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Monday, August 9, 2010

Is Gold Demand Increasing...???

Every investor should know that nothing goes up in a straight line forever. Gold is no different. There will be temporary reactions as events change around us and, as the global financial crisis is proving, events cannot be anticipated even by the brightest of economists, who are not always so bright. Many of them still don't even realize that China is a bigger energy consumer than the US, not to mention being the biggest buyer of autos worldwide.

This increased demand means rising prices in the most basic commodities which are moving in the same direction. Oil is still holding at around US$80 per barrel when it is normally lower at this time of year. The drought that has hit Russia's grain belt, which runs from the Black Sea to Siberia, is starting to affect food prices as water becomes an ever-growing problem.

India and China are already seeing rising domestic inflation rates. As the old saying goes, "America catches a cold and Europe gets pneumonia". Now we are in thrall to the East.

But what about the supply and demand for gold? First, let's look at the advances being made for its industrial use. Normally, in this area, gold has always lagged silver which has many applications in the medical, electrical and photographic arenas. It has come to our attention that a team of scientists at Oregon University think they have discovered a way to release energy from bacteria found in raw sewage. The key to this process is coating the graphite anodes with a tiny amount of gold. This tiny amount of gold on an anode will use a massive amount of gold if the technology is duplicated around the world. What do you think this would do for the price of gold?

And now China has just announced measures to liberalise its local gold market even further. Thai farmers traditionally have put a bit of gold under their beds after a good harvest as insurance against worse times ahead and now the Chinese have adopted the same basic view. It has an essential role in the psyche of people in Asia and the Far East..

As you may know, the current population of China is around 1.32 billion people. What if they all bought 1 gramme of gold this year- 1 gramme not one ounce? That would remove 1,750 tonnes of gold from the market, which is more than half the world's annual production. Now apply that to India with a population of 1.15 billion and rising, and total production is accounted for. In both countries there is a massive migration from country to towns as citizens look for higher income. Along with higher incomes will come higher amounts of gold being put aside for investment or decoration or both.

Monday, July 19, 2010

America Heads Down The Path Germany Took In WWII...????

Wars cost a lot of money. Take Germany which had to borrow heavily to pay for World War 1. The result: inflation. By 1923 the wildest inflation in history was raging in that country and things often cost twice as much in a few hours. People stampeded to buy goods and get rid of their money. Toward the end of 1923, it took 200 billion marks to buy a loaf of bread. Millions of German citizens found that their life's savings would not buy a stamp to mail a letter. They were broke.

When conflict broke out in 1914, the German Central Bank (Reichsbank), suspended redeemability of its notes in gold. Following that there was no legal maximum as to how many notes it could print of thin air (like the U.S. government is doing now). Not wanting to upset people with heavy taxes, the government borrowed large amounts of money which was to be paid by the enemy after Germany had saw victory in the war. Alot of this borrowing was discounted and monetized by the German Central Bank and this amounted to printing money. In modern terminology it is called "quantitative easing".

Toward the end of the war the floating debt of the Reichsbank had jumped from 3 billion to 55 billion marks! The move towards inflation and then hyperinflation was set in stone. There are no longer many people around who had this personal experience, but it is stamped deep in the psyche of the German race and needs to be awaken in the American public.

On that note, the annual Precious Metals Conference of the London Bullion Market Association will be held in Berlin later in 2010. Wilfried Held, managing director of Fachvereinigung Edmettale, the German Precious Metals Association, said one big subject for discussion would be "the high uncertainty about the future of the euro caused through discussions about potential sovereign defaults and the related role of gold".

For Germany, the most powerful country in the EU, the problems have not gone away, they have done what the US politicians are doing and that is simply sweeping then under the carpet! They are hoping against hope to get their economies back on track. Lots of luck with that...!!!!

It is worth remembering that a wheel barrow load of marks would not have bought an ounce of gold during those years of hyperinflation in the 1920s. Those who already had a few ounces in their back pockets were the ones who survived.

Monday, July 12, 2010

Pension Funds Buying Commodities

According to Bloomberg, pension fund assets in commodities rose to 2% in 2009 from 0.4$ in 2008, based on the 100 biggest pension fund managers in a poll.

Evidently, they are doing this to take advantage of declines in prices, and the pension funds may purchase raw materials this year..........

