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We've Never Seen This Before In The Gold Market
Submitted by Dave Forrest via OilPrice.com,
It might prove to be a one-off. But one group in the gold industry this week forged ahead with a unique strategy - which might just change the market.
The group is India’s largest jewellery-maker, Rajesh Exports. Which said that it is taking an unusual step in securing gold supply for its operations.
Buying gold mines.
The firm’s owner, Rajesh Mehta, told reporters in Australia this week that he is visiting the country to vet potential mining acquisitions. Adding that his company has hired investment bankers to identify assets that could “ensure a reliable and permanent gold supply-line to our company”.
The buys are apparently sizeable. With Mehta indicating that he may spend up to $700 million to acquire “equity or loan” interests in mining projects.
“We would also like to invest in the retail jewelry sector in Australia,” he said. “That is, take the gold from here, process it in India and then supply the jewelry back here in the retail line that we set up here.”
Of course, the words of one company don’t make an industry trend. But in the case of Rajesh Exports, the firm does have substantial clout in terms of gold demand — currently consuming about 140 tons per year of the metal. Equal to about 15% of India’s total yearly gold import volume.
It also signals an interesting trend in natural resources of late. Where end users of metal globally are becoming some of the most active parties in funding new mining projects.
We’ve seen similar moves from state-owned metals firms in Asia — in markets ranging from copper to platinum to coal. But the Rajesh Exports asset buy would be one of the first-ever project transactions by an end user for the gold market. Watch for announcements on specific investments for the firm.
Here’s to going to the source.
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just more "lack of demand"...
/s
This could be interesting depending on how they play it out. Our completely un-rigged and open market could get just a teensy bit strange....
Imagine if miners started selling directly to retailers, and cut out the Bullion Banksters. I see this as positive for gold and silver mining stocks.. However, I do not think this is a major game changer for the Gold market since mines only increase existing stocks of Gold by 1-2 per year.
You get permission from KWN to use that headline??
The depressed equity prices for the miners are pushing them to new directions. What I like about this trend is that it cuts out bank financing and the associated with its forward sale/hedge mandates.
The same thing that is pushing gold miners around is pushing around users of their PHYSICAL product. A jewelry company might think an artificually depressed price for gold (the primary commodity affecting their stock in trade) is good..... for a while.
But when you need 140 tons of physical a year, after a while the SHORTAGE OF PHYSICAL GOLD AT THAT PRICE matters a lot more than the raw materials savings. Their customers' demand for jewelry is high because the price of gold is too low. So they try to make more jewelry to fill the demand. And that's where the wheels come off because the miners CAN'T OR WON'T produce more at that price. Normally the price would rise to reflect that greater demand, but not when every CB in the world is committed to keeping the price depressed. Shortage/scarcity then becomes the rationing factor in the market, not price any more.
Inability to access reliable supply of the physical is the ONLY reason to make such a move. If the world was awash is physical gold this vertical integration would not make much business sense.
Again, anytime central planners try to manage an economy people always seem surprised by how fast "low prices" become "shortages".
Just ask any 50-something Russian who has lived in St. Petersburg their whole life.
Suppressed prices => shortages is one of the few iron laws of economics.
The fact that we don't appear to be seeing physical shortages suggests either prices are not all that suppressed... or the elasticity of supply is greater than realised.
I've lost count of the 'experts' over the years who have been forecasting imminent COMEX default. Either they were hyperbolising, or there are a lot more hidden gold stock the cartel can draw on than people realise.
Yamashita's hoard, anyone?
Don't know about gold, but we are getting close to the tipping point with oil. Someone had better bring those fusion reactors online quick.
That cover photo is Martha Gold mine in Waihi New Zealand. Just thought I'd point out that random piece of useless information. Its about all I can contribute anyways as nothing makes sense to me anymore. Cheers.
Yes LoP, i wonder why there's no major coverage on ZH.
The recent USD strength over the past few months has breathed some reprieve of life into gold miners, given that majority of PM miners are from non-USD countries.
Check the gold price in local currencies, Kitco has it on their main page gold/silver priced in major producer nation(non-USD) currencies, and you will understand why supply is starting to revive.
gold in AUD(Australian dollar) has shot straight up in dec/jan and is staying up thanks to AUD/USD valuations.
Just currency valuations doing their part.
@LawsOfPhysics - I'm actually old enough to have visited the old USSR in its waning days. I remember going into grocery stores with large coolers filled with only a few packages of meat. People waited in long lines outside to maybe get lucky and buy some. The average Safeway store in the US today looks like heaven in comparison.
The only places where you could find anything were in stores only open to foreigners (hard currencies accepted) and on the black market.
In that time a line would indicate that something of value was available. People would stop, just because of the line. Whatever was available, would be bought, Grannies would be buying size 10 (US) soccer shoes, not for personal use but for barter....
Plus the miners are simply cheap right now. It's a win win.
But you can't eat gold or its miners, oh wait.
They're going to scoop up all the juniors they can get their hands on.
