It's beautiful in Maine this time of year. It's cool at night, fireflies are lighting up the back yard and strawberries are in season. Have a great weekend.
"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”
Here's three pices of news out today that means more than they seems on the surface …
XX My take – this likely means that the Bank of Japan's growling about potentially raising interest rates is all noise and no teeth. And THAT should be good for gold prices. Japanese investors – huge gold buyers – were cutting back on gold purchases on the hope that the BOJ was going to raise rates. "Why risk money in gold when you might get a good return just sticking your money in the bank," is how that reasoning goes.
But if the BOJ isn't raising rates, the Japanese might buy gold instead. Let's watch and see how this develops.
XX My take -- This is actually important for uranium. Uranium prices have been weakening partly because investors, traders and utilities alike were factoring in huge production increases from Kazak uranium mines. But now we see that Kazak is suffering serious delays in its oil projects. What do you think the odds are that it will suffer serious delays in its uranium projects? Better than average, I'd say. Bottom line: This should be bullish for uranium prices. That said, the expected pullback in uranium prices could be a self-fulfilling prophecy by now. I'm just more convinced than ever that it will be a buying opportunity.
XX This is interesting news, and not just because Yamana is in the Red-Hot Canadian Small-Caps portfolio. The companies have good reasons for the merger/takeover.
In other words, with this combination, these companies are on their way to the big league.
But it also shows that gold companies don't consider themselves overvalued. In fact, they think this is prime time to do mergers and acquisitions. Gold is cheap at these prices, my friends, and select gold miners are even more so. I expect another wave of M&A activity in the near future.
Gold has traditionally been seen as a haven for investor money but more recently has been put in the same category as other commodities, which are considered risky investments.
"We've seen this countless times. When there is a whiff of risk aversion...gold like any other commodity tends to get affected by long liquidation and that's what we're seeing," said Robin Bhar, metals analyst at UBS Investment Bank.XX My take -- mining stocks cratered yesterday, so now isn't the time to sell them. A "3-month low" or other benchmark often comes right before a significant rally. We'll do some risk reassessment of our own on open positions.
That seems to be the view over at StockInterview.com – a great site, by the way – where they analyze the latest news from Nuclear Market Review in the following story:
Uranium Demand Showing Price Weakness
TradeTech's Nuclear Market Review reports, "Two sellers that were evaluating bids in response to their auctions have concluded their evaluations and have decided not to sell at this time."
Stock Interview does more digging: In an eye-opening interview with Joe McCourt on May 21st, we learned about his company's proprietary Blended Fuel Value (BFV). McCourt told us, "The BFV calculates the weighted average price of uranium held by all publicly traded funds as a function of the fund share price. The upward and downward price movement of the BFV reflects North American and European investors' sentiments on the current spot price of physical uranium."
Until this past April, the BFV has traded well above the weekly spot uranium price indicators, published by either TradeTech or Ux Consulting. For the week, the BFV has traded a whopping $19/pound BELOW the price indicators.
According to Joe McCourt, who writes in this week's FreshFUEL, "The value of the BFV should be about $6 higher than spot U3O8 to account for the cost of underwriting and distributing the shares of the fund. Currently, the BFV is about triple that amount lower than the spot price." [XX emphasis added]
On the bright side …
Traders have backed off the past few weeks. General discontent through the utility industry suggests spot U3O8 needs to take a breather. In an April 12th interview with Dr. Robert Rich, he warned of a 'price adjustment.' But, he also told us at the time, "The minute buyers see things go down, they are going to flock back into the market, and say, 'Okay, we knew this was going to happen. Now, we buy.' The utility consumers will come back into the market like lemmings, and buy up anything available. The next thing you know, there's another spike."
Cyclical droughts are a normal part of nature. In the US Southwest, they come and go in 20- to 30-year cycles, and within each cycle there are good years and bad years. But accumulated convincing evidence that this latest drought is worse than its mid-20th-century predecessor.
Some interesting stats …
You can read more by CLICKING HERE.
Meanwhile, the era of cheap food is coming to an end.
Labels: global warming
While refineries were able to crank out an additional 100,000 barrels per day versus gasoline production in the week-ago period (thanks to the use of refinery unit downstream from the distillation tower), refiners remained incapable of expanding utilization: For the week ended June 8, refinery utilization totaled 89.2%, down 0.4% from the previous week and below the year-ago level of 92.7%.
With several refineries still down due to planned and unplanned maintenance, and hence, the industry's inability to maintain a utilization rate above the 90%, we reaffirm our view that record low gasoline inventories leave the domestic-refining system and gasoline consumers vulnerable to upward gasoline-price volatility as we progress through summer.
There are two things weighing on the US dollar now – rising gas prices and a crumbling housing market. You’ll notice I haven’t put the trade deficit in there because the trade deficit hasn’t mattered … yet. If these trends continue, the US dollar should go lower and gold should go higher. If the trade deficit starts to matter, the dollar could get shellacked.
