Gold Rises as Stocks Tumble, Silver Tops $15

Gold prices edged higher Tuesday with a sharp drop in U.S. stocks cited as the main catalyst for the yellow metal’s gain. Silver advanced as well to above $15 an ounce while platinum declined toward $1,225 an ounce. Oil prices slipped nearly 3 percent to reach a two-week low.

New York precious metals trading figures follow:

• Silver for December delivery rose 13.7 cents, or 0.9 percent, to $15.06.

• Gold for December delivery rose $3.00, or 0.3 percent, to $956.50 an ounce.

• October platinum declined $17.20, or 1.4 percent, to $1,226.80 an ounce.

Notable bullion quotes of the day follow:

"September has been the best time for gold in terms of its month-over-month price appreciation," Frank Holmes, chief executive officer at U.S. Global Investors Inc., which manages funds such as the $200 million Gold and Precious Metals Fund. Holmes was quoted on MarketWatch in an article entitled Gold shines in September, analysis of 20 year’s data shows.

"Direction is still lacking and moves have thus far been tentative and largely determined by developments in other markets," wrote Jon Nadler, senior analyst at Kitco Metals Inc. "Oil and stocks have been steering this gold market for quite some time now." [Click to read Nadler’s full commentary].

In London bullion, the benchmark gold price was fixed 50 cents lower earlier in the day to $955.00 an ounce. Silver was at $14.74 an ounce for a 20 cent gain. Platinum was set lower by $10.00 to $1,234.00 an ounce.

Gold, considered a hedge during times of high inflation and economic uncertainty, tends to follow oil and move opposite to the U.S. dollar. A rising greenback makes dollar-denominated commodities, like bullion, more expensive for holders of other world currencies.

Oil and gasoline prices

Oil plunged Tuesday to its lowest level in two weeks "as pressure on Wall Street dampened energy-sector sentiment and as a stronger dollar weighed on dollar-denominated oil prices," wrote Moming Zhou and Myra P. Saefong of MarketWatch.

"The oil market this week is going to move on every little swing of the stock market and currency market," Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, consultant, was quoted on Bloomberg.

New York crude-oil for October delivery dropped $1.91, or 2.7 percent, to close at $68.05 a barrel.

The national average for unleaded gasoline on Tuesday fell three-tenths of a cent to $2.607 a gallon, according to AAA data. The price is 1.6 cents lower than last week, 6.9 cents higher than a month back, and $1.08 lower than a year ago.

U.S. Stocks

U.S. stocks tumbled Tuesday "as investors took a big step back at the start of what is typically a rough month, betting that stocks have risen too far too fast without any underlying support," wrote Alexandra Twin of CNNMoney.

The Dow Jones industrial average plunged 185.68 points, or 1.96 percent, to 9,310.60. The S&P 500 Index tumbled 22.58 points, or 2.21 percent, to 998.04. The Nasdaq Composite Index lost 40.17 points, or 2.00 percent, to 1,968.89.

Gold, Silver and Metals: Prices and Commentary – Sep 1
by Jon Nadler, Kitco Metals Inc.

For Sale: 20,000 Tonnes of Gold. Interested?

Good Afternoon,

Precious metals markets were essentially stalled near previous levels and they were seen quietly tracking investor sentiment following various economic data releases across the globe. The US dollar managed a gain of 0.21 on the trade-weighted index, rising to 78.33 ahead of this morning’s start in the markets. Crude oil climbed ever so slightly, and was idling at one or two pennies under the $70 per barrel mark.

Gold bullion opened its first September trading session showing a $0.90  gain at $951.80 per ounce. Direction is still lacking and moves have thus far been tentative and largely determined by developments in other markets. Oil and stocks have been steering this gold market for quite some time now.

Internal dynamics still show very poor offtake from India (it probably only imported 12 tonnes last month as against last year’s 98) while the largest gold ETF remains in hibernation mode. Imports by Turkey fell 74% in August, to almost the same 12 tonne level that India recorded. These are key markets, and we fear that someone (or something- i.e. high prices) has thrown away the key.

The United States Mint’s published figures for August — you may find them at:

http://www.usmint.gov/mint_programs/american_eagles/index.cfm?action=sales&year=2009

revealed a 26% slide in gold coin sales from June to July, and another, near-5% fall in the August numbers. Some 82,000 one-ounce Gold Eagles took flight from the Mint’s shipping docks last month. Silver Eagle coin sales declined by over 24% from the levels they enjoyed in July. A bit of a different statistical reality than the picture painted by various hard-money pundits, one could say.

