Crude Oil Guide: Brent Vs. WTI, What’s The Difference? (via Cannon Trading)“U.S.-produced oil is a substitute, in terms of volume, to non-U.S. sources, and it’s geographically safe and secure, sending a hedge into the WTI price, not into Brent,” said Richard Hastings, a macro strategist at Global Hunter Securities. Hastings…
By www.CentralBankNews.info Botswana’s central bank held its bank rate steady at 8.0 percent, saying the current economic outlook and inflation forecast “suggests that the current monetary policy stance is consistent with managing inflation within the Bank’s 3-6 percent objective in the medium term.”
The Bank of Botswana, which has cut the bank rate three times this year for a total cut of 150 basis points, said the medium-term outlook for inflation was positive and inflation was forecast to remain within the central bank’s target range.
Botswana’s inflation rate eased to 5.6 percent in August from 5.7 percent in July with weak domestic demand underpinning the expectation that inflation will fall further in the short term.
However, the bank said this outlook could also be affective by “unanticipated large increases in administered prices and government levies, as well as a possible increase in international food and oil prices to levels beyond the current forecast.”
Botswana’s Gross Domestic Product expanded by an annual 7.9 percent in the second quarter, up from 3.3 percent in the first quarter and the bank said it expects non-mining output to remain below potential in the medium term and generate minimal inflationary pressure.
By Investment U
The government actually did it. It shut down. Leaving Americans to ask the question: What do we do now?
My suggestion is that, instead of panicking, we take a webpage out of Amazon.com Inc.‘s (Nasdaq: AMZN) playbook and go about life as usual, setting goals and accomplishing them with the same dedication we always have.
The world’s largest online retailer seems completely unfazed by the government shutdown, the official introduction of Obamacare, or any national predictions for the rest of the year or 2014. Far from it: It says it’s hiring 70,000 full-time seasonal U.S. workers to handle the holiday season.
That’s 20,000 more seasonal employees than it hired last year, and Amazon says it expects to keep at least a few thousand of them on for the long haul.
Taken by itself, that’s quite the bullish move on the company’s part, especially at a time when the economy still hasn’t fully recovered. But after looking at what Amazon has been up to over the past couple years, it’s difficult to think of it as anything but strong… with a stronger future ahead of it.
In 2010, Amazon made total revenue of $34.2 billion and gross profit of $7.64 billion.
In 2011, it saw those numbers rise to $48.07 billion and practically $10.79 billion respectively.
And in 2012, total revenue was $61.09 billion and gross profit rose to $15.12 billion. So the company has clearly been successful in its expansion efforts over the past three years.
As for 2013, Amazon is well in line to net further gains, since it’s already brought in $8.7 billion in profits for the first half of the year… well before its most profitable quarter – October through December – is factored in.
That’s not to say that expansion doesn’t cost something. As evidenced by the numbers above, its financial intake has been increasing steadily… But so has the cost of earning it.
That push for more actually led Amazon to report a surprise loss of $7 million during its last quarterly statement, and the stock sold off as a result. And while it initially recovered those losses and then some, it went on to waver its way downward through August until finally turning around last month.
It’s since hit an all-time high of over $317, adding over $4 in early trading on October 1 alone.
And chances are, it will hit somewhere significantly higher before the year is out.
Amazon CEO Jeff Bezos knows exactly where he wants to steer the company, and that’s in the direction everything else is going these days: toward digital products.
Books, video services and other sources of entertainment or information are increasingly moving out of their traditional boxes and onto computers or computer substitutions… like Amazon’s Kindle.
Just last week, the online retailer introduced the Kindle Fire HDX, the latest installment of its e-reader. This newest version adds better clarity and color as well as faster speeds and less heft.
It’s that kind of focus that ultimately led Amazon to its quarterly tumble, but it’s also that kind of focus that will send its stock soaring going forward.
Though it’s trailing Netflix (Nasdaq: NFLX) badly when it comes to subscription-based video streams (2% versus 89%), and Apple (Nasdaq: AAPL) has it soundly beaten in the e-reader department (48% versus 17%), that just shows how much ground it can gain…
And how much profit it can make.
If anybody can improve those margins against such formidable competitors, it’s Amazon.
Remember: Neither Apple nor Netflix are invulnerable. Google (Nasdaq: GOOG) and its Android smartphone operating system have more than proven that the once almighty iPhone can lose market share. So against the right tools and advertising skills, the iPad can lose its place of dominance as well.
As for Netflix, well, it can easily be its own worst enemy as we’ve seen in the past.
Amazon is more than tough and savvy enough to improve its digital-world standing from here. Expect its stock to reap the rewards.
Article By Investment U
Original Article: What Government Shutdown?
By The Sizemore Letter
From the news, you would think that Brazilians had stopped drinking beer. Ambev (ABV), the Brazilian brewing giant, is expected to see mildly negative volume growth this year, as slower economic growth and rising inflation appear to have dampened the party spirits.
Ambev—which trades as a separate ADR despite being controlled by global brewer Anheuser-Busch InBev (BUD)—has followed the Brazilian market lower this year. In dollar terms, Ambev is down about 17% from its February high vs. a loss of 15% on the popular iShares MSCI Brazil ETF (EWZ).
So, after its recent spill, is Ambev a buy?
At current prices, Ambev is not a compelling buy. True enough, the brewer is one of the purest plays on the rise of Latin American living standards. This is a durable macro trend and, in my view, one of the most attractive investment themes of the next decade. But trading at 23 times expected 2013 earnings and yielding only 2.3% in dividends, it can’t be considered a screaming bargain.
What about its behemoth international partner, Anheuser-Busch InBev?
BUD is the largest brewer in the world and one of the most diversified. It counts over 200 beers in its product portfolio, claims 6 of the 10 most valuable beer brands in the world, and it sells over half of its beer by volume in emerging markets.
BUD isn’t “cheap” trading at 20 times earnings, but for a high-quality, defensive dividend grower with unparalleled international reach, I wouldn’t consider it expensive.
Earlier this week, I wrote about my favorite way to invest in emerging markets: Western-domiciled multinationals with an oversized presence in the developing world, or what I like to call “Emerging Markets Lite.” Anheuser-Busch InBev would certainly make the cut here.
But as attractive as BUD is, it’s not my favorite. That distinction belongs to Dutch-based megabrewer Heineken (HEINY).
