http://harveyorgan.blogspot.com/2013/06/gld-slightly-declinesgoldsilver.html
Monday, June 17, 2013
GLD slightly declines/Gold/silver withstand another raid/
Good evening Ladies and Gentlemen:
Gold closed down by $4.50 to $1382.80 (comex closing time). Silver fell by 20 cents to $21.75 (comex closing time)
In the access market at 5:00 pm, gold and silver finished trading at the following prices :
gold: 1385.40
silver: $21.88
At the Comex, the open interest in silver fell by a rather large 1923 contracts to 148,560 contracts despite silver's rise in price on Friday. The silver OI is still holding firm at these highly elevated levels. The bankers will desperately try and remove some of these stubborn longs before the big July delivery month rolls around.
The open interest on the entire gold comex contracts rose by 759 contracts to 377,031 which is still extremely low. There is no question that all of the weak speculators in gold have now departed. The number of ounces which is standing for gold in this June delivery month is 942.800 or 29.32 tonnes.The number of silver ounces standing in this non active month of June remained constant at 705,000 oz
Tonight, the Comex registered or dealer inventory of gold rose a tiny bit to 1.434 million oz or 44.60 tonnes. This is still dangerously low. The total of all gold at the comex rose a bit tonight but it is still well below the 8 million oz mark at 7.706 million oz or 239.68 tonnes of gold.
JPMorgan's customer inventory shows no change and rests tonight at its nadir of 136,380.611 oz or 4.24 tonnes. Its dealer inventory remains at 413,526.284 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.
The total of the 3 major bullion dealers, Scotia , HSBC and JPMorgan have in the dealer account only 30.02 tonnes of gold
The GLD reported a loss in inventory of .36 tonnes of gold inventory. The SLV inventory of silver remained firm with no losses or gains in inventory.
In physical stories we have reports from Jeff Neilson, Bill Holter, Alasdair Macleod David Franklin of Sprott Asset Management and Steve D'Angelo.
On the paper side of things, Bill Holter presents his second paper of the day.
Mark Grant delivers a very important commentary with respect to China.
We will go over these and many other stories but first.....................
Let us now head over to the comex and assess trading over there today.
Here are the details:
The total gold comex open interest rose by 759 contracts from 376,272 back up to 377,031 with gold rising by $9.20 on Friday. The front active month of June saw it's OI fall by 160 contracts from 1542 down to 1382. We had 172 deliveries served upon our longs on Friday. We thus gained 12 contracts or 1200 additional oz that will stand in this delivery month of June. The next delivery month is the non active July contract and here the OI remained constant at 719. The next active delivery month for gold is August and here the OI rose by 141 contracts from 212,613 up to 212,754. The estimated volume today was atrocious at 63,968 contracts. The confirmed volume Friday was also poor at 106,007. It seems that the many now realize that the Comex is a crooked game so investors are seeking other means to acquire gold.
The total silver Comex OI fell considerably despite as silver's in price by 37 cents on Friday. It's OI fell by 1923 contracts to 148,560. The longs in silver remain resolute, willing to take on the criminal bankers. The front non active June silver contract month shows a loss in OI of 5 contracts resting tonight at 29. We had 5 notices filed Friday so in essence we neither gained nor lost any silver contracts. The next big delivery month is July and here the OI fell by 2864 contracts down to 58,123. We are less than two weeks away from first day notice (June 28.2013) and judging from the relatively high OI in July, we may see some fireworks in silver. The estimated volume on Friday was poor, coming in at 29,576 contracts. The confirmed volume on Friday was extremely good at 51,475.
We again had 1 customer deposits today
i) Into Scotia: 12,178.435 oz (this arrived from the Brinks withdrawal on Friday)
total customer deposit: 12,178.435 oz
It is very strange that in a big delivery month, we are witnessing no gold enter the dealer or even the customer.
we had one tiny customer withdrawal:
i) Out of Scotia, 202.48 oz was withdrawn.
zero ounces were withdrawn from JPMorgan today as well as no notices were issued them as well.
As we reported to you two weeks we reported to you that JPMorgan withdrew a huge amount of gold from its customer account:
Out of JPMorgan: 217,844.96 oz.
If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).
