My initial Colt Resources (GTP) research report can be accessed at the link at the top left of the website tonight. Colt Resources is one of my favorite "unknown" companies that has 3 exciting plays in Portugal (1) a high grade gold deposit (2) a high grade tungsten deposit and (3) a potential elephant-sized VMS deposit. The reason it is one of my favorites is if you combine the properties listed above with a tight share structure, a tiny market cap (under $2.5 million)and their relatively unknown status among investors, Colt's share price has the potential to be re-rated higher by the market once their story gets out.
Please take the time to review the report as I'm sure you'll find Colt Resources an exciting junior play leveraged to the high price of both gold and tungsten.
Wednesday, September 23, 2009
Friday, September 18, 2009
Decade (DEC.V) - A Possible Eskay #109 ?
We should know next week whether lightning can strike twice at Stewart. There is a buzz that Decade's hole #9 at Red Cliff may be a company maker and results are expected late next week. Anything remotely close to hole #109 and you will have a 10-bagger from today's $1 level. Other companies that will benefit include Mountain Boy (MTB) who will own 20% of the Red Cliff deposit, Auramex (AUX) whose 100% owned property is adjacent to Red Cliff and Bonterra (BTR) who just staked claims northwest of Red Cliff. Timing couldn't be better as the Toronto Resource Conference kicks off next weekend. See a summary of Eskay # 109 below:
stateside
The Northern Miner’s 1990 “Mining Man of the Year” Chet Idziszek and Murray Pezim (Eskay Creek) – by Vivian Danielson
A dozen different companies optioned and explored the Eskay Creek property north of Stewart, B.C., over the past half century before its real potential began to emerge in the fall of 1988. That’s when Murray Pezim, 70, Canada’s best known mining promoter, backed a recommendation by Chet Idziszek, 43, and his team of geologists to drill the Eskay Creek project brought to Pezim for financing by a little known junior called Calpine Resources.
Today Eskay Creek is recognized as being among the most significant of discoveries made in Canada since the Hemlo gold deposits were found in Ontario in the early 1980s. The two projects have some interesting parallels, not the least of which is the fact that Murray Pezim played a significant role in advancing each of these geologically unique and truly world-class discoveries.
The Eskay Creek discovery also focused attention on the under-explored and often underestimated mineral potential of northwestern British Columbia. And it underscored the important but often thankless role played by the Vancouver Stock Exchange in providing funds for juniors to carry out high-risk exploration.
It is for their roles in the discovery and development of the Eskay Creek deposits that The Northern Miner has named Murray Pezim and Chet Idziszek jointly as Mining Men of the Year for 1990.
Theirs is an unlikely partnership. Pezim, is flamboyant, some times abrasive, a workaholic and an unabashed risk-taker. He came to Vancouver from Toronto in 1965. Since then, his career has been a roller-coaster ride of triumphs and tribulations. Notwithstanding the pall over his reputation cast by a recent investigation by the British Columbia Securities Commission, Pezim’s contribution to mineral exploration in Canada is assured by his role at Eskay Creek, Hemlo and other areas.
Idziszek, holder of a M.Sc. degree from McGill University, is a personable and respected professional geologist whose technical skills have steered the Eskay Creek project through some challenging times. Without the conviction of his technical expertise, Eskay Creek might still be just a remote watershed in British Columbia’s rugged hinterland.
It took 76 drill holes before Hemlo even began to be taken seriously, and 109 holes before Eskay Creek became widely accepted as a truly significant discovery.
Geological reserves at Eskay Creek today stand at 4.36 million tons of 0.77 oz. gold and 29.12 oz. silver, the bulk of which is classed as probable reserves in the 21B zone which is also rich in zinc, lead and copper sulphides.
Idziszek’s involvement with Pezim began in February, 1987, 0000,1006 when he moved to Vancouver from Toronto to head up Prime Explorations, the exploration arm and wholly owned subsidiary of Prime Resources. Its main role was to seek out new exploration and development projects and manage programs on existing properties throughout North America for the Prime group of companies (about 50 at the time).
Idziszek may have been coaxed to move to Vancouver by his wife, Nell Dragovan. Back in the early 1980s, she played an important role in acquiring some Hemlo gold properties for a Vancouver-based junior that later became Corona (TSE).
