Category Archives: Buying Gold / Selling Gold

Western Australia’s Gold Output Affected By Bad Weather

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The weather is an important factor in the mining industry. As much as rain is important for pretty much everything, it affects mining production in a bad way. The weather in Western Australia and Queensland where most of Australia’s gold mining operations are found. According to the latest reports, Australia has managed to produce 74 tonnes of gold in the first quarter. That’s a 7% decrease from the amount produced around the final quarter of 2017.


According to experts, the figures are better than what was anticipated considering the amount of rain that came down in the first quarter of the year. The figure is actually 4% more than what was reported for the first quarter of the previous year. However the wet weather affected production at various mines. Wet weather cause haulage problems and forces operators to use low-grade gold stockpiles just to maintain the mill throughput. In addition to that, wet ore tends to be sticky and when it is, it becomes harder to crush and affects conveyor belts and other equipment designed to deal with mining ore when it is dry. Production plants either run slower or they shut down in parts and stockpile the ore to be run through when the conditions are more favourable. Heavy rains also affect the supply of essential services and consumables like diesel to mines located in remote areas of Australia.


Looking at individual operators: the Tropicana Joint Venture by AngloGold and Independence Group produced 34,000 ounces less gold than the previous quarter; Barrick and Newmont’s Super Pit produced 28,000 ounces less gold; Newcrest and Telfer’s operation production was down 33,000 ounces whilst Newmont’s Boddington and Tanami operation fell by 30,000 ounces. The Tanami desert area needs as much rain as it can get, however the rainfall early this year was particularly high, it caused sustained flooding in most areas. Because of this, diesel, which is Tanami mines’ primary fuel could not be trucked to the mine. As a result production fell by 30,000 ounces. Only a small number of mining operations reported a higher output, these include AngloGold’s Sunrise Dam Mine BHP, Silver Lake’s Olympic Dam operation and Mt Monger mining operation. These mining operations produced more gold than expected under the circumstances of wet weather.


Weather isn’t the only thing creating difficulties for the mining industry. There is talk that the Australian government is contemplating increasing the royalties of gold mined in Western Australia. This would be a disaster for the mining industry. Although the sector works hard to keep costs low, some gold producers have been unable to control costs and have All In Sustaining Costs (AISCs) that are above the gold price. Imposing a higher royalty would be a peculiar way for the government to retain jobs in an industry that is already struggling. It will also reduce the earnings that the government will make with gold exports. The situation is still being closely monitored and mining companies will soon meet with government to discuss the royalties and the taxes that they are already paying especially at this crucial point in time when the industry isn’t doing as good as it.



The West Buys Fewer Investment Grade Gold Coins And Bars In The First Quarter Of 2018

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According to the World Gold Council, Europe’s demand for freshly minted coins and bullion bars is at its lowest. The drop is significant. It is at levels that have not been seen in a while. Jewellery owners, on the other hand, have reduced the selling of their gold jewellery despite the high price of gold. Recycling is an important cog in the gold production cycle and with talk of mines reaching peak gold, the trend is worrying. It means that there is less ready to sell gold on the market or that bullion dealers are sitting with inventory for longer periods than they should.


The levels of recyclable gold for the first quarter of 2007 and of 2018 reached the low levels that they were on in 2007. The high price of gold should have translated to more people selling their scrap gold, but it would seem there are less cash-strapped people. This might have to do with the strong economic growth in most Western Countries. Brexit has the UK worried, the U.S Trade war, The U.S withdrawing from the Paris Climate Accord spells impending disaster, but that trouble hasn’t been evident yet and maybe people aren’t worried about buying gold to store their wealth.

Europe and America might have gotten used to the story of gold being near depletion which would have made scrap gold dealers less sensitive to the gold price. For dealers, the spot price of gold might be too high for launching a concerted effort to get as much gold as they can. The decline in demand for new bullion coins in the U.S has given rise to the secondary market where coins are being circulated amongst collectors. This trend has continued on to the second quarter of 2018 despite the rising gold price. More gold coins are sold at auction or traded amongst collectors. This is the gold that mostly goes unaccounted for. Gold that is sold by gold dealers, refineries and mints is easy to account for but the amount of gold that has been moved around from dealers to dealer and then to investors is based on speculation. Is it that the industry has enough mined gold to fulfil all that is required and there is supplementary gold needed in the form of recycled gold to meet demand?. Maybe the demand for investment bars and coins has declined but the demand for gold in industrial use has not subsided.


