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XMFSinchiruna (28.57)

Lifting Gold's Veil of Secrecy

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June 29, 2011 – Comments (28)

While many still cling to the fully disproven notion that gold has lost its relevance within our modern financial world, the pattern of secrecy and mysterious dealings that characterizes the global gold market makes it clear: gold still matters to some very powerful entities. 

.....

Gold is like a pancreas: relatively few seem aware of what it does, or how it functions, and yet it's as indispensible to the functioning of the larger system as any other key component. Imagine, then, that your doctor tells you your pancreas can not be examined. Here in this age of high-tech imagery, you might be surprised by such an admission. "If the TSA can see through my clothes at the airport", you might wonder aloud, "how is it that my pancreas remains absconded from the view of medical science?" 

.....

What lies beneath?

 

Just what may lie hidden beneath gold's veil of secrecy is a topic of much speculation. Under a spotlight of true transparency, would we discover a coordinated scheme to suppress the price of gold as GATA strongly suspects? Might we discover that much of the gold held within U.S. reserves, for example, has been leased, swapped, or otherwise made subject to competing claims? Are major financial institutions able to build powerful positions within futures and derivatives markets by leveraging competing claims to an insufficient physical supply in a high-stakes twist of fractional reserve banking? 

.....

From all the potential hidden truths about the global gold market that we Fools may not yet be privy to, I have opted as an investor to find some shelter within the portion of the market that I do know. I personally have concluded that gold prices must trend higher, and that gold miners as a group offer multiple high-quality vehicles for bargain-priced exposure. I look forward to a day (perhaps naively) when gold may emerge from the shadows of opacity, and become an even more effective barometer of distress in financial markets by virtue of that transparency.

 

 

Lifting Gold's Veil of Secrecy

http://www.fool.com/investing/general/2011/06/29/lifting-golds-veil-of-secrecy.aspx

28 Comments – Post Your Own

#1) On June 29, 2011 at 7:59 PM, kdakota630 (33.34) wrote:

Excellent work, as always (and gave a rec here and the full article).

Hoped you might have a comment on Rubicon today, or a mention about Kitco in this article.

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#2) On June 29, 2011 at 8:06 PM, XMFSinchiruna (28.57) wrote:

Great point ... would have been a great place to mention the Kitco thing! Even if I had thought to include it, though, I was short on space.

I am flabbergasted by Rubicon's PEA! I am hoping to get through to my contact at the conmpany tomorrow before drafting a piece on it. 

I am just as surprised as the market was by that disappointing PEA! I am not selling, though, because I believe the metrics will imrprove with further drilling. I am, however, frustrated by the slow pace of the deposit's development toward what I still feel is an ultimate potential well beyond what today's seloff might imply.

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#3) On June 29, 2011 at 8:49 PM, 100ozRound (30.56) wrote:

What's up with Kitco?  Or are you referring to the raid a few weeks ago?

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#4) On June 29, 2011 at 10:55 PM, ikkyu2 (99.52) wrote:

Gold is a pancreas.  Got it.

..a-a-a-nd, nominating you for the Worst Metaphor Award 2011.  :)  Actually the pancreas can be examined by a number of means, including CT and MRI scans of the retroperitoneal abdomen, and a variety of endoscopic studies including endoscopic retrograde cholangiopancreatography (say it 3 times fast - ugh), and endoscopic ultrasound.

But I see your point.  I certainly would agree that gold plays a vital role in the world financial system; all the folks who yammer on about decreased use in dental amalgams, or the use of substitute metals for Indian wedding ceremonies, are totally missing the point and look very obtuse to me. 

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#5) On June 29, 2011 at 11:17 PM, XMFSinchiruna (28.57) wrote:

ikkyu2

Speaking of mising ths point, you totally missed the point of my pancreas metaphor.

You appear to have glossed over the word "imagine". There begins the hypothetical. :)

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#6) On June 29, 2011 at 11:19 PM, XMFSinchiruna (28.57) wrote:

Actually, it's technically a simile.

