There’s an interesting story playing out near the southern tip of Argentina that people who play the gold market should watch closely.
Andean Resources, a mining exploration company whose principal assets are gold and silver deposits in the Santa Cruz region of Argentina, had two gold companies offer to buy the company – Goldcorp, which made a $C3.6 billion bid, and Eldorado Gold, which offered $C3.4 billion. Andean accepted the higher offer but the market thinks another one could be coming.
The accepted offer translates into about $3.4 million. The value of the gold and silver reserves is about $3.6 billion. Now we all know there is a cost involved in extracting the gold from the ground, thus a bid should be at a discount. But this one seems very close to the reserves value. Which could mean a couple of things – Goldcorp and Eldorado are making a statement about gold and silver prices and that statement is they think prices will go higher. It could speak to the rarity of such desposits being available for sale. Or it could mean Goldcorp thniks there’s more gold in them hills. Likely a combination of the three.
And that could mean the bidding for Andean has only just begun.
Central banks have become net buyers of gold this year for the first time since the late 1980s, with India making a large purchase from the IMF earlier in November and Russia and China continuing to add to their holdings. Could this be the same kind of turning point as 1965, when gold purchases by the French central bank were the prelude to large-scale purchases by other central banks and – amid concerns about US inflation and the value of the dollar - a foundation of the long bull run in gold prices during the 1970s? So argues Societe Generale analyst Dylan Grice, in a research note entitled “Popular Delusions: a Minskian roadmap to the next gold mania.” If Grice is correct, we may be nearer to the beginning than the to end of another 1970s-style bubble in gold prices, even after the recent run-up. ”Gold feels frothy today, but the Indian purchase of IMF gold eerily parallels the French purchases of the late 1960s,” he writes.
When most of your business is sitting under the ground we walk on, and it fluctuates in value literally every minute of the day, you try to find create ways to minimize those potential price swings. And sometimes if you think the value is headed lower, you try to lock in what you believe might be a higher price.
Thus the $5.6 billion little headache Barrick Gold revealed late yesterday when it said it planned sell stock and use the proceeds to effectively cancel out some hedges that, well, didn’t exactly hedge the way they thought they would.
Today’s big news isn’t retailers’ so-so improvement in August sales. We’re still in less-bad territory – eg retail sales weren’t as bad as they were the previous month, or as expected. The big story is: GOLD. It’s nearing $1,000. The December gold contract is up 5.5% since Tuesday. What’s up with gold? It seems people aren’t overly worried about inflation – this normally propels a surge in gold-buying but all signs are that inflation won’t come roaring back any time soon. Frankly, it’s the dollar which is mainly propelling the gold rally. People just aren’t comfortable with the weakening greenback and are spreading their bets by stocking up on gold. DJN colleague Matt Whittaker refers to it as “alternative-currency buying.” Effectively, people are looking for something that’s not the stock market and not the U. S. dollar. They’ve filled up on Treasurys. What’s left that’s safe and reliable? Gold. Matt wonders when buyers will take profits – at nearly $1,000 certain investing sectors will indeed sell. Tomorrow’s U.S. nonfarm payrolls data will be key, Matt notes. If it’s lousy, gold will be supported If it’s good, we may see some selling. I’ll be off tomorrow, but watching my Blackberry …
Buy gold, says the manager of a small Sydney-based hedge fund whose reports are a quarterly treat to read. Last week’s disclosure that China holds more gold than it previously let on has whetted his appetite. I think he has misunderstood what actually happened. More on that below. Continue reading…
It doesn’t look like George Zimmer is going to be able to guarantee it, anymore. The founder of Men’s Wearhouse has been fired from his own company, the clothier announced today. Click here to read the announcement. “The Board expects to discuss with Mr. Zimmer the extent, if any, and terms of his ongoing relationship […]