The US Mint has reported sales levels they have not seen since 2007. Germany, on the other hand, has increased its gold consumption. It has managed to move from 12th place to 4th place in the table of gold consuming nations. Germany’s household demand for investment gold has risen to 92% between 2013 and 2017. The global average during this period was close to 33%. However, in the first quarter of 2018, it too experienced a dip in demand. The gold market is holding out for this to change but there are so many factors that play into this, it’s hard to determine when everyone will reach a tipping point for things to start changing.




The Perth Mint Unveils New Chinese Lunar Coin

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Perth Mint has an impressive coin edition commemorating the Chinese Zodiac Calendar and this year, they have unveiled their latest coin. According to the ancient 12 year Chinese lunar cycle 2019 is the Year of the Pig. The pig is also the last sign of the Chinese lunar calendar. However, it is not only honoured by the Chinese. The pig is also significant in other cultures around the world.


Pigs have been depicted in various forms ranging from the docile domesticated pigs to the fearsome wild boar. Regardless of the form that pigs are depicted in various cultures they all symbolise power, wealth and abundance.


To the Ancient Egyptians, the pig was the great mother. It was associated with Isis, the goddess of fertility and agriculture. Pigs were slaughtered and offered to the gods for an increase of the harvest and by childless women who wanted to children.


The Greeks also slaughtered pigs and offered them to Gaia who was the equivalent of Isis. They were also offered to Deter and Ares to increase the harvest. To the Greeks pigs were thought to have the intellect that is closest to humans.


The Celtic culture also valued pigs. They symbolised prosperity and strength. The pig appeared on money as far back as the 1st Century BC, when it was inscribed on the Celtic silver coin. Celtic lore associated pigs with fertility and abundance because of the rate they reproduce and the large numbers of their litters. Celts sacrificed pigs to the goddess Phaea and Ceridwen who were associated with fertility. The wild boar was associated with masculine power and it’s bristles were believed to possess magical powers. Wild boars were offered as a sacrifice before soldiers went into battle.


The pig was regarded as the harbinger of rain by Native American tribes. They were important because rain is essential for a good harvest. Like the ancient Egyptians and the Celts native American tribes revered pigs because they were associated with fertility and abundance.


Coming back to the Chinese lunar cycle, the pig is a symbol of prosperity and luck. People born in 1923, 1935, 1947, 1959, 1971, 1983, 1995, 2007 and those who will be born in 2019 are ruled by the pig. The people born under this sign are considered as generous, loyal and honest. This could also mean that 2019 will be an auspicious year, especially for those born in the year of the pig.


The first series of the Chinese lunar calendar coins was launched In 1996 starting with the year of the mouse. Altogether the Chinese Zodiac has 12 animal signs and the pig is the last one. The first 12 years were called the Lunar I series. In 2008, the second series was launched. This 2019 Year of the Pig coin is the last in the Lunar II series. The coin features a domestic pig with beautiful foliage behind it. The Chinese character for pig is inscribed on the coin as well as the traditional ‘P’ for the Perth mint. There is an effigy of Queen Elizabeth II, the year, weight and fineness inscribed on the other side of the coin. The coin is struck from 99.99% gold and is issued as legal tender according to the Australian government’s Currency Act of 1965. The mint plans to make 388 proof coins which means they will be amongst the most sought after coins by coin collectors.




Is Gold entering a Bull Market?

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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!



The Volcker Rule and its Effects on the Precious Metal Industry

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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.

Bullion Treasure Chest

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It is no secret that the precious metals industry is indeed capital intensive and the reason for it is not only because precious metals are rare, but there is also the business of constructing mines and building production facilities in the middle of nowhere and these initiatives takes a lot of capital. However, this does not mean that investing in bullion is a non profitable initiative as a matter of fact the only reason any individual should invest in gold is to protect themselves from economic conditions that are uncertain. It is imperative for anybody who is planning on investing in gold bullion to understand this.

