The Daily Market Report

28-Oct (USAGOLD) — Gold surged this week on rumors, and then ultimately confirmation, that policymakers had agreed on a deal to address the Eurozone’s sovereign debt and banking crises. Whether or not the measures agreed to will actually mitigate the twin crises is subject to debate and will be under intense scrutiny in coming weeks, but for the time being anyway, the relief associated with more borrowed time (and money) has reignited risk appetite.
The EFSF bailout fund will apparently be expanded to about €1 trillion. Greek bond holders were arm-twisted into accepting a 50% haircut. And European banks will be recapitalized. While there wasn’t much detail beyond this, stocks were off to the races on Thursday and the euro rebounded to new 7-week highs.

Eurozone fix so far so good, but gold positive doubts remain

Gold and silver prices rose a little in London this morning, openingat $1,735 in Europe before rising as high as $1,738 before London's morning Fix was set at $1,735.00 and in the euro at €1,224.504 while the euro itself stood at €1: $1.4194. The London Fixing price then continued to dominate trade just ahead of the opening of New York. The euro slipped slightly to €1: $1.4156 and gold began to rise ahead of New York's opening to $1,737.50 and in the euro at €1,227.39.
The silver price in Asia stood above $35 then rose slightly in London to Fix there at $35.42. Thereafter the silver price moved slightly weaker, ahead of New York's opening, to $34.97.
Now the euphoria over the ‘solution' to the Eurozone crisis is abating, markets are looking a little more closely at what we have been told. There appears to be far more debt involved and the way that is to be structured points to the E.U. carrying a far greater load. It will be weeks before we have clear details, but markets are telling us, ‘so far' so good!'  It is apparent though that there will be far more money around than before, far more than the 50% losses the banks will have to take on the chin in the Greek haircut.

Gold ends winning streak

NEW YORK, Oct 28, 2011 (UPI via COMTEX) -- Gold prices ended a five-session winning streak Friday in New York as the dollar index rose.
Traders deemed dollars worth buying as the U.S. Congress' deficit reduction committee eyed its Nov. 23 deadline and worried about the European debt deal holding together. The ICE Dollar Index rose to 75.04 from 74.879.
On the Comex division of the New York Mercantile Exchange, gold lost $3.10 to close at $1,744.60 per troy ounce. Silver added $1.74 to reach $35.27 per ounce.
West Texas Intermediate crude oil eased 55 cents to $93.41 per barrel.
The euro fell to 1.4147 from Thursday's $1.4186. Against the yen, the dollar fell to 75.82 yen from Thursday's 75.94 yen.

The Mineral gold

Gold is one of the most popular and well-known minerals, known for its value and special properties since the earliest of time. Most of the natural Gold specimens that have been found since early times have been smelted for production. Nice specimens, therefore, are regarded very highly, and are worth much more than the standard gold value. Only recently have more specimens been available to collectors, as more miners have been saving some of the larger pieces for the collectors market.

Gold in its natural mineral form almost always has traces of silver, and may also contain traces of copper and iron. A Gold nugget is usually 70 to 95 percent gold, and the remainder mostly silver. The color of pure Gold is bright golden yellow, but the greater the silver content, the whiter its color is. Much of the gold mined is actually from gold ore rather then actual Gold specimens. The ore is often brown, iron-stained rock or massive white Quartz, and usually contains only minute traces of gold. To extract the gold, the ore is crushed, then the gold is separated from the ore by various methods.

Gold price retests the 150 daily moving average

The gold price kept falling this morning and went and tested its 150 daily moving average. Something we thought might happen yesterday:
The 150 DMA stands at $1604 which should offer up some decent support should we trade that low.
After the initial sell-off spike lower back on September 26th we re-tested the 150DMA on the 29th September and again this morning:

Hong Kong starts trading gold in renminbi

Hong Kong’s Chinese Gold & Silver Exchange Society officially starts trading gold denominated in renminbi today, in a bid to attract the HK$600 billion of Chinese currency sitting on deposit in the city’s banks.
Haywood Cheung, president of the 101-year-old bullion exchange, said the so-called Renminbi Kilobar Gold contracts could boost trading volumes by up to 30%, or HK$40 billion a day, during the next six months. Growth has already been strong this year, with average daily electronic transactions reaching HK$136 billion after a full-year average of just HK$31 billion in 2010.
“By attracting both local and international investors, the Renminbi Kilobar Gold is a significant step towards internationalising the renminbi,” said Cheung. “It also consolidates Hong Kong’s position as an offshore renminbi centre by providing investors with a new alternative in leveraged trading of renminbi.”

Fed Keeps QE3 on the Table Despite Internal Dissent

The Federal Reserve released the minutes from their September policy meeting where the now famous “Operation Twist” was unveiled. The minutes released today indicate the Fed plans to keep a third quantitative easing program in their arsenal to combat a possible deflation threat or a widening of the output gap.
More Money Printing Could Be on the Way
Despite September’s upside surprise on the jobs data, the economy is still seen as growing well below potential. Even if the relative strength of September’s jobs numbers (100K jobs/month) remain, the unemployment rate is unlikely to fall and growth will remain near stagnant. The Fed sees the economic picture as weakening going into the end of September and lowered their growth forecasts as a result. The Fed, in response to their bleak outlook, engaged in a policy designed to increase the average maturity of their balance sheet without affecting the overall size, thereby flattening the yield curve. Some considered QE3 as a better option than a maturity composition shift but preferred to reserve another asset purchase program for future needs. According to the minutes,

A number of participants saw large-scale asset purchases as potentially a more potent tool that should be retained as an option in the event that further policy action to support a stronger economic recovery was warranted.

