Nov 06 Japan's kaput?! MERK

Japan’s economy is down but not yet out. The world’s third largest economy won’t go quietly. Both these statements are merely my opinion, but if you believe there’s a risk that I’m right, you may want to pay attention to what the
 implications may be.

In determining whether a country is willing and able to pay its bills, three key dimensions to consider are:

• Can the government pay the interest on outstanding debt?
• Can the government roll over maturing debt?
• Can the government balance its books without servicing its debt

Let’s the take last item first: when you have lots of debt, do you want to beg for another loan or should you default? The reason Greece agreed to harsh terms imposed by the International Monetary FUND (IMF) was that they couldn’t self-fund themselves. The budget before servicing debt is referred to as the primary budget balance. A country considering a default needs to be aware that the day after they default it might be difficult to get a fresh loan at palatable terms. As such, a country with a primary budget deficit has an incentive to service its debt because it will need further loans. In contrast, a highly indebted country with a primary budget surplus has an incentive to default on its debt. In Greece’s case, they now have a primary surplus; Greece is in the driver’s seat when it comes to negotiating terms on its debt loans, as they could walk away. One caveat to this is that domestic banks might collapse if they hold lots of debt of their own government.

Japan has a primary budget deficit, i.e. needs to pile on to its debt burden no matter what interest rates are. A goal set last year to eliminate the primary deficit by 2020 appears elusive now. To balance its budget before paying interest expense, Japan – quite simply – needs to either raise revenue or cut expenses. In April, Japan’s value added tax (VAT) rose from 5% to 8%; whether another rise to 10% scheduled for October 2015 will be implemented is an open question. As Europeans have learned, VAT is a powerful way to raise revenue. Except that the higher rates have also caused significant headwinds on consumption. As long as Japan has a primary deficit, it may be at the mercy of the MARKETS.

This ‘mercy’ can be expressed in the interest rate a government has to pay. Japan’s 10-year bonds (JGBs) currently yield 0.4% per annum. Differently said, the market does not appear to be concerned about Japan’s ability to meet its future obligations – at least not according to this measure. But even as we consider dire scenarios, the biggest threat Japan may be facing is that Prime Minister Abe’s policies actually work. That’s because should growth materialize, odds are that JGB’s would sell off, increasing the cost of borrowing. That’s not a problem immediately, as not all debt matures at once. However, should much of the debt burden have to be FINANCEDat a higher rate, it may make it all but impossible to finance the deficit.

In practice, as the European debt crisis has shown, it’s not about the average cost of borrowing, but the rolling of debt. Spain, with an average maturity of about seven years for government debt, was considered very prudent in its debt management. However, during the peak of the Eurozone debt crisis, there were concerns that Spain might face trouble refinancing its debt. It didn’t matter that only a comparatively small portion of Spain’s debt needed to be refinanced. Governments – just like corporations or individuals – can face a cash squeeze.

But fear not, because Japan has a few tricks up its sleeve. The best known one is the Bank of Japan (BoJ). While the BoJ denies it is FINANCING government deficits, it’s gobbling up an enormous number of JGBs, thereby keeping yields low. It does have the side effect that this formerly highly liquid market is experiencing a drought. But why bother, what could possibly go wrong?

The other trick Japan has up its sleeve is its $1.2 trillion Japanese government pension FUND. The fund announced it would lower its allocation of domestic bonds from 60% to 35%, while doubling its domestic and international equity INVESTMENTS:

In the aftermath of the announcement, the yen fell sharply, while both domestic and international equity MARKETS jumped higher. Japan wants to boost the returns on its pension fund, but may achieve quite the opposite. In the short-term, yes, both domestic and international equity prices soared. But the new allocation has only been announced, not implemented. As such, the pension fund will buy assets at elevated prices. And because Japan’s population is ageing, odds are that they will be net sellers rather than buyers over time. During the roaring markets in the U.S. in the 1990s, prevailing cooler heads cautioned that the government investing in THE STOCK MARKET makes little sense, as while it may boost short-term returns, future returns would likely be lower. There is no free lunch.

