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This Statement is Signalling the Bottom for Gold Miners
Last week, Reuters released an update article saying that the amount of gold that had been hedged by gold mining companies in 2014 showed the biggest annual increase since 1999. According to the data, mining companies hedged an additional 103 tonnes of gold (3.3 million ounces) compared to 2013. The majority of the additional hedges is coming from Fresnillo and Polyus Gold.
That’s nothing new to us as we already discussed Polyus’ hedging strategy in an earlier column, wherein we linked the company’s hedging program with its main corporate lender. It turned out that the majority owner of Polyus’ main financier was nobody less than the Russian Central Bank, so we figured all of Polyus’ hedged gold went straight to the central bank’s vaults in Moscow.
The increase of the total amount of gold being hedged by gold miners could also signal the bottom. The ladies and gentlemen working in the corporate offices of these mining companies usually are the best contra-indicator you can imagine. Gold miners spent billions of dollars to unwind their gold hedges at the top of the market as they were all thinking the sky effectively was the limit. By doing so, they got screwed twice. By buying back their protection they spent billions of dollars of cash they could have deployed elsewhere. Secondly, the moment the markets started to turn, the majority of the mining companies didn’t have a single hedge in place anymore.
The past 3-4 years were very painful for investors in gold as the price of the yellow metal just continued to slide. And now, when the bottom seems to have been reached, the gold producers are increasing the amount of gold they are hedging so it definitely looks like they haven’t really learned anything from the past 10-15 years.
As you can see in the chart above, the Money Flow Index into the GDX-ETF has been increasing, as more cash is flowing towards precious metals and senior producers. We see the same evolution in the GDXJ-ETF and GLD(here below).
More cash is flowing into gold and gold-related investments, and we aren’t surprised to see the gold mining companies being a contra-indicator once again by increasing their hedge positions when the gold price is close to a five year low.
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An ounce a month...One of gold, one of silver!
That's my pleasure
So, let's see here,,,now is a good time to buy miner's corporate paper using government IOU's?
Nova Gold. Now there's a fun ride.
Hey, that there Country Boy Mine looks like just the place to invest my life savings; I wonder where I can buy some stock in that ?
Ole' Sprott there has called all 17 of the last 3 bottoms in Miners. I'm sure he's right this time. Well, not that sure.
Most miners have been so royally f****d by naked short selling and incompetent management that they will never recover even if gold goes up.
I'll believe it when it happens; the precious metals miners have been taken to the woodshed.
Personally, I'm planning on not believing it even IF it does happen; and I'm certainly not buying stocks. The trouble with mining stocks is they're STOCKS. Duuh.
Woodsheds are not a destination. They are but a waypoint...
Comstock Mining LODE is a good long term investment.
Silver Metal is a long term investment; dumbfuck mother's lode is not an investment; it's a stock; Stocks fail periodically; and often spectaculary, and probably this year; so good luck with your none investment.
Has Winfield finished diluting? If I recall, the largest shareholder was diluting the hell out of the company via convertible debt and he was picking up shares on the cheap. It may do well down the road but maybe for him only. Maybe something's changed. I haven't looked at GSPG/LODE in a very long time.
Gold has not bottomed. This guy is full of shit, as usual.
Supply dries up sub 1200. When the producers quit producing, the price will go up. That's why gold has been dragging along at the1150-1200 level for a year or two. If it were going lower, it would have done so already.
There is a difference between speculating on physical versus the mining company stocks. Apparently, you don't know history or the difference.
Let me give you a clue.
After 1929, physicial PMs declined and mining stocks bottomed out. Mining stocks then began a bull market while physical PMs suffered.
You go first, and I'll watch.
The last time I lost almost as much money was in the tech bubble. I should have just went to Vegas and blown it all over a couple of weeks on craps blow and hookers, it would have been a lot more fun and certainly a lot less painfull. Balls.
well. gotta agree. at least there would be warm memories on cold winter nights...
it's lke pissing up a rope to make any money in these fucking miner stocks.
Agreed. So I accumulate and pray. Can't beat the price and only buy what you can afford.
We're all placing our bets now.
Gold Miners are smart to hedge in the short run 1180 can't hold here if the market has one more shot at making new highs. A new lower level is needed for fuel to make that run, push to 2800-3000 in 18 months or so, but the real story is the markets fall that's coming this fall.
This fall will be 7 years since the last crash Oct/2008 and that is 7 years after it's last crash of Sept/2001
The 3rd horse, (Revelations Chapter 6) black with a pair of scales comes this fall Sept/15. The scales are not for weighing pavement bricks! lol
With each 7 year milestone passing things have gotten harder for man, with this passinng it's all going to get much worse.
did you pull that out from an astrology book or your ass?
Everyone should pause a minute or two from posting to remember the date.
April 5, 1933 was when FDR announced confiscation of gold.
