It’s true; gold has become noticeably less unpopular during the last few months. It is still not as popular an investment as, say, AIG or the shares of almost any other incompetent financial institution. But some investors have actually begun to admit that they’ve purchased some gold.

A couple of the most conspicuous gold-buyers – the Chinese government and hedge fund manager, John Paulson – represent quintessential examples of the “new” gold buyer. This new type of buyer does not also buy ammunition, bottled water and Lynyrd Skynyrd tank tops. Nor does this new gold buyer spend Saturday nights sipping Gallo Hearty Burgundy in his La-Z-Boy, while flipping through binders full of Walking Liberty gold coins.

These new gold buyers do not LOVE gold nearly as much as they FEAR paper. But they are buying aggressively nonetheless…and leaving their tracks everywhere.

Earlier this year, for example, Paulson & Co., the hedge-fund firm run by billionaire John Paulson, became the largest holder of the SPDR Gold Trust (NYSE: GLD), an ETF that buys gold bullion. The New York-based firm owned 8.7 percent of the fund, as of March 31. Paulson has also taken very large stakes in several gold mining companies – in particular Gold Fields Ltd. (NYSE:GFI), Kinross Gold Corp. (NYSE:KGC) and AngloGold Ashanti Ltd. (NYSE:AU)

Paulson has lots of company among mom and pop investors who are allocating some of their capital to gold. As the nearby chart illustrates quite clearly, the SPDR Gold Trust ETF has been accumulating ever-rising quantities of gold bullion – all in response to investor demand.

Although this chart is a bit dated, the trend it illustrates remains firmly entrenched. As of September 21, this ETF controlled 1,563 tonnes of gold, making it the world’s fifth individual holder of gold. The Swiss central bank, by comparison, holds only a little more than 1,000 tonnes of gold.

Meanwhile, the Chinese doubled their official gold holdings last year, and have been making a lot of headlines with some very public gripes about the dollar. A couple weeks ago, Cheng Siwei, former vice chairman of the Standing Committee of the Chinese Communist Party, complained, “If [the Fed] keeps printing money to buy bonds, it will lead to inflation, and after a year or two, the dollar will fall hard. Most of our [Chinese] foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies…Gold is definitely an alternative.”

No wonder rumors were running rampant last week that the 403 tonnes of gold the IMF is selling will land in a Chinese vault.

Interestingly, while investment demand for gold inexorably rises, mined production of gold inexorably declines. Apparently, the folks who coax this precious metal from the earth can’t coax as much of it as they might like.

According to Grant’s Interest Rate Observer (citing statistics from the World Gold Council), worldwide gold production has dipped over the last seven years. Gold production since 2002 has declined from 2,590 metric tons to 2,486 metric tons through June 30.

These divergent trends – demand up and supply down – do not guarantee a rising gold price, but they do suggest that a rising gold price may become the path of least resistance.

Obviously, substantial above-ground supplies of gold – in bank vaults, around fingers, in belly buttons, etc. – will find its way into the gold market if/as/when prices rise. Nevertheless, a powerful inflationary trend would produce enough investment demand for gold to easily absorb all sources of supply…and ALSO push the gold price higher.

“There is a growing distrust of paper currencies amid a deluge of massive government deficits since late 2008,” Roseman concludes. “The dollar might be the biggest drunk at the bar, but the euro and other currencies are also drinking their way to devaluation against gold.”

Source: The New Gold Buyer

It’s true; gold has become noticeably less unpopular during the last few months. It is still not as popular an investment as, say, AIG or the shares of almost any other incompetent financial institution. But some investors have actually begun to admit that they’ve purchased some gold.

A couple of the most conspicuous gold-buyers – the Chinese government and hedge fund manager, John Paulson – represent quintessential examples of the “new” gold buyer. This new type of buyer does not also buy ammunition, bottled water and Lynyrd Skynyrd tank tops. Nor does this new gold buyer spend Saturday nights sipping Gallo Hearty Burgundy in his La-Z-Boy, while flipping through binders full of Walking Liberty gold coins.

These new gold buyers do not LOVE gold nearly as much as they FEAR paper. But they are buying aggressively nonetheless…and leaving their tracks everywhere.