We consider Japan’s recent moves deeply troubling acts of desperation: In our assessment, Japan signals it wants to move its pension assets offshore as it prepares for a default:

• Japanese pension fund dramatically lowers its allocation to government bonds. The markets don’t panic because the BoJ simultaneously steps in to buy about $60 billion worth of bonds each month (keep in mind that the U.S. economy is about 3 ½ times larger than the Japanse economy)
• By buying foreign assets, Japan is ready to debase the value of the yen further, while trying to preserve the purchasing power of those assets.
• In the run-up to Zimbabwe’s default, the country’s STOCK MARKET soared; simultaneously the value of the now defunct Zimbabwe dollar imploded. It appears only logical that Japan would invest its nest egg in stocks, with an emphasis on foreign stocks. It’s logical if and only if Japan intends to debase the value of its debt.

There’s more than one way to default. The honest way is to restructure debt. The painful way is through inflation. Pundits may wonder what inflation can there possibly be when JGBs don't show inflation? We would counter with questioning what good an inflation indicator JGBs can possibly be given the Bank of Japan owns an ever-increasing amount. Something has to give. What is an investor to do? With the caveat that the following is not INVESTMENT advice:

• Some opt to short JGBs. Critics have labeled this the widow-maker TRADE, as JGB’s have held up; indeed, when shorting bonds, one has to constantly pay (rather than receive) interest. There are some that short bonds using options. When properly executed, that strategy may yield steady losses, then possibly a major gain at some point. We don’t pursue this strategy and caution anyone to be aware of numerous risks this strategy entails, ranging from the fact that one is fighting a central bank through the use of derivatives.
• Short the yen. As we have indicated in the past, we don’t see how the yen can survive this. But be aware that foreign exchange analysts are rather frustrated with our take on this. That’s because a price target of ‘infinity’ (an infinite number of yen per dollar) is difficult to fit into any model or short- to medium- term forecasts. And clearly, the yen’s demise is unlikely to happen in a straight line. In fact, whenever the yen rallies, I get lambasted by so-called experts that the yen is still a ‘safe haven’ CURRENCY. My take is that the yen’s ability to benefit from a “flight to safety” has been directly correlated to the market’s perception of how effective Abenomics is. As policy makers double down on Mr. Abe’s policies, the yen’s safe haven characteristics may well erode further.
• Buy Japanese stocks. Printing money to BUY STOCKS has been a boon for the Japanese market. And as Zimbabwe’s experience has shown, stocks can perform well in this environment. But Zimbabwe’s experience didn’t end well. Neither do I believe will Japan’s. Given the much higher volatility of stocks versus the currency (assuming no leverage is employed), it’s a much higher risk way of protecting from government failure. Also keep in mind that should a default become reality, it may have profound implications for Japan’s banking system, as well as Japan’s economy as a whole. No country in history has managed to keep its citizens wealthy while defaulting on its debt.
• Gold. Ironically, in the hours after the announcement of the recent initiatives by the Bank of Japan to increase its quantitative easing, as well as the change in Japan’s pension fund strategy, gold fell – not just in U.S. dollars, but also when priced in yen. A little later, gold was priced higher in yen, but still down when priced in U.S. dollar. Gold has not fared very well of late, but it may serve as a good diversifier as Japan’s economic gamble plays out.

As we have a dire view on Japan, we should add that we don’t think Japan’s problems are all that unique. There is too much debt in the U.S. and Europe. The one country where citizens are fed up with deploying central banks to cure all problems is Switzerland. We will have an in-depth discussion of Switzerland’s vote to force the Swiss National Bank to hold a minimum of 20% of its reserves in gold in an upcoming Merk Insight (to ensure you don’t miss it, sign-up to receive our free newsletters). On that note, please register for our upcoming Webinar on November 20, 2014, where we will discuss how investors can build their personal gold standard.

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The 6 p.m. Recap with Gary Wagner: A Wild Horse - Kitco News, Nov 6 2014 6:09PM

A Wild Horse

Thursday November 06, 2014 18:02

Editor's Note: Technical expert and star of Kitco's popular show Chart This!, Gary Wagner will now provide Kitco.com visitors with an exclusive evening recap Monday to Thursday at 6:00 p.m. EST. The commentary, called Hawaii Six-O, will provide a brief overview of the day's news as it relates to gold. A former city guy, Gary abandoned the briefcase and tie, and joins us now daily from his home in Hawaii. Whether you are a newbie or veteran trader, Gary provides a great overview for all levels of investors.

