Wednesday, August 31, 2011

Harris Originals Appoints Zimmermann as President, CEO

Harris Originals appointed John Zimmermann as its new president and chief executive officer (CEO) to replace Beverly Harris, who will assume the role of chairman of the board. Zimmermann previously served as corporate senior vice president and president of Zale Canada where he led a successful turnaround of the company. Subsequently, he became president of Zale North America, where he dramatically improved merchandising, sales, marketing and operations.

After being involved with Harris Originals for most of her life, and leading the company during the past five years as president and CEO, Harris will remain actively involved in the business as chairman of the board, but will relinquish her day-to-day operating responsibilities to Zimmermann and the executive team.

Harris said, ''As a distinguished business leader and veteran jewelry executive, John Zimmermann is a valuable addition to our company's management team. He brings to Harris an extensive retail background and proven track record based on three decades of successfully operating and growing businesses within the specialty retail arena. We feel fortunate to bring on board a CEO and leader of John's caliber, and I know my father would be extremely proud to see John at the helm of the company he worked so hard for over 50 years to make the success it is today."

Zimmermann, his wife Jessica and their three sons, will be relocating to Long Island, New York, from their current home in Dallas, Texas. Harris will relocate to the Los Angeles area, but continue to maintain a presence in New York.

Chinese view gold as real money and demand is exploding

Chinese demand is behaving as we predicted. If you look at the recent history of Chinese gold demand, you start in 2003 when gold ownership was made acceptable, having been banned from 1945 until then. This occurred at a time when the agency for the People's Bank of China began buying gold for their reserves. Prior to that, HSBC tried to persuade China to buy gold, but the time was not quite right for them. Now it is very right for China to buy gold. What has happened since 2003 and during 2010?


Once allowable, gold ownership was, hesitatingly, encouraged. But first, as with so many areas of finance in China, the embracing of the western financial system had to be tempered with the development of skills and structures to handle the changes. In gold's case, the Shanghai gold market had to be instituted, the banking system's gold distribution had to be established, all of which has taken since 20003 to bring a sufficiently capable system to their gold markets.

In the past year, we have seen the Chinese government issue permits to import gold into the country by a much larger number of banks and importers. The Chinese gold distribution system has still a long way to go, in line with the development of the country overall. Gradually, the distribution system for gold was slowly developed, first in the main centers for the newly wealthy, then through the select top five Chinese banks and their main central outlets. All the banks are now allowed to distribute gold and slowly, it will reach the western outer reaches of China as the country develops.


China's development, as we all know, began with the export of cheap parts sub-contracted out of the developed world, then moved onto exports of their own. The south-east and mid-east benefited first with infrastructural development fanning out from there.

Now infrastructural development is reaching into all other parts of the nation at break-neck speed. With this development comes a new middle class of hard working people earning small proportions of what they could in the developed world, but saving up to 40 % of their income.

Now this middle class is growing explosively alongside the overall development of the nation. Until recently they held their savings in bank deposits, which is why when interest rates go up, Chinese middle class disposable income rises with them.

For good reasons, the government has realized that China, as a whole, will benefit from its citizens owning gold as well as the central bank, the People's Bank of China. Hence, they are actively encouraging the Chinese people to buy gold, as are the banks. The Chinese have memories of how gold is real money. They are buying it because it is seen as true wealth in all seasons. They don't buy it simply as a hedge against inflation, but because it will weather all sorts of financial ails.


In addition, the government published two years ago that the People's Bank of China had added 400 tonnes to its reserves. It became clear that another government agency was acquiring this gold over the previous five year period for the central bank. We are of the opinion that the same agency continues to acquire gold for the central bank. This will only be disclosed when [likely in another three years - every five years] it suits the government to disclose it. However, we now realize that it may well be a mistake to think that the 400 tonnes acquired over the five years prior to 2008 was acquired at an even rate. This amount could well have been the buying of rising local production over those years. After all, as the Chinese themselves have said, buying on the international market can be difficult without forcing the gold prices up [it can be done on a ‘limit' order basis, accepting offers only, without chasing prices]. It makes far more sense to buy local production from local producers ‘off' market.

