Gold Trader's Digest

Gold and Rate Cuts - What Goes Around, Comes Around

2007-10-13T18:02:00.001-07:00

The rock-and-the-hard-place question has been resolved…the Fed has cut rates and, if possible, things are looking even more intriguing for gold. Over the last four years, the precious metal has prospered solidly under higher interest rates—to the astonishment of many an analyst. But now that rates are heading south, what’s in store for gold and the greenback?

And could one incredible consequence be an interest rate boomerang?

Why the Fed Caved

To be fair, the Fed was in a real spot. No question about it. Raise rates and you might temporarily catch the free falling dollar…but you shove the housing industry right off the cliff. Lower rates and you help out a bunch of banks and people who probably shouldn’t have had anything to do with mortgages in the first place…but you wave bye-bye to the dollar. Perception will always be greater than reality, though, and it’s the American people’s understandable perception that keeping their homes is a far more critical issue than resolving some complicated dollar problem. That shouldn’t come as any big surprise. The great shaper of American’s perception, the media, hasn’t told the public about the real danger of a collapsing dollar.

In fact, the worst-case scenario the media has painted — and continues to paint — is that a wimpy dollar simply means overseas travel will now be a lot more expensive. Big deal. Stack that up against homeowners losing their homes, and the whole matter is an American no-brainer. So the Fed yielded to popular pressure.

But, most assuredly, the consequences of the collapsing dollar will be far more worrisome than a higher hotel bill in Paris. And, ironically enough, those consequences could start with another steep rise in interest rates.

Follow the Yellow Brick Road
Right Back to Higher Rates

It’s like we’re suddenly all stuck in the whacky world of Oz. Follow this unsettling line of reasoning (as depicted by analyst Martin Weiss, editor of Money and Markets):

One/ When the Fed made its dramatic rate cut, it signaled to the world that the dollar (which was, pathetically enough, already near record lows) was not going to be supported by the U.S. anytime soon. So the trickle of dollar selling quickly became more like dollar dumping…and when dollars are dumped, so are U.S. bonds.

Two/ Sure enough, treasury bonds plunged by more than two points in the days following the rate cut, the worst drop since September of 2003. Since bond yields move just as fast in the opposite direction, they’ve been skyrocketing lately. But, of course, the big trouble with that is…

Three/ …long-term mortgage rates follow long-term treasury yields! Yikes. That means if this dollar dumping continues, it will likely result in higher mortgage rates across the board—from sub-prime to prime.

“According to textbook theory,” Weiss wrote, “this wasn't supposed to happen! But it is happening. Why are Treasury yields surging (and their prices plunging) even while the Fed is cutting its interest rates? Simple: It's primarily because of the key factor we've been hammering away at day after day, week after week—the U.S. dollar.”

The big question is, will this dollar dumping continue? Ominously enough, U.S. bond demand was down a whopping 80% in just one month. Where it goes from here is something we’ll all have to wait and see. But if it does continue, interest rates could indeed boomerang…and boomerang with a vengeance. But, in the end, it won’t make all that much difference to gold.

Lower Interest Rates? Higher Interest Rates?
Gold is Likely Headed North Either Way

Unlike that of paper investments, the destiny of precious metals is no longer irrevocably bound with interest rates and where they’re headed.

Today, it’s more a matter of confidence.

Foreign nations are dumping dollars because, like the irresponsible teen with his first credit card, the U.S. is racking up a dreadful debt. We are, shamefully, the greatest debtor nation in the world. And, since the currency of the greatest debtor nation in the world also happens to be the world’s reserve currency, the world is quickly losing confidence.

After all, the world is holding over $7 trillion right now. And every time the dollar sets a record low against the euro and other currencies, something that’s been happening with disturbing frequency lately, the value of that $7 trillion gets eroded.

Which is why nations are hedging their dollars with gold…and why you should do the same. Julian Phillips, of goldforecaster.com wrote: “Gold has broken out of all restraints now and is an entirely new ball game after Fed President Ben Benanke dropped interest rates at the expense of the dollar’s value internationally. National interests will always override international ones. Only confidence in the U.S. economy, its banks and the ability of the consumer to spend will restore confidence in the dollar and turn gold’s price down again. Will this happen?”

Gold is your insurance in case it doesn’t.•

You’ve seen him on Fox News Television and heard him on the Rush Limbaugh Show. He’s a published author, writer and an expert guest on more than 1000 radio programs discussing today’s economy and gold. Kevin DeMeritt, President of Lear Financial, is a nationally renowned financial analyst whose insight into the future of domestic and global economies is right on the money. His book, The Bulls The Bears and the Bust, reviewed by the Associated Press, predicted the market crash of 2001 and the ensuing rise of gold to the status of best investment.

Mr. DeMeritt has made Lear Financial into one of the most highly endorsed gold companies in the country. Relying on his insightful recommendations, uncanny market trading skills, and 20 years of experience in investment quality gold, he has navigated thousands of portfolios to profitability through boom and bust times. Now more than ever, Mr. DeMeritt's insights are welcome by skittish investors.

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Rising Interest Rates and Gold

2007-09-16T17:53:00.000-07:00

By Kevin A. Demeritt

It’s almost a cliche in the investment world: Rising interest rates and higher gold prices aren’t supposed to get along. The reasons are seemingly clear: As interest rates head higher, the widespread perception is that gold—which doesn’t pay any interest—can’t go along for the ride.

And because it can’t go along for the ride—can’t generate those higher payouts—investors are inclined to look elsewhere. That’s what is supposed to happen, anyway. But the funny thing here, in later 2007, is that interest rates are up—the latest cut is the first since July of 2003, in fact—but gold’s been up, too, and has been since 2001.

So much for investment cliches.

It’s Not the First Time, Either

This cliche-busting phenomenon of rising interest rates and rising gold has happened before, of course. It was back in the 1970s. You remember those days of “oil shock,” Jimmy Carter’s smarmy smile, Iran and Afghanistan? Well, after the overthrow of the Shah in late ’78. Iranian oil, formerly a safe bet for the US, took a drastic production cut from 5.2 million barrels in ’78 to just 1.7 million barrels in ’80.

Oil prices in the US soon rose 30 percent to $9 a barrel in ’78. Inflation followed right on its heels, jumping to a hefty 9 percent. Trying to catch up, the prime rate climbed as well, hitting nearly 12 percent—at the exact same time gold crossed the $200/oz barrier for the first time ever.

Just a year later, oil spiraled higher to $12.64 for another 40 percent jump. And everything else, not unexpectedly, followed: Inflation rose to 11 percent, interest rates hit a jaw-dropping 15.25 by year’s end, and gold crossed first the $300, then the $400 barrier, hitting $455 on its way to averaging $306/oz for the year.

But That Just Set The Stage For The Thrilling 1980 Climax

In 1980, oil prices reached $21 a barrel due in large part to Iran invading Iraq. Accordingly, that spurred inflation to an “official” 13.58 percent. The prime answered with an almost loan shark 20 percent on April 2nd. And gold? It hovered in the $500 vicinity on that same April 2nd day, after setting the current $850/oz record on January 21st (thereby smashing the $500, $600, $700 and $800 barriers in one fell swoop).

So both gold and interest rates set nearly simultaneous records.

Then came the late 80s.

In ’87 and ’88, interest rates responded to higher oil and inflation by rising from 7.75 to 10.5 percent. Meanwhile gold followed suit, jumping $100 (from $390 to $499).

Interesting picture. Are we now seeing that same picture today?

What’s “Supposed” to Happen Isn’t Happening

What’s supposed to happen today with the price of gold has to do with the difference between interest rates and inflation.

When interest rates are lower than inflation, gold is supposed to be considered a good investment. When rates are significantly higher than inflation, though, borrowing is considered “expensive”— if the rate were 9 percent and inflation were 3.5 percent, for example, the resulting 5.5 yield would be regarded as “high.” Conventional wisdom says it’s during just such times that the price of gold is supposed to go south.

Yet with the prime currently at 8.25 percent and the “core” inflation rate (which is, ridiculously enough, minus the everyday essentials of energy and food) at under a measly 2 percent annual pace, the resulting yield should be high enough to put gold back on its heels. It hasn’t. While gold has been a bit range-bound of late, it shows no signs of heading south.

In fact, as mentioned earlier, it’s been up strongly, impressively, over six years now.

So…either this “rising interest rate theory of avoiding gold” is just a bunch of hooey…or, as in the late 70s, inflation really is a lot higher than its officially being pegged.

When Inflation, Interest Rates AND Gold Go Up At the Same Time

According to the Federal Reserve Bank of Dallas, “nine of the ten post-World-War-II recessions were preceded by sharply rising oil prices.” And that’s despite any tactics the Fed did or didn’t employ.

Higher interest rates are certainly no panacea. There can be so much weakness inherent in the economy, so much “oil shock,” so much debt, so much doubt, that higher rates simply fail to gain the expected traction (unless it’s to demolish the real estate market).

When the majority of people notice the inability of higher rates to calm the economy, when they witness raging inflation in their everyday purchases —something that isn’t, as in the 70s, reflected by “official government statistics”—then their attention can be drawn to other means of financial security. Like precious metals. And that can be what’s accounted for gold’s 6-year bull run.

Hopefully, we won’t follow that startling post-World War track record and suffer a serious recession just up ahead. But whether we do or not, your job is to protect your family, yourself and your hard-earned assets in the best way you know how.

Now I realize that rates are on the verge of being cut to save the floundering housing industry. But, whether the interest rates are rising or falling, it’s not hard to see that the kind of financial security most of us seek comes in a gleaming, beautiful form.

Kevin DeMeritt, President of Lear Financial, is a nationally renowned analyst whose insight into the future of domestic and global economies is unmatched.

His book, The Bulls The Bears and the Bust, reviewed by the Associated Press, predicted the market crash of 2001 and the ensuing rise of gold to the status of best investment.

Now more than ever, his insights are welcome by nervous investors.

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When Gold Speaks a Thousand Words

2007-09-14T14:02:00.001-07:00

By John Reizner

There were two inflationary waves in the 1970’s, the first peaking in 1974-5, and the second more severe wave peaking in the late 1970’s and early 1980’s. This period was also marked by escalating oil prices, driven by the actions of an Arabian cartel. Eventually, the gold price rose from its fixed price of $35 to its peak of almost $700 per ounce (London pm fix) in 1980.

We are now encountering, after 27 years of a gold bear market, a revival of both oil and gold prices similar to that of the 1970’s. Gold is in the $600 plus range after years of languishing below $400 per ounce. Just as occurred in the 1970’s, we have recently seen gold, oil and oil service shares increase tremendously in value. We are seeing some months of consumer price inflation beyond what I believe is a comfortable range. Farm land and food price inflation is with us as well. There has been a well-documented inflation in the price of commodities, which some have attributed to the extra demand from India and China. I think this latter point is a good thing in that it shows the expansion of capitalism or, in the case of China, communism with a capitalist face, which should increase world trade and act as a damper on some excess inflation.

On March 21, 2007 the Federal Reserve chose to leave interest rates unchanged and appeared to back away from future rate increases, while at the same time recognizing potentially inflationary pressures. Whether the Fed will reverse its trend since mid 2004 of raising rates and actually lower them shortly remains to be seen. It is entirely possible that we could experience inflationary pressures even if the economy slows down. The undesired effect of this event would likely be a return of inflationary expectations among the American citizenry, something that has not really happened for over two decades. That is not in the memory of many players in the markets, and thus could occur while not being fully recognized as such.

It is interesting to consider from a technical point of view (though I am no chartist) just why the gold price started to accelerate after 2002. Gold is after all, a commodity, and the price of commodities can be known to turn on a dime. Sometimes it pays to keep this analysis on the simpler side. If one draws a simple trend line on a monthly gold chart across the top of the gold price in 1980 through the top in the mid 1990’s, one would find that the gold price broke that downtrend line on the upside in 2002 when gold traded past approximately $300. As I was late to this market, I bought the physical metal myself four times: one time in the mid $300’s, twice around $400, and once again in the mid $400’s. I realized upon looking at this monthly chart, that we were talking about a longer term swing upward in the gold price. A breakout of this magnitude is much more significant than one on a daily or even a weekly chart. Well, enough about charts and technical analysis. In my opinion, the only time charts are readable in relative isolation is when one considers commodities.

The gold price is an indication of inflation in our economy. It has even trended upward at times even when our dollar has risen against other currencies. I believe the jury has rendered a verdict of “bull market.”

About the Author

John Reizner was first exposed to financial markets when he started reading the stock quotes out of the newspaper to his businessman grandfather, who was legally blind, when he was about ten. Papa always told him: "Buy Triple A" (the best stocks). Later, John studied economics at both Vassar College and Columbia University, where he became intrigued by the link between psychology and economic theory. His current e-book, A Way to Wealth – the Art of Investing in Common Stocks, is available at his website, http://www.ReiznersWay.com.

