The all-inclusive cost to produce gold is about $ 1,100

“Gold’s father is dirt, yet it regards itself as noble” So goes a Yiddish proverb. Trouble is, it has not lived up to the proverb’s meaning: gold, like other commodities, has taken a beating over the past month.

Unlike many commodities, it has few industrial uses. A big chunk of demand is for investment. Gold held in exchange traded funds — a typical investment instrument — has fallen 40 per cent since a 2012 peak.

The recent gold price fall means more trouble ahead for gold miners. The all-inclusive cost to produce gold is about $1,100. If gold prices fall below $1,000, some gold reserves (assets) would be unprofitable to recover and need to be written down, putting pressure on the more indebted miners.

Gold cannot fall forever. Even so, listed gold miners should at some point be cheap. One early buy signal is when it costs less to buy mines on the stock market than to build them. Building a gold mine from scratch can be measured, crudely, by the cost of the investment (including debt) an ounce of gold produced. An average new mine would cost $2,500 an ounce of annual output, estimates RBC. Yet the larger listed gold miners still have an average enterprise value to production of $3,600.

More traditional valuation metrics tell a similar story. Despite the precious metal’s fall, the two largest miners by market value, Barrick Gold and Newmont Mining, still trade at double their forward price earnings multiples of two years ago.

Even if gold prices keep falling, it is far too early to sift the dirt for glitter.

Iron ore price rally has legs

The price of iron ore jumped on Wednesday as the market for the steelmaking raw material in top consumer China picks up and traders square positions ahead of a public holiday in the Singapore hub.

The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin advanced $1.40 or 2.5% to $56.40 a tonne, according to data provided by The SteelIndex. That's up just under 28% from record lows hit July 8.

The advance in the Metal Bulletin's benchmark 62%-index at the ports of Qingdao-Rizhao-Lianyungang in China was $1.49 to $56.78 while lower grade 58% fines soared $2.91 a tonne to $52.46, a 5.9% gain on the day.

Chinese steel prices have come off one-month highs hit yesterday but at $337 a tonne the most-traded rebar contract on the Shanghai Futures Exchange is up sharply from a record low of $305 hit early July.

Platts News reports that some Chinese steel mills have begun to raise output on the back of the higher rebar and billet prices:

"Many mills near Beijing will be mandated to reduce their steel output so as to ensure a clear blue sky in the capital," the source said. "Mills in the south that not affected by the output cut are producing as much as possible so that they have steel products on hand to sell when steel prices are expected to hike by end of this month."

That blue sky would be courtesy of the Chinese government which has halted all construction inside the capital city and ordered steelmakers in areas surrounding to make drastic cuts in production and ahead of September 3 military parade marking the 70th anniversary of the end of World War II.

Not everyone is convinced that the rally in steel and iron has much further to go. One steel trader told Reuters that "some traders and mills are trying to sell more as buying isn't as strong as the rally in prices and they are worried that prices might have hit the ceiling at the moment."

A slowing economy and rapidly cooling property market have seen the country's steel consumption contract by 4.7% in the first six months of 2015 according to the country's Iron and Steel Association (CISA).

China forges almost as much steel as the rest of the world combined and the country sucks in more than 70% of the world's seaborne iron ore.

LME Lead prices may drop to $1,670-1,680 a ton range next week

 LME lead should weaken towards $1,670-1,680 a ton next week, SMM lead group foresees.

Base metals should continue to be depressed by China’s negative indicators and stronger dollar next week, boding ill for lead prices.

Longs for LME lead exit market, driving positions down. Technical indicators also show signs of falling.

SHFE 1510 lead may slip to RMB 12,800 a ton next week with strong resistance forming at RMB 13,000 a ton.

China spot lead is expected to range between RMB 13,100-13,300 a ton next week. Trades should pick up early August. 

More lead smelters will resume operation but operating rate at motive battery makers will also increase due to battery price hikes.

Gold to dip below $1,000 by end of the year – report

Gold is doomed. That’s the message we are clearly getting these days from several analysts who predict prices for the metal have, at least, another 30% to fall by the end of 2015.

According to the latest Bloomberg survey of analysts and traders, bullion prices will hit $984 — the lowest price for the precious metal since 2009 — before the year-end.

Speculators are shorting the metal for the first time since US government data began in 2006, and holders of exchange-traded products are selling at the fastest pace in two years”

“Speculators are shorting the metal for the first time since US government data began in 2006, and holders of exchange-traded products are selling at the fastest pace in two years”, according to the report.

Analysts from Deutsche Bank predict a much greater decline than that.

"Gold would need to fall towards $750/oz to bring prices in real terms back towards long-run historical averages," they said Tuesday.