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#7) On June 30, 2011 at 7:09 AM, skypilot2005 (< 20) wrote:

On June 29, 2011 at 10:55 PM, ikkyu2 (97.89) wrote:

" Actually the pancreas can be examined by a number of means, including CT and MRI scans of the retroperitoneal abdomen, and a variety of endoscopic studies including endoscopic retrograde cholangiopancreatography (say it 3 times fast - ugh), and endoscopic ultrasound."

Where else can you get good stock and medical information at one source?  I know of none other than Sinch’s blog.

:)

I cc’d both, too.

Sky Pilot

Official Web Link Assistant to Sinch

 

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#8) On June 30, 2011 at 8:45 AM, XMFSinchiruna (28.57) wrote:

The article is posted on GATA's home page today:

http://gata.org/node/10064

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#9) On June 30, 2011 at 8:50 AM, Jbay76 (< 20) wrote:

Sinch,

I am confused, RBY states that they had a positive PEA, but you say its horrible.  ACM did state that they were conservative in the values they used....oh man I feel like I'm back where I started from years ago!  Shite! 

Aside from the RBY issue plaguing my brain, this is a great article though.  I'd be stoked in RP coudl get a full audit of all our gold repositories.  If we all just vote him into office, he'll be able to use the eagle to get in and count them bars :)

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#10) On June 30, 2011 at 9:17 AM, XMFSinchiruna (28.57) wrote:

Jbay76

I didn't say it was horrible ... just that it came in well below my expectations (and those of the market, clearly). The PEA did show positive economics at present prices, but not to the degree I anticipated. More detail in my article later today.

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#11) On June 30, 2011 at 9:58 AM, Jbay76 (< 20) wrote:

Thanks Sinch!  I look forward to the article, as always! :)

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#12) On June 30, 2011 at 12:36 PM, whereaminow (73.77) wrote:

Great stuff!

David in Qatar

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#13) On June 30, 2011 at 1:19 PM, DarthMaul09 (30.42) wrote:

  TMFSinchiruna

Your blog/article also got picked up by Jesse's Cafe Americain.

Do you think that the continued price drop of RBY might trigger a take over bid by a large neighboring miner?  I thought that you might have written about that possibility in a prior blog.

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#14) On June 30, 2011 at 1:59 PM, rfaramir (30.55) wrote:

Interesting editing from the above to the final article. While some is just cleaning and tightening up, much feels like a downgrade of impact.

"While many still cling to the fully disproven notion that gold has lost its relevance within our modern financial world" ->

"While many cling to the disproven notion that gold is irrelevant to modern finance"

downgrade: -still -fully

tightening:  "has lost its relevance within our" -> "is irrelevant to"

 

"the pattern of secrecy and mysterious dealings that characterizes the global gold market makes it clear:" -> "mysterious dealings in the global gold market suggest that"

downgrade: -"pattern of secrecy", "makes it clear" -> "suggest that"

tightening: "that characterizes" -> in

 

"relatively few seem aware of what it does, or how it functions, and yet it's as indispensible to the functioning of the larger system as any other key component" -> "Few people seem to know what it does, yet it's indispensible to a properly functioning system."

tightened nicely

"Imagine, then, that your doctor tells you your pancreas can not be examined. Here in this age of high-tech imagery, you might be surprised by such an admission. "If the TSA can see through my clothes at the airport", you might wonder aloud, "how is it that my pancreas remains absconded from the view of medical science?"" -> "So just imagine that your doctor told you your pancreas could not be examined."

downgraded: -"high-tech imagery" -whole TSA sentence

tightened: way too tightened!

