Author Archives: The Economics Club

Is Gold entering a Bull Market?

Published by:

The world is a scary place these days. Fortunes can be made or lost in the blink of an eye, but through it all gold still remains a safe-haven investment. This month Gold broke through the $1,300 mark. There are a number of reasons that could set and sustain gold’s bull run.

Looking at all the geopolitical issues today, very few seem like they will be resolved anytime soon. North Korea has not been resolved, Israel is as volatile as ever, ISIS is not relenting, America won’t fix it’s dysfunctions and President Donald Trump won’t become anyone but himself. The stock market will also continue to look like a bubble unless someone decides to burst it.

The latest data from the Commodity Futures Trading Commission shows that money managers have taken a bullish stance with gold. Gold has been bullish for almost 11 months. This could be due to the following:

– Global interest rates staying negative.
– High broad equity valuations and complacency.
– The U.S. Dollar enters the bear market.
– The surge in demand for gold from countries like China

The most pertinent of these four is the broad valuations and market complacency. Let’s look at the valuations by starting with the S&P500.

It is currently overvalued because of this belief that Trump’s intention to cut corporate tax will drive future earnings in a positive direction. However, slashing corporate tax may have a bad effect on a company’s valuations.

We can debate how much of a safe haven gold is luckily, there is a well documented history of gold’s performance over the years. Between 1961 and July 2017, the gold price returns were positive, especially when inflation went up and stock market returns were in negative numbers. Indications show that we can expect gold to be strong against a weak dollar.

Complacency has affected a lot of market analysts and other qualified financial commentators. A lot of people expect the gold market to be sky high given the state of affairs in the world. Take into account, Brexit, Trump trade tariffs, the Iran deal, climate change, etc.

The best time to buy insurance, in this case gold being insurance against economic depression, is when the risk event isn’t the imminent threat at the forefront of investors’ minds. Gold is currently an under owned, underappreciated commodity which could turn out to be the best insurance to buy into right now.

According to JP Morgan’s money managers hold the view that gold could reach peaks of $1,400 by the end of the year. Gold’s fluctuations over and under $1,300 is an expected reaction as the market has to self-correct before it can begin to climb again. Banks like JP Morgan and many money managers believe that gold has entered a bull market.

If you have been sitting on the sidelines waiting to buy gold, then this could be lowest that gold will be for a while. We may be headed higher, but how long it will take and what will trigger that surge past the $1,300 threshold no one really knows. The time to buy gold is now!



Agnico Eagle Mines Limited: A Fast-Growing Gold Mining Company We Shouldn’t Ignore

Published by:

There is a chance that you don’t know Agnico Eagle, one of the most promising mining companies in the world. It has been around longer than many, yet it has remained partially in the shadows.

Truth be told, Agnico Eagle Mines Limited has brought attention to its operations recently due to the fast-growing numbers that the company is enjoying. In fact, Agnico Eagle reported US$1,896.8 million in revenue by the end of 2014, representing a whooping 15.8 percent increase.

For this and other reasons, paying more attention to this Canadian mining colossus would be a good idea for investors thinking about the future.

A Decades-Old Gold Mining Company

It’s true that Agnico Eagle Mines Limited isn’t a new player. In 1953, Cobalt Consolidated Mining was born in Canada as a merger of five different mining companies that were facing important challenges. Four years after that, the group decided to change its name to Agnico Mines.

Again, six years later, Agnico Mines merged with Eagle Mines Ltd, a company that was mostly dedicated to gold exploration with modest success. This merger allowed the growing company to fruitfully develop projects based on the yellow metal, which can supply the ever growing technology sector along with selling to gold bullion refiners sectors. A decade later, Agnico Eagle would acquire Dumagami Mines Limited’s assets, including the mine that is now called LaRonde mine, which is currently the company’s main operation.

During the 90s and 00s, Agnico Eagle continued its expansion steadily, acquiring operations in Canada, Mexico, and Finland. Other remarkable acquisitions by the company were the Meadowbank gold project, the Meliadine property, and Rubicon Minerals’ participation.

