Gold in A Goldilocks Scenario

Both fundamental and technical factors are aligning up for the ascent of Aurum.

As per the World Gold Council while the total supply of gold declined 8% YoY, most forms of demand, viz. jewellery, bar & coin, central bank, technology, were up YoY.

Gold is trending up against all major fiat currencies and a technical break out seems to be in the making.

In our previous write up on Gold (GLD, GOLDX, GLDI, GLDW) and Gold miners (GDX, GDXJ, NUGT, JNUG): The Ascent of Aurum – Long Gold, we wrote a bullish thesis that rested on the following factors:

  1. Declining global mine production in years to come — a result of past, massive, haircuts to capex by some of the largest gold miners around the world. Gold miners’ Capex has declined 65% from 2012 to 2016.
  2. Gold is a safe haven asset and according to world Gold Council’s most recent report on demand trends, current uncertainties in China and Europe are driving these flows.
  3. Technical analysis of gold price chart reveals a strong bullish set-up at a time when this trade is far from being crowded.

We review our thesis and present both fundamental and technical evidence to convince any gold bears out there to get out of the way.

Please click here to view the presentation.

The Doldrum in Platinum – Part II

This is the second article in a three part series. Our focus in this article will be on the state of South Africa and its currency.

South Africa – on the verge of being a failed state

As a primer, we encourage you to read the following two articles to truly appreciate the current state of affairs in South Africa:

  1. A fascinating piece written by Mr. Michael Fridjhon, titled: South Africa: The Rambo Nation.
    • Given the rate at which things are falling apart, it’s evident we are running out of time. Forget about downgrades, #GuptaLeaks and elective conferences. If we don’t address what is happening, it’s only a matter of time before the kind of widespread looting which follows a natural disaster will become a norm. If the law cannot hold, lawlessness followed by martial law (replete with its own abuses) is what awaits us – and it’s just around the corner.

  2. A brilliant piece in today’s Financial Times, written by David Pilling, titled: How corruption became ‘state capture’ in South Africa.
    • The National Prosecution Authority, headed by Shaun Abrahams, a Zuma appointee, has denied suggestions that it prosecutes selectively. Mr Zuma, for one, has been a beneficiary of the office’s busy workload. So far, he has avoided prosecution on no fewer than 783 pending charges of fraud and graft.

Please click here to read the article.

 

The Doldrum in Platinum – Part I

This article will be the first one in a three part series on Platinum (PPLT). Our objective in this series will be to construct a hypothesis on the outlook for platinum prices using three pillars:

  1. Supply-Demand trends
  2. State of South Africa and its currency
  3. Future of combustion engines

Supply-Demand Trend

The total supply of platinum, on a year over year basis, has declined by 2% but the total demand for platinum has declined by 6%. What is more concerning is that the demand has declined in all but two categories: medical (+2%) & other (+1%), which together only account for about 7% of total platinum demand. In every other category platinum demand has declined: automotive, which represents over 40% of total demand (-2%), jewellery, which represents about 33% of total demand (-1%),  industrial, which represents about 20% of total demand (-9%), investment, which accounted for a little over 6% last year (-50%).

Please click here to read the article.

 

The Ascent of Aurum – Long Gold

Exactly a year ago, in May-2016, we published our analysis of Gold demand trends provided by the World Gold Council. We wrote:

Gold price charts and physical gold demand trends offer a dichotomous view on the future of gold price. On the one hand, the extremely lose [sic] monetary policies of the world, and the phenomenal 1st quarter performance of gold relative to every other major asset in the world makes for a very compelling bullish case and on the other hand the physical gold demand trends paint a very bleak, if not scary, picture.

The World Gold Council recently published their 1st quarter 2017 report on gold trends but this time our analysis of that report leaves us with anything but a bearish outlook on gold. We have turned massively bullish on gold and we will outline our reasons below.

Our thesis rests on three reasons:

  1. Declining global mine production in years to come — a result of past, massive, haircuts to capex by some of the largest gold miners around the world. Gold miners’ Capex has declined 65% from 2012 to 2016.
  2. Gold is a safe haven asset and according to world Gold Council’s most recent report on demand trends, current uncertainties in China and Europe are driving these flows.
  3. Technical analysis of gold price chart reveals a strong bullish set-up at a time when this trade is far from being crowded.

Please click here to read the entire article.

Platinum, Ain’t So Precious!

Platinum has been steadily gaining its share of investment demand from precious metals investors, alongside gold and silver. As per the World Platinum Investment Council, investment demand for Platinum was 150 koz in 2014, 260 koz in 2015, and 505 koz in 2016 but the possibility of a declining industrial demand going forward will make it a tough battle for precious metals investors to continue justifying platinum’s preciousness. Of the 7,780 koz of platinum consumption demand forecast for 2017, 3,245 koz, or roughly 41%, is forecasted to come from the automotive sector (especially the diesel segment) for use in catalytic converters. This is the largest single component of platinum demand and that might be a big problem going forward.

Please click here to read the entire article.