Gold and inflation call it quits

Film at 11

Reuters News reports that “some of the biggest U.S. bond firms are making aggressive pushes into the $5.17 trillion equity market business, spurred by fears the bull market in fixed income could end and anticipation of growing retail investor interest in stock funds.” Following five years of “monstrous” fund inflows into fixed income markets, the bond market’s most notable players are suddenly quite interested in…stocks.

More than $1 trillion in money has flowed into bond mutual funds since 2007. This process was a reflection of “investors' flight to safety from the U.S. and European debt crises, as well as expectations that bond prices will rise as interest rates fall.” We have now come to a point where rates are hardly able to “fall” any further and where the US economic recovery is beginning to put upward pressure on rates and just plain ‘pressure’ on the Fed to exit from its current monetary policy stance sooner rather than later.

Speaking of money and flows thereof, we have previously reported here that Japanese investors have been selling their gold for many years now, into rising prices. Well, confirmation of this phenomenon came this week from Japan’s largest bullion retailer. This writer had the pleasure of visiting Tanaka Kikinzoku Kogyo K.K.’s Ginza establishment several years ago and meeting the firm’s Chief Executive. Tanaka is a most impressive and trusted gold source for the Japanese public.

Alas, the statistical findings released by Tanaka dispute recent World Gold Council gold activity metrics for that country. The WGC reported that the 12-month period ending in October of last year saw private Japanese gold demand (sales vs. purchases) as “virtually balanced.” We must guess that such a conclusion depends on one’s definition of the words “virtually” as well as “balanced.”

Tanaka K.K. reported that for the eighth year in a row, Japanese investors have dishoarded their gold as prices rose to greater heights. Last year, the firm purchased 28.5 thousand kilograms of bullion from Japanese sellers while it only sold 22.8 thousand kilos to same. Overall Japanese gold demand turned net negative in 2006 as locals let go of 42 tonnes’ worth of investment bars and coins. The tonnage outweighed the 33 tonnes that jewellery offtake witnessed that year. Motto: There is a time to buy, and a time to…reap benefits. Did not want to say: Buy low / Sell High. Guess we just did.

Finishing this week’s roundup, are two mining-related items.

First, we brought you news about interstellar precious metals mining circa April of last year. Some of you responded with calls of “Science Fiction!” Well, behold this little news tidbit then:

Washington, January 23(ANI): US space company Deep Space Industries has announced that it will send a fleet of asteroid-prospecting spacecraft out into the solar system to hunt for resources to accelerate space development to benefit Earth. These “FireFly” spacecraft utilize low-cost CubeSat components and get discounted delivery to space by ride-sharing on the launch of larger communications satellites.

“This is the first commercial campaign to explore the small asteroids that pass by Earth,” said Deep Space Chairman Rick Tumlinson (who signed up the world’s first space tourist, led the team that took over the Mir space station, was a Founding Trustee of the X Prize, and Founded Orbital Outfitters, the world’s first commercial space suit company.)“Using low cost technologies, and combining the legacy of our space program with the innovation of today’s young high tech geniuses, we will do things that would have been impossible just a few years ago,” he added. FireFlies' mass is about 55 lbs. (25 kg) and it will first be launched in 2015 on journeys of two to six months. Deep Space will be building a small fleet of the spacecraft using innovative miniature technologies, and working with NASA and other companies and groups to identify targets of opportunity.

Finally, are you wondering what happened to the M&A fever that was gripping the mining sector just a few short years ago? From the Wall Street Journal’s Blog “Deal Journal” we bring you the (possible but most likely) answer:

“Don’t hold your breath for megadeals in mining as a new crop of CEOs takes over. At least 20 mining chief executive officers have stepped down in the past year, many under pressure from investors and boards. Tom Albanese, CEO at Rio Tinto PLC, was the latest to leave the corner office, agreeing to step down last week as the mining giant said it would write off roughly $14 billion in the value of various assets. “There is a frequently expressed view that the demise of a number of CEOs is partly related to failed or unsuccessful acquisitions,” said Patrick Loftus-Hills, head of global metals and mining at Moelis & Co. “That puts a lot of pressure on the replacement CEO if they are wanting to make a big, bold move.”

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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