Earlier this year, for example, Paulson & Co., the hedge-fund firm run by billionaire John Paulson, became the largest holder of the SPDR Gold Trust (NYSE: GLD), an ETF that buys gold bullion. The New York-based firm owned 8.7 percent of the fund, as of March 31. Paulson has also taken very large stakes in several gold mining companies – in particular Gold Fields Ltd. (NYSE:GFI), Kinross Gold Corp. (NYSE:KGC) and AngloGold Ashanti Ltd. (NYSE:AU)

Paulson has lots of company among mom and pop investors who are allocating some of their capital to gold. As the nearby chart illustrates quite clearly, the SPDR Gold Trust ETF has been accumulating ever-rising quantities of gold bullion – all in response to investor demand.

Although this chart is a bit dated, the trend it illustrates remains firmly entrenched. As of September 21, this ETF controlled 1,563 tonnes of gold, making it the world’s fifth individual holder of gold. The Swiss central bank, by comparison, holds only a little more than 1,000 tonnes of gold.

Meanwhile, the Chinese doubled their official gold holdings last year, and have been making a lot of headlines with some very public gripes about the dollar. A couple weeks ago, Cheng Siwei, former vice chairman of the Standing Committee of the Chinese Communist Party, complained, “If [the Fed] keeps printing money to buy bonds, it will lead to inflation, and after a year or two, the dollar will fall hard. Most of our [Chinese] foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies…Gold is definitely an alternative.”

No wonder rumors were running rampant last week that the 403 tonnes of gold the IMF is selling will land in a Chinese vault.

Interestingly, while investment demand for gold inexorably rises, mined production of gold inexorably declines. Apparently, the folks who coax this precious metal from the earth can’t coax as much of it as they might like.

According to Grant’s Interest Rate Observer (citing statistics from the World Gold Council), worldwide gold production has dipped over the last seven years. Gold production since 2002 has declined from 2,590 metric tons to 2,486 metric tons through June 30.

These divergent trends – demand up and supply down – do not guarantee a rising gold price, but they do suggest that a rising gold price may become the path of least resistance.

Obviously, substantial above-ground supplies of gold – in bank vaults, around fingers, in belly buttons, etc. – will find its way into the gold market if/as/when prices rise. Nevertheless, a powerful inflationary trend would produce enough investment demand for gold to easily absorb all sources of supply…and ALSO push the gold price higher.

“There is a growing distrust of paper currencies amid a deluge of massive government deficits since late 2008,” Roseman concludes. “The dollar might be the biggest drunk at the bar, but the euro and other currencies are also drinking their way to devaluation against gold.”

Source: The New Gold Buyer

Silver developed the gentlest of upward trends early in London and rode that trend through the Globex, ending just off its intraday high at $13.87/oz., up 17 cents. For the week, silver is up 3.4%. (Click here for charts)

Although profit-taking kept gold from staging a big rally this week, the yellow metal should be well supported at current levels because of dollar weakness and inflation fears, analysts said.

“We are still up here in quite a high range. We don’t see any physical buying coming in at these levels, but what is supporting it is the dollar,” said Andrey Kryuchenkov, an analyst at VTB Capital.

“The dollar’s weakness and the idea that inflation expectations are on the rise are holding gold here,” Kryuchenkov added.

In company specific news, Mineweb reported that Kinross Gold (NYSE:KGC) has recently assumed stock price leadership of the loosely-defined Tier 1 global gold stocks sector, which includes 12 companies with an aggregate market value of just under $200 billion. Kinross’s stock price fluctuated between a 52-week low of $6.85 and high of $20.98 a share, with current trades around the $20.28 mark.

Barrick, the world’s biggest gold miner by value and production, is trading nearly 25% off its 52-week high. Kinross was one gold stock chosen for investment this year by US hedge fund Paulson & Co Inc., which famously scored gains of nearly $4 billion betting against banks in 2007 and 2008.

In the past several years, Kinross has transformed itself from a stodgy, higher cost gold producer to one that increasingly reports lower costs, along with a highly convincing longer-term growth profile.

Source: Gold Pushes Through $950

Union workers are becoming the star attraction for investors with Kinross Gold’s La Coipa gold mine in Chile on strike. Affected production is stated at 300 ounces of gold per day and the workers are standing by their wage demands. Kinross (NYSE:KGC) ended the session up C$0.05 at C$20.71.

