What Next for Gold Mining Stocks? - 8 September 2011

Gold mining stocks have taken a beating...

KNOWN AS The Mercenary Geologist, Michael S. "Mickey" Fulp has more than 30 years' experience searching for economic deposits of base and precious metals, industrial minerals, coal, uranium, oil and gas, and water in the Americas, Europe and Asia.

In this interview with The Gold Report, Mickey Fulp explains why he expects a lot of the patient money sitting on the sidelines to get itchy soon...

The Gold Report: In the midst of a number of record three-digit swings in the Dow of late, the market's just pounded some otherwise healthy precious metals stocks. You pointed out in a July Musing that TSX junior resource valuations were down 20% from their March highs. Is this a good time to take a look at micro caps, Mickey?

Mickey Fulp: I think late summer is always a good time to take a look at our junior resource sector because of disinterest during the doldrums. At some point during the summer, stocks oftentimes drift down to their yearly lows or at least a trough.

If you looked at a chart of the Toronto Venture, you'd probably see summer troughs almost every year. Sometimes they last for a couple of months and at other times as little as a week. This year's summer doldrums, caused by lack of liquidity and lack of buying interest, has been going on for a couple of months now and the Venture Exchange continues to drift lower. The TSX index is down 35% from its highs in early March, right before the Prospectors and Developers Association of Canada (PDAC) conference.

So, yes, I think this is a buying opportunity for some of the fundamentally strong micro caps.

Continue here..........

Rapaport TradeWire September 9, 2011

Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices.

Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices. Market waiting for Hong Kong show amid hopes that Far East demand will improve industry sentiment and stabilize prices. One carat RapNet Diamond Index (RAPI) falls 4% to 103.91 in August. Rough trading weak. ALROSA sales +23% to $3.2B in first eight months of 2011. Harry Winston 2Q group sales +45% to $222M, net profit -23% to $10M. U.S. July polished imports +25% to $2.06B, polished exports +20% to $1.42B. Volatile gold sets new record ($1,922.20/oz).

Rapaport TradeWire September 9, 2011

Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices.

Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices. Market waiting for Hong Kong show amid hopes that Far East demand will improve industry sentiment and stabilize prices. One carat RapNet Diamond Index (RAPI) falls 4% to 103.91 in August. Rough trading weak. ALROSA sales +23% to $3.2B in first eight months of 2011. Harry Winston 2Q group sales +45% to $222M, net profit -23% to $10M. U.S. July polished imports +25% to $2.06B, polished exports +20% to $1.42B. Volatile gold sets new record ($1,922.20/oz).

Market Comments 9/8/2011

Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices. Market waiting for Hong Kong show amid hopes that Far East demand will improve industry sentiment and stabilize prices. One carat RapNet Diamond Index (RAPI) falls 4% to 103.91 in August. Rough trading weak. ALROSA sales +23% to $3.2B in first eight months of 2011. Harry Winston 2Q group sales +45% to $222M, net profit -23% to $10M. U.S. July polished imports +25% to $2.06B, polished exports +20% to $1.42B. Volatile gold sets new record ($1,922.20/oz).

Global Markets

United States: Some polished trading is taking place with retail buyers pressing for deeper discounts in the hope that a stronger buyer’s market will develop ahead of the fourth-quarter season. Wholesalers are hoping that the Hong Kong Gem & Jewellery Fair, which starts on September 19, will bring price stability and inject some confidence for the season. There is a shift toward cheaper stones with buyers focused on SI goods. Bridal continues to carry the market with rising interest in branded goods, but at lower price points.

Belgium: Activity is slow in Antwerp, despite being the first full week of trading since the summer break. Polished buyers are prepared to hold back from making large purchases while prices continue to downtrend. Rough inventories remain high but trading in the dealer market is low. Overall, sentiment is restrained as dealers lack the confidence to close deals at while price levels appear uncertain.

Israel: Trading remains slow as local and international buyers are waiting to assess if further rough and polished price reductions are pending. There is some concern that the market slump will extend through the Hong Kong show, which could negatively impact the fourth-quarter season. The Inquiries are being submitted, but it appears that most of the activity is about understanding prices, rather than finding goods. Buying is focused on filling existing orders.

India: Activity in the local polished market has improved slightly after many dealers returned to business following the recent Jain festival of Paryushan. There is good demand for star and 1.00-carat size goods, but buyers and sellers are uncertain about whether to close deals given the significant price variations prevalent in the market. Indian retailers and polished dealers have adopted a wait-and-see attitude to assess near-term price trends. Sentiment in the rough market remains weak as buyers refrain from buying since they expect prices to decline further.

China: Wholesale activity has improved slightly as retailers have begun preparations for the National Day Golden Week celebration on October 1. However, buying remains cautious due to price uncertainties. There is a sense that the upcoming Hong Kong show, which starts on September 19, will provide strong last-minute buying opportunities for the festival and inject some stability in prices.