There was no confiscation! People were asked to turn in their american gold coins and where given paper dollars amounting to more than the face value of each coin! Circulating american gold coins being used at the time were $2 1/2,$5 ,$10 and $20! People used them for everyday transactions. Most people today wouldn't know a gold coin if it hit them in the head. You really think the government is going to ask us to turn in 1oz PANDA? For how many FRN's? 1200? Not a chance! It's inconceivable to think that with so few americans owning gold of anything other than jewelry that the government would waste its time!
I hate it when people split hairs. Confiscate, order, seize, compel, what verbage is suitable? The net effect was the same. Once they had our gold, they revalued it- thus screwing people out of the turned in price of 20 and making the new price 35 which allowed them to nearly double the fiat supply. Which did not work, btw. It will not work this time either- but it will take a little time to prove out.
meh.
how many people actually had their gold confiscated? 1?
http://en.wikipedia.org/wiki/Executive_Order_6102
and, back then, the us $ was backed by gold, so the govt needed gold in order to add to the money supply, increasing the gold stock in govt hands was their version of QE back then.
now, with fiat $FRN, govt is under no such compunction, and doesn't have much of a motivation to confiscate / outlaw gold ownership.
"now, with fiat $FRN, govt is under no such compunction, and doesn't have much of a motivation to confiscate / outlaw gold ownership."
@stacking, neding to cover all the naked short selling from last years (when china and india actually require the gold to be delivered) would be motivation enough for you? ;)
stacking.
Do you always misinformation?
+++++++++++++++++
Effect of the order[edit]Executive Order 6102
Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67 (equivalent to $376.58 today[4]) per troy ounce. Under the Trading With the Enemy Act of 1917, as amended by the recently passed Emergency Banking Act of March 9, 1933, violation of the order was punishable by fine up to $10,000 (equivalent to $182,185 today[4]) or up to ten years in prison, or both.
Order 6102 specifically exempted "customary use in industry, profession or art"—a provision that covered artists, jewellers, dentists, and sign makers among others. The order further permitted any person to own up to $100 in gold coins (a face value equivalent to 5 troy ounces (160 g) of gold valued at about $6,655 in 2014). The same paragraph also exempted "gold coins having recognized special value to collectors of rare and unusual coins." This protected recognized gold coin collections from legal seizure and likely melting.
The price of gold from the Treasury for international transactions was thereafter raised to $35 an ounce ($587 in 2010 dollars). The resulting profit that the government realized funded the Exchange Stabilization Fund established by the Gold Reserve Act in 1934.
The regulations prescribed within Executive Order 6102 were modified by Executive Order 6111 of April 20, 1933, both of which were ultimately revoked and superseded by Executive Orders 6260 and 6261 of August 28 and 29, 1933, respectively.[5]
Executive Order 6102 also led to the ultra-rarity of the 1933 Double Eagle gold coin. The order caused all gold coin production to cease and all 1933 minted coins to be destroyed. About 20 illegal coins were stolen, leading to a standing United States Secret Service warrant for arrest and confiscation of the coin. A legalized coin sold for over 7.5 million dollars, making it one[6] of the most valuable coins in the world.[7]
Prosecutions related to Executive Order 6102[edit]Numerous individuals and companies were prosecuted related to President Roosevelt's Executive Order 6102. The prosecutions took place under subsequent Executive Orders 6111,[8] 6260,[9] 6261[10] and the Gold Reserve Act of 1934.
There was a need to strengthen Executive Order 6102, as the one prosecution under the order was ruled invalid by federal judge John M. Woolsey, on the grounds that the order was signed by the President, not the Secretary of the Treasury as required.[11]
The circumstances of the case were that a New York attorney, Frederick Barber Campbell, had on deposit at Chase National over 5,000 troy ounces (160 kg) of gold. When Campbell attempted to withdraw the gold Chase refused and Campbell sued Chase. A federal prosecutor then indicted Campbell on the following day (September 27, 1933) for failing to surrender his gold.[12] Ultimately, the prosecution of Campbell failed, but the authority of the federal government to seize gold was upheld, and Campbell's gold was confiscated.
The case was cause for the Roosevelt administration to issue a new order under the signature of the Secretary of the Treasury, Henry Morgenthau, Jr., which was in force for a few months until the passage of the Gold Reserve Act on January 30, 1934.
President Roosevelt issued new Executive Orders 6260, 6261 related to the seizure of gold and the prosecution of gold hoarders: also the Congress passed the Gold Reserve Act of 1934. Prosecutions of U.S. citizens and non citizens followed the new orders.