Closer to home, a strike against Vale Inco in Sudbury is all but certain to begin on Monday with the contract expiring for members of United Steelworkers Local 6500. Vale is looking to trim costs from what it calls its highest cost operation and the workers are not fans of the cost cuts.

Uranium One achieved record quarterly attributable production of 833,900 pounds U308 from its Kazakhstan operations the second quarter of 2009. That’s an 18% jump over the first quarter. The company also tabled a new resource for its South Inkai mine. Total indicated resources now tally 34.1 million tonnes grading 0.053% U308 and total inferred resources came in at 42.8 million tonnes grading 0.047% U308, of which a total of 58.8 million pounds of U308 is attributable to Uranium One. The miner ended the day up C$0.18 at C$2.72.

Meanwhile shares of Ivanhoe Mines (NYSE:IVN) added C$0.38 to close at C$9.35 after the company announced that the Mongolia national parliament had voted to advanced approval discussions for the huge Oyu Tolgoi copper-gold project.

Shares of  Quest Uranium continued to soar on big volumes with no reported news. Rumours are that the company is attracting big player interest thanks to their Strange Lake rare earth project in Quebec. Quest ended the day up C$0.075 at C$0.50.

The summer doldrums have clearly arrived with trading volumes on the junior bourse falling to extremely modest levels. We shall see what Friday trading has in store.

Source: Resource Stock Roundup:Friday, July 10, 2009

“FEAR, Mr. Bond, takes gold out of circulation and hoards it against the evil day,” as 007 learns from a Bank of England officer in Ian Fleming’s Goldfinger (1959).

So “in a period of history when every tomorrow may be the evil day, it is fair to say that a fat proportion of the gold dug out of one corner of the earth is at once buried again in another corner.”

Evil-day gold buying really motored since the credit collapse began in August 2007. Soaking up investment dollars worldwide, in fact, new allocations to the metal – whether trust fund or owned outright – swelled by 38% during the first quarter of 2009 compared with total demand between Jan. and March 2008, according to marketing-group the World Gold Council (WGC).

Within that figure, what the GFMS consultancy (who supply the WGC with its data) calls “identifiable investment” leapt 248% compared to Q1 ‘08. And gold ETFs made the headlines once more, sucking in “another quarterly record” as new inflows required 465 tonnes of metal to back them, thus dwarfing the previous record of 149 tonnes set in the third quarter of last year.

That doesn’t mean the world’s investors are now all in, however. According to the World Gold Council’s Marcus Grubb last month (using we-don’t-know-which data), current gold investment allocation stands at less than 0.6% of total global wealth.

It makes a nice pie chart, and it offers a useful snapshot of different asset classes vs. each other. But we also think the idea’s worth refining. Because this estimate both over-states liquid assets in toto and under-estimates the stock of gold available to investment flows – whether retail or wholesale.

First, note the scope for double-counting between pension, mutual and insurance funds. I’m not saying the WGC’s data trips up on that error, but you can see how likely it seems given the end-allocation categories applied. For instance, “hedge funds” are stripped out separately (as are REITs and private-equity), even though institutional allocations via funds-of-funds will be counted elsewhere under the broader “funds” title.

Similarly, but more pertinent, the outstanding quantity of “gold – investment stocks” underplays the true volume of metal held as a store of wealth. Simply counting the “investment” volume excludes fully 84% of the above-ground supply, as another chart from the WGC’s presentation shows.

Why not also include “official sector” gold hoards? Sovereign wealth funds and FX reserves were included on the other side of the ledger, after all.

More crucially still, why not include jewelry? Trying to split out the volume of trinkets held for aesthetics alone might feel easy enough to a Western analyst just back from window-shopping at Mappin & Webb. But across south-east Asia, and most particularly in India – typically the world’s No.1 destination for physical gold each year – large, chunky necklaces and bracelets make for “investment jewelry”, acting as a store of wealth in the absence of any formal banking network.

Still, the point is well made, we believe. Gold remains but a slither of investable wealth – albeit a fast-growing slither as the value of other assets has dropped.