Hong Kong: Trading remains cautious as buyers are uncertain about price trends in the coming weeks. Many are waiting for the Hong Kong show to assess prices and make larger purchases to fill inventories. Wholesalers are focused on getting ready for the show. Polished diamond demand is stable as jewelry retail sales continue to rise across the region.

Market Comments 9/8/2011

Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices. Market waiting for Hong Kong show amid hopes that Far East demand will improve industry sentiment and stabilize prices. One carat RapNet Diamond Index (RAPI) falls 4% to 103.91 in August. Rough trading weak. ALROSA sales +23% to $3.2B in first eight months of 2011. Harry Winston 2Q group sales +45% to $222M, net profit -23% to $10M. U.S. July polished imports +25% to $2.06B, polished exports +20% to $1.42B. Volatile gold sets new record ($1,922.20/oz).

Global Markets

United States: Some polished trading is taking place with retail buyers pressing for deeper discounts in the hope that a stronger buyer’s market will develop ahead of the fourth-quarter season. Wholesalers are hoping that the Hong Kong Gem & Jewellery Fair, which starts on September 19, will bring price stability and inject some confidence for the season. There is a shift toward cheaper stones with buyers focused on SI goods. Bridal continues to carry the market with rising interest in branded goods, but at lower price points.

Belgium: Activity is slow in Antwerp, despite being the first full week of trading since the summer break. Polished buyers are prepared to hold back from making large purchases while prices continue to downtrend. Rough inventories remain high but trading in the dealer market is low. Overall, sentiment is restrained as dealers lack the confidence to close deals at while price levels appear uncertain.

Israel: Trading remains slow as local and international buyers are waiting to assess if further rough and polished price reductions are pending. There is some concern that the market slump will extend through the Hong Kong show, which could negatively impact the fourth-quarter season. The Inquiries are being submitted, but it appears that most of the activity is about understanding prices, rather than finding goods. Buying is focused on filling existing orders.

India: Activity in the local polished market has improved slightly after many dealers returned to business following the recent Jain festival of Paryushan. There is good demand for star and 1.00-carat size goods, but buyers and sellers are uncertain about whether to close deals given the significant price variations prevalent in the market. Indian retailers and polished dealers have adopted a wait-and-see attitude to assess near-term price trends. Sentiment in the rough market remains weak as buyers refrain from buying since they expect prices to decline further.

China: Wholesale activity has improved slightly as retailers have begun preparations for the National Day Golden Week celebration on October 1. However, buying remains cautious due to price uncertainties. There is a sense that the upcoming Hong Kong show, which starts on September 19, will provide strong last-minute buying opportunities for the festival and inject some stability in prices.

Hong Kong: Trading remains cautious as buyers are uncertain about price trends in the coming weeks. Many are waiting for the Hong Kong show to assess prices and make larger purchases to fill inventories. Wholesalers are focused on getting ready for the show. Polished diamond demand is stable as jewelry retail sales continue to rise across the region.

Whats new? Check it out

ROUGH DIAMOND PRICE CORRECTION WELCOMED BY SURAT DIAMANTAIRES

Surat’s diamantaires are welcoming a recent correction in the prices of rough diamonds, India’s Business Standardreports.

Rough prices, which have shot up by as much as 60% since the start of the year, have declined by 20-22% in the past few weeks.

Surat Diamond Association President Dinesh Navadia said that with rough prices “under control” and the holidays approaching, “the time had come” for diamantaires to make a profit. “We are hopeful for robust demand during Diwali and Christmas,” Navadia stated.

A major issue with the spiraling cost of rough product seen this year is that polished diamond prices, while increasing, have failed to keep pace, cutting into diamond manufacturers’ profit margins. That trend has been reflected in the recent market correction, Navadia noted, with polished prices down but not to the extent of rough.

According to the Standard, some Surat diamantaires may take advantage of the drop in rough prices to build up their stocks. However, Navadia pointed out, not many diamond traders had the necessary liquidity to finance such a move.

ROUGH DIAMOND PRICE CORRECTION WELCOMED BY SURAT DIAMANTAIRES

Surat’s diamantaires are welcoming a recent correction in the prices of rough diamonds, India’s Business Standardreports.

Rough prices, which have shot up by as much as 60% since the start of the year, have declined by 20-22% in the past few weeks.

Surat Diamond Association President Dinesh Navadia said that with rough prices “under control” and the holidays approaching, “the time had come” for diamantaires to make a profit. “We are hopeful for robust demand during Diwali and Christmas,” Navadia stated.

A major issue with the spiraling cost of rough product seen this year is that polished diamond prices, while increasing, have failed to keep pace, cutting into diamond manufacturers’ profit margins. That trend has been reflected in the recent market correction, Navadia noted, with polished prices down but not to the extent of rough.