Before Eskay Creek, Idziszek was the main driving force responsible for the identification and evaluation of the Snip gold deposit as an acquisition target for Prime Resources. It is now being readied for production by Cominco (TSE), which has a 60% interest and is operator. Once up to full speed, Snip is expected to produce 93,000 oz. gold annually.
In the summer of 1988, after a technical evaluation, Idziszek and geologists James Foster and David Mallo (Idziszek’s former colleagues at Gold Fields Canadian Mining) recommended Prime take on the Eskay Creek project. At the time, Calpine was hard pressed to raise $900,000 which it needed to spend to earn a 50% interest from Stikine Resources (VSE), then known as Consolidated Stikine Silver.
Pezim and associate John Ivany agreed to finance and acquire an interest in the company, which eventually became a subsidiary of Prime Resources Group (VSE). A fall drill program was outlined by Prime Explorations based on a detailed office evaluation of previous results, some interpretative work, surface geological mapping and a soil geochemistry program.
A month or so later, as part of a 6-hole drill program contracted to Keewatin Engineering, a significant gold discovery was made when the last hole of the program intersected 96.5 ft. of 0.75 oz. gold and 1.13 oz. silver per ton.
Prime picked up important clues for its drill program after it reviewed results from a 1985, limited drill program carried out by Kerrisdale Resources in an area adjacent and peripheral to what is now the 21A zone. Kerrisdale was unable to raise funds to continue work and its option from Stikine was dropped. But had it been able to come up with the funds to carry out the next phase of drilling recommended by its consulting geologists, David and Virginia Kuran, Mallo said the Eskay Creek story “could have been a very different one.”
Encouraged by initial results, Pezim raised funds to carry out an expensive drilling program through the winter of 1988-89 (one of the worst on record). As the drilling progressed, however, it became apparent that the 21A zone was metallurgically complex with limited tonnage potential.
In the summer of 1989, drilling on the 21A zone was suspended in favor of an accelerated program on the 21B deposit, where some widely spaced stepout holes at the end of the winter program (holes 67,68,69) had revealed high-grade gold and silver mineralization associated with base metals. The two zones are separated by an approximate 500-ft.-long weakly mineralized area.
It was a gamble that paid off handsomely. Results kept getting better and better until a widely spaced stepout hole drilled on an induced polarization target at the northern end of the property made history.
The now-famous hole 109 returned a 682-ft. interval grading an average of 0.87 oz. gold, 0.97 oz. silver, 1.12% lead and 2.26% zinc. In the process, the spectacular hole triggered a trading frenzy on the Vancouver Stock Exchange.
Ongoing work led to geological reserve calculations, metallurgical studies which returned positive results from 21B zone mineralization, and an underground program to provide information for mine planning feasibility studies. In addition, several new zones were discovered which increased the property’s reserve potential.
Headed by Idziszek, the team responsible for the Eskay Creek discoveries includes Mallo and Foster as well as field managers Ron Fenlon and Gerry McArthur.
But credit must also be given to Tom Mackay, the prospector who explored Eskay Creek in 1932 and who first believed in its potential. His widow, Marguerite, held on to the property through Stikine Resources, which was later acquired about equally by Corona and Placer Dome (TSE). (The acquisition provided a handsome return to Stikine shareholders.) Corona, which currently has the larger stake in the project, hopes to name the mine after Mackay.
Also, Pezim’s contributions have been more than financial. He solidly backed his technical people and promoted Eskay Creek to anyone who would listen. And he got a better response than in the early 1980s when he tried to convince a skeptical industry that mines were ready for the making at Hemlo.
“Gold mines were found by guys like Placer and Noranda, not by some raggedy-ass VSE promotion,” said author Frank Keane describing the prevailing attitude in the early Hemlo days in his book Pezim, Tales of a Promotor.
But industry skepticism lingered at Eskay Creek (does lightning really strike twice?), and it was not until the deposit was substantially drilled off that two majors, Corona and Placer Dome, moved to acquire their direct interests in the project.
All the fanfare at Eskay Creek in the summer of 1989 landed Pezim and several associates in hot water with British Columbia’s securities regulators. They were recently cleared of insider trading and breach of directors’ duties, but Pezim is now trying to appeal a 1-year trading ban imposed on him for contraventions of disclosure requirements during a hectic period in 1989 when drilling was taking place at Eskay Creek.