The last Tuesday in May, we had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of last night 28,389.579 oz was settled upon, leaving 71,611.00 oz still left to arrive in the settling process.
Last Tuesday, June 11, we had 217,844.96 actual ounces leave JPMorgan
Today we had no issuance from any of the major bullion banks, JPMorgan, HSBC and Scotia.
In summary on the customer side of things for JPMorgan:
From the beginning of June we have had 1527 notices served from the customer side of JPMorgan for 152,700 oz. If we add the 71,611.00 oz owing from May issuance, we get 224,311 oz. We can subtract the actual withdrawal of gold form JPMorgan of 217,844.96. This still leaves 6466.04 oz that needs to be settled upon from the vaults of JPMorgan customer side.
Today we had one adjustment.
i) out of Scotia: 8819.233 oz was adjusted out of the customer account and this landed in the dealer account of Scotia.
The total dealer comex gold thus rises a bit to 1.434 million oz or 44.60 tonnes of gold.
The total of all comex gold, dealer and customer rests tonight at 7.706 million oz or 239.68 tonnes..a slight increase from Friday.
Thus tonight we have the following closing inventory figures for JPMorgan:
i) dealer account: 413,526.284 oz
ii) customer account remains at 136,380.611 oz. (or only 4.2 tonnes of gold)
Now for JPMorgan's dealer side and what the inventory should be:
Last Tuesday night we reported that 4935 contracts have been issued by JPMorgan's house account since first day notice and not yet subtracted out of inventory
You will also recall a week ago on Saturday and again last Monday night, I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 58,795.82 oz was either withdrawn or adjusted out, leaving the dealer side at 413,526.284 oz where it sits tonight.
On the dealer side a week ago Thursday, we had 10 notices issued on JPMorgan's dealer account.
Last Friday: zero
8460 contracts x 100 oz per contract or 846,000 oz served upon + 968 contracts or 96,800 oz (left to be served upon) = 942,800 oz or 29.32 tonnes of gold.
We gained back 12 contracts or 1200 oz and this additional gold will stand in the June contract month.
We now have the official USA production of gold last year and it registered 230 tonnes. Thus approximately 19.16 tonnes of gold is produced by all mines in the USA per month. Thus the amount standing for gold this month represents 153.02% of that total production.
Ladies and Gentlemen: we have a three-fold problem:
i) the total dealer inventory of gold is at a very dangerously low level of only 44.32 tonnes and none of the 9.5 tonnes delivery notices from May and the 30 tonnes from June have been removed from inventory as of yet.
ii) a) JPMorgan's customer inventory remains at an extremely low 136,380 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.
ii b) JPMorgan's dealer account rests tonight at 413,000 oz. However all of this gold has been spoken for plus an additional 81,000 oz
iii) the 3 major bullion banks have collectively only 30.08 tonnes of gold left!!
Gold closed down by $4.50 to $1382.80 (comex closing time). Silver fell by 20 cents to $21.75 (comex closing time)
In the access market at 5:00 pm, gold and silver finished trading at the following prices :
gold: 1385.40
silver: $21.88
At the Comex, the open interest in silver fell by a rather large 1923 contracts to 148,560 contracts despite silver's rise in price on Friday. The silver OI is still holding firm at these highly elevated levels. The bankers will desperately try and remove some of these stubborn longs before the big July delivery month rolls around.
The open interest on the entire gold comex contracts rose by 759 contracts to 377,031 which is still extremely low. There is no question that all of the weak speculators in gold have now departed. The number of ounces which is standing for gold in this June delivery month is 942.800 or 29.32 tonnes.The number of silver ounces standing in this non active month of June remained constant at 705,000 oz
Tonight, the Comex registered or dealer inventory of gold rose a tiny bit to 1.434 million oz or 44.60 tonnes. This is still dangerously low. The total of all gold at the comex rose a bit tonight but it is still well below the 8 million oz mark at 7.706 million oz or 239.68 tonnes of gold.
JPMorgan's customer inventory shows no change and rests tonight at its nadir of 136,380.611 oz or 4.24 tonnes. Its dealer inventory remains at 413,526.284 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.