We are aware that the government is still buying in the international market as well as local production but it is impossible to discern what amounts, without the government supplying that information. More than that, it is very difficult to discern what the government is buying and what the Chinese jewelry and investment trade is taking. With local production of 340 tonnes this year and imports set to be around 280 tonnes for the year, with an unknown amount perhaps stored in Hong Kong vaults for the government agency, we do know that China is taking at least 620 tonnes in total in 2010. But what will happen in the Chinese gold market in 2011 and beyond and what will that do to the gold price?

About that gold correction – was that ‘it’?

We often sight (here, here and here for example) the 200 daily moving average (DMA) as a good long term indicator of when to buy gold on a pull back. However for most of this year gold has hugged the 20DMA very closely.

After getting as high as $1920/£1161 gold corrected sharply, falling some $220/£121 from top to bottom. But what is truly amazing about this correction is that gold from top to bottom fell over 11% in $s and just under 10% in £s and yet it still managed to close eacn and everyday above the 20DMA – this just goes to show that whenever there is a pull back in gold the depth and strength of the buying is incredibly strong and incredibly quick.

In $s:

Gold price in end of august1 About that gold correction   was that ‘it’? (click for sharper image)

And in £s:

Gold price in £ end of august About that gold correction   was that ‘it’? (click for sharper image)

So with many (yet again) calling for the top in gold as we’ve pointed out here, here andhere, we are still far from a top in gold. Despite the volatility the gold correction of last week was just another perfectly healthy correction in the long term bull market. In fact the price action since the beginning of August was starting to look parabolic, which is a phase gold will reach, just not for a while yet and at much, much higher prices.

A few weeks of consolidation around the $1774/£1080 level and a much needed breather for gold would be very healthy before making its inevitable assent on $2000 and beyond.

With gold now trading at prices seen two weeks ago it is leaving many people asking “is that it?” when comes to last week’s gold correction.

Push For QE3 Commences in Earnest

Just days after Fed chairman Bernanke left the door slightly ajar for QE3 in his Jackson Hole speech, the market is already attempting to kick that door wide-open. Bernanke claimed that the central bank has pretty much done all it can do and asked for lawmakers to do more on the fiscal side. However, in the wake of the contentious debt ceiling debate, investors rightfully are assuming there will be no political compromises on fiscal stimulus until after the 2012 Presidential election. And even then, unless one party holds the Oval Office and both Houses of Congress, it would be doubtful.

Therefore the ball is squarely in the Fed's court. If there is to be any stimulus at all, it will have to be the monetary kind. The market is already looking forward to the September FOMC meeting in 3-weeks, anticipating that the punchbowl will inevitably be refilled and the party can continue. Today's terrible consumer confidence print for August will add further impetus to the cup-banging for 'more punch.'

Consumer confidence plunged to 44.5 in August, a level not seen since the worst days of the financial crisis in April 2009. The decline from the negatively revised 59.2 reading in July was the biggest point drop since October 2008, just after the collapse of Lehman Brothers.

ZeroHedge cited a Goldman Sachs report today that states that they believe further monetary easing is indeed in the offing. They do suggest that inflation, which continues to be at the high end of expectations, and last week's better than expected PCE data are potential mitigating factors. Although I would argue that today's big confidence miss pretty much offsets the latter, and perhaps the former as well.

Goldman suggests some "radical" measures that the Fed might employ that may garner some more favorable results than the QE measures of the past. If the Fed does indeed go "radical," so too would the gold market in all likelihood. As the pseudonymously named Tyler Durden of ZeroHedge quipped, "we hope readers have their gold $3000 calls firmly in place."

Monday, August 29, 2011

India and China Boosting 2011 Diamond Market

Over the past week commodity prices took a dive and the future of some remains hazy. The diamond market has been impressively strong, and as the mid-year mark approaches, predictions are that 2011 will conclude with the same accolades. At worst, diamond prices are expected to remain firm, but some predictions have prices rising due largely to growing demands in India and China.

India and China

The people of India and China are earning the title of diamond consumers. These two countries have seen market growth of about 25 percent and they contributed 20 percent to the global demand over the past year, according to Crisil, a credit rating company.

Both polished and rough diamonds are moving well in these countries. And, this is happening despite price increases.