Although there were gold buyers a-plenty today, they were fighting an uphill battle against an implacable, rampaging foe. The dollar has become an untamable wild horse, rampaging here and there without effective resistance.

The trot turned into a full-scale gallop after the Japanese announced their form of quantitative easing only two weeks ago. For a while, the yen had been serving as a junior reserve currency in its stable, slow but steady growth homeland.

Nevertheless, the bargain hunters and fast-turnaround traders made a buck today even with the soaring dollar. (In late afternoon gold is up only 70 cents.)

The dollar's strength has another path to weigh on gold prices - any dollar denominated commodity is going to feel pressure when the dollar rises. This has kept gold sliding. The trading is best for those with dollar accounts. The rest have a cold drink and watch from the sidelines. Or, they head for the equities, which many are doing, as we know.

Risk off is the dominant trend. It's inescapable right now.

There was another overtone to the precious metals today. Tomorrow, Friday, the Labor Department will issue its October employment report. This put trading into a subdued mode, not that anyone is expecting any drastic surprises. As we noted yesterday, private job watcher ADP said 230,000 new jobs were created in October.

"We're holding steady today but nobody wants to make a big move ahead of the employment numbers tomorrow morning. If there's a positive number, they (the bears) may take a run at it," said Paul Sacks, principal gold trader at New York's Aurum Options Strategies.

Wishing you as always, good trading,

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Nov 06 Gold, Economic Theory & Reality: A Conversation with Alan Greenspan AUreport

Gold, Economic Theory and Reality: A Conversation with Alan Greenspan

Source: JT Long of The Gold Report  (11/5/14)

When Dr. Alan Greenspan became chairman of the Federal Reserve, he moved from the world of rhetorical economics to the world of action. His most recent memoir, "The Map and the Territory 2.0: Risk, Human Nature, and the Future of Forecasting," attempts to make sense of how the financial crisis of 2008 came to be and how we can better predict future crises, along with the role of gold in a global monetary system. In this excerpt from Greenspan's appearance at the New Orleans Investment Conference with Navellier & Associates Senior Writer Gary Alexander, Gloom, Boom & Doom Report Publisher Marc Faber and Stansberry & Associates Investment Research Founder Porter Stansberry, The Gold Report delves into the role of gold versus fiat currency, why central banks own so much gold if it is truly "a barbarous relic," and the reason China is buying so much gold today.

Gary Alexander: You said that when you were named to the position of Federal Reserve chair you left the world of theoretical economics philosophy and entered the arena of action. You moved beyond the role of pamphleteer on the sideline to being part of the action. In what way did your objectivist teaching from your time with Ayn Rand and your belief in the gold standard influence the people around you? How did you convince people to see things your way or did you feel that most of the compromise went the other way?

Alan Greenspan: When I wrote a paper on how agricultural subsidies made no sense to the farmers in the long run, two Republican senators from Nebraska taught me the reality of actually implementing the values we hold as best we can in the context of a political environment. I never changed my fundamental views because they were rational. President Ronald Reagan advised that other than your core beliefs, which are protected by the Constitution, sometimes you have to compromise. We learned to change the world bit by bit.

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Nov 06 Paul Singer Slams The Fake World: "Fake Growth, Fake Money, Fake Jobs, Fake Stability, Fake Inflation Numbers" ZeroHedge

Nobody knows when reality will overtake the rhetoric, lies, phony statistics, wishful thinking, fake prices and tiresome poseurs pretending to be world leaders. The situation is universal, a consequence of incompetent leaders and careless (or ignorant) citizenry. Global problems are continuing to mount, along with the risk that the consequences of years of bad policies and inept leadership compound (as sometimes happens) in a short window of time. Let us start by unpacking some current examples of fakery, and then try to explore the consequences.

Monetary policy.