According to the Standard, some Surat diamantaires may take advantage of the drop in rough prices to build up their stocks. However, Navadia pointed out, not many diamond traders had the necessary liquidity to finance such a move.

ROUGH DIAMOND PRICE CORRECTION WELCOMED BY SURAT DIAMANTAIRES

Surat’s diamantaires are welcoming a recent correction in the prices of rough diamonds, India’s Business Standardreports.

Rough prices, which have shot up by as much as 60% since the start of the year, have declined by 20-22% in the past few weeks.

Surat Diamond Association President Dinesh Navadia said that with rough prices “under control” and the holidays approaching, “the time had come” for diamantaires to make a profit. “We are hopeful for robust demand during Diwali and Christmas,” Navadia stated.

A major issue with the spiraling cost of rough product seen this year is thatpolished diamond prices, while increasing, have failed to keep pace, cutting into diamond manufacturers’ profit margins. That trend has been reflected in the recent market correction, Navadia noted, with polished prices down but not to the extent of rough.

According to the Standard, some Surat diamantaires may take advantage of the drop in rough prices to build up their stocks. However, Navadia pointed out, not many diamond traders had the necessary liquidity to finance such a move.

PRESIDENT SAYS ISRAEL, BELGIUM SHOULD EXPAND TRADE BEYOND DIAMONDS

Diamonds represent 70% of the trade between Israel and Belgium, and the two countries should work together to expand the scope of trade to encompass less “shiny” industries, President Shimon Peres told Belgian Prime Minister Yves Leterme, who is making the first visit by a Belgian prime minister to Israel since 2005.

The Foreign Ministry reports that Peres said Belgium was Israel’s second-largest trading partner in Europe and that trade between the two nations totaled some $4 billion annually.

Leterme told Peres that the purpose of his visit was to help garner momentum on bilateral relations and to increase the mutual investment between Belgium and Israel. The Foreign Ministry notes that the economies of Belgium and Israel are similar; both are small, open and have very developed hi-tech industries.

In addition to trade issues, Peres and Leterme discussed recent events in the Arab world, the Israeli-Palestinian peace process in light of the planned Palestinian declaration of statehood, and strengthening both Israeli-European bilateral relations and relations between Israel and Belgium.

Bleak global outlook aids gold's record run

MUMBAI/LONDON: Gold demand in India, the world's biggest buyer, was moderate on Monday after the prices in the local market rose 2% to a record high tracking firmness in global markets and due to a weak rupee, dealers said.

At 3:57 pm, the October contract on the Multi Commodity Exchange was up 1.74% at Rs 28,273 per 10 grams, after hitting a record high of Rs 28,355 earlier in the day. The contract has risen over 20% since the beginning of August.

"Demand was normal. People were buying despite the record high prices," said TK Chandiran, managing director with Coimbatore-based KTM Jewellery. "Though most people are buying jewellery, sales of coins and bars have also risen."

Wedding and festival season demand will gain pace and peak in October before tapering off in December. "Festival demand is going to slow down if prices remained above Rs 28,000," Chandiran said.

The rupee stayed weak in afternoon trades on Monday as the dollar gained overseas with investors seeking safe-haven assets after bleak jobs data on Friday cemented view the United States might be slipping back into recession. The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.

Continue reading

Apollo Consolidated hitches wagon to West African gold exploration

Apollo Consolidated (ASX: AOP) in a fascinating change of direction from biotechnology, plans to acquire West African gold exploration assets through a deal to acquire unlisted Aspire Minerals.

Aspire holds rights to over 3,000 square kilometres of Birimian greenstone belts in northern and central Cote d"Ivoire and has spent $400,000 to date on exploration.

The lead projects are in close proximity to Perseus Mining's (ASX: PRU) one million ounce Sissingue Project.

The Aspire acreage covers three projects (Seguela, Tengrela and Korhogo) with strong gold anomalies defined in surface and trench sampling, artisinal workings.

Geochemical sampling programs are continuing.

Exploration permits have yet to be granted, however the Energy and Mines Minister are known to be supportive of increasing production of gold.

Seguela is a 920 kilometre, two permits project where early stage trench results returned 10 metres at 2.80g/t gold. Korhogo is a 1,000 square kilometre permit along strike from Randgold's 4.3 million ounce Tongon Gold Project and Griffin Mineral's 1.5 million ounce Banfora Gold Project.

Tengrela West covers 1,000 kilometres adjoining Perseus' Sissingue discovery.

Interestingly, the projects have seen limited exploration and no drilling. There are known to be walk up drill targets on the lead Seguela project.

Subject to shareholder approval, Apollo will issue 100 million fully paid shares to acquire 100% of Aspire plus performance based shares. This will be via a prospectus.

The company will need to comply with Chapters 1 and 2 of the ASX Listing Rules and raise $2 million. The change to minerals exploration company may require the company to be reinstated to quotation after approvals.