I agree that price suppression will lead to shortages but I'm not sure we are there yet. Could be these jewelers are a) looking ahead and b) taking advantage of the extreme underpricing of gold in the ground.
If these jewelers are buying miners on the come, they'd be the only ones I've ever heard of that would think that far ahead (or take that much risk- mining is a LOT different than the jewelry business). No, I think there is RIGHT NOW, TODAY pain for them in obtaining the needed phyzz to justify undertaking such a venture.
On top of that, Jewelers don't care what the price of gold is. They get paid on the DIFFERENTIAL between cost and sale price. Low or high doesn't matter- they need to sell a certain QUANTITY to generate the spread to hit their numbers.
Perhaps they may be fearful of Apple´s upcoming demand for gold and are afraid their supply may be squeezed so badly that the quantity that they need to stay profitable cannot be guarenteed. Even if Apple is only a side show, a global fiat crisis could also zap supply in no time. I can imagine the demand for silver jewelery as the alternative for poorer Indians will be on the rise (even more than it has risen in India already) in the event of a gold supply squeeze. Could you picture Apple buying a gold mine with the kind of capital it has to secure or supplement it´s own supply needs? Depending on demand for it´s top end watch, it could easily happen.
There's no price suppression. If there's manipulation, it's in both directions. Do you think the banksters want to only make *half* the profits?
Great explanation. If jewelers mine their own gold, the "spot" price of physical will eventually decouple from the fix/ futures and move to real market price discovery. People will care more about how much the gold necklace inside the glass case at the local jeweler cost today?
NOW THAT IS FUNNY!
Where have you seen this in the gold market before?
Haha, good one. I didn't bother to check KWN but would guess it's been talked about or will be.
"THIS will send gold SOARING IN 2015!"
"We checked in with our resident expert, Snidegrass Snippleheimer, a 80 year veteran in the metals industry and the implications are stunning!!"
just more "price discovery" too.
Hell, I wonder if the CBs are paying them to do this. Makes a big chunk of physical demand disappear off the market and hides what the real price of physical is. Sounds like a win for the manipulators to me!
Where can I get one of those?
Start working at home with Google ! Its by-far the best mixed bag of goods I've had. Last Thursday I got a trademark new Bmw since getting a check for $6474 this - 4 weeks past. I began this 8-months ago and immediately was coming with house at least $77 per hour. I work through this connection, go.to tech marker for work detail.... www.globe-report.com
I would not announce this. I would not want the price of miners to pop and cost me more money.
I think it's safe to say the price of gold is well contained so they have nothing to worry about...for now.
They may have taken a long position and are hoping to get close it at a profit.
What? The Gold miners finally get a bid from someone!?!?
At least it is a bid by a producer of something and not a paper pusher.
Each day this shit show continues in Gold. Is each day the western Zionists lose more and more of their wealth to the East. Long may it continue until Rothchild himself is crying into his empty palm. A little hopeful I know...
Rest assured that Rothchild is sitting on a huge multigenerational stack unless you assume that the family is not so smart. I wouldn't.
I dont know....do you think that Rothschilds can have more gold than governments of Russia, China, India plus all the Chinese, Indian and Russian elites, who have been buying gold like crazy for many years already??? Who are buying more than the world production of gold? I am afraid this time the Rothschilds just blew it and the win goes to the East. Unfortunately, i am afraid this is why the Rothschilds will try to start WWIII. To get back some gold???
Move East young carpetbagger.
it would be fun to see the jewelry makers at etsy climb into some of those ridiculously large dumptrucks.
How does one "consume" gold?
Goldschläger
Industrial use and boating accidents.
They can always just print more mines.
They're very confused; how can you get nice fresh paper gold contracts from a hole in the ground ? Tch-tch. those dumb Indians.
That's why they employed the help of investment bankers. Miners of paper extraordinaire.
I want to buy the mine over Chases vaults in NYC
Barbarians ;)
"hired investment bankers" ROFLMAO ,
All he'll get from them is a Sep 2016 contract for "delivery" on the CRIMEX.
Which will in due course be rolled over to a further contract for delivery a year later.
All those hot Indian brides will be wearing pieces of paper.
the risk of getting fucked over by financial fraudsters in the gold market is now officially higher than the risk of managing a mining operation
JPMorgan has been doing this for years so whats the big deal.
Keyword. "End User"
ie not a bank
Indians and Pakis certainly apprecaite the yellow metal and wear it well. The 24k is beautiful against their skin color.
Raycisss
Those hot chicks in the Bollywood films look spectacular decked out with all that 24k and rubies. Maybe I'm also rayciss but I think the deep 24k against their lite brown skin is gorgeous.
Sadly they hit the wall even harder than blondes.
The model worked well for De Beers.....
Is it just me or does anybody else read Indian in the same manner that you "hear" the Indian accent?
The miners are reacting to "something" today. Maybe this?????
Seems I read a couple of weeks back that JPM was setting up a $300m fund to invest in the miners. Prehaps someone else has some information on that if it is true.