This article contains the opinions and ideas of its author and is designed to provide useful information to the reader on the subject matter covered. The author may or may not have current positions in the investments mentioned in this work, and the author may from time to time make investments in a manner that is not described here. Past performance is no guarantee or prediction of future results and any investments made, based on the opinions and ideas contained in this work, may or may not be successful. The strategies contained herein may not be suitable for every situation, and the author is not engaged in rendering legal, accounting, investment advisory or other professional services.

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My Experiences Trading Gold and Silver Commodity Futures Contracts and Options

2007-09-14T13:54:00.001-07:00

By Thomas Cathey

Sometimes, all that glitters is gold. What a great trading market! Here's some valuable hints and kinks taken from actual trading experiences.

Gold is a great commodity futures market for trading. As of January, 2007, $3,375 of account margin controls $61,300 of gold. (100 ounces valued at $613 /oz.) That's about 5.5% money down, giving tremendous leverage. A $1 move in gold futures equals $100. Thus, a gold futures contract move from $400 to $500/oz equates to a $10,000 profit or loss.

Within the last year, gold has become more liquid for trading. The CBOT (Chicago Board of Trade) has begun electronic metals trading and is now the preferred way to trade gold FUTURES. In the past, using the Comex exchange in New York was difficult at best. The price slippage was extensive and fills were slow during active markets. But all that has changed. However, the Comex still serves a purpose. At the present time, gold OPTION executions are best at the Comex. It pays to know WHERE to trade as well as what and when.

When trading gold options, use a broker who can call the floor directly to get bids-offers and fills. Many times a good broker can give you an immediate fill from the floor. This can be a great advantage during very volatile times to know your exact position. Not all brokers are able to do this for you.

Gold is a market known for its large price swings. When there's crisis in the news, gold is one of the more sensitive commodities. I've known gold day traders who trade for small one to two dollar swings. They love the daily moves. While others hold for longer term price swings of $20 - $100 per ounce. Gold is one of those markets that usually has enough action for any form of trading.

Gold is also known for false breakouts and triangle patterns. The breakouts are especially prone to breaking above an old high and then moving back into the middle of the range. Triangles in gold can be seen quite often over the last 40 years or more. A good example is to look at the 1979-1981 gold bull market. You'll see many triangles (on daily bar charts) that are textbook perfect. There's many ways to trade triangles once they are identified as such.

Buying options on gold is best executed when the market is quiet. Waiting for counter-trend advances and declines can also result in great fills. Gold has a tendency to trade counter-trend overnight. In a bullish market, buying calls or futures early in the morning after an overnight decline may result in a profitable trade later in the day. Selling a big up move is often best done in the morning after a series of strong upside moves. A wide range day out of the ordinary many times signals a turning point. All these technical techniques can give you good entries and exits. In addition, go AGAINST the news for buying and selling into price spikes. The gold futures market swims in seas of fear and greed. Keep this in mind when looking for the price turns.

When trading gold, watch a few other markets for clues. Although nothing is in concrete, the U.S. Dollar is probably the best reverse indicator of gold. Like all other U.S. markets, gold is traded in dollars, though gold seems especially sensitive to this relationship. When the dollar drops you need more dollars to buy the same amount of gold. When the dollar starts rising it may be the beginning of a drop in gold. Careful, there could be a lag until this actually occurs. This lag could give you time to position, but if it doesn’t happen, the subsequent reversal could be sharp and fast.

Watching the other metals like silver, platinum and copper may give you clues as to the direction and magnitude of gold futures and options. At times silver can go counter to gold in certain types of cross-market activities. However, this trend-bucking usually doesn’t last long.

When gold is very active, it's a good idea to place your protective stop loss orders at the farthest pivot point you can withstand...still staying within your risk parameters of 5%-7.5% per trade. The gold market loves to spike and take out the maximum amount of players before a big move. Gold also tends to trend well since it is based on large geopolitical factors that are hard to turn around. Keep your eyes on the break-outs to higher and lower levels. They are very telltale as to what news the global community is responding to. Watch gold's price action as related to news. In other words, if the news is very bullish and gold cannot rally strongly, then the next move will probably be down, and fast!

Here's how I look for opportunities in the metals markets: First I generate a TimeLine forecast that shows a strong move up or down in a particular metal. The TimeLine is based on time cycles and other preprogrammed patterns. I then determine if the move is expected to be choppy, trending, and for how long. This helps us focus on possible directional futures/option positions or writing options in a range, or even writing options with the trend.

Next I use automated option software to search for the best of 1600 strategies based on the expected market move. I compare these option to option combinations against futures to options combinations. At some point I will find a compromise between risk, profit and simplicity in one or two strategies. In hindsight there's always a best strategy we could have used. Keep this is mind when narrowing down the choices. When finished, we want to have one or two potential trades to work with. We call the selected few, "high probability, low risk trades."

Remember there is more to planning a trade than just coming up with a forecast. The market may move as predicted but we can still lose by choosing the wrong trading vehicles. Pick the right vehicles and strategies that will allow us to stay in the market without excessive fear, but still carrying calculated risk.

We NEED to take on calculated risk or the market will not pay us for our services. In addition, the vehicle has to move far enough to make a profit without letting the expense of protection eat us up. Excessive protection (risk avoidance) can come in the form of option premiums, too close-in stop loss orders - and overdone, complex spread strategies. Matching a forecast to a strategy is an important skill to succeed in commodity trading.

Good Trading!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

Thomas Cathey - 27-year trading veteran heads the managed futures division of Thomas Capital Management, LLC. Get FREE, his complete 44+ lesson, "Thomas Commodity Trading Course" and free weekly TimeLine Alert Forecasts. http://www.thomascapitalmanagement.com/commodity/welcome.htm Main site: http://www.ThomasCapitalManagement.com

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Central Fund Of Canada - An Alternative Investment Vehicle For Precious Metals

2007-09-14T11:47:00.000-07:00

By Aidan McNamara

Gold has been considered for centuries the "ultimate store of value." In a world where governments in developed countries as well as their central bankers have become increasingly adept at guiding their economies through sometimes even the most turbulent of economic and financial squalls, gold's role as the "ultimate hedge" against financial calamity has become increasingly something of a historic curiosity rather than something that affects the decisions of many of today's investors. Exceptions are those die-hard gold bugs including some who still hanker for a return to some kind of international gold standard under which all currencies are pegged to or backed by gold.

In the last few years, however, it is true that gold has had something of a resurgence. This was partly because of increasing demand for gold jewelry in developing countries such as India and latterly China, but partly also because of geopolitical instability that has generated uncertainties of a more complex and fluid nature than those that ruled during the cold war years with their geopolitical stalemate between the two superpowers based on the terrifying, yet ironically stabilizing, fear of mutually assured destruction. There is also some evidence that the recent formation and purchases of physical gold by gold-linked exchange traded funds (ETFs - see below), have also helped spur demand for gold.

Direct investments in gold may be made through purchase of bullion, coins, jewelry, and other physical forms of the precious metal, but for all but smaller amounts this brings with it the inconvenience and risks of storage and security. For the investor or trader, stocks of gold mining companies provide an excellent way to take a speculative or hedged position on future movements in the gold price. Stocks such Newmont Mining (NEM), Barrick Gold (ABX), Agnico-Eagle Mines (AEM), or Goldcorp (GG) are quoted on the New York Stock Exchange. (The last three of these are Canadian-based companies, however).

While gold mining stocks represent shares in corporations and therefore their individual price movements reflect news that is specific to the individual company, as a group their share prices generally follow the gold price closely. Gold mining companies' production costs are fixed, so any increase in the gold price flows through to the bottom line, and profits are equally affected adversely by any fall in the gold price. A rising gold price is a harbinger of inflationary pressures and so both gold and gold mining company stocks tend to rise when stocks overall are under pressure and fall when the stock market is generally up on the day.

A purer form of gold (and indeed precious metals) investment/trading play and one that is not well known to many U.S.-based investors is Central Fund of Canada, quoted on the Toronto Stock Exchange and with the symbol CEF on the American Stock Exchange. Calgary, Alberta based Central Fund of Canada is itself not engaged in any kind of mining operations. It is a closed-end investment management company set up in 1961 to hold gold and silver bullion passively on a secure basis. At least 90% of CEF's assets are maintained in gold and silver. An investment in Central Fund of Canada provides share ownership in this gold and silver bullion, the value of which, together with some cash holdings and other assets, was at August 31, 2007 just under $950 Million (U.S. Dollars). As at that date the split in precious metals holdings was 52% of net assets in gold and 46% of net assets in silver.

It should be noted that silver has somewhat greater volatility than gold, largely owing to the fact that it has fewer commercial and industrial applications, as well as not having the same status as an "ultimate store of value." For a trading position therefore, the silver element serves to "juice" the position. For an investor, on the other hand, Central Fund of Canada can still be targeted as a way to take a speculative position in gold specifically as well as in precious metals more generally. This is because over time the correlation between the gold and the silver price has a tendency to keep to a settled pattern. Recently this has been around 60:1, with one ounce of gold typically valued around the same as approximately sixty ounces of silver.

Recent developments with the introduction of gold exchange trade funds (ETFs) provide another convenient medium for investors and traders to speculate on or hedge against the gold price. These offer many of the same basic advantages that Central Fund of Canada offers in terms of convenience and easy availability. The significant difference between the Central Fund model and ETFs is that as open-ended vehicles ETFs will tend to trade close to their underlying net asset value.

Central Fund of Canada in common with other close-end vehicles will trade at a discount or premium to its net asset value that at times can be quite significant. (It currently trades at a premium). What the authors particularly like about CEF is its track record - 46 years in existence. We believe that narrow sector ETFs still have too short a track record for all of their advantages and disadvantages as trading and investing vehicles to have fully emerged and we do not as yet have the same comfort level with ETFs that CEF provides us. At the very least, as a kind of older and more mature cousin of the hot gold sector ETFs of today, we would suggest that investors/traders in the latter may have an interest in looking more closely at the not so very well known Central Fund of Canada.

Full disclosure: The authors trade in and out of stocks on a very short-term basis using their own "Contrarian Ripple Trading" technique. Of the stocks mentioned here, they have recently traded CEF, ABX and NEM.

This article was written jointly by Aidan J. McNamara and Martha A. Brozyna

Aidan McNamara is associate publisher at The Deal LLC in New York, publisher of the weekly financial magazine The Deal as well as The Daily Deal and TheDeal.com. He holds an MA (with distinction) in Area Studies (Eastern Europe and Russia) from the University of London, 1981 and a BA in German from the University of Manchester.

Martha A. Brozyna received a Ph.D. in history from the University of Southern California in 2005 and a BA in history and political science from Rutgers University where she graduated Phi Beta Kappa in 1995.

McNamara and Brozyna are the authors of Contrarian Ripple Trading: A Low-Risk Strategy to Profiting from Short-Term Stock Trades, scheduled for publication by John Wiley & Sons in October 2007. Martha Brozyna published Gender and Sexuality in the Middle Ages: A Medieval Source Documents Reader in 2005 (McFarland & Co.)

The authors have additional information on themselves and their forthcoming book at their website http://www.ridetheripples.com

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Rising Commodity Prices Causing New Turmoil through the Mining Sector

2007-09-13T13:48:00.000-07:00

By James Finch

Good times in the mining sector, eh? The Gold and Silver Index (XAU) is holding steady above 120, having reached a high above 156 in January, a level it had not seen since September 18, 1987. The spot uranium price is higher than it’s been since January 1980. Crude oil? Filling up your gas tank should remind you that oil prices are still painfully high. So all of this must mean mining companies are thrilled with their good fortune? WRONG! There’s a snowballing crisis in the mining sector, which has been kept off the typical investor’s radar screen. This new emergency could drive commodity prices to even higher levels over the coming months, and possibly until the end of the decade.

The two-decade long bear market drove many geologists, and other qualified technicians, out of the mining sector. Drilling companies went bankrupt. Even with the recent explosion of activity in the mining sector, exploration in the sector is less than one-third of its peak in 1981, when more than 5,500 drill rigs were running.

The mining sector’s labor and drill rig shortage has gone past the “we’re in a crisis” stage. Without qualified geological staff and drill rigs for exploration and development programs, companies may fail to get their projects online fast enough to satisfy the worldwide demand for their metals, whether it is gold, silver, copper, or uranium. The Baker Hughes North American rotary rig count is a good barometer of how strongly the commodities boom has impacted the sector. In 1999, the U.S. and Canadian drill rig count reached its nadir of 488. On March 17th, the number stood at 1546 and climbing. Over the past seven years, the count jumped 316 percent. Compared to a year ago, the North American Rotary Rig Count is up by nearly 20 percent. Internationally, the same rig count rose almost 60 percent.

During the course of our three-month investigation, we found the labor and equipment shortage applied not only to uranium but also to coal, oil and gas, coal bed methane and precious metals exploration. Ed Calvert, who runs Nucor Drilling Inc in Wyoming, exclaimed, “There just aren’t any rigs available in the U.S. You may find one, but it’s a problem finding the right rig at the right time.” His company began searching for a drill rig in September for drilling scheduled to commence June 1st. Calvert explained that the big oil companies had signed up rig contracts so they wouldn’t get caught short, adding, “Whether the rigs are being used daily or not, they are paying the fees to hold them.”