The total of the 3 major bullion dealers, Scotia , HSBC and JPMorgan have in the dealer account only 30.02 tonnes of gold
The GLD reported a loss in inventory of .36 tonnes of gold inventory. The SLV inventory of silver remained firm with no losses or gains in inventory.
In physical stories we have reports from Jeff Neilson, Bill Holter, Alasdair Macleod David Franklin of Sprott Asset Management and Steve D'Angelo.
On the paper side of things, Bill Holter presents his second paper of the day.
Mark Grant delivers a very important commentary with respect to China.
We will go over these and many other stories but first.....................
Here are the details:
The total gold comex open interest rose by 759 contracts from 376,272 back up to 377,031 with gold rising by $9.20 on Friday. The front active month of June saw it's OI fall by 160 contracts from 1542 down to 1382. We had 172 deliveries served upon our longs on Friday. We thus gained 12 contracts or 1200 additional oz that will stand in this delivery month of June. The next delivery month is the non active July contract and here the OI remained constant at 719. The next active delivery month for gold is August and here the OI rose by 141 contracts from 212,613 up to 212,754. The estimated volume today was atrocious at 63,968 contracts. The confirmed volume Friday was also poor at 106,007. It seems that the many now realize that the Comex is a crooked game so investors are seeking other means to acquire gold.
The total silver Comex OI fell considerably despite as silver's in price by 37 cents on Friday. It's OI fell by 1923 contracts to 148,560. The longs in silver remain resolute, willing to take on the criminal bankers. The front non active June silver contract month shows a loss in OI of 5 contracts resting tonight at 29. We had 5 notices filed Friday so in essence we neither gained nor lost any silver contracts. The next big delivery month is July and here the OI fell by 2864 contracts down to 58,123. We are less than two weeks away from first day notice (June 28.2013) and judging from the relatively high OI in July, we may see some fireworks in silver. The estimated volume on Friday was poor, coming in at 29,576 contracts. The confirmed volume on Friday was extremely good at 51,475.
Comex gold/May contract month:
June 17/2013
the June contract month:
the June contract month:
Ounces
| |
Withdrawals from Dealers Inventory in oz
|
nil
|
Withdrawals from Customer Inventory in oz
|
202.48 oz (Scotia)
|
Deposits to the Dealer Inventory in oz
|
nil
|
Deposits to the Customer Inventory, in oz
| 12,178.435 (Scotia) oz |
No of oz served (contracts) today
|
414 (41,400 oz)
|
No of oz to be served (notices)
|
968 (96,800 oz
|
Total monthly oz gold served (contracts) so far this month
|
8460 (846,000 oz)
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
78,856.579 oz
|
Total accumulative withdrawal of gold from the Customer inventory this month
| 259,153.01 oz |
We again had tiny activity at the gold vaults
The dealer again had 0 deposits and no withdrawals.
We again had 1 customer deposits today
i) Into Scotia: 12,178.435 oz (this arrived from the Brinks withdrawal on Friday)
total customer deposit: 12,178.435 oz
It is very strange that in a big delivery month, we are witnessing no gold enter the dealer or even the customer.
we had one tiny customer withdrawal:
i) Out of Scotia, 202.48 oz was withdrawn.
zero ounces were withdrawn from JPMorgan today as well as no notices were issued them as well.
As we reported to you two weeks we reported to you that JPMorgan withdrew a huge amount of gold from its customer account:
Out of JPMorgan: 217,844.96 oz.
If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).
The last Tuesday in May, we had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of last night 28,389.579 oz was settled upon, leaving 71,611.00 oz still left to arrive in the settling process.
Last Tuesday, June 11, we had 217,844.96 actual ounces leave JPMorgan
Today we had no issuance from any of the major bullion banks, JPMorgan, HSBC and Scotia.
In summary on the customer side of things for JPMorgan:
From the beginning of June we have had 1527 notices served from the customer side of JPMorgan for 152,700 oz. If we add the 71,611.00 oz owing from May issuance, we get 224,311 oz. We can subtract the actual withdrawal of gold form JPMorgan of 217,844.96. This still leaves 6466.04 oz that needs to be settled upon from the vaults of JPMorgan customer side.
Today we had one adjustment.
i) out of Scotia: 8819.233 oz was adjusted out of the customer account and this landed in the dealer account of Scotia.