The closing of Diamdel’s three week auction on May 3 provides indication of the positive market conditions. Prices were up by double digits in some cases, and of the 218 lots made available, all of them sold.

“Consistent demand from Indian based buyers saw them gain a greater share of sales and record demand from Asia Pacific translated into record spot sales to buyers in Hong Kong and mainland China,” CEO Neil Ventura commented after the event.

Polished diamonds

Polished diamonds are feeding growing jewelery demands. In China, diamond jewelry markets grew by 25 percent, while growth in India’s jewelery demand was 31 percent in 2010, according to Varda Shine CEO of Diamond Trading Company (DTC).

But the jewelry demand is not all about being glamorous, at least not in India. Natives of India are well-known for being jewelry investors. Traditionally, their investments have been primarily in gold.

During a tour of the country to assess the diamond market, Shine said “a visible shift is seen in consumers’ perception in the last couple of years, of growing confidence with certification and buy-back guarantees. Inherent gold consumers in India have gradually started diversifying a part of their investment to the diamond jewelery segment.”

Rough diamond supply

There are reports that some rough diamonds have increased in value by up to 300 percent over the past two years. Shine said she is not sure of 300 percent but rough diamond prices, which move in line with polished diamonds, have certainly gone up. She also added that in the future prices will continue going up on reduced supply.

India and China have not been immune to the supply crunch, which is blamed on several factors. To begin with, in response to the economic crisis in 2008, major diamond miners cut their output due to the drop in demand. But, the recovery for the diamond market came faster than expected, straining the market and pushing prices up.

Excessive demand is corrected by increased supply. Mining majors, such as De Beers, are planning to boost production, but that is not an overnight process. There is also some anticipation about the price relieving effects of Zimbabwe’s return to the market.

Meanwhile, extra pressure is being applied to the rough diamond market because supply problems with polished stones has led cutters and polishers to buy rough diamonds, notes Nico Kruger, CEO of Namakwa Diamonds (LON:NAD).

The increasing demands of India and China are expected to result in price hikes of another 20 percent this year, according to Shivom Seth at Mineweb.

If supply does increase to match demand, predictions have prices stabilizing. Either way, there is little indication at this point that diamond prices will tumble before the end of the year.

Petra Diamonds (LON:PDL) says the positive fundamentals of the market provide a compelling case for investment.

Tiffany Raises Forecast as Sales Rise Worldwide

Tiffany raised its full-year profit outlook as more shoppers worldwide snapped up its jewelry during the bridal season, overcoming rising gold and diamond costs, sending shares up nearly 8 percent.

Tiffany & Co.
Flickr User: bretthpatrick
The Tiffany & Co. store in New York City.

Tiffany [TIF 69.01 5.90 (+9.35%) ] net income rose 33 percent to $90 million, or 33 cents per share, during the quarter that ended on July 31, from $67.7 million, or 53 cents a year earlier.

Excluding one-time items, Tiffany earned 86 cents a share.

Tiffany raised its full-year profit outlook range by 20 cents and expects to earn between $3.65 and $3.75 per share, above the $3.56 Wall Street analysts were forecasting, according to Thomson Reuters I/B/E/S.

Carats in the Milky Way – Discovery of the Diamond Planet

If that sounds like something out of a far-fetched Star Trek episode, think again. Astronomers at the University of Manchester announced they have found a planet made of just that, diamonds.

The team first detected an unusual star called a pulsar - a small star about 20 kilometers in diameter that emits a beam of radio waves - and followed up to discover the gravitational pull of a small companion planet orbiting the pulsar. The pulsar in question, they explain, is a millisecond pulsar that spins at more than 10,000 times per minute.

The astronomers believe that the diamond planet is all that remains of a once massive star, most of whose matter was siphoned off towards the pulsar. Given the close proximity between the pulsar and its companion, the star would have lost its outer layers and over 99.9 percent of its original mass. Click to read more

Friday, August 26, 2011

Some Gold Bulls Say Time to Cash In, Rally Overdone

As gold prices near $2,000 an ounce, some bulls say its time take money off the table after the safe-haven rally extended too far too fast in recent weeks.

