Mexico's Central Bank buys 100 tonnes of gold bullion

The main LatAm goldbug story out today is that Mexico has finally done the right thing and its Central Bank is a buyer of gold. During February and March, The Mexico Central Bank (known as Banxico) ploughed more than U$5Bn into buying around 3.25m troy ounces of gold (that's 100 metric tonnes). So according to those preliminary numbers, Banxico paid over U$1,500 for each ounce (1538). Apparently the FT broke the story, but we don't link to them cos they have a stupid firewall. Instead, hear more about the news via this Spanish language link.

UPDATE: On rummaging round the Banxico website it's not easy to spot the datapoint, but it's worth noting here that Mexico's total international currency reserves (i.e. us dollars) stood at U$125Bn as at April 2011 so the gold bullion purchase works out as 4% of Mexican reserves. Hardly a game-changer in itself, so goldbugs will be better advised to obsess over the trend.

USA ratings outlook revised to negative by S&P

This is not a joke.

S&P just completed its review on US debt and reaffirmed its rating on the paper, but revised its outlook down to negative.

I presume that nearly all readers of IKN own gold. This is a good thing.

UPDATE: Still 10 minutes before the bell and we now have reporter-type articles appearing on this big news. Here's marketwatch with its take. Meanwhile, gold is already at an all-time high after having lost 10 bucks overnight and got within inches of 1500.

UPDATE 2: Felix Salmon does a good job with his post, "The implications of a downgraded US"

Peruvian gold and mercury poisoning

An excellent article is yours to be read just by clicking this link and going over. Penned by Barbara Fraser, it's all about how high levels of mercury in the atmosphere in and around Peruvian gold shops selling wares from informal/illegal mining may be a very serious health hazard for the wider population. Here's how the note starts, make sure you click through for the rest and thanks due to the eversuperduper Jacqueline Fowks for the headsup. Great journalism.

Townspeople, gold shopkeepers highly exposed to mercury in Peru

Experts have long known Peru’s miners are exposed to extremely high levels of mercury. But now new research shows that the toxic threat has spread to towns in the Amazon and Andes Mountains where gold is sold. Inside Puerto Maldonado's gold shops, shopkeepers heat clumps of ore, releasing mercury vapors that waft into the shop, and then outside, into streets crowded with townspeople. Researchers detected mercury levels at a gold shop so extreme a monitor couldn’t measure them. Then, high in the Andes, they measured unsafe levels in the air outside the shops.

PUERTO MALDONADO, Peru -- On a busy, dusty street beside a huge open-air market, signs reading “oro” mark shops that trade in gold. The customers, mostly men in work clothes and rubber boots, have just arrived from the mining camps to sell their gold and wire money home.

Inside, shopkeepers heat the miners’ clumps of gold ore, releasing mercury vapors that waft into the shop, and then outside, into the streets crowded with townspeople.

Experts have long known Peru’s miners are exposed to extremely high levels of mercury. But now new research shows that the toxic threat has spread to towns in the Amazon and Andes Mountains where gold is sold.

In Puerto Maldonado, a jungle town in Madre de Dios, one of Latin America’s most productive gold mining areas, researcher Luis Fernández in 2009 detected mercury levels at a gold shop that were more than 20 times higher than an international worker safety standard. This February, his follow-up testing found mercury levels inside one shop that were so extreme his monitor couldn’t measure them.

Then, a week later, in a town high in the Andes, Fernández became truly alarmed when he measured mercury in the air outside the gold shops, and detected levels that exceeded the amounts considered safe.

“It seems clear that these workers are under extraordinary risk for acute mercury poisoning,” he said, adding that people outside the shops are highly exposed, too.

In the first study of its kind in Peru, Fernández and a team of researchers funded by the U.S. Environmental Protection Agency are measuring mercury pollution from gold shops in Puerto Maldonado, in the Amazonian lowlands, and La Rinconada, 15,000 feet above sea level in the Andes Mountains.

Their initial findings – coupled with new tests by Peru’s National Institute of Health that measured mercury in people’s urine – point to a public health risk in towns near informal mining camps, which have flourished with skyrocketing international gold prices.

CONTINUES HERE

UPDATE: IKN has the benefit of smart readers and one, who'll go by the name of 'Reader B' because he's not into fame and such, really knows his beans about all sorts of mining issues, including  mercury. Here's the mail he just sent in:

You know what is most upsetting to me about the mercury contamination from placer miners? It can be eliminated 98% by the use of a mercury retort, 500 year old technology. Any tinsmith/ mechanic/ plumber can make one for about $50, and it allows the miners to re-use the mercury again and again (so it would save them money) and save their health, the environment etc. See attached image, or Google your own.