 

"Just what may lie hidden beneath gold's veil of secrecy is a topic of much speculation. Under a spotlight of true transparency, would we discover a coordinated scheme to suppress the price of gold as GATA strongly suspects? Might we discover that much of the gold held within U.S. reserves, for example, has been leased, swapped, or otherwise made subject to competing claims?" -> "Would true transparency reveal a coordinated scheme to suppress gold prices, as GATA strongly suspects? Has much of the U.S. gold reserve been leased, swapped, or otherwise claimed by outside parties?"

downgrade: -whole "topic of much speculation" sentence (implying only GATA is inquiring), -"gold's veil of secrecy" (left only in title and poll), -"Under a spotlight"

tightened: "Might we discover that much of the gold held within U.S. reserves, for example, has" -> "Has much of the U.S. gold reserve" (but this also downgrades an accusatory question to a simple question), "made subject to competing claims" -> "claimed by outside parties" (also reduces redundancy later)

 

"From all the potential hidden truths about the global gold market that we Fools may not yet be privy to, I have opted as an investor to find some shelter within the portion of the market that I do know. I personally have concluded that gold prices must trend higher, and that gold miners as a group offer multiple high-quality vehicles for bargain-priced exposure. I look forward to a day (perhaps naively) when gold may emerge from the shadows of opacity, and become an even more effective barometer of distress in financial markets by virtue of that transparency." -> "In a global gold market full of unknowns, I seek shelter in the parts of the market that I do know. I think gold prices must trend higher, and that gold miners as a group offer lots of great ways for bargain-priced exposure. In the meantime, I can only hope that more transparency will one day make gold an even better barometer of global financial distress."

downgraded: -"potential hidden truths", -"not yet be privy to", "multiple high-quality vehicles" -> "lots of great ways", -"emerge from the shadows of opacity", -effective, -virtue

tightened: "I have opted as an investor to find some shelter within the portion" -> " I seek shelter in the parts", "I personally have concluded that" -> "I think"

 

Your concluding sentence in particular completely loses the urgency and fine oratory of the original. Throughout, your editor has truly helped with readability, but in the process removed so much of the emotion and force that it doesn't sound like you anymore. It loses impact. I noticed the same thing when UltraLong became TMFUltraLong (Sean Williams). I didn't recognize him at all! Sean's strength was sharp, short, snappy evaluations, not depth. At least your depth and insight still shine through the taming.

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#15) On June 30, 2011 at 2:28 PM, Frankydontfailme (27.45) wrote:

Fascinating. I wasn't aware TMF writers were under editorially supervision (ie lacked final say).

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#16) On June 30, 2011 at 2:49 PM, outoffocus (24.51) wrote:

Can someone explain to me what happend to Kitco?

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#17) On June 30, 2011 at 3:11 PM, XMFSinchiruna (28.57) wrote:

outoffocus

http://www.google.com/hostednews/canadianpress/article/ALeqM5jiO8KeAlU1ieMZqDaXDLFhk1qSnw?docId=7110894

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#18) On June 30, 2011 at 3:21 PM, XMFSinchiruna (28.57) wrote:

rfaramir

Thank you! :)

Please note, however, that out of hundreds and hundreds of articles I've published at TMF, fewer than 10 have been heavily redacted or modified in such a way.

99.99% of the time, what you see is 100% me. :)

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#19) On June 30, 2011 at 4:02 PM, XMFSinchiruna (28.57) wrote:

Great Expectations for Rubicon Minerals

http://www.fool.com/investing/general/2011/06/30/great-expectations-for-rubicon-minerals.aspx

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#20) On June 30, 2011 at 6:37 PM, rfaramir (30.55) wrote:

"99.99% of the time, what you see is 100% me. :)"

That's reassuring! Glad to hear it.

It just caught my eye, as I made sure to rec both, that they started a bit different, and then continued to be heavily edited. As I marvelled at how much was changed, I started noticing a trend in the kind of changes. I then wondered about their motivation. I must admit that the editor did a good job improving and cleaning the prose, but seemed to go way overboard in toning it down. Almost as if someone flagged it for being Politically Incorrect to question the whole financial system, or The Man might get mad, or some such fear.

Maybe it was just written in too much a seat-of-the-pants mode, so the editor really got on a roll fixing it and didn't know where to stop. Nothing ominous to see here.... (maybe)

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#21) On June 30, 2011 at 6:46 PM, XMFSinchiruna (28.57) wrote:

rfaramir

Almost as if someone flagged it for being Politically Incorrect to question the whole financial system, or The Man might get mad, or some such fear.