Pezim and Idziszek are currently heading up Prime Equities, which has a host of junior companies under its corporate umbrella. And, as Mallo says, “there will be more discoveries.”
This entry was posted on Thursday, January 1st, 2009 at 1:59 pm and is filed under Northern Miner - Mining Person of the Year Award. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
stateside
The Northern Miner’s 1990 “Mining Man of the Year” Chet Idziszek and Murray Pezim (Eskay Creek) – by Vivian Danielson
A dozen different companies optioned and explored the Eskay Creek property north of Stewart, B.C., over the past half century before its real potential began to emerge in the fall of 1988. That’s when Murray Pezim, 70, Canada’s best known mining promoter, backed a recommendation by Chet Idziszek, 43, and his team of geologists to drill the Eskay Creek project brought to Pezim for financing by a little known junior called Calpine Resources.
Today Eskay Creek is recognized as being among the most significant of discoveries made in Canada since the Hemlo gold deposits were found in Ontario in the early 1980s. The two projects have some interesting parallels, not the least of which is the fact that Murray Pezim played a significant role in advancing each of these geologically unique and truly world-class discoveries.
The Eskay Creek discovery also focused attention on the under-explored and often underestimated mineral potential of northwestern British Columbia. And it underscored the important but often thankless role played by the Vancouver Stock Exchange in providing funds for juniors to carry out high-risk exploration.
It is for their roles in the discovery and development of the Eskay Creek deposits that The Northern Miner has named Murray Pezim and Chet Idziszek jointly as Mining Men of the Year for 1990.
Theirs is an unlikely partnership. Pezim, is flamboyant, some times abrasive, a workaholic and an unabashed risk-taker. He came to Vancouver from Toronto in 1965. Since then, his career has been a roller-coaster ride of triumphs and tribulations. Notwithstanding the pall over his reputation cast by a recent investigation by the British Columbia Securities Commission, Pezim’s contribution to mineral exploration in Canada is assured by his role at Eskay Creek, Hemlo and other areas.
Idziszek, holder of a M.Sc. degree from McGill University, is a personable and respected professional geologist whose technical skills have steered the Eskay Creek project through some challenging times. Without the conviction of his technical expertise, Eskay Creek might still be just a remote watershed in British Columbia’s rugged hinterland.
It took 76 drill holes before Hemlo even began to be taken seriously, and 109 holes before Eskay Creek became widely accepted as a truly significant discovery.
Geological reserves at Eskay Creek today stand at 4.36 million tons of 0.77 oz. gold and 29.12 oz. silver, the bulk of which is classed as probable reserves in the 21B zone which is also rich in zinc, lead and copper sulphides.
Idziszek’s involvement with Pezim began in February, 1987, 0000,1006 when he moved to Vancouver from Toronto to head up Prime Explorations, the exploration arm and wholly owned subsidiary of Prime Resources. Its main role was to seek out new exploration and development projects and manage programs on existing properties throughout North America for the Prime group of companies (about 50 at the time).
Idziszek may have been coaxed to move to Vancouver by his wife, Nell Dragovan. Back in the early 1980s, she played an important role in acquiring some Hemlo gold properties for a Vancouver-based junior that later became Corona (TSE).
Before Eskay Creek, Idziszek was the main driving force responsible for the identification and evaluation of the Snip gold deposit as an acquisition target for Prime Resources. It is now being readied for production by Cominco (TSE), which has a 60% interest and is operator. Once up to full speed, Snip is expected to produce 93,000 oz. gold annually.
In the summer of 1988, after a technical evaluation, Idziszek and geologists James Foster and David Mallo (Idziszek’s former colleagues at Gold Fields Canadian Mining) recommended Prime take on the Eskay Creek project. At the time, Calpine was hard pressed to raise $900,000 which it needed to spend to earn a 50% interest from Stikine Resources (VSE), then known as Consolidated Stikine Silver.
Pezim and associate John Ivany agreed to finance and acquire an interest in the company, which eventually became a subsidiary of Prime Resources Group (VSE). A fall drill program was outlined by Prime Explorations based on a detailed office evaluation of previous results, some interpretative work, surface geological mapping and a soil geochemistry program.