The total dealer comex gold thus rises a bit to 1.434 million oz or 44.60 tonnes of gold.
The total of all comex gold, dealer and customer rests tonight at 7.706 million oz or 239.68 tonnes..a slight increase from Friday.
Thus tonight we have the following closing inventory figures for JPMorgan:
i) dealer account: 413,526.284 oz
ii) customer account remains at 136,380.611 oz. (or only 4.2 tonnes of gold)
Now for JPMorgan's dealer side and what the inventory should be:
Last Tuesday night we reported that 4935 contracts have been issued by JPMorgan's house account since first day notice and not yet subtracted out of inventory
You will also recall a week ago on Saturday and again last Monday night, I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 58,795.82 oz was either withdrawn or adjusted out, leaving the dealer side at 413,526.284 oz where it sits tonight.
On the dealer side a week ago Thursday, we had 10 notices issued on JPMorgan's dealer account.
Last Friday: zero
On Monday: 1
On Tuesday: 0
On Wednesday : 0
On Wednesday : 0
on Thursday: 0
on Friday: 0
today: 0 again.
Thus, 4946 notices have been issued by JPMorgan so far for 494,600 oz and these ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 413,526.284 oz.
Somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 81,074 oz (413,526 inventory - 494,600 oz issued = 81,074 oz)
In other words, the entire 413,526 must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 81,074 of additional gold
JPMorgan has not had any deposits in gold in quite some time. As a matter of fact, zero ounces has entered on the dealer side from the beginning of 2013.
How will JPMorgan satisfy this shortfall??
on Friday: 0
today: 0 again.
Thus, 4946 notices have been issued by JPMorgan so far for 494,600 oz and these ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 413,526.284 oz.
Somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 81,074 oz (413,526 inventory - 494,600 oz issued = 81,074 oz)
In other words, the entire 413,526 must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 81,074 of additional gold
JPMorgan has not had any deposits in gold in quite some time. As a matter of fact, zero ounces has entered on the dealer side from the beginning of 2013.
How will JPMorgan satisfy this shortfall??
Tonight the total dealer gold inventory falls again to 1.425 million oz (44.32 tonnes of gold). The total of all comex gold falls again , resting tonight at 7.6940 million oz or 239.31 tonnes.
Another disturbing piece of news is the low dealer gold inventory for our 3 major bullion banks: Scotia, HSBC and JPMorgan equal to 30.08 tonnes
i) Scotia: 285,596.23 oz or 8.88 tonnes (a slight increase from Friday)
ii) HSBC: 270,197.277 oz or 8.4 tonnes
iii) JPMorgan: 413,526 oz or 12.8 tonnes
Brinks dealer account has the lions share of the dealer gold at 445,398.58 oz 13.89 tonnes.
Today we had 414 notices served upon our longs for 41,400 oz of gold. In order to calculate what I believe will stand for delivery in June, I take the OI standing for June (1382) and subtract out today's notices (414) which leaves us with 968 contracts or 96,800 oz left to be served upon our longs.
Another disturbing piece of news is the low dealer gold inventory for our 3 major bullion banks: Scotia, HSBC and JPMorgan equal to 30.08 tonnes
i) Scotia: 285,596.23 oz or 8.88 tonnes (a slight increase from Friday)
ii) HSBC: 270,197.277 oz or 8.4 tonnes
iii) JPMorgan: 413,526 oz or 12.8 tonnes
Brinks dealer account has the lions share of the dealer gold at 445,398.58 oz 13.89 tonnes.
Today we had 414 notices served upon our longs for 41,400 oz of gold. In order to calculate what I believe will stand for delivery in June, I take the OI standing for June (1382) and subtract out today's notices (414) which leaves us with 968 contracts or 96,800 oz left to be served upon our longs.
Thus we have the following gold ounces standing for metal in June:
8460 contracts x 100 oz per contract or 846,000 oz served upon + 968 contracts or 96,800 oz (left to be served upon) = 942,800 oz or 29.32 tonnes of gold.
We gained back 12 contracts or 1200 oz and this additional gold will stand in the June contract month.
We now have the official USA production of gold last year and it registered 230 tonnes. Thus approximately 19.16 tonnes of gold is produced by all mines in the USA per month. Thus the amount standing for gold this month represents 153.02% of that total production.