Active Mining Operations

Nowadays, Agnico Eagle has remarkable mining ongoing operations with no cease at sight. The magnitude of these greatly varies, with LaRonde mine being the biggest one for the company and at the same time, the deepest mine in America.

Now, let’s get into the details.

LaRonde: This underground mine has an estimated life from 1988 to 2024, reporting productive numbers around 305,788 ounces of gold, 988,000 of silver, 4,687 tonnes of zinc, and 4,416 of copper in 2016.

Lapa: A considerable smaller underground mine, it’s located near to LaRonde site. This operation has an estimated life from 2009 to 2017, reporting a production of 73,930 ounces of gold during 2016.

Goldex: In the same region as the previous two, the Goldex operation consists in a multipurpose underground mine. While Agnico Eagle is the operation’s owner, the national government joined the activities to progressively restore the Manitou mine tailing site. Its estimated life is between 2013 and 2025 and 2016 operations produced 120,704 ounces of gold.

Meadowbank: This open pit mine is expected to complete its operative life by 2018 while it produced 312,214 ounces of gold and 221,000 of silver in 2016.

Pinos Altos: Outside Canada, we have the Pinos Altos mine in Mexico, with an estimated life between 2009 and 2023. In 2016, it produced 240,068 ounces of gold and 2.7 million ounces of silver.

La India: Also in Mexico, La India mining operation produced 115,162 ounces of gold and 486,000 of silver in 2016. This open pit mine is expected to be fully operative until 2022.

Kittila: The Kittila mine is the only Agnico Eagle operation outside America. This mine is located in Northern Finland and its one of the largest gold deposits in Europe. It produced 202,508 ounces of gold in 2016 and the estimated life is between 2009 and 2034.

The Volcker Rule and its Effects on the Precious Metal Industry

Published by:

Before moving on into the topic of how the Volcker rule affects the precious metal industry, it is crucial that the Volcker rule itself be understood first. The Volcker rule is basically a reformation act that restricts the banks in the United States from taking high risk investments, especially high risk investments that do not benefit the customers of the bank. In view of the major scandals involving banks using people’s money to make short term gains that saw profit flow into the banks but not to the customers, but when things go wrong, the customers bear the burden of the loss.

In other words banks are prohibited from investing in short term or long term hedge funds, speculative markets that are highly risky and it also prevents banks from investing in the precious metals industry (gold bullion / silver bullion). Banks are currently actually looking for loopholes in the legislation rather than comply to it, but according to the legislators the loopholes do not exist. How this would affect the precious metal industry is multi tiered, as some analyst say that banks are the biggest buyers and sellers in the precious metal commodity trade industry and that they are the main ‘market forces’ applied through hedge fund managers and their absence would create a huge void in demand and drive prices down. On the other hand there are those who believe that the absence of these speculative strong forces would provide stability to the prices of gold as most of the trading done by these market forces are for short term gains and in retrospect most of the gold bought by them are never held fopr more than a few days.

Looking into the average investor who looks towards the shiny yellow metal as a safe haven to secure wealth, the absence of these speculative forces will actually bring about the true essence of the gold value and allow the average investor to sleep peacefully knowing that there are no hedge fund managers trying to manipulate the gold market prices. Many have applauded this move, especially the savers, as many have seen what has happened in recent years to big financial institutions that were financially ruined and in the process ruined many other lives of individuals who had trusted these financial institutions to keep their life saving safe.

The reformation brought about by the Volcker rule is expected to bring confidence back into the precious metal industry as smaller investors will no longer have to contend with big players who use other people’s money to fill their coffers. Nevertheless, prior to this there have been numerous other ‘so called’ rules that were supposedly supposed to protect the small people, however in light of what transpired during the global financial meltdown and other similar situations, how long this rule lasts before it is overwhelmed or manipulated by the powers that be would not be long, and those who want to place themselves within the safe zone amidst a financial crisis would typically be the ‘Average Joe’ with a fistful of gold.

Silver Prices Rising Due To Shady Transactions in India

Published by:

As in many other undeveloped countries, black money is abundant on every single level of the Indian economy. This is a matter that has attracted nationwide attention because it seems to be slowing economic growth. The national government has declared a war on this issue, trying to eradicate the flow of this money.