While early days, the deal has the propensity to change the valuation dynamics favourably for Apollo Consolidated.

Gold Hovers Around $1,900 on Euro Zone Woes

Spot gold hovered around $1,900 an ounce on Tuesday, as renewed fears over the euro zone's debt crisis drove investors to safe-haven assets such as bullion.

Worries about the resurfacing euro zone debt crisis helped push gold above $1,900 in the previous session, while Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt crisis and step up pressure for governments to try more radical solutions.

Greece expects to receive another tranche of aid on schedule in September despite a dispute with international lenders Athens had fallen behind schedule in cutting its deficit.

Global growth in services came to a virtual standstill last month as new business all but dried up, adding to fears the world economy is facing another recession.

nvestors are closely watching the data out of Europe, including revised Gross Domestic Product (GDP) for the second quarter and Germany's industrial orders in July.

European stocks tumbled 4 percent on Monday, as fears for the future of the euro zone bubbled up against a background of weak economic growth and threats to the banking sector. Wall Street was closed for a public holiday.

The euro wallowed at one-month lows against the greenback in Asia on Tuesday, while commodity currencies nursed heavy losses as concerns about the health of the global economy prompted investors to dump riskier assets.

Gold Hovers Around $1,900 on Euro Zone Woes

Spot gold hovered around $1,900 an ounce on Tuesday, as renewed fears over the euro zone's debt crisis drove investors to safe-haven assets such as bullion.

Worries about the resurfacing euro zone debt crisis helped push gold above $1,900 in the previous session, while Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt crisis and step up pressure for governments to try more radical solutions.

Greece expects to receive another tranche of aid on schedule in September despite a dispute with international lenders Athens had fallen behind schedule in cutting its deficit.

Global growth in services came to a virtual standstill last month as new business all but dried up, adding to fears the world economy is facing another recession.

nvestors are closely watching the data out of Europe, including revised Gross Domestic Product (GDP) for the second quarter and Germany's industrial orders in July.

European stocks tumbled 4 percent on Monday, as fears for the future of the euro zone bubbled up against a background of weak economic growth and threats to the banking sector. Wall Street was closed for a public holiday.

The euro wallowed at one-month lows against the greenback in Asia on Tuesday, while commodity currencies nursed heavy losses as concerns about the health of the global economy prompted investors to dump riskier assets.

Russia Stockpiles Diamonds, Awaiting the Return of Demand

Mikhail Metzel/Associated Press

A diamond mining pit in the town of Mirny in Siberia. In the Soviet era, the country had an agreement with De Beers to sell Siberian diamonds in a way that would not undercut the market

MOSCOW — The global recession sapped demand for all kinds of commodities — like steel and grain — yet small burlap bags are still arriving by the planeload at Russia’s state-owned diamond company.

Each day, the contents of the bags spill into the stainless steel hoppers of the receiving room. The diamonds are washed and sorted by size, clarity, shape and quality; then, rather than being sent to be sold around the world, they are wrapped in paper and whisked away to a vault — about three million carats worth of gems every month.

Team Monitoring Diamond Trade Rebukes Zimbabwe

JOHANNESBURG — A team assessing Zimbabwe’s compliance with international standards to prevent the diamond trade from fueling conflict found that the nation’s military had been directly involved in illegal mining and that the authorities had carried out “horrific violence against civilians,” according to a memo the team gave to Zimbabwean officials.

The team, sent on a mission to Zimbabwe last week under the Kimberly Process, an international undertaking to halt the trade in so-called blood diamonds, said its recommendations could include the full suspension of Zimbabwe from the process, further complicating the country’s ability to sell its diamonds on international markets. Already, the World Federation of Diamond Bourseshas recommended that its members in 20 countries not trade diamonds from the Marange deposits in eastern Zimbabwe because of reports of abuses.

Continue reading.....

Team Monitoring Diamond Trade Rebukes Zimbabwe

JOHANNESBURG — A team assessing Zimbabwe’s compliance with international standards to prevent the diamond trade from fueling conflict found that the nation’s military had been directly involved in illegal mining and that the authorities had carried out “horrific violence against civilians,” according to a memo the team gave to Zimbabwean officials.

The team, sent on a mission to Zimbabwe last week under the Kimberly Process, an international undertaking to halt the trade in so-called blood diamonds, said its recommendations could include the full suspension of Zimbabwe from the process, further complicating the country’s ability to sell its diamonds on international markets. Already, the World Federation of Diamond Bourseshas recommended that its members in 20 countries not trade diamonds from the Marange deposits in eastern Zimbabwe because of reports of abuses.

Continue reading.....

Opportunity Knocks

The diamond trade returned from the summer vacation period to a different market reality than when it left. As a result, trading has slowed as dealers are seeking price stability with unease and a bit of nerves. There should be little surprise that the diamond-trading environment turned anxious in August — so did the world.

