BULLION BULLETIN SPECIAL INTRODUCTORY EDITION
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COMING THIS FALL The definitive source for precious metals investors, collectors and bullion market watchers Get your precious metals news and information from Bullion Bulletin magazine and bullionbulletin.com For advance subscriptions and more information, contact editors@bullionbulletin.com
March 2018
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A Welcome Message from the Editor We hope you enjoy this special introductory issue of BULLION BULLETIN. Beginning this fall, the magazine and its companion website, bullionbulletin.com, will provide precious metals enthusiasts and investors, as well as professionals in the mining, metals production and jewelry industries, with the highest-quality news, information and analysis. In this issue, we give you just a taste of things to come. Precious metals Analyst Moniruz Zaman takes a look at what to expect in the gold, silver and other metals markets over the next year. And we talk to Royal Canadian Mint Vice-President of Sales Chris Carkner to get the inside story on what’s new and exciting at the Mint, as well as his thoughts on trends in the sales of gold and silver products. If you’re interested in physical gold and silver, whether you’re an investor, industry professional, or collector, we believe BULLION BULLETIN and its digital properties will give you the edge you need in this fascinating and lucrative area of the metals sector. Andrew Flynn Consulting Editor
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CONTENTS
FEATURES
PRECIOUS METALS IN 2018 4 Staying Golden By Zaman Moniruz
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SOLVING THE SILVER BULLION WHITE SPOT PROBLEM
Article courtesy of the Royal Canadian Mint
DEPARTMENTS
A WELCOME FROM THE EDITOR 3
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PRECIOUS METALS IN 2018 Staying Golden By Zaman Moniruz
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“Some things are so unexpected that no one is prepared for them” – Leo Rosten
Every year, observers take a stab at predicting the prices of precious metals, trying to determine the likelihood of different scenarios and gauging the economic outlook for the year ahead. From geopolitical events to a change in the supply-and-demand ratio, many things can happen. Some are unpredictable, and many defy statistical models. And as someone once said, the best way to predict future behaviour is to look at the past. So, let’s begin with a look at what happened in 2017.
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Interest rate hikes Ahead of the fully expected rate increase at the end of 2017, the price of gold declined. However, after the benchmark interest rate hike of 0.25% in the U.S., the prices seem to keep moving up. The Fed’s decision to increase the rate triggered others, including the Bank of Canada, to increase their rates as well. And it would be no surprise to see rates around the world increase throughout the year. Inflation has begun to rise faster than the interest rate; when the interest rate drops
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below inflation, the interest is considered to be negative. As long as this continues to be the case, and the inflation rate is higher than the interest rate, gold will have an advantage. The predictions of Dr. Martin Murenbeeld, a well-known authority on the subject, might disappoint both gold bulls and gold bears. He expects a 9% increase in gold prices by the end of the year. That’s two percentage points less than in 2017, which would indicate that the current bull market is in decline and the cycle may be slowly bringing back a bear market. However, 9%
is still arguably a positive outlook for this year. Bulls are expecting gold to rise to nearly $1,800 due to current events even though most banks seem to be on the bearish side, expecting an average of $1,200. Gold’s many upward pressures In my opinion, there are many factors pushing gold prices towards the higher end of the scale. Asian demand continues to grow and with the Chinese New Year close, the demand will increase rapidly. Apart from the Chinese New Year, as the USD index is expected to decline, a lot of people might be cashing in their dollars and opting for the ultimate monetary insurance: gold. Plus, if the USDX does continue on this path, the exchange rate will allow other currencies to buy gold at a cheaper price; so again, demand will increase throughout the world. Do I even have to mention overpriced equities, another influence pushing investors to buy gold? Everything is aligning to increase demand in precious metals drastically. There are a few loose ends, of course. When gold does well, so do paper holdings and non-physical investments. Demand can suddenly shift back and end up depressing the market. On top of this, there is a possibility that NAFTA will suffer changes that will have an unpredictable effect on the precious metal industry. However, I wouldn’t count on threats to end NAFTA actually coming true, as the person who made those threats isn’t known for being able to follow through on threats in general. The historical trends Historically, gold has set the trend for other
...as the USD index is expected to decline, a lot of people might becashing in their dollars and opting for the ultimate monetary insurance: gold.