“Gold [has] been deprecated and reduced as a financial asset,” as Jeffrey Christian of the CPM consultancy put it earlier this year. “In 1968 gold may have represented 4.5% to 5.0% of the world’s wealth…By the 1990s it was down to 0.2% of the world’s wealth. Not that gold was falling in value so much as the other wealth – stocks, bonds, paper assets, government bonds, corporate bonds, bank deposits – were exploding once the tie to gold was severed.

“In 2006 gold represented 0.2% of world wealth. At the end of 2007, it was about 0.4%. Depending on what you think about wealth destruction in 2008, it may have been 0.6%.”

That figure just about matches the WGC’s estimate of 0.7% (perhaps they used the same inputs and excluded the same volumes of central-bank and jewelry gold?). It also contrasts with our own Estimate of Gold as a Proportion of Investable Wealth at nearer 2.7% by the close of 2008.

Either way, gold is fast-attracting attention – both from nay-sayers, retail investors and new die-hard bulls amongst the professional institutions. Regulatory filings show legendary hedge-fund manager John Paulson took his position in the SPDR Gold ETF (NYSE:GLD) to 30% of his portfolio during the first quarter of 2009. Paulson & Co. now owns 8.7% of that paper – as well as significant chunks of the Gold Miners ETF (NYSE:GDX), Kinross Gold (NYSE:KGC), Gold Fields (NYSE:GFI) and AngloGold Ashanti (NYSE:AU) – if not any actual bullion itself.

Does that in itself make gold a buy? Of course not. But compared to the evil days of 1930s depression – or the fearful inflationary panic of the late 1970s – the world’s wealth remains very under-invested in metal right now.

Regards,
Adrian Ash

Source: The World Gold Council Wrong About Gold

Yamana Gold (NYSE:AUY) tabled first quarter earnings of $86 million or $0.12 per share on revenues of $224.3 million. Production rang in at 271,482 gold equivalent ounces with cash costs hitting $379 per ounce. Yamana ended the day up C$0.39 at C$10.33.

Kinross Gold (NYSE:KGC) earned $76.5 million or $0.11 per share in the first quarter on production of 526,888 gold equivalent ounces. Revenue rang in at $532.7 million with cost of sales coming in at $419 per ounce. Kinross closed at C$19.70 for a C$0.50 gain.

Northern Freegold Resources completed its earn-in on Atac Resources‘ Golden Revenue project in the Yukon. Atac received C$100,000 and 1 million Freegold shares as it final payment and Atac retains a 1 percent net smelter return royalty. Atac ended the day up C$0.025 at C$0.215, while Northern Freegold added C$0.01 at C$0.59.

Alexco Resource (AMEX:AXU) stated that initial underground chip-channel results from the Bellekeno resource in the Yukon returned up to 57.3 ounces of silver per ton over 6.04 metres. Alexco ended the day up C$0.05 at C$1.79.

Fewer than expected job losses in the United States during April and a robust rise in Canadian building permits in March caused euphoria on the Canadian markets. Clearly this logic is somewhat flawed given the overall weak numbers but who am I to argue with a stellar bull run. We shall see what Thursday trading has in store.

Source: Resource Stock Roundup:Thursday, May 07th, 2009

Shares of Kaminak Gold added C$0.055 to close at C$0.18 after the junior announced that it picked up an option to earn 100 per cent in three projects located in the White Gold area of the Yukon.

Moly miner Roca Mines added C$0.065 to close at C$0.40 on no new developments.

Charles Fipke-led Metalex Ventures reported that the third vertical hole drilled on a kimberlite discovery in Angola hit kimberlite at 12.2 metres depth and the drill is still in primary kimberlite at 141.8 metres depth. Metalex is hoping that the eroded parts of this pipe are the source of the abundant high-quality alluvial diamonds being mined downstream. Metalex ended the day up C$0.10 at C$0.69.

On the copper front, shares of Anvil Mining added C$0.26 to close at C$1.39 after the company closed a C$34.5 million financing priced at C$1.15 per share. The funds will be used on its Kinsevere copper mine project in the Democratic Republic of Congo.

Phoscan Chemicals surged C$0.10 to C$0.43 on no new developments. The cash rich company holds the Martison phosphate property in Ontario.