While industry-specific issues such as tight liquidity in India have certainly played their part, the underlying insecurity has been caused by global economic trends, particularly the slowing of growth in the U.S. and Europe. If the industry learned anything from the 2008 downturn, it is that it too is vulnerable to global economic developments.

Therefore, as financial markets screamed volatility and lost about 5 percent in value through August, and as consumer confidence dropped, it was quite natural — and in fact healthy — for the diamond market to react. Not having prices go down when they should, would create an unsustainable, artificial market environment.

There are many lessons from 2008 that one could apply to the situation today, even if the atmosphere is not comparable. Back then the market was far more fearful and uncertain, and prices fell by far more. Liquidity across the board was scarce as the banks dramatically tightened their lending to the trade.

The answer then was to neither freeze prices nor trade, but to turnover inventory at new price levels, regardless of historic costs. Such was the success of the Indian industry. The advice given at the time by Martin Rapaport, chairman of the Rapaport Group, is therefore relevant today as prices have dropped in August (see editorial entitled “Transparency” in the December 2008 issue of the Rapaport Diamond Report).

“How to make money when prices go down? Sell cheap and buy cheaper,” Rapaport wrote. “Let’s say you have a diamond that cost you $1,000 and you can now replace it for $700. Sell it for $770, pocket the profit and replace it or hang on to the cash. As long as you can replace it, you can tell yourself you have not lost money. Don’t hang on to old inventory because of historic cost. A diamond is only worth what you can buy it or sell it for.”

The August market correction presents an opportunity for shrewd diamond cutters to profit as they were unable to do during the perpetual increases in rough prices over the preceding nine months. This correction should allow cutters to profit, rather than compete in an environment that is fully stretched with high prices feeding the mining company coffers.

Make no mistake —the biggest winners in the market surge in the first half of 2011 were the mining companies. Consider BHP Billiton’s diamond unit, whose production fell 18 percent year on year during the period, but managed to post 15 percent growth in earnings before interest and taxes (EBIT) to $537 million, as revenues rose 12 percent to $1.01 billion on the back of higher prices. The profits of other major miners such as De Beers and ALROSA have been well documented in these reports.

Assurances by mining company executives not to raise prices for the remainder of the year may sound assuring, but are in fact ridiculous. One would hope that their prices always reflect the state of the market, including when rough demand slumps.

No one is denying them their business success. But as rough prices in the dealer market have dropped, the opportunity is ripe for cutters to buy reasonably priced rough, sell their polished at lower prices but more profitable margins, and steadily raise their liquidity levels. As Rapaport stressed, “Diamonds may be forever, but cash is king. Get liquid, stay liquid and spend your cash wisely.”

The opportunity is especially true as rough inventories are reportedly high while polished inventories are said to be low. And it is especially relevant as weak economic data continues to filter in from the U.S. as we head into the all-important fourth quarter. Just this week, the Conference Board’s Consumer Confidence Index for August fell to its lowest level since April 2009, or as one analyst put it, “back to recessionary levels.”

That is not to be a prophet of doom. By all means the outlook for global diamond demand remains positively driven by China and India. But uncertainty prevails and the diamond market should reflect that reality. The industry needs to realize that it is not immune to a volatile and risky world. Only then will it recognize opportunities when they truly present themselves.

Opportunity Knocks

The diamond trade returned from the summer vacation period to a different market reality than when it left. As a result, trading has slowed as dealers are seeking price stability with unease and a bit of nerves. There should be little surprise that the diamond-trading environment turned anxious in August — so did the world.

While industry-specific issues such as tight liquidity in India have certainly played their part, the underlying insecurity has been caused by global economic trends, particularly the slowing of growth in the U.S. and Europe. If the industry learned anything from the 2008 downturn, it is that it too is vulnerable to global economic developments.

Therefore, as financial markets screamed volatility and lost about 5 percent in value through August, and as consumer confidence dropped, it was quite natural — and in fact healthy — for the diamond market to react. Not having prices go down when they should, would create an unsustainable, artificial market environment.

There are many lessons from 2008 that one could apply to the situation today, even if the atmosphere is not comparable. Back then the market was far more fearful and uncertain, and prices fell by far more. Liquidity across the board was scarce as the banks dramatically tightened their lending to the trade.

The answer then was to neither freeze prices nor trade, but to turnover inventory at new price levels, regardless of historic costs. Such was the success of the Indian industry. The advice given at the time by Martin Rapaport, chairman of the Rapaport Group, is therefore relevant today as prices have dropped in August (see editorial entitled “Transparency” in the December 2008 issue of the Rapaport Diamond Report).

