Workers at Antamina continues with indefinite strike

The union leader of the mine workers, stated that, the union is not planning to  dispose the strike for further negotiation with the management. At the present Jorge Juarez, is appointed as the secretary general of the workers union, SUTRACOMASA

The union stated that, the workers are planning to halt their works and demand for bonus, as the company’s agreement of profit sharing was violated with the decline in copper production. The strike, which was intiated by the workers are becoming a threat to the copper production  in Antamina, which produces over 30,000 tonnes of copper per month.

After the meeting with the management the Secretary of SUTRACOMASA, Juarez, stated the negotiation meeting reached nowhere, hence the union has decided to go on with their plan of the strike.

In a statement, the Vice President for Human Resources and Safety, at Antamina, Silvio Brigneti stated that, the workers are  demanding for the needs which cannot be fulfilled and accepted. He also added that, they have to understand the matter and move forward to restart the production.

The company stated that the profit sharing agreement with workers and the company has not been violated but had to be put on a temporary halt due to the decline in copper production as well as the lower copper prices. 

Swiss yes vote could lift gold price 18%

Gold was trending lower for a sixth straight session on Thursday hitting fresh four-year lows, but a market desperate for bullish news could find it in Switzerland at the end of the month.

The Swiss go to the polls on November 30 in a referendum that will lay down new rules for the country's central bank concerning its gold reserves.

Surveys are divided about support for the "Save Our Gold" camp that would force the Swiss National Bank to hold 20% of its reserves in gold, repatriate bullion held outside its borders and halt all sales, but a yes vote would be just what investors who nursing a 30%-plus drop in the price over the past two years need.

To meet the 20% requirement the SNB will have to buy between 1,500 – 1,800 tonnes on the open market, which at today's ruling price would set the fiscus back nearly $60 billion.

Financial Review quotes Bank of America analyst Michael Widmer as saying a positive outcome may push gold above $1,350 an ounce, more than 18% higher than today's price.

Joni Teves, an analyst at UBS AG in London, told the Australian website "it would have a major impact if it passes":

"If they do launch a buying program, it would have effectively a constant bid in the market."

Currently, the bank has 1,040 tons of gold, with roughly 70% stored in Switzerland, 20% at the Bank of England and 10% at the Canadian central bank.

If the SNB starts buying Switzerland, it would be placed third on the list of official gold reserves by country behind the US and Germany.

Switzerland produces no gold itself but it's the world's gold refining hub, a major global center for bullion vaults and boasts the world's 8th largest official hoard of gold.

The country was also late coming off the gold standard and as recently as 1999 its constitution required the franc to be 40% backed by gold.

Physical Gold Shortage Worst In Over A Decade: GOFO Most Negative Since 2001

The last time there was an systemic physical gold shortage was in July 2013. It is then that, for the first time in 5 years, the 1-month Gold forward offered rate, or GOFO, went negative. We said:

Today, something happened that has not happened since the Lehman collapse: the 1 Month Gold Forward Offered (GOFO) rate turned negative, from 0.015% to -0.065%, for the first time in nearly 5 years, or technically since just after the Lehman bankruptcy precipitated AIG bailout in November 2011. And if one looks at the 3 Month GOFO, which also turned shockingly negative overnight from 0.05% to -0.03%, one has to go back all the way to the 1999 Washington Agreement on gold, to find the last time that particular GOFO rate was negative.

 Fast forward to today, when as noted over the past week there has been a massive shortage of precious metals - most notably silver which as of this moment is indefinitely unavailable at the US Mint - as a result of the tumble in the paper price, and following 8 days of sliding and negative 1 month GOFO rates, today the physical metal shortage surged, as can be seen by not only the first negative 6 month GOFO rate since last summer's much publicized gold shortage when China was gobbling up every piece of shiny yellow rock available for sale, but a 1 month GOFO of -0.1850%: the most negative it has been since 2001!

Said otherwise, the physical shortage is the worst it has been in over a decade, even as the price of paper gold continues to drop!

And for those for whom the topic of GOFO inversion is new, here is how we described the situation last time:

* * *

What is GOFO (Gold Forward Offered Rates)?

GOFO stands for Gold Forward Offered Rate. These are rates at which contributors are prepared to lend gold on a swap against US dollars. Quotes are made for 1-, 2-, 3-, 6- and 12-month periods.