precious metals. This is especially true for silver. Whenever gold does well silver tends to do better, and when gold has declined, silver falls even farther. However, in 2017, silver bucked the trend by following its own path and it’s hard to determine whether this will be the case in 2018. The price of silver usually goes hand-in-hand with the gold-silver ratio, which indicates how many ounces of silver can buy an ounce of gold. When precious metals were used as currency, the ratio used to be much lower than it is today. In the 17th and 18th centuries an ounce of gold was worth around 15 ounces of silver. Currently silver is very undervalued, and most people predict it will remain at around $17. Bulls expect it to reach $25 by mid-year, but unless its industrial demand increases spontaneously, it’s hard to see silver going over $22. With that said the gold-silver ratio should end up around 80 overall. Let’s not forget industrial demand Speaking of industrial demand, platinum used to be the #1 choice in the auto catalyst
market; with a huge demand and its costly extraction, more often than not platinum was priced higher than gold. When automakers began to seek an alternative metal, palladium began to be used in auto catalysts as a cheaper option for exhaust-cleaning systems. The newly increased demand for palladium has made it more expensive than platinum. This means manufacturers have again an incentive to switch back to platinum, which can result in either bringing the price of platinum up, or, bring both platinum and palladium down. The price of palladium has already started to fall, however, platinum doesn’t seem to be doing any better. Manufacturers of auto catalysts may continue to drive the prices down. In the final analysis, I’m going to predict that gold will certainly cross the $1,400 mark, and probably continue to rise to $1,600. Silver will probably reach $20 an ounce. Both platinum and palladium should arrive at around $1,150 an ounce.
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SOLVING THE SILVER BULLION WHITE SPOT PROBLEM Article courtesy of the Royal Canadian Mint
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White spots on silver bullion coins have been a known issue in the global bullion market for years. While white spots do not change the purity or composition of bullion coins, investors have expressed concerns about their impact on the coins’ aesthetic quality — a fact that presented a challenge for the R&D and engineering teams at the Royal Canadian Mint. Determined to get to the bottom of the elusive white spot problem, the Mint engaged in a four-year process of research and exploration that culminated in 2018 with the announcement of MINTSHIELD™ surface protection, the first proven, proprietary solution for significantly reducing the occurrence of white spots. High-Tech Detective Work White spotting is not like tarnishing or other oxidation phenomena. Its appearance is unpredictable and irregular. The Mint’s engineering team knew the first order of business was to identify the root cause of the spots. “Our team considered every factor that could possibly play a role, including chemical, environmental, handling and storage conditions,” explained Dr. Xianyao Li, Chief Technology Officer at the Royal Canadian Mint. “We used the full range of tools at our disposal: image analysis system, X-Ray spectroscopy for compositional analyses, and surface microstructure and morphology examinations.” To expand the scope of its investigation, the Mint collaborated with a local Canadian university to take advantage of its laboratories. The Mint’s research concluded there is no single cause of white spots. Multiple factors have an impact, including the way silver reacts with contaminants in processing, handling and storage. While this makes it challenging to come up with a single, definitive solution to the
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issue, by the end of its intensive investigation, the Mint believed it had identified a way to reduce and contain white spots. Putting Theory to the Test With a prospective solution identified, the Mint began testing. On a small scale, the results were positive. The Mint’s technique reduced the occurrence of white spots. But the real measure of success was confirming it worked at production scale, with consistent outcomes even across different coin finishes and textures. Accelerated testing confirmed the surface protection would significantly reduce the appearance of white spots for years. All along, the Mint’s research team knew the viability of the solution depended on its ability to integrate with existing production and quality control processes. “That was one of our mandates right from the beginning,” said Dr. Li. “MINTSHIELD needed to fit with what we already do while delivering on quality and manufacturing efficiencies.” Bullion Redefined All Silver Maple Leaf bullion coins dated 2018 and later will now be protected with MINTSHIELD, significantly reducing the occurrence of white spots. “Our goal, as always, was to arrive at a customer-focused solution drawing on the Mint’s extensive R&D expertise and our unrelenting commitment to innovation. MINTSHIELD is engineered to support the long-term protection and integrity of bullion coins to meet the needs of the global market,” said Sandra Hanington, President and CEO. “Combined with Bullion DNA anti-counterfeiting technology, it represents the next step forward in delivering the quality, security and aesthetic excellence investors expect of our Silver Maple Leaf bullion coins.”
MINTSHIELD™ SURFACE PROTECTION
BULLION DNA™ ANTI-COUNTERFEITING TECHNOLOGY
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