Goldcorp Inc. (GG) fiat$28.91 UP $1.58 +5.78% :-) Volume: 11,881,881 @ 4:25:44 PM ET Bid Ask Day's Range - - 28.26 - 29.29 GG Detailed Quote Wiki
The Shanghai Gold Surprise
The physical gold market continues to develop in the most wonderfully counterintuitive way. While the paper gold price languishes below US$1,300 per ounce, physical demand out of China is now reaching previously unforeseen levels. If you’ve heard this story before, it’s more of the same, except that the demand tonnage is now so high as to be almost comical.
According to data released by the Shanghai Gold Exchange, the amount of gold contracts settled for physical delivery on its exchange reached a staggering 1,098 metric tonnes year-to-date as of the end of June.1 This is an astoundingly large amount of physical gold. For perspective, 1,098 tonnes represents approximately 40% of the entire estimated global gold mine production in 2013. It also represents roughly 1/8th of the US Treasury’s official gold reserves, and over 100% of China’s stated official gold reserves. If the rate of physical delivery on the Shanghai Gold Exchange continues at current levels, it will deliver the equivalent of over 100% of global mine production by the end of this year… all through one exchange.
In contrast, the COMEX futures exchange in New York, where the bulk of US gold futures are traded, saw a measly 160.7 tonnes of physical delivery requests over the same period (year-to-date to June).2 Although the paper volume on the COMEX dwarfs that of the Shanghai Gold Exchange, the level of physical delivery requests is only 15% of that seen in Shanghai.
If the Shanghai data is true, when combined with the gold imports going into China via Hong Kong, we now have a situation where China is buying the equivalent of all global gold mine production produced on a monthly basis. How that can coincide with a gold price drop of US$400 per ounce over Q2 is beyond our capability to explain, but it does mean that China is now the undisputed hub for physical gold.
Interestingly, China’s demand for physical gold does not seem to be benefitting the growth of gold ETF products within the country. Bloomberg recently reported that China’s first two exchange-traded funds backed by bullion both had disappointing debuts, with Huaan Asset Management Co. reportedly raising only $195 million out of an expected $400 million at launch.3 Although the press has naturally concluded that this news indicates waning gold demand in China, we can’t help but think it shows that China’s gold interest is primarily focused on the physical metal, as opposed to financial products that trade on exchange. Certainly if the time ever comes where the physical gold market sets price discovery for the gold price (as opposed to the futures market) it seems highly likely that the first place that will happen now is within Shanghai itself.
Whether there’s a link between China’s increasing physical gold deliveries and the drop in gold inventories within the COMEX and GLD ETF remains to be seen, but whoever is supplying China’s gold appetite is supplying it in size. Despite gold’s lackluster price performance, these developments strongly suggest we could be in for an interesting summer in the weeks ahead. Gold is a finite resource - if China’s current purchase rates continue, it is going to own a significantly large proportion of global gold reserves.
Published on Jul 20, 2013 Beijing is considering backing the yuan with gold and ditching the USD world reserve currency. What outcome will this have on the worldwide economy?
According to media reports of early July, the People's Bank of China is mulling the possibility of phasing out the dollar as the reference currency for the yuan exchange rate, and to start using gold as the reference point.
The reports have not been confirmed officially, but analysts are warning that the step, if taken, will weaken the yuan and destabilise China's already troubled economy, ultimately provoking a new bout of the economic crisis worldwide.
Beijing's possible move to back the yuan with gold would not be meant as a strategic measure to strengthen the national currency and increase its attractiveness as an investment medium.
Rather, it would be a flaunt aimed at demonstrating to the world (and to the USA in particular) that China is capable of taking the risks associated with a departure from the dollar standard.
Experts warn however that, apart from benefiting no-one, such a decision may actually have catastrophic consequences.
Separating the yuan exchange rate from the US dollar may further weaken the American currency in the long run; in addition, China's monetary policy would become very much restricted, believes Evgeny Nadorshin, chief economist at AFK Sistema. "The yuan will start fluctuating severely against the dollar and other major reserve currencies. This will affect the Chinese economy, which currently has serious problems as it is: the export revenues are falling, and the statistics for freight traffic and electricity consumption indicate a significant slowdown in business activity," says Aleksandr Golovtsov, head of the research department at UralSib Asset Management.
Possible effect on Russia When it comes to discussing possible consequences for Russia however, opinions differ. Aleksandr Osin, chief economist at Finam Management, actually believes Moscow could benefit from a gold-backed yuan because this would help Russia in its economic relations with China.
On the other hand, the greatest danger to Russia being highlighted by most experts would be an increase in competition from Chinese commodities, which will be offered more aggressively in the export market due to the shrinking of domestic demand. "China's demand for Russian raw materials, in particular for crude oil, metals and fertilisers, will be growing at a slower pace [than is currently the case]," Golovtsov notes. Read more: http://rbth.asia/business/2013/07/17/china_reportedly_planning_to_back_the_yuan_with_gold_47997.html God Bless
Chuck Jeannes, chief executive officer of Goldcorp Inc., discusses the outlook for gold prices and his company's second-quarter earnings. Jeannes speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Goldcorp is now the world's lowest-cost, million-ounce gold producer. The acquisition of Wheaton River Minerals Ltd. has increased gold production, gold reserves and resources and given the company one of the fastest growth curves in the industry. It has strengthened Goldcorp's already solid balance sheet and lowered production costs per ounce even further. Goldcorp is in excellent financial condition. It has no debt, a large treasury, strong cash flow and earnings and pays a dividend 12 times per year. Goldcorp is completely unhedged.
The Gold Report Interview with Chris Mancini (8/19/13) "Goldcorp Inc. is in the Good category. It is building the Cerro Negro project in southern Argentina, the Éléonore project in northern Quebec (adjacent to Eastmain's Eau Claire deposit) and an expansion to its Red Lake mine in Ontario. So Goldcorp is spending a lot right now, but it has a net-neutral balance sheet. Once these projects are completed by the middle of next year, they should generate a lot of cash. Goldcorp owns 10% of Eastmain, and if it were to finance Eastmain at reasonable valuations, I think that would be accretive for it."
Barry Allan, Mackie Research Capital (7/26/13) "Goldcorp Inc. remains our top senior pick with an attractive growth profile. Compared to the peer group, the company has low operating costs and is expected to grow production from 2.4 Moz gold in 2012 to 3.85 Moz in 2016. . . we reiterate our Buy recommendation."
The Gold Report Interview with David H. Smith (6/19/13) "Companies like Goldcorp Inc. know how to solve problems. . . [they] are realizing that they have a responsibility to help good exploration companies keep the doors open. If all these companies blow away, the feeder stream that nourishes the large mining companies is going to dry up. It's like the food chain."
The Gold Report Interview with Tobias Tretter (5/29/13) "The Guerrero region of Mexico hosts a very famous and very prospective gold belt. We will hear about a lot of new companies in the future from this belt. Goldcorp Inc. is already producing from the Los Filos mine in the Guerrero Gold Belt. Goldcorp has about 13 Moz gold there and is producing 330 Koz/year right now."
Alec Kodatsky, CIBC World Markets (5/3/13) "Goldcorp Inc. delivered Q1/13 operational results that were in line with our expectations in terms of both production and costs; we think this sets a good tone to the year and leaves the company on track to hit our 2013 production forecast of 2.6 Moz. . .the march towards 70% production growth by 2017 carries on. Goldcorp remains the only senior name in North America that expects production growth in 2013, has a comfortable degree of leverage and low political risk."
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