JP Morgan still bullish on platinum and gold

Brendan Ryan | Mon, 14 Dec 2009 12:40
[] — JP Morgan analysts Steve Shepherd and Allan Cooke have turned even more bullish on platinum and gold, as well as South African platinum and gold equities.
That’s despite the numerous challenges faced by the SA miners. These include rand strength, the concerning outlook for electricity and water supply and the impact of various types of government involvement in the mining arena.
On gold, they said: “We see upside in the rand gold price and in our SA gold share picks, despite the challenging near-term operating environment in South Africa. We expect our gold share picks to outperform the gold price over the next six months.”
JP Morgan’s SA gold share picks are AngloGold Ashanti and Gold Fields. The analysts have also just upgraded DRDGOLD, changing their recommendation from “underweight” to “overweight” for investors’ portfolios.
They pointed out the most vulnerable stocks are Harmony and DRDGOLD, which had a high gearing to the rand/dollar exchange rate and cost inflation.
On platinum, Shepherd and Cooke summed up the situation as one of “solid demand and constrained supply outlook. Game on.”
They said: “We believe the ingredients may well be in place for the platinum group metals (PGM) basket to overshoot mid-cycle prices in the next couple of years and, if history repeats itself, equity prices should perform strongly in response to this.
“JP Morgan’s SA equities strategy to be overweight on platinum in 2010 reflects our expectations for this.”
Turning to the platinum shares, the analysts said: “Our top major pick remains Anglo Platinum, followed closely by Lonmin which we have upgraded from neutral to overweight.
“This said, we continue to expect the smaller names such as Northam (overweight) and Eastern Platinum (overweight) to be the top performers in 2010 due to a compelling valuation and the prospect for quantum production growth over the next five to 10 years.
“We are cautions on Impala Platinum (neutral), where we see some concerning management issues at its huge Rustenburg mine. Despite a good management team, we remain underweight on Aquarius Platinum due to its less favourable relative resources position and our valuation work.”
The analysts expected platinum demand to show progressive recovery, driven by a gradual recovery trend in global growth with emerging markets leading the way.
On the supply side, they believed a number of factors would adversely affect South African PGM production levels.
These included sharply reduced levels of capital expenditure; loss of production because of enforced safety-related interruptions to mining operations; concerns over future electricity supply from Eskom; worries over future water supplies and “developments of a political/taxation/ BEE [black economic empowerment] nature.”
Shepherd and Cooke said: “There appears to be an increasing risk that state interventions/involvement will tend to slow the rate of new PGM capacity investment in South Africa, which over time could add to PGM market tension.”
They said: “Given that the issues we highlight above pan out, we can only foresee that investors in commodities will continue to be attracted to PGM, adding further tension to the market. In this scenario we see the potential for prices of the metals to spike.”
On the gold sector, the analysts said they increased their near-term gold price forecast by 36% to $1,288 per ounce for 2010 and $1,225/oz for 2011.
They also strengthened their rand/dollar exchange rate forecast by 11% to R7.73/$1 in 2010 and R8.2/$1 in 2011.
They said: “Our outlook for the sector’s key drivers is much improved, with the rand gold price forecast to average around R320,000/kg over the next two years.
“If we are on the money, this will be good news for SA gold producers’ top lines that have sagged in 2009 under the weight of a stronger rand and lower production due to safety stoppages.”
Shepherd and Cooke commented the South African gold share ratings remained subdued and “quite frankly, are disappointing give the recovery in the rand gold price as the gold price has breached the $1,000/oz level.
“Our base case numbers continue to reflect multiples at around a 40% discount to the major North American gold miners. Relative to their ratings history and North American peer spot multiples, the shares continue to look inexpensive to us.”

Is Federal Reserve manipulating gold prices?

WASHINGTON (Commodity Online): Politicians in the United States are coming out in the open demanding constitutional remedies to curb manipulation and rampant speculation in gold prices. Congressman Ron Paul said that the US Federal Reserve and the Treasury department have been manipulating gold prices to deflate the price of gold.

Congressman Ron Paul of Texas this week introduced legislation designed to curb the ability of the President or the Treasury Secretary to manipulate worldwide gold prices. The “Monetary Freedom and Accountability Act” restores proper congressional authority over gold policy by requiring that body to vote its approval before the President or Secretary buys or sells gold.