Vancouver-based Max Resources announced in early January of this year they had received permits to drill on their Thomas Mountain uranium prospect in Utah. They hoped to drill in late January, depending upon drill rig availability. We interviewed the company’s uranium geologist Clancy Wendt, who complained in early February, “I thought I had a rig lined up. Now we have no idea when we will get a rig.” Max Resources recently announced it planned to start drilling on or about the middle of March. Norman Burmeister planned more wisely, announcing in mid January Kilgore Minerals would drill the company’s Idaho gold property in July. But Burmeister got stumped in moving his uranium property’s permitting process forward, “I am still trying to find an archaeologist for my Nevada property. They just aren’t available.” Until he finishes that step of the permitting process, Burmeister can’t lock up a drill contractor to help delineate his uranium prospect.

The drill rig shortage pales when compared to the frighteningly tight labor market in the mining sector. According to the February 2006 Employment Situation Summary, published by the U.S. Department of Labor, “Mining continued its upward trend in February, adding 5,000 jobs.” Cynthia Pomeroy, Director of Wyoming’s Department of Employment confirmed the crisis, “There is definitely a labor shortage.”

Matt Grant, assistant director of the Wyoming Mining Association adamantly announced, “There are 800 direct job openings in the mining business that could be filled today.” He quickly noted another 2400 indirect jobs to service the mining industry remain empty, begging for bodies to satisfy those positions. Starting geologists make between $35,000 and $50,000 annually. Top geologists command $200,000 and higher. Mining consultants get $800-1000/day. Even day helpers on drill rigs can charge $22/hour or more. Wyoming state and county development associations have attended job fairs in Michigan earnestly trying to fill the growing job vacancy by recruiting laid-off auto workers.

David Michaud, president of TheJobPit.com, finds jobs for geologists, metallurgists and others in the mining sector. A mining engineer and consulting metallurgist, having graduated from Queens University in Kingston, Ontario, and until recently the operations manager for Corriente Resources in Ecuador, he began his internet employment agency for the mining sector because the demand was overwhelming. “Headhunters who have been around for twenty years say they’ve never seen a market like this,” Michaud stressed. “For the last ten years, the mining industry fed mining graduates to the wolves. Now they need them. All are busy with no takers to those far away places.” Michaud lambasted the mining companies for their lack of foresight, “Mining companies have to expect the demand for professionals, such as production geologists, will go up with the price of metals. There were no jobs for the past eight years.” He added, “It takes two to five years to train them.”

For example, Michaud is desperately trying to fill a South American mining company’s job opening for an experienced metallurgist. “Free housing, two cars, four weeks off annually, two plane tickets, basically no living expenses, and a salary starting at US$150, 000,” Michaud sadly explained because no one has jumped at the offer. “In the field of metallurgy, including mill managers, metallurgical engineers, techs and operators, about 150 new jobs are offered each month.” Only about one-half will be filled. Michaud warned the copper mining companies were in especially dire straits to fill new job openings.

Uranium Sector Struggling to Keep with Demand

The U.S. Energy Information Administration announced in its most recently published annual report, “The U.S. uranium production industry initiated a turnaround in 2004. All U.S. uranium drilling, mining, production, and employment activities increased for the first time since 1998. More companies conducted exploration and development drilling than in the prior 2 years. Employment in the U.S. uranium production industry totaled 420 person-years, an increase of 31 percent from the 2003 total. Wyoming accounted for 33 percent of the total 2004 employment, while Colorado and Texas employment almost tripled since 2003. Overall, $86.9 million went to drilling, production, land, exploration, reclamation and restoration activities in 2004.” And that was in 2004. Imagine what the employment snapshot looks like today?

While the spot uranium price continues rising, exploration companies may find it harder to recruit veteran uranium geologists, to sign contracts for drill rigs, and to operate those rigs. Nucor’s Calvert laughed, “Finding and keeping employees is definitely a problem.” Michaud explained, “Finding a metallurgist is hard enough. Finding one with uranium experience is almost impossible.” David Miller, president of Strathmore Minerals, lamented, “Expertise in the uranium industry started with geologists who made discoveries in the late 1940s through the late 1970s. They trained the next generation, which coincided with the 1970s uranium boom. That boom was short lived and fizzled out by 1981. A very small number of professionals continued in the uranium industry, during the twenty-year bear market. Now that the number of uranium companies has skyrocketed to more than 420, there is a potentially catastrophic shortage of uranium expertise.” The generation gap has come to haunt the industry.

What’s the solution? Many, such as Michaud, believe, “Retired baby boomers are coming out of retirement to fill the generational gap and ride their last metal rush into the sunset.” Bloomberg News ran a story on December 8th discussing developments in the oil sector, “U.S. producers and contractors such as Ryder Scott, which assesses drilling projects and oil and natural-gas reserves, are working harder to keep their oldest employees and recruit college graduates because there aren't enough new engineers to go around. Engineers who help find petroleum deposits are in demand…”

UR-Energy Chief Executive William Boberg showed off the company’s recent hire, Dawn Schippe, during our tour of his offices, “She’s an engineering graduate of the Colorado School of Mines,” he said. “Her experience in uranium is now two weeks.” Others in his company have decades of uranium experience, but are three times Dawn’s age.

Aging talent has found its way back into the uranium sector. Aging geologists such as Dr. Boen Tan, who helped discover two of the Key Lake uranium deposits in Canada’s uranium-rich Athabasca Basin in the early 1970s, is now helping Forum Development explore for new uranium deposits at its Costigan Lake, Key Lake Road and Maurice Point projects in Athabasca. Uranerz Energy’s entire advisory board consists of former Uranerz professionals, including top geologists, Dr. Franz Dahlkamp and Dr. Gerhard Ruhrmann. Respectively, they have 45 and nearly 30 years experience in the sector. Strathmore Minerals geological team includes former Pathfinder Mines employees, a subsidiary of Cogema, including board member Dieter Krewedl, President David Miller, and vice president of technical services, John DeJoia. Some of these companies bring more than 200 years of experience, collectively, to their new ventures. But without sufficient new mining school graduates to mentor under them, future exploration and development may become stalled. Michaud announced a chilling observation, “Annually, Canadian universities produce less than 10 new metallurgical engineers.”

What the Future Holds

What is troubling about the uranium market, in particular, is that the soaring spot uranium price shows no signs of abating. The crisis comes at a time when President Bush announced his nuclear initiative, as more U.S. utilities plan to add to the country’s nuclear fleet, and as China and India clamor for a reliable source of uranium to fuel their aggressive nuclear energy programs. Without uranium for those reactors, the power plants won’t produce the electricity required to meet their demand. As an aside, uranium mining is the stage in the nuclear fuel cycle where the environmentalist fanatics are baring their teeth. This past November, an office manager at Albuquerque’s Southwest Research and Information Center, an anti-nuclear activist group reportedly funded by Mott’s Applesauce and Ben & Jerry’s ice cream, told us when we went undercover, “We want to stop the front end of the nuclear fuel cycle, which is uranium mining.”

Don’t say the warnings weren’t made well in advance. At the World Nuclear Association (WNA) Symposium in 2004, Dr Moukhtar Dzhakishev, a Russian physicist and a former deputy minister of energy and mineral resources, presented his conclusions, “Firstly, natural uranium mining capacities cannot satisfy reactor requirements. Secondly, accumulated uranium inventories will be exhausted sooner or later. Thirdly, the spot price does not reflect the actual problems and, on the contrary, is capable of misleading all of us about the urgency of investments to be made in the development of new mining facilities.”

In his speech, Dr. Dzhakishev emphasized to the WNA, “Judging by these facts, the conclusion is evident: one day nuclear power plants will face a natural uranium shortage and it is not necessary to be a prophet to foresee this. It is clear today that the key to the solution of the major problems of the uranium market lies with the development of the potential of the uranium producers.”

This past August, Angela Jameson reported in the online version of The London Times, “A GLOBAL shortage of uranium could jeopardise plans to build a new generation of nuclear power stations in Britain… a recent report by the Asia Pacific Foundation of Canada said that there was likely to be a 45,000-tonne shortage of uranium in the next decade, largely because of growing Chinese demand for the metal.”

The upward spiral of the commodities boom is racing ahead at full speed. Depending upon whom you talk to, the labor and drill rig shortage is either very bad or worse than you can possibly imagine. If there are commodity inventory shortages right now, what happens by the end of this year, or later this decade, if current exploration efforts get grounded because companies lack the trained personnel, the proper equipment and the expertise to explore and/or develop their properties? You can’t run a drill rig if you can’t get your hands on one. You can’t drill the property if you can’t find drillers to run the rig. While commodities prices soar to levels not seen in twenty or thirty years, the tight labor and equipment market could ratchet prices to much higher levels. And junior uranium development companies, with proven pounds-in-the-ground assets, should become sought-after acquisition targets by those who have the staff and drill rigs to bring the projects online.

For investors, the labor and drill rig shortage has a silver lining. As inventories dwindle lower, commodity prices will continue rising. For junior uranium investors, this might someday be realized as the “hidden reason” why spot uranium prices continued rising past $40/pound. If you don’t drill for the commodity, you can’t find it and develop it. This strengthens the case for $50/pound uranium in the near future. Now we understand why Strathmore Minerals’ David Miller warned us in November, “I wouldn’t be surprised to see uranium prices double again.”

James Finch contributes to StockInterview.com and other publications. StockInterview’s “Investing in the Great Uranium Bull Market” has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com

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Uranium: The New Precious Metal

2007-09-13T13:36:00.001-07:00

By James Finch

Newly mined uranium remains ‘highly sought after’ maintains Nuclear Market Review (NMR) editor Treva Klingbiel in the February 23rd issue of the weekly trade magazine, servicing the utility and nuclear fuel industry. It was no more evident than at this past week’s spot auction for U.S.-mined uranium.

The record $10/pound price increase, reaching a new spot uranium record of US$85/pound, was, according to Klingbiel, “the single largest (dollar) increase recorded since prices were first published in 1968.” TradeTech posts the weekly spot uranium price, as reported in NMR, on the consulting service’s website.

At US$85/pound, it has occurred to us that uranium oxide concentrate has now begun to approach ‘precious metal’ status at $5.31/ounce, or 17.4 cents/gram. It is reminiscent of the silver price, which last traded around this level in August 2003. Metals become precious when there is a scarcity of available supply.

A modest sum of 100,000 pounds of U3O8 was offered (again) by Mestena Uranium LLC, a privately held uranium miner in Texas. According to a February 13th quarterly report, published by the Energy Information Administration (EIA), annual production capacity at Mestena’s Alta Mesa in situ recovery (ISR) operation is one million pounds. The material auctioned this past week could represent as much as 10 percent of the company’s potential product to be offered at auction during 2007.

Because the majority of other uranium supply is being offered with ‘market-related pricing terms’ at the time of delivery, a fixed delivery price has now become the rage among utilities and speculators. “Bidding was extremely aggressive with a record number of bidders vying to purchase the material,” wrote Klingbiel. “Higher prices have not deterred potential buyers.”

The spot uranium market has come to rely on the Mestena sealed-bid auctions for longer-term price guidance. “Public auctions were a key factor in the price rise witnessed last year and clearly will continue to be instrumental in price formation during 2007,” Klingbiel wrote. “The year 2007 may well eclipse the extraordinary price increases witnessed last year.”

Long-term demand for U3O8 now exceeds 54 million pounds. This past week, a non-U.S. utility requested offers to buy two million pounds U3O8 for delivery starting in 2008. Prior to this request, 15 utilities were evaluating offers or seeking to purchase nearly 54 million pounds, according to NMR.

The record price has also encouraged higher uranium production at U.S.-based facilities, such as Mestena. In its quarterly report, preliminary EIA data suggested total U.S. uranium concentrate production of 4.1 million pounds – a 53-percent increase in production over 2005. Douglas Bonner, who prepared the EIA report, wrote, “This is the highest (annual) production level since 1999.”

We believe this strong annual production level came mainly from Wyoming’s Smith Ranch-Highland and Nebraska’s Crow Butte ISR uranium mines. The in situ recovery (ISR) operations produced a record 2.7 million pounds U3O8. These operations contributed nearly 13 percent of Cameco’s worldwide mining production in 2006. The balance of 2006 uranium production came from Mestena and Uranium Resources, both based in Texas.

Fourth quarter 2006 production was reportedly 78 percent higher than 4Q 2005. This was the highest quarterly production level since the fourth quarter of 1997. U.S. concentrate production this past year was 76 percent higher than at the nadir of the domestic uranium-mining depression in 2002. Despite this increase, the U.S. uranium mining industry only produces about seven percent of the raw product that nuclear fuel U.S. utilities consume each year. Nuclear utilities rely upon foreign-mined uranium and dwindling stockpiled inventories to power the country’s 103 nuclear reactors.