Seriously, in 1556 Georgius Agricola wrote De Re Metallica, which instructs one in the art. One of the very earliest science text books.

I know a Yukon placer mining consultant who always takes one with him as a gift when he goes to visit placer mines in the third world. Biggest problem is the ultra-violence often found in illegal placer mining camps (see any episode of Deadwood). Often too scary to even approach these places.

Throwing the kitchen sink at gold (from IKN100)

The intro to last weekend's edition of the weekly took a slightly different tack and went off on the price of gold. By the looks of the action in gold today, it's working out quite well as a think-piece. Here it is:

Throwing the kitchen sink at gold

This publication doesn’t really exist to make comments on the macro scene for gold made in countless other places and spaces. So to prove that’s a lie, here’s a thought or two on gold that formed as I was taking the bus down to see the doctor last Friday morning and crystallized into written words on Saturday evening.

On Friday morning your author was only one of the 18 people packed into a small bus* going too fast on balding tires over bumpy roads and tight corners, so it’s fair to say it was another typical bus ride in urban South America and the physical sensation tied into the thoughts of how despite having all sorts of flak thrown at it so far this year gold was still showing stout resilience at over $1400/oz (most of the time at least). This simple chart of GLD YTD  gives the basic idea.

The latest go at gold came on Friday on the back of a U.S. Employment report that headlined 8.8% unemployment, down from 8.9%. For sure this is good news (less unemployment is better than more unemployment) but the immediate rush to conclusions saw one percent knocked off Au in seconds and the spike going over 1.5% before the rebound set in.

We’re getting used to this kind of pseudogoldbearish action. I mean, does anyone remember Plosser of the Fed and his “high hurdle” for QE3 that hit gold at the time? That was back in the ancient history of....ten days ago, did the same kind of thing to gold for basically the same amount of time. Then, as now, the yellow metal picked itself up, dusted itself off and set about returning to previous price levels (and yes, guilty as charged of a nasty case of anthropomorphism, but as my Eng Lit prof would say, if it’s good enough for Walt Disney, Tolkien and the authors of The Bible it’s good enough for me). But back to last Friday’s action and this little snippet from the invaluable Calculated Risk (1) on Saturday neatly sums up the reality behind that US jobless number:

“The March employment report was another small step in the right direction, but the overall employment situation remains grim: There are 7.25 million fewer payroll jobs now than before the recession started in 2007 with 13.5 million Americans currently unemployed. Another 8.4 million are working part time for economic reasons, and about 4 million more workers have left the labor force. Of those unemployed, 6.1 million have been unemployed for six months or more.”

(Aside: Calculated Risk has been mentioned in these pages on several occasions and it gets another no-holds-barred reco today; for a guy like me who needs to keep a tab on what’s going on in the US without wanting or needing to go into the minutae, it’s the perfect one-stop statscruncher read, taking up a minimum of my screentime and handing over good analysis without much in the way of op-ed spin. It really is must-read material for anyone involved with the markets, cannot be reco’d highly enough and one of the few high-traffic blogs where I’m happy to drop a coin in its tip jar on a regular basis).

So sell gold on that kind of scenario if you must, but in my personal opinion we’re still a long, long way from any macro that is truly gold bearish. As for the threat of no QE3 this year once QE2 comes to its programmed end, all I can say to Bernanke & Co is “Go ahead punk, make my day” because I still have cash in the accounts waiting for knockdown bargains. Seriously, who is out there begging to buy up the bonds that The Federal Reserve is currently buying?

This chart of the ten year note interest rate speaks its own volumes. We know what happened in late 2008. Then our eyes are turned to 2010 when the deflationary scare started all over again, the Fed implemented mo’QE in August and then, as the desired effect didn’t happen, upped the ante in November 2010 and started buying back treasury securities (a cute way of saying ‘printing money’) at an increased clip. Only then did the market react. And these people are trying to tell me that they’re just going to turn off the spigot and stop the buybacks once the QE2 program is done without any sort of deflationary pressure building that will scare the pants off of them as a result? Again, the simple question:  Who is out there ready to take the Fed’s place and buy those bonds? They think we’re that stupid?