Where the news to move this market out of its doldrums might come from, is anyone’s guess at this time. It will have to be the kind of news that either has strong geopolitical shock-value, or inflationary-in-the-extreme in flavor. Speaking of guesses,…

…Analysts at Standard Bank Group have offered up a technically-based price scenario by which gold might break out of its current pattern and -if it manages to successfully close above $981 per ounce – shoot up to $1325. Of course, given the historical reliability of such developing patterns, the breakout could also turn out to be a break…down. In that case, the bank feels that once support at $935 gives way, the door could be open for a decline to anywhere between $800 and $850. Take your pick.

Silver started with an 11-cent loss at $14.79 per ounce, while platinum opened $2 lower at $1236.00 per ounce. Palladium dropped $1 to ring in at $288 an ounce. Meetings between labour and management were on tap at South African platinum producers today. Other -unverified- news indicates that Russia may have exhausted its palladium stockpiles and is supplying the market from current production at this time.

Spot gold was last seen trading at $955.00 per ounce, still orbiting within $5 of either side of the "unchanged" price point for the day ($950.90 bid). Lows came near $946, while highs were seen near $957.

Silver took the lead, gaining 11 cents to $15.01 per ounce, largely on the post-ISM optimism among commodity players. Platinum lost $16 to fall to $1222.00 and palladium dropped $3 to $286.00 an ounce. "Tense" strike negotiations in South Africa and the looming post-cash-for-clunkers automotive sector hangover dented the noble metals complex today. August US car sales data will start trickling in any minute now.

The first day of September dawned to mixed global economic news and sent investors off into different directions depending on what they concluded on the basis of such stories. Tuesday marks the harvesting of manufacturing data from across various regions of the global economy. To say that the news reveals a tenuous recovery process, is to understate matters.  Here is the roundup, as of early this morning:

China’s lending spree during this year’s first half resulted in the country’s fastest expansion in manufacturing in nearly a year and a half. However, questions about the government’s continued willingness to pump up the economy with liberal lending that will unquestionably result in more lethal bubbles continue to make the rounds among Chinese speculators. In any case, yesterday’s victim of such apprehensions – copper- picked up steam following the news. August’s Indian manufacturing activity showed the slowest pace in over five months, but remained above the 53-mark anyway.

Over in Euroland, the common currency fell following reports that the region’s manufacturing activity was doing the opposite of that in China. Investors may have cheered the decline in German unemployment and rise in retail sales, but the shrinkage in manufacturing (albeit milder than previously), coupled with the highest regional unemployment rate in a decade put a significant damper on things and caused a 1.1% decline in Europe’s Stoxx 600 index. Across the English Channel, a somewhat more scary report: the UK’s manufacturing index fell back into contraction mode and local consumer lending shrank for the first time in 16 years.

Stateside, a number of fund managers were still basically seen as betting against Goldman’s recent call for the official start of an economic recovery. Goldman’s call was strongly echoed by Moody’s head, Mr. Zandi today. He called the ISM manufacturing gauge’s reading as the ‘clearest sign yet that the US recession is O v e r."

US markets have enjoyed a six-month long rally that brought the S&P 500 to levels not seen since 2004. The overall theme remains the same, no matter where one cares to look: namely, that, speculative expectations have gotten somewhat -and in some cases, way – ahead of the realities on the ground.

It is hard to blame participants for wanting to put the last two years’ worth of misery behind them and get on with making money once again. There is, however, a balancing trick involved here and we can also forgive the doubters for not jumping on this bandwagon with the same wild abandon as some have.

Thus, US stock index futures were pointing to a feeble September debut this morning, even as anticipation grew that American manufacturing activity might show a departure from the rest of the world and look more like China’s.

The expectation were that the ISM figures would show a rise above the key 50% level (even if only 0.50% above it) and tilt into expansion mode for the first month since January of 2008. That, they did, and then some. The ISM index rose to a 52.9% reading – the best since the recession started in late 2007/early 2008. Translation: the recession is   o  v  e  r.  No depression has taken place.

