Daily Gold & Silver Market Report – 12/28/2016

Cassie Bastien

12/28/2016 9:24:00 AM

THE PEAK OF GOLD PRODUCTION

Will hitting the peak of Gold production this year have any impact on the price of Gold itself? Lawrence Williams, a well-known, London-based writer and commentator on financial and political subjects with Sharps Pixley, says “It may improve sentiment towards investing in the yellow metal given that the pro-Gold commentators will hammer the point in their end-year analyses and in their forward forecasts, but in terms of the Gold supply/demand balance, any production downturn is likely to be very small in percentage terms, at least in the initial couple of years.” It is possible the price of Gold could actually be the sole contributor to a production fall as higher Gold prices may lead to lower Gold output, by slowing the mining process, and vice versa. Williams says, “One factor stemming from these cost cutting programs is that the miners have also been cutting exploration, expansions and other capital expenditures which will all have a knock-on effect in the years ahead and if peak Gold is not actually with us yet it very certainly will be by the end of the decade.” He went on to say there are still large undeveloped Gold deposits such as Pascul Lama, Cerro Casale, KSM and more. The problem is all of those places will require high levels of capital expenditure, “and are probably uneconomic at current Gold prices anyway due to low grades and known and unknown environmental problems,” Williams said. Still, even if there is a substantial Gold price increase, none of these are likely to be brought into production until the next decade, which could then be too late. Williams said, “even if we don’t actually see global peak Gold output this year, it is definitely coming in the future, and when it does will likely accelerate as more and more elderly mines need to close and new production coming on stream is insufficient to counter the trend. … [Although the fact that] global output may be falling a little in the short term is unlikely to make much difference to the Gold price performance per se, but as time goes on, the size of the likely fall will have an impact – and likely a substantial one.”

2017: GOLD AND SILVER’S YEAR OF PUBLIC RECOGNITION

David Smith with SilverSeek.com reports, “December 2015 marked the bottom of the cyclical Gold and Silver bear market – a bear cycle that had been in play since Silver topped in May 2011 and Gold in September of the same year. During the fourth quarter 2015, share price declines of the Precious Metals mining companies tapered off once the last of the weak hands gave up and sold their positions to stronger, forward-looking investors.” So far in 2016,  Silver has risen more than 40 percent while Gold is up almost 20 percent. After touching the $26 per ounce level for the fourth time in 2013, the Silver price broke down sharply, initiating two years of decline. Smith explains, “A rule of charting is that broken support becomes resistance to a return move. Therefore, it is reasonable to expect that $26 will offer a major (initial) impediment to rising prices.” When the $26 level is hit on the upside and a base built above it, Smith says prices have the potential to accelerate rapidly.

DOW SET TO MAKE PUSH TO 20K

With investors looking for the Dow Jones Industrial Average to breach a never-before-seen 20,000 level, Wall Street looked set to open higher Wednesday. Yashawini Swamynathan with Reuters says, “The blue-chip index came within 20 points of the psychological milestone on Tuesday, helped by gains in technology stocks, which also pushed the Nasdaq to a record high.” However, Swamynathan adds, trading volumes will be light as the year ends. Janlyn Capital LLC Managing Director Andre Bakhos said, “Even in quiet times, crowd behavior often rules and many investors are looking forward to the new year.” The Dow is on track to have its best yearly gains since 2013. Swamynathan reports, “The dollar index rose 0.44 percent and is on track for its best day since December 15. Shares of Qualcomm fell 1.2 percent after South Korean antitrust regulators fined the chipmaker $854 million for what it called unfair business practices in patent licensing and modem chip sales. [Furthermore] Live Venture, the owner of internet marketing firm LiveDeal, rose 21.5 percent after saying that it expected 2017 revenue to increase over 50 percent.”

At 10:24 P.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,140.60 Up $0.10
• Silver, $16.03 Up $0.03
• Platinum, $895.60 Down $9.50
• Palladium, $671.60 Down $3.20

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