The next official U.S. government statistical report on U.S. uranium production will be released on May 17th.

James Finch contributes to StockInterview.com and other publications. His focus on the uranium mining and nuclear fuel sector resulted in the widely popular “Investing in the Great Uranium Bull Market,” which is now available on http://www.stockinterview.com and on http://www.amazon.com TradeTech posts the weekly spot uranium price on the consulting service’s website at http://www.uranium.info

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Molybdenum's Diversity Keeps Demand Firm

2007-09-13T13:31:00.001-07:00

By James Finch

If one believes the forecasts recently made by Terry Adams of UK-based Adams Metals and the Albemarle Corporation, then the escalating demand for molybdenum products could impact the stainless steel business of POSCO. The Korean-based steelmaker, with about 6.5 percent of sales coming from stainless steel, is the world’s fourth or fifth largest, depending upon production or market capitalization.

According to the company’s 2006 annual report, POSCO exports more than 70 percent of its steel products across Asia, mainly to China, Japan and southeastern Asia. In response to record high nickel prices, the steelmaker announced it would begin manufacturing nickel-free stainless steels. So did European steelmakers ThyssenKrupp and Outokumpu, which has heavily relied on its austenitic products.

Would a sustained rally in the moly price result in the same backlash nickel recently suffered? Unfortunately for steelmakers, molybdenum has a broader range of applications than nickel.

At a recent industry conference, Terry Adams shocked his audience by warning of potential supply/demand imbalances commencing as early as 2011. He believes by 2015, the molybdenum price could get ‘interesting.’

But, this wasn’t the first sign of brewing trouble for molybdenum buyers. In early May, one trader told American Metal Market magazine, “We just don’t have any supply available.” He lamented that primary moly producers, also known as swing producers, have ‘nothing to sell right now.’

On June 18th, China is expected to announce the export quotas for molybdenum products it has assigned to a limited number of exporters. Potential labor disputes at copper mines in Mexico and Chile could further reduce available molybdenum supply later in June. A Chilean labor spokesman warned of a ‘hard and prolonged strike.’ Molybdenum mined as a byproduct of copper production accounts for about 60 percent of the global supply.

At this pace, molybdenum pricing could be severely impacted as early as this summer. By next year, if primary molybdenum production doesn’t quickly rise to meet the demand, the pricing climate could worsen for end-users. Some traders believe moly prices could soon creep above previous price peaks two years ago. “Things are going to get a lot firmer because there’s a lack of material,” one trader reported earlier this week. “There’s not a lot on the ground.”

According to different down-the-road forecasts, the magic demand number is 460 million pounds of molybdenum. Adams predicts that projected western world demand could reach this consumption by 2015. Others believe strong moly demand could bring this target consumption a few years earlier.

Another concern is one we highlighted in a previous article.
stockinterview.com/News/11082006/Roasting-molybdenum.html USGS molybdenum commodity specialist Michael Magyar warned of a bottleneck, “… we can’t roast much more moly right now. No one is actively permitting for more roasting capacity in North America.

Additional roasting capacity is, however, coming online this year or next, courtesy of Molymet. Adams points out, “With the growth in demand a new roaster, the size of the new Molymet roaster is needed every two years.” Adams further explained, “Without further investment a roaster bottleneck could occur in 2011. Molymet plans another roaster about this time, but this would only allow another two years growth.”

In his presentation, Adams glimpsed in the future. While western world demand should continue to annually increase by three percent, demand in China and the C.I.S. could increase by more than 10 percent every year. “The combined global effect would be an annual growth rate of about 4.5 percent,” he predicted. “Western mines will have to increase production by at least 6 percent per annum.”

As we and others have concluded, Adams forecast, “Increased output at primary (moly) mines will be needed to fill the gap beyond 2009.”

We presume delegates from the junior molybdenum mining attendees mentally began popping champagne corks after Adams announced this point. But it was his next two points which investors should digest:

• New or shuttered primary mines will have to open by 2011
• By 2013, current primary mines and Climax could be at capacity

High-Level Growth in the Molybdenum Chemical Market

Having researched molybdenum for more than one year, only recently did a couple of technical experts (http://stockinterview.com/News/06042007/molybdenum-copper-nickel-condenser-crossover.html) help us understand how much molybdenum is utilized in the condenser tubes of nuclear and desalination plants. Because of the diversified applications for this metal, there is less reliable information about the molybdenum sector than in others we’ve explored, e.g. uranium.

We continue to gather data for our next publication, “Investing in the Great Molybdenum Bull Market,’ and will present our detailed research in late August.

We have discovered two strong-growth areas for molybdenum applications.

It’s not just the steel market which uses molybdenum. Although the stainless and low alloy markets represent about two-thirds of molybdenum usage, the fastest growing market appears to be catalysts in the moly chemical market.

According to a spokesman for the Albemarle Corporation, moly consumption in the catalyst section could grow by more than 30 percent by 2011. The chemical sector could consume as much as 30 million more pounds in the 2006 to 2011 time period.

The global catalyst market is expected to reach US$13 billion in sales this year. Of this the petroleum refining sector should consume about 35 million pounds of molybdenum. The moly is used as a hydroprocessing (HPC) catalyst.

Growing global demand for crude oil, changing fuel specifications and strength in demand for aviation and diesel fuel should contribute to molybdenum demand.

Because the overall quality of crude oil has significantly deteriorated, over the past 25 years, more molybdenum could be consumed as a catalyst during the refinery process. Sulfur content in U.S.-imported oil has doubled over this same time period. Molybdenum-based catalysts are utilized to remove sulfur from petroleum, petrochemicals and coal-derived liquids

Tighter specs over the past 15 years have demanded a higher performing catalyst and more contained molybdenum in those catalysts. Over this time frame, catalyst demand per barrel of crude oil has doubled – an average growth rate of five percent per year.

One industry expert expects global HPC catalyst growth to annually increase by eight percent between 2006 and 2010. Molybdenum consumption for this use could increase by 46 percent through 2010. Annual consumption could rise to more than 60 million pounds of molybdenum.

Lack of New Primary Mining Supply

The typical molybdenum concentrates being sold by the copper producers, as byproduct mining, contain 40 – 45 percent Mo. Concentrates from primary producers often average 50 – 55 percent.

As a result, primary molybdenum mining operations offer a more desirable concentrate. Technical moly, also known Mo03 (molybdenum trioxide) specifies 57 percent Mo and contains less than 0.05 percent copper and 0.1 percent sulfur. Primary molybdenum producers provide concentrates with lesser amounts of deleterious elements.

Because the concentrate is ‘cleaner,’ less roasting is required to upgrade the material to tech oxide spec. Less electricity is expended to power the multi-hearth furnaces during the roasting process. The cleaner primary moly concentrate offers the roaster more flexibility. The higher spec concentrates can be blended with lower spec concentrates to upgrade the overall product, or the roaster can refine the higher spec material separately if the end-user requires it.

The less roasting to bring material up to spec could also help avoid the bottlenecks a few years from now.

Although byproduct molybdenum producers are expected to bear the brunt of increased demand, the copper producers aren’t cooperating. Codelco’s molybdenum production dropped by 25 percent in 2006 to 60 million pounds this past year. Moly production could drop another 15 percent or more this year.

Because of the recent molybdenum price revival, dozens of exploration companies have ‘suddenly’ become molybdenum companies. There are scarce few with a potentially viable project.

Those primary molybdenum producers and future producers we’ve been monitoring appear to be moving their projects forward.

Thompson Creek is Thompson Creek. This has emerged as the ‘primary’ primary player in North America while the world waits for Climax to come online again. Some believe the company’s Davidson moly deposit in British Columbia may not arrive on the company’s timetable. If so, then this could further pressure the moly price.

Roca Mines should become a producer during July. But, this company also hopes to expand its operations deeper and should also commence those exploration efforts this summer. In the interim, the high-grade molybdenum found at the company’s MAX mine should become a cash cow in the third and fourth quarters of this year. And for several years forward. Although the company is not yet in production, there appears to be no scarcity of molybdenum traders clamoring for the company’s future production. Another indication of a tight market.

Last month, Adanac Molybdenum Corp ordered its long-lead time equipment for the construction of its mining and milling complex at Ruby Creek. Expenditures totaled nearly C$40 million, for which the company has made its down payments. Also, some time this summer, Adanac should finally receive its permits and commence construction. While the company boasts of 220 million pounds of molybdenum, a recent chat with Adanac consultant Ken Reser suggests Ruby Creek have more pounds than was previously thought. Ongoing drilling results could later confirm this speculation.

We continue to watch United Bolero as a promising development company in Montana. We were told drilling at Bald Butte began over the weekend to upgrade the resource category. Hopefully, the drilling program will also move to its nearby Cannivan Gulch property. Historically, but not technically documented, major miners, who worked these properties in the previous moly cycle, estimated the company’s properties could host more than 400 million pounds of molybdenum.

Primary producers, such as these and possibly others, is what molybdenum end-users are depending upon to meet their needs as we approach 2009, 2010 and beyond.

Over the course of this summer, we’ll further study other potential near-term producers, such as Moly Mines and others.

Conclusion

Many in the industry have warned us about the potential increase of ‘moly dumping’ by the Chinese. Historically, China has helped chill out molybdenum prices in the past. According to Adams, as noted earlier in this article, China could become less of a factor.

Fundamentally, this should not be a concern. Typically, a country is indirectly focused on the background of its leading politician. In China’s case, the eight members of the Politburo Standing Committee – China’s most powerful politicians – are all engineers. All are graduates of engineering or technology schools.

China’s president was trained as a hydraulics engineer. The premier is a geologist, who also has a degree as a mining engineer. The former vice-premier was trained as an electrical engineer, as was the ‘propaganda’ chief. The Secretary of Political and Legislative Affairs was trained as a metallurgist. Others hold degrees in thermal engineering, radio electronics or electronic motor design.

Engineers like to build things. China has embarked on the greatest industrialization period in history, dwarfing the construction of infrastructure of the late 19th century in Europe and North America. Because molybdenum’s applications include architecture, energy, petroleum refinement, coal conversion, chemicals and other industrial applications, we would not be surprised if China soon announces the ‘strategic’ importance of molybdenum (as it has uranium) and stops all exports.

Molybdenum also plays a strong role in numerous and diverse military applications. Globally, military spending reached $1.2 trillion last year. In 2006, China surpassed Japan as the largest military spender in Asia. The U.S. Pentagon estimates China could be spending up to US$125 billion this year. At least ten varieties of ballistic missiles are deployed or in development. Our preliminary research into this subject confirms the large percentage amount of molybdenum utilized in missiles. In some applications, the moly content is greater than 20 percent.

In summary, every time we delve into a new area to investigate demand for the molybdenum application, we find growth. Strong demand could surprise many stock and industry analysts over the next decade. In the meanwhile, more primary molybdenum producers need to come forward. Unlike some, we don’t believe the molybdenum story has yet been fully revealed. This summer, we hope to make the molybdenum market more transparent – both on the demand side and the supply side.

James Finch contributes to StockInterview.com and other publications. He has contributed to the widely popular “Investing in the Great Uranium Bull Market,” and “Uranium Outlook 2007 - 2008.” His recent work, “Investing in China’s Energy Crisis,” is now available at http://bookstore.stockinterview.com/

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The Emerging Manganese Bull Market

2007-09-13T13:29:00.001-07:00

By James Finch

Although manganese is the fourth most heavily consumed metal – behind iron, aluminum and copper, most investors have failed to observe the dramatic bull market in manganese which began unfolding this past spring.

About 34 million tons of manganese ore were mined in 2006.

Manganese (Mn) is a key component in steel and iron production, which accounts for up to 90 percent of the metal’s current consumption. But, the grey-white metal also plays an important role in low-cost stainless steel formulations and aluminum alloys. For example, manganese steels contain up to 14 percent Mn.

In 2006, the global unit consumption of manganese ferroalloys was approximately 10 kilograms alloy per metric ton of steel produced.

In specialty alloys, where nickel is replaced in part or entirely by manganese, the Mn content can run as high as 16 percent. Hadfield Steel contains 13 percent or more manganese. This brand of steel requires toughness and wear-resistance for applications in gyratory crushers, jaw crusher plates, rail steel and cutting edges for earth-moving equipment.

Earlier this year, Allegheny Ludlum explained high prices had forced the specialty steelmaker to replace nickel with manganese in some of its products. This spring, Finnish stainless steel manufacturer Outokumpu launched a duplex stainless product, LDX 2101, as a nickel-free stainless. The product utilizes a greater percentage of manganese instead of nickel.

Where applications permit, the stainless steel market is hoping to move away from austenitics to duplex, ferritic and other grades in order to rely less upon nickel. One report suggested chrome-manganese production could jump by 50 percent within two years. Consequently, the nickel-chrome grades could lose 20 percent of their stainless steel market share.

Why Manganese?