Others saw QE3 as more dangerous than helpful,

Volatility Approaches Crisis Levels

Investor fears – along with volatility – are on the rise...
THERE ARE few sure bets in the financial markets, writes Brian Hunt for Steve Sjuggerud's Daily Wealth.

Few "this is the case, and it always will be" statements that we're comfortable making. The market is just too messy for those kinds of words. A particular stock investment idea will work for years, and then it won't. A commodity trading strategy will work for years, and then it won't.

Gold Price "Will Push Higher in 2012" says report

INTEREST RATE policy, quantitative easing and increased government debt are expected to lead to a higher Gold Price in 2012, according to a report released today by research strategists at Standard Bank.
The report's authors say there are two long-term causal drivers of the Gold Price:

1. Global liquidity – which they measure by using the US Federal Reserve's balance sheet plus foreign exchange holdings 
2. Real interest rates – nominal rates minus the rate of inflation

"Global liquidity should continue to grow as long as (a) governments increase their nominal debt burden and/or (b) central banks, such as the US Fed, implement quantitative easing measures," the report says, including a chart – available to view here – that shows rising liquidty and the price of gold since 2004.
The report estimates that global liquidity will grow by 18% in 2012 – compared to 20% this year and 16% in 2010.
Real interests meantime remain low or negative in many parts of the world, including the US, UK and Europe. In August Fed chairman Ben Bernanke said the economic conditions are likely to warrant "exceptionally low" interest rates until at least mid-2013.

Nevada: Low-grade, World Class

The romance of golden riches has attracted would be gold miners for hundreds of years; unfortunately, very few of the early prospectors were successful in their hunt.  When the gold rush hit California most who had good fortune in finding gold out west had previous victories back east.  Did pure luck play a part?  Perhaps, but experience was paramount. These early prospectors were the first to use science to increase the probability of discovering gold.
Over the years, gold exploration has evolved. The early-day prospectors searched for gold with nothing more than a pick axe and perhaps a gold pan. Today, explorers hone in on a gold resource by using a variety of technically advanced geophysical surveys.
Modern day explorers, while still concerned with discovering gold, are even more interested in the quality of a potential deposit.  In assessing quality, an exploration company will estimate the concentration (grade) of the gold, the total amount of gold, the cost of extracting the gold, and the cost of refining the gold.  The balance of all these variables determines the value of a mine.  The estimated value of a property indicates whether or not it can be developed into a viable mining operation, a transition that many exploration properties never make.
When determining the viability of transitioning an exploration property to a profitable mine, the total picture must be assessed.  According to the World Gold Council, larger and better quality underground mines contain around 8 to 10g/t of gold, while marginal underground mines have averages of around 4 to 6g/t. Open pit mines usually have lower grades from 1g/t to 4g/t, but can be highly valuable despite the lower average grade.  In all cases, the tonnage contained in the deposit is the last and most important piece of the puzzle.
In the past, gold explorers would shy away from a deposit with less than 1g/t of gold, common in Nevada. However, those who saw the total picture were willing to take a risk in mining for gold in the state.  To date, the low grade deposits in Nevada have become one of the largest sources of gold in the world. Total recorded gold production from 1835 to 2008  totaled 152 million ounces, worth about US$180 billion at 2010 prices with the majority coming from low grade/high tonnage deposits in the last 30 years.
Nevada is home to the famous Carlin trend, one of the top three gold fields in the world. The Carlin and other mines along the trend pioneered the method of open-pit mining with cyanide heap leach recovery that today is used at large low-grade gold mines worldwide. The state is also home to other prolific gold trends, including the Cortez.

Gold Mining in Russia

Covering more than a ninth of the Earth’s land area, Russia, has the largest reserves of natural gas.  In 2009 Russia was the world’s largest exporter of natural gas, the second largest exporter of oil, and the third largest exporter of steel and primary aluminum. Russia is also well reputed to have an expansive mineral wealth including:  coal, cobalt, copper, diamond,lithium, nickel, oil, potash, silver, as well as gold.
Successful gold exploration and mining were introduced in Russia by Peter the Great. In 1702 the first silver deposit was discovered in Transbaikalia (Nerchinsky Mine) and in 1745 a peasant named Erofey Markov found gold on the eastern slope of the Ural Mountains and in 1748 the first Russian purely gold mine was set up.
According to United States Geological Survey base estimates, Russia has the third most extensive gold resources tin the world.  With the majority of gold extraction remaining generally in the control of state run industry, the nation was theoretically underrepresented in its global productivity total as Russia was the fifth largest gold producer last year.  The total numbers of exploration enterprises are also considerably underrepresented by junior gold companies compared with activity in other mining jurisdictions, considering the vast underlying mineral potential in Russia.
Economic Context
Transforming from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy, Russia has undergone significant changes since the collapse of the Soviet Union. Economic reforms in the 1990s privatized some industry, with notable exceptions in the defense-related and energy sectors. The swift privatization process has left equity ownership highly concentrated, including a highly contentious “loans-for-shares” scheme that capitulated major state-owned firms to politically-connected “oligarchs”.