The gold price reached a six-year high on Friday, June 21, hitting $1,410 at its peak as investors sought a safe haven in amid troubled global waters and announcements by the European Central Bank and the Federal Reserve saying they are leaving the door open to interest-rate cuts this year. A lower interest rate in combination with a weakening dollar has historically always made gold an interesting investment. Now that bonds are yielding less, equities seem to have reached an apex and raw materials and currencies are now worth less, gold has become more attractive.
Anglo American Plc’s billionaire shareholder, Anil Agarwal, said he had no intention of behaving like an activist investor following his $2.5 billion investment for a 13% stake earlier this month. He continued by staying he had no plan to buy Anglo’s assets in South Africa, or to push for a seat on the board. The investment was made through Agarwal’s holding company, Volcan Investments, rather than Vedanta Resources.
Last week, De Beers published its second "Diamond Insight Report", analysing the current state and future outlook for the global diamond industry - 'from mine to finger' as they say.
Pin Lee, writing for the South China Morning Post, spoke with insiders from the Hong Kong and Asian diamond market to get their opinions on diamonds as an investment. While not without risk, as with any investment, by making a careful choice and focusing on the highest quality and rarest of stones, one should end up with a rock-solid investment. "Generally speaking," said Chin Yeow Quek, Sotheby’s deputy chairman of Asia and chairman of international jewellery in Asia, "diamonds do not fluctuate but, as with most items of value, there will be some ups and downs.
Analysts are "scrambling to increase their gold price forecasts, as the gold price continues to rise," the World Gold Council (WGC) said in a statement. The price of gold has again passed the $1,360/oz for a second time in 2016, a level previously seen in early 2014. The gold price has increased by almost 29% in US dollar terms so far this year (as of August 2). This has been gold’s largest continuous gain since the European sovereign debt crisis in 2010 and 2011.
Real assets should provide investors with a sense of a safe haven. But today, the image of financial products related to gold, silver or industrial metals, which are hedged with physical assets and should therefore provide investor protection, is damaged. A changing world requires a range of long-term, value-protecting alternatives to hedge financial investments. On top of this list should be investment diamonds.
My perception of the diamond industry is that it is probably doing a little bit better than most of the other commodities. The only reason is that it’s a very different market. So if you look at the bulk commodities … those guys are dependent on infrastructure growth, development in the countries where they are doing their production ... So where the economies start to diminish, you cut back on infrastructure, you cut back on the major projects ... De Beers [production cutting] strategy is probably right as the world economy is down.
Mining giant Anglo American, which owns 85% of De Beers, has reported a pre-tax loss of $5.5 billion for 2015 – more than double the loss reported in 2014 – as the company wrote off $3.8 billion due to sharply declining commodity prices. Chief executive Mark Cutifani said the state of the global economy left the mining industry facing "significant challenges". In a bid to deal with the financial hurdles facing it, the miner plans to sell assets worth $3 billion to $4 billion to repair its finances.
The gold price hit an eight-month high overnight (Feb. 8-9), very close to $1,200 an ounce and establishing a new battleground that will determine whether the current rally turns into a prolonged upward trend, writes The Week. After three consecutive annual falls during a bull market for equities and, latterly, the apparent return to an increasing interest rates, some analysts have ditched earlier predictions for gold prices to drop further.
Despite the economic conditions we’re all facing, I remain convinced that the extractives industry in Africa can serve as a powerful catalyst for broad-based economic transformation and long-term growth. But, the current economic reality must be recognized. Commodity prices are at decade lows, global investment in mining projects is slowing, and everyone is becoming more risk adverse.
As plummeting commodity prices have forced miners to watch their profits and investments go up in smoke, Mineweb reports that numerous junior miners are shifting away from their core exploration activities to pursue a business with high returns: marijuana.
"Prepare for further big declines in commodity prices", writes A. Gary Shilling, as a process of American and European deleveraging is far from finished and expectations of continued Chinese expansion led to massive overcommitment to supply. In short, slowing growth has lead to a general surplus of supply relative to demand, forcing the prices of overabundant commodities down. Shilling cites additional forces depressing prices, such as "a number of hard-rock miners being so deep into new projects that they are compelled to complete them.
The Economist reports that traditional banks, who used to finance the commodity trade for an average annual US$ 14 trillion, are stepping out of the game due to increased regulation, the threat of huge fines for serving shady customers and the high cost of vetting new clients in terms of compliance. New players, eg smaller banks in the Gulf, are profiling themselves as new players, although they are often too small to handle large transactions, The Economist says.
Mining and commodities giant Glencore, which recently became the face of struggling commodity companies hit by a major sell-off in raw materials, unveiled a $10 billion package of debt-reduction measures. This includes plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia in a move that it says will take 400,000 tonnes out of the market and potentially provide a boost to metals prices.