Prices for the precious metal have hit  five-year lows on expectations that the US Fed was going to hike interest rates for the first time in almost 10 years. As gold doesn’t pay income it benefited from the historic period of near-zero interest rates. Betting Fed officials were in favour of an increase, many decided to unload their gold holdings.

August gold was down $6.30, or 0.6%, at $1,089.90 an ounce in late morning trading the New York Comex after trading as high as $1,098.50 earlier. Prices were set to mark their sixth straight settlement under $1,100.

However the Federal Reserve on Wednesday both declined to rate interest rates and provide any clues about when a hike is on the way.

Codelco halts world's largest open pit copper mine over strike

A week-long strike by contract workers at world’s No.1 copper producer Codelco spread Tuesday to Chuquicamata, the Chilean company’s second largest mine, forcing the miner to halt operations.

Protesters began demonstrations on July 21 in demand for better pay and working conditions, blocking roads into some of the country's largest copper mines.

Things took a turn for the worse Friday, when a worker was shot dead by police near Codelco's smaller Salvador mine in northern Chile. Strikers then proceeded to seize control of the operation over the weekend and it remains occupied by the protesters, Cooperatival.cl reported(in Spanish).

Striking workers want Codelco to join their negotiations with the mining company's contractors and subcontractors, but the state-owned miner has so far declined.

Chuquicamata, which is located 1,650 km north of the Chilean capital of Santiago, is Codelco’s main division, accounting for over 40% of the miner’s total production in 2014.

Chuquicamata, which is located 1,650 km north of the Chilean capital of Santiago, is Codelco’s main division, accounting for over 40% of the miner’s total production in 2014.

The copper giant is in the midst of executing a $25 billion investment plan aimed to expand its decades-old flagship mines and search for new high-grade deposits.

Copper, which accounts for 60% of Chile's exports and 15% of gross domestic product, has lost 11% of its value during the past year. Only yesterday it hit a six-year low as slowing demand in China increased concerns over a glut.

India cuts tariff value on imported gold

The Indian Government today announced cut in import tariff value for gold and silver . The import tariff value of gold was slashed by nearly 6%, in accordance with prices of precious metals in the international market. Meantime, tariff value on imported silver has been left unchanged.

The Central Board of Excise and Customs (CBEC) issued notification in this regard reducing the gold import tariff value to $354 per 10 grams. The import tariffs are being slashed from the existing $376 per 10 grams. Meanwhile the import tariff value of Silver has been kept unchanged at $498 per kilogram.

The government move to lower the import tariff value is in primarily on account of weakening gold prices in the global and domestic markets. The possibilities of US Fed raising rates by September this year have also hit the sentiments badly for gold.

Meanwhile, gold prices edged lower on Singapore session today, on the back of rising dollar strength and higher US interest rate hopes. The prices slipped to five-year low level of $1,084.80 per Oz. Many brokerages have downgraded their earlier forecasts on gold prices. For instance, Macquarie has cut its gold price forecasts by 7% to 15% from this year through 2019, signaling a possible long term down-trend for the yellow metal. The investment firm has cut its gold price estimate for the current year to $1,152 per Oz from the earlier $1,249 per Oz.

The gold in India declined almost Rs 320 per 10 grams to Rs 25,050 per 10 grams on declining demand from retail buyers. Industrial demand for gold also remained weak. Silver too witnessed significant fall on lack of demand. The prices dropped by Rs 380 per kg to touch Rs 33,950 per kg.

Tariff value is the base price on which the customs duty on imported gold or silver is calculated and it further helps prevent under-invoicing.

Global Zinc market ends in surplus during first five months in 2015

According to the latest published metals balances report by the World Bureau of Metal Statistics (WBMS), the worldwide zinc market has recorded a marginal surplus during January to May this year. During the entire year 2014, the global zinc market had recorded deficit.

As per WBMS data, the global zinc market recorded small surplus of 214 kt during the initial five months of the year from January to May in 2015. It should be noted that the worldwide zinc market had reported a deficit of 145 kt during the entire year 2014.

Global refined zinc production witnessed rise of 8.2% during the five-month period. The Chinese production of locally refined zinc surged higher by nearly 14.4% when compared with the corresponding five-month period in 2014.

The global demand for the metal has declined by 49 kt when matched with January to May in 2014. The Chinese apparent demand fell by 0.2% over the previous year to 2,522 kt. It accounted for just under 46% of the global refined zinc demand. The Japanese demand for the metal dropped 18% when matched with the levels recorded during Jan-May ’14. The Japanese demand during the five-month period totaled 171.9 kt.

The reported stock of the metal has declined by 75,000 tonnes during the five-month period. The LME zinc stocks declined by 15.9 kt during the month of May and accounted for 41% of the global stock of the metal.

The Chinese zinc metal imports reduced significantly by nearly 43% during Jan-May ’15 to 178 kt when compared with the imports of 311 kt during the same period last year.