Measure after measure, people involved in these illegal activities are looking different ways to back up their wealth and transform their black money into “white”. According to a report from The New Indian Express, this is intensively happening in Salem City, in the state of Tamil Nadu.

How Is Silver Gaining From This?

In the constant quest of transforming black money, people involved in these activities are naturally attracted to precious metal. At first, most people were buying all the gold they could with their black money, but now they are more attracted to silver for obvious reasons.

“After demonetization, most of the black money holders in and around Salem bought gold bars. But, after information spread that government will next focus on gold sales, they are afraid that the gold rate will come down drastically in the coming days,” said a silver anklet shop owner that was interviewed for the news report.

Salem City has abundance in silver commerce, mainly in form of anklets. This is leading black money holders in the region to visit the city in order to spend their wealth and backing it up with a safe metal.

Legal Actions

The national government is committed to search and prosecute those people who are involved with black money, arguing the threat they suppose to the whole economy. In fact, the population that falls in this shady sector were buying gold by the ton before official statements.

“There have been reports from around the country that people were buying gold, often at a premium, with the demonetized currencies. Following this, the Central government responded saying they will track jewelers and purchases to crack down on black money holders,” says the article.

It is logical to think that this announcement affected the gold market and redirected black money holders towards silver bars, anklets, and other presentations that would result useful for backing up their wealth, enjoying a degree of liquidity which is much easier to manage than if they were to buy gold bullion or jewellery, which is of a much higher value per item.

Global Impact

There is no way to know if black money holders have the capacity to influence the global market of silver and gold. It’s true that this population handles a massive amount of money, also involving illegal businesses. But from this to pushing forward an international market, there is a lot to consider.

India represents the second global consumer of the yellow metal. Now those black money holders are afraid of putting their bet on physical gold, this could actually affect the market. This would be decreasing the national demand, not only in Salem City, where silver is more popular than anything else.

Nevertheless, India’s rural finances are stronger than ever, thanks to the good monsoon. This means that gold demand will continue to increase, because farmers have limited access to the banking system, pushing them to invest in metals.

High Prices Could Affect Indian Gold Jewellery Business Next Year

Published by:

Having increasing prices in gold isn’t always a good news for producers and investors. A recent announcement from the World Gold Council said that there is a high chance of Indian gold demand dropping to 750-800 tons by the end of this year in comparison with 860 tons from 2015.

The main reason for this is that gold prices have been going up steadily, making it too expensive. While investors are quite happy about the bullish market, this situation could reverse performance by the end of this year and the first semester of 2017.

As you might know already, India is the second gold consumer in the world, only behind China, which is also decreasing its gold demand for the upcoming years.

The gold market has been positively bullish, stimulated by uncertainty regarding US economy, Europe’s decisions on monetary policies, and other geopolitical events of great relevance. But massive changes in Indian gold consumption could be a decisive factor for the precious metal’s prices.

Jewelers Strikes

But a higher price isn’t the only factor affecting demand. In recent months, India’s jewelry industry was on a strike, demanding big changes in the tax system. The government increased taxes on this sector, causing great unrest and leading jewelers to an indefinite strike.

Another inciting factor for the strikes was the imposition of a Pan Card number for every jewelry purchase above 200,000 Indian Rupees. According to jewelers who went on strike, this imposition would greatly affect the consumer, ultimately leading to losses.

Monsoon Benefits All

Conversations between the jewelry industry and the government led to positive changes, getting producers go back to work. But don’t think that this was the decisive element changing jewelers’ minds.

This year monsoon was flourishing all across in the country. Just like always, monsoon performance is translated into gold demand during Dewali and wedding seasons, both starting soon.

The jewelry industry isn’t capable of being absence during these seasons, even if the circumstances were different. With a highly positive monsoon, gold demand from consumers will exceed expectations.

The Risk is Still There

With the jewelers strike out of the equation, Indian economy is only facing high prices. The gold market remains bullish and most forecasts indicates that it isn’t going to change.