Ladies and Gentlemen: we have a three-fold problem:
i) the total dealer inventory of gold is at a very dangerously low level of only 44.32 tonnes and none of the 9.5 tonnes delivery notices from May and the 30 tonnes from June have been removed from inventory as of yet.
ii) a) JPMorgan's customer inventory remains at an extremely low 136,380 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.
ii b) JPMorgan's dealer account rests tonight at 413,000 oz. However all of this gold has been spoken for plus an additional 81,000 oz
iii) the 3 major bullion banks have collectively only 30.08 tonnes of gold left!!
now let us head over and see what is new with silver:
Silver:
June 17.2013: June silver contract month:
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory | 538,576.075 oz (Brinks,CNT) |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | nil oz |
| No of oz served (contracts) | 4 (20,000 oz) |
| No of oz to be served (notices) | 25 (125,000 oz) |
| Total monthly oz silver served (contracts) | 116 (580,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | 982,955.47 oz |
| Total accumulative withdrawal of silver from the Customer inventory this month | 3,489,959.2 oz |
Today, we had good activity inside the silver vaults.
we had 0 dealer deposits and 0 dealer withdrawals.
We had 0 customer deposits:
total customer deposits nil oz
We had 2 customer withdrawals:
We had 0 customer deposits:
total customer deposits nil oz
We had 2 customer withdrawals:
i) Out of Brinks: 266,400.20 oz
ii) Out of CNT: 272,175.875 oz
total customer withdrawal : 538,576.075 oz
ii) Out of CNT: 272,175.875 oz
total customer withdrawal : 538,576.075 oz
we had 1 adjustment today
i) Out of Scotia:
14,846.70 oz was adjusted out of the customer and this landed in the dealer.
i) Out of Scotia:
14,846.70 oz was adjusted out of the customer and this landed in the dealer.
Registered silver at : 41.773 million oz
total of all silver: 164.579 million oz.
The CME reported that we had 4 notices filed for 20,000 oz today. In order to calculate what we believe will stand in the month of June, I take the Oi standing for June (29) and subtract out today's notices (4) which leaves us with 25 notices or 125,000 oz.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
116 contracts x 5000 oz per contract (served) = 580,000 oz + 25 contracts x 5000 oz or 125,000 oz left to be served upon = 705,000 oz
we neither gained nor lost any silver ounces standing today.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
116 contracts x 5000 oz per contract (served) = 580,000 oz + 25 contracts x 5000 oz or 125,000 oz left to be served upon = 705,000 oz
we neither gained nor lost any silver ounces standing today.
Now let us check on gold inventories at the GLD first: .36 ton loss from GLD inventory today....
Paper versus physical.
Intraday commentary on the widening gold premiums in Vietnam here. It will be more impressive when we see the same type of explosive demand in a few other countries. Until then it is what it is.
But on the whole, it's not nice to fool Mother Nature.
I think you have had to experience a collapsing currency first hand in order to truly appreciate the fundamentals of monetary value, and how these things can take on what seems almost like a force of nature.
I was doing business in Moscow during 1990's, and saw the slow motion collapse of the rouble. Or at least it seemed like a slow motion collapse at first, until it gained quite a bit of momentum, despite the measures the State took to maintain currency controls 'official rates.' It was an enlightening episode in the resiliency of people even in what was then was still a police state.
I guess they had a sovereign currency, right? And so does Vietnam, and any of the other countries that experienced extraordinary currency depreciation, otherwise known as monetary inflation, since WW II. Perhaps they just needed some better theorists, or enforcers with hairier knuckles. Their elite seem to have had plenty of false bravado, and were not particularly long on freedom.
But then again, they were not us, the masters of all that we survey and purvey, the beauty of the world, the paragon of animals. Where the elite come to eat.
Here is what is happening with gold prices in southeast Asia now. Ding dong.
This from Goldcore:
June 17/ 2013:
June 14.2013:
Tonnes1,003.17
Ounces32,252,855.33
Value US$44.649 billion
June 14.2013:
Tonnes1,003.53
Ounces32,264,597.16
Value US$44.860 billion
and selected news and views........