Aside from a small circle of metallurgists, chemists and miners, manganese is not a well-known element. Appearance-wise, it resembles iron.

By virtue of its properties – sulfur-fixing, deoxidizing and alloying, manganese is essential to iron and steel production. If you dropped a crescent wrench on a cement floor, it would shatter into pieces if the wrench were made without manganese. It is the ‘glue’ that binds, hardens and prevents iron and steel products from being too brittle.

Some manganese compounds have been added to gasoline to boost octane rating and reduce engine knocking. In organic chemistry, manganese dioxide is used as a reagent for the oxidation of benzylic alcohols. Manganese has a vast array of industrial uses – rust and corrosion prevention on steel, paint pigments, dry cell and alkaline batteries, animal feed, glass production, fertilizers and many medical and health applications.

China will depend upon the manganese in railroad steel rails as the country dramatically expands its rail system over the next decade.

The automotive industry will depend upon manganese for the next generation of hybrid electric automobiles and fuel cells. Manganese can not only reduce costs in car body components – offering less weight in auto frames, but it can also add greater structural strength. Toyota reportedly is close to perfecting a lithium-manganese ion battery for the Hybrid Electric Vehicles (HEV). The new generation cathodic materials include manganese and have more power capability, longer runtime and are more cost-effective because they are smaller and lighter.

Aluminum alloys utilize small quantities of manganese to enhance corrosion resistance. Many commercial copper alloys contain up to two percent manganese. And uranium ore is processed with manganese as an oxidizing agent to produce yellowcake for use in nuclear reactors.

New applications for manganese are being researched. Recently, at Kyoto University in Japan, researchers have developed a new process designed to reproduce the photosynthesis process. By using manganese dioxide, it may be possible to absorb a large quantity of carbon dioxide (CO2) emissions, which contribute to global warming.

According to the U.S. Geological Survey, “Manganese has no satisfactory substitute in its major applications.”

On the Manganese Production Front

Over 80 percent of the known world manganese resources are found in South Africa and the Ukraine. Other major manganese deposits are found in China, Australia, Brazil, Gabon, India and Mexico. In recent years, up to 60 percent of world manganese ferro-alloy production comes from South Africa, China and the Ukraine.

The United States imports more than 50 percent of its manganese from South Africa and Gabon.

Fewer countries now produce manganese and ferro-manganese than in the previous decade. Major producing countries such as Canada and the United Kingdom ceased production in the early 1990s. Japan and Germany curtailed their output during an era of ‘cheap manganese’ when the metal sold for pennies per pound.

By 2001, the manganese ferro-alloys industry estimated it had a 40-percent overcapacity – much of this was found in China and the CIS. China closed many of its unprofitable manganese operations; fewer than 10 out of 800 were believed to be profitable.

Presently, no new manganese mines appear on the near-term horizon.

As has been found with other metals – predominantly uranium and molybdenum, a ‘drought’ over more than one or two decades caused prices to dramatically rise in recent years. Manganese’s price rise is the same condition found in other mineral spaces - far too few new mines for far too many years.

But, manganese demand jumped by 14 percent.

According to the International Iron and Steel Institute, world crude steel production of the 67 reporting countries increased by 10.2 percent of 2007 compared to the comparable period a year earlier.

In the report for 2007, the International Manganese Institute announced, “Manganese demand prospects have never been so good.” Key points included:

• Manganese intensive steel grades to grow faster than average

• Specific manganese consumption growing again

• Steel demand to exceed six percent per year for many years to come

• Limited down risks for the next ten to fifteen years

Note: Manganese-intensive steels represent 13 percent of total stainless steel production, but consume 41 percent of the total amount of manganese consumed by the steel industry.

To meet the growing demand, BHP Billiton announced it had ramped up manganese production to a record 1.5 million tons. Consolidated Minerals Ltd of Australia has dramatically increased manganese production over the past two years. Other large manganese mines have also increased production.

U.S. Manganese

Because it is essential to steel production, the U.S. government considers manganese a strategic metal. According to Lisa Corathers, U.S. Geological Survey manganese commodity specialist, “A continued supply of manganese materials is vital to any defense effort as well as to maintenance and growth of an industrial economy.”

Concerned about adequate inventories, the U.S. government began stockpiling manganese after World War II. But, by 1965, the federal government began selling off manganese materials, which they believed were in excess of what was required. By 2003, the government had whittled down its stockpiles to less than two years of manganese consumption.

Corathers said, “The United States has been reliant upon 100 percent of its manganese needs since 1985.”

We talked with Larry Reaugh, chief executive of Rocher Deboule Minerals Corp – which recently acquired the open pit-able Artillery Peak (Arizona) manganese resource. Unless we are mistaken, he is the only junior mining explorationist currently acquiring manganese resources in the United States and Canada.

Reaugh told us, “I have been watching manganese intently for the past several months. The price has risen dramatically this year, bringing large low grade deposits into the realm of feasibility.”

He pointed out, “Manganese is one of the top four strategic metals in the United States, which has no domestic production, and which is also subject to imports from countries which for the most part have political instability. And this creates uncertainty for U.S. supply”.

Although prices for nickel, cobalt, vanadium and molybdenum have respectively surged higher by seven-fold, four-fold, six-fold and six-fold, manganese has but doubled in price. The grey-white metal may have more room for growth in the years ahead.

Ken Reser is a research consultant who has covered the molybdenum sector for more than two years and recently began coverage on manganese. Contact: Email: ykgold@telus.net

Article Source: http://EzineArticles.com/?expert=James_Finch
http://EzineArticles.com/?The-Emerging-Manganese-Bull-Market&id=623265

The Uranium Bull Market Keeps Getting More Bullish

2007-09-13T13:26:00.000-07:00

By James Finch

China Demand for Uranium, World Growth in Electricity Demand to Drive Uranium Price Higher

Industry expert says all new production already factored in uranium price “We are consuming far more uranium than we are producing worldwide,” explained David Miller, Wyoming legislator and recently appointed president of Strathmore Resources (TSX-V: STM; OTC: STHJF.PK). “All the new production is already factored into the future market for uranium. We’re underwater right now without building one more nuclear power plant.” Nuclear reactor requirements have far outstripped current mining production (see chart below) for the past two decades. Current worldwide production is more than 80 million pounds, but the demand for uranium, which fuels nuclear reactors, is running an annual deficit of approximately 60 million pounds.

According to a World Nuclear Association report on uranium supply, published this past September:

“…the world's present measured resources of uranium in the lower cost category (3.5 Mt) and used only in conventional reactors, are enough to last for some 50 years… Further exploration and higher prices will certainly, on the basis of present geological knowledge, yield further resources as present ones are used up… so a significant increase in exploration effort could readily double the known economic resources, and a doubling of price from present levels could be expected to create about a tenfold increase in measured resources, over time.”

Electricity: Uranium’s Supply and Demand Problem

“We’re not going to run out of uranium, but where will the price go to encourage new production?” asked David Miller. “We are around over $33/pound now. Could it double again? It wouldn’t surprise me at all.” Kevin Bambrough, a research analyst for Sprott Asset Management, heartily agreed with Mr. Miller, saying, “We have just started a long term uranium bull market that will end in a ‘uranium mania’ as utilities and countries drive uranium prices to unbelievable highs as they compete to secure supplies."

That driving force is demand for more electricity. Over the past 25 years, total world energy use expanded by almost 50 percent, with stronger growth in electricity usage. Demand for electricity is increasing far more rapidly than overall energy use. Electricity demand has been projected to grow 2.8 percent annually through 2010, and substantially more between then and 2020. About 2 billion people currently have no electricity access, and with United Nations forecasts of world population growth by 1.5 billion people in 2020, electricity demand will continue to grow.

As an interim solution to the greenhouse gas problem and climate changes (e.g. the worst Atlantic hurricane season since record-keeping began), a growing number of countries are investigating nuclear energy to solve their burden of a soaring electrical demand. Presently, there is as much electricity generated by nuclear power as was provided by all sources worldwide in 1960.

Nuclear power generates more than 16 percent of the world’s electricity, nearly 24 percent of the OECD and 34 percent of the European Union’s electricity needs. In an April 2005 speech to the National Small Business Conference in Washington, President Bush announced, “Nuclear power is now providing about 20 percent of America's electricity, with no air pollution or greenhouse gas emissions. Nuclear power is one of the safest, cleanest sources of power in the world, and we need more of it here in America.”

Demand for electricity is projected to impact other commodities as well, not just the price of uranium. In the Energy Information Agency’s Annual Energy Outlook 2005, U.S. electricity demand will bring about increases in natural gas consumption. By 2025, the electric power sector will account for 31 percent of total demand for natural gas, as consumption increases from 5.0 trillion cubic feet in 2003 to 9.4 trillion cubic feet in 2025.

China’s Demand May Be Greater Than Anticipated

Today, 441 nuclear power reactors in 31 countries provide more than 16 percent of the world’s electricity. In 2003, that was 2525 billion kilowatt hours. Eleven countries are constructing thirty more reactors, mainly in China, but also in Russia, Japan and Korea. The International Atomic Energy Agency has projected at least 60 new power plants will be constructed over the next 15 years. By 2020, nuclear power’s electricity production share will increase to 17 percent.

“China is the future wild card,” said Miller. “Their current uranium demand is miniscule. They have a small nuclear industry. They may have three or four thousand megawatts of capacity. Their uranium demand is only about 4 or 5 million pounds per year. They meet that internally from their own uranium deposits. But what they are planning for nuclear is probably the most aggressive program in the world. I visited China in 2003 to teach ISL (in situ leaching) uranium geology and ISL mining techniques to a couple of institutes. At that time, they were talking about building two new nuclear power plants per year for the next 20 years.”

But as Miller observed, they may have more ambitious plans. He added, “Since then, I have heard of more aggressive programs. One article I read recently was entitled, Let 1000 Reactors Bloom. That is more than 200 percent of the nuclear reactors we now have on earth. I believe that is what the Chinese will be doing in the next 40 – 50 years, converting nearly 100 percent of their electrical generation from nuclear power.” Currently, China is generating less than three percent of their electricity from nuclear energy.

Miller speculates of how this might impact the price of uranium, “If they are building nearly three times the world fleet in just China, then that would be about 500 million pounds of uranium demand from China in fifty years. Other companies are announcing new nuclear power plants.” What does that mean for the price of uranium? Miller concluded, “So, the demand for uranium is going up. I think the growth in demand will be more rapid than we realize.”

Uranium Mining: A Slow Process

David Miller, who was previously interviewed by StockInterview.com in June 2004 (view article), reflected on last year’s forecast, “I thought $30/pound was sufficiently high to encourage enough new production around the world.” But there are major issues with supplying the increasing appetite of the burgeoning nuclear power industry. Miller warned, “The problem with encouraging new production is you don’t turn these things on and off. The only uranium, coming onto the market in addition to what’s already planned right now, will come from the already-discovered deposits.”

Two years from now, Miller thinks the spot price of uranium could double again. “There are going to be a lot of people trying to put uranium mines into production, but it is not an easy process.” Permitting requirements in countries where most uranium is mined are roughly comparable. “If you haven’t done any work, after a discovery, it still will take about four to six years to mine in any of those areas.”

In early 2004, there were probably less than twenty uranium producers and exploration companies. Since then, the number of uranium exploration companies has jumped to more than 200. Miller warns investors that it could take up to 12 years for a grass roots project to begin mining yellowcake. Miller explained, “Starting, finding, permitting and mining a project is probably going to take a minimum of 12 to 20 years. From the start of the exploration program to defining the ore body, after you make a discovery, to starting the background and permitting process, to development and then finally mining – it’s going to take a long time.”

Through 2005, many uranium exploration companies announced new projects throughout Canada and the United States. Miller did not see how their efforts would immediately alleviate the uranium supply crunch, “If you are talking about any of those, such as in Labrador or the Yukon or in the basins outside the Athabasca Basin, or even within the Basin, for those that are just now doing their first exploration, you are talking the year 2020 before those could come online and supply uranium to the world market.”

But, what about the world’s richest concentrations of uranium in Canada’s Athabasca Basin? Will they help stem the rising uranium price? In a nutshell, Miller says no. He explained, “The next one to come online is Cigar Lake, but it was discovered over 20 years ago. Cigar Lake may come online in 2007 or 2008. There is another one called Shea Creek, which was discovered by Cogema more than a dozen years ago. They are having some very good results on that.” Could they start the permitting process on that one in the near future? “Absolutely,” Miller responded. “But you are talking about 8-10 years before that one could come online. It might be close to 2015 before it could bring any uranium to the world market.”

The future largest producing uranium mine in the world is likely to be Olympic Dam in Australia. It’s basically a copper mine with uranium grades. On October 27th Hong Kong-based institutional advisor Marc Faber, and author The Gloom, Boom and Doom Report, told Dow Jones newswire that he thought copper prices would fall by as much as 40 percent. (Note: Marc Faber also said, “I’d be a physical buyer of uranium.”) “What happens when copper is $0.50/pound? What will be their cost of producing that uranium?” asked Dave Miller. “Olympic Dam is low grade uranium, less than 0.05 percent U308. Their cost to operate the uranium portion of that will go up, if copper prices go down. It would make their cost higher, and they would be less inclined to sell it at a low price.”