Jack Vearey | Getty Images

Gold investors at several firms said that gold prices could correct sharply, citing overvaluation. While that does not mean prominent bulls are now bears, they recommended investors take profit on gold holdings, after the precious metal traded briefly above $1,900 on Tuesday for the first time.

Spot gold [XAU= 1773.30 3.80 (+0.21%) ]quickly recoiled to end down more than 3 percent on Tuesday, its biggest daily fall in a year and a half, having advanced by almost 8 percent in just the last three sessions and by more than $400 since July.

Independent investor Dennis Gartman, who has long been bullish on gold priced in non-U.S. currencies, said he was reducing his long positions on gold priced in euro and sterling terms.

"Perhaps things have become a bit too frothy and reduced rather than increased exposure seems reasonable and wise," Gartman said.

Gartman said gold's rally was not sustainable after SPDR Gold Trust's [GLD 172.36 0.714 (+0.42%) ] total assets surpassed that of the SPDR S&P 500 ETF, making GLD the largest exchange-traded fund in the world for the first time.

"Such things senseless happen after periods of euphoric rises in prices of some markets," Gartman said.

In a note on Tuesday, UBS Metals Strategist Edel Tully said that the Swiss bank "has certainly noticed an increase in clients looking to book profits."

Tully also cautioned that the risk of more margin hikes from CME Group [CME 246.32 -7.59 (-2.99%) ] was rising, after the U.S. commodity exchange raised margins by 22 percent earlier in August.

Buy the Rumor, Sell the News?

Investors in droves have sought a refuge in bullion from a stock market meltdown, fears about sovereign debts in Europe and the United States and worries about a recession.

Fund managers said the metal was bid up as an inflation hedge on expectations of further U.S. monetary easing, and bullion could sell off if Federal Reserve Chairman Ben Bernanke does not announce a new bond-buying stimulus program at an annual Fed conference in Jackson Hole, Wyoming on Friday.

"There is some potential degree of 'Buy the rumor, Sell the news' on any future Fed policy that may come out at Jackson Hole. Investors might want to have that on the back of their minds as well," said Michael Cuggino, portfolio manager of the $15 billion Permanent Portfolio Funds.

"Gold being as volatile as it is, it can go down in $100 to $200 and not really blink an eye," Cuggino said.

Analysts said anything short of a third round of quantitative easing would likely provide limited support for gold as the Fed had already vowed to keep interest rates low into 2013.

Cuggino said that investors should stay put and not add new gold positions at current prices, even though the metal is still a safe haven and an integral part of an investment portfolio in longer term.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, a broker-dealer with $54 billion in assets, said that on charts, gold is vulnerable for a sharp pullback as it is trading at $400 above its 200-day moving average, a sign of overbuying.

"From a purely technical standpoint, I think it'd be wise to take some chips off the table," Luschini said.

King Solomon Mines follow-up drilling underway at Inner Mongolian gold project

King Solomon Mines follow-up drilling underway at Inner Mongolian gold project

King Solomon Mines (ASX: KSO) has resumed drilling with two rigs at the Mud-house gold prospect within the Sonid North gold project in Inner Mongolia, China.

A program of 11 diamond holes for 3,100 metres will follow-up the encouraging results announced last month including 21.4 grams per tonne (g/t) gold over 2 metres and widths averaging 1.9 metres (on a 1g/t Au cut-off).

The follow-up program is aimed at establishing grade of, and continuity between, the mineralised structures within the 750 metres strike of the package established to date, and continuing exploration along strike of the 1.8 kilometre Au-in-RAB anomalous zone hosting the package.

Drilling will also investigate the deeper levels of the system for a potentially larger scale source of the widespread low-grade gold enveloping the higher grade structures.

The company expects assay results over the next 3 months.

Gold Set to End Longest Winning Run in Four Years, Dropping 7% From Record

Gold headed for a weekly decline, snapping its longest winning streak in more than four years, as some investors sold the metal after equities rebounded and futures margins were raised for a second time this month.

Bullion for immediate delivery fell as much as 0.9 percent to $1,757.80 an ounce and was little changed at $1,777.20 at 11:26 a.m. inSingapore. The metal has dropped 7.1 percent from its record $1,913.50 on Aug. 23 and lost 4.1 percent this week.