17 JUNE 2013
Gold Daily and Silver Weekly Charts
Paper versus physical.
Intraday commentary on the widening gold premiums in Vietnam here. It will be more impressive when we see the same type of explosive demand in a few other countries. Until then it is what it is.
But on the whole, it's not nice to fool Mother Nature.
Gold Premiums in Vietnam Hit $217 Over Spot In Heavy Demand
I think you have had to experience a collapsing currency first hand in order to truly appreciate the fundamentals of monetary value, and how these things can take on what seems almost like a force of nature.
I was doing business in Moscow during 1990's, and saw the slow motion collapse of the rouble. Or at least it seemed like a slow motion collapse at first, until it gained quite a bit of momentum, despite the measures the State took to maintain currency controls 'official rates.' It was an enlightening episode in the resiliency of people even in what was then was still a police state.
I guess they had a sovereign currency, right? And so does Vietnam, and any of the other countries that experienced extraordinary currency depreciation, otherwise known as monetary inflation, since WW II. Perhaps they just needed some better theorists, or enforcers with hairier knuckles. Their elite seem to have had plenty of false bravado, and were not particularly long on freedom.
But then again, they were not us, the masters of all that we survey and purvey, the beauty of the world, the paragon of animals. Where the elite come to eat.
Here is what is happening with gold prices in southeast Asia now. Ding dong.
This from Goldcore:
The Vietnamese Central Bank sold another 25,700 taels (1 tael = 37.5 grams or 1.2 troy ounces) at a gold bar auction on Friday in order to try and satiate the massive public demand for gold in Vietnam.
The Central Bank hopes that the sale of gold into the market will reduce the very high premiums paid by gold buyers in Vietnam, the largest buyer of gold in Southeast Asia after Thailand and one of the largest physical buyers of gold per capita in the world.
Vietnamese people hold gold as a store of wealth for protection against war, inflation and currency depreciation. In recent months, the bursting of bubbles in the stock market (see chart) and property market and the continuing devaluation of the dong has led to record demand in Vietnam and a surging premium over the spot price of gold.
Today, the premium was close to 5.5 million dong which is the equivalent of a very high premium of $217 per ounce over spot.
A excellent paper courtesy of David Franklin,Sprott Asset Management on India:
(courtesy David Franklin/Sprott Asset Management)
-- Posted Monday, 17 June 2013 | | 0 Comments and 0 Reactions By David Franklin, Sprott Asset Management With the Indian rupee plumbing new lows against the US dollar and the country’s current account deficit at record levels, the Reserve Bank of India (RBI) is taking the easiest route to tackle both; it has declared a war on gold. Our Chart of the Week shows the Indian current account deficit from 1970 to the end of 2012. As you can see, it has hit a record deficit level and continues to weaken. Put simply, a current account deficit occurs when a country's total imports of goods is greater than its total export of goods; this situation makes a country a net debtor to the rest of the world. India is the largest consumer of gold, almost all of which is imported and is a significant contributor to this deficit. The RBI has drawn the battle lines and targeted gold imports as the main culprit. The central bank has announced a series of measures over the past month, including restraining lending against gold-backed assets, and restricting gold imports. The hike in gold import duty to 8% this month is the most recent announcement in this drive and doubles the duty that was applied at the beginning of this year.1 The RBI has asked bank trading houses not to import gold on a consignment basis for domestic sales, further insisting on 100% cash margin for letters of credit. The restrictions were invoked after imports soared to 162 tonnes in May from 142 tonnes in April on the back of weak international prices. In their campaign against gold imports the Indian finance minister P. Chidambaram has even urged banks to advise their customers not to invest in gold. “I think the Reserve Bank has advised banks that they should not sell gold coins,” said Chidambaram, while speaking at an event in Mumbai.2 Gold is synonymous with savings and security for many of India's 1.24 billion people. Only about 36,000 of India's 650,000 villages have a bank branch, which mean the working class hold much of their assets in gold coins and jewelry. Further increasing demand is gold’s cultural significance which makes it essential for weddings and other ceremonies. We suspect that there is very little the RBI can do to supress the consumption of gold and the central bank’s efforts will serve only to push the gold trade underground through smuggling and off-shore trading centres.  Source: Bloomberg, Sprott Asset Management LP Sprott Group offers a wide range of investment products and services to U.S., Canadian and International investors. learn more » |
A super commentary on silver and how production per tonne is faltering globally from all the mines:
(courtesy Steve D'Angelo/SRSRocco)
A super commentary on silver and how production per tonne is faltering globally from all the mines:
(courtesy Steve D'Angelo/SRSRocco)
Silver Price to Rise as Top Miner’s Production Evaporates
One of the most insidious problems taking place in the gold and silver mining industry is the decline in falling yields. Not many realize, when yields decline, production evaporates and disappears. To offset the decline in metal yields, the mining companies have to add new mines and or increase the amount of processed ore.