Kinross Gold (NYSE:KGC) has agreed to take down 10 million of the 14 million shares of Fortress Minerals being offered at C$0.25 per share. The proceeds will be used on the Svetloye gold Project in Far Eastern Russia. Fortress ended the day up C$0.06 at C$0.35.

A rising tide lifts all boats seems to be the saying of the day. The euphoria has junior exploration companies once again talking about spinning off assets to unlock value. This suggests that the go-go mentality is coming back into the sector….perhaps way too soon. Unemployment numbers for Canada and the United States are due to be released on Friday so some caution is warranted. We shall see what Tuesday trading has in store.

Source: Resource Stock Roundup:Tuesday, May 05th, 2009

David Einhorn, the hedge fund manager who predicted the downfall of Lehman Bros., recently bought gold for the first time. And then there is John Paulson, the guy who made billions of dollars by correctly anticipating the housing bust and credit crisis.

Paulson just plunked down $1.3 billion for an 11% stake in AngloGold (NYSE:AU). He’s also got a big position in Kinross Gold (NYSE:KGC).

Peter Munk, the 82-year-old chairman and founder of Barrick Gold, also offers up his own anecdote about gold’s broadening appeal. “I have had more phone calls in the past six months than ever before – from people who have $120,000 inherited from grandmother, and from hedge fund managers with millions,” he says. “I am not saying George Soros, but people of that caliber have told me they are buying gold.”

You no longer have to be a gold bug to think gold will rise in price. In fact, this buying by some of the world’s greatest investors may be the leading indicator for a quick 116% climb – to $2,000 per ounce or higher. Give gold the cold stare of a professional handicapper and the odds look very good, indeed.

Why? The biggest reason is that the value of the dollar looks about as brittle as a 90-year-old’s hip socket. And if you worry about the value of the dollar – or any paper currency – then gold is a good alternative.

In fact, gold has held up well while most everything else has taken a beating over the last year. On a recent conference call with investors, First Eagle fund manager Abhay Deshpande points out that gold is at a new high in just about every currency apart from the U.S. dollar and Japanese yen. “It has performed its job for everyone in these countries,” he says. “It has held its value.”

Take a look at the nearby chart and you can see the falloff of the dollar in recent years and the rise of gold.

“But there have always been worries about the value of the dollar,” you say. “That’s not new.” True. What is new is a global financial crisis unlike anything we’ve seen in the post-World War II era. And that crisis has brought with it serious doubts – the most serious in decades – about the dollar’s ability to keep its top perch in the aviary of world currencies. As that doubt increases, gold gathers new fans.

As I write, the headlines are abuzz with China’s proposal to replace the dollar as the world’s reserve currency. (The U.S. Treasury secretary, in a weak moment, said: “We are quite open to that.” He took back those words, but the hammer had already hit the nail.) China and other countries hold a lot of dollars. And they are not too happy to see the U.S. government handing out bills like after dinner mints. America’s $2 trillion (and ballooning) annual deficit and ballooning national debt causes them to wonder about the value of all the paper they hold.

They are not the only ones worried, as I noted up top. Many top investors are already buying gold.

It is easy to buy gold today with gold exchange-traded funds (ETFs). They are like mutual funds that hold gold. As investors pile into these ETFs, the ETFs’ gold holdings also go up. It’s one way to see the dramatic increase in demand for gold in just the last few quarters. (See chart below.)

So we have to ask: At $900 per ounce, are all the fears baked in or are we on some new history-making path?

I have a good friend who advises institutional clients on investing. As he reminds me, the really big money hasn’t started buying yet. There are no big pension funds or endowments with significant gold holdings. That could change. If so, the gold price will go wild.

“Gold is a small market,” Munk notes. Munk’s career spans 60 years and he knows the gold market as well as anyone. Says he:

“Let’s say a small percentage of the world’s central banks – or simply the United Arab Emirates itself – do not believe President Obama’s pledge that he will halve the U.S. deficit by the end of his first term. They shift some of their dollar reserves to gold. It would not take many decisions of this kind to push the price above $2,000 per ounce.”

That’s how gold gets to $2,000 per ounce – just a bit of doubt turning into action. The mind boggles at what would happen if China decided to hold more gold! Gold could well hit $5,000! As long as President Obama, Fed Chief Bernanke and pals treat the dollar like confetti, gold should continue to gather new fans. And gold stocks should do even better.

Gold stocks are supposed to do especially well as gold rises. But that has not been the case over the last year and a half. Mostly, this was because mining costs were rising as fast as, or faster than, the price of gold – thanks in part to record-high energy prices. But as Deshpande points out: “These things have reversed in recent months as gold stocks became quite cheap relative to the underlying value of the gold in the ground.”

The case for gold and gold shares is a nice and clean setup, like one of those toy houses in the window at Macy’s on Madison Avenue. The world order will not always hinge around the dollar. Global finance will not always find its center on Wall Street. As Munk pointed out: “Look around Davos this year. So Goldman Sachs (NYSE:GS) cancels its dinner party. In its place, a Kazakh company has a dinner party.”

As the dollar goes bust, who knows what will replace it? With gold, you don’t have to worry too much about the answer.

Source: How Gold Will Top $2,000 Per Ounce

Aurizon Mines (AMEX:AZK) inked a C$50 million bought deal financing comprising just over 9.7 million shares priced at C$5.15 each. The gold miner ended the day down C$0.51 at C$5.13.

Shares of Goldsource Mines continued to slump on the back of the last batch of drill results from the Border coal project in Saskatchewan. Goldsource fell C$0.15 to C$1.38.

Teck Cominco (NYSE:TCK) cashed in 5.6 million shares of Kinross Gold (NYSE:KGC) that it acquired in January on the sale of Teck’s sixty per cent interest in the Lobo Marte property in Chile. Teck got $18 per share for a cool $141 million. Teck ended the day up C$0.77 at C$8.74.

We may have bounced off the bottom but on a year over year comparison, the value of trades on the junior bourse is down 77.2 per cent, while the trading volumes are down 29.7 per cent. More importantly, equity financings are down 64.8 per cent over the first three months of 2009. We shall see what Thursday trading has in store.

Source: Resource Stock Roundup: Thursday, April 09th, 2009

In 2008, his fund returned 37%  – in a year where the typical hedge fund lost 19%.

Since last September, Paulson earned nearly $420 million shorting the stocks of some U.K.-based bank stocks – specifically Lloyds Banking Group PLC (ADR: LYG), and the former HBOS PLC (which Lloyds absorbed in January).

Paulson clearly does his homework, and now he’s turned his attention to gold.

In a recent move that garnered much industry attention, Paulson acquired an 11.3% stake in AngloGold Ashanti Ltd. (ADR: AU). At $32 per share, that acquisition set him back a cool $1.28 billion. British mining giant Anglo American PLC (ADR: AAUK) was the beneficiary of Paulson’s acquisitiveness, for it sold Paulson the AngloGold shares from its own stake in that company.

So let’s think about this for a moment. A single transaction shifted a significant portion of ownership, and more than $1 billion in cash, strictly between two parties:  No banks and no stock markets took part in the deal.

Besides his 11.3% stake in AngloGold (the world’s fifth-largest gold miner by market cap), Paulson also owns 4.1% of Kinross Gold Corp. (KGC), making him that gold company’s fourth-largest shareholder.

It seems this prescient investor is in good company, too.  David Einhorn, founder of Greenlight Capital Inc., with $5 billion in assets, also began buying gold earlier this year – for the very first time.

Noted value investor Jean-Marie Eveillard holds $1 billion in a vault near Times Square as “calamity insurance.” What’s more, as much as 8% of his First Eagle Global Fund is comprised of bullion and gold miners’ shares.

In the case of Paulson, the billionaire hedge-fund investor, his exceptional skill lies in his ability to foresee extreme financial episodes. From there, he decides how to position his funds to benefit from a likely outcome.

And that’s why we should all pay close attention to his most recent actions.

The very day after Paulson’s acquisition of AngloGold, the U.S. Federal Reserve announced that it would buy back a total $1.25 trillion of long-term Treasury bonds and Fannie Mae (FNM) and Freddie Mac (FRE) mortgage junk. That is essentially a monetization of the debt.  And that’s a red-carpet invitation for inflationary times (which is also the best time to play gold).

Pure coincidence? Maybe. But it’s a lot more likely that one of the savviest investors of our recent era is really onto something.

Source: If You Follow the (Smart) Money, Gold is Clearly the Smart Play