A month or so later, as part of a 6-hole drill program contracted to Keewatin Engineering, a significant gold discovery was made when the last hole of the program intersected 96.5 ft. of 0.75 oz. gold and 1.13 oz. silver per ton.
Prime picked up important clues for its drill program after it reviewed results from a 1985, limited drill program carried out by Kerrisdale Resources in an area adjacent and peripheral to what is now the 21A zone. Kerrisdale was unable to raise funds to continue work and its option from Stikine was dropped. But had it been able to come up with the funds to carry out the next phase of drilling recommended by its consulting geologists, David and Virginia Kuran, Mallo said the Eskay Creek story “could have been a very different one.”
Encouraged by initial results, Pezim raised funds to carry out an expensive drilling program through the winter of 1988-89 (one of the worst on record). As the drilling progressed, however, it became apparent that the 21A zone was metallurgically complex with limited tonnage potential.
In the summer of 1989, drilling on the 21A zone was suspended in favor of an accelerated program on the 21B deposit, where some widely spaced stepout holes at the end of the winter program (holes 67,68,69) had revealed high-grade gold and silver mineralization associated with base metals. The two zones are separated by an approximate 500-ft.-long weakly mineralized area.
It was a gamble that paid off handsomely. Results kept getting better and better until a widely spaced stepout hole drilled on an induced polarization target at the northern end of the property made history.
The now-famous hole 109 returned a 682-ft. interval grading an average of 0.87 oz. gold, 0.97 oz. silver, 1.12% lead and 2.26% zinc. In the process, the spectacular hole triggered a trading frenzy on the Vancouver Stock Exchange.
Ongoing work led to geological reserve calculations, metallurgical studies which returned positive results from 21B zone mineralization, and an underground program to provide information for mine planning feasibility studies. In addition, several new zones were discovered which increased the property’s reserve potential.
Headed by Idziszek, the team responsible for the Eskay Creek discoveries includes Mallo and Foster as well as field managers Ron Fenlon and Gerry McArthur.
But credit must also be given to Tom Mackay, the prospector who explored Eskay Creek in 1932 and who first believed in its potential. His widow, Marguerite, held on to the property through Stikine Resources, which was later acquired about equally by Corona and Placer Dome (TSE). (The acquisition provided a handsome return to Stikine shareholders.) Corona, which currently has the larger stake in the project, hopes to name the mine after Mackay.
Also, Pezim’s contributions have been more than financial. He solidly backed his technical people and promoted Eskay Creek to anyone who would listen. And he got a better response than in the early 1980s when he tried to convince a skeptical industry that mines were ready for the making at Hemlo.
“Gold mines were found by guys like Placer and Noranda, not by some raggedy-ass VSE promotion,” said author Frank Keane describing the prevailing attitude in the early Hemlo days in his book Pezim, Tales of a Promotor.
But industry skepticism lingered at Eskay Creek (does lightning really strike twice?), and it was not until the deposit was substantially drilled off that two majors, Corona and Placer Dome, moved to acquire their direct interests in the project.
All the fanfare at Eskay Creek in the summer of 1989 landed Pezim and several associates in hot water with British Columbia’s securities regulators. They were recently cleared of insider trading and breach of directors’ duties, but Pezim is now trying to appeal a 1-year trading ban imposed on him for contraventions of disclosure requirements during a hectic period in 1989 when drilling was taking place at Eskay Creek.
Pezim and Idziszek are currently heading up Prime Equities, which has a host of junior companies under its corporate umbrella. And, as Mallo says, “there will be more discoveries.”
This entry was posted on Thursday, January 1st, 2009 at 1:59 pm and is filed under Northern Miner - Mining Person of the Year Award. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Thursday, September 17, 2009
Another spike
$5 spike at 1:45 AM. Folks, as Jim Sinclair has said repeatedly, this is it. $1,000 is the floor now.
Wednesday, September 16, 2009
Major move in gold tonight at 1:45 AM
A quick late night post at 1:45 AM. Gold just made a $7 spike move in a 1 minute period. This is unheard of in Asia so it is something to watch tomorrow to see if there is any follow through.