“How to make money when prices go down? Sell cheap and buy cheaper,” Rapaport wrote. “Let’s say you have a diamond that cost you $1,000 and you can now replace it for $700. Sell it for $770, pocket the profit and replace it or hang on to the cash. As long as you can replace it, you can tell yourself you have not lost money. Don’t hang on to old inventory because of historic cost. A diamond is only worth what you can buy it or sell it for.”

The August market correction presents an opportunity for shrewd diamond cutters to profit as they were unable to do during the perpetual increases in rough prices over the preceding nine months. This correction should allow cutters to profit, rather than compete in an environment that is fully stretched with high prices feeding the mining company coffers.

Make no mistake —the biggest winners in the market surge in the first half of 2011 were the mining companies. Consider BHP Billiton’s diamond unit, whose production fell 18 percent year on year during the period, but managed to post 15 percent growth in earnings before interest and taxes (EBIT) to $537 million, as revenues rose 12 percent to $1.01 billion on the back of higher prices. The profits of other major miners such as De Beers and ALROSA have been well documented in these reports.

Assurances by mining company executives not to raise prices for the remainder of the year may sound assuring, but are in fact ridiculous. One would hope that their prices always reflect the state of the market, including when rough demand slumps.

No one is denying them their business success. But as rough prices in the dealer market have dropped, the opportunity is ripe for cutters to buy reasonably priced rough, sell their polished at lower prices but more profitable margins, and steadily raise their liquidity levels. As Rapaport stressed, “Diamonds may be forever, but cash is king. Get liquid, stay liquid and spend your cash wisely.”

The opportunity is especially true as rough inventories are reportedly high while polished inventories are said to be low. And it is especially relevant as weak economic data continues to filter in from the U.S. as we head into the all-important fourth quarter. Just this week, the Conference Board’s Consumer Confidence Index for August fell to its lowest level since April 2009, or as one analyst put it, “back to recessionary levels.”

That is not to be a prophet of doom. By all means the outlook for global diamond demand remains positively driven by China and India. But uncertainty prevails and the diamond market should reflect that reality. The industry needs to realize that it is not immune to a volatile and risky world. Only then will it recognize opportunities when they truly present themselves.

GIA Announces New Education Campus in Bangkok

The Gemological Institute of America (GIA) announced the new location of its education campus in Bangkok, Thailand, which will officially open on September 29, and will be located in the same building as the GIA Laboratory and Research Center in Bangkok.

Starting in October, a variety of GIA lab classes and programs will begin at the new campus location including: Diamond grading, gem identification, colored stone and pearl grading lab classes. The programs include the GIA Graduate Gemologist and Graduate Diamond program.

''Thailand is the world’s leading gemstone trading and cutting center and a priority for GIA,'' said Bev Hori, GIA chief learning officer and vice president of education. ''This new campus location will provide students with significant benefits, including close proximity to our industry experts, and exposure to the latest gemological discoveries as they occur.''

The new GIA campus is located on the 2nd floor of the U Chu Liang Building, on
968 Rama 4 Road in Bangkok

GIA Announces New Education Campus in Bangkok

The Gemological Institute of America (GIA) announced the new location of its education campus in Bangkok, Thailand, which will officially open on September 29, and will be located in the same building as the GIA Laboratory and Research Center in Bangkok.

Starting in October, a variety of GIA lab classes and programs will begin at the new campus location including: Diamond grading, gem identification, colored stone and pearl grading lab classes. The programs include the GIA Graduate Gemologist and Graduate Diamond program.

''Thailand is the world’s leading gemstone trading and cutting center and a priority for GIA,'' said Bev Hori, GIA chief learning officer and vice president of education. ''This new campus location will provide students with significant benefits, including close proximity to our industry experts, and exposure to the latest gemological discoveries as they occur.''

The new GIA campus is located on the 2nd floor of the U Chu Liang Building, on
968 Rama 4 Road in Bangkok

Buyers Avoid Large Purchases, Markets Seek Price Stability

Trading slow with buyers avoiding large purchases as diamond markets seek stable price levels. Rough continues to fall in dealer markets with elimination of premiums and some discounting of mining company prices. ALROSA sells $23M at Aug. tenders (90% by volume) with prices +5% over regular selling list. Large jewelers report strong growth in latest quarter: Tiffany sales +31% to $873M, profits +33% to $90M; Signet sales +11% to $798M, profits +71% to $66M; Zale sales +9% to $377M, loss of $33M vs. $29M a year ago. Best wishes “Michhami Dukkadam” to our Indian friends and “Eid Mubarak” to our Arab friends. Human Rights Watch reports ongoing abuse in Marange fields. Buyers Beware.


Global Markets

United States: Wholesale trading has further quieted as low consumer confidence, price uncertainties and the traditionally slow summer season combined to take their toll. Demand remains focused on stones suitable for the engagement and bridal market, with rounds, 0.50-carat to 1.99-carat, G-H, VS-SI goods leading the way. However, it appears difficult to sell these goods as buyers are resisting higher price points. Demand for larger goods above 3.00 carats remains weak. Retailers appear most concerned about economic trends ahead of the fourth-quarter selling season.