Either out of ideology or incompetence, all major developed governments have given up (did they ever really try?) attempting to use solid, fundamental policies to create sustainable, strong growth in output, incomes, innovation, entrepreneurship and good jobs. The policies that are needed (in the areas of tax, regulatory, labor, education and training, energy, rule of law, and trade) are not unknown, nor are they too complicated for even the most simple-minded politician to understand. But in most developed countries, there is and has been complete policy paralysis on the growth-generation side, as elected officials have delegated the entirety of the task to central bankers.

For their part, the central bankers are proud and delighted to be providing the primary support for the global economy. Their training for this role took place in the decades before the 2008 financial crisis, when central bankers (led by “The Maestro,” Alan Greenspan) “deftly” headed off crisis after crisis. These policy responses “worked,” we were told, and they promised a new era of fine-tuning, moderation in markets and complete control of the economy by central bankers. The words in quotes are meant to be ironic, of course, because in fact, the Federal Reserve Board’s moves disguised hidden – but serious and real – future costs, which came due in 2008. The ensuing crisis introduced the term “moral hazard” (not meant to be ironic) into the mainstream, meaning that risks were taken by financial institutions and others seeking private reward, while the costs of the risks were borne primarily by the taxpayers. Central bank manipulation of prices and risk taking has become the norm over the last six years, because it is so hard for investors to see the downside. QE and ZIRP have been “free,” as far as most people are concerned, in terms of stability, asset price and economic growth, and economic recovery. “Free” in this context means devoid of future countervailing negative consequences. Unfortunately, this particular magic bullet is illusory – the negative consequences are in the early stages of revealing themselves.

Among the worst consequences of the delegation of responsibility from political leaders to central bankers has been the increasing arrogance of the latter group and their inability to understand the rapidly evolving nature of the world’s major financial institutions. Prior to the crisis, central bankers were unable to understand the risks that were building up in the global financial system and the economy. They did not see the 2008 collapse coming, nor did they perceive how fragile the system had become, or that the major financial institutions had become the largest and most leveraged hedge funds on earth.

This lapse was a catastrophic error, not just of execution but also of theory and structure. During the 2008 crisis, the central bankers (rightly) applied standard (more or less) responses to financial collapse (flooding the system with liquidity and reducing interest rates), which of course truncated the crisis and stabilized the system. But their inability to understand the financial system, or to take responsibility for their massive failures in causing/allowing the crisis to occur, has resulted in a seriously deficient economic recovery phase.Central bankers do not understand that it was their tinkering, manipulation, bailouts and false confidence that encouraged and enabled the insanity that led to the fragility and collapse. Partially as a result of that misunderstanding, the developed world has doubled down on the same policies, feeding the central bankers’ supreme self-confidence. Political leaders have been content to stand aside and watch the central bankers do their seemingly magical and magnificent work.

The believers in the wisdom of this central-banker-centric economic world have been crowing and gloating that those (like us) who have raised concerns about the risks posed by the post-crisis, monetary-dominated policy mix (inflation, distortions, growing inequality, lower growth) are just “wrong” and should apologize for a “massive error.” This, shall we say, “Krugmanization” of a substantial portion of the economics profession and punditocracy is in its triumphalist phase, and whether its smug non-stop “victory lap” ultimately represents an embarrassing high-water mark is for subsequent events to reveal.

However, let us look at the policies that have been implemented post-crisis (in the absence of the kind of solid pro-growth policies that we and others have been advocating) and compare them to the policies that were in place during the run-up to the 2008 crisis.

Pre-crisis, the Fed funds rate was 1% for 2-1/2 years. There was no asset buying by the central bank (QE), but the persistently low Fed funds rate fueled bubbles in leverage, real estate and structured products. The balance sheets and derivatives books of financial institutions went from crazy to colossally insane.

Following the crisis, the Fed funds rate has been effectively zero for six years, and QE has put several trillion dollars of government and mortgage debt on the books of the world’s major central banks. Indeed, a substantial portion of government spending in the past six years has been “financed” by QE. If the gibberish that passes for explanations of why this is not just money printing makes sense to you, then please give us a call so we can be educated. The explanation makes no sense to us.