In fact, with the great uncertainty that is being experienced on a worldwide scale, gold prices are more likely to increase. With the US elections, unclear FED’s plans for the future, the Brexit, and actual monetary policies being used by the European Central Bank, many investors have their doubts regarding Forex and stocks.

So far, the yellow metal seems the most suitable alternative. Even with China and India decreasing their numbers, gold is could remain bullish. In comparison, India’s expectations about demand are more negative than the Chinese ones.

Recent official reports told the media that China is planning to decrease demand growth, instead of demand itself. This means that the sector will continue to expand, despite the blow coming from India.


Jim Rickards is Telling Investors to Buy Gold Now

Published by:

Investors often feel overwhelmed by the many personalities forecasting the market trends on the media. The emotional side of investment is always affected by this matter.

Now is the turn for Jim Rickards, who spoke about the gold upcoming opportunities during CNBC’s Squawk Box last Monday. He recommended investors to put physical gold among the priorities.

The main reason he claimed for such a thing was that many central banks all around the world are taking desperate measures in order to increase inflation. This is having a deep impact on physical gold’s prices.

So according to him, this is a smart move backed up by central banks’ ongoing and future plans to work with the damaged economy.

No Distractions

Mr. Rickards told CNBC that low interests, which are a hot matter right now by the way, allows the gold holder to be relaxed, because there aren’t other better alternatives to analyze closely.

In fact, during the interview he gave a straightforward advice, telling that everyone should have a 10 percent of their portfolio in physical gold. This is a pretty detailed recommendation that many investors may be applying now.

In order to back up his own point of view, Mr. Rickards also made emphasis on the recent comments from seasoned investors like Gorge Soros and Bill Gross, who told the media that people should put gold among their short-term priorities for investments.

Establishing a Difference

Mr. Rickards made a clear distinction between physical gold and futures. He claimed that the former is the winning player for this scenario, while paper gold would not perform even close to it when the proper time comes.

This is an advice that is really hard to ignore. Jim Rickards is a well-known gold expert with several publications on the shelves. These same publications have enjoyed popularity among analysts and investing experts.

He graduated from The Johns Hopkins University with a Bachelor of Arts degree before getting its Master in International Economics.

A fruitful career allowed him to gain fame among financial institutions and media. He worked on Wall Street for more than three decades. Also, Mr. Rickard has testified before the U.S. House of Representatives to present his point of view and opinions about the risks the economy was facing after 2008.

People are Losing Faith

While Mr. Rickards is talking so positively about acquiring physical gold, other analysts are convinced that the bullish trend this precious metal is enjoying is actually cooling down. They are suggesting that it’s time to go out before gold start losing big points.

According to a recent publication from Bloomberg, many hedge funds and speculators are getting out from the gold rally because they are losing faith in the metal. The negative forecasts are talking about a weakened market, which is not going to report gains like during previous weeks.

A solid part of this forecast is that investors have more interest on the upcoming economic reports that are about to be released by the FED. The last time, these reports were positive at some degree, so some observers have chosen to trust in the economy indicators for the third quarter over the yellow metal.

While this can be partially true, the central banks still are on their quest to increase inflation. Even when this isn’t going so well, gold is still benefiting.

Today’s trading session closed at US$1350.90, representing a 2.50 percent gain. A few days have passed since both Mr. Rickards’ declarations and Bloomberg’s forecast, but the gold rally is still there, making some investors really happy.

Is there a Pattern to the Precious Metals Market?

Published by:

The precious metals market unpredictability has many in a bind over which direction to go, those who are holding on to physical precious metals or even mining stocks are at the edge of their seats based on what has been unfolding, and many have actually turned towards the capital markets based on the more attractive returns that it has to offer.

Although this may seem to be the best move currently and for the short run, those holding on to precious metals related assets are definitely in a better position for the long run. This based on the fact that the precious metals market has been pressured into submission by the powers that be, and it is only a matter of time before the lid pops open sending the precious metals markets soaring. Gold related assets are and have always been long term investment schemes and buying gold with the intention of making gains in the short term is not only unadvisable, but it is also extremely dangerous from a financial perspective as the precious metals market is known to fluctuate steeply in both ways triggered by the slightest economic spark and unless would be investors have enough patience and resources to endure market pressures working against their positions it is best not to dabble in it.

