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Source: George S. Mack of The Energy Report (6/13/13) – http://www.theenergyreport.com/pub/na/15368

The synergy of temperament and intellect has fostered much success for the father-son team of Michael Berry, editor of Morning Notes, and Chris Berry, founder of House Mountain Partners LLC. In this Father’s Day interview with The Energy Report, the Berrys reveal what they’ve learned from each other’s investment strategies over the years, and mull energy metals and emerging green technologies that could be “compelling investment opportunities.” They also reveal that, for all the familial camaraderie, there are energy issues about which they strongly disagree.

The Energy Report: Mike and Chris, it’s always a pleasure to talk with you. Thank you for joining us for this Father’s Day edition of The Energy Report. I want to start with that theme. Chris, what’s the single most useful thing your father has taught you about investing?

Chris Berry: That’s a difficult question to answer because so many things come to mind. I’ve been privileged to have learned about investing by following my father’s career as a professor at a top-tier business school and then as a portfolio manager for a mid-market cap value fund. I have been able to see both the “theoretical” and “practical” sides of investment analysis. The opportunity to hone my analytical skills through these two differing viewpoints has been invaluable.

I think the most valuable lesson I have learned thus far is in the approach to evaluating markets and publicly traded companies. There is no substitute for intellectual rigor and intellectual honesty. The ability to recognize and eliminate biases is crucial. Emotion is definitely your enemy in this business. It’s also vital to have a solid vetting process and to stick to it regardless of the volatility in the macro environment.

TER: Mike, today Chris is a standout analyst doing terrific diligence on his coverage, and I know that makes you proud. What has Chris taught you about investing?

Michael Berry: Chris is always on top of the issues. He has helped me develop and refine the 10-point grid we use in our Discovery Investing discipline. Chris gets down to the fine points and assesses each problem in very granular detail. In this respect we complement each other quite well. What I have also learned from Chris is that he has a very sharp memory and can keep several companies—say in the graphite or rare earth space—in close analysis. He is really good at differentiating the “wheat from the chaff,” and this just seemed to come naturally to him.

Chris also is very good at assessing detail, listening carefully and dissecting companies when he is in the field. I am always surprised by the next step he takes in his analytical career. It’s been a lot of fun working together. It is evident that Chris loves what he does and is good with people. I am learning from him!

TER: Chris, you just spoke at the Cambridge House Resource Investment Conference in Vancouver. Your focus seemed to be deflation. You presented a barrage of 10-year bond charts that showed consistent declining yields over the last two decades. What was your point? What will be the effect of this deflationary environment?

CB: A large part of the research I do is focused on the macro economy and where we are cyclically in the market. In the wake of the financial crisis and the central banks’ response to it, there has been a great deal of ink spilled surrounding the debate over the aftereffects of policies such as quantitative easing—specifically the implications for inflation or deflation in the economy.

While I think the U.S. economy is headed for inflation at some point in the future, based on expansion of the Federal Reserve’s balance sheet, I do not see enough evidence to lead me to believe that an inflationary episode is imminent. In fact, when I look at a broad array of data, I think deflation is the more pressing issue. Government bond yields are at historically low levels, inflation is “in check” (I know this can be manipulated), unemployment is at a structurally and historically high level, and various metrics like gross domestic product, industrial production and capacity utilization are all operating at levels below the historical trend. In my Cambridge House presentation, I said that the global economy is “treading water.” There is growth out there, but it is mostly sluggish—and in the case of the Eurozone, contracting.

This paints an ominous picture for many commodities in the near term. Slowing demand in countries like China, which has been the engine of the commodity supercycle, has put the prices of any number of commodities under pressure since mid-2011, when the commodity complex began its downward trend. With substantial slack in aggregate demand, it’s deflation that is the worry, and not inflation.

TER: Chris, you seem to lament the lack of investment in green energy. Is it your contention that we will not turn to alternative sources until there is a price crisis (oil at $250-300/barrel) or a climate crisis?

CB: I wouldn’t say I “lament the lack of investment,” as billions of dollars are being spent in research institutes, university laboratories and in the private sector globally on advancing green or sustainable technologies. I think it is unfortunate that people view a few poor investments in the space as a proxy for the success or failure rate of the entire burgeoning industry. It is undeniable the companies like A123 Systems LLC (manufacturer of lithium-ion batteries), Fisker Automotive Inc. (manufacturer of premium hybrid electric vehicles), and Solyndra LLC (maker of solar products) have proven to be taxpayer-funded disappointments.

However, are we really going to assume that all greentech research efforts are failures based on the results from these three? That is a very naïve and narrow-minded approach.

With population increasing globally, becoming more interconnected, and set to live a more commodity-intensive lifestyle, sustainability and efficiency in our progress as a society will be of paramount importance. I just do not believe that you can have as much intellectual capital and financial capital all working toward next-generation technologies and not have breakthroughs that provide compelling investment opportunities and also leave our children a lasting legacy.