“The Constitution grants authority over monetary policy specifically to Congress alone, not to the executive or the administration,” Paul stated. “Yet Congress has neglected its duty for decades, and now our foolish fiat money system is run without challenge exclusively by unelected Treasury and Fed bureaucrats. As a result, the Treasury has been able to engage in the buying and selling of gold to manipulate the worldwide market price. Gold is very important to markets and investors in America and across the globe, and Congress should not allow the administration to interfere in the gold market behind closed doors.”

The private Gold Antitrust Action Committee held a press conference this week to discuss federal manipulation of gold markets. The group has uncovered evidence suggesting that the Federal Reserve and the Treasury department, operating through the Exchange-Stabilization fund and in cooperation with the International Monetary Fund, have been systematically working to deflate the price of gold.

Because rising gold prices are seen by investors as a barometer of inflation, the Fed has purportedly suppressed prices to disguise the true nature of the financial bubble of the 1990s.

“The Fed wants all of us to think the stock market is not overvalued, and that credit and monetary expansion can create lasting prosperity,” Paul concluded. “My bill will make it harder for the Fed and the Treasury to manipulate gold prices, which should always serve as an unbiased indicator of the true health of world markets.”

What are short sellers playing in the near future?

As per December 10, 2009, let’s see what are the short sellers playing in the near future, courtesy of Douglas A. McIntyre from

Short sellers sharply increased their gamble that financial stocks would fall based on short selling data from NYSE and Nasdaq on the last day of November.
Shorts pushed into Citigroup (NYSE:C), increasing their positions by 11% to 216 million shares making the bank stock the most shorted among all US companies. Bets against Bank of America (NYSE:BAC) rose 13% to 75.5 million shares and 2% against Wells Fargo (NYSE:WFC) to 77.2 million.

Short selling made very large gambles against the big companies in the retail sector probably based on the belief that holiday sales will be weak. Shares short in Wal-Mart (NYSE:WMT) rose 37% to 28.2 million. The short interest in Macy’s (NYSE:M) was up 13% to 40 million shares. Shares short in Barnes & Noble (NYSE:BKS) rose 15% to 17.1 million The short interest in Office Depot (NYSE:ODP) was higher by 20% to 21.7 million, and shares sold short in Nordstrom (NYSE:JWN) were up 15% to 21.8 million. However, shares short in e-commerce leader Amazon (NASDAQ:AMZN) dropped by 13% to 17.1 million.

Short sellers appear to think that the results for airlines and hotels will be good in the near term. Shares sold short in Southwest (NYSE:LUV) fell 9% to 26.1 million. The short interest in Marriott (NYSE:MAR) was down 7% to 33.2 million. Shares short in Delta (NYSE:DAL) fell 15% to 24 million.

Among big tech stocks, shares sold short in Dell (NASDAQ:DELL) rose 35% to 37.9 million. Most other changes in hardware and software stocks were modest. Share short in Microsoft (NASDAQ:MSFT) fell 18% to 64 million. The short interest in Intel (NASDAQ:INTC) fell 4% to 52.6 million. Shares sold short in Cisco (NASDAQ:CSCO) rose 2% to 42.4 million. The short interest in Nvidia (NASDAQ:NVDA) rose 3% to 34.3 million. The short interest in Symantec (NASDAQ:SYMC) was down 1% to 21.7 million. Shares short in RIM (NASDAQ:RIMM) rose 1% to 22.3 million.
The short interest in Oracle (NASDAQ:ORCL) fell 14% to 21.6 million ahead of the EU decision on the company’s buy-out of Sun (NASDAQ:JAVA). The market reacted well to the restructuring of Electronic Arts (NASDAQ:ERTS) as its short interest was up only 2% to 21 million shares. Investors are betting that Palm (NASDAQ:PALM) will have a rough fourth quarter sending shares short up 19% to 56.5 million.
Among tech giants, shares short in Apple (NASDAQ:AAPL) dropped 14% to 13.5 million ahead of the holiday sales period. Shares short in Google (NASDAQ:GOOG) fell 11% to 3.8 million.

Gold: Seasonal Pullback before Christmas Rally?

Is Gold into a seasonal pullback or is it something worse?
Are any real, objective reasons to believe that the US economy is in recovery as mentioned by Ben Bernanke?

Let’s see some facts, courtesy of

US Population: 308,112,749
US National Debt: over 12 trillion
Official Unemployment: 15,403,107
Actual Unemployment: 26,467,659
Food Stamps Recipients: 37,887,326
Foreclosures: 782,592

Over the past days, gold was in pullback. Healthy, as considered by various stock market gurus, scary as considered by me. Having invested in gold mining companies, the pullback was anything but a warm feeling. The question is: are we going to see a Christmas rally in gold price?