Heineken depends on Western Europe for a larger chunk of its revenues than Anheuser-Busch InBev, which has muted investor enthusiasm. But Heineken gets about half of its revenues and more than 60% of its sales by volume from emerging-market countries, and it has excellent positioning in Africa, the last real investing frontier of any size.
Africa already accounts for 22% of Heineken’s sales by volume, and this percentage will only increase with time as African consumer trade-up from home brews to branded beer.
Heineken trades for a reasonable 17 times earnings and pays a modest 1.8% dividend.
Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he was long HEINY. Click here to learn about his top 5 global investing trends and get your copy of “The Top 5 Million Dollar Trends of 2013.” This article first appeared on InvestorPlace.
This article first appeared on Sizemore Insights as Want Emerging Markets Exposure? Go for Global Beer
London Gold Market Report
from Adrian Ash
BullionVault
Thurs 3 Oct 08:55 EST
PRECIOUS METALS fell back Thursday morning in London, with gold reversing $20 of yesterday’s near-$50 rally to trade 2.6% lower for the week so far.
The price of silver dropped almost 50c from Wednesday’s peak, but held only 1.1% beneath last week’s finish at $21.57.
World stock markets meantime ticked lower, as did major government bonds and commodity prices.
At this morning’s London Fix – the global benchmark for valuation and shipping contracts – daily volatility in the gold price stood near last week’s 2-month highs at 25.7%.
Silver price volatility – a measure of the violence in its daily swings – last week hit its highest level since May at 43.9%, retreating to 39.2% by Thursday’s Fix in the London bullion market.
“It remains a mystery what caused gold to collapse [Tuesday lunchtime],” says a note from Japanese conglomerate Mitsui’s trading team.
“[But] many of the precious metals market participants were in Rome for the LBMA conference,” they add.
Tuesday’s sudden $40 drop in gold – made inside 1 hour – happened right at the start of US trade. Wednesday’s sharp bounce in the Dollar price, which came after weak US jobs data, “[still failed] to regain the previous high,” says Victor Thianpiriya at ANZ Bank in Australia.
Wholesale prices for gold bullion peaked yesterday at $1324 per ounce, beneath the $1331 level where Tuesday’s drop began.
“[That] suggests,” says ANZ, “the near-term downtrend remains intact and we remain wary of buying-the-dip while [wholesalers in] China, the natural bid, remains on holiday” for Golden Week.
“With [dealers in] China on holiday,” agrees Walter de Wet at Standard Bank, “there may not be the same strength in physical demand for gold if the price moves lower.
“The fact that precious metals have sold off quite aggressively while uncertainty about US fiscal policy lingers, is a bearish sign. However, we do believe that markets in general are looking through the fiscal impasse towards a solution.”
Official US jobs data in the monthly Non-Farm Payrolls Report will not be released as scheduled on Friday, the Bureau for Labor Studies says, “due to the suspension of Federal government services” thanks to the US debt limit wrangling in Congress.
Leading bank chiefs met with President Obama on Wednesday to plead for a resolution to the debt-ceiling row before the US begins to default on its debt repayments and obligations.
Yesterday’s private-sector ADP report said net hiring in the US economy totaled 166,000 in September, below analyst forecasts of 180,000 and with a sharp downwards revision to August’s first estimate.
Gold coin sales by the US Mint meantime recorded a 6-year low over the last two months, notes Barrons magazine.
From Monday this week, adds specialist site Mineweb, the State of Texas is levying no sales tax on gold, silver or platinum coins – a first for US citizens, and eliminating a 6.25% on bullion coin and numismatic purchases made locally below $1,000 in value.
Gold trading in China is also set for further deregulation, the People’s Bank said earlier this week, as it opens up new licenses for importing and exporting.
Looking at Chinese premiums, over and above the world’s London benchmark gold price, they “did not rise as might have been expected” in September, notes Australia’s Macquarie bank, “suggesting a non-price related weakening of Chinese demand.
“In other words, the Chinese [did] not want much gold” as the current Golden Week, typically a strong period for shoppers to buy gold whether as jewelry or bullion, approached.
Across in India today – traditionally the world’s heaviest gold consumer market – “Some jewellers are placing orders as they have very thin inventory,” Reuters today quotes a private importer in Mumbai.
“They want supplies for Dussehra and Diwali,” he added, pointing to the Hindu festivals taking place later this month.
Prices for Indian gold consumers – hit by strict anti-import rules this year, aimed at reducing the country’s large trade deficit – eased on Thursday as the Rupee recovered 1% on the currency market.
Gold price chart, no delay | Buy gold online
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.
(c) BullionVault 2013
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
EURUSD: With EUR resuming its broader medium term uptrend, the risk is for more upside to occur. As long as it holds above the 1.3650 level, its medium term uptrend remains intact. Resistance resides at the 1.3710 level, its Feb 01’2013 high with a breach targeting the 1.3750 level followed by the 1.3800 level and possibly higher towards the 1.3850 level. Its daily RSI is bullish and pointing higher supporting this view. Conversely, on a price failure it will target the 1.3500 level followed by the 1.3456 level and then the 1.3321 level. A cut through here will target the 1.3250 level. Further down, support comes in at the 1.3165 level. All in all, EUR continues to retain its upside bias in the medium term.
Source: JT Long of The Gold Report (10/2/13)
http://www.theaureport.com/pub/na/bob-moriarty-ignore-the-noise-and-profit-from-golds-volatility
Opining that Fed Chairman Ben Bernanke has put a stake in the heart of the dollar, Bob Moriarty of 321gold advises people to invest in something real or be prepared to see their investments go to money heaven. Attributing many of the declines in share prices to irrational behavior, he tells The Gold Report about several of the bright companies now selling at “absurdly cheap” share prices.
The Gold Report: Bob, gold prices jumped up on the news that the Federal Reserve would not taper bond buying, then fell days later on news of a possible government shutdown. Did we mark a bottom? Are we in for some more headline-based volatility through the rest of 2013?
Bob Moriarty: Essentially, the news announced on Sept. 18 was Fed Chairman Ben Bernanke putting a stake in the heart of the dollar. He guaranteed its destruction. The move up in gold was a natural, logical move by the shorts to cover.
Bernanke’s theory that pouring tons of money into the economy will increase employment hasn’t worked since quantitative easing (QE) 1. It is just guaranteeing the destruction of the currency.
I’m not sure what happened on Sept 20. I don’t think gold’s fall that day had anything to do with the government shutting down. I think we had a major bottom in June. Lately, I’m seeing so many bright companies that are so absurdly cheap. It’s a wonderful opportunity for investors.
TGR: Does it matter to the price of gold who chairs the Fed?
BM: No, it doesn’t. It’s similar to asking whether it’s more important whether you die of cancer or of a heart attack.
TGR: You said in an article in 321gold that markets go up and down; you can make a lot of money if you learn to ignore the clutter and noise. How are you adjusting for the volatility in the market today?
BM: Volatility doesn’t bother me. The small, vocal group that has been screaming about gold and silver being manipulated is ignoring the fact that all financial markets are manipulated. The manipulation doesn’t make any difference. It doesn’t give you a buy signal or a sell signal.
We have had extraordinary extremes and bullishness for the Dow and the S&P 500 and extraordinary extremes and bearishness for gold, silver and platinum. You just have to ignore the noise.
The people claiming a manipulation/conspiracy have convinced a lot of people that markets are never supposed to go down. Gold is a good investment and it’s supposed to go up every single day, they said.
Gold is a good investment, but it’s not supposed to go up every single day. No market goes up every single day. It’s not manipulation when markets go down.
TGR: You spent much of the summer touring mine sites. Tell us what got you excited.
BM: Just today I talked with the management and the technical teams at Cayden Resources Inc. (CYD:TSX.V; CDKNF:NASDAQ). When I wrote about the company in May, the stock price was $0.72. It’s around $1.65 today. The stock was cheap at $0.72 and it’s cheap today. This could be a $30 stock. It’s an extraordinary opportunity.
Cayden has two homeruns. One is Morelos Sur, a project in the Guerrero Gold Belt, in between two gold mines owned by Goldcorp Inc. (G:TSX; GG:NYSE). Unless Goldcorp buys the Cayden project, it will lose 2–3 million ounces (2–3 Moz) of gold. It’s only a question of how much Goldcorp will pay for it. I used to believe it would be $42 million ($42M). Now, it looks as if it will be $100–200M, depending on the price of gold. As of today, Cayden has a total market cap of $70M and an enterprise value of $55M. Yet it could get a check from Goldcorp for $2.50 to $5 a share. The current price is simply nuts.
Cayden also has a project in Jalisco that had been mined before, El Barqueño. The company just started drilling and I think the results will be extraordinary. In May, I predicted it would be a 5 Moz project. I now believe this will be a whole new district.
TGR: Cayden just filed an updated technical report on the Morelos Sur and El Barqueño projects. Did that give you the results you were hoping for?
BM: No, because the technical reports were technical in nature. They didn’t address the resource. What the reports said was true, but it’s not meaningful. When Cayden releases drill results in mid-October, I expect intercepts of 70–100 meters (70–100m) of 3+ grams per ton (3+ g/t) material.
A lot of majors are looking at Cayden right now. This will be one of the major successes of 2013.
TGR: What other companies did you see in Mexico?
BM: I also visited Silver Bull Resources Inc. (SVB:TSX; SVBL:NYSE.MKT). Silver Bull has a really unusual deposit. Silver is a very reactive metal. It’s very common in the silver-gold system to have near-surface silver oxidize and get washed away. There will be lots of gold, but no silver at surface. The majority of this deposit is silver oxide.
TGR: Silver Bull uses its SART (Sulfidization, Acidification, Recycling and Thickening) process for extracting silver and zinc. Once the feasibility of the metallurgy is proven, would this company also be a takeover target?
BM: Absolutely. You have to process silver oxide differently than silver sulfides. It’s very typical in a heap leach to have 50% or 60% recovery of silver. You could recover more if you used more cyanide, but that costs money and in most cases it’s not worth it. The SART process recovers cyanide. While it’s not a cheap process for Silver Bull, it will be a very important technical issue. In the next six months, when the silver price goes through $25/oz, I expect an offer for Silver Bull will be considerably higher than the stock is now.
TGR: You also spent a week in Nevada. What did you see there?
BM: I went to see a project I first visited 12 years ago called Kinsley Mountain, owned by Pilot Gold Inc. (PLG:TSX). It was first put into production in 1994 and went out of production in 1999.
Kinsley Mountain is one of those projects that may be a Long Canyon-type project—which would be 2, 5, even 10 Moz—or not. Even if it’s not a Long Canyon, it would still be 500,000 oz (500 Koz), and could still sell. It won’t cost Pilot Gold anything to drill, because the company can recover the money.
Pilot’s management team is the best in the industry, with most members coming from Fronteer Gold. When Newmont Mining Corp. (NEM:NYSE) bought Fronteer out for $2.3 billion ($2.3B), it was an absolute homerun for shareholders. Pilot is doing the same thing. You’re buying at a 60% discount to what it was nine months ago.
A year ago, I visited Pilot Gold’s projects in Turkey. One is a copper-gold porphyry; the other is a gold-silver epithermal system. Both were very attractive and had great technical success and great drill results. The stock went from $1.30 last year to $2.40 in January 2013. Then, it got knocked down to about $0.71. After the shenanigans of last week, it was up to $1.10 and it’s back below $1 now.
It’s important for your readers to understand that the decline in shares since January has not been rational. Nor has it been manipulation or shorting. It’s been hedge funds and gold mutual funds being forced to sell shares. Often, they sold the best projects just because they could. They needed cash and sold everything they could to raise it.
TGR: Where is Pilot Gold’s focus, in Turkey or Nevada?
BM: It’s focused on both locations and all three projects. The company’s joint venture with Teck Resources Ltd. (TCK:TSX; TCK:NYSE) on the big porphyry project in Turkey is in a holding pattern. It’s not attractive at $3/lb copper, but it’s very attractive at $4/lb copper.
The company is drilling the heck out of the TV Tower project and Kinsley Mountain. It has plenty of cash and an incredible ability to raise money.
TGR: What else did you see in Nevada, Bob?
BM: There are three projects in the Walker Lane Trend, which runs parallel to the Nevada/California/Arizona border, between Las Vegas and Reno. The Comstock Lode and Round Mountain gold mines are both in the Walker Lane Trend.
I visited Star Gold Corp. (SRGZ:OTCQB), which is extremely tightly held. The company is moving forward with production plans for 2016. The repetitive drill-and-raise-money approach has proven to be a flawed business model. Star Gold’s management wants to get into production. The company has 250 Koz gold that can be heap leached.
One of my suggestions to management was that the company needed to be a little more liquid so people could buy and sell. I hope it will do that. The company is doing a $1M placement now. I think it will do fine.
I also visited Walker River Resources Corp. (WRR:TSX.V). Its Lapon Canyon high-grade gold project had been privately held for about 70 years, and nothing had been done in that time. The company went public in July 2012. Walker River has good grades and a good technical team. It has a very tight share structure and very small number of shares.
Star Gold is going after the low-grade, bulk tonnage and Walker River is going after the high-grade vein structures. I think both will succeed. Both are focused on production.
TGR: How will companies in these historic areas succeed when others couldn’t before? Is it new technology? Is it the price of gold?
BM: Both Walker River and Star Gold are projects that have never been drill tested.
At Round Mountain, the most gold is found in type 2 rock, which is volcanic tuffs, similar to a sponge. It’s very easy rock to leach. The liquid containing the gold goes through the rock and the gold that’s left is very easy to mine.
Star Gold has a bigger percentage of type 2 rock than Round Mountain, which makes the company attractive. I like the idea of getting into production cheaply. The company has a very loyal, very tight group of shareholders. The only proviso is that the stock will be very difficult to buy.
Walker River, on the other hand, has about 15M shares outstanding, selling for about $0.15/share. It easily has tenbagger potential and it is easy to buy and sell.
TGR: Anything else in Nevada?
BM: I talked to the technical team from NuLegacy Gold Corporation (NUG:TSX.V). It is near Elko and has a joint venture with Barrick Gold Corp. (ABX:TSX; ABX:NYSE). NuLegacy has 70% of the project; Barrick 30%. NuLegacy has $5M to spend in a certain period of time. The company has spent about half and has produced very attractive results.
Management has to figure out a strategic issue: Does it want Barrick to back in or not? If Barrick backs in, Barrick will have to spend three times what NuLegacy spent; it will have to spend $15M in a five-year period and NuLegacy would get a 30% carried interest to production. In effect, NuLegacy would get a free ride. From a strategic point of view that’s brilliant; Barrick puts the mine into production and NuLegacy gets 30%.
The problem is that NuLegacy could go for several years with no news for investors. That hurts the share price. The alternative is for NuLegacy to drill some areas that are not that good to discourage Barrick, in which case NuLegacy would get 70%.
NuLegacy gets a homerun at 70% or 30%. How aggressively the company drills is the technical issue right now.
TGR: I visited there a year ago and the big topic of conversation was being in a trend with visual lines of sight to working gold mines. There are many trends in Nevada; are they turning out to be good indicators of where gold is being found?
BM: In Star Gold’s case, absolutely, but that’s not always true.
Walker Lane is hundreds of miles long. Ninety percent of it doesn’t hold much, but 10% holds something very, very good.
TGR: Are you following other Nevada companies?
BM: There is Comstock Mining Inc. (LODE:NYSE.MKT), which continues to produce. The company is growing, adding to its resource. It produces 25 Koz of gold equivalent. It needs to increase that to do something for the shareholders.
TGR: What about outside Nevada?
BM: Resource nationalization has produced some interesting results. Gold companies deliberately, and mistakenly, underestimated their costs of production. When countries like Mongolia, Tanzania, Peru, Bolivia and Ecuador saw the gold price hit $1,900/oz, they reacted by saying, “These companies are making so much money, we need to take a big chunk of it.” As a result, there have been tens of billions of dollars in write-offs.
Kinross Gold Corp. (K:TSX; KGC:NYSE) wrote off $2.3B in Ecuador because the Ecuadorean government demanded 80% of the project. Kinross said that it funds 100% of the mine, so if it gives 80% to the government, it can’t make any money. The government didn’t budge. Kinross walked away. That was a smart move on its part.
TGR: Which countries not experiencing resource nationalization would you rather be in?
BM: The location of a resource is increasingly important. The top three safest jurisdictions in order are probably Canada, Mexico and the U.S.
You need to remember that every country in the world has been spending money that it doesn’t have. They are broke. The entire financial system is broke. Governments are doing whatever they can to beg, borrow or steal money. In the case of resource nationalization, they’re going to steal it. What they’re doing is long-term negative for the countries, but they don’t care.
TGR: Is that the case in Peru?
BM: Peru keeps making noises, but mining is the number one industry in Peru. I visited Peruvian Precious Metals Corp. (PPX:TSX.V; PPX:BVL), but it was called Sienna Gold when I was there. It needs to raise money and do more drilling in a difficult environment, in a difficult country. But the management is strong and it can deliver.
TGR: The company needs to show technical results and rebrand the company to regain trust in management, correct?
BM: Absolutely correct. The prior management was utterly incompetent.
But I must say that for the last two years it’s been very difficult for anyone to raise money. The good companies, like Cayden, Pilot Gold and Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE), have such strong management that they can raise money. But they’re paying a price. It’s not cheap.
TGR: Where else have your travels taken you?
BM: Recently I made another quick trip to Chile to visit an interesting company listed in Australia named Hot Chili Ltd. (HCH:ASX). It is a production oriented company. The biggest problem in the copper arena right now is the number of low-grade, high-capex projects. There is a world of projects needing in excess of a billion dollars that work at $4/lb copper but not at $2.50/lb copper.
Hot Chili pulled off a coup in Chile in the middle of the Atacama Desert. Chile is an interesting country to work in. In 1970 the government nationalized the biggest copper mines and distributed the most potential copper ground to the state copper company, CODELCO, and the state iron company, CAP S.A. Small mines were left to the existing small owners and operators. In the case of what Hot Chili has named the La Productora project there was a core, high-grade copper mine surrounded by both CODELCO and CAP S.A. Ground. Hot Chili recognized that if all three segments were put together, they could have a large, high-grade copper project right in the middle of existing infrastructure. It took years but Hot Chili put it together and did deals with all three parties.
Hot Chili nearly doubled its resource in 2013 with a Joint Ore Reserves Committee (JORC) resource of 165 million tonnes (165 Mt) of mineralization and a high-grade core of 53 Mt. The company is in the midst of a 100,000-meter drill program and intends to complete another resource upgrade in late 2013. It is moving forward with the intent to go into production in 2017 with both copper and iron. The project has a low capex required of between $500M and $700M. The company is fully funded.
TGR: You’ve talked before about Mundoro Capital Inc. (MUN:TSX.V). It recently released trench sample results on a project in Serbia. Were you surprised when the stock price went down?
BM: Yes, I was. Mundoro had $0.36/share of cash when it started its drill program. Now, you can buy the shares for $0.30/share. You’re paying nothing for the deposit. The company has good management and an extraordinary technical team. It trenched 12m at 30 g/t gold. Then the gold price went down.
TGR: Is this a situation where, if the gold price goes up, the stock price will rise as well?
BM: Here’s what’s crazy. You’re buying dollar bills for $0.90 and investors don’t want to do it. That is as close to an absolutely sure sign of a bottom I’ve ever seen. It happened in 2001 and in 2008. It’s happening now and it’s utterly irrational.
TGR: Normally, gold prices go back up cyclically in the fall. Does that trend still apply or is the price all over the place because we had a bumpy summer?
BM: We did have a very rough summer, with a low for gold and gold shares at the end of June. I think we’ve seen a bottom.
Everybody is terrified of buying gold. That’s totally nuts. Everybody should run to the bank, take out all their money and put it in gold.
TGR: That sounds like the perfect ending for a Gold Report interview. Thanks for your time and insights.
Bob Moriarty and Barb Moriarty brought 321gold.com to the Internet almost 10 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Bob was a Marine F-4B and O-1 pilot with more than 820 missions in Vietnam. He holds 14 international aviation records.
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DISCLOSURE:
1) JT Long conducted this interview for The Gold Report and provides services to The Gold Report as an employee. She or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Almaden Minerals Inc., Cayden Resources Inc., Goldcorp Inc., Silver Bull Resources Inc., Pilot Gold Inc., Walker River Resources Corp., Peruvian Precious Metals Corp., Comstock Mining Inc., Hot Chili Ltd. and Mundoro Capital Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Bob Moriarty: I or my family own shares of the following companies mentioned in this interview: Walker River Resources Corp. and Star Gold Corp. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Cayden Resources Inc., Silver Bull Resources Inc., Pilot Gold Inc., Walker River Resources Corp., Star Gold Corp. and Mundoro Capital Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
Streetwise – The Gold Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.
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Source: JT Long of The Gold Report (10/2/13)
International uncertainty about conflict, growth and market transparency can make the world a scary place to invest your life savings. In this interview with The Gold Report, Windermere Managing Director Brian Ostroff focuses on North American gold and phosphate stories that offer an alternative to risky jurisdictions and can be profitable at even conservative resource prices. By understanding the unique supply and demand factors for each subsector, he isolates the opportunities that often get buried in the big, bad commodity basket.
The Gold Report: When we talked 10 months ago, the U.S. was grappling with cutting more than $1 trillion from its budget, yet you were optimistic about the U.S. economy as a whole. Now we have a government shutdown, possible credit rating cuts if the debt ceiling isn’t raised again and debates about tapering quantitative easing. As a Canadian watching from above, how do you see the U.S. economy?
Brian Ostroff: I think it really comes down to how you define the economy. You could argue that the economy based on paper is doing fairly well. Corporate earnings have been strong and the big-cap equity markets have been doing very well. The real economy, however, seems not to be doing that well. There seems to still be a lot of pain, the number of jobs being created is moderate and people feel very uncertain about their future. There definitely is a dichotomy between the statistics and the real world.
Tapering of quantitative easing had been rumored for months and the consensus was that it would be announced at the last Federal Reserve meeting. I find that interesting because the consensus was shaped by financial people who live in the stock market world. They see the Dow doing well and believe that tapering would be good because it would show the economy was healthy. But the decision not to taper was based on the economy as a whole. For most people, the economy is not the stock market. It is jobs, the housing market and the like. That is why I see the Fed’s decision not to taper as insight into where the real economy is today.
TGR: We’re not seeing Europe in the headlines as much as we did a year ago. Is that because things have recovered or we’ve just gotten tired of it?
BO: Again, based on the markets, you would believe that things are getting better. Even the euro has done a very good job against the U.S. dollar. Government bond yields of Greece, Italy and Spain have come down quite a bit. But is the overall economy better or have we, as you say, gotten tired of the headlines and moved on to focus on the Middle East? Only time will tell.
TGR: What about China and the emerging economies? We’ve heard a lot of debate about whether China is growing and, if so, how much.
BO: I think China is very interesting. When we talked last year, we debated whether China was going to have a hard landing or a soft landing. I said that I thought the outcome could actually be no landing. I still believe that. There is a lot of talk about the pending demise of China and the bubble bursting, but I don’t think the statistics really bear that out. I think it is in China’s best interest for the world to believe that its economy is cooling. Then demand for commodities would cool, keeping prices down and making it easy to accumulate resources. But if you look at the statistics, Chinese imports of crude oil are at all-time highs. Imports of copper concentrates are up 32% year over year. That’s on top of a 22% increase in 2012 over 2011. Not only are those numbers increasing, but they’re increasing at an increasing rate. I don’t think these statistics tell a story of China falling off of the cliff. A rapidly slowing economy doesn’t result in increasing imports of copper and oil, two great economic barometers.
TGR: Are we talking about stealth growth?
BO: Yes. It is always difficult to get accurate statistics from China. But I think the country is using that to its advantage to catch the world flatfooted.
TGR: If China is really growing and Europe and the U.S., at least on paper, are growing, what does this mean for natural resource stocks?
BO: The future continues to look bright for commodities in general. Some have said the supercycle has come to an end. Here at Windermere, we just don’t believe that. But it is important to understand not all commodities are alike. Industrial commodities, currency commodities such as gold, energy commodities and agricultural commodities are all different and they don’t necessarily all move together as they have in the past.
When people talk about commodities being down, they often look at the precious metals, namely gold and silver. They see how much the precious metals have come down and they paint the entire commodity sector as bad. In reality, oil prices are pretty close to their highs. Copper, although off its high, is not down that much. The agricultural commodities are a little bit lower, but certainly not down considerably. What are down quite a bit are the natural resource stocks. They’re down a lot more than their underlying commodities. But in the physical commodity world, I don’t think things are that bad. I do think that there is an underlying demand for this stuff.
TGR: So why are the stocks, the companies that are actually producing these commodities, doing worse than the commodities themselves? If that continues, how will companies still deliver the goods the economy needs to keep going?