An example of a recent success is Tesla Motors Inc. (TSLA:NASDAQ). This company was actually initially funded by private money. The company has just paid back a U.S. Department of Energy loan—nine years early, at a $20 million ($20M) profit to tax payers. This is not a failure. This is a success. It remains to be seen how Tesla performs going forward, but I view the company as a proxy for the commercial viability of next-generation technologies. I recently test-drove a Model S and I am more convinced than ever that vehicle electrification has a place in society, however small it may currently be.

TER: Mike and Chris, you have both addressed this question outside this forum: What is concealing the investment potential of energy metals? What are the factors obscuring demand for these vital elements—scandium, cobalt, tungsten and lithium? What are the drivers?

CB: I have already mentioned two—deflationary headwinds and the credibility problem with green technology. Obviously the challenging financing environment for junior mining companies is another huge issue. A final issue is the perceived “death” of the commodity supercycle. The good news is that I view each of these issues as temporary, which should give investors the opportunity to look for undervalued companies that can demonstrate financial sustainability and execute their business plans.

The real driver is that the commodity supercycle is not dead. I do think that it is changing, however—becoming somewhat less infrastructure-focused and more consumer-focused. But by no means has the emerging world stopped yearning for a higher quality of life. Furthering that idea, we here in the developed world haven’t given up trying to improve our lives either. As the consumer in the West deleverages his or her personal balance sheet, and countries like China shift development models from one that is export-led to one that is driven by internal demand, there will be renewed focus on many of the energy metals we are following.

MB: These metals, in my view, are very research intensive. They are also, in general, quite small markets, which tends to obscure them. Many companies just don’t want to get involved in small markets. The graphite market, for example, is totally different from the copper market on many dimensions. Yet when graphite became the discovery play of the day, dozens of companies “became” graphite companies. The market in graphite simply cannot sustain the attention.

Many of these energy metals must belong to a “supply chain.” It is not enough anymore to say you have a resource with a certain grade, you must show how the metal impacts the energy system. It is a fact that China controls the supply chains for many of these metals. There is more to energy metals than exploration and development. . .much more.

TER: Chris, what companies fit into this growth story?

CB: I’m focusing on just a few energy metals right now: uranium, scandium and cobalt. I like scandium, as it is one of those metals for which China doesn’t dominate production. Global production, such that it exists, is miniscule and there are a number of future uses—specifically solid oxide fuel cells—that could absolutely take off if a reliable and secure supply of scandium could be found. I have been watching EMC Metals Corp. (EMC:TSX) and Metallica Minerals Ltd. (MLM:ASX)in particular, as they are among the most advanced scandium exploration plays. The lack of scandium availability is a great example of industry being held back by a lack of secure supply. Let’s also not forget the potential military applications.

TER: Mike, you have been making a bullish case for energy based on the phenomenon of urbanization. Can you talk about that?

MB: Yes. I just finished presenting at a biotech symposium in Hong Kong. Even there, the participants speak of the healthcare tsunami we are now in. Urbanization is proceeding everywhere. According to Bloomberg, China must spend $8.1 trillion on urbanization in the next three decades. About 60% of her massive population will urbanize and live in cities not yet built, and they willconsume.

A vast new middle class is emerging. Just take a trip to Hong Kong and you will see it. These new city dwellers must have better nutrition and cheaper energy. The food chain is tied to energy, so energy metals and the advancement of cheaper energy modalities will be key.

With 440 new cities to be built in “Emergica” (a term we coined to represent the cities identified in a McKinsey Global Institute report), the commodity supercycle has barely even begun. But the new energy metals boom, in particular, will be fostered and catalyzed by research and development (R&D) and supply chain development; quite a different world from what we have seen in previous industrializations in history.

But get ready, because the new consumer in Emergica is evolving and will demand a higher quality of life. They will be meat eaters. Energy metals, water, arable land and fertilizers will all be part of that onslaught. This why we believe so fervently in Discovery Investing as a critical platform.

TER: Mike, you have been talking to investors about the impact of urbanization on commodity prices. I take it you believe natural gas and oil are about to turn upward? Kindly explain your thesis and, if possible, tell me when we could expect the upturn?

MB: I am not sure about prices turning upward. But a transformative technology has revolutionized the supply-demand equation for oil and gas, particularly in favor of U.S. domestic production. Canada is likely to be hurt most by this “fracking” revolution.

Domestic natural gas and oil production is the one really bright spot in the U.S. economy today. The Eagle Ford shale in Texas will produce 3 to 5 million barrels of oil per day within a very few years. Domestic supplies will turn upward, no doubt. I may disagree with Chris here, but I think that transformative technology like fracking is the death knell for domestic nuclear power. Gas for combined-cycle gas turbine power plants is cheaper, cleaner and much less risky for the environment. Much will come from this oil and gas domestic revolution.

TER: Mike, Chris tweeted out a June 1 column in Project Syndicate written by New York University economist Nouriel Roubini entitled “After the Gold Rush.” Roubini listed and commented on several factors favoring a bearish scