Friday metals report

May 5, 2017 01:00 PM

IBM Watson - Gaining New Exploration Insights Through Artificial Intelligence:  Goldcorp/Value creation in mining has shifted from how well a company moves material, to how well it acts on information to increase efficiency and production. This shift is highly influenced by the vast amount of data mining companies are able to collect from sensors, equipment monitors and other digital and connected devices. The key to unlocking this value lies in harnessing the capabilities of cognitive computing systems to turn big data into useful insights for future events.

Cognitive computing also referred to as Artificial Intelligence, is now considered an essential tool in helping companies make better business decisions on how to improve processes and outcomes. This is one of the main reasons Goldcorp recently started working with IBM Watson.

Unlike traditional computer systems, which are programmed by people to perform certain tasks, cognitive computing systems have the ability to learn through their interactions with both data and humans. Watson, for example, is able to distinguish between different types of information. It gathers relevant data from different sources, creates hypotheses and continuously checks to identify the most reliable and accurate results.

Friday Trivia Question:  What country first used silver to coat glass to create a mirror?

Russia Adds Another Big Tranche of Gold to Its Reserves/Lawrie Williams:  Russia continues to close the gap on China as being the world’s fifth largest holder of gold in its official reserves.  In March figures from the Russian central bank have shown it added some 800,000 ounces – 24.9 tonnes - to its gold reserves bringing them to around a total of 1,679 tonnes – now only some 164 tonnes light of China’s officially reported figure.  With China having not added to its gold reserves since October if this pattern continues Russia could surpass China’s official gold reserve figure by the end of the current year.

This is a Clip from the CME Groups Metal Report/Erik Norland – CME Group:  The collapse in gold prices after 2011 did eventually slow the increase in mining output, which may have helped to stabilize prices in 2016.  That said, mining output is still growing.  It rose 1.4% in 2016 versus 2015.  More importantly, mining gold remains profitable.  At current prices, consultancy GFMS estimates in its 2017 Gold Survey that at $1,280 per ounce, 97% of the world’s mines are cash-flow positive and 94% of the world’s mines are profitable on an all-in sustaining basis.  Moreover, with gold at $1,280 per ounce, the world’s mines are earning operating margins of around 50% — much better than a few years ago when the price had fallen to around $1,050 per ounce.

The fact that gold mining remains profitable does not guarantee that mining output will continue to rise.  But it does provide a strong incentive for further investment that may result in rising mining output.  If gold mining supply continues to rise, it could be quite bearish for the price of gold given other factors; it could augment the downside for gold if the Fed accelerates the pace of tightening, and dampen the upside if the Fed reverses course and eases monetary policy.

As such, gold is the ultimate hedge for setbacks in the Trump agenda. If the administration fails to get its plans enacted, gold prices will likely move higher.  If the Administration succeeds, gold prices could retest or break their December lows.  Although Trump’s presidency appears to be off to a rocky start, don’t count him out: many past Administrations took months or years to accomplish their main objectives.

Gold Demand Trends Q1 2017/World Gold Council:  Q1 gold demand: down 18% from last year’s exceptional high Global gold demand in Q1 2017 was 1,034.5t. The 18% year­over­year decline suffers from the comparison with Q1 2016, which was the strongest ever first quarter. Inflows into ETFs of 109.1t, although solid, were nonetheless a fraction of last year’s near ­record inflows. Slower central bank demand also contributed to the weakness. Bar and coin investment, however, was healthy at 289.8t (+9% yoy), while demand firmed slightly in both the jewelry and technology sectors.

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About the Author

Pete Thomas of Zaner Precious Metals is an active cash and OTC metals broker for the last 35 years. He can be reached at 312.277.0140 or a