shown a lack of follow through
on Barclays’ “phantom central bank selling”. No sales have
shown up, even with the two month delay. This is just the first time central
banks have failed to meet the quota. I’m going out on a limb and saying
they’ll never meet the sales quota again which means an additional source
of supply to the market is drying up.
Platinum has begun running on the last few weeks with new rumors of a planned
platinum ETF. Much like the silver and gold ETFs, if this becomes a reality,
they’ll be a big positive for us on creating additional demand in the
market. More on this as I find additional information.
Dehedging number were reported for the quarter and again, we had a major source
of demand in the market with over 2 million ounces of gold dehedged by mining
companies. There are currently about 40 million ounces of gold left on the hedge
market and we expect this number to continue to fall until it gets to about
the 15-20 million ounce level over the next few years. Dehedging will be the
floor for periods of price consolidation when we have pull backs in the price.
While there is a bit of uncertainty about what the Fed’s next move is
(continue pausing or begin discussing some rate cuts?), one thing seems certain
and that is Japan and the ECB will be increasing rates to help choke off inflation
over the next few quarters. This is extremely gold positive news because of
the pressure it will put on the US Dollar. |