ZIRP has allowed insolvent corporations to issue debt at almost no premium to government bond rates.Companies that should be shuttered or taken over and chopped up are instead able to pursue projects that should never have seen the light of day, and to create fake demand that essentially borrows growth (and jobs) from the future.

A good deal of the economic and jobs growth post-crisis is false growth, with little chance of being sustainable and self-reinforcing. It is based on fake money conjured by the Fed to buy assets at fake prices. What happens when interest rates are normalized and QE stops (and reverses) globally is a question that nobody wants to contemplate. The financial system is fragile, still ultra-leveraged and reliant upon a continuation of superlow interest rates. Thus, the appearance of stability and low volatility is also illusory.

Government economic data.

Some of the most important government data is unreliable, starting with inflation. Reported real GDP growth has been in the 2% annualized range for the last few years. The 4% annualized real growth rate reported for the second quarter of 2014 only reversed the terrible first quarter numbers, so year-over-year growth was still only in the 2% range for the twelve months ended June 30, 2014. Only if third and fourth quarter real GDP growth reaches 3% or higher, and only if that rate persists next year, will it be fair to say that the U.S. economy has finally recovered from the crisis (six tough years later).

But regardless of the purported results for the rest of 2014 and into 2015, all of the reported growth numbers are too high, because the official inflation number is too low. Over a long period of time, these figures have become politicized, always in the direction of under-reporting inflation. Constant repetition has resulted in most policymakers and economists now just accepting the adjustments and tricks that have become part of the reporting culture. From the notion that there is “core” and “non-core” inflation; to ignoring house prices and using “rental equivalence”; to “hedonic adjustments” according to which, if your computer is “better” than last year’s, then you should subtract an amount from the actual price every year to reflect that improvement, even though it is subjective and not really quantifiable; to a handful of other nonsensical adjustments, inflation is understated. Inflation is also distorted by the increasing gap between the spending basket of the well-off and that of the middle class (check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like).

Said differently, inflation is the degradation of the value of money. Money has no meaning beyond the value of the real things for which it can be exchanged. The inventions and tools of modern finance have made things look really complicated, but stripping inflation to its essence is critical to understanding what is real and what is false. The inflation that has infected asset prices is not to be ignored just because the middleclass spending bucket is not rising in price at the same rates as high-end real estate, stocks, bonds, art and other things that benefit from QE and ZIRP. Money is losing value in those areas. This is inflation, plain and simple. If and when the situation gets to be Argentina-like, with generalized increases across the entire spending spectrum, it will be clear to everyone. In the meantime, sadly, policymakers do not recognize the reality of the peculiar and sectoral inflation, in some cases massive and growing, that has been caused by money printing and bad policy.

Even apart from rising prices in high-end goods, all of this suggests that CPI inflation is being understated by some unknowable amount, which we estimate is between 1/2% and 1% per year. This is a big difference in a 2% or 2-1/2% per year reported real GDP growth environment. Middle class citizens who are paying more at the supermarket and for college tuition and for many other goods and services feel that inflation is higher than reported, but they lack access to reliable data. The well-off think that it is their exquisite good choices that enable them to sell their overpriced $10 million co-op apartment and buy a $20 million overpriced Hamptons beach home. Neither group is coming to grips with the insidious and tricky nature of modern inflation, and the government just uses its tone of complete confidence to ignore what citizens see with their own eyes.

Unemployment figures are also a source of faulty or misleading data. The headline currently reported unemployment rate of 5.9% is deeply misleading. A 35-year low in the workforce participation rate, a policy-driven transition from full-time to part-time jobs, and the transition from high-paying jobs to relatively low-paying service jobs, all combine to make the headline rate a poor measure of employment health. Support for our statement is provided by the data on real wages, which have been stagnant during the entire post-crisis period. These figures for trends in real wages avoid the distortions we have described above, and are consonant with the polling numbers which show that Americans believe their country is on the wrong track and that the future prospects for themselves and their children are poor.

Deleveraging.

