gold chronicle
On Oct 29, 2012, at 8:31 PM, j wrote:
H, you are our mining expert but you never reminded the rest of us of how much fun it was during our sandbox days. I intend to take jack to the beach this weekend and show him what his earth manipulation toys are all about.
We are busy
(i) hiring folks for mill and mine
(ii) dispatching to the still-obama empire aussie expert who is conversant in buying secondhand road-building equipment at duper mark-down prices courtesy of wastrelism. We can use the road-building equipment (2 excavators, 2 loaders, 4 trucks, 1 grader, 1 crushers, etc) because of our mom-n-pop scale
(iii) buying spanking new water and service trucks, one of each, and 8 light vehicles. I can guess but have no real idea how these would be used.
Must note that Aussies seem really expert at digging, shoveling, dozing, crushing, and otherwise playing in dirt.
(iv) talking to some folks willing to extend financing at fairly reasonable rates in order for them to securely engage with the output of the mines on sustained basis at 9999 purity from Perth mint by via mat and brinks to Singapore for the Arabs, and Hong Kong for the Chinese.
We do not really need financing because we are engaging w/ rocks for processing essentially cash-free, however the financing, basically in the form of pre-buy at 12-16% discount to market price would allow us to seek and own more rock-rich claims to drill, and put the results on the books to call our own, so as to assure an ever growing pile of rocks to discount back from the future.
The gold business in many ways seem an exceedingly simple business, and certainly more so than, say, medical device commercialization or trying to make money by apple, amazon or google.
We are essentially a price-taker in the output market, a scavenger of the out-backs by the exploration department, a chiseler on cost in the milling department, and a deal-maker by the acquisition department. There is no serious marketing, absolutely devoid of r&d, and definitely no after-sales service.
In the mean time, another sovereign seem more keen to reacquaint itself with quaint tradition ...
https://wealthcycles.com/blog/2012/10/23/romania-wants-return-of-934-tons-as-gold-repatriation-ratchets-up
Romania Wants Return of 93.4 tons as Gold Repatriation Ratchets Up
Romania wants its gold treasure back from Russia, a recent Bullion Street article says. It’s another signal of the accelerating trend of countries to repatriate their gold—and another indication that the tide is turning toward gold and silver.
Two railway carloads, or 93.4 tons of gold, were transferred to Russia as German troops began to threaten the region during World War I. According to the article, “All the governments of Romania since World War I, regardless of their political colour, have tried unsuccessfully to negotiate a return of the gold.”
Of course, this is not the first time the Romanian people, or people of any region for that matter, have found their monetary metals tempting to foreign powers. Invaders sent by Roman Emperor Trajan found gold and silver in great quantities in the Western Carpathians, which run through what is now modern-day Romania. Resulting from this conquest, Trajan brought back to Rome over 165 tons of gold and 330 tons of silver.
It is interesting that considering this history independent auditors say Germany has stored its gold abroad since the Cold War in case of Soviet invasion. Additionally, the auditor’s report says the German gold stored in London has fallen "below 500 tons" due to recent sales and repatriation. Considering German gold stocks have remained the same, the sale of physical gold must have been offset by an acquisition of paper promising to pay gold from the Federal Reserve Bank or other entities needing a physical supply of gold.
One event that may have triggered a large-scale demand for physical delivery of gold was the repatriation of the 211 tons, or 17,000 standard 400-ounce bars, of Venezuelan gold.
“We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” President Hugo Chavez said, “It’s a healthy decision.”
The obvious danger to having others hold your valuables is that they can simply deny your right to audit or access what they store for you. German lawmakers were turned away from viewing the 1,500 tons of German gold reportedly held at the New York branch of the privately held Federal Reserve Bank (Fed). This fact may have played a part in the recent German federal court ruling that mandates repatriation of 50 tons of the gold per annum. For more, see Germany Brings it Home – Gold Repatriation as Stocks Scare.
One reason Russia has refused to cooperate with Romania’s demand for its gold is assumed to be Romania’s cooperation with the U.S. missile “shield.” According to the Huffington Post, in 2011, U.S. Secretary of State Hillary Clinton signed the agreement with Romanian Foreign Minister Teodor Baconschi and said the United States expected to deploy interceptor missiles at a Romanian air force base in approximately four years.
Mr. Eugen Anca at the time of the following quote ran the European arm of the Institute for Foreign Economic Relations (VNIIVS), a governmental agency of the Russian Federation’s Ministry of Economic Development and Commerce. He comments on the Romanian “gold treasure”
The Treasure is privately owned. Specifically, it is the private property of the National Bank of Romania (BNR)! At least this is how it was defined and certified by Victor Antonescu himself, the minister for finances in 1916, who signed the Protocol with Kremlin. This document is public and it can be found by any interested reader in the Foreign Ministry Archive, fund 71/1914, E2, Part I, vol. 183, pages 50 – 53. And there are certified copies of this document held by the Ministry for Finances, BNR, the French and British embassies, and Kremlin.
For this reason the Russians wanted a private corporation to exchange the BNR’s gold with a private Romanian entity that could secure assistance in developing Siberian natural resources as a win-win situation that could offer an new option to offset the 300 million (274 tons of gold) owed Russia per the 1947 Paris peace treaty previously satisfied via confiscation of the BNR gold stored in Russia. This is crucial, the “Romanian gold” is not even owned by Romania, it is owned by a private bank acting as the central bank of Romania. Sounds familiar as Americans handed their gold over to the Federal Reserve in 1934, not their state or federal Treasuries.