Tuesday, September 8, 2009
Barrick moves to eliminate hedges
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_Rt2xgQeWvY
Why is this bullish?
Barrick hedged (went short) millions of ounces of gold that has cost them billions of dollars as the price has risen 8 straight years. They had agreements with the bullion banks that they would never have to cover their short, just roll them over year to year. This had the effect of suppressing the gold price although as one can see over the years, it just slowed down gold's movement higher.
If Barrick thought $1,000 was a top, they would have no reason to cover their short (hedge) as a declining price would help their financial situation. No, Barrick thinks the gold run is just beginning and wants to get out of their short position NOW even though it is costing them billions. Maybe they believe the Chinese when they say they are buying gold and will continue to do so to diversify away from the USD.
I had to laugh at all of the top callers in gold today. They are a joke and are laughed at by those who understand the real gold story.
Speaking of stories, we should finally get back to discussing Oro Gold drill results tomorrow.
Why is this bullish?
Barrick hedged (went short) millions of ounces of gold that has cost them billions of dollars as the price has risen 8 straight years. They had agreements with the bullion banks that they would never have to cover their short, just roll them over year to year. This had the effect of suppressing the gold price although as one can see over the years, it just slowed down gold's movement higher.
If Barrick thought $1,000 was a top, they would have no reason to cover their short (hedge) as a declining price would help their financial situation. No, Barrick thinks the gold run is just beginning and wants to get out of their short position NOW even though it is costing them billions. Maybe they believe the Chinese when they say they are buying gold and will continue to do so to diversify away from the USD.
I had to laugh at all of the top callers in gold today. They are a joke and are laughed at by those who understand the real gold story.
Speaking of stories, we should finally get back to discussing Oro Gold drill results tomorrow.
Monday, September 7, 2009
A concise picture of why gold is moving higher
I don't often post full length articles but the missive below lays out for all why gold is now moving higher:
stateside
Adrian Douglas: A run on the Bank of the Gold Cartel
Submitted by cpowell on Mon, 2009-09-07 18:15. Section: Daily Dispatches
By Adrian Douglas
Monday, September 7, 2009
An interview by MineWeb with GFMS CEO Paul Walker is headlined, "This May Not Be the Gold Rally You Have Been Waiting for":
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88713&sn=Detai...
The sub-headline says, "The GFMS CEO does not believe this is the rally that will sustain gold above $1,000 an ounce."
Well, it looks like Walker has just given a way a lot more information than he intended.
Walker "believes that the recent jump in the gold price is the result of 'a few fairly significant lumpy transactions' that have gone through the market at a time when he, and his colleagues at GFMS maintain, there has been a degree of illiquidity. Speaking to Mineweb, Walker said that although gold still has some upside potential, the current jump, if anything, represents 'a little more downside risk in the short term.'"
I have recently described what is going on in the physical market to be the equivalent of a "run on the Bank of the Gold Cartel." There are many factors that are leading to that conclusion and here are just a few:
-- China is a confirmed large buyer of gold, along with Russia.
-- Germany has apparently asked for its sovereign gold stored in New York to be returned.
-- Hong Kong is repatriating its sovereign gold from London and will be the repository for gold to back the Shanghai Futures Exchange.
-- Greenlight Capital sold $500 million of the GLD exchange-traded fund and bought physical bullion.
-- The European Central Bank gold sales have dried up to almost nothing.
-- AnglogoldAshanti has reduced its hedges to less than one year of production.
-- Central banks are net buyers of gold for the first time in more than 20 years.
-- China has declared its right to default on commodity derivatives.
-- China is encouraging its citizens to buy gold and silver.
-- The contango on silver and gold has almost disappeared.
-- Gold and silver movements from the COMEX warehouses are inconsistent with the delivery notices.
-- Mine supply of gold continues to contract.
And Walker is talking of "significant lumpy transactions." What does that mean?
My guess is that he can be referring only to the physical market and that it means that some big players have asked for delivery of gold in large quantities.
Walker says this has come at a time when "there has been a degree of illiquidity." What does that mean? It means that the Gold Cartel doesn't have the gold to meet these large deliveries.