And this is the real story with gold and its current action. People aren’t buying into the jawboning and headline flash numbers for more than the minimum amount of time these days, because anyone who can see further than tabloid/yellow press headlines knows that (to steal one of übersmart Gary Tanashian’s favoured phrases) “It’s inflation all the way”. So thanks all the same to you readers who have recently (and kindly with all best intentions) sent in links to this-or-that market commentator or who is calling his-or-her market top in silver, or gold, or junior miners, or copper explorers or whatever, be their calls of the short-term-it-needs-a-break-and-can-drop-10%-here-before-moving-back-up-again type or the final-top-now-we-all-gonna-die-ice-age-Armageddon-oh-no variety. There’s a whole industry out there that feels the need to feed the beast and keep up the non-stop chatter on gold and silver, so it’s pretty natural that these chatterers need to chatter about something...so why not call a top in silver? After all, the parasitic end of financial commentary world is full of charlatans good at remembering successful predictions at a later date but tending to suffer acute amnesia about bad calls made.

I digress. Yes, thanks to those sending in links to market soothsayers about the imminent demise of gold, but I have to say I take little notice. For one thing, short-term calls aren’t my strong point, I don’t tend to enter that arena much and I don’t care much about the noise generated by writers on the subject, no matter how widely read they might be. But more importantly, even if there is some sort of short-term downwards movement there’s no reason to panic out and sell positions at the moment, not with the state of macro play being obviously bullish for gold over the time periods that really matter. As I wrote to a regular mailer and longtime subscriber on Saturday, “Be long gold, it's so obvious it hurts my brain”.

*For the record, we do not own a car and have no plans to change that

Greystar Resources (GSL.to) and the upcoming shareholders' revolt

Your author has heard on good authority that there are many unhappy shareholders of Greystar Resources (GSL.to) out there in investment land. In fact they're so unhappy that on May 18th, at the company's Annual General Meeting, enough big shareholders of GSL have already agreed to pool their votes, take over the meeting from the floor and kick the current board of directors out of the company once and for all. Your humble scribe also hears that the unhappy holders have already got together more than 51% of the voting shares so get ready for the fireworks because this one is going to happen, folks.

And quite right too, considering the utter balls-up GSL.to has made of its 15 years in Colombia and the mushroom politics it's employed to the people who pay them good money for zero results. Welcome to capitalism, Kesler. All that's left to consider is how this will play out. So will GSL;

• Try to pretend the threat isn't serious and have a really bad day at the office May 18th?
• Try to do the sneaky deaky and postpone the AGM?
• Do something that may equate to honourable (even at this late stage) and resign en masse before the fateful day arrives?

Inquiring minds, etc. Anyway, remember where you heard it first, people. At your caring and sharing IKN.

Minefinders (MFN) (MFL.to) update

I'm happy with the way this trade is going. Not only that, but we got the timing right too:

Y'see, even a dumbass like your humble scribe gets one right occasionally. Disclosure, long (reco'd to subscribers since November 3rd 2010) and still holding, because the target price is much higher (and it'll get there too).

What Goldman Sachs thinks about gold right now

If you want to read a copy of the nine page report out of GS yesterday then mail me (for some reason I can't get it to download into the normal filesharing site) but here's the text from the front page that gives the quickread of contents below the fold. Suffice to say that Goldman likes gold (and who am I to argue?).

Gold set to rally as events send US real interest rates lower 

Optimism over the state of the global economic recovery at the start of the year, which drove US real interest rates sharply higher – and gold prices lower – has been tempered by the ongoing events in the Middle East and North Africa (MENA) and Japan, sending the 10-year US TIPS yield down to near 80 bp, setting the stage for the next gold price rally.

We expect gold prices to rally toward our 3-month price target of $1480/toz, and continue to recommend a long gold trade. While the protests and threat to oil supplies in the Middle East and North Africa drove COMEX gold prices to a new record high of $1437/toz on March 2, the events in Japan have paradoxically sent gold prices back below $1400/toz despite the ongoing decline in US 10-year TIPS yields. Given the decline in US real interest rates, we see the recent retracement in gold prices as offering a good buying opportunity, and maintain our long gold trading recommendation as we expect gold to rally to our 3-month price target of $1480/toz.

We see strong upside to gold prices in the near term, but continue to expect rising US real rates to lead prices to peak in 2012. We expect gold prices to move higher throughout 2011, but continue to believe that gold at current price levels is a compelling trade, not a longterm investment. In particular, we expect that as US real interest rates rise with the recovery in the US economy, gold prices will likely reach a peak in 2012.