Who provides the rates?

The contributors are the Market Making Members of the LBMA: The Bank of Nova Scotia–ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA London Branch, Goldman Sachs, JP Morgan Chase Bank, Société Générale and UBS AG.

When are the rates quoted?

The means are set at 11 am London time. These are the rates shown on the LBMA website.  To show derived gold lease rates, the GOFO means are subtracted from the corresponding values of the LIBOR (London Interbank Offered Rates) US dollar means.  These rates are also available on the LBMA website.

How are the GOFO means established?

At 10.30 am London time, the Reuters page is cleared of all rates. Contributors then enter their rates for all time periods. A minimum of six contributors must enter rates in order for the means to be calculated. At 11.00 am, the mean is established for each maturity by discarding the highest and lowest quotations in each period and averaging the remaining rates.

What are some uses for GOFO means in the market?

They provide a basis for some finance and loan agreements as well as for the settlement of gold Interest Rate Swaps.

* * *

Unpleasant similarities with Libor and most other fixed (literally and metaphorically) rates aside, what is known is that under normal market conditions, GOFO is always positive, or in other words gold serves as a money-equivalent collateral for a pseudo-secured loan against paper fiat (USD in this case) hence the low interest rate.

Sometimes, however, normality inverts and the rate goes negative and as such serves as a useful indicator of gold market dislocations. Thus, while disagreements exists, one can safely say that what GOFO is, is simply a blended indicator of liquidity, counterparty or collateral (physical availability) stress in the gold market. Since it is next to impossible to isolate just which component is causing the indicated disturbance, it is prudent to be on watch for all three.

The best known example of a complete collapse in the GOFO rate, is the September 1999 Washington Agreement on Gold, which in brief, was an imposed "cap" on gold sales (mostly European in the afteramth of Gordon Brown's idiotic sale of UK's gold) to the tune of 400 tons per year. The tangent of the Washington Agreement is quite interesting in its own right. Recall the words of Milling-Stanley from the 12th Nikkei Gold Conference:

"Central bank independence is enshrined in law in many countries, and central bankers tend to be independent thinkers. It is worth asking why such a large group of them decided to associate themselves with this highly unusual agreement...At the same time, through our close contacts with central banks, the Council has been aware that some of the biggest holders have for some time been concerned about the impact on the gold price—and thus on the value of their gold reserves—of unfounded rumours, and about the use of official gold for speculative purposes.

"Several of the central bankers involved had said repeatedly they had no intention of selling any of their gold, but they had been saying that as individuals—and no-one had taken any notice. I think that is what Mr. Duisenberg meant when he said they were making this statement to clarify their intentions."

Of course, this happened in a time long ago, when the primacy of Fractional reserve banking was sacrosanct, when the first Greenspan credit bubble (dot com) was yet to appear, and when barbarous relics were indeed a thing of the past, only to be proven oh so contemporary following not one, not two, but three subsequent cheap-credit bubbles which have vastly undermined the religious faith in fiath and central banking, sending the price of gold to all time highs as recently as 2011.

Another subsequent negative GOFO episode occurred in early 2001, which coincided with what has been rumored to be a speculative attack and reversal of the futures market. However, while pushing 1 month rates negative, 3 month rates remained well positive.

Indeed, the only other time when both 1M and 3M GOFOs were both negative or almost so (3M touched on 0.05%) was in the aftermath of the AIG bailout following the Lehman collapse in November 2008.

Fast forward to today, when all GOFOs, from 1M all the way to 6M just went negative.

And while both Antal Fekete and Sandeep Jaitly, traditionally two of the most vocal pundits in the arena of gold backwardation and temporal and collateral gold market arbritrage, are likely come up with their own interpretations of what may be causing this historic inversion, the reality is that one can't know for sure until after the fact. It may be one of many things:

• An ETF-induced repricing of paper and physical gold
• Ongoing deliverable concerns and/or shortages involving one (JPM) or more Comex gold members.
• Liquidations in the paper gold market
• A shortage of physical gold for a non-bullion bank market participant
• A major fund unwinding a futures pair trade involving at least one gold leasing leg
• An ongoing bullion bank failure with or without an associated allocated gold bank "run"
• All of the above

The answer for now is unknown. What is known is that something very abnormal is once again afoot at the nexus of the gold fractional reserve lending market. 