Remember that GFMS recently published its second quarter report on the gold market. I wrote a critical analysis of this report:
http://www.gata.org/node/7699
I pointed out that GFMS, with a blatant manipulation of the statistics, had turned a 2 percent growth in gold demand to an 8.6 percent decline. This was because central banks had turned net buyers of gold in the quarter and GFMS excluded their purchases from the demand statistics because, in GFMS' words, central banks traditionally are a source of supply.
Now we learn that the gold market is illiquid. Isn't it disingenuous at best or fraudulent at the worst to turn a 2 percent demand surge into an 8.6 percent plunge just when the market is drying up, knowing full well this report is widely followed? It also brings into question the motives of the World Gold Council, which commissions the GFMS reports.
There is nothing new about the scam perpetrated by the Gold Cartel. Goldsmiths as early as the 16th century invented the fraud of "fractional reserve banking." They found that customers would buy gold from them but not take it away, leaving it with them for safe keeping. As long as the goldsmiths had a gold bar to show a new customer, they could sell him gold and give him a deposit receipt. The gold bar then was returned to the vault and could be sold several times over. The goldsmiths discovered that the "safe" buffer of gold to have in inventory was about 10 percent, as that was in practice the typical maximum demand they would see from customers wanting to take delivery.
I estimate that today 1 ounce of gold backs about 20 ounces of gold sales. Just like 500 years ago, investors are prepared to accept a paper IOU for gold in lieu of physical gold -- whether that IOU be in the form of pool accounts, futures, derivatives, unbacked ETFs, etc. Just as it did in history, the game will come to an end when there is a demand for physical that cannot be met.
As recently as 2005 Morgan Stanley was selling precious metals that did not exist. The firm even had the audacity to charge customers a storage fee for non-existent metal. The firm settled a class-action suit, admitting no wrongdoing, because, in the words of a company spokesman, no investor lost money and each investor was given metal or cash. As far as I know there has been no criminal action. But since when did the definition of criminal activity depend on no one having lost any money at the time a crime was discovered?
So if Morgan Stanley had rediscovered the old scam of the goldsmiths, what are the chances this firm was the only ones doing it?
What is curious is that GFMS' Walker offers investment advice that encourages investments in instruments that will not require gold to be delivered to customers. He singles out the Paulson Fund as a shining example, as it invested in Anglogold and ETFs and, MineWeb reports, he suggests that we should all follow that trend:
"As an example of this Walker says hedge fund manager John Paulson's strong move into gold could well have had an effect.
"'There's no doubt that the gurus in the market will definitely bring people along with them. And, as you say, John Paulson's made a lot of his stake in AngloGold; very large positions in ETFs. And I think a lot of people will be looking at somebody who's got one of the largest hedge funds in the world, saying maybe this guy knows something that we don't know and, given that he's made tremendously good calls in the recent past, maybe we should just in a sense trend-follow him and get on the back of this."
Now isn’t that convenient advice just as the gold market is becoming "illiquid"?
The GFMS Internet site says "GFMS can claim to be the only genuinely independent researchers of the gold market, as we do not rely solely on financial support from one sector of the industry. You can trust us to give it to you straight."
I don't get a feeling there is much straight talking coming out of GFMS.
"In the 1980s inflation was running high; gold prices went down. And conversely, if you have a look at the very low rate of inflation we've had in the last seven or eight years, that's when we've had the bull rally. Without getting into too many technicalities, I think that's because we have some rather curious ways of measuring inflation rather than the actual fundamental issue underlying price trends, and housing would be just one example of that."
And GFMS claims that we can trust it to give it to us straight!
Walker is alluding to the manipulated Consumer Price Index and Producer Price Index, where everything that is going up is systematically excluded or given less weight. So if Walker knows that there is a government manipulation of price indices "without getting into too many technicalities," I wonder how he explains why gold -- which serves only one real purpose, to store wealth instead of storing fiat paper alternatives -- does not have a price in fiat money terms that has kept pace with the manipulated CPI and PPI.
The answer is simple. The gold supply has been artificially inflated at a rate similar to that of fiat money by supplementing mine supply and central bank dishoarding with a blizzard of paper IOU gold. In this way the gold price is suppressed. The Gold Cartel hasn't cared about the damage inflicted on the mining industry, because why bother to mine gold when you can create paper substitutes?
But every time in history when this has been done there eventually has been a "bank run" when it was revealed that the gold in the vaults had been encumbered or sold many times over.
