FROM DUST TO BARS: The Complete Story Of How Gold Is Mined And Refined

Gold prices have tumbled since their $1,900 peak in 2011. The yellow metal slumped into a bear market in April, and now prices are just above $1,200.

Investors have warned that the correction in gold prices has meant that miners are producing gold at cost or are losing money.

Last year, CNBC's Bob Pisani traveled to South Africa to show us how gold goes from particles to gold bars.

He followed AngloGold Ashanti's gold mining process from start to finish. Workers there pull up 5000 metric tons of earth per day, which yields as much as 1,700 ounces in gold.

Pisani also visited the Rand Refinery, which has refined nearly a third of the gold mined since 1920.

In light of the recent sell-off in gold, we decided to revisit Pisani's tour of the gold mine and see just how complicated and dangerous the process is.

Note: Simone Foxman wrote the original version of this feature.

This story was originally published by CNBC.

View the original article here

CHART OF THE DAY: S&P 500 Investors Don't Need To Freak Out About An Emerging Market Meltdown

The S&P 500 is a great index for U.S. investors because its constituents offer some great international exposure.

But in recent weeks, there has been some concerns arising in the emerging markets.  With interest rates on the rise, investors have been yanking out their funds from the EMs at a breakneck pace.

Earlier today, we got more evidence that China was slowing as interest rates rise in the region.

So where does that leave investors exposed to the S&P 500?

Goldman Sachs' David Kostin doesn't think you need to be too worried.

"We believe weaker EM growth poses little risk to S&P 500 earnings," he wrote in a new note to clients. "We estimate roughly 5% of S&P 500 revenues are derived from EM, and BEA data suggest a similar EM share of total US corporate profits. Two-thirds of S&P 500 sales are domestic, making our forecast for stronger US GDP the biggest driver of our EPS growth forecasts of 11% and 8% in 2013 and 2014."

Kostin is one of the most bullish strategists on Wall Street, forecast the S&P 500 to hit 1,750 by the end of the year.

Goldman Sachs

View the original article here

The Chart That Says The Gold Sell-Off Still Has A Long Way To Go

In the second quarter of 2013, gold posted one of its worst quarterly declines ever, losing 23% of its value.

The shiny yellow metal endured two brutal liquidations in Q2 – the first came in early April, and the second has played out over much of June.

After falling as low as $1184 an ounce on June 27, the metal is arguably looking oversold. (Today, it's up 2.6%, and is now trading around $1256.)

The big question, of course, is whether the bleeding in the gold market has stopped for now.

Those still bearish on the metal, even at these levels, are probably looking at the chart below, provided by Credit Suisse analysts (via David Hall), who have been among the most bearish toward gold on Wall Street.

The chart compares the real price of gold (adjusted for consumer price inflation) during the bull market of the 1970s and subsequent unwind to today's experience.

By this measure, at least, gold may have further to fall.

View the original article here

MORGAN STANLEY: We Now Think 'Good Is Good And Bad Is Bad'

The second quarter just ended, which mean Q2 corporate earnings season will begin in just two weeks.

Adam Parker, Morgan Stanley's top U.S. equity strategist, has long argued that earnings growth expectations need to come down. And perhaps this will be the season when we get the news needed to get those forecasts down.

"[S]econd quarter earnings season is just around the corner and we think it will be more critical than normal," wrote Parker in a new note to clients.  "Why? Because unlike earlier this year, we now think “good is good and bad is bad,” meaning the fundamentals will be in focus."

For a while, many have argued that bad news was good because that meant that Fed would be increasingly likely to extend monetary stimulus, which has been attributed to strength in the stock markets.

"Downward earnings revisions have persisted in recent months with 7 of 10 GICS sectors seeing lower estimates over the last 3 months, and we continue to believe estimates have further to fall. Analysts are embedding 7% earnings growth in 2013 to $111 per share, followed by 11% growth in 2014 to $123 per share. Our top-down estimates are more muted— $103 and $110 of earnings per share in 2013 and 2014, respectively."

