One of the big news items these past few days is an intriguing article in the London Telegraph on Nov 11th by Ambrose Evans-Pritchard on "Barrick shuts hedge book as world gold supply runs out." Drudge carried it as a major story last Saturday and Sunday. Obviously, if this report has merit, it could be earth shattering for the gold market in the coming days. The prospects of the world gold supply running out must concern the gold manipulators who have spent decades suppressing the price of gold.
The basis of Evans-Pritchard's report was remarks from Aaron Regent, president of the Canadian gold giant Barrick Mines. Regent told the Telegraph that global gold output has been falling by about one million ounces per year since 2000. As ore quality eroded, total mine supply dropped by ten percent.
In a reference to current gold production, Regent said at a London gold conference that "There is a strong case to be made that we are already at 'peak gold.'" Regent noted that "It is increasingly difficult to find ore." The story added that "Ore grades have fallen from around 12 grams per tonne in 1950 to nearer 3 grams in the US, Canada, and Australia. South Africa's output has halved since peaking in 1970. The supply crunch has helped push gold to an all-time high, reaching $1,118 an ounce at one stage yesterday."
The Evans-Pritchard story also took note of India's recent purchase of IMF gold and reported that "China has quietly doubled holdings to 1,054 tonnes and is thought to be adding gradually on price dips, creating a market floor. Gold remains a tiny fraction of its $2.3 trillion in foreign reserves. Gold exchange-traded funds (ETFs) - dubbed the 'People's Central Bank' - have accumulated 1,778 tonnes, making them the fifth biggest holder after the US, Germany, France, and Italy."
Despite increased exploration budgets by mines, production has declined. The story quoted Harmony Gold that it may close two more mines in coming months due to poor ore grades and Barrick will wind down the remaining 3m ounces of its infamous book over the next twelve months, "an implicit bet on rising gold prices over time." Per Regent, Barrick's hedge policy had made Barrick "enemy number one among 'gold bug' enthusiasts." The hedges obliged Barrick to deliver part of its gold into futures contracts set long ago at levels far below today's spot prices.
As noted, the hedge strategy worked well in the falling market of the 1990s, but cost Barrick lost profits this decade. In the third quarter, Barrick took a $5.7 billion charge on hedge contracts. Regent added that the hedge policy had weighed badly on the share price and irked investors, becoming a bone of contention at every meeting; and "It was clear to me that there were a significant number of institutions who wouldn't invest in Barrick because of the hedge book."
The CIA Skullduggery with Gold
It was good of Mr Regent to confess and acknowledge the dissatisfaction of gold proponents with Barrick and its hedge book operation. In the Goldsmiths 30 (at www.analysis-news.com), I wrote at some length on the skullduggery in the gold markets and touched upon Barrick in particular based upon the findings of Bix Weir in "My Gold and Silver Conspiracy Story." Weir wrote that after WWII a vast gold hoard of Japanese gold (called Yamashita's Treasure) was found hidden in over 175 different sites in the Philippine Islands by a member of General Charles Willoughby's staff. Willoughby was General MacArthur's Chief of Intelligence. In that Goldsmiths, I added the question of lost Nazi gold in Europe and what had happened to it.
Per Weir, the US decided to keep the treasure find a secret and use it as a source of covert funding by the US and Western intelligence agencies to manipulate financial markets, overthrow governments, and enrich the personal coffers of those who have been charged with administering it. He added that the institutions that were involved with it included JP Morgan, Citigroup, AIG, the World Bank, Morgan Stanley and so forth.
Weir said that in the 1980s and 1990s various schemes were used to rig the gold and silver prices by setting up a shell mining company named Barrick Gold. Reportedly, Barrick processed the Yamashita Gold in order for it to be the instrument to facilitate the many gold manipulations, and gold hedging scams of the banking cabals--along with metal leasing, swapping, pooled funds, ETF's, etc.
It is interesting that Mr Regent, in the Evans-Pritchard article, allowed that indeed Barrick had been involved in some questionable activities in its operation of its hedge fund. Perhaps Weir was on the mark in his allegations against Barrick. While Regent seems to be a reasonably new manager at Barrick, and may not be responsible for past questionable activities, one must still pause here and wonder if now all of a sudden Barrick is on the up and up in its operations and in alleging sharp declines in gold production in the coming days.
By the way, along with questions over lost Japanese and Nazi gold in 1945, with the end of WWII, the Goldsmiths 30 addressed some more serious allegations over the work of the CIA to seize Iraqi gold with the US invasion in 2003. For persons wanting to read these allegations of the CIA seizing/stealing Iraqi gold, please read the Goldsmiths Part XXX (at www.analysis-news.com).
Regardless of whether Barrick is now being honest in its operations or not, the evidence available to me does suggest that there is a serious trend in declining gold production which will bode well for the price of the metal in coming days. I must hasten to add that there are a few other related factors which the Telegraph's article did not properly address.
First, on the gold shortage issue, the declining production can really explode if it develops that the US particularly and possibly other foreign governments have lied to the public about their reserve gold holdings. I covered this in the Goldsmiths 17 (at www.analysis-news.com) which reported on the work some years ago by analysts like Dr Peter Beter and Edward Durrell.
The essence here is that the US reportedly now has something around 8,136.2 tons of gold in its reserves. But since our government lies so much to us about so many things, one must wonder if all that gold is really there. The work of Beter, Durrell and others prompted a so-called US Congressional investigation of gold holdings at Fort Knox in which some Congressmen actually went to Kentucky to check the status of gold. The Treasury showed the Congressmen a couple of vaults containing some melted down coins from the FDR heist in the 1930s. Apparently, these melted down coins were sufficient to appease the Congressmen who dropped the matter and went no further on their inquiry.
Yet, for purposes of this discussion, let us just hypothetically imagine that indeed the US government has significantly lied to us about US gold holdings. What if much of that supposed gold is simply not there? And what if it should develop that some insightful and courageous soul can do some investigatory work and establish that US gold holdings are substantially smaller than the alleged 8,000 plus tons? What would that finding do in the context of declining gold production at the various worldwide mines? It should not take a genius to see at once that gold would go into the sky, and especially if such knowledge arrives in tangent with a rapidly falling dollar.
While there is absolutely nothing positive in the above comments to increase the availability of gold, there is one issue that few persons seem to have grasped. The gold suppression manipulators have hurt gold production so profoundly since WWII that numbers of mines have simply closed and went out of business because it was not profitable for them to operate their mines with gold prices suppressed. The same thing is true with silver mines.
As I live in North Idaho, I am acutely aware of numbers of especially silver mines which closed long ago. Today, the stock in many of these companies are classified as penny stocks because they are now valued in the pennies. Along with the closed silver mines, there are also some closed gold mines, though not as prevalent in Idaho as closed silver mines.
If and when it becomes legitimately profitable for gold and silver mines to operate, many of these closed mines will reopen and resume production. Their stocks, now in the penny category, can easily go up to be dollar stocks.
Also, as the above Telegraph article noted, there has been deterioration in ore quality which makes it less profitable to pursue it in production. Obviously, an explosion up in price will allow miners to go after ore that is of less quality than the ore mined when prices were suppressed. With price suppression, mines could only pursue high grade ore which could be profitably extracted. But this can change with increased ore prices.
The Bottom Line
The bottom line here is that indeed gold production is on a decline. With an increasing public and central bank appetite for gold, it manifestly means increasing prices in the coming days. Likely, the present levels of production should increase and intensify as gold prices go up. So the dire forecast of gold shortages by Barrick may not be as bad as it may seem at first.
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