I assure you that wasn't the case. One of many reasons why I'm such a happy camper writing here over the years relates to the distinct lack of censorship.

Anyway, I appreciate your feedback, and your Foolish attention to detail. :)

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#22) On July 01, 2011 at 6:36 AM, skypilot2005 (< 20) wrote:

The latest from Nothern Abitibi Mining:

http://www.naminco.ca/docs/NR11-8%20NAI%20Results%20Holes%20104%20to%20109.pdf

 

http://www.naminco.ca/news.php

Sky Pilot

Official Web Link Assistant to Sinch

 

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#23) On July 01, 2011 at 7:23 AM, skypilot2005 (< 20) wrote:

Sinch, I thought I heard my cell phone ringing but, it wasn’t.  I thought “I wonder if my old friend Yukon Nevada is trying to contact me……" Recent updates from Yukon-Nevada: http://www.yukon-nevadagold.com/s/Home.asp   http://www.yukon-nevadagold.com

/s/NewsReleases.asp?ReportID=464195&_Type=&_Title=Resource-Estimate-at-Ketza-River-to-Support-Imminent-YESAB-Application   http://www.yukon-nevadagold.com

/s/NewsReleases.asp?ReportID=464415&_Type=&_Title=Yukon-Nevada-Gold-Corp.-Reports-on-Reserves-at-Jerritt-Canyon-Nevada

Sky Pilot

Official Web Link Assistant to Sinch

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#24) On July 01, 2011 at 11:35 AM, ElCid16 (93.92) wrote:

Sinch,

Could you elaborate the $2B+ spike in deferred taxes for GG over the past 5 quarters?  Their total deferred income tax liability now stands at roughly $6B.  Is this a cause for concern?

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#25) On July 01, 2011 at 12:43 PM, XMFSinchiruna (28.57) wrote:

ElCid16

I am no tax expert, to be sure, so I must plead ignorance to what motivated their decision to defer such a large chunk. I agree that's a pretty big leap since January 2010, and it certainly does stand out on an otherwise pristine balance sheet. 

If I had to hazard a guess, the decision to defer likely stems from the aggressive capex expenditures presently underway, and a desire to fund same with minimal use of bank debt. Additionally, the decision might be informed by internal projections for steady margin increases in a long-term rising gold price environment.

Thanks for bringing it up, and please let me/us know if you uncover an alternate explanation for the increase within your DD. The next time I connect with someone at GG, I'll pose the question.

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#26) On July 01, 2011 at 1:16 PM, ElCid16 (93.92) wrote:

To be fair, GG is hardly alone in this (potentially deceptive) practice.  

Many of the big blue chips that conduct business abroad practice this in order to keep earnings at (or above) analysts estimates.  While I initially assumed that this was simply money that companies keep abroad for future international reinvestment, money that is intended to be kept abroad atually doesn't get added to deferred income taxes.  

So in essence, deferred income taxes are literally an added buffer to net income, in the same way that accrued expenses and accounts payable are an added buffer to operating income.

Read this, and the attached PwC link, for more insight on deferred taxes.  Always check deferred taxes, accrued expenses, and accounts payable YOY changes when assessing earnings quality.

 http://caps.fool.com/Blogs/sampp-500-earnings-for-2010/608138

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#27) On July 01, 2011 at 1:18 PM, ElCid16 (93.92) wrote:

To be fair, V2.0, I am no tax expert either.  Do you know anyone that works for the Fool that could elaborate on deferred tax practices for us?  I'd prefer not to have to do hours of DD if someone at the Fool has already done much of the legwork for us. :)

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#28) On July 01, 2011 at 2:06 PM, XMFSinchiruna (28.57) wrote:

 ElCid16

Not off hand ... sry. Never hurts to pose a research question like that either as a blog post or in the Fool discussion boards. There's a lot of talent within this community.

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