BO: People who invest in stocks look into the future. They don’t look at today. So when people truly believe that prices will be lower, even if they’re not lower today, they sell. I think that is what we have seen. Gold has come down from $1,700–1,800/oz. If you believe that gold is going to continue to drop and it’s going to be $1,000/oz a year from now, then you are going to keep selling the stocks and price in a $1,000/oz gold price. If you think that the economy is going to slow and China is going to go off of the cliff, then you price in $2.75/lb copper. Because of this thinking, a lot of the larger resource company stocks have taken a pretty big hit and the junior stock prices have been hit even harder. The juniors really suffer from a lack of liquidity. There have been a lot of redemptions in the space. The small-cap resource sector has been a train wreck. In July, the Toronto Venture Exchange (TSX.V), which serves as a pretty good benchmark of small-cap resource names, traded down to a level that it had not seen since March 2009, which was pretty much when the S&P 500 put in its low. A lot of the gains have been completely erased. Since about April of 2011, when the TSX.V hit its recovery high to its low in July, we’re down in excess of 61%.
It’s been a pretty brutal decline, worse than 2008. Remember, 2006 and 2007 were pretty good years. A lot of smaller companies were able to finance so they went into 2008 with pretty decent cash on their balance sheet. The 2008 drop was severe but it was brief. Within a year, opportunities came back and money started to flow again. The recent decline has been a slow death. The ability to finance has been shut for over two years now. Most of these companies have no access to money. As most of them don’t generate cash flow yet, so they really rely on public markets to raise capital.
TGR: Is that why the larger and producing companies did better than the junior companies? They have cash flow? Is that changing?
BO: Relatively speaking, the large companies have done better than the small companies. It doesn’t mean that the large companies have done well. But we think things are starting to get better. I recently saw a chart that compared the TSX.V to the TSX composite. It showed that the degree of underperformance of the TSX.V had hit a level that was worse than it was in 2008 and that has started to change. It is now showing a similar pattern to what happened coming out of 2008 and so I think that there is some hope.
Over the last month or six weeks, the small-cap resource market seems to be acting a little bit better. There is some volume coming back and there is more interest in the sector. One of the real keys is redemptions. A lot of the funds that were focused in this space had big redemptions and may have been worried about putting cash to work for fear of more redemptions. They just needed that cash on hand. The belief that we have put in a bottom should curtail redemptions and money could start to work its way back into the markets.
TGR: If a bottom has been put in and, at least for now, we’re dealing with gold in the $1,300/oz range, what are some examples of junior mining companies that could do well at that price?
BO: I think that there are a lot of very interesting companies out there today whose stocks have just really been hit well beyond where they should have been. The more immediate opportunities are probably with companies that are currently cash flowing. They already have operations and they’re not dependent on the equity markets being available to them for financing immediately.
One name we like is Scorpio Gold Corp. (SGN:TSX.V). It has the Mineral Ridge project in Nevada, which is already in production. Last quarter it produced 11,000 ounces (11 Koz) at a reasonable cost, just over $700/oz. It had $8 million ($8M) in earnings last quarter before interest, taxes, depreciation and amortization (EBITDA) or roughly $0.04/share. This is great cash flow for a stock trading at $0.21/share. The company is continuing to build out its operations and basically should be a 40 Koz/year producer. Yet, its stock is trading at about 1.25x forward EBITDA.
TGR: It released some drill results Sept. 23 on the Mineral Ridge project in Nevada, but the stock went down. Is that a function of the Venture market or Scorpio’s performance?
BO: I think that that’s just a function of the Venture market right now. We are starting to see a turn, but there are still people searching for liquidity. Good news generates liquidity and the opportunity for people to sell. The sellers are still out there, but piece by piece I think that they’re being cleaned up. It is not representative of Scorpio Gold, but of the tenuous rebound we are seeing in the junior market.
TGR: Were you pleased with the drill results? It showed one hole with 22.3 grams per ton (22.3 g/t) over 10.6 meters. Were the results what you expected?
BO: Yes. I think those numbers are good. One of the knocks against Scorpio Gold is that it hasn’t published a long mine life. It is a balancing act, the gold seems to be there but it is expensive to produce these resource calculations. So far, when it has drilled it has shown that the gold is there. I am comfortable that it still has many years of production ahead of it. As investors come to understand that, the stock should make its way higher.
TGR: Any other companies that you want to mention that could do well?
BO: I would just say, generically, look for companies that are producing cash flow, have kept their costs under control and have decent deposits. If a company has grade, that definitely is a good buffer against low gold prices. A lot of small-cap gold producers out there are very interesting. Even at $1,300/oz gold, they are profitable and their stocks have just been sold down way too much based on a concern that gold will be $1,000/oz or lower a year from now.
TGR: Windermere is known for focusing on less-covered sectors. With the growing global middle class, is agriculture a good investment? What’s the best way to enter that space?
BO: Windermere has done quite well by focusing on lesser-appreciated commodities. Currently, our largest holdings are in phosphate. I think that the fertilizer space, in general, is interesting. Ultimately, population continues to grow and people’s diets continue to get better. There is going to be a continued demand for the grains and farmers need fertilizer to grow those grains. That said, I don’t think that there is a wide spread depth of knowledge in the fertilizer space among investors.
Fertilizer is made up of three components: potash, nitrogen and phosphate. A lot of investors don’t understand how different those three components are and that they each have unique supply and demand mechanics. A good example was in late July, when Uralkali (URKA:LSE), which was in a potash cartel with Belarus, decided that rather than maintaining price, it was going to focus on volume. That threatened potash prices across the board and the potash stocks all experienced a considerable drop. The problem is that all of the fertilizer stocks fell; phosphate and nitrogen included. To me, that shows investors view the fertilizer sector as one without understanding that the components all have separate markets.
Windermere’s interest right now is very much focused on phosphate. Phosphate is the one component of fertilizer where North America is not self-sufficient. Recently, that deficit has grown even larger because Agrium Inc. (AGU:NYSE) closed one of its mines in Ontario due to depletion. This lack of domestic supply is exacerbated because of the source of the imported supply. Most people go to bed at night worried about Saudi Arabia and what could happen to oil prices. But most people don’t realize they should be worried about Morocco. Morocco is four times bigger in phosphate than Saudi Arabia is in oil. Other big players in phosphate are Tunisia, Egypt, Syria, Jordan and Israel. These are not places large integrated fertilizer companies want to rely on for feedstock. Security of supply is a big issue and we think it needs to be addressed.