Wednesday, June 23, 2010

China National In Deal With US Coeur Alaska

Coeur Alaska, Inc. has inked a deal with China National Gold Group Corporation, which is now China's largest gold producer. The amount will be for about half the projected gold output from the new Kensington gold mine in Alaska.

The Kensington mine will begin production shortly, according to Coeur's website.

It should produce 50,000 oz of gold in 2010 and average 125,000 oz/year over an initial 12.5 year life based on current reserves of 1.5 million oz.

Presently, China National Gold runs about 60 gold mines in China, which is more than 20% of the country's total gold production.

Friday, April 2, 2010

Persian Gold Will Be Changing Almost Beyond Recognition

By Alastair Ford

“Persian Gold is battling on”, says company chairman John Teeling. In one sense that short phrase encapsulates everything that Persian’s been about since it listed several years ago with high hopes of prizing open the promising geology that’s been locked up behind baffling and impenetrable bureaucratic structures for longer than anyone can remember. The Iranians that John Teeling brought to London, and Dublin, were an impressive bunch, and friendly too. And the geology certainly was promising, no doubt about it. The company held, and still holds several licences across the famous Tethyan belt, which hosts rich mines in the west all the way to Turkey, and in the east in Pakistan and beyond. Gold-copper porphyrys and volcanic-hosted gold deposits are the prize, and one day someone with enough muscle, and enough stamina will come in and take one or many of these prospects into production.

But it’s now looking increasingly likely that that someone won’t be Persian Gold. At least not in the short-term. For a man who’s built a career out of being the first mover in all sorts of situations, John Teeling’s not one to take defeat lying down. There’s no talk, yet, of withdrawing from Iran. On the other hand, he’s not known for throwing good money after bad either, and a quick look at the list of the announcements that have come out from Persian over the last 18 months, shows that you have to go back to January 2009 before you get to any news about drilling. Some hiatus, and although the company wasn’t shy in its interims nine months later in stating a considered view that its Chah-e-Zard deposit could be “commercial”, that boldness was more than balanced by the subsequent clear and uncompromising statement that “further progress and development has been frustrated by inaction on behalf of the authorities”.

No mincing of words there, but it was the next statement that gave the clearest indication that John was beginning to feel that enough was enough. “Persian Gold is looking to examine other opportunities and strategic directions”, read the statement. Once that statement of intent was out in the public domain, speculation raged about exactly where the company would focus next. One thing seemed sure – the name “Persian Gold” was likely to have reached its sell-by date sooner rather than later.

Now, some months into 2010, it looks as though that prognosis is about to come true. John’s been fairly tied up lately grappling with financing and legal issues relating to one of his other companies, African Diamonds, but in the background the work to turn the ship at Persian Gold around has been going on unabated. The big work at African Diamonds is nearly over, as the company has until 14th April to exercise its option to go up to a 40 per cent interest in its AK6 diamond project. Whether it does so or not – and the signs are that it will – the die will have been cast, and the shape of AK6 and African Diamonds will have been settled. With Lundin making the running there, John can sit back, wait for production to start rolling in, and start to think about exploration.

Persian Gold then rises to the top of the “to-do” list, and John makes no bones about it. “I think we could anticipate significant changes in Persian Gold in the next six weeks”, he says. “We’re looking at material outside of Iran.” No surprises there, although just exactly what is on the cards isn’t clear yet. There was speculation at the end of last year that the company might make a move into Bolivia, either into the oil space, or into the newly fashionable lithium sector, or both. The market thinking now is that it’s a bit early for the lithium deal, although such a deal may yet come off in due course. Oil looks the most likely bet.

And if the leap from copper and gold in Iran to oil in Bolivia looks a bit far, it’s worth just bearing in mind that John, and his moneyman Jim Finn, have wide reach across a multitude of resources in a multitude of jurisdictions. That all of the operations are relatively small is neither here nor there –these chaps know the small oil scene just as well as they know the small mining scene, and they’ve made money in both. Pan Andean and Petrel Resources are the two most recent oil companies out of the Teeling stable, though “Pan” as it was affectionately known on the markets has now been sold. And given that Pan had South American operations at its core for many years, there’s perhaps an obvious gap to be filled there. We’ll know soon enough.