Still, the Dow had a difficult day, as many players gauged the 50% gains achieved in the US market since March as overdone. September and October. Breakdowns, breakouts, sell-offs, or buying sprees? Seasonal plays are on everyone’s mind. Let’s see if this year’s patterns might constitute a departure from the norm. This applies to equities, as well as to gold. We have our own reservations. You can read some of them in an analytical Markewatch piece that was published just as we went "to press" this afternoon:

http://www.marketwatch.com/story/gold-shines-in-september-historical-record-shows-2009-09-01

Finally, in case anyone still feels bored tonight, they might want to read an almost comedic (if it were not so terribly sad) piece on a gold scam, as supplied to the wires by Bloomberg this morning.

 http://www.bloomberg.com/apps/news?pid=20601109&sid=an7Pm3hkmauw

Next time someone calls up and offers you 20,000 metric tonnes of gold bullion for sale, you’ll be prepared. Unless, of course, you live in…Utah. In which case, you might wish to call us ,or any other legitimate bullion dealer first, and obtain a quick education on matters. It could save you….$50 million ?!!!

Gold continues to represent a powerful magnet for human aspirations – both good and evil – and in the extreme. The latest such manifestation comes to us from Africa and Mining Weekly.com, which reports that:

"Increasing gold theft from South African mines was funding international terrorism and human trafficking and amounted to a global money-laundering operation of huge magnitude, Pan African Resources CEO Jan Nelson said on Tuesday.

"Dirty money is coming in and clean gold is going out," Nelson told Mining Weekly Online at question time during the company’s annual results presentation, where Pan African reported a 15% increase in underground gold production and 30% earnings before interest, tax, depreciation and amortization.

"It’s a money-laundering operation on a huge scale. We have to attack this problem at various levels and the role players are interacting and there is assistance from government," he said.

Pan African’s security costs have risen to close to 3%, which represents a total of $15/oz of gold produced. Of that $15/oz, $7/oz goes directly towards fighting criminal miners. At international levels, UN resolutions were being evoked and special programmes implemented.

"Interpol is involved, because the money leaves South Africa and it is funding international terrorism and it’s also funding human trafficking," Nelson divulged. The London Aim- and JSE-listed Pan African, which is debt-free, unhedged with cash in hand, is a junior gold-mining company that produces close to 100 000 oz/y of low-cost, high-margin gold from its Fairview, Consort and Sheba mines in Mpumalanga.

The company’s gold sales totalled R760-million in the year to June 30, 2009, from 97 500 oz. Nelson said, during question time in response to Mining Weekly Online, that "criminal mining" was on the increase at the company’s mines in Barberton and throughout South Africa.

"We have seen an increase in criminal mining. We are targeting the criminal syndicate leaders. We know who these people are, we know where they are, they are being tracked and they will taken out," he told Mining Weekly Online.

The criminal miners were illegally entering the company’s operations, threatening Pan African’s employees and endangering the viability of the business. A Presidential South African oversight committee had visited the mine and a special police task team had been assigned to the task of eradicating criminal mining at South African operations.

"We need to understand that criminal mining is not only a Barberton problem, but a South African problem and an international problem. "We are linked into the precious metals committee and we have got the cooperation of the special task team of the South African police. "On the first level, we are contributing $7/oz to fighting these criminals," Nelson told Mining Weekly Online.

"We have to do it and we will do it because we will not lose our business, and so we’ve improved security measures and we’ve also improved our interrogation systems in terms of information.

"When a criminal miner is captured and he has a cell phone, we download all the information, which is supplied to the government and the special task teams that use that to look at the networks on a country basis.

"On the ground, we are fighting criminal mining with additional security, we’re looking at better information systems. "But then, on the next level, at the tier-two level, we need special task teams from the police to fight the syndicate bosses. We are all coordinating our activities to do that, because you have the criminal miners doing the dirty work on the mines, but they are not earning a lot of money," Nelson said.

"It has an impact on our bottom line of $7/oz, but we are prepared to pay that to win the fight and we are coordinating with government," Nelson said. The company had growth projects at Barberton; its Phoenix project is a year away from going into production of between 10 000 oz and 15 000 oz of platinum-group metals a year from early 2011. The company, which has exited from its exploration assets in the Central African Republic and Ghana, no longer has that exploration expenditure, which will have a positive impact on cash flow.

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