“We expect the gold price will remain supported by a weaker outlook for the U.S. dollar and the economic and financial uncertainty from the euro-zone sovereign-debt turmoil,” Commonwealth Bank of Australia analysts, including Lachlan Shaw, wrote in a note today.

Before this week, gold had climbed for seven straight weeks in its longest run of weekly increases since April 2007. The metal advanced 25 percent in 2011, set for an 11th year of gains, as slumping equities, declining currencies and inflation concerns spurred investors to seek a store of value.

CME, the largest futures market, joined the Shanghai Gold Exchange in raising margins. The initial- and maintenance-margin requirement, or the minimum amount of cash that speculators must keep on deposit, was raised 27 percent per 100-ounce gold contract starting close of trading yesterday.

The December-delivery contract rose for a second day, gaining as much as 1 percent to $1,780 an ounce on the Comex. Gold futures tumbled 5.6 percent on Aug. 24, the most since March 2008, and last traded at $1,779.10.

Price Volatility

“Trading exchanges tend to hike margins due to increased volatility in the gold price,” said Shaw. “The margin hikes may have caused traders to liquidate futures positions, putting downward pressure on the gold price.”

Gold’s 30-day historical volatility, a measure of how much the metal fluctuates, climbed to about 27 yesterday, the highest level since April 2009 and up from this year’s low of about 9 on June 22, Bloomberg data showed. Futures touched $1,705.40 yesterday, dropping 11 percent from their record $1,917.90.

U.S. stocks declined yesterday, halting a three-day rally, after jobless claims unexpectedly increased and traders sold German equity futures before France, Italy and Spain extended curbs on short selling in an effort to prevent the region’s sovereign-debt crisis from worsening.

That drove the dollar to a one-week high against a basket of six currencies amid speculation that Federal Reserve Chairman Ben S. Bernanke may today disappoint investors betting he will signal a third round of asset purchases to stimulate the economy.

Cash silver shed 0.8 percent to $40.77 an ounce, palladium fell 0.3 percent to $750 an ounce, while spot platinum was little changed at $1,824.25 an ounce.

Your Birth Stone for Month of September

he striking deep blue of a quality sapphire is reminiscent of a cloudless night sky. Ancient civilizations believed that the world was set upon an enormous sapphire, which painted the sky blue with its reflection. This legend, as well as the belief that the ten commandments were inscribed upon tablets made of sapphire, gives September’s birthstone a royal place among gemstones.

Named after the Greek word "sapphirus", meaning blue, Sapphires have long been a favorite among priests and kings, who considered them symbolic of wisdom and purity. These gemstones are prominent among the British Crown Jewels, and Prince Charles chose this as the engagement stone for his fiancée, Princess Diana.

In ancient times, Sapphires were thought to be protective against envy, and even against poisoning. A common belief was that a venomous snake placed in a Sapphire vessel would rapidly die! Ground to a powder, the blue stone was believed to cure colic, rheumatism and mental illness, and to strengthen eyesight.

Sapphire is a variety of the mineral corundum. Corundum is found in every color of the rainbow, with red being designated as ruby and all other hues Sapphire. But the most prized color of Sapphire is a rich, deep blue. These gemstones were mined as early as the 7th Century BC from India and what is now Sri Lanka. They are found today in Sri Lanka, Kashmir, Myanmar, Thailand, Australia, Nigeria, Kenya, Tanzania, China, Madagascar, and the United States. Large specimens of Corundum crystals are rare, although the 563-carat Star of India can be seen in the American Museum of Natural History. This is the largest and most famous of star Sapphires, which are cut to reflect light from inclusions within the stone, revealing a bright six-legged star pattern.

The Sapphire is second only to the Diamond in hardness, making it a durable gemstone for setting into jewelry. A gift of Sapphire represents sincerity and faithfulness. As nourishing to the soul as gazing up at the sky on a summer day, this brilliant blue gemstone is truly a heavenly choice!

Manufacturing - Ankit Gems Plans to Double its Workforce in Namibia

Ankit Gems Private Ltd., a Mumbai-based diamond manufacturer, plans to more than double the number of employees at its Namibia facility by March 2012 as the company is hopeful to be awarded a Namibia Diamond Trading Company (NDTC) sight.

