Major Gold Miners Q3 Financial Results: 4% growth, Operating in Black, $936 Cost Per Ounce.

4 Major Gold Mining Companies Achieved 4% Growth in Q3
Total production of gold or Gold Equivalent Ounces (GEO) depending on what the company reports increased by 4% over Q3 2012.  Each of the 4 major gold miners on my watch list is well on track to meet production estimates for 2013 that were communicated in mid-2013.  Yamana recently started production at a new mine that will add to growth in Q4.  Earnings from Operations at each of the 4 were in the black.  The average realized gold sales price during Q3 was about $1,330.

No-Growth Miners Generating Cash
Barrick (ABX) and Newmont (NEM) have poor growth prospects.  Free cash flow for ABX and NEM was positive in Q3 due capital spending reductions.  Goldcorp (GG) and Yamana (AUY) continue to invest in growth and reported negative free cash flow.  Free cash flow is Net Cash Flow From Operations less Capital Expenditures.

All In Sustaining Cost (AISC) Reduced to $936/ounce
The weighted average AISC for these four miners in Q3 was $936 per ounce, down from $1,043 per ounce in Q2.  AISC is a new industry (not GAAP) metric.  AISC includes by-product credits and sustaining capital.  It excludes new project and exploration capital and expenses.  More detail is available via the World Gold Council:  http://www.gold.org/media/press_releases/archive/2013/06/guidance_note_on_non_gaap_metrics_pr/

Industry Viable When Gold >$1,300
Q3 financial results show that these miners are viable when gold sales prices are $1,300 per ounce.  In Q3 gold sales averaged about $1,330 and the miners generated free cash flow while spending enough capital to grow production.  The miners could respond to lower gold prices by reducing capital expenditures even further as evidenced by their reported AISC.  Less capital spending would come at the expense of future production.  If miners get really desperate they can high-grade or produce at only higher grade deposits, which would lower total gold production.

US Mint Gold Coin Sales Steady in November. Silver Eagle Sales Drop.

Sales of gold Eagle and Buffalo coins by the US Mint were 62,000 ounces in November, compared to 66,500 in October and 23,000 in September.  November gold sales were 60% less than in November last year which was an exceptional month.  As of November, year to date gold sales are 1,032,500 ounces which is 29% more than in 2012 and 5% less than in 2011.  The US Mint reported November sales of 14,000 gold Buffalo coins and 48,000 ounces of gold Eagle coins.

Sales of silver Eagles by the US Mint were 2,300,000 in November, compared to 3,087,000 ounces in October.  November sales were by far the lowest month of this year.  Sales in November were 27% less than in November 2012.  Year to date silver Eagle sales are a record 41,475,000 ounces which is 29% more than 2012 and 10% more than in 2011.  The Mint has sold the most silver Eagles in 2013 than in any recent year.

source: http://www.usmint.gov/about_the_mint/index.cfm?action=PreciousMetals&type=bullion

The US Mint reduced the retail price for an uncirculated Gold Eagle from $1,625 to $1,525 during November.  And, the US Mint's website currently (Dec 5th) states that uncirculated gold Eagles are sold out.  An uncirculated silver Eagle retails for $43.95 which is unchanged from July, August, September, and October.

A quick survey of 3 internet coin dealers currently shows premiums of about $4.00 for silver Eagles.  Unlike last month the coin dealers are now quoting prices that are very close to each other.  The premium for gold Eagles is about $60, which is slightly less than last month.  These price premiums are based on purchasing one coin.  All dealers offer volume discounts for larger purchases.  Spot gold and silver market prices are currently $1,233 and $19.70, respectively.

Coin dealers are currently offering to pay about $20.00 and $1.90 over spot to purchase gold and silver Eagles, respectively.  This seems reasonable because the US Mint charges dealers 3% for gold and $2.00 per coin for silver.  Dealer purchase premiums are not hinting at supply constraints as they were in April and May.

Gold Market Halted by Large Sell Order, Again!

Zerohedge reports that last night a sell order for 1,500 contracts worth about $180M was dumped on the gold futures market.  Gold price dropped about $10/ounce in response and market halts triggered stopping trading for 20 seconds.  Now (as of 10am eastern) gold has rebounded to above $1,240 where it started the day.
http://www.zerohedge.com/news/2013-11-25/gold-hammering-leads-another-overnight-gold-market-halt

It's deja vu all over again.  The gold market did the same thing last Wednesday, November 20th.  1,500 contracts sold; halted market for 20 seconds; price rebounded quickly.  Then, last Wednesday a second large sell order hit the market in the afternoon which smashed prices $15 to $1,245.  Gold prices stayed down after the second beating of that day.  

Will we see a second blatant sell order this afternoon as we did on the 20th?  The beatings will continue until morale improves.

Today, Monday November 25 gold and silver option on the COMEX expire.  Wednesday November 27th is the first notice day for COMEX December gold and silver contracts.  That is the first day that holders of December dated futures contracts can provide notice to the COMEX that they are standing for delivery.

COMEX registered gold inventory is 589,414 ounces or 18.3 tonnes.  Total December future contracts or open interest as of Friday evening was 104,270 for 10.4M ounces.  There are 100 ounces per contract.  Only 0.6M ounces are in inventory to cover a potential demand of 10.4M.  The demand or open interest is, however falling quickly as is typical just before a notice period especially with falling prices.  On Thursday and Friday open interest for December futures fell by 23,784 and 22,313, respectively.
http://www.cmegroup.com/trading/metals/precious/gold_quotes_volume_voi.html

Signs of Desperation from the Gold Cartel

Someone dumped 1,500 Dec gold contracts on the COMEX this morning that smacked-down the price and caused a 20 second market halt.  This is the third time in about 2 months that large sell orders have triggered stop logic on the COMEX.
http://www.zerohedge.com/news/2013-11-20/furious-gold-slamdown-leads-third-consecutive-20-second-gold-market-halt

Reading from the charts that Zerohedge provided gold prices fell about $12 per ounce and have since recovered about have of the drop.

Hopefully, these are signs of desperation on behalf of a gold cartel that is clearly, actively suppressing market prices:
- the front month (December) contracts were attacked.  
- increasing frequency of the attacks
- gold price recovered quickly after the smackdown

1,500 gold contracts * 100 ounce/contract * $1,270/ounce = $190.5M.  Suppressing gold prices discourages an alternative to debt and equity markets.  $190M is a small price to pay/invest for a cartel that has been spending $85B per month to maintain confidence in those markets.  

I am getting tired of lying against the ropes and taking these punches.  Let's hope they have almost punched themselves out so that we can 'rope these dopes'.
http://en.wikipedia.org/wiki/Rope-a-dope

"You have no power.  You can't hit.  You swing like a sissy."  Muhammad Ali said to George Foreman before their famous rumble in the jungle boxing match.

Conspiracy for Sale $831M

COMEX gold inventory on November 8th was 19.9 tonnes which amounts to $830M at $1,300 per ounce.  So if someone purchased $831M of gold futures and stood for delivery of all 19.9+ tonnes the COMEX would be forced to settle some of those futures in cash.  When the COMEX paper gold market is shown to have no physical gold backing it the price of physical will jump and reveal the gold price suppression conspiracy.  Cash settlement will likely be at 'before' prices.  But the buyer will realize a nice gain on the physical gold that they were able to receive and get their money back on the ounces that are cash settled.  

Surprisingly no ambitious hedge fund has tried this yet.  Since most hedge funds have about 4:1 leverage it would take them only $170M of equity.  Didn't Steve Cohen of SAC Capital just sell some artwork for a couple hundred million?  What is keeping George Soros, Kyle Bass, John Paulson, Carlos Slim or some other 21st Century version of the Hunt Brothers from giving it a go?  They've thought of it - or I charge only a small finders fee, just enough to wet my beak!*

Financiers looking at cornering the COMEX gold market must think that 1) the COMEX can get more bullion quickly and/or 2) cash settlement of COMEX futures would not send the physical price skyward and/or 3) selling their recently purchase 19.9 tonnes would tank gold prices when they try to cash out.  Could cash settlement already be built in to the price?  I doubt it.  And, if it is purchasing the last of COMEX's bullion at paper prices would be a fantastic investment.  Where could the COMEX get more bullion?  GLD?  the US Treasury?  The GLD ETF self-reportedly has 866 tonnes of gold.  And GLD's gold is conveniently stored at the same bullion banks who warehouse the COMEX's registered and eligible gold.  Selling 19.9 tonnes of gold without depressing prices should be easy since China is purchasing over 100 tonnes per month these days.  

What am I missing?  Perhaps anyone and everyone who can come up with $831M is not greedy enough to upset the apple cart.  LOL!!!!!