Do I think it's a low-ball bid? Heck, yeah!
Let's see if the Chinese are going to make a bid.
Dr Campbell, is a former chief geologist and vice-president at a string of oil majors including BP, Shell, Fina, Exxon and ChevronTexaco. He explains that the peak of regular oil - the cheap and easy to extract stuff - has already come and gone in 2005. Even when you factor in the more difficult to extract heavy oil, deep sea reserves, polar regions and liquid taken from gas, the peak will come as soon as 2011, he says.Personally, I subscribe to the theory that we'll only see Peak Oil in the rear view mirror -- we won't know we've hit it until after it happens. But I believe Dr. Campbell's concerns are worth listening to.
Labels: peak oil
Red-Hot Asian Tigers subs, aren't you glad we bagged gains on this one on in March? Whew!
Secondly, this lower pricing may be just a problem for ERA. I haven't heard complaints of contract price weakness from other miners. It is true that ERA supplies 10% of the world's uranium. But it's also experienced a major setback this year with the flooding of its Ranger Mine. Is its lower pricing partly to keep customers happy?
And another thing: SXR's Neal Froneman recently told reporters that his company is signing contract prices at $60 per pound. He also expects demand for nuclear fuel will continue to outstrip demand for the next eight years.
Meanwhile, Steve Kidd, Director of Research for the World Nuclear Association recently told Resource Investor that "There will probably be a period from perhaps 2009 to 2015 when the market has sound supply. Thereafter with rising demand but diminishing secondary supplies it will become more challenging for the industry to meet demand."
To me it the future price of uranium sounds like anyone's guess. We do know this: There is a supply/demand squeeze in uranium right now, and it should continue for the short term. This SHOULD drive prices higher.
Which brings me to my next point ...
How High Can Prices Go?
My own personal target, set when uranium was at $120 per pound, was $298 in 12 to 18 months. That's based on the supply-demand squeeze that is expected by many analysts through 2009 (as you can see from Kidd and Froneman, opinions vary). So how much of a price rise can the industry absorb. Previously, I'd heard the cost of uranium oxide accounts for only 5% of the cost of electricity from a nuclear power plant. However, it turns out that's a myth.
According to the Nuclear Energy Institute, from mining the raw ore to converting it into pellets packed in fuel assemblies, uranium represents 18% of a typical nuclear plant's operating costs.
Nuclear power plant operators say it's even higher than that -- Dr. Haksoo Kim, Acting Director of Fuel Supply for Exelon Corp., says the cost of nuclear fuel is between 20% and 25% of the electricity cost. Then again, you'd expect utilities to put out a worst-case scenario.
Why? Because utilities are having a stare-down with uranium suppliers. As I told you in the June 6 Money and Markets, In its annual uranium marketing report, the U.S. Energy Information Administration determined a total of 276 million pounds of unfilled uranium contracts exist for the period from now through 2016.
In other words, the utilities are banking that prices will go lower. They say they just can't afford higher costs.
Maybe so. After all, US utilities have to figure in fat profit margins to their bottom lines. So maybe we won't see a US nuclear Renaissance if prices continue to soar.
And that's a pity. Because you know who may not be deterred by higher prices? China, Russia, India, Japan, and South Korea -- in other words, the countries where nuclear power plant construction is already shifting into higher gear.
And remember, coal amounts to 78% of the cost of operating a coal-fired plant, and natural gas amounts to 94% of operating a gas-fired one, according to 2005 data. I don't know if you've noticed, but coal and natural gas prices are both heading higher.
I believe the world is on the cusp of not only peak oil, but also peak natural gas. In the context of a fossil fuel peak, $298 uranium becomes quite achievable. It just might take a little longer.
But maybe not too much longer. Take a look at this chart of uranium prices I snagged from the ERA PDF linked higher in this post ...
That looks like a rocket launch to me. Are we going to see prices pull back eventually? I should think so ... maybe now is the time. Maybe speculators will be spooked by the news out of ERA and sell some of that stuff they've been hoarding for years. Rising interest rates could have a hand in that, too. If you borrowed money at an adjustable rate to buy uranium, and interest rates rise, I think you would sell some uranium to cover your debts.
We'll have to see how that plays out. I think it would be the buying opportunity of a lifetime, if it hasn't already been priced in to uranium stocks.
Meanwhile, my subscribers keep bagging uranium gains. Red-Hot Canadian Small Caps subs recently bagged gains on Energy Metals (good timing on that one, too) and now we find out that Areva is in talks to take over UraMin! Give me some more of that luck!
Keep your powder dry and wait for my signal. It could be a wild ride.