Most gold bugs who own physical bullion however are optimistic about the current lower prices of gold as it is allowing them to bring the cost of their physical gold holdings by at least 10 % giving them better margins for the future.
What exactly is happening to the precious metals industry is pretty obvious, despite the current shaky global financial situation and volatile markets the strength of the dollar and the appeal of the capital markets are holding ground. Coupled with lower oil prices and governments trying to stimulate economies which require them to inject funds into the markets, the lure of the capital markets is difficult to resist. This has also rendered conventional theories related to the commodity markets and how they respond inapplicable as markets are anything but predictable these days. One thing that is for certain is the fact that the disorganized and fragile global financial system is destined to crumble as even well informed financiers are uncertain of the mechanics that are at work and over the last two to three decades the financial machine has become too obscure to a point that it has become mystical and the only constant in the equation seems to be the fact that gold and other precious metals are still being considered as a safe haven by everyone and it does seem that most have a finger or two in precious metal pies in the event that the capital markets disintegrate.

Many have grown tired of waiting for gold prices to rise and gold bugs are reeling from the losses that they are incurring from the costs of holding, storage and insurance and many gold bugs fear that when the time does come to sell, the margins will not be justifiable.

Golden Conflicts

Published by:

It is not new to the world when certain factions misuse natural resources to finance or advocate conflict which has become a common phenomenon over the last few decades: from crude oil in the Middle East, timber in Cambodia, blood diamonds in Sierra Leone and Angola and even gold in low income countries. Very often natural resources provide a means to finance as they are internationally tradable assets which are mobile and easy to dispose off. Without appropriate measures, these assets may find their way towards funding armed groups that are conditioned to overlook human rights and grossly neglect humanitarian laws.

The Democratic Republic of Congo for Instance was responsible for 0.8 % or 22 tonnes of newly mined gold, but because of the countries weak governance coupled with the fact that most of the gold mines are artisanal small scale mines, they are often subjected to the whims and fancies of armed groups who frequently extort them, therefore the possibility of the gold produced in the Democratic Republic of Congo getting into the gold supply chain is minimal. These are only some of the issues as incidences of forced labour by armed groups, low wages, adverse working conditions, negligent mining practices and conflicts continue to be highlighted and the only way to deter these incidences is by obstructing gold mined under these conditions to get into the supply chain.

However this is not an easy task as gold from independent small mines are usually melted down and mixed with gold from other sources (usually with recycled gold – 35 % of the annual gold supply comes from recycled gold) and sent off to end users through a complex transactions which make them virtually impossible to be traced back to its origins. It is largely due to the availability of ready buyers that these armed groups are brazen about their activities as once the gold artisanal and small scale mines reach a refinery, their origins cannot be traced and therefore refineries have become a strong element in the value chain of armed groups and establishing a relationship with a refinery that would accept their gold (knowingly or unknowingly) is all that they need.

Recently the World Gold Council has launched a ‘conflict free gold program’ which aims to stop or prevent gold from conflict zones or high risk areas from reaching refineries and subsequently end users as this would be an effective measure towards eliminating these conflicts and bring reprieve to those who bear the brunt of these armed groups.

However, it is undeniable that artisanal mining is a vital economic activity in some places and if it was not for the gold, the communities in these places would be left without nothing and based on the fact that a significant proportion of mining in these places are illegal and operate beyond government supervision it is prone to smuggling which is often backed by armed groups.

Proving that a gold batch is from these situations or sources is the first step, but a difficult one undeniably.

Gold Mining Companies & Investments

Published by:

Investing in gold does not necessarily mean buying gold bars by the dozen and storing them in a impregnable safe tucked away behind a portrait of the Mona Lisa, although that is an option and according to most gold bugs, it’s the best way to invest in gold, there are investors who prefer to take a much more indirect approach towards investing in the shiny yellow metal. They do it by investing in gold mining company stocks; however, before you take the leap into this realm, there are some things that an investor should essentially know if he or she is going to use this approach to invest in gold.

