David Hargreaves on Precious Metals, week 36 2014

So gold only slipped a notch, $20 to $1266 this week, a mere 1.5%, but it has anchored below the $1300 upsidebreakout level, despite political turmoil. The raging bulls are, to say the least, distressed, but the practical bears are in analytical mode. WIM stays with $1200 whilst Goldman remains unrepentant at $1050. The failure of gold to rise to the bait of the Russia-Ukraine, Syria, Libya, Iraq and even Ebola fever has taken many by surprise but as we continue to stress, has a simple basis. There ain’t gonna be no World War Three, so no nuclear naughties, but there is an economic revival and it is USA driven. This puts China’s pause into perspective. America still wields the bigger stick.

It has recovered its oil power. That puts OPEC and the Middle East firmly on the back foot. Even as commodities pause for breath, the stock markets are strong and interest rates have a horny feel about them (bar the EU). It could be dividend-time, so what price gold? The miners are continuing to put their houses in order, all-sustaining costs are being massaged down towards $1000/oz and demand is muted. Hardly a raging buy signal, is it? The American public tends to treat the purchase of bullion coins like an anti-depressant. Thus August sales of gold eagles doubled from a year ago but are down 54% year-on-year at only 331,500 oz whilst silver eagles are down 15%. The fall in August was a full 45% on 2013.

India throws an interesting one into the pot. Its top refining group, MMTC-Pamp says gold should be treated as a currency. This would take the form of a gold metal account scheme and pay interest. The rationale is that India has at least 20,000 tonnes of the metal lying idle in private hands which could be utilised to alleviate the government-inspired shortage. Presumably the interest would be payable from premiums charged to manufacturers. We shall follow this one.

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About David Hargreaves

David Hargreaves

David Hargreaves is a mining engineer with over forty years of senior experience in the industry. After qualifying in coal mining he worked in the iron ore mines of Quebec and Northwest Ontario before diversifying into other bulk minerals including bauxite. He was Head of Research for stockbrokers James Capel in London from 1974 to 1977 and voted Mining Analyst of the year on three successive occasions.

Since forming his own metals broking and research company in 1977, he has successfully promoted and been a director of several public companies. He currently writes “The Week in Mining”, an incisive review of world mining events, for stockbrokers WH Ireland. David’s research pays particular attention to steel via the iron ore and coal supply industries. He is a Chartered Mining Engineer, Fellow of the Geological Society and the Institute of Mining, Minerals and Materials, and a Member of the Royal Institution. His textbook, “The World Index of Resources and Population” accurately predicted the exponential rise in demand for steel industry products.