This is what is beginning to happen right now. The market is entering a very different phase. As the run on the Bank of the Gold Cartel gathers pace, the price moves are going to shock even the most bullish. The usual shenanigans of the cartel to turn the market down by selling a blizzard of paper future gold promises will be impotent against a marauding crowd of investors hungry for real gold.
-----
Adrian Douglas is publisher of the Market Force Analysis letter (www.MarketForceAnalysis.com) and a member of GATA's Board of Directors.
stateside
Adrian Douglas: A run on the Bank of the Gold Cartel
Submitted by cpowell on Mon, 2009-09-07 18:15. Section: Daily Dispatches
By Adrian Douglas
Monday, September 7, 2009
An interview by MineWeb with GFMS CEO Paul Walker is headlined, "This May Not Be the Gold Rally You Have Been Waiting for":
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88713&sn=Detai...
The sub-headline says, "The GFMS CEO does not believe this is the rally that will sustain gold above $1,000 an ounce."
Well, it looks like Walker has just given a way a lot more information than he intended.
Walker "believes that the recent jump in the gold price is the result of 'a few fairly significant lumpy transactions' that have gone through the market at a time when he, and his colleagues at GFMS maintain, there has been a degree of illiquidity. Speaking to Mineweb, Walker said that although gold still has some upside potential, the current jump, if anything, represents 'a little more downside risk in the short term.'"
I have recently described what is going on in the physical market to be the equivalent of a "run on the Bank of the Gold Cartel." There are many factors that are leading to that conclusion and here are just a few:
-- China is a confirmed large buyer of gold, along with Russia.
-- Germany has apparently asked for its sovereign gold stored in New York to be returned.
-- Hong Kong is repatriating its sovereign gold from London and will be the repository for gold to back the Shanghai Futures Exchange.
-- Greenlight Capital sold $500 million of the GLD exchange-traded fund and bought physical bullion.
-- The European Central Bank gold sales have dried up to almost nothing.
-- AnglogoldAshanti has reduced its hedges to less than one year of production.
-- Central banks are net buyers of gold for the first time in more than 20 years.
-- China has declared its right to default on commodity derivatives.
-- China is encouraging its citizens to buy gold and silver.
-- The contango on silver and gold has almost disappeared.
-- Gold and silver movements from the COMEX warehouses are inconsistent with the delivery notices.
-- Mine supply of gold continues to contract.
And Walker is talking of "significant lumpy transactions." What does that mean?
My guess is that he can be referring only to the physical market and that it means that some big players have asked for delivery of gold in large quantities.
Walker says this has come at a time when "there has been a degree of illiquidity." What does that mean? It means that the Gold Cartel doesn't have the gold to meet these large deliveries.
Remember that GFMS recently published its second quarter report on the gold market. I wrote a critical analysis of this report:
http://www.gata.org/node/7699
I pointed out that GFMS, with a blatant manipulation of the statistics, had turned a 2 percent growth in gold demand to an 8.6 percent decline. This was because central banks had turned net buyers of gold in the quarter and GFMS excluded their purchases from the demand statistics because, in GFMS' words, central banks traditionally are a source of supply.
Now we learn that the gold market is illiquid. Isn't it disingenuous at best or fraudulent at the worst to turn a 2 percent demand surge into an 8.6 percent plunge just when the market is drying up, knowing full well this report is widely followed? It also brings into question the motives of the World Gold Council, which commissions the GFMS reports.
There is nothing new about the scam perpetrated by the Gold Cartel. Goldsmiths as early as the 16th century invented the fraud of "fractional reserve banking." They found that customers would buy gold from them but not take it away, leaving it with them for safe keeping. As long as the goldsmiths had a gold bar to show a new customer, they could sell him gold and give him a deposit receipt. The gold bar then was returned to the vault and could be sold several times over. The goldsmiths discovered that the "safe" buffer of gold to have in inventory was about 10 percent, as that was in practice the typical maximum demand they would see from customers wanting to take delivery.
I estimate that today 1 ounce of gold backs about 20 ounces of gold sales. Just like 500 years ago, investors are prepared to accept a paper IOU for gold in lieu of physical gold -- whether that IOU be in the form of pool accounts, futures, derivatives, unbacked ETFs, etc. Just as it did in history, the game will come to an end when there is a demand for physical that cannot be met.