The 16th Geneva Report on the World Economy (published in September of this year by the Centre for Economic Policy Research) says that the total burden of global non-financial debt, private and public, has risen from 60% of national income in 2001 to almost 200% after the crisis in 2009 and to 215% in 2013.Contrary to widely held beliefs, the world’s leading governments and financial institutions have not yet begun to de-lever, and the global debt-to-GDP ratio is still growing to record highs, even before taking into account entitlement programs.

*  *  *

Nobody can predict how long governments can get away with fake growth, fake money, fake financial stability, fake jobs, fake inflation numbers and fake income growth. Our feeling is that confidence, especially when it is unjustified, is quite a thin veneer. When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.

Average:

4.78

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The 6 P.M. Recap With Gary Wagner: Laboring Through The Elections - Kitco News

Laboring Through The Elections

Wednesday November 05, 2014 18:05

Editor's Note: Technical expert and star of Kitco's popular show Chart This!, Gary Wagner will now provide Kitco.com visitors with an exclusive evening recap Monday to Thursday at 6:00 p.m. EST. The commentary, called Hawaii Six-O, will provide a brief overview of the day's news as it relates to gold. A former city guy, Gary abandoned the briefcase and tie, and joins us now daily from his home in Hawaii. Whether you are a newbie or veteran trader, Gary provides a great overview for all levels of investors.

Gas under $3 a gallon, unemployment under 6%, stock market breaking records every day, no wonder Obama is so unpopular.

 We're wondering if the election results were already "baked in" to the markets today. The takeaway from the elections for the economy is fairly clear. Nothing will change the course of the mighty U.S. economy barring disaster of epic proportions. The equities markets gave a bit of endorsement to the election results but there was other news that is overriding the Republican sweep.

Private employers added 230K jobs in October, well more than estimated and the largest gain since June. That's according to ADP's National Employment Report, which casts a positive light on the hiring front two days before the Labor Department's payrolls report.

"The report is strong enough to maintain the view that the labor market is recovering into the final quarter, and is likely to provide optimism among investors ahead of Friday's official government employment report," Andrew Wilkinson, chief market analyst at Interactive Brokers, was quoted as saying today.

At 4 o'clock in New York, gold is down a little over 2%, slightly off its lows for the day. Silver was battered down almost 4.5%. Ouch.

The other usual suspects have been rounded up for the sinking of gold.

The dollar found more room to strengthen, although that seems to be on the wings of a faltering monetary policy dance in Europe and the continued intrigue people are finding in Japan's huge bond buyback move. Both situations will resolve eventually.

The real story was real trading. Investors just don't like precious metals right now. Risk on is the watch-phrase of the period we're in right now and will be until the bull equities market runs into a stone wall. Gold may find buyers as it floats down toward $1100, buyers who will chance some money on a quick turnaround. But, as we know, buying a dip within a bear market is very tricky and very risky.

Oil found some legs underneath itself today, as a slower pace in the rise in inventories spooked a few bears and a rumor concerning a pipeline explosion in Saudi Arabia rattled energy markets in general. Crude did, however, remain below $80. If you're thinking the recent fall in crude prices has been precipitous, think back to 2008-9 when oil plummeted from roughly $135 a barrel to $35 a barrel. Talk about Humpty-Dumpty.

A good question to ask ourselves regarding our current short side trade is: what possibly could make gold go up significantly?

Wishing you as always, good trading,

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Nov 05 Getting It All Right Bob Moriarty

Columbus Gold (CGT-V) runs a gold exploration program in French Guiana on a deposit called the Paul Isnard project that has produced more than 2 million ounces of placer gold since 1875. It was interesting to me that French Guiana actually produced more gold per capita than any other country in the world. But the population isn’t all that much.

Columbus Gold is the brainchild of Robert Giustra, cousin to Frank Giustra but in an entirely different segment of the market. Columbus Gold was formed in 2003 as a project generator primarily based in Nevada with as many as 22 projects and JVs at one time. In 2011 Giustra became aware a subsidiary of IAMGold wanted to sell a 1.9 million ounce gold project in French Guiana.

Through a series of deals, Columbus Gold picked up 100% of the Paul Isnard project for 18 million shares, $4.2 million and an NSR of 1.8% on the first 2 million ounces of gold and .9% NSR on the next three million ounces of gold. An updated 43-101 released in August of 2014 showed an inferred gold resource of 4.3 million ounces. In addition to the NSR Columbus Gold sold a 1% royalty on the project for $5 million in May of 2013.