The gold bears are cheering now, but for how long?

On December 2, 2009, a key figure at the People’s Bank of China made the following remark:
“We must keep in mind the long-term effects when considering what to use as our reserves,” Hu Xiaolian, a vice-governor at the People’s Bank of China, told reporters in Taipei, when asked if China had plans to increase its gold holding in its foreign exchange reserves.
“We must watch out for bubbles forming on certain assets, and be careful in those areas.”

Interesting enough, before the Chinese talked about gold being in a bubble on December 2nd, they were talking about needing to buy more. But naturally, why would they be eager to buy at such a high price when India purchased 200 tons of IMF gold and paid only $1,045/oz. for it.
Immediately after that, the price has skyrocketed to $1,227/oz. It’s pretty clear that speculation has pushed prices up after the Indian purchase and as clear it is that the Chinese will wait for a correction before they buy, and if the correction does not happen naturally, a ‘bubble gold’ announce may do the trick. The lemmings with weak hands are jumping off the cliff, and the Chinese are getting the supply they need to buy 6000 tons of gold cheaper.
Between Chinese ‘gold bubble’ comment and Bernanke’s comment that the U.S. economy faces “formidable headwinds,”, gold has nothing else to go but down.
Let’s hope that after the weak hands were dealt with, the strong ones are going to push the gold up once again.

December 7, 2009: Top Canadian Small Advancers and Decliners

The following article is from Stockhouse website.

Stockhouse Canadian Small and Micro-cap Stock Report for Monday, December 7, 2009

TORONTO (SHfn) – A natural gas discovery was ‘sweet’ news for some shareholders Monday, while oil flowed for one junior.

Sure Energy (TSX: T.SHR) shares climbed 20% to 48 cents on Monday after the oil and gas explorer/producer said it has made a sweet dual zone natural gas discovery in the Peace River Arch area of Alberta. The 100% working interest well production flow tested for eight days at a combined stabilized rate of 3.5 MMcf/d from two separate zones. This discovery well is anticipated to begin production at a rate of 2.0 MMcf/d (335 BOE/d) net to the company.

As well, shares of International Royalty (TSX: T.IRC) shot up 50% to $7.06 as the mineral royalty firm reported that it has been informed of the intention of Franco-Nevada Corporation to, directly or indirectly through a wholly-owned subsidiary, make a formal all-cash offer to IRC shareholders to acquire any or all of the outstanding common shares of IRC for $6.75 cash per share.

Talon Metals (TSX: T.TLO)
shares powered 26% higher to 58 cents after the explorer/developer said it has concluded an agreement in which it has a right to acquire a 75% interest in a subsidiary of Lara Exploration, that holds all 13 of Lara’s potash exploration licences (including five applications for potash exploration licences), in Brazil.

Vulcan Minerals (TSX: V.VUL), meanwhile, announced that Vulcan-Investcan Red Brook#2 in Newfoundland has flowed natural gas to surface on three drill stem tests. This is the first flow of natural gas to surface for any petroleum well in the Bay St George basin and the company claims it “clearly demonstrates the hydrocarbon potential of this under-explored area.” The well will be cased to a total depth of 1965 metres for further evaluation and determination of accurate sustainable flow rates in order to fully assess this discovery. Vulcan stock popped 28% to 68 cents.

And, Nexstar Energy (TSX: V.NXE.A) Monday reported on developments with respect to its Cardium horizontal light oil exploration and development program in the Pembina area of Alberta. During a three-day test of its 8-16-48-5 W5M Pembina Cardium horizontal oil well, the well flowed frac oil and new oil at a controlled rate of approximately 850 bbls/day. Management expects the well to be placed on production within 30 days at an initial rate of between 200 to 300 bbls/day. Its shares jumped 11% to 25 cents.

Top Canadian Small/Micro-cap Advancers (as of 4 PM Eastern)
Tanqueray Resources (TSX: V.TQY) + 133%
Northern Spirit Resources (TSX: V.NS) + 47%
Darnley Bay Resources (TSX: V.DBL) + 44%
X-Ore Resources (TSX: V.XOR) + 36%
Int’l Sovereign Energy (TSX: T.ISR) + 34%

Top Canadian Small/Micro-cap Decliners
Richards Oil & Gas (TSX: V.RIX) – 50%
Silver Shield Resources (TSX: V.SSR) – 33%
Copper Mesa Mining (TSX: T.CUX) – 33%
Radius Resources (TSX: V.RAX) – 27%
Sola Resource (TSX: V.SL) – 25%