Gus Farber, a diamond and jewelry merchant from San Francisco, was prosecuted for the sale of thirteen $20 gold coins without a license. Secret Service agents discovered the sale with the help of the buyer. Farber, his father, and 12 others were also arrested in four American cities after a sting conducted by the United States Secret Service. The arrests took place simultaneously in New York and three California cities, San Francisco, San Jose, and Oakland. Morris Anolik was arrested in New York with $5000 in U.S. and foreign gold coins. Dan Levin and Edward Friedman of San Jose were arrested with $15,000 in gold. Sam Nankin was arrested in Oakland. In San Francisco, nine men were arrested on charges of hoarding gold. In all, $24,000 in gold was seized by Secret Service Agents.[13]
David Baraban and his son Jacob Baraban owned a refining company. The Barabans' license to deal in unmelted scrap gold was revoked, so the Barabans operated their refining business under a license issued to a Minnie Sarch. The Barabans admitted that Minnie Sarch had nothing to do with the business, and that she had obtained the license so that the Barabans could continue to deal in gold. The Barabans had a cigar box full of gold-filled scrap jewelry visible in one of the showcases. Government agents raided the Barabans' business and found another hidden box of U.S. and foreign gold coins. The coins were seized and Baraban was charged with conspiracy to defraud the United States.[14]
In 1934, Congress passed the Gold Reserve Act of 1934 which ratified President Roosevelt's orders. A new set of Treasury regulations was issued providing civil penalties of confiscation of all gold and imposition of fines equal to double the value of the gold seized. Louis Ruffino was one individual who was indicted on three counts purporting to charge violations of the Trading With The Enemy Act. Eventually, Ruffino appealed[15] the conviction to the Circuit Court of Appeals 9th District in 1940; however, the judgment of the lower courts was upheld based on the President’s executive orders and the Gold Reserve Act of 1934. Ruffino, a resident of Sutter Creek in California-gold country, was convicted of possessing 78 ounces of gold and was sentenced to 6 months in jail, paid a $500 fine, and had his gold seized.[16]
Foreigners also had gold confiscated, and were forced to accept paper money for their gold. The Uebersee Finanz-Korporation, a Swiss banking company, had $1,250,000 in gold coins for business use. The Uebersee Finanz-Korporation entrusted the gold to an American firm for safekeeping. The Swiss were shocked to find that their gold was confiscated. The Swiss made appeals, but those appeals were denied. The Swiss were entitled to paper money – but not their gold. Of course, after the gold was seized, there was a 1934 overnight increase of the price of gold from $20.67 per ounce to $35 per ounce. The Swiss company lost 40% of their gold's value.[17]
Another type of de facto gold seizure occurred as a result of the various Executive Orders and it involved bonds, gold certificates and private contracts. Private contracts or bonds which were written in terms of gold were to be paid in paper currency instead of gold. This was in spite of the fact that these contracts and bonds all proclaimed that they were payable in gold, and at least one, the fourth Liberty Bond, was a federal instrument. The plaintiffs in all cases received paper money instead of (the contract terms') gold. The contracts and bonds were written precisely to avoid currency debasement by requiring payment in gold coin. The paper money which was redeemable in gold was instead irredeemable based on Nortz v. United States, 294 U.S. 317 (1935).
the gold was technically nationalized, not confiscated.
Ah yes, magical thinking.
Fiat money is magical thinking.
A mine is nothing more than a hole in the ground with a liar standing over it. No way in hell miners ever go up again, sell them before they go to zero.
You got it half right. Markets are made of sellers as well as buyers.
But recall it is not just reality tv stars with a dump truck, a D10 and a loader building out the global au mining infrastructure these last 15 yrs.
Its big money with much more than a wee bit of hopium driving their business plan.
Of course they'll go up again, and the same people that made money all the way down will make money all the way up. It's a piece of cake when you're an insider and drive the markets.
"No way in hell miners ever go up again.."
Do you sell time blocks to gaze in that crystal ball of yours?
Is that you Bloomberg?
Bloomberg considers running for Mayor of London story out today.
Apparently if you are rich Banker, you might be a citizen of the UK & London.
London is a strange animal, read up on how they are legally set up if you enjoy WTF moments on a large scale.... :-)
care to provide a link ?
@ stacking12321
Try starting with this:
"The (Secret) City of London, Part 1: History "
https://www.youtube.com/watch?v=LrObZ_HZZUc
thanks!
Edit
thanks for your opinion.....that cleared up a lot
If you're buried in them just look at the bright side, they have strong support at zero! :)
Not necessarily; they could be forced to actually pay for the toxic sludge they leave behind .
Not likely, but this is the NEW old song...
Speaking of zero.., what's your background in the metals and mining industry?
Mercury in his tooth fillings.
Two posts for the price of one click. Easter sale on comments!
Well I think he is on to something as our economy is now based on fraud. Producing things for wealth is so 20th century.
MINERS need to set the price for gold.
YES it CAN be done. Don't sell for less than costs + profit.
Instead of taking what JPM says they'll pay.