If we take a look at the top 6 silver producers, we can see that the average yield declined 38% since 2005, from 13.0 oz/t (ounce/tonne) to 8.1 oz/t in 2012:
The companies and individual primary silver mine included in the graph above were, Fresnillo, BHP Billiton Cannington, Pan American Silver, Polymetal, Hochshild & Hecla. Furthermore, I only included primary silver mine production from these companies.
For example, both Fresnillo and Polymetal had higher annual silver production figures than is shown in the graph above. This by-product silver came from their primary gold mines and was excluded from the calculations as it would have significantly lowered the average yield.
This next chart shows the inverse relationship between falling yields and increased processed ore:
In 2005, these companies processed 9.4 million tonnes of ore to produce 123 million ounces of silver. However, by 2012 a total of 15.8 million tonnes of ore was processed, an increase of 113%, to supply 127 million oz of silver.
Pan American’s Dolores silver & gold open-pit mine was not included in the 2012 calculations due to its extremely low average ore grade of 42 g/t (grams/tonne). Even though the Dolores mine added 2.6 million oz to Pan American’s total, it would have severely impacted the group’s 2012 annual yield by knocking it down from 8.1 oz/t to 6.4 oz/t.
One of the most insidious problems taking place in the gold and silver mining industry is the decline in falling yields. Not many realize, when yields decline, production evaporates and disappears. To offset the decline in metal yields, the mining companies have to add new mines and or increase the amount of processed ore.
If we take a look at the top 6 silver producers, we can see that the average yield declined 38% since 2005, from 13.0 oz/t (ounce/tonne) to 8.1 oz/t in 2012:
The companies and individual primary silver mine included in the graph above were, Fresnillo, BHP Billiton Cannington, Pan American Silver, Polymetal, Hochshild & Hecla. Furthermore, I only included primary silver mine production from these companies.
For example, both Fresnillo and Polymetal had higher annual silver production figures than is shown in the graph above. This by-product silver came from their primary gold mines and was excluded from the calculations as it would have significantly lowered the average yield.
This next chart shows the inverse relationship between falling yields and increased processed ore:
In 2005, these companies processed 9.4 million tonnes of ore to produce 123 million ounces of silver. However, by 2012 a total of 15.8 million tonnes of ore was processed, an increase of 113%, to supply 127 million oz of silver.
Pan American’s Dolores silver & gold open-pit mine was not included in the 2012 calculations due to its extremely low average ore grade of 42 g/t (grams/tonne). Even though the Dolores mine added 2.6 million oz to Pan American’s total, it would have severely impacted the group’s 2012 annual yield by knocking it down from 8.1 oz/t to 6.4 oz/t.
Declining Silver Yields = Evaporated Production
If we take the top 6 silver production in 2005 at 123 million oz and figure a seven-year 38% decline in yield, we would have the following:
123 million oz (X) -38% yield = 47 million oz loss of production
So, if no new production was added by these 6 mining companies overall supply would have declined to 76 million in 2012. To be able to increase production on top of declining yields, the silver miners have to either add new mines or ramp up their milling and processing of ore.
A perfect example of this took place at Fresnillo. Here we can see that overall production at Fresnillo remained the same in 2012 as it was in 2005:
How was Fresnillo able to keep its production at 33.4 million oz as its average yield declined from 15.2 oz/t in 2005 down to 9.2 oz/t in 2012? This 40% decline in yield caused a huge reduction of 13.3 million oz in this seven-year time period.