The term phosphate is used generically. People use it to refer to phosphate rock, phosphoric acid or finished phosphate fertilizer products. Typically, when most people or the media talk about phosphate, they talk about finished phosphate products like monoammonium phosphate (MAP) and diammonium phosphate (DAP). Our interest is in the phosphate rock market, which is the feedstock to make MAP and DAP. That is where there is a shortage of secure supply and thus the opportunity.
Large fertilizer companies want to be vertically integrated. They want their own rock going to their own phosphoric acid plants, mixing their own ammonia to produce and sell their own MAP and DAP. They are going to continue to try and source their own rock supplies rather than depend on third-party suppliers to ensure supply. Aside from the practical reasons for securing their own supply, there are large economic incentives to doing so, namely in the way of increased margins. Agrium recently experienced a sharp miss in earnings. That was the result of compressed margins exasperated by its need to source some third-party rock from Morocco in order to compensate for the mine closure in Ontario. The situation is going to get worse as Agrium, The Mosaic Co. (MOS:NYSE) and Israel Chemicals Ltd. (ICL:TASE) all face further mine closures over the coming years. This does not even address the current list of countries and companies that do not have enough of their own rock. Companies that own their own rock supply can save as much as $100/ton and that can make a big difference to the bottom line when you are talking about millions of tons.
TGR: Right now, the phosphate rock price is at $145/ton. It’s been as high as $420/ton in 2008. What numbers do you use looking forward?
BO: Phosphate is not like gold. Gold that is produced in Argentina or Russia or Canada is all the same—and trades for the same price. Each phosphate deposit has its own unique geology, and results in a different quality of phosphate. The numbers you are quoting are Moroccan FOB. Because they are so large, that is the benchmark. But it is a fairly low-grade concentrate, about 30%. Higher grade concentrates can command higher prices. But even the Moroccan prices will probably increase because of increasing demand. And if there is conflict in North Africa, anything could happen to the price because supplies could be cut off. Ultimately, I don’t believe that the large fertilizer companies want to rely on North Africa for rock supply if there is an alternative.
TGR: What North American companies could help fill this need?
BO: The largest holding in our fund is Arianne Phosphate Inc. (DAN:TSX.V; DRRSF:OTCBB; JE9N:FSE). Since we last talked, the company has been very busy. Additional drilling has tripled the resource in just its Lac à Paul pit. It now has 750 million tons (750 Mt) phosphate rock grading a little over 7%. That makes it the biggest undeveloped phosphate asset in the world. It is a unique deposit. Ninety percent of the world’s phosphate deposits are sedimentary, which often has a higher in situ grade, but cannot be turned into as high of concentrate grade. Sedimentary deposits, such as those in Morocco or in Florida where Mosaic has most of its production, also tend to include contaminants like uranium, thorium and cadmium, which pose environmental issues.
Arianne has an igneous deposit, similar to several Russian deposits. Although a lower grade in situ, it can make a very pure concentrate. Arianne’s metallurgical tests show it produces a 39% concentrate. That gives it roughly 30% more phosphate content than a typical Moroccan style 30% concentrate. The beauty of igneous deposits is they don’t have any of these deleterious materials in them; they don’t have uranium, thorium or cadmium. It also means they can command a premium price. PhosAgro, a Russian producer of 39% concentrate from an igneous deposit, is selling rock in the neighborhood of $230–240/ton. That is the type of pricing Arianne should be able to get.
In addition to tripling its resource and confirming its metallurgy, Arianne has made some additions to its board and management; these are some pretty serious guys. Steven Pinney was former head of fertilizers at Cargill and then senior vice president of phosphates at The Mosaic Co. He joined the board along with Dominique Bouchard who was the president of Rio Tinto Iron Ore and Titanium. Dominique has a great understanding of bulk commodities and how to transport them. He also lives in the region so he enjoys a strong relationship with the community, the First Nations, the port and rail authorities. Brian Kenny, a seasoned mine builder, joined as CEO. He built Falconbridge Ltd.’s New Caledonia mine and spent the last few years in the Middle East with Dubai Aluminium Co. Ltd. He was also president of Bechtel Canada, where he oversaw the design and construction of several projects. The most recent addition to the company’s board was Pierre Fitzgibbon, who has held very senior positions with National Bank and sat on the board of the Caisse de Depot et Placement du Quebec. I think that as the project moves into either a development phase or a merger and acquisition phase, he will be a big help.
TGR: Dundee Capital initiated coverage on Arianne in March with a target price of $1.90/share and several other brokers cover the company as well. The stock is currently at $1.24. What could move the price 50% higher?
BO: There are a number of pending catalysts. First, despite the progress made in the last few months, the market cap remains around $100M, which is only 10% off its billion-dollar net present value. Going forward, the company will put out its bankable feasibility study (BFS) sometime around mid- to late October. That will tell a lot. A prefeasibility study released a year-and-a-half ago estimated a capital expense (capex) of about $800M to build a mine. In my experience, it is not uncommon for a BFS to see a 50% increase. My head is at a capex of $1.2–1.3 billion.
TGR: That’s a big number.
BO: Yes, it is, but I think that has to be put in perspective. If it were gold or copper, that would be a hard number to swallow, especially in today’s world. But, the reality is we are talking about a phosphate mine and there are not a lot of these things all queued up and ready to be built. Further, it’s in a jurisdiction where it’s sorely needed. Lastly, the companies that would have an interest in the project all have market caps in the billions of dollars so, rightly or wrongly, I just don’t see that capex as a major impediment. It’s funny, people look at the capex but don’t give much thought to the other side of the equation, namely, a project that will do roughly $700M in revenue and have gross margins of over $300M a year.
What I do believe is important is the operating expense (opex) and not just how much it costs at the mine. How much does this cost to put onto a ship? Because the infrastructure already exists in Quebec, it should be reasonable. Roads are in place. Power is in place. There is the deep-sea port. Once you start a mine, the capex money has been spent, and while you do depreciate it off your balance sheet, that money is gone. Opex is about what the mine will cost to run for the next 40, 50, 60 years, the life of this mine. That is where the focus will be for the majors considering an acquisition of the company. If the all-in cost to produce the phosphate and put it on a ship ends up being somewhere around $120/ton, that could appeal to a lot of suitors. Remember it’s a 39% concentrate so, $120 and ready to go wherever it’s needed is very attractive.
