Bulls are back: Buy gold now

January 4, 2017 03:05 PM
Mid-Week Metals Report

Rajendra Jadhav & Apeksha Nair:  Gold discounts in India widened this week as a rebound in global prices prompted buyers to postpone purchases amid a severe cash crunch, while demand across Asia remained subdued.

Spot gold rose to its highest in over two weeks on Friday on a weaker dollar and was set to end 2016 more than 9% higher, marking its first annual gain in four years. For the week, gold is up about 2.5% and is poised to register its best weekly gain since early June. In India, the world's No. 2 consumer of the metal, dealers were offering a discount of up to $4 an ounce this week over official domestic prices that include a 10% import tax. They offered discounts of up to $2 last week.

Trivia Question:  Up to the Medieval era of the Middle Ages, it was believed that there were only seven metals which are referred to as the Metals of Antiquity. What were they?

JP Morgan Gobbles Up a Minimum of Over 31 Tons (Possibly Up to 186 Tons) of Physical Gold.

Kitco News:  Gold prices ended the U.S. day session solidly higher and hit a two-week high Thursday. A drop in the U.S. dollar index on this day prompted good short covering in the futures market and some bargain hunting in the cash market. If there is decent follow-through buying interest and a technically bullish weekly high close on Friday, such would be an early chart clue that the gold market has put in at least a near-term low, if not a major low.

ETF Investors, Hedge Funds Bail on Gold as Dollar, Equities Gain/Luzi-Ann Javier:  SPDR Gold withdrawal reaches $2.27 billion, most since 2013. Money managers pare bullish bets to smallest since February. Investors just keep bailing on gold. In December, $2.27 billion was pulled out of SPDR Gold Shares, the world’s largest exchange-traded fund backed by the metal. That was a third straight monthly loss and the biggest since May 2013. Money managers have also turned less bullish on bullion, cutting their net-long positions for a seventh straight week to the smallest since February, U.S. government data showed Friday.

Mining News:  A Chinese court has sent a strong message to corporate executives who have been seen playing fast and loose within the rules of boon-times capitalism in China. Sun Zhaoxue, the former president of state-owned enterprise Chinalco, was found guilty of graft and corruption and sentenced to 16 years in prison. The sentence was handed down by The Tieling Municipal Court Intermediate People’s Court, which found that Sun "had amassed a fortune in property through corruption during his lengthy time in the Chinese resources and commodities industry," The Australian reported today.

Chinalco, of course, is connected to Simandou in Guinea, since the company up to the end of October was partnered with Anglo-Australian mega miner Rio Tinto (LON: RIO) to develop the world's largest mining project – through joint venture Chalco. But in July Rio Tinto said it had decided to put its Simandou project on ice due to the iron ore glut that is keeping a lid on prices – despite delivering a bankable feasibility on the project in May. Then on Oct. 28 Rio sold its 46.6% stake in Simandou to Chinalco, potentially opening a new path to development for the $20 billion iron ore mine. The deal, worth between $1.1 billion and $1.3 billion, ups Chinalco's stake to nearly 95%.

Copper/Mining.com:  Copper, until recently one of the worst performing commodities of the past two years, experienced a sudden spike at the end of 2016, posing several questions as to the direction of the market as we move into 2017.

The rally, which began on the heels of Donald Trump winning in the U.S. presidential election, has been partly based on speculation regarding the impact of the President-elect’s $500 billion infrastructure plans on demand for the metal.

It has also been fueled by a pick-up in Chinese imports, responsible for almost 50% of global copper demand, which is seen a good omen for the industry’s health. Even Goldman Sachs — usually the most pessimistic when it comes to forecasting what’s in stake for copper in the short term — has changed its tone to a more positive one.

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About the Author

Peter Thomas is a senior vice president at the Zaner Precious Metal Division. As a licensed floor broker he was a filling broker in the silver pit back in the days when silver ran to $55 an ounce. He currently manages a global cash desk which handles Refiners, Recyclers, Mining Operations and Coin & Bullion companies.