It is also important for would be investors to understand the factors that play a big role towards how gold prices are influenced in the market. These influences may range from variables such as fabricator demand, expected inflation as well as central bank demand which has a tremendous effect on the demand curve that push supply lines that in turn creates upward stress on the price ceiling or resistance levels of the market. Thus if we look at the structure of how gold bullion prices work it becomes more obvious that gold is heavily pegged to the patterns or the whims and fancies of the supply-and-demand patterns. Another aspect of the industry from a ‘production perspective’ is the fact that when the prices of the precious metal is low production is low due to the fact the mining companies would not be able to make profits when gold prices are low and most resort to keeping the stock of until prices are more feasible for release and of course in contrast high prices result in high production. Nevertheless it is market forces that determine price the prices of gold, silver and other precious metal bullion. This simply means that controlling costs is vital towards maintaining the financial health of mining companies when prices are low.

Other formats of bullion trading would include commodity ETFs or Exchange traded funds which is available for gold, silver and platinum. ETFs are instruments that are typically convenient for purchasing gold or selling gold and are easily liquidated with a push of a button. However, ETFs does not necessarily mean you will get the gold at the end of the transaction as it is a promise of gold delivery OR a sum of money that is equivalent to that of the gold you hold on paper. Other formats of gold related investment instruments include Common Stocks and Mutual Funds which are basically shares of precious metals mining companies and unless you have a good definition of how mining stocks values are arrived as it would be much safer to use the services of fund managers who have a proven track record. If you do not have sufficient funds for engaging fund managers, then the best option is to buy small gold bars from a reputable dealer systematically and slowly. The smaller the gold bar denominations you buy, the better it is for your future liquidation purposes.

Is Warren Buffett confused about Gold?

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Warren Buffett is a well respected man in the financial world. People generally listen to what he has to say. He is after all the oracle of Omaha and everything he touches turns to gold. However, Buffett is not a fan if the yellow metal and he goes to great lengths to explain to people why he believes investing in gold is not a good idea.

Every year, Buffett sends a letter to his Berkshire Hathaway shareholders to share with them some of his wisdom about investing and financial management. His yearly missive just landed in the mail recently and as expected, he implores investors to put their money in stocks rather than gold.

Buffett started investing in the stock market in 1942. According to him, he started off by buying shares that were $114.75. He says that if those shares had been invested in a no-fee S&P 500 Index fund they would have a value of $606,811 today.

Had he used the amount of money to protect himself financially by buying gold, he would only have been able to get 3 1⁄4 ounces of gold. The gold would only be worth $4,200 which is less than 1% of the money he would have made had he invested in a no-fee fund.

Thee problem with Buffet’s illustration is that there was no S&P 500 index in 1942. The S&P 500 index only began in 1957 and non-fee funds only became available in 1976. In addition to that, Buffett would not have been able to buy gold because Franklin Roosevelt had already declared that private individuals could not own gold.

Buffet’s illustration also neglects to mention that the price of gold was tightly regulated for 30 years after 1942. The price was fixed at $35 an ounce and $42 an ounce between 1934 and 1971. During that time, America was trying to dig itself out of depression and recover from the wars. Public company shares were free to appreciate. However, there were only 60 companies of the 500 that initially made up the S&P Index in 1957. The share price of many of these firms plummeted to Zero dollars. Buffett sidesteps these facts in his comparison and makes it sound like shares of any stock would become more valuable than an ounce of gold sitting in a vault for a couple of years. What he fails to acknowledge is that gold is more reliable than stock in the long run. Another mistake that Buffett has made in his analysis is to think of gold only as an investment asset when it is so much more. Gold is treated as money that is more valuable than any fiat currency by central banks and governments. There are different ways of owning gold. You can buy gold bars or buy gold bullion coins and rounds or even own gold in the form of jewellery.


When you take all of the above into consideration you can see the holes in Buffet’s analogies. It would have been fairer had Buffet compared buying stocks to keeping the dollars in a savings account rather compare it with gold. However, that would make gold look compelling which is not what The Oracle of Omaha wants you to believe.


The reality is that gold has been a better investment that stocks for year. It outperformed the S&P 500 during the 1970s. Gold is money. Currencies can lose their value able but this yellow metal never does .