WTI Crude Tumbles Under $78 As OPEC Slashes Growth & Demand Expectations

While it has been obvious to many that the drop in oil prices is a weak demand issue (amid a desperate over-supply pump for revenues in a decling growth world), talking-heads have remain unashamedly bullish of growthiness and shrugged at commodities dumping at the fastest pace since Lehman. However, it appears OPEC just burst that little bubble of hope by slashing demand forecasts. Crude prices tumbled on the admission.

OPEC's World Oil Outlook slashes GDP growth expectations from last year

With OECD demand tumbling

And the result...

Global Commodity Prices Are Collapsing At The Fastest Pace Since Lehman

Nothing to see here, move along...

We are sure it's nothing to worry about, and in now way indicative of any global aggregate economic weakness, but global commodity prices (that would be the 'stuff' that is used to make the 'stuff' we all buy every day) are collapsing at the fastest rate since Lehman...

Of course, it's all about over-supply, not under-demand... just like the Baltic Dry was not low because of shitty trade volumes but because of too many ships... but it's just the other side of an uncomfortably real mal-investment-driven fiasco...

As the chart below shows... maybe it is the economy stupid and with US GDP expectations being ratcheted down after construction spending and trade deficit data, maybe the US is not decoupling after all.

But is merely 'lagging' as it always does...

Charts: Bloomberg

Oil Prices Spike On Saudi Fears

Oil prices are spiking (WTI crude is up $3 off this morning's lows) following the pipeline explosion in Saudi Arabia. Of course, energy stocks are surging on the news too and we are just waiting for some clever talking head to proclaim this surge as demand-driven showing how strong the economy is...

Oil is surging...

Gold prices: where they’re headed and how to profit

As far as investment and trading opportunities go, gold is currently the stock market’s poor cousin. No one really craves the yellow ore at this time. The reality is that unless you are looking for jewelry, there’s really no reason to buy the metal right now.

Back in September, when I last discussed the prospects for this precious metal, I wrote that “in the absence of further turmoil in Ukraine, gold prices could deteriorate to below $1,200, possibly even $1,180.”

The precious metal did bounce to the $1,225 level recently on concerns surrounding ISIS and the economic situations in both Europe and China. Since then, it has also collapsed to below $1,200 to $1,170 for the December contract.

Following the Federal Reserve’s recent elimination of its third round of quantitative easing (QE3) and its hinting at higher interest rates coming sometime in 2015, the metal is now at its lowest level since April 2010. The strong advance reading of the third-quarter gross domestic product (GDP) growth at 4.5% and the strong earnings growth in S&P 500 companies are also making us lean towards higher rates. With this, the greenback has been moving higher, which is hurting the demand for gold due to its denomination in U.S. dollars.

In addition, inflation, a supporter of gold, continues to look benign both at this time and as we move forward. The metal is used as a hedge against inflation and risk, so in the absence of these two key variables, I’m not surprised to see prices move lower on the charts. And it could worsen.

Moreover, the so-called positive impact of buying from India and China appears to be neutralized. The lead off towards Christmas is a major buying period for India, but don’t expect a strong surge in prices unless the country buys the entire Fort Knox gold reserve.

In fact, according to an article published by Bloomberg, in October, more than $1.3 billion left U.S. exchange-traded funds (ETFs) that focused on precious metals. (Source: Roy, D., “Gold Bulls Retreat With $1.3 Billion Pulled From Funds,” Bloomberg web site, November 3, 2014.)

On the charts, the breakdown at the psychological $1,200 level is bearish. Now, we could see a bounce back, but it would likely have to be triggered by a sudden swelling in geopolitical risk. The reality is that traders and investors are looking at equities at this time and not gold.

Gold is simply not desirable as a buy-and-hold investment; at this time, it should only be traded.

The precious metal’s break below $1,180 is bearish. Failure to rally could see gold move lower towards the technical support level around $1,125; alternatively, an oversold bounce could drive prices back up towards $1,200. A lot will have to do with the state of the global economy and geopolitical risk.

You can trade the uncertainty of gold via the use of a long option straddle on an ETF like SPDR Gold Shares (NYSEArca/GLD). This strategy would involve a two-legged trade via the buying of a put option and a call option with the same strike price and expiry. Through the use of this investment strategy, you make money should gold move enough in one direction or the other to cover the premium paid to initiate the trade.

by George Leong, B. Comm.