With great hindsight, Giustra pulled the deal of the century with Russian based Nordgold in September of 2013. Nordgold is the world’s 13th biggest gold producer with nine operating gold mines in four countries and production of 925,000 ounces in 2013.

Nordgold agreed to earn 50.1% of the Paul Isnard project by spending a minimum of $30 million US and completing a BFS (Bankable Feasibility Study) by March of 2017. Columbus operates the project and collects a 10% management fee. That is enough money, that in the most dismal gold market in memory they can afford to move their primary Nevada project forward.

The budget for 2014 provides for up to 25,700 meters of drilling done by three drill rigs and a potential 130 holes. They are doing infill drilling on 50-meter centers to upgrade the resource to measured and indicated from inferred. Columbus Gold plans on releasing an updated resource in January of 2015 and completing a PEA at the end of Q1 of 2015.

The Isnard project has great potential for expansion. The drill program designed to increase the confidence level of the resource will be drilling a lot of the 2.5 km wide existing resource that continues 1-3 km both east and west in both gold anomaly and favorable geology. Due to the existing wide spacing in the existing drill holes, they will be adding ounces internally as well as externally to the existing deposit.

Once the BFS has been completed, depending on the cost of construction, Columbus Gold can fund their 49.99% or allow dilution by Nordgold depending on the number of proven and probable ounces outlined in the study. The numbers vary but basically the higher the number of ounces, the better the deal for Columbus Gold. In the worst case, if CGT is diluted to below 10% their interest reverts to a 2% NSR.

Nordgold is already making plans for the future. Between September of 2013 and August of 2014, they quietly bought up about 9.9% of the shares of Columbus on the open market. Given the last placement, they have been diluted down slightly but they still own about 9% of the outstanding float. It would be natural for them to think about simply buying Columbus Gold at some point .

If you ignore the very real assets CGT holds in Nevada, at today’s price of the stock, the market only values their gold at $22 an ounce. Given the world class potential, those ounces would be going to $100 an ounce in a rational market and $400-$800 in a takeover. Nordgold will buy Columbus at some point, it would be nuts for them not to.

But given the state of affairs between the US and Russia, I doubt the company would be at all interested in the Nevada properties. The flagship Nevada asset is the Eastside project some 25 miles west of Tonopah. CGT owns 100% of Eastside subject to underlying royalties.

Drilling in 2011 resulted in a discovery hole of 13.6 meters of 2.42 g/t Au. A follow-up phase II drill program of 12 RC holes in 2013 found additional mineralization. A major drill campaign for 2015 calls for 64,000 meters of drilling in 250 holes with the intent to generate a 43-101 resource by the end of 2015. The technical staff believes Eastside has district potential. Investors seem to give Eastside no value whatsoever.

Columbus Gold has excellent management, a world-class project with over 4 million ounces where CGT only gets $22 an ounce in the ground and district scale gold in Nevada. They are partnered with one of the most dynamic young gold companies in the world who will finance the French Guiana project to a BFS. It doesn’t get any better than that. They are doing everything right and one day either gold mining will stop entirely or prices will come back to sanity.

Columbus Gold is not an advertiser and I don’t own shares. I do like them a lot. Do your own due diligence.

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Delhi - Gold Rates

Gold rates	Gold (in Rs/10g)
		22-Carat	24-Carat	Change(%)
Current Price		Rs. 24497	Rs. 26200.00	-0.49%
Yesterday's Price		Rs. 24618.55	Rs. 26330.00

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P.M. Kitco Metals Roundup: Gold Prices End Mixed, Hovering Near 4-Year Low

(Kitco News) - Gold prices ended the U.S. day session narrowly mixed Tuesday—cash (spot) gold slightly higher while Comex futures prices were modestly lower. The gold bears remain in firm technical control as prices trade not far above the recent four-year low. The key “outside markets” remain in overall bearish postures for the precious metals—a stronger U.S. dollar and slumping crude oil prices. December Comex gold was last down $2.50 at $1,167.30 an ounce. Spot gold was last quoted up $1.80 at $1,167.50. December Comex silver last traded down $0.206 at $15.995 an ounce.