India imported 211 tonnes of gold in January-March, a 50 percent jump over the same period last year, data from WGC showed. In 2006, gold imports were at 715.5 tonnes, down less than a percent over the previous year.XX Well, that's good news. Now, let's look at a chart of gold ...
Gold may touch $1000: JP Morgan Gold may rise to more than $1,000 an ounce as demand from
However, as long as the down days are bigger than the up-days, the bears will still be in charge. How much longer will that last? My crystal ball is cloudy. For clues, let's look at the US dollar ...
And now to silver, which is a bit more bullish than gold ...
China's Trade Surplus Widens 73 Percent, Adding to U.S. Pressure Over Yuan
Putin Says Western Nations Must Recognize Economy's `New Balance of Power' President Vladimir Putin, hosting a conference with 200 chief executives from around the world, said Western nations must recognize an economic ``new balance of power'' in which Russia has a central place.
I’m not too worried about oil. See this chart:
Fundamental drivers going forward …
Gasoline demand: While growth in gasoline demand has slowed somewhat, it is still rising (up 1.5% year over year). Every time gasoline prices flatten, demand surges. This should keep upward pressure on gasoline prices, and that should keep upward pressure on light sweet crude, the easiest source oil to use for gasoline.
refiners are underutilizing their refineries. We’re below pre-Katrina rates. There are plenty of reasons, but they won’t matter beans if we have a bad hurricane.
Hurricane season is here -- and it should be a whopper! We already had two named storms by the official start of hurricane season on June 1. Experts at
Plus, scientists say nine of the storms should become hurricanes, a stunning five of those major hurricanes with sustained winds greater than 111 miles an hour!
There’s also a 74% chance that at least one major hurricane will make landfall on the
It’s likely that global warming will make things worse. For example, in the Persian Gulf, a killer cyclone (what we call a hurricane) shredded itself before slamming into the Persian Gulf country of
It sounds like we have the ingredients for a hot and potentially volatile summer in “oil rig alley” in the
Of course, like everyone, I hope we are spared an active hurricane season. But the fact remains that even the hint of potential hurricane-related supply disruptions can send energy prices soaring.
Welcome to all my visitors from the Emirate of Dubai and the Sultanate of Oman. I’m not sure how you found this little blog – which is nominally about natural resources – but I see from my visitor log that there are a lot of you, and you are certainly most welcome here.
Ihave to admit that most Americans probably only know
Wikipedia is not always the most accurate, so perhaps some of our new friends from
My personal interest in
As long as you get through this storm without losing friends or family, you’ll be okay in the end. And you’ll have stories to regale your grandchildren (I’m Irish, so my stories may improve in the telling over time). Peace be upon you and good luck.
Latest update: Good news! Cyclone Gonu Weakening!
Scroll down the page for more links.
Scroll down the page for more links.
This is an unprecedented event. NO CYCLONE has ever entered the
Financial Leverage May Boost Global Growth Beyond IMF Forecast Sixth Year When it comes to world economic growth, the glass is suddenly looking a lot more than half full. The Paris-based Organization for Economic Cooperation and Development just raised its 2007 growth forecast for its 30 member nations to 2.7 percent from 2.5 percent.
Global warming 'is three times faster than worst predictions' Global warming is accelerating three times more quickly than feared, a series of startling, authoritative studies has revealed. They have found that emissions of carbon dioxide have been rising at thrice the rate in the 1990s. The Arctic ice cap is melting three times as fast - and the seas are rising twice as rapidly - as had been predicted.
Fed Faces Growing Pressure to Raise Interest Rates, Options Market Shows In the options market where the savviest investors take apart conventional wisdom, the Federal Reserve is facing growing pressure to consider raising interest rates as soon as December.
China's CSI 300 Plunges 7.7 Percent, Extending Stocks Rout to $350 Billion
China Plans to Cut Greenhouse Gas Output as Nation Nears U.S. in Emissions China plans to use hydropower, nuclear energy, biomass fuels and gas to help cut 950 million metric tons of so-called greenhouse gas output by 2010 as the country closes in on the
Australia Dollar Trades Near a 17-Year High as Prices of Gold, Copper Rise The Australian dollar rose, approaching a 17-year high, as prices for metals exported by the nation including gold and copper climbed.
Australia Company Profits Rise at Fastest Pace in Two Years, Led by Banks, Retailers Australian company profits rose at the fastest pace in almost two years in the first quarter as an accelerating economy fueled earnings at banks and retailers.
Copper Rises in London as Stockpiles Fall Most in Seven Months; Zinc Drops Copper rose in London as stockpiles of the metal fell the most in more than seven months, indicating demand may slow less than expected during the northern hemisphere summer. Zinc and lead also dropped.
Gold May Climb as World's Central Banks Slow Sales This Year, Survey Shows Gold may gain for a second straight week on speculation central banks will slow sales of the metal.