TGR: So you agree with Dundee’s target price of $1.90?
BO: I actually foresee a higher price because I ultimately see no other logical conclusion to this story than an acquisition. Large, integrated fertilizer companies want to own all the phosphate rock they require. Their missing link is phosphate rock. There are enough large players out there that are short of phosphate rock and not comfortable relying on North Africa and the Middle East for their supply and this, to me, makes an acquisition inevitable.
If these companies see a viable opportunity to go back to being fully vertically integrated and owning their own rock supply, this will be very attractive. If they can save $80–100/ton by owning a mine rather than buying the raw commodity from a third party, at 3 Mt/year (Arianne’s planned production rate), you’re talking about a savings of $300M each year. Within three or four years, the acquirer has made back the cost of building the mine. And for the next 40 years, it will reap the savings while escaping the international supply risk.
TGR: Any other companies in North America that could help fill that need for domestic supplies?
BO: The other project that has moved along is Paris Hills in Idaho, which is owned by Stonegate Agricom Ltd. (ST:TSX, SNRCF:OTCPK). It’s a very different type of situation. The deposit is smaller and the annual production is lower, but it comes with a much lower capex.
TGR: Stonegate is in the permitting phase. Are there any catalysts coming up we should be watching?
BO: It has moved along on its permitting and is hoping to receive the last of its necessary permits by the end of 2014. That is the final catalyst. There are some concerns around permitting process, but this is a resource that North America needs, and I think that it will be successful.
TGR: When could it have a mine?
BO: If everything goes according to plan, it could be in production in 2016.
Between Arianne at 3 Mt and Stonegate at 1 Mt, we could be a long way toward closing the North American deficit. I think there is a strong opportunity for both of these assets to come into production.
TGR: Any final advice for investors looking to protect or even grow their wealth going into 2014?
BO: It is important is to understand the different commodities, the supply-demand dynamics for each and realize that when you’re talking about commodities, you’re not talking about a basket that will all go in the same direction. They each have their own uses. They have their own market dynamics. You have to understand the underlying commodity before you start making choices about specific companies.
TGR: Thank you so much for taking the time to talk to us.
BO: Thank you.
Brian Ostroff is a managing director at Windermere Capital, where he focuses on the junior and mid-tier mining sectors. He brings over 25 years of small-cap mining expertise to the table, having served at RBC Dominion Securities and as a managing partner at Goodrich Capital, an M&A advisory firm. Prior to joining Windermere Capital in 2009, Ostroff spent four years as an independent proprietary trader.
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DISCLOSURE:
1) JT Long conducted this interview for The Gold Report and provides services to The Gold Report as an employee. She or her family own shares of the following companies mentioned in this interview: None.
2) The following company mentioned in the interview is a sponsor of The Gold Report: Adrianne Potash Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Brian Ostroff: I or my family own shares of the following companies mentioned in this interview: Scorpio Gold Corp., Arianne Phosphate Inc. and Stonegate Agricom Ltd. I personally am or my family is paid by the following companies mentioned in this interview: None. Windermere Capital owns stock in Scorpio Gold Corp., Arianne Phosphate Inc. and Stonegate Agricom Ltd. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
Streetwise – The Gold Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.
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Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.
Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.
101 Second St., Suite 110
Petaluma, CA 94952
Tel.: (707) 981-8999
Fax: (707) 981-8998
Email: [email protected]
Euro (FX: EURUSD) moved nicely higher yesterday after the ECB press conference that finally sent EURUSD out of the range. As such, we believe that Euro will continue higher within current wave (v) towards 1.3680. Once those levels are tested we need to be aware of a bearish reversal in minimum three legs. As per Elliott Wave Principle, after every five waves move correction takes place. But break of 1.3500 price level will suggest that in Euro there is already top in place.
British Pound (fx: GBPUSD) is moving higher after we called a completed wave (iv) last week at 1.5950 in our members area. So if that was wave four then we know that market is now in wave five, final leg within an impulsive rally that has began back on Aug 28th. This wave five is also a motive wave, which means it must be subdivided by five smaller sub waves. Therefore, we expect more upside in the next few days. Ideally we will see a test of 1.6300 region, from where we could see a bearish reversal, into a larger corrective pull-back. A divergence on the RSI also suggests that pair is in final stages of a recovery. But lets focus on one direction at the time; for now that is up to 1.6300.
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Spain’s final service PMI dropped to 49.0 points lower in September, falling below the 50 threshold and lower than previous reading of 50.4 in the previous month, the Markit Economics reports confirmed.
“The Spanish service sector failed to show much sign of a recovery during September as activity fell back in response to weaker new order growth which itself had been supported by further sharp discounting. One bright spot from the latest survey was that companies were at their most optimistic about the future for nearly three-and-a-half years, suggesting that Spanish service providers are seeing some light at the end of the tunnel.” Andrew Harker, a senior economist at Markit commented..
The manufacturing PMI for Spain in September was above the 50 threshold for a second month, with a reading of 50.7 points, compared to 51.1 reported in the previous month.
“The September manufacturing PMI for Spain confirms the picture of gradual improvement seen in the third quarter of the year, supported again by solid growth of exports. It remains to be seen whether this stabilization can be translated into a period of expansion or whether the sector will slip back into contraction again,” Andrew Harker said.
“With domestic demand remaining weak, much seems to depend on the ability of manufacturers to continue generating strong export sales”, he added.
Spain has struggled to recover from its seven consecutive quarters of recession and the recent macroeconomic report released showed that the country’s economy has still not recovered.
Spain’s economy contracted 0.1% in the second quarter, while on an annual basis; the country’s economy shrank 1.7% due to the weaker domestic demand.
According to the latest reports released, Spain is expected to remain in recession this year with a slowdown in both consumer and investment spending, along with the high employment figures.
Meanwhile Spain retail sales declined in August, dropping 4.5%, while the country’s industrial output lost 1.4% in July.
Retail sales in Spain dropped again in August, falling 4.5%, while industrial output declined 1.4% in July, measured over the year and working-day adjusted.
The country’s high unemployment rate dropped to 26.26% in the second quarter from previous record of 27.16% in the previous quarter.
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