Gold Seeker Closing Report: Gold and Silver End Slightly Lower

The Metals:

Gold fell $11.40 to $1712.00 by a little after 8AM EST before it rallied up to $1727.40 in the next couple of hours of trade, but it then fell back off midday and ended with a loss of 0.25%.Silver slipped to $33.329 before it rebounded to $33.818, but it then fell to a new session low of $33.257 and ended with a loss of 0.56%.

Euro gold rose to about €1311, platinum lost $19 to $1626, and copper fell a few cents to about $3.80.

Gold and silver equities fell over 2% by about 1PM EST before they bounced back higher in late trade, but they still ended with over 1% losses.

The Economy:

Tomorrow brings Empire Manufacturing, Net Long-Term TIC Flows, Industrial Production, Capacity Utilization, and FOMC Minutes.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil ended slightly lower in mixed trade as worries about Iran were offset by a stronger dollar.

The U.S. dollar index rose versus the yen after the Bank of Japan surprisingly expanded its asset-purchase program.

“The central bank said the ¥10 trillion increase in the asset purchases — raising the total to “about ¥65 trillion” — would be earmarked for the purchase of Japanese government bonds.”

Treasuries rose on worse than expected economic data that sent the Dow, Nasdaq, and S&P modestly lower for most of trade, but hopes over progress in Europe turned the major indices mixed and near unchanged by the end of the day.

Among the big names making news in the market today were Google, Apple, Boeing, and Avon.

The Commentary:

“The gold mining shares, as evidenced by the HUI, continue to lose ground against the price of gold bullion itself. They are approaching the three year low in this ratio that was made 3 weeks ago. One would think that they would find some buying support soon for valuation reasons.

The hedge funds continue to ply that ratio spread trade which they will do until they can no longer make any profits off of it. Maybe we are seeing a bit of a delayed reaction to news that the Obama budget contains a hefty 5% royalty tax on their revenues. That budget has zero chance of passing in its current form but it could be that the mere mention of such a thing has gotten some owners of these shares nervous especially if those risk aversion trades come back in vogue.

Once again it comes back to the desire on the part of investors to gain LEVERAGED exposure to the gold price. If they can do this by using the ETF and not have to concern themselves with risks of a political nature such as what is being attempted by the current Administration, they why bother buying these things at all is the thinking that is currently in vogue among the larger part of the speculative community at this point.

The mining shares are also now seriously underperforming the broader stock market continuing a pattern that has emerged since last summer.

Some of the readers wrote to express their desire to see a tax of this sort hit the mining sector. My only response to that is very simple - a royalty tax comes right off the bottom line of any company involved in mining here in the US. The lower the net profits of a company, the more it impacts their share price. Be careful what you wish for if you hold these shares in your portfolio and take the side of the Administration that this is a good and necessary tax. That is your portfolio and your wealth that is going to take the hit. If you are willing to lose your money over it - fine and dandy - but then do not complain and bitch when you see your portfolio going nowhere or actually moving in the wrong direction.

Hedge funds are not going to acquire mining company shares out of the supposed "goodness" of their hearts. They will only buy them if they think that they can make a profit on them and that necessitates continued strong and rising profits from these companies. Anything that might impact that will be part of the equation in calculating whether or not they meet these criteria.”- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

“Dear Extended Family,

The Gold Aficionado’s greatest fear is totally without basis. The price of gold will not fall significantly from its points of true standard valuation and the introduction of a new currency system.

Gold is heading back towards a monetary system and not away from it. The producing gold company of the future is the new utility as it dividends a majority of its profits to its shareholders.

The fact that gold is money and not a commodity is the safety latch that opens on its own when all other forms of money close. Gresham’s Law is human nature seeking a standard when all other forms of exchange have mutated to casino chips with national flags on them. Increasing world liquidity multiplies itself in increasing volatility of all things traded until an epic moment when over the top volatility convinces even the most economically ignorant that only a standard that cannot be multiplied by an instant Bernanke helicopter unlimited electronic monetary liquidity system is honest money. It is the flight from the burning values in terms of purchasing power of the casino chips called fiat currency towards a standard that proves Professor Gresham’s Law. It is a study of history that repeatedly shows his thesis that good money, honest money, forces out bad money.