Where else do utilities turn for their growing uranium needs? There are big known deposits in Australia, and one that has hundreds of millions of pounds of uranium in it. But, it happens to be adjacent to, and possibly partly in, one of Australia’s national parks. In other words, utilities are likely to be paying more for their uranium as this decade progresses.

David Miller argues that some of that uranium production is likely to come from the smaller, but well-capitalized, companies, such as Strathmore Minerals. “Our strategy from day one, and we haven’t veered from this at all, has been to acquire as many known uranium deposits as we possibly could,” explained Miller. “We started early in this uranium cycle in 2003. We were out there before 95 percent of these other uranium companies even thought of starting uranium companies. We were able to pick up some very good deposits in New Mexico and Wyoming. These are known, drilled-out uranium deposits in the country that’s produced as much as uranium anywhere else on earth. We’ve taken all that exploration information, where they discovered these old deposits, and have acquired a number of those old deposits. Now, we have opened a permitting office in New Mexico and starting the permitting process to put those into production, somewhere down the road. We don’t know if we can do it in four years or six years. It’s a long process and all kinds of studies must be done to get these fully permitted and into production.”

But there is a second part to the Strathmore Minerals strategy. Miller announced, “Don’t ignore the richest uranium province on earth, which is the Athabasca Basin in Canada. Strathmore is the Number One landholder in the Athabasca Basin., even larger than Cameco. We control approximately 3 million acres in Canada, and nearly all of that is in the Athabasca Basin. We have dozen different individual projects in the Basin. We are starting the exploration process on all of those. As I said earlier, exploration takes a long time. We have not made any discoveries yet, and it may be three to five years before we make a discovery.”

The case with Cameco (NYSE: CCJ), the blue chip publicly traded uranium producer, may also help fuel uranium prices rally to higher levels. They have forward sold their production. Added Miller, “I would bet their average sales price, under contract right now, of the 20+ million pounds they deliver every year is somewhere in the low teens – maybe $13/pound plus/minus $1-2. As these contracts mature, and bring on new contracts, that price is going to keep going up, but lag the market. They should keep going up for the next five years.”

And that should summarize why uranium prices are unlikely to suffer a down cycle over the next several years.

The Case for Nuclear Energy

As electricity demand grows by leaps and bounds during the 21st century, many of the world’s governments are seriously considering nuclear energy as a safer alternative to coal-fired plants. As many study the safety issues of nuclear-powered electricity, they tend to conclude that nuclear energy may very well provide a healthier, as well as a less expensive, alternative to present power generation methods.

Miller pointed out, “In the 1970s, when the anti-nuclear movement was very strong, the U.S. was then mining and burning 600 million tons of coal each year. And now, thirty years later, because the anti-nuclear industry was successful, we are burning 1 billion tons of coal per year, a 50 percent increase in the amount of coal we burn in this country.

According to the Environmental Protection Agency, U.S. air pollution in 1999, as a result of energy from coal, emitted more than 13 million tons of sulfur oxides and nearly 5.5 million tons of nitrous oxides. In a Harvard School of Public Health study, as many as 70,000 Americans are dying each year as a result of air pollution. From sulfur dioxide alone, Harvard estimated that 2400 Americans die for every million tons of sulfur dioxide emitted, or more than 30,000 American deaths annually.

But, air pollution is far worse elsewhere. “The pollution levels in China – from Shanghai to Beijing – are shocking,” said Miller. “Emphysema kills 5,000 people per year in the coal mines. They need nuclear power, probably more than any area on earth, to clean up their air.”

About David Miller:
David Miller, P. Geol.
President & COO, Strathmore Minerals Corp.

David worked for over 20 years with Pathfinder Mines Corporation/Cogema, the second largest producer of uranium in the world, the last 4 years as its chief geologist for in-situ operations in the US. Mr. Miller has over 25 years of experience in the exploration and acquisition of uranium properties. He has also consulted in uranium exploration, mining, and "in-situ" recovery for the International Atomic Energy Agency (IAEA) in Vienna. In association with the IAEA, David also taught uranium geology, exploration and ISL mining practices at the Beijing Research Institute of Uranium Geology and Mining. Mr. Miller is also an elected member of the Wyoming Legislature. His committee assignments include the Minerals and the Energy Council. Mr. Miller has been the key architect behind the Strathmore Mineral Corp's property acquisition strategy in the U.S. in identifying drilled out in-situ leach recoverable uranium properties in Wyoming and New Mexico.

November 16, 2005
By James Finch
StockInterview.com

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http://EzineArticles.com/?The-Uranium-Bull-Market-Keeps-Getting-More-Bullish&id=97682

$20.00 Saint Gaudens Coins a Great Gold Investment

2007-09-12T21:32:00.001-07:00

By Michael Russell

The $20.00 Saint Gaudens gold piece is an absolutely beautiful coin that deserves the consideration of hobbyists around the globe. This coin, being a collectors' coin and not a bullion piece could be worth two to three times the actual ounce price of gold! These coins were minted from 1907 through 1933 and many investors already rank it as one of their best choices for investment purposes. These $20.00 gold pieces have been recognized since the Civil War and have a broad appeal. Therefore they are selling fairly low for gold pieces right now!

When looking to purchase these beautiful coins it is recommended that you research gold prices at the same time. PCGS MS-64 and MS-65 grade the prices of St. Gaudens coins. The higher the MS value, the more valuable the coin is. Visit numismatic sites on the Internet such as California Numismatic Investments to educate yourself on these investments.

This $20.00 piece provides a "double play" advantage because of its high gold content and when gold bullion prices rise these coins will also rise and could bring you a handsome return, up to three times the price of gold bullion! The market of Saint Guadens gold coins holds their value. Many wealthy royal families and government treasuries along with collectors, typically own Saint Gaudens coins! Besides their market value, the beautiful design of the coin is gorgeous. Its art form is in itself an incentive for collecting the coin!

The American Government considers the $20.00 gold piece a rare coin, even though the premiums on the higher-grade coins are low. This rare coin is not subject to the ordinary reporting requirements that gold bullion coins are. Many people think that further government controls will be places on gold bullion and others even think that it is possible for gold bullion to even be confiscated again! If this happens, then the Saint Gaudens coin will become even more desirable and possibly more valuable!

When looking to buy these coins, make sure they are professionally graded by the most highly respected grading organization in the world, The Professional Coin Grading Service, or the PCGS. When you own a coin with this grading behind it you can determine your investment in regards to price and grade. You know what you have and are not dependent on a coin dealer!

The $20.00 gold coin market is traded via satellite by The Certified Coin Exchange (CCE) daily, so instant prices quotes are available! Value of these coins is not an abstract quality. The direct bearing on the coin’s worth involves its function of demand, investor base, weight, beauty, rarity, affordability and profit potential. Many individuals who believe in the power of gold to make money will move up to fifty percent of their bullion coins into St. Gaudens $20 pieces which are graded PCGS MS-64 (choice uncirculated) or even the higher grade of PCGS MS-65 (gem uncirculated). That way the gold pieces are actually worth more than their weight as in bullion coins!

These coins will surely improve and enhance your investment portfolio and give you beautiful pieces of art to treasure and admire! So go ahead and expand your investments with the beautiful Saint Gaudens coin!

Michael Russell

Your Independent guide to Coin Collecting

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Gold and Silver Investment Choices

2007-09-12T21:30:00.001-07:00

By Chris Ralph

Gold and other precious metals have been moving rapidly upward in the market, and investors wonder what investment vehicles are the best choices to capture that upward price appreciation in the precious metals market. Many wish to buy and hold the precious metals themselves, but there are a number of alternatives. Each of these different options has its own strengths and weaknesses. This discussion gives some basic information on the most common possibilities. Depending on what your goals are, you may choose to use one or more of the available options described below. I'm not an investment counselor, nor am I offering any investment advice, but here is a brief explanation and introduction to each of the best known opportunities for precious metals investment:

US and international gold bullion coins

The US and many other countries have made and are continuing to make gold bullion coins for sale. These are not coins which are rare and have numismatic value, but are coins made for investors interested in their bullion value. The American gold eagle coin is available and denominations of 1/10 ounce, one quarter ounce, one half ounce and 1 ounce. The great advantage of bullion coins is that they are easily available, liquid and portable. Most coin shops buy and sell them. If you plan to buy small amounts of gold, perhaps half an ounce a month for investment purposes, this is the kind of thing you may be interested in. The disadvantage is that they have a significant cost of getting in and out. It will cost about $25 plus the spot price for 1 ounce coin, and if you sell it you will receive a few dollars less than the spot price. The cost for a buy and sell combined is about $30. Foreign bullion coins, such as Canadian Maples or Krugerrands are slightly less liquid but may also have lower buy and sell costs. There are also one ounce silver bullion coins, which are available with a similar significant cost to buy and sell.

US 90% coin silver

Until 1964, all US coinage other than nickels and cents were made of 90% silver. These coins also have a bullion value based on their silver content. You can normally purchase from just a few to a big bucket full, and they are sold both by weight and by face dollar amount - by weight is probably the better deal as some old coins are worn. These coins are available at most coin shops. Like other bullion coins, there is a significant cost to buy and sell.

US Gold numismatic collector coins

Many investors are interested in gold collector coins. These are coins with a large numismatic (coin collector) value premium in addition to their bullion value. These coins will fluctuate somewhat with precious metal prices, but many times they also contain a significant price premium due to their desirability as collector coins. Sometimes the collector price appreciates significantly, but for those who really wish to invest in the appreciation of precious metal prices, these coins are probably not the best vehicle.

There are many more potential investment choices for gold and silver. Check out the Author’s website for further discussion. http://nevada-outback-gems.com/gold_invest/investing_gold_vehicles.htm

Chris’s Web page and BLOG on investing in the gold and the stock Market can be viewed here: http://nevada-outback-gems.com/gold_invest/Investing_Gold.htm Chris Ralph writes on small scale mining and prospecting for the ICMJ Mining Journal. He has a degree in Mining Engineering from the Mackay School of Mines in Reno, and has worked for precious metal mining companies conducting both surface and underground operations. After working in the mining industry, he has continued his interest in mining as an individual prospector. He can be reached at P.O. Box 3104 Reno, Nevada 89505. His information page on prospecting for gold can be viewed at: http://nevada-outback-gems.com/prospect/chris_prospect.htm

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Is Gold Going to Double in Price AGAIN?

2007-09-12T21:28:00.001-07:00

By Justin Power

If the so-called ‘gold bugs’, investors who believe passionately in the long-term value of buying gold, are right, then this could be a good time to add a little glitter to your portfolio. Over the last five years the price of gold has more than doubled from US$250 to US$574 a troy ounce and it is still nowhere near its all time 1980 high of US$850 a troy ounce. In fact, there are many who believe it could double in price AGAIN!

Just because gold is cheap now when compared to 25 years ago doesn’t automatically mean that it is a good investment. However, there are three sound reasons to believe that prices will continue to soar.

Firstly, the growing economies of Asia and the Middle East have resulted in a huge surge in demand – especially for gold jewellery. For proof one need look no further than global gold jewellery sales, which increased by 19% last year.

Secondly, a rising number of private investors all over the world have been putting some or all of their savings into gold as a hedge against economic or political instability and, in some cases, war. When investors feel the future is uncertain (as many appear to at the moment) demand for gold always surges. This is doubtless in no small part due to the fact that the price of gold tends to move in the opposite direction to virtually all other conventional asset classes – making it ideal when investors wish to diversify.

Thirdly, the mining industry can’t keep up with demand. Last year’s figures show that in excess of 4,000 tonnes of gold were purchased, but only 2,500 tonnes were mined. What’s more, production is falling by an average of 4% a year and it will take the industry anything up to ten years to increase supply by the required volume. In the past, when demand outstripped supply, the shortfall was met by many of the world’s central banks. No longer. Countries, which had been disposing of their gold reserves, have slowed down sales or even stopped selling altogether. Some central banks, notably those of Russia, Iran and China, are actually believed to be buying bullion.

Although I believe that gold prices are likely to carry on moving upward, I would only suggest buying if you already have a range of other investments including shares, bonds and property. Furthermore, I wouldn’t necessarily advise buying gold coins or gold bars. The idea of owning a little ‘hoard’ may seem attractive, but gold in all its forms is expensive to ship, store and insure. Instead you may like to consider investing in one of the various gold mutual funds. These offer a cost-effective, convenient and potentially more lucrative way to benefit from any increase in gold’s value.

