Stock Preacher

Crude Oil rose about US$1 toward US$74bbl to settle at a 10 month high Friday as data in the United States promised economic recovery and a revival in energy demand. US Crude for October delivery settled up 98 cents at US$73.89bbl, the highest settle since October 20. London Brent crude for October settled up 86 cents at US$74.19bbl Crude Oil gained US$6.38 on the week, about 10%, from the US$67.51 settle on August 14. The US$ was down against the Euro, helping to support commodity prices, with investors showing some appetite for risk.

Popularity: unranked [?]

BHP Billiton Ltd. Pc announced that they would cut 6,000 jobs and close the giant Ravensthorpe nickel mine in Australia, writing off US$1.6 B, as the global resources giant battles a collapse in commodity prices. Until now BHP, the world’s largest miner, had set itself apart by maintaining production and just last month said sales volumes were holding up despite a global downturn.

But as it became increasingly apparent there would be no quick fix to the slump in commodity prices, BHP was forced to close mines and cut jobs.”Clearly their balance sheet is in a respectable position. But they are not immune from the commodity price environment that we’re seeing, and earnings are going to suffer,” said Neil Boyd-Clark, managing partner at Fortis Investment Partners.BHP Chief Financial Officer Alex Vanselow warned last week that more mines could be closed given the uncertainty in commodity markets, with the Australian metallurgical coal mines already slated to reduce output by 10-15%.

Popularity: 10% [?]

US inflation slowed to 50-yr low last year as industrial output fell for the first time since 2002, raising the specter of deflation. Consumer confidence is also at depressed levels suggesting that the economy could take longer to recover from the downturn that augurs to be the longest and perhaps deepest since World War II. The US Consumer Price Index dropped 0.7 percent in December for a 3rd straight monthly decline, capping a year in which prices advanced only 0.1 percent, the weakest 12 month reading since December 1954, according to the US Labor Department.

Weakening economic activity worldwide has depressed commodity prices, pulling headline inflation figures down sharply and the core US inflation, sans the volatile food and energy costs, is also slowing, increasing the risk of deflation. Deflation is a sustained decline in price levels, and is regarded as dangerous because it stifles economic growth.

Popularity: 4% [?]

After the collapse in commodity prices during the second half of 2008 some commodity prices moved higher over the last two weeks. Crude Oil has taken the limelight, rising from a year low of US$34 bbl to just below US$50 and traced back to the mid US$30’s bbl. But commodities like nickel and wheat have also jumped, and prices have in general been moving higher in line with improved risk appetite in financial markets. Prices tend to be extra volatile around Christmas and into the New Year due to thin liquidity. Looking at 2009 it appears that commodities have in moved into a consolidation phase and that prices will end the year higher. The combination of production cut backs, lack of investment and improved economic growth during 2009 should lift sentiment, and improve the demand and supply balances going forward

Popularity: 4% [?]

Let’s have a look at the one of the Top 10 Gold Miners in the World (Number 3 in North America): Kinross Gold Corporation (KGC) from a Technical POV (point of view).

The overall analysis after today’s market action is Bearish overall, in the near term it is Bearish, mid-term Neutral, and long term Very Bearish, this can change on any continuing strong upside action with good volume.

Today’s Action (November 13th, 2008)

KGC 11.41 -2.00 Volume13,697,493

There is a Gap Open Up on October 29, 2008 at (8.59 to 8.94); the near term resistance is 12.48, the 50 day moving average at 13.19, support 8.77 and next 6.85.

This is Kinross Gold Corporation: Kinross Gold likes Gold mining so much since prices have risen sharply that it has acquired three North American Gold miners Echo Bay Mines, Crown Resources, and Bema Gold. Those transactions made Kinross one of the world’s Top 10 Gold miners, raising its proved and probable reserves of 45MM ozs of Gold and another 75MM ozs of Silver. Nearly half of the company’s revenues come from its Fort Knox and Round Mountain properties in the USA. Kinross also has operations are located in Brazil, Chile, Russia, and Zimbabwe. Kinross bought Bema for about $3B b at the beginning of 2007 a deal that came on a wave of consolidation in the Gold mining industry.

Gold Demand: Strong domestic and international demand

Large economies of scale: Large

Kinross Gold Competitors

Barrick Gold, Toronto, Canada

Goldcorp, Vancouver, Canada

Newmont Mining, Denver, CO

Note: In the metals mining sector demand is driven by industrial demand and economic growth, both domestic and foreign. A company’s profitability depends on volume and efficient operations. Large companies like Kinross can afford to discover and develop new deposits and increase reserves. Small companies typically own just one mine, limit exploration to that one property, and operate it as efficiently as possible. Gold mining today is highly automated; annual revenue per employee is approx. US$300,000. The overall analysis after yesterday’s market action is Bearish overall, in the near term it is Neutral, mid-term Bearish and long term Bearish, this can change on any strong upside action with good volume.

Gold and Politics
On August 15, 1971, US President, Richard Nixon unilaterally canceled the Bretton Woods system and stopped the direct convertibility of the United States dollar to gold. As a result, the U.S. dollar was decoupled from gold, and gold prices could fluctuate like any other commodity.

The data is limited when comparing the performance of Gold prices as they relate to the political affiliation of the President of the United States. There are some striking similarities between the performance of Gold prices during the great Gold bull market of the 1970s and today’s Gold bull market and how the Presidential political affiliation was and is tilted.

Popularity: 2% [?]