As recently as 2005 Morgan Stanley was selling precious metals that did not exist. The firm even had the audacity to charge customers a storage fee for non-existent metal. The firm settled a class-action suit, admitting no wrongdoing, because, in the words of a company spokesman, no investor lost money and each investor was given metal or cash. As far as I know there has been no criminal action. But since when did the definition of criminal activity depend on no one having lost any money at the time a crime was discovered?
So if Morgan Stanley had rediscovered the old scam of the goldsmiths, what are the chances this firm was the only ones doing it?
What is curious is that GFMS' Walker offers investment advice that encourages investments in instruments that will not require gold to be delivered to customers. He singles out the Paulson Fund as a shining example, as it invested in Anglogold and ETFs and, MineWeb reports, he suggests that we should all follow that trend:
"As an example of this Walker says hedge fund manager John Paulson's strong move into gold could well have had an effect.
"'There's no doubt that the gurus in the market will definitely bring people along with them. And, as you say, John Paulson's made a lot of his stake in AngloGold; very large positions in ETFs. And I think a lot of people will be looking at somebody who's got one of the largest hedge funds in the world, saying maybe this guy knows something that we don't know and, given that he's made tremendously good calls in the recent past, maybe we should just in a sense trend-follow him and get on the back of this."
Now isn’t that convenient advice just as the gold market is becoming "illiquid"?
The GFMS Internet site says "GFMS can claim to be the only genuinely independent researchers of the gold market, as we do not rely solely on financial support from one sector of the industry. You can trust us to give it to you straight."
I don't get a feeling there is much straight talking coming out of GFMS.
"In the 1980s inflation was running high; gold prices went down. And conversely, if you have a look at the very low rate of inflation we've had in the last seven or eight years, that's when we've had the bull rally. Without getting into too many technicalities, I think that's because we have some rather curious ways of measuring inflation rather than the actual fundamental issue underlying price trends, and housing would be just one example of that."
And GFMS claims that we can trust it to give it to us straight!
Walker is alluding to the manipulated Consumer Price Index and Producer Price Index, where everything that is going up is systematically excluded or given less weight. So if Walker knows that there is a government manipulation of price indices "without getting into too many technicalities," I wonder how he explains why gold -- which serves only one real purpose, to store wealth instead of storing fiat paper alternatives -- does not have a price in fiat money terms that has kept pace with the manipulated CPI and PPI.
The answer is simple. The gold supply has been artificially inflated at a rate similar to that of fiat money by supplementing mine supply and central bank dishoarding with a blizzard of paper IOU gold. In this way the gold price is suppressed. The Gold Cartel hasn't cared about the damage inflicted on the mining industry, because why bother to mine gold when you can create paper substitutes?
But every time in history when this has been done there eventually has been a "bank run" when it was revealed that the gold in the vaults had been encumbered or sold many times over.
This is what is beginning to happen right now. The market is entering a very different phase. As the run on the Bank of the Gold Cartel gathers pace, the price moves are going to shock even the most bullish. The usual shenanigans of the cartel to turn the market down by selling a blizzard of paper future gold promises will be impotent against a marauding crowd of investors hungry for real gold.
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Adrian Douglas is publisher of the Market Force Analysis letter (www.MarketForceAnalysis.com) and a member of GATA's Board of Directors.
Thursday, September 3, 2009
Thoughts on today........................
- gold has broken out of it's wedge formation. Once it breaks $1,000 and closes above it for 3 days, a re-test of $1,000 will set the floor and gold should run to $1,200 during this phase.
- gold and silver juniors have awaken. The move over the next 6 months will surprise even the most optimistic gold bug.
- Now is the time to be "all-in"
- I came across a junior exploring for gold in Portugal that has been overlooked by the market; more on this one later.
- Decade Resources (DEC.V) news release today got the markets attention.....and mine.
- gold and silver juniors have awaken. The move over the next 6 months will surprise even the most optimistic gold bug.
- Now is the time to be "all-in"
- I came across a junior exploring for gold in Portugal that has been overlooked by the market; more on this one later.
- Decade Resources (DEC.V) news release today got the markets attention.....and mine.
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