A good example of what a mutual gold fund has to offer is the top-performing Merrill Lynch Gold & General Fund which has produced an average annualised gain of 33.9% over the past five years and which is up around 1000% since its launch in 1988. The bulk of the UK£855 million fund is invested in gold mining shares. Obviously, gold mining shares rise in line with the value of gold. Your risk is diversified and you can leave it up to the fund manager to choose the best opportunities. There are plenty of funds to choose from and you can pick a fund that matches your own objectives. One fund might aim to track the price of gold, for instance, another to track one of the various market indices such as the FTSE mining index.

Speaking of the FTSE mining index, which outperformed the FTSE all-share index in 2005, if you have plenty of capital at your disposal an alternative option would be to buy a portfolio of individual mining company shares. On the upside this will give you greater control and involvement. On the downside you will have to decide which of the hundreds of different mining company shares to buy.

There is one further possibility worth considering. Invest your money in one of the exchange-traded funds (ETFs) for gold. An ETF is listed on the stock market and allows you full exposure to the price of gold, without actually having to take delivery of the bullion. The fund buys and holds the gold, while the investor holds ETF shares. The world’s biggest ETF is Exchange Traded Gold (marketed under different names) which holds 431 tonnes of the yellow metal. This is more than the Bank of England’s reserves.

One of the most senior industry experts in the world, Robert McEwen of U.S. Gold, was recently reported as predicting that gold prices may reach US$2,000 an ounce by 2010. If he is right, you could be kicking yourself for not getting into the market whilst prices are still relatively low.

Justin Power http://www.powerreport.net

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Five Good Reasons to Invest in Gold

2007-09-12T21:26:00.001-07:00

By Nancy Ayash

Financial markets have always been uncertain; it is the nature of the beast. But in today’s world of globalization, economic health can get more out of whack than ever before. This just might be a good time to smooth out some of that insecurity by investing in gold, also known as the money of last resort. Not only would you protect yourself against the falling dollar, but you could make a hefty profit in precious metals. Here are the best reasons for converting your money into gold:

• Troubled times in the United States’ fiscal gap.

As you read this, the US government is piling on more debt, which at the moment stands at $63 trillion. What does this mean for you? As the Federal Reserve continues to print more money, it will cut into the purchasing power of the dollar, and inflation will spin out of control. This happened to Germany following World War I, when it took a wheelbarrow of German marks to purchase one loaf of bread.

• Troubled times in the macroeconomic investment climate.

Kuwait has just announced that their currency will not be pegged to the dollar. China has sold off at least 1 billion in US Treasury Notes, as Venezuela and the United Arab Emirates replace their dollar reserves with the euro. The signal coming from other governments is a warning sign; our dependence on foreign bond buyers to finance domestic consumption is rapidly coming apart. The United States’ economy is held together with baling wire and duct tape.

• Supply and Demand.

While mining companies continue to extract gold, production cannot keep pace with demand. From 1992 to 2005 world output totaled 1.1 billion ounces. Reserves are barely half that size, and dwindling. Large mining companies must scramble to keep up production, turning to the junior mining segment for exploration and discovery. But between 1985 and 2003 new discoveries had slipped by 30 per cent. Basic economics tells us that when supply cannot meet demand, the value increases.

• Historical value.

Gold cannot be made. It is what it is. That is why the value of gold has been used for over 5,000 years. In his speech, Anthony S. Fell, a leading banker with the Royal Bank of Canada, stated the following:

“To some extent, I regret to say, all paper currencies are becoming somewhat suspect, and accordingly, it is my view that gold bullion, rather than being the barbarous relic described by John Maynard Keynes, may well become the asset of choice for many investors over the coming decade…notwithstanding the modest rise in gold prices over the past few years, that is where gold bullion is today, and it represents great opportunity.”

• Gold is the great stabilizer for all economies.

Gold inhibits governments from printing money and placing the citizenry in debt. It prevents the devaluation of currency brought about by inflation, and increases the wealth of nations. Gold provides protection from abusive usury, encourages savings, and puts and end to taxation and the exploitation of the world’s population.

Investing in precious metals is the only safe haven against a falling currency. The U.S. Dollar index has fallen 30 per cent since 2001, while gold and silver have more than doubled in value.

Since 1913, when the Federal Reserve became the issuer of American currency, the dollar has lost 98 per cent of its value.

The question arises, should you be investing in paper assets, or gold?

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Buying and Selling Gold

2007-09-12T21:23:00.001-07:00

By William Brister

Gold has always been used as a form of money since 560 BC. And even today, it is considered by many cultures as a valuable and long term investment as well as a safe haven in times of crisis. Gold and other precious metals are assets that are both tangible and liquid and hence considered safer than other investments. Most people believe that if the monetary or financial systems collapse, gold would still retain its value. Selling gold accumulated over the years could be the answer out of financial ruin. Thus gold as an investment is a prudent idea. Even central banks across the world are believed to retain large reserves of gold.

Today, gold trades in all the big financial markets around the world. It would not be surprising to note that a current market price for gold is being established in some market at any time of the day or night. Two of the most important world markets are in London and New York.

The London market is one of the oldest in the world as well as the largest for physical gold. The term ‘London gold fix’ which has been used since 1919 is used in contract arrangements across the globe. The New York market is particularly noted for the volume of "paper gold transactions" such as futures contracts that are traded on the exchange. The other important gold markets are in Zurich, Tokyo, Sydney and Hong Kong.

Today, like all investments, the price of gold is governed by demand and supply as well as hoarding and selling. The latter plays a more important role as far as the affectations in price are concerned because all the gold that is mined comes on to the market at the right price. Thus, given the huge quantity of hoarded gold compared to the annual production, the price of gold is affected by changes in sentiment rather than changes in production or demand on gold jewelry.

Why invest in gold?

There are some fundamental reasons why the price of gold will tend to see an incline in the next few years and gold as an investment will be considered a wise move.

Since 2001, Gold is believed to have doubled in value. In a simultaneous reaction the U.S. Dollar index has fallen by about 23% while the Dow Industrials have only risen by 16%. That is why most analysts believe gold will continue its rise in a bull market and gold as an investment will continue to flourish.

Another important reason for gold prices to increase is the continuous rise in world oil prices. The factors leading to this phenomenon are the Middle East crisis, OPEC’s commitment to higher oil prices and more importantly the potential decrease in oil supplies with a growing demand of oil from developing nations. Subsequently, as oil prices rise, so do the gold prices as it spurs inflation in the economy.

Last but not the least it is the $63 million fiscal gap that is contributing to the rise in gold prices. The fiscal gap is a measure of the difference between projected future government expenditure and tax receipts. This means that, with a $63 million fiscal gap, the government is in debt or technically bankrupt. To manage this debt, it can print money which will only lead to inflation; thus precious metals such as gold will remain one of the few safe investments that not only protect us against inflation but also unrestrained government expenditure.

Thus, buying gold as an investment at today’s prices would offer considerable gains and protection from financial problems in the future.

William Brister http://moneyproguide.com/ - Buying gold as an investment at today’s prices would offer considerable gains and protection from financial problems in the future.

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Is Gold Still a Buy?

2007-09-12T21:21:00.001-07:00

By Al Thomas

The price of gold has advanced more than 100% is less than a year. Is this a time to buy or sell?

As you know gold comes in many forms. Gold bars, gold coins, gold mining stocks, Exchange Traded Funds (ETFs) and gold mutual funds. Lots of gold bars are at the U.S. Mint. These come in various sizes and the biggest drawback is resale because they have to be re-assayed for purity content.

Gold coins are minted by many governments including our own. They all have approximately one ounce of gold, but may be of different carat purity. There are American Eagles, South African Krugerands, Austrian Philharmonics, Chinese Pandas, Canadian Maple Leafs, Australian Kangaroos and on and on. Almost all stamped in one ounce coins and many are available in 1/10 ounce size. These can be bought and sold at any legitimate coin shop with a bid and offer differential of less than 5%.

Price of gold fluctuates daily as it is traded on a supply and demand basis. There is not a single major currency in the world in which gold has not seen a price rise. That is why gold is going up and that is why gold has not seen its highest price yet.

Let’s look at it a different way. An ounce of gold is still an ounce of gold, BUT the major world governments are printing more and more paper money every day with no backing to the currency.

What you are really seeing is more paper money being created for the same amount of gold. Yes, more is being dug out of the ground, but Japan, Germany, England, France, Germany, etc. etc., are running the printing presses faster than the guys are digging with the shovels. As long as that continues the price of gold will rise – and there doesn’t seem to be any end in sight.

The excess printing of paper money until it has become completely worthless has been done many times in history before including by our own government. During the Civil War both the North and South printed themselves into oblivion, but gold was always accepted because it had value.

Gold has always been hoarded more in Europe and Asia because they have seen the ravages of the government printing press. We all remember the stories of inflation in the Weimar Republic of Germany after World War I where it took a wheelbarrow of paper money to buy a loaf of bread. Unless we can put a muzzle on politicians it can happen again. The only protection the citizen has is real value and gold represents one item of true wealth.

Is gold still a buy? As long as the federal government continues printing worthless paper money gold will be a good investment.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

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Why Invest in Gold?

2007-09-12T21:19:00.000-07:00

By Michael Dawson

I am often asked - why do I invest in gold and gold stocks? There are many reasons why gold prices are increasing and will continue to increase, but the simplest answer is the basic principles of supply and demand. In the early 80s, Cabbage Patch dolls were selling 100 times retail price due to lack of supply. This priced many people out of the market and angered parents around Christmas time. I don’t believe the company intended to drive prices up with a limited supply strategy - especially since it didn’t benefit from the higher prices as a secondary market evolved. Thus, to profit from the demand the company had to increase production. I believe that a similar scenario is evolving in the gold patch.

From 1980-2001, there was very little interest in Gold as it fell to a low of $255/oz. Mining companies were not able to attract investment capital to bring new mines and projects to fruition, thus gold supplies diminished. During this same time period, India and China were beginning to see the fruits of their industrialization efforts. As the countries industrialized, their citizens benefited and began moving from the poor to middle class.

There are literally billions of people in India and China. Each has cultures that encourage savings and have a strong affinity to gold. As more move to the middle class and transfer a part of their savings to gold, the investment demand will be tremendous. This will be exciting for gold investor; however, that will only be a fraction of the demand. The central banks of Russia, Argentina and South Africa have all announced that they will be increasing their gold reserves with rumors of China and perhaps all of Asia to follow.

http://www.kitco.com/ind/Hommel/dec122005.html

The gold mining companies do not have the luxury of the Cabbage Patch doll company which was able to quickly ramp up production. It takes 5-10 years to bring a new gold mine into production. This will leave the industry in supply deficit for many years to come. Investment demand alone should be enough to get you excited about investing in gold. However, there are many more reasons. The Aden Sisters captured it extremely well in their latest commentary.

http://www.321gold.com/editorials/aden/aden062206.html

The investment demand from individuals as well as governments will put a tremendous demand on an industry that is already in supply deficit. As with any investment, its price will not go straight to the moon, but will ebb and flow. However, until supply and demand are in balance prices will continue to increase. An investor with a systematic approach as described in my previous article, “Dollar Cost Averaging Your Way to Double Digit Returns,” will be extremely pleased.

About the Author

Michael Dawson, is the founder, of The Time and Money Group. The company was created to encourage others to achieve their dreams through financial freedom.

http://www.thetimeandmoneygroup.com

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The Gold ETF: Maybe The Best Way To Own Gold

2007-09-12T21:16:00.000-07:00

By Larry Holmes

Let's start off with the assumption that you want to own gold. You want to own gold as a hedge against inflation. You want to own gold as a hedge against a declining currency, like the U.S. dollar. And you want to own gold -- well, for the same reason you would make any investment -- because the price is likely to go a lot higher in coming years.

But how do you own gold? Until this year you had two basic choices: You could own the metal or you could own shares of gold mining companies (for the purpose of this discussion I'm leaving out gold futures). The disadvantage of owning the metal is that it's not convenient. You have to store it and insure it. That's a pain. And the transaction costs can be high when you go to buy or sell it.

The disadvantage of owning the shares of mining companies is that you own a stock. And you have all the risks that you would have in owning any stock. Management may make poor decisions. Increased operating costs could hurt earnings. The price of the stock could go down while the price of the metal goes higher, etc.

There's a third way to own gold. And it may be the best way. StreetTracks Gold Trust (symbol: GLD), makes purchasing gold just as easy as buying shares of Microsoft or Starbucks. It's innovative and it offers a very liquid and cost-effective way to invest in an important asset that, until now, was not available to individual investors. In fact, it is so innovative and such a major advancement that it will dramatically change the way investors look at investing.

Here are some relevant facts about GLD…

The investment objective of the Trust is for the shares to reflect the performance of the price of gold bullion less the expenses of the Trust's operations. The shares are designed for investors who want a cost-effective and convenient way to invest in gold.

One unit (share) of GLD represents 1/10 of an ounce of gold. For example, if gold is at $470 an ounce, the shares will be priced at approximately $47.

GLD trades on the New York Stock Exchange.

It trades at a very small premium or discount to gold at any given time -- usually less than 1%.