One lesson here for international players is that “if you can’t hold it, you don’t own it!” According to Edel Tully, precious metals strategist at UBS, “There is a growing preference among many different communities in the gold market to have their physical gold at home.”
Over the years the Russians have returned to Romania 17 railroad car loads of archives and documents, including as many as 39,320 Romanian art works were returned in 1956, including paintings, drawings, engravings, icons, tapestry works, religious objects, gold coins, medals and the Pietroasele treasure (below).
While this recent spate of repatriation may not be what sends gold immediately surging higher, it will be this repatriation movement that prevents the paper price from accurately reflecting the value of the physical metal. The paper market only has sway over prices of real silver and gold because the paper contracts bestow the bearer a right to physical delivery of metal. When the exchange defaults, by either limiting buying or by settling in cash, more and more holders of paper will catch on to the very real physical shortage of monetary metals, especially as gold and silver are more and more commonly used as a medium of exchange. There is infinite demand for money.
The fundamentals underpinning the greatest wealth transfer in the history of the world are solid. Considering the 80-year bull market, during which gold rose from 20 dollars per ounce to near 1700 paper dollars today, we conclude that it is the fundamentals of the Fed’s dollar are volatile—not the fundamentals of gold and silver.
Even under a fully implemented, “extreme” Paul Ryan budget, the federal deficit would persist until 2040, with debt growing larger and larger. The debt ceiling will be breached in 2013 either way, and printing paper rectangles is slated to increase in speed soon with promises to stop only when unemployment falls “significantly.”
With the money supply still deflating since 2008, for the first time since the first Great Depression, what makes anyone think this time is different, and that the Keynesian promises of real growth will somehow finally materialize? The fact is, bankers fight deflation with re-inflation, or further increases in the supply of currency and credit. This process, repeated five times in the U.S. and many times abroad since the recent crisis began, has been very good to gold and silver money, the stable landmass to which all fiat currencies are referenced. Better stated, the cycle of deflation and re-inflation has been very bad to paper currency.
Generally speaking, prices don’t rise; the value and purchasing power of the Fed’s co-opted dollar falls. Bob Januah of Nomura, who has been calling for a sell-off in markets for some time now, says that gold has consolidated by around $100 recently, and that he feels that these look like attractive entry levels to position for additional action by the Federal Reserve. Time to musk up.
For more on the Swiss initiative to repatriate their gold see Gold Reserves Increasing at Central Banks and addressing the concerns of Americans, see Gold Audit Fails to Discover Who Owns What.
TAGS: Currency, Government, Monetary Policy, Security, currency, currency inflation, economic education, economic history, education, Federal Reserve, financial history, Germany, Gold, investment education, Monetary History, Monetary Policy, Money, Pools and Certificates, precious metals, Russia
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On Oct 27, 2012, at 2:37 AM, H wrote:
FWIW I disagree with Hendry on gold stocks. Not in the long term (in the long term, gold will definitely outperform the stocks of senior gold producers by a large margin), but in the short to medium term 'long gold/short gold stocks' is 'yesterday's trade' - it was the trade that worked in 2010 to May 2012, but no longer. There is a time for everything, and now is the time for gold miners to outperform the metal - something that could last for two to three years, enough to make the position he recommends a rather painful experience.
The time to worry about confiscation has not yet arrived. In the 1970's bull market, gold prices increased by 2,500%. If the current bull market repeats that feat, gold will rise to $6,400/oz. So, how many gold mines were confiscated in the 1970's? Can anyone name even a single one?? Besides, if governments stoop to confiscating i mines, they can do the same with gold bullion (admittedly that is easier to hide).
Anyway, the market doesn't look out to the 'maybes' of confiscation in the distant future. It is only concerned with whether the managements of gold mining companies finally stop wasting capital, and on that front a lot of changes have taken place. Willy-nilly expansion has been halted everywhere. Only the most promising projects still get financing. Expensive takeovers have stopped.
Dividends are being increased. Prodded by disappointed investors, gold mining managements have begun to listen and have begun to institute the changes the mademands. Many CEO's have been canned and replaced with men better suited to the task.
Moreover, in an economic contraction, gold mining margins tend to expand even if the nominal gold price doesn't increase much. After all, it is the spread between input costs like energy and labor and the gold price that is relevant to profit margins. At the moment, these margins should be increasing noticeably and this can be expected to accelerate as the global synchronized economic slowdown, resp. contraction, continues.
Hendry also overlooks that precisely for the above reasons, gold stocks are the only market sector that is demonstrably negatively correlated with the stock market at large over the long term. During the great asset mania of 1982 to 2000, gold stocks were in an unrelenting bear market. During the secular bear market of 2000 to ??, they have been in a massive bull market. When the S&P 500 fell by over 50% in 2000-2002, the HUI added nearly 300%.
Hendry's recommendation is not going to be useful to navigate the next few years. He seems to believe that the liquidity crisis of 2008 is the yardstick one should from now on use in anticipating future developments. However, contrary to 2008, there is now ample excess liquidity and the central banks are ensuring that this will remain so. Admittedly there is still a degree of '2008 muscle memory' in the market. But I nonetheless expect the gold sector to out perform both the metals as well as the broader stock market considerably over the next two to three years.
On Fri, Oct 26, 2012 at 3:25 AM, B wrote:
Hugh Hendry, Buttonwood Gathering, 10/24-25/2012 NYC:
This runs about 20 minutes...
livestream.com |