''We have plans to increase our employee strength to around 100 by March 2012 if we get the DTC sight,'' said Ankit Shah, a partner at Ankit Gems. The company, which recently trained two Namibian employees at its Surat facility, plans to bring more workers to India for training, he added.

Ankit Gems started operations in Namibia two years ago in a joint venture with Crystal Diamond Namibia Pty. Ltd. and currently employs about 40 people there. It currently sources rough diamonds from India for the manufacturing facility.

Shah explained that the company has applied for a NDTC sight for the next contract period, which begins April 1, 2012. ''We are very optimistic of getting the NDTC sight as we are already doing the things on our own there,'' he said.

De Beers is expected to announce its list of sightholders in December.

Rough Markets - Cash Strapped

RAPAPORT... Diamond cutters, mainly in India, are facing tough times. Simply put, they no longer have the cash to support the high rough diamond prices that have defined the market for so long. Even after the successes of the first half of 2011 - among the most profitable periods the diamond industry has experienced in years - their lack of liquidity has become a debilitating factor in the market today.

It was therefore inevitable that their current limitations to buy rough, coupled with stark warnings about prospects for the developed economies of Europe and the U.S., would filter down to the rest of the industry. Diamond cutters and dealers, the majority of whom are based in India, have lost the confidence and edge they carried in the first seven months of the year. This should sound as a warning bell.

Reports from this week’s Diamond Trading Company (DTC) sight may be misleading. The large estimated sight value of $800 million and firm prices that De Beers upheld are not a fair reflection of the current market environment. Rather, one should assess the low premiums and discounts at which DTC boxes are being traded on the secondary market, along with reports of a 15 to 20 percent decline in BHP Billiton tender prices this week. The reality is that rough prices have dropped in the past few weeks and dealer trading has gone quiet. The same is true for polished.

It appears that overconfidence during the first half growth period has caught up with the industry, as has the manner in which the market developed. High rough prices have crippled cutters’ ability to get more money to produce diamonds. And while growth in the industry was encouraging - albeit against the depressed numbers of the past two years - demand for diamonds has been far outpaced by the demand for more money.

In fairness, the manufacturers hold perhaps the most challenging position in the diamond pipeline. While they are required to pay cash for the rough they buy, they are forced to give credit terms to their polished-buying clients. The situation has improved since the 2008 crisis. Gone are the days of 180 days credit and money is turning around at a faster pace than before. A 60-to-90-day credit term is now the healthier norm.

Still, the lag in which they are caught between buying the rough, selling the polished and collecting the money brings added pressure to their businesses. But none so much as the rising costs they have faced in the past few months.

Consider the average price of ALROSA’s production in the first half of 2011. The Russian mining company sold its output for an average $113 per carat during the period, compared to an average $80 per carat in the first six months of 2010. Similarly, De Beers reported that its prices rose 35 percent in the first half, after they increased an estimated 6 percent in the second half of 2010.

As a result, diamond manufacturers need to pay 41 percent more than they did a year ago to obtain the same volume of rough required to keep their factories churning. While the volume of sales across the diamond pipeline has not increased in 2011, the return made by cutters on the price-induced growth has already been reinvested in the diamond cutting process.

Rough buying was encouraged by strong downstream demand in the first half of 2011 but equally by access to easy credit in India. Now, the Indian banks have tightened their previously loose lending belts given their clients’ plight, particularly as the outlook for the global recovery became less certain. One banker told Rapaport News that the cost of giving credit has also increased. “There is a slight shortage of dollars and because of that, the rate at which dollars are lent has gone up,” he said. “So it’s not only that we have tightened our financing, in many cases we haven’t. But the dollars that are coming to us are costlier.”

There is no need to panic. But one must recognize that the industry has entered a period of uncertainty which mirrors that of the equity markets, even if only temporary. This writer certainly hopes it is and that stability will prevail.

For now, there have not been reports of major defaults and the market is by no means heading down on the 2008 path. Consumer demand in China remains strong and investment demand is on the rise. But the diamond industry is not immune to rising concerns about global economic performance. In an overheated market a correction is inevitable. And for an industry where cash is king, a lack of liquidity will weigh heavily.

The writer can be contacted at

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