Between now and 2015 gold will meet and, like all markets, exceed its value as a standard of measure. However there will be no repeat of the 1980 to 2001 price adjustment. Of course gold will meet and exceed a number, but its return to that full valuation will be a modest percentage of the total value. Gold is headed to a pendulum point at the introduction of the new virtual Western World Reserve unit for trade settlement.

I see the new system utilizing a Western World M3, which all member governments will agree to as 100 on the Index of Standard Currency Equilibrium. As this measure rises and falls, governments will agree that the value of their Treasury gold will move in the same direction and percentage according to their GDP ranking.

What will of course happen is the Squids of the Western world, the investment banks, will invent derivatives to speculate on member’s gold value requirements, which will change the price of gold in the marketplace and therefore remove the necessity of doing anything from the central banks. Once again the airwaves of the financial world will hang on the weekly announcement of the M figures, but this time it will be for a Global Western M3 tallied by the historical lender of last resort, The US Federal Reserve Bank.

There will be many variations and tweaks to this concept, but once again a new Rentenmark will be invented as a virtual reserve currency unit tied to a standard (gold) with a shadow of control on Western global money supply. A function of control will be by exposure (M3), but not convertibility. Like the Rentenmark it will be a bit of a farce, but it will work due to the demand for a fix that sits in the shadow of gold but is not convertible. This new Rentenmark will not be tradable by general business but rather be the virtual Standard Reserve Currency Unit (SRCU) available only to the central banks of the Global Western Monetary Association. All the present fiat currencies, the casino chips with national flags on them called things like the dollar and euro, will still be around and serving a purpose valued against the virtual Standard Reserve Currency.

The survivor will be gold. Its volatility will subside as it trades around a pendulum point that will be the price of gold on the day of agreement to the setting of the Index of Standard Currency Equilibrium (ISCE).

Assuming Alf Fields has called the number at $4500, then gold would trade in a range around $4500, say by $500, as the derivatives created to speculate on the Global Western world M3 changes via gold’s value.

What would not remain is the purchasing power of each casino chip with a flag on it, fiat currency. That would have fallen victim to currency induced cost push inflation, which now permeates the Western world’s financial system yet to be properly defined.

In conclusion, gold will not fall significantly in value after finding its full valuation as a standard. It will mutate into a currency form the same way German real estate gave the Rentenmark its value when Germany did not own all that much real estate.

The producing gold companies will now return to what they were in the 1940s and 1950s, the utility sector of the equity market as the best and certain yielders.

This is why I do what I do every day. Rather than in the 70s when I carried 22,000 long Comex gold contracts, I am building an entity to carry as many ounces of mineable gold as I possibly can assemble to become a utility equity of the future via outright ownership and royalty. That is done through TRX on the NYSE and TNX on the senior Toronto Stock Exchange.

Regards,”- Jim Sinclair, JSMineset.com

GATA Posts:

Adrian Douglas: Large move in the gold stocks imminent?

David Cottle: Gold has humbled smart men before

The Statistics:

Activity from: 2/13/2012

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: No change in Total Tonnes from yesterday’s data.

COMEX Gold Trust (IAU) Total Tonnes in Trust: 179.27: No change from yesterday’s data.

Silver Trust (SLV) Total Tonnes in Trust: 9,658.22: -42.31 change from yesterday’s data.

The Miners:

Centerra’s (CG.TO) work stoppage update, Keegan’s (KGN) drill results, Kimber’s (KBX) second quarter results, U.S. Silver’s (USA.TO) normal course issuer bid, Alexco’s (AXU) drill results, and Silver Standard’s (SSRI) sales update were among big stories in the gold and silver mining industry making headlines today.

WINNERS

LOSERS

Winners & Losers tracks NYSE and AMEX listed gold and silver mining stocks that trade over $1.

Please see Yahoo’s Mining/Metals News Wire for all of today’s mining news.

- Chris Mullen, Gold Seeker Report

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Additional Resources for today’s Gold Seeker Report can be found:

• http://www.capitalupdates.com
• http://www.goldseek.com
• http://www.silverseek.com
• http://www.goldreview.com

©Gold Seeker 2012

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