Gold mining: the fading away of an industry...

The protracted downtrend of precious metal prices may have run its course, there is however no clear indication of much higher gold and silver prices in the near or medium term future.  Gold is moving sideways, unable to uphold $1400 for more than a few days.  Producers are scrutinizing their mining sites and not without reason. Production at mines with high total production costs may need to be scaled back.  Any new mining development will need to factor in lower gold prices going forward and the internal rate of return will be substantially lower.  Especially on sites where investment costs have been spiralling out of control, tough decisions may have to be made.  It should be clear that, under these circumstances, the global gold mining output will continue its decline, possibly at an accelerated pace.  Gold mining: the fading away of an industry...

Precious metals and miners make a U-turn

After grinding lower the first week of August, precious metals made a U-turn. The sentiment change sent the heavily depressed miners soaring. HUI/Gold made it to 0.20 last week and now stands at 0.195. (for fresh graphs, check the GoldMinerPulse page). While we could barely imagine any value below that 0.20 threshold until recently, we're glad the gloomy days are behind us (at least for a while). Last Friday gold peaked above $1400 intraday for the first time since early June.

Brutal end of a nascent gold miner recovery

We 've witnessed a nascent precious metal miner recovery since June 27, as miners have started recovering even before gold found its final bottom below $1200 in the morning of June 28. For as long as the stealth gold rally had legs, miners responded favorably. The gold rally was petering out the week after last posting:
The stealth gold recovery rally. Gold has been sliding from July 29 onwards. Despite a small technical recovery last Friday, the gold slide aggravates. Whenever there is some rumor out about "tapering" the QE3/QE4 bond purchase programs of the FED, hell breaks loose.

The stealth gold recovery rally

Ever since bottoming in the morning of June 28, gold has been hesitantly drifting higher. The short first week of July, with American and Canadian exchanges closed for the national day, the yellow metal lingered on, apparently challenging its June 28 bottom. Gold closed the short week down 1%, however without closing below $1200. Ever since we seem to experience a stealth gold recovery rally. Until this morning, $1300 seemed to be a firm resistance for gold. After a few failed attempts, we're now vigorously steaming up higher.

Depressive June ending with a manic gold miner recovery rally

Precious metal investors have been watching in disbelief how gold tumbled through all resistance levels eventually bottoming well below $1200 in European trading and during the NYMEX morning session, yesterday June 28. The recovery rally however was written in the stars:

• On Thursday, precious metal miners followed the stock market recovery, ignoring the continuing plunge of the yellow metal;
• While gold continued the last stage in its race to the bottom, silver upheld well on Thursday and both platinum and palladium reverted course and started recovering; the proverbial "bridge too far" for gold bears...

Investing in gold miners and getting out alive (?)

When plotting the HUI index (basket of unhedged gold miners) relative to gold, we've been witnessing an almost uninterrupted slide since nearly three years. HUI/gold made a post Feb 2001 low last month (well below the crisis bottom level of 2008). As gold held above $1400 a couple of weeks ago, HUI/Gold was flirting with its 0.200 resistance. Until few months ago it was difficult to conceive HUI/Gold ever breaking below that 0.200; yet it has and is again challenging its 0.181 bottom.

Leveraged Exchange Traded Funds: a trader's tool

Among the ever growing family of exchange traded funds (ETF's), there are quite a few leveraged products. Direxion probably is the larger distributor of this particular type of ETF's.

Soros gambles on a swift gold recovery

George Soros confused the markets with his gold ETF sales. Now he seems having put a on a far riskier bet. Not only he bought a fair stake in GDX, the main large cap gold mining ETF, Soros also gambles on a swift gold recovery though a considerable long position using call options on the Market Vectors Gold Miner Junior ETF (GDXJ).

Volatility in the gold market

It’s often heard that gold takes the staircase up, but the elevator down. A gold rally would then consist in a gradual process of relatively small but consistent daily upward moves. The gold cartel (bullion banks and investment banks, backed by the FED) would not allow gold to rally over 2% daily.

Once ignited, swoons in precious metals are thought to aggravate by forced liquidation of future long positions and the redemption of leveraged products and bullion ETF’s...

All of this is a mixture of facts and myths, causes and consequences, hidden motives and secrecy, misinformation, manipulation and opportunism. While I can do very little about most of those, I will try to clarify some of the facts in order to eliminate a few of the myths.

Honestly, you don't want to know...

Gold price manipulation reached its culmination on Monday with an over-night low around $1320. The multiyear resistance of gold at $1525 was broken the previous week, triggering the plunge. After a suggestion by IMF president Christine Lagarde, rumours were out that Cyprus was to sell its gold holding in order for the €10 B bail-out loan to be approved. Little imagination is needed to shift focus to Italy: in a political stale-mate and with debt equally spiraling out of control. Contrary to Cyprus, Italy does have meaningful gold holdings, however still only worth a fraction of their outstanding debt.