We expect gold to rally following the recent events, but the PGM outlook is increasingly tied to the speed of Japan’s recovery. The sell-off in PGM prices accelerated after the Japanese earthquake, with platinum prices down 5% and palladium prices down 9% this week. While PGM prices softened with the rise in oil prices accompanying the MENA events, the recent declines reflect the potential loss of autocatalyst demand from idled automobile manufacturing in Japan. Not only does Japan account for 12.6% of global automobile production, it also accounts for a large share of global industrial PGM consumption: 16.4% for platinum and 18.1% for palladium in 2010.

Chart of the day is....

...gold, which is doing just fine so far this week.

It must really be pissing the "gold is dead" braindead brigade that in the middle of an enormous market wobble, gold hasn't seen much more than 3% off its price at at moment.

Today's action in gold

I'm impressed with gold's resilience this morning. Five minute candle chart here:

If it holds current levels the We-All-Gonna-Die brigade will be washed out the market without too much damage and what's left can only be good. Oh yeah, I'm watching FOMC this week. Are you watching FOMC this week? Will Bennyboy turn the spigot or won't he? Faites vos jeux, mesdames et messieures...

Market quote of the day

From Jonathan's 'Gold This Morning', quite superb:

"I have already digested the pretense and artifice of talking-head claims of the evacuation of Tokyo and QE 15 and we shall just have to stand aside and wait for the reality of our facts."

Read the whole thing here.

Greystar Resources (GSL.to) and Tom Petty

Here's the chart:

$3.80 to today = 33% drop. Here's the music.


We'll have a note on GSL.to on Sunday, subbers.

Mo' Richard Fifer

A lot of very interesting feedback and reaction to the post yesterday on Richard Fifer, chairman of Petaquilla Minerals (PTQ.to) so far, and for what it's worth I've spent a good chunk of this morning forwarding the original PDF to people (perhaps people with a slower download link speed are having the problems, because others get to download the 4.9Mb PDF without grief).

One point raised by a couple of mails has been "OK he did prison time for cocaine dealng but dude, it was 1975, he did his probation and may have turned over a whole new leaf" or words to that effect. Well maybe, as long as he had by then turned over a new leaf by and since then has been an upstanding member of the bizworld. Unfortuntely for the people who have had dealing with Fifer since his drug dealing days that's a crock, so next up we'll show you how he tried to defraud another member of the Panama mining community to the tune of nearly U$500,000 in the 1990's (with all the necessary documentary evidence, of course) and only got reeled in by the courts six years after the scam he pulled. New leaf my ass. Watch this space.

Madre De Dios: The Peru gov't bullshit never stops

So today we had the lapdog Peruvian Environment Minister, Antonio Brack-Egg (crazy name, crazy guy) stating that he was looking to promote alternatives to mercury for gold extraction/refining in the enviro-wasteland Madre de Dios region. Apparently he's all concerned all of a sudden (because the disaster area is finally making headlines) and also ssay that part of his protfolio is to recover the 32,000 heactares lost to the goldrush so far. 

This is utter tripe as usual. Let's look at the latest official production figures out of MDD, according to the Mining Ministry and while we do, keep in mind that the unofficial production is estimated to match the official numbers. Here's the monthly production from MDD....

...and this chart (featured before) is the one that takes official MDD production as a percentage of Peru's total product.

So yep, it's got slightly better in the last two months since that jawdropping spike, but it's still way way above the historical average for the region and there's still scant progress being made by Peru to combat this filth. The reason for that is simple enough; The bunch of two-faced moneygrabbers running the country don't give a rat's ass. DYODD

Greystar Resources (GSL.to): Don't say you weren't warned

How's Greystar (GSL.to) doing this PDAC week? Anyone got word from Nicholas CampbellSoup about his reco SNAFU yet? Is Soupy available for comment on other Political Risk issues? Does he charge for his services at the Can of Corn?

Hmmmm.....guess it has something to do with the post from Tuesday last week which ended....

"Right now I'd rather hold Osama Bin Laden's penis than GSL stock."

...but did you listen? Oh well, as they say in Blighty, you can lead a horse to water but you can't bring that dog in 'ere, mate. DYODD, dudettes & dudes.

UPDATE: 12:50pm EST: Trading in GSL.to was halted a couple of minutes ago, pending news. 


UPDATE 2: The NR is out and here's the moneyline:

"Greystar will only develop a project with the support of both. We will work with the relevant authorities in the review of the project in order to determine whether modifications are possible that address concerns whilst ensuring an economically viable and environmentally sustainable project."

What's the residual value on this thing's cash position again?