The good thing about gold mining stocks is that gold mining stocks are rather easy to buy or sell hence if the situation arises whereby you need instant cash you would be able to sell your stock immediately and in comparison to physical gold bullion that you have stored in a safe, the process may take a tad bit longer as it goes through the assaying process and getting a buyer who would be willing to pay a reasonable price for it.

On the flip side however, if at all the gold mining stock that you own belongs to a company that is embroiled in some kind of issue that may range from low production, lack of funds, pollution or land acquisition issues, it may not be quite as easily traded. Always remember that by buying a gold mining stock, the investor is actually buying a portion of the company that is mining the gold and although there is potential for additional upsides the downside risks are more often than not equal.

For instance, gold mining is capital intensive meaning that it requires a substantial amount of cash to develop and operate a mine, hence buying into a mining company that has a sound financial background is one of the most vital aspects. Gold mining companies are also known to play the market by lowering production when gold prices are low and increasing production when prices are favourable to maximise profits, thus gold mining stocks may tend to undergo massive price swings making patience a key component in being successful with gold mine investments.

Nevertheless the main thing about investing into gold mining companies is in being able to identify good gold mining stocks and this obviously would take a significant amount of research. Most seasoned investors go for value-plus proposition which in layman terms mean that if the price of gold rises significantly they expect the mining company to be able to offer a 1x plus gain as an additional profit potential, because if that is not in the option, then the investor might as well invest in physical gold and as mentioned earlier store it in a safe hidden behind a DaVinci painting.

It is also imperative that the gold mining company has distinct qualities that make them good investments such as effective management, competent with environmental and political risks and also has the ability to obtain finance at the drop of a hat.

Canadian Gold Tales: The Canadian Wild West

Published by:

Towards the end of the nineteenth century around 100,000 people overpowered the Klondike area arranged within as far as possible searching for gold, is a noteworthy piece of American history. Presumably, a couple made their riches, yet most lost all that they had. The Klondike’s record is one of disturbance and obsession that passed on them to the region, and in addition brought the most exceedingly terrible out of a huge part of them. Gold fever held people all over the place all through the United Sates and when news of Klondike gold spread like crazy flame and people like George Carmack, Skagway criminal Soapy Smith and others, for instance, Mountie Sam Steele got to be enlivened.

Brutality, starvation and even the unforgiving atmosphere of the Yukon and were not satisfactory to keep mineworkers away. Stories of the Klondike has wound up central to Canadian history and also the gold business as it arrived that excavators started obtaining and offering cases instead of burrowing for the gold themselves as a result of the way that, if whenever there was a spot on the planet where burrowing was in every way that really matters unbelievable for individuals with picks, hammers and tomahawks – it was the Klondike. The masses extended so fundamentally (from 500 to 30,000 within months) that the immediately manufactured wooden structures as often as possible seethed to the ground and to compound matters unsanitary conditions killed various.

On the other hand, various don’t have the foggiest thought regarding exchange drivers behind the dashes for unheard of wealth of the Klondike, it was not on account of the interest of the significant metal alone, it was in like manner as a result of the mistake of the cash related structures in the US, banks were falling level all through the United States and various were about section 11 in the midst of that time, and when news of the gold disclosure went to these people, it was all in all the principle decision they expected to recoup their financial strength. Another component that empowered the Klondike dash for unfathomable riches was furthermore the high rate of unemployment that stretched out from San Francisco to Seattle. Each one of these segments was the key components that drove such countless prospect for gold in the Yukon.

However within a few years, gold had been found in Alaska and the scene was an extraordinary arrangement also obliging to prospect for gold in examination to the Klondike that enacted another move, the Klondike district was left for a time span, before people started mining the Klondike scope of and on. At whatever point a noteworthy gold piece was found in the Klondike and news spread, “littler than anticipated” undertakings for incredible riches consistently came about, however these downsized dashes for inconceivable riches when in doubt, did not last over a month preceding mineworkers left.