*The Beakwetter.  JP Morgan should hire whoever produced this video to manage their Twitter presence;-)

COMEX Dec Gold Future Contracts OI Down 30% While Registered Inventory is Down 75% from 2012

The current number or open interest (OI) of COMEX gold future contracts for December 2013 delivery is 183,966, which is 30% less than at this time last year.  COMEX future contracts are for 100 ounces.  If all of the current December gold futures contract owners stood for delivery in December the COMEX would need to deliver 18.4M ounces or 572 tonnes.  For reference, about 3,400 tonnes of gold are mined annually worldwide http://pubs.usgs.gov/of/2013/1091/OFR2013-1091.pdf  

The COMEX currently has 223 tonnes of gold stored in its custodian's vaults.  203 tonnes of this gold is reported as eligible, which means that it is owned by others who have warrants to claim it.  The COMEX vaults are storing this gold which is 'eligible' to be reclassified as registered gold in the event that the owner decides to sell it.  20 tonnes of the COMEX inventory are currently registered and available to deliver to futures contract holders who stand for delivery.

The COMEX has 20 tonnes of gold to cover a potential demand of 572 tonnes in December alone.  The situation seems extreme.  But, somehow the COMEX has avoided a delivery default and cash settling future contracts in all previous months.  December contracts are very popular so a comparison to last year at this time is more instructive than comparisons to previous months of 2013.  

Going in to year-end the COMEX currently has proportionally fewer ounces to cover December contracts.  Open interest for December contracts is down 7.8M ounces or 30% from this time last year.  And, inventory of registered gold is down 1.9M ounces or 75%.  The charts of COMEX registered gold inventory over time that Jesse publishes show that about 1.0M ounces were added to inventory in mid-December last year.  Then the inventory dropped back down by 1.0M ounces in January 2013.  This gold was presumable delivered to Dec 2012 contract holders who stood for delivery, but one cannot be sure.  It must be possible for the COMEX to negotiate delivery from other sources of gold to satisfy delivery demands, as well.

All I want for Christmas is for just 10% of the December contract holders to stand for delivery and publicize when the COMEX forces them to settle for cash instead of bullion.  This charade has gone on long enough!      
http://jessescrossroadscafe.blogspot.com/2013/11/claims-per-ounce-of-deliverable-gold.html

http://harveyorgan.blogspot.com/2012_11_04_archive.html

Direct Registering Shares - Update on My Experience

Many months ago I researched the pros and cons of direct registering shares instead of holding them at my broker in street name <How to 'Own' Securities>.  The table below is a summary.  In order to gain more experience with it, I transferred some of my long term investments to direct registration.  It was the right move.  Once discovered the process was very straight forward and no cost.  

In order to direct register shares, the shares must be transferred to the company's transfer agent.  Chevron (CVX) and their transfer agent ComputerShare are an example.  Frustratingly, ComputerShare will not create a new account unless they already have your shares.  Their service is aimed at company (e.g. Chevron) employees who may want to start a Dividend Reinvestment Plan (DRIP) or direct purchase more shares.  This was especially frustrating because in order to transfer shares out of my brokerage accounts the instruction forms require that an account name and number be provide for the 'transfer to'.  The name must be the same owner/beneficiary as on the brokerage account.  The transfer instruction forms are typically used to transfer securities from one broker to another.  

Fortunately, one of my three online brokers knew that ComputerShare would create a new account if we submitted the paperwork without a ComputerShare personal account number.  Instructing my broker to transfer my shares out into the ether without a specific destination was a little worrisome.  But, as promised within 2 weeks ComputerShare sent my new account information and password.  The correct amount of shares were in the account.  On the next quarterly dividend date the correct amount was paid to my bank account as instructed.  

ComputerShare could be much more helpful.  Their phone help did not understand the concept of direct registration in relation to street-name.  They couldn't tell me how to instruct my broker to transfer shares to CompuShare without an account.  And, then they wouldn't create a new account.  None of this information is available on their website.

One can understand why my brokers obscure the process for transferring assets out of their domain.  Two of my three brokers even charge a fee.  The broker that successfully transferred my CVX shares to ComputerShare for no cost is now doing most of my businesses including trading. Transferring shares to my now preferred broker from the other two was very straight forward via standard forms on the brokers websites.

Hopefully my experience will help you decide how to best protect your assets.

Ownership Model	Street Name (Brokerage)	Direct Registration (Transfer Agent)
Insurance	SIPC up to $500k	No SIPC.  No FDIC.  Investee’s discretion
Fungibility	High: ownership transferred by broker	Medium:  must instruct broker to use Direct Registration System (DRS)
Investee-Investor communication	Administered by broker	Direct
Pledging securities as collateral	Medium	High
Creating a margin account	Easy	Not available
Receiving interest and dividend payments	Broker is added step in payment chain - delays possible	No delays
Administration regulated by	SEC	SEC
Record keeping	Book entry.  No paper.	Investee's Register.  No paper.
Corporate governance	Easier for investee to go dark with fewer registered owners.	More difficult to avoid mandatory disclosures.