Belgium: Trading activity remains slow as price uncertainties and economic concerns persist. In addition, many Antwerp-based Indian dealers were still on holiday through this week’s Jain festival. There is demand for polished as sellers are offering less for their goods while buyers are holding back until price stability sets in. Rough trading is slow with price declines more apparent in the secondary market than at the mining company source.

Israel: Trading has slowed as dealers are cautious but are hoping for price stability ahead of the Hong Kong show, which starts on September 19. Despite the uncertain outlook for the show, there is a strong emphasis on further penetrating the Far East market where the strongest growth opportunities lie. At the same time, sellers appear willing to compromise on price, even at the expense of incurring a slight loss, in order to maintain partnerships with their strong retail partners. Rough dealers are pushing for greater discounts.

India: Activity in both the polished and rough markets has been restrained due to the ongoing Jain religious festival of Paryushan, one of India’s major holidays. Polished buyers are not in a hurry to purchase as they expect prices could fall still further and overall demand remains poor as a result. Tight liquidity issues continue to hurt traders’ confidence. Sentiment in the rough market also remains weak. However, limited trading is taking place as some Diamond Trading Company (DTC) boxes are selling at discounts.

China: Polished dealers are cautious about buying large volume of new goods until prices stabilize. Rather, they appear focused on selling existing inventories to keep cash flows moving. Still, buying activity this week has increased slightly from last week as buyers have begun preparations for the National Day Golden Week holiday, which starts on October 1. Retailers are expected to increase their buying to fill their inventories in the coming weeks.

Hong Kong: Trading is slower than expected for this time of year, which generally involves early buying for China’s Golden Week celebrations. Wholesalers appear unsettled by the recent downtrend in prices and buyers are holding back until they see signs of greater stability in the market. There is some concern that the slow trading will extend through the Hong Kong show, which may impact the winter trading season.

Buyers Avoid Large Purchases, Markets Seek Price Stability

Trading slow with buyers avoiding large purchases as diamond markets seek stable price levels. Rough continues to fall in dealer markets with elimination of premiums and some discounting of mining company prices. ALROSA sells $23M at Aug. tenders (90% by volume) with prices +5% over regular selling list. Large jewelers report strong growth in latest quarter: Tiffany sales +31% to $873M, profits +33% to $90M; Signet sales +11% to $798M, profits +71% to $66M; Zale sales +9% to $377M, loss of $33M vs. $29M a year ago. Best wishes “Michhami Dukkadam” to our Indian friends and “Eid Mubarak” to our Arab friends. Human Rights Watch reports ongoing abuse in Marange fields. Buyers Beware.


Global Markets

United States: Wholesale trading has further quieted as low consumer confidence, price uncertainties and the traditionally slow summer season combined to take their toll. Demand remains focused on stones suitable for the engagement and bridal market, with rounds, 0.50-carat to 1.99-carat, G-H, VS-SI goods leading the way. However, it appears difficult to sell these goods as buyers are resisting higher price points. Demand for larger goods above 3.00 carats remains weak. Retailers appear most concerned about economic trends ahead of the fourth-quarter selling season.

Belgium: Trading activity remains slow as price uncertainties and economic concerns persist. In addition, many Antwerp-based Indian dealers were still on holiday through this week’s Jain festival. There is demand for polished as sellers are offering less for their goods while buyers are holding back until price stability sets in. Rough trading is slow with price declines more apparent in the secondary market than at the mining company source.

Israel: Trading has slowed as dealers are cautious but are hoping for price stability ahead of the Hong Kong show, which starts on September 19. Despite the uncertain outlook for the show, there is a strong emphasis on further penetrating the Far East market where the strongest growth opportunities lie. At the same time, sellers appear willing to compromise on price, even at the expense of incurring a slight loss, in order to maintain partnerships with their strong retail partners. Rough dealers are pushing for greater discounts.

India: Activity in both the polished and rough markets has been restrained due to the ongoing Jain religious festival of Paryushan, one of India’s major holidays. Polished buyers are not in a hurry to purchase as they expect prices could fall still further and overall demand remains poor as a result. Tight liquidity issues continue to hurt traders’ confidence. Sentiment in the rough market also remains weak. However, limited trading is taking place as some Diamond Trading Company (DTC) boxes are selling at discounts.

China: Polished dealers are cautious about buying large volume of new goods until prices stabilize. Rather, they appear focused on selling existing inventories to keep cash flows moving. Still, buying activity this week has increased slightly from last week as buyers have begun preparations for the National Day Golden Week holiday, which starts on October 1. Retailers are expected to increase their buying to fill their inventories in the coming weeks.

