Archive for the ‘Vertical: Materials’ Category

Draining Silver Inventories

Thursday, January 27th, 2011

Scotia Mocatta, one of the world’s biggest bullion banks has sold out of its silver inventory. Of their silver bar related products, the bank only had the 1kg Valcambi silver bar, which is no longer in stock. The bank now has the 100 oz silver bar back in stock. Though Scotia Bank and HSBC are the two banks that have been losing the bulk of their silver, other banks and dealers have been running low on bullion stock for a the past couple of months. The recent drain on bullion inventories of banks may be the result of precious metal investors buying in bulk because of the decrease in the price of silver.

Over the past week, we have seen a slight correction in gold and silver, ($1318/oz.) on the back of greater commodity weakness.  Energy commodities have weakened as OPEC has declared that it will increase oil supply in 2011, and U.S. surpluses of natural gas and oil at the hubs have surprised traders.

The spread between brent crude and nymex hasn’t been this high in years (~$11)!  Kudos to those who can set up a play to arb the difference.

For those interested in the prices of gold and silver, I found these sites to be pretty nifty.

Durden on silver inventories.

It seems that not a day passes by without some major dealer running out of a precious metal in inventory. Last Thursday when we presented the most recent inventory at Scotia Mocatta (alongside the ongoing firesale at the US Mint where incidentally total silver sales in January are now at a fresh all time record 4,724,000 ounces), one of the ten market-making members of the London Bullion Market Association and one of only 5 banks to participate in the London gold fixing, we indicated that of all silver bar related products, the bank only had the 1kg Valcambi silver bar, that was listed 3 weeks ago, in stock. As of today, this object is no longer in inventory even at the unit price of CAD$980.11. Reader S. presents the two logical alternative for what is happening: “This can only conclude two things: 1. They purchased a limited amount (due to low supplies) and was sold off quickly. 2. They purchased a large amount and was sold off due to major purchases.” Alternatively, the bank now has the 100 oz silver bar back in stock. We will keep tabs on how long before this also becomes “sold out.” Our question is whether the ongoing shortage at most dealers, despite the so-called drubbing in PM prices, is nothing but definitive evidence that just like in stocks, precious metal investors are merely using every drop in prices as nothing more than a chance to “buy the fucking (fisical) dip”?

Goldman on Gold…Going Up!

Thursday, October 21st, 2010

Goldman published this report on gold early this fall, and so far, so gold…Paulson’s gold fund must be doing pretty well…

With U.S. real rates declining, it makes sense that this commodity rose to nearly $1,380 just days ago because of the depreciation of the U.S. dollar currency.

In the report, Goldman cites U.S. 10 year TIPs sliding below 1.0%, suggesting gold is oversold.  Quantitative easing will only add to the hype…

Goldman Gold

De Beer’s Shareholders Provide Another $1B in Principal

Sunday, December 6th, 2009

De Beers

De Beers is tapping into the funds of their 3 largest shareholders, the Oppenheimer family, Anglo-American, and the government of Botswana, in order to pay down upcoming debt.  De Beers will raise $1B in order to help pay a $1.5B debt facility due this coming march.  The 3 shareholders will contribute 40%, 45%, and 15% respectively.

This $1B in principal collection follows $500M that was collected from the same 3 shareholders earlier this year.  Beyond a $1.5B obligation this upcoming March, De Beers will face a $1.7B debt facility due in 2012.

Lynette Gould, a De Beer’s spokesperson commented that this raise in capital will “lower De Beers’ level of external debt, improve the company’s capital structure, and place it in a position to take advantage of any new opportunities that might arise, as the diamond market moved out of recession and into recovery mode” (Source: Mining Weekly).

De Beers has certainly felt the impacts of the recession with a 99% drop in profits over the past year from $316M to $3M. Production has already been cut in South Africa, Botswana, and Canada.