Gold and Silver Blog

Friday marked the beginning of gold futures trading in India, after a 43 year hiatus (see India launches bullion futures after four decades). This seems to be the gold story that everybody else was talking about yesterday. India is the largest consumer of gold, but I'm not sure if gold futures trading in India would have any impact on gold prices.

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To follow up on my post yesterday about Wheatoin River (AMEX: WHT, TSX: WRM), I notice that an analysis of this company, by Peter Zihlman, appears at the Gold Eagle website.

Without having done my own detailed analysis, I offer my hunch that Wheaton River is overpriced at the moment.

Nonfarm payrolls grew by 57,000 this month, which greatly exceeded expecations of a loss of 15,000 jobs (see CBS MarketWatch: U.S. payrolls rise, at last). Furthermore, August's payroll loss was revised to 41,000 from 93,000.

Is this news the reason why gold and silver tanked big time today? I have no idea, but some people tie the two events together. All I know is that today was a very painful day :(

An interesting, but skeptical article about Wheaton River (AMEX: WHT) can be read at Mineweb (see The promoter's dream gold market). According to my favorite stock research webiste, MSN Money, Wheaton has a market capitalization of $832 million USD and produces 500,000 ounces per year. One day I'll have to make a chart comparing all these gold companies together using such factors. In comparison, my favorite gold stock, Durban Deep (NASDAQ: DROOY), produces 1 million ounces and has a market cap of only $554 million USD. But Durban has all that South African political risk associated with it.

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Mineweb today also takes back an earlier report that the S.A. government would be taking steps to weaken the rand (see How far from the edge for SA miners?). "Mineweb speculated recently that government was considering proposals to weaken the rand. But Elias Masilela, chief director for macro-economic policy at the National Treasury, denied knowledge of a government initiative to deliberately weaken the rand, even in a stepped way, and as such considers it an unlikely possibility."

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Recently it was reported here that Harmony's (NYSE: HMY) management was raking in a lot of money. Now, I report that Durban Roodepoort Deep allegedly has the highest paid CEO of any S.A. gold mining company. R14.1 million. (See DRD chief the highest paid gold industry executive.) Mark Wellesley-Wood has done a great job as CEO, and I'm sure glad that Roger Kebble is out of there, but I have to agree that he's overpaid nevertheless.

Somehow, yesterady, I overlooked the lastest news release from the prophet and astrolger Mahendra Sharma (see This week newsletter (29 Sep to 4 Oct) for free because you all looks confuse [sic]). Mahendra says that you shouldn't worry abut the small dip in gold prices, they will only go down another $2 or $3 at the most (I guess that happened yesterday) and then gold prices will bounce back and cross $400. And he says that there will be major price rises in silver which will touch $5.50 next week.

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An article in Canada's National Post says that gold mining stocks are overpriced (see All they need is gold at US$700).

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Taking the opposing viewpoint, an article in South Africa's BusinessDay is quite bullish on gold, based on predictions that the U.S. Dollar is on the decline (see Think gold forget the dollar). The author is decidedly anti-U.S., but I agree with him that a declining dollar is bad for the U.S. Some think it's a good thing because it will make U.S. industries more competitive in the world market.

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Beginning on Friday, Gold Reserve Inc (TSE: GLR.A, OTCBB:GLDR) will be trading on the American Stock Exchange. The new ticker symbol will be GRZ). The company's website is www.goldreserveinc.com.

The Rand is at a three year high (see Mineweb: Rand at three year high, miners tremble). I report this not to quote daily price movements, but because many investors in the U.S. look at the price of gold in U.S. dollars, and they don't realize that in Rand the price of gold isn't so high. This explains why South African gold mining stocks didn't rise with the price of gold yesterday.

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Harmony Gold (NYSE: HMY) may sell out its Russian investments to raise capital to fund Australian expansion (see Mineweb: Harmony’s Russian gambit could fund Aussie growth). It looks like Harmony made some good money on its Russian investments, so that's worked out well for them.

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At Financial Sense, there is a very long and well written article by Jim Puplava, where he lays out his bullish views on gold and silver (see The Silver and Gold Train Wreck). He even mentions the recent Kodak announcement that everybody is still talking about.

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The New York Times reports that all the people in the United States who are out of work are still not finding new jobs (see Slowing Stream of New Jobs Helps to Explain Slump). Another reason to be worried that the new bull market in non-gold stocks is going to run out of steam soon.

An article at SmartMoney.com highly recommends that you buy gold (see Trendspotting: A Golden Opportunity). These types of articles could create investment demand for gold and gold mining stocks that could potentially cause a big price increase.

Mineweb reports that there is not going to be a strike at Durban Roodepoort Deep (NASDAQ: DROOY) (see DRD dodges strike again). It's like I said before, the talk of strikes was just posturing by both sides, DRD always reaches an agreement with the union at the last minute.

In other DRD news, the company announces that they are interesting in expanding into Australasia (see Durban Roodepoort Has US$100 Million Ambition In Australasia). This would be good for shareholders, so long as they don't overpay for what they buy there. And it works out better than DRD's last adventures in that region.

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Thom Calandara at CBS Marketwatch writes about the exchange-traded gold fund hopefully coming to the New York Stock Exchange (see Gold fund on track, new filing shows ). This would make it as easy for investors to buy gold bullion as it is to buy stock. Signifcantly more investors are familiar with buying stock than buying futures contracts, so this could help to increase speculative interest in gold, which would be bullish for gold prices.

The World Gold Council is behind the ETF gold fund idea, so kudos to them.

Bill Fleckenstein's Contrarian Chronicles column this week is entirely devoted to gold, and how to value gold stocks. A must read for all gold investors. Bill seems to like Newmont Mining (NYSE: NEM). At the end of his column is an interesting comment about the possibility of China buying a large amount of gold with its U.S. dollars stockpile.

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Those who think that Indian jewelry is somehow an important component of the bullish case for gold will probably be interested an an article in IndiaExpress about India's gold and jewelry industries moving towards certification and branding (see Gold industry: trying to put its house in order).

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"The need to find replacement gold ounces is likely to drive the continued consolidation of the global gold sector, Harmony Gold (NYSE: HMY) chairperson Patrice Motsepe said in the group's 2003 annual report." (See Business Day, Harmony sees gold sector consolidation.) If true, then one could make some good money in the marke if one could identify the companies that will be taken over.

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And talking about making money, Harmony's management is making a lot of it. They've signifcantly increased their salaries during the last year (see Business Report, Harmony bosses rake it in, even as share price wilts). It's as I've said before about investing, the guys in management are going to make a lot more money than I'm going to make by buying shares of their companies, even if I were fortunate enough to find ten baggers (an investing nirvana that contines to elude me).

There is an article in Mineweb that talks about Barrick Gold's (NYSE: ABX) recent announcment about its hedging policies (see Barrick hedging message still fluid).

As you recall from the previous discussion here on the Gold and Silver Blog, Barrick intends to buy back some hedges during the dips. The author of the Mineweb article wonders why Barrick, if they are so good at knowing when the dips and peaks happen, wouldn't also want to re-hedge when the gold price is high. This is a good question.