Here's what Parker will be looking for in the earnings announcements:

What we will be watching this earnings season:
Revenue and Earnings: After beating on earnings but missing on revenues in Q1 (Exhibit 2), can companies beat consensus Q2 estimates on both revenue and earnings?
Guidance: Do we see a slowdown in the rate of negative forward guidance?   
Capital Spending: Are companies in technology and industrials seeing capacity constraints, growing order backlogs, tight inventories?    
Fed Tapering / Interest Rates: Are non-financials focused on the recent moves in the yield curve?    
Foreign Exchange: Has the year-to-date move in the Japanese yen, in particular, had a material effect?
Domestic Demand: Do we see an early indication of the expected second-half bounce-back in US economic growth and is that reflected in guidance?

View the original article here

Here's What Happened In The Complex Commodity Trade At The End Of 'Trading Places'

Last week, we celebrated the 30th anniversary of "Trading Places," the greatest movie about finance ever made, with an oral history of the film.

There are so many unforgettable moments.

But we wanted to zero in on what is arguably the most complicated, real-life climax in cinematic history, because a lot of people get confused about what actually happened.

Earlier in the film, Mortimer and Randolph Duke, the two corrupt, septuagenarian brothers who run a commodities brokerage house, arrange to get an advanced copy of the USDA's monthly orange crop report. These crop reports are real, and you can find a calendar of them here.

The Dukes hope to discover that the crop report will reveal extensive damage to the Florida orange juice crop — due to a hard freeze — and thus they could make a fortune buying a ton of orange juice futures right before that data comes out, on the premise that the freeze would cause a shortage of oranges.

Billy Ray Valentine (Eddie Murphy) and Louis Winthorpe III (Dan Aykroyd) — who has lost his job at the brokerage — catch wind of the scheme, and they deliver to the Dukes a faux report that confirms what they want to hear, that the crop was badly damaged. (In fact, the real crop report showed that the freeze wasn't that bad.)

Not knowing the real crop data, the Dukes plan is to book as many orders for high bids as possible — "corner the market" (which in real life, thanks to new regulations, is now either illegal or extremely difficult to pull off).

Here's their floor broker, Wilson, set to pull off what he thinks is a foolproof moneymaking trade. He's been instructed to buy Frozen Concentrated Orange Juice futures non-stop until the crop report comes out.

Meanwhile, Winthorpe and Billy Ray get the Dukes to flood the market with bullish orders to drive the price up:

But they need to leave enough time before the crop report is published to book as many short orders as possible. Basically, Winthorpe and Valentine are SELLING frozen concentrated orange juice futures en masse, with the knowledge that the crop report will show no hard freeze, implying bountiful oranges, which will cause the price to collapse.

Winthrope and Valentine need to show some patience, as shorting anything is only preferable once the price is very high.

The floor needs to think they can make even more money on a bullish report by trading with the guys selling at lower prices.

Eventually, Winthorpe decides the time is right, and calls out that they are selling contracts for ¢142. The floor will want to lock in that price because they think the report will cause the price to go even higher.

Netflix

Were the price to go up, Winthorpe and Billy Ray would be screwed, as they'd have to buy back the contracts they sold (shorting anything requires a later purchase) at a higher price.

But when the crop report comes out, the tables are turned. The harsh winter did NOT hurt the crop.

Now everyone has to sell! There are plenty of oranges out there. There's no shortage at all.

Netflix

Winthorpe and Billy Ray now wait again for the price to come back down, to max out the spread between what everyone they sold the contracts for initially, and the price at which they can buy the orders back:

Netflix

Finally, they must also not take the post-report sell orders from the Dukes, to maximally screw them over.

Netflix

Eventually the price settles at ¢29:

Netflix

The Dukes are ruined. They were buying all the way up, but the prices in the end collapsed.

Netflix

And Winthopre and Billy Ray are the ones who've made out like bandits:

Netflix

(h/t TradingPitBlog, WiseBread StraightDope, and DangerousLogic for guidance)

View the original article here

Italian Manufacturing Shows Big Improvement — Production Increases For The First Time In Nearly 2 Years

More green shoots in Europe, where Italian PMI just jumped to 49.1.

Production grew for the first time in 20 months.

From Markit:

View the original article here