Expenses are low -- currently 0.4%

GLD is very liquid. There are 66,900,000 shares outstanding. Average daily volume is almost two million shares. Assets are currently valued at $3,155,106,000. And that's after less than one year of trading.

The StreetTracks Gold Trust has been one of the most successful new financial vehicles ever launched. And for good reason -- GLD is a great way to buy and sell gold.

Larry Holmes invites you to visit http://www.smart-money-report.com/ Your common sense guide for financial and investment success.

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South African Mining Companies and Mining Houses are Being Reevaluated

2007-09-12T19:09:00.000-07:00

By Gerald Crawford

South Africa holds the world’s largest reserves of gold (35%), platinum group metals (55.7%), manganese ore (80%) chrome ore (68.3%) titanium metals (21%). It also produces a large share of the world’s diamonds and mineral deposits.

Lucrative opportunities exist for downstream processing and value adding of iron, carbon steel, stainless steel, aluminium, platinum group metals and gold.

Beneficiation of minerals before export is a major growth area. The Department of Minerals and Energy has embarked on a small-scale mining programme aimed at encouraging and facilitating the development of economically viable small-scale mining and mineral-based industries, in line with the government's desire that small miners gain access to mineral rights suited to small mining activity.

Relationships between individual mining companies and the controlling mining houses are being reevaluated. Mergers, restructuring and unbundlings have created much optimism for the industry in recent years, driven by the need to develop black ownership, to expand abroad and by a languishing gold price.

Mining and minerals in South Africa:

South Africa is a world leader in mining. The country is internationally renowned for an abundance of mineral resources, accounting for a significant proportion of both world production and reserves, and South African mining companies dominate many sectors in the global industry.

South Africa is the world's biggest producer of gold and platinum and one of the leading producers of base metals and coal.

The country's diamond industry is the fourth-largest in the world, with only Botswana, Canada and Russia producing more diamonds each year.

Although well over a century old, South Africa's mining industry is far from fully tapped. The country is a treasure trove, with mineral deposits only matched by some countries of the former Soviet Union.

While holding the world's largest reserves of gold, platinum-group metals and manganese ore, the country has considerable potential for the discovery of other world-class deposits in areas yet to be exhaustively explored.

Only two strategic minerals - crude oil and bauxite - are not available in the country. For the rest, the sector spans the full spectrum of the five major mineral categories, namely precious metals and minerals, energy minerals, non-ferrous metals and minerals, ferrous minerals and industrial minerals.

Apart from its prolific mineral reserves, South Africa's strengths include a high level of technical and production expertise, and comprehensive research and development activities.

The country has world-scale primary processing facilities covering carbon steel, stainless steel and aluminium industries, in addition to gold and platinum.

Minerals beneficiation:

With the growth of South Africa's secondary and tertiary industries as well as a decline in gold production, mining's contribution to South Africa's gross domestic product (GDP) has declined over the past 10 years.

However, this may be offset by an increase in the downstream or beneficiated minerals industry, which the government has targeted as a growth sector.

Lucrative opportunities exist for downstream processing and adding value locally to iron, carbon steel, stainless steel, aluminium, platinum group metals and gold.

A wide range of materials is available for jewellery, including gold, platinum, diamonds, tiger's eye, and a wide variety of other semi-precious stones.

Industry transformation:

South Africa's mining industry is continually expanding and adapting to changing local and international world conditions, and remains a cornerstone of the economy, making a significant contribution to economic activity, job creation and foreign exchange earnings.

Change strategies adopted by the industry since the end of apartheid in 1994 have made it more competitive.

With new leadership in place, better structured companies, and a more robust operating and financial base, South Africa will continue to be an important player in the global mining industry.

Gerald Crawford was born in South Africa, studied electronics, telecommunication, eco-travel and african travel concepts. He taught responsible tourism in South Africa. If you have any questions or comments please e-mail me on. E-mail Address: southafricantravelarticles@12234455.co.za Website Address: http://www.12234455.co.za

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Gold Mining Stocks Yield Big Profits: Get Your Share

2007-09-12T19:01:00.001-07:00

By Chris Ralph

In the past three years, gold has nearly doubled in price, and exploration for gold and silver, long neglected for most of the past 20 years is again springing to life. Geologists are studying maps and flying off to check out neglected gold deposits all over the world. Smaller, junior mining exploration firms are out sampling, trenching and drilling their properties. In Nevada, it’s hard to get a knowledgeable and well qualified drill crew to come out with their rig and drill your property – there is a waiting list. Almost as soon as the drill samples are collected, they are whisked off to be analyzed and not long afterward the mining and exploration companies are reporting their results.

The stock price a successful exploration company with a new find may increase 4 fold and more in a matter of a few weeks. Spectacular gains for certain select mining stock prices has happened a number of times in recent years. With the strong price of gold and silver, and the potential for significant gains, many investors are seriously considering mining and exploration company stocks for inclusion in their portfolio. The question becomes, however which companies should be selected for investment? Unfortunately, the geologic information in the press releases they offer can be confusing and their interpretation difficult. So how is the investor to sort through and interpret all these reports with their technical information such as geologic maps and sections when they are offered to the investing public?

Before investing in a company, be sure to do your homework and find out everything you can about the company you are interested in. Press releases are a common source for information, but be sure to also look at the company websites. Many companies will have a copy of the report they made at the last stock holders meeting and this will often have much more detailed information than is offered in simple press releases.

Both exploration and mining are risky businesses – There is a great potential for gains, but also great potential risk of loss. Consider all the sources of information you can get and before you invest in an exploration company, study up and see what the potential really is. Know and understand the potential risks and don’t take on more risk than you can reasonably afford. Be sure not to put all your eggs in one basket – it is a sound strategy to diversify and invest in a number of companies in a variety of industries. Take the time to learn about the mining industry in general – how it works, the processes used, etc. before you jump in and invest. Taking a raw property from moose pasture to productive mine is far more difficult than it may appear.

The author is an independent investor and not a consultant, advisor or broker. Information in this article is presented for educational purposes, and it is not intended to be used as investment advice. The reader is strongly urged to fully identify and consider all the risks before making any investment.

For more information on investing in mining company stocks, check out the authors web page on Mining Company stocks at: http://nevada-outback-gems.com/gold_invest/Investing_Gold_mines.htm

For More general information on investing in gold and other precious metals, check out the authors web pages on investing at: http://nevada-outback-gems.com/gold_invest/Investing_Gold.htm

Chris Ralph writes on small scale mining and prospecting for the ICMJ Mining Journal. He has a degree in Mining Engineering from the Mackay School of Mines in Reno, and has worked for precious metal mining companies conducting both surface and underground operations. After working in the mining industry, he has continued his interest in mining as an individual prospector. He can be reached at P.O. Box 3104 Reno, Nevada 89505. His information page on prospecting for gold can be viewed at: http://nevada-outback-gems.com/prospect/chris_prospect.htm

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Steep Gold Price Increases Ahead - Experts Foresee $2000 Per Ounce

2007-09-12T18:58:00.000-07:00

By Chris Ralph

Many investors are realizing that gold and silver now have an upside potential to appreciate that has not been seen since 1980. Similar to the situation of the late 1970’s, investors are once again seeing gold coins and bullion as an important hedge against the uncertainly of war, inflation and the potential destruction of wealth due to a shaky dollar. Gold’s recent performance is also attracting serious interest from investors because it has outperformed the S&P 500 index for the past five years in a row. Gold and silver prices have moved steadily upward since 2001, as the value of the dollar has weakened. Many experts believe that this is a longer-term rally, which is quite young.

Robert McEwen, chairman and chief executive of a Canada-based gold mining company is very bullish on the future outlook for gold. "I expect it to test $850 by the end of 2008, and by the end of 2010, north of $2,000, possibly $5,000," McEwen stated in a recent interview. Strong gold and commodity prices are spurring investment in the search for new deposits by many mining companies across the world. His company is currently exploring for gold on mineral lands in central Nevada and expects to spend about $50 million to develop the site over the coming years.

Gold is seen as a profitable opportunity by many investors, having risen over 50% during the last two years, from $430 per ounce in May of 2005 to its current spot price of around $660. While McEwen’s price projection is considerably above the current spot gold price, he is not the only industry executive who foresees steeply increasing prices in the near future. The former CEO of a large well known US based gold mining company, Pierre Lassonde, believes gold will reach $750 by Christmas of this year. In spite of the price increases in the past several years, actual production of newly mined gold from most nations continues to decline, as costs rise at existing mines.

In spite of the fact that gold prices have been rising toward their May 2006 peak of $725, they have failed to break above the $700 mark this year, and are still seen as consolidating after the sharp run-up in prices last year. In addition, selling of the gold reserves of certain European nations, most notably Spain, is seen as depressing prices in recent weeks. Silver prices have also remained strong.

Many experts believe that although demand from jewelry makers will likely drop off as gold prices rise, it is likely to be more than made up for by increased purchases from investors who are seeking a liquid investment alternative to the dollar. Investment in gold and silver for both large and small investors has been made considerably easier in recent years with the creation of Exchange Traded Funds – funds whose assets are gold or silver held in storage. That expected increase in investment demand, coupled with the declining value of the dollar, rising costs to mine gold and the geopolitical risks around the globe, should tighten the supply and demand picture for the precious metal providing the driving force to move prices upward in the coming years.

The author is an independent investor and not a consultant, advisor or broker. The information and opinions expressed in this article are presented for educational purposes, and are not intended to be used as investment advice. The reader is strongly urged to fully identify and consider all the risks before making any investment.

For more information on the case for investing in gold can be seen at the authors website at: http://nevada-outback-gems.com/gold_invest/investing_gold_case.htm

Chris’s Web page and BLOG on investing in the gold and the stock Market can be viewed here: http://nevada-outback-gems.com/gold_invest/Investing_Gold.htm

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Gold and Silver Investment Choices

2007-09-12T18:56:00.001-07:00

By Chris Ralph

US and international gold bullion coins

US 90% coin silver

US Gold numismatic collector coins

There are many more potential investment choices for gold and silver. Check out the Author’s website for further discussion. http://nevada-outback-gems.com/gold_invest/investing_gold_vehicles.htm

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A Unique Precious Metals Exchange Traded Fund is Launched Under a Cloud of Worry

2007-09-12T13:45:00.000-07:00

By Andy Goldman

On May 22nd a new metals based Exchange Traded Fund began trading on the Amex (GDX). The new Market Vectors - Gold Miners ETF was launched by the Van Eck Global firm and trades under the ticker symbol GDX. Those who follow the Exchange Traded Fund Industry are likely to be aware of streetTRACKS Gold (GLD), iShares Comex Gold Trust (IAU) and iShares Silver Trust (SLV). All these funds have come into being with a great deal of fanfare. This new fund which tracks the Gold Miners Index happened to have been launched during one of the most precipitous drops in precious metals prices seen in years. No wonder why you may have missed its launch.

Its’ downplayed launch was too bad, especially because the Gold Miners ETF is the only one of its kind in the US. Though it is related to the precious metals industry, it is much diferent then the GLD, IAU, and SLV Funds, which are all based on the prices of either silver or gold. This is a very narrow focus, much more like investing in commodities then in equities.

The Amex Gold Miners Index, is the first exchange-traded fund in the U.S. offering investors exposure to the gold-mining equity market, as opposed to just the metal itself. This is more broad based for investors and is based on equities in the industry not commodity prices. The new ETF may present more opportunities to benefit from volatility, as mining-related shares tend to move more dramatically than overall bullion. Another key difference is that, unlike GLD, the GDX is optionable. The top ten holdings in this new ETF are:

Newmont Mining 13.51
Barrick Gold 8.50
AngloGold Ashanti 7.51
Goldcorp 6.53
Gold Fields 6.50
Freeport-McMoran 6.16
Glamis Gold 4.97
Harmony Gold 4.37
Kinross Gold 4.06
Buenaventura 3.72

With the recent downturn in gold and silver stocks , much of the thunder was taken out of the launch of the GDX. This fund had the unfortunate luck to be released for trading during a period in which the precious metals have seen their greatest setback in years. The most popular of the Gold ETF’s streetTRACKS GLD has been trading at a volume of 10 to 20 million shares for most of May. The Gold Mining ETF, GDX, has traded at a volume of 200,000 to 600,000 shares in its first week. GDX, which is a broader based fund then GLD, may have easily traded at a much higher volume its first week, if it wasn’t for a steep downturn in precious metals.

The question now is it a good time to buy this new ETF? The Gold Mining Index which this new Exchange Traded Fund is based on, has just dropped from 1200 to 1000 in one week, a big drop for an index of stocks. A bounce here is likely. There was a great deal of speculation in gold. Even if this is the bottom, it will take some time before Gold prices begin to recover from their recent plunge. Keep a close eye on the trading volume for GDX to see if institutional investors begin moving into this fund.

Andrew Goldman is president of Metal Rabbit media services, the operator of http://www.Exchangetradedfundinvesting.com He has written a number of articles on finance and investment over the last ten years.

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