The “outside market” feature Tuesday was the drop in crude oil prices to a three-year low of $75.84, basis the nearby December Nymex futures contract. Combined with the appreciating value of the U.S. dollar, these two outside markets have been a major influence on other markets the past few weeks—and especially a negative force for the raw commodity sector, including gold and silver.

The other feature Tuesday was Japan’s Nikkei stock index hitting a seven-year high. The Nikkei has rallied over 7% since last Friday, in the aftermath of a new batch of monetary stimulus from the Bank of Japan. The Japanese yen has slumped against its world rivals following the BOJ move on Friday.

(Note: Follow me on Twitter--@jimwyckoff--for breaking market news.)

European stock markets were under selling pressure Tuesday following news the European Commission reported it expects European Union gross domestic product to rise by just 0.8% in 2014. That’s down from the 1.2% growth-rate forecast the agency issued in the spring. The Commission cited the Russia-Ukraine tensions as a major contributor to the slowing EU growth the past few months.

There are two big economic data points this week: the monthly meeting of the European Central Bank on Thursday and the U.S. employment situation report on Friday. Recent dour economic data coming out of the EU, and Japan’s fresh monetary stimulus last week, suggest the European Central Bank will move to enact more monetary stimulus sooner rather than later.

The London P.M. gold fix was $1,166.50 versus the previous London A.M. fixing of $1,169.25.

Technically, December gold futures prices closed near mid-range and closed at another fresh four-year low close today. The gold bears have the strong near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above what is now solid technical resistance at $1,183.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,150.00. First resistance is seen at today’s high of $1,175.00 and then at $1,180.00. First support is seen at last week’s low of $1,160.50 and then at $1,155.00. Wyckoff’s Market Rating: 1.0

December silver futures prices closed near mid-range. Prices today closed at a contract and four-year low close. The silver bears have the strong overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.00. First resistance is seen at this week’s high of $16.22 and then at Friday’s high of $16.515. Next support is seen at this week’s low of $15.74 and then at the contract low of $15.635. Wyckoff's Market Rating: 1.0.

December N.Y. copper closed down 465 points at 301.85 cents today. Prices closed nearer the session low today and scored a bearish “outside day” down on the daily bar chart. The bears have the near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 315.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 300.00 cents. First resistance is seen at 305.00 cents and then at today’s high of 307.35 cents. First support is seen at 300.00 cents and then at 298.00 cents. Wyckoff's Market Rating: 3.5.

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Gold Rate in India Cities

Date: 05-11-2014, 10:49:36 AM

Chennai Gold & Silver Rate
24 Carat (1gm)	Rs. 2615.00
22 Carat (1gm)	Rs. 2445.00
Silver (1gm)	Rs. 37.50
Silver (1kg)	Rs. 35050.00

Mumbai Gold & Silver Rate
24 Carat (1gm)	Rs. 2608.00
22 Carat (1gm)	Rs. 2463.00
Silver (1gm)	Rs. 37.50
Silver (1kg)	Rs. 35050.00

Hyderabad Gold & Silver Rate
24 Carat (1gm)	Rs. 2622.00
22 Carat (1gm)	Rs. 2479.00
Silver (1gm)	Rs. 37.50
Silver (1kg)	Rs. 35050.00

Delhi Gold & Silver Rate
24 Carat (1gm)	Rs. 2620.00
22 Carat (1gm)	Rs. 2474.00
Silver (1gm)	Rs. 37.50
Silver (1kg)	Rs. 35050.00

Kolkatta Gold & Silver Rate
24 Carat (1gm)	Rs. 2618.00
22 Carat (1gm)	Rs. 2474.00
Silver (1gm)	Rs. 37.50
Silver (1kg)	Rs. 35050.00

Bangalore Gold & Silver Rate
24 Carat (1gm)	Rs. 2615.00
22 Carat (1gm)	Rs. 2471.00
Silver (1gm)	Rs. 37.50
Silver (1kg)	Rs. 35050.00

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