Hong Kong: Trading is slower than expected for this time of year, which generally involves early buying for China’s Golden Week celebrations. Wholesalers appear unsettled by the recent downtrend in prices and buyers are holding back until they see signs of greater stability in the market. There is some concern that the slow trading will extend through the Hong Kong show, which may impact the winter trading season.

Gem Diamonds Recovers 553-Carat Diamond

Gem Diamonds Ltd. announced that it has recovered a 553-carat, D, type II diamond from the Letšeng mine in Lesotho. The diamond is undergoing analysis in Antwerp.

The company called the stone exceptional and historic in size, ranking it the 15th largest white diamond ever to be recovered. Gem Diamonds had not yet named the diamond. It is the fourth historic diamond recovered from the Letšeng mine in recent years, following the recovery of the 603-carat "Lesotho Promise," the 493-carat "Letšeng Legacy" and the 478 carat "Light of Letšeng."

Global Uncertainty "Could Push Gold Bullion into Uncharted Territory", Euro Crisis "Not Over" and "Will Test German Economy

Dollar prices for Gold Bullion eased down to $1820 per ounce by Thursday lunchtime in London – 1.1% off the high for the week so far – while stocks and commodities fell and government bonds rose following publication of weak European manufacturing data.

"The [gold] market is dead in this time zone," said one Gold Bullion dealer in Hong Kong this morning.

Silver Bullion prices were also steady, holding around $41.60 – 0.5% above where they started the week.

"The power of the drop from $50 [earlier in the year] still overhangs silver so we would not be surprised at another sideways month in price action," say technical analysts at Gold Bullion bank Scotia Mocatta.

Euro Gold Bullion prices meantime edged up to €1278 per ounce Thursday morning – a high for the week so far.

Eurozone manufacturing activity declined in August, according to the purchasing managers index for the 17 nation single currency area. The Eurozone PMI fell to 49.0 – down from 50.4 in July (a figure below 50 indicates contraction).

China's PMI recovered slightly to 50.9 – up from 50.7 in July – while the UK's manufacturing sector continued to contract, its PMI falling from 49.4 in July to 49.0. Similar manufacturing data for the US are due out later today.

German manufacturing PMI fell from 52 in July to 50.9 last month – its lowest level for two years. German economic growth meantime slowed to 2.7% year-on-year in the second quarter – down from 4.9% in Q1 – according to official data published Thursday.

"The recovery should continue, albeit at a slower pace," reckons Carsten Brzeski, senior economist at ING in Brussels.

"Nevertheless, the next stage of the Eurozone debt crisis will put...the German economy to the test."

Elsewhere in Europe, FT Alphaville reports on French banks' relatively high dependence on wholesale funding – with deposits making up 31% of total assets, compared to 36% for banks in Europe as a whole – which, the report says, could leave them vulnerable to a shift away from Europe by money market funds.

UBS has reportedly cut its 2012-13 forecast for French banks' earnings as a result.

"It is not a sustainable sign of faith in the region that some of the largest banks in the Eurozone, with generally sound asset quality and business models, struggle to fund themselves in public markets," says Omar Fall, equity analyst at UBS in London.

"The crisis is not over," Juergen Stark, European Central Bank executive board member, told an economic forum in Austria on Thursday morning.

"Not just in Europe is it not over, it is also not over in other regions of the world," Stark added, citing the "enormous" debt problem in the United States.

"Given the weak [US] data we've seen recently," Federal Reserve Bank of Atlanta president Dennis Lockhart said in a speech on Wednesday, "and considering the rising concern about chronic slow growth or worse, I don't think any policy option can be ruled out at the moment."

Lockhart added, however, that he is "acutely aware that pushing beyond what monetary policy can plausibly deliver runs the risk of creating new distortions and imbalances."

"The uncertainty clouding the macro outlook has lifted Gold Prices," says a research note from Barclays Capital on Thursday.

"As long as it persists and investors remain responsive to gold, barring short term corrections, prices are set to venture further into uncharted territory."

Gold Prices rose over 11% in US Dollar terms last month – despite Congress reaching an agreement on the debt ceiling at the start of August – with many gold buyers choosing physical Gold Bullion.

"Looking at the physical market, last month's sales of gold and silver coins by the US Mint were strong," notes one Gold Bullion dealer here in London.

"Its year-to-date gold sales [though] are lower than last year, perhaps indicating a reduced degree of fear amongst buyers this year."

UBS, however, last month noted a "growing preference towards Allocated Gold" – gold held securely in a professional vault on behalf of its owner, rather than stored in its owner's residence or safe deposit box.

Allocated Gold providers BullionVault saw the volume of gold owned by its users grow 6.7% in August, hitting a new record of 24.3 tonnes.

By value, client-gold holdings at BullionVault rose by 20% in August to stand above $1.42 billion at today's AM Gold Fix.

Thinking of Buying Gold?...