In the Goldman Sachs Dominican Republic bad debt rollover to Venezuela..... http://www.bloomberg.com/news/articles/2015-01-20/dominican-republic-pla... .... they secured the bonds with future gold thefts of Dominican gold mines.
Buying mining stocks in't a hedge, they're already owned by the banks, they just haven't foreclosed yet.
Damn those other countries getting wise to gold theft at manipulated prices.
But that gold belongs to the bullion bankers! The get subsidized to price it to sell!
It's difficult for jewelers to have a very volatile cost structure, so that is what this is about. If they pay spot and the price of the metal drops in value prior to them being able to resell it as a finished product, they take a hit on that. In this particular case, if their cost for extraction were $800/oz, it would matter less if the price of gold dropped from $2000 to $1200, because they still would be able to make a profit.
I don't see this as bullish or bearish for gold -- it is just a case of market price volatility causing jewelers to do this. The same basic thing applied with Delta Air Lines buying the refinery. While they don't yet have rigs, they were able to control part of the cost and ensure supply where they need it.
If the cost of carry is low relative to likely downside in gold prices, then that's the only reason they need.
They hedge their inventory if they are smart, so they elimiante most of that volatility risk.
Why would anyone buy a mine when you can just buy at the current spot price? Pure to four nines and at a deep discount, without operational or counterparty risk.
Your comment mirrors the American short term investment strategy, as if gold will be artificailly cheap forever.
Not really. I believe gold will go up exponentially, but I'm not taking any bets on timing. The problem with a miner is it has to stay solvent in the meantime. My point was why not buy the physical rather than dealing with operation, labor, environmental and safety issues, not to mention leverage which a lot of miners have. I also don't assume interest rates will be low forever.
Just a risk preference that's all.
It's a lot easier to mine paper gold at the Comex - shift starts at 8am every day and you don't even have to go down the shaft, you just have to give it.....
If the miners ever hope to succeed, they need to set a high daily bag limit on gangbankster manipulators.
TIL there is still an actual gold market.
vertical integration......bitchez.
let them spend 100s of millions like china.
once extraction begins cia,mossad and mi6 will send in the rabbi group called isis or africon version trash kill then take over the site.
the paki indian and the chink need to start fighting back or they will be forever zion shitty of london ass raped out of all foreign investments
<-- I love John Cleese humour.
<-- Huh?
I see one problem with this strategy - future changes in Australian law.
If gold goes ballistic, do you think the Ozzies will allow a foreign owned miner to export gold at mining cost, without increased export duties or restrictions on export volumes? Russia increased export duties on grain, when the Rouble devalued recently.
If gold goes to $5,000 and costs $1,000 to mine, would any sensible government allow a profit of $4,000 per toz to disappear out of the country without heavy taxation or restriction? Nope!
Why not "vertically integrate" your supply chain; food companies like Micky D's have been doing it for decades? Why depend on the pirate asshats in the metals dealer community to supply you at your disadvantage when you can own the supply yourself?
www.traderzoo.mobi
eeek no! There is no such thing as perminant supply in mining. buy mineral rights, not the fucking operation you idiots!
Just as long as the gold markets get ass fucked.....lord knows we don't want sound money now do we!?!?
putin regime crimes to people of Russia - exposed:
https://youtu.be/a0DEbJitRaY
Switch on ENG subtitles if you don't understand russian.
Crazy foreigners buying more Barbarous relics....
What are they thinking????
LOL
This is a massive vote of no confidence in the market.
North American Miners need to diversify and get into making jewellery themselves through a subsidiary.I'd by directly from a Miner if the quality was excellent.Why pay more?It's not rocket science.
This is brilliant.....I have no idea why they didn't do this before. Gold miners are so beat up that they can be valued at far less than a reasonable valuation of the proven reserves. Of course management have been known to be so wasteful, pathetic or greedy that they turn shareholders away in disgust....maybe owners who are actually businesmen can make these companies responsible and profitable....all imho.
Barbarous collateral.
If there is justice in the universe, the Rothchilds will one day be moving from homeless shelter to homeless shelter - but I'm not putting any money down on that EVER happening; but then again, strange things have been known to occur...
While we're not betting any money on it, I agree. We can still pray and hope!
The smartest business thing I ever seen awesome.
duh!
Yet another way for the world to avoid paying in US dollars or using US bankers.
Sweet, sounds like a gold cartel. About fucking time.
So they want to own a gold mine here in Australia then ship the gold to India where the labor is cheap, create jewelry and then sell it at 1000% + mark up back to us dumb fucking Aussies.
Fuck you ya cunts, stick to running 7/11's.
India is the world'd biggest arms Importer.
Indians spend maximum money on arms imports from whom :
Israel
Now the picture gets clear,
make money , but Israel gets richer out of it
while you foolish Indians spend money on arms which ultimately burns, to fire , vanishes on pretext of security threats from China & Pakistan.
(only corrupt gain & keep in foreign banks)
Well remember why there is the word 'Jew' in Jewelry.