To offset this large decline in yield, the company ramped up its milling capacity 26% at its Fresnillo mine and added production from its new Saucito mine. In 2012, the Fresnillo mine accounted for 26.4 million oz of production while Saucito made up the difference by added 7 million oz to the total.
Again, the figures in the chart above only came from Fresnillo’s two primary silver mines… Fresnillo and Saucito. Fresnillo accounted for all the production until 2011 when Saucito ramped up production.
This is the big problem companies face as silver yields decline. In the case above, Fresnillo PLC had to ramp up production at Fresnillo and had to bring on a new mine (Saucito) just to keep production the same as it was seven years ago.
Now we can see how costs rise as yields decline. For instance, think of all the capital it took to bring Saucito from an exploration stage to commercial mine production. Furthermore, the company had 875 contractors working at its Saucito mine in 2012 including all the additional mining equipment, materials and energy costs.
If we take the top 6 silver production in 2005 at 123 million oz and figure a seven-year 38% decline in yield, we would have the following:
123 million oz (X) -38% yield = 47 million oz loss of production
So, if no new production was added by these 6 mining companies overall supply would have declined to 76 million in 2012. To be able to increase production on top of declining yields, the silver miners have to either add new mines or ramp up their milling and processing of ore.
A perfect example of this took place at Fresnillo. Here we can see that overall production at Fresnillo remained the same in 2012 as it was in 2005:
How was Fresnillo able to keep its production at 33.4 million oz as its average yield declined from 15.2 oz/t in 2005 down to 9.2 oz/t in 2012? This 40% decline in yield caused a huge reduction of 13.3 million oz in this seven-year time period.
To offset this large decline in yield, the company ramped up its milling capacity 26% at its Fresnillo mine and added production from its new Saucito mine. In 2012, the Fresnillo mine accounted for 26.4 million oz of production while Saucito made up the difference by added 7 million oz to the total.
Again, the figures in the chart above only came from Fresnillo’s two primary silver mines… Fresnillo and Saucito. Fresnillo accounted for all the production until 2011 when Saucito ramped up production.
This is the big problem companies face as silver yields decline. In the case above, Fresnillo PLC had to ramp up production at Fresnillo and had to bring on a new mine (Saucito) just to keep production the same as it was seven years ago.
Now we can see how costs rise as yields decline. For instance, think of all the capital it took to bring Saucito from an exploration stage to commercial mine production. Furthermore, the company had 875 contractors working at its Saucito mine in 2012 including all the additional mining equipment, materials and energy costs.
The Cost to Produce Silver will Rise as Yields Continue to Decline
The impact of falling yields shown in the Fresnillo example above is taking place in the whole mining industry. Pan American Silver was producing silver at 7.4 oz/t in 2005, but by 2012 this had fallen to 5.1 oz/t (this is excluding the Dolores open-pit mine which would drop the average yield down to 2.9 oz/t). Furthermore, Hochschild’s average silver yield declined from 12.4 oz/t in 2005 to only 6.7 oz/t in 2012. I could go on and on.
What we are witnessing here is the evaporation of high-grade silver production only to be replaced by a much more expensive low yielding supply. This will only become more difficult each passing year. As costs to mine silver continue to rise in the future, so will the price of silver.
Lastly, energy is the overwhelming factor contributing to the increased costs of mining silver as yields decline. Thus, silver will become one of the best stores of value in the future because it functions as an excellent store of trade-able energy value.
The impact of falling yields shown in the Fresnillo example above is taking place in the whole mining industry. Pan American Silver was producing silver at 7.4 oz/t in 2005, but by 2012 this had fallen to 5.1 oz/t (this is excluding the Dolores open-pit mine which would drop the average yield down to 2.9 oz/t). Furthermore, Hochschild’s average silver yield declined from 12.4 oz/t in 2005 to only 6.7 oz/t in 2012. I could go on and on.
What we are witnessing here is the evaporation of high-grade silver production only to be replaced by a much more expensive low yielding supply. This will only become more difficult each passing year. As costs to mine silver continue to rise in the future, so will the price of silver.
Lastly, energy is the overwhelming factor contributing to the increased costs of mining silver as yields decline. Thus, silver will become one of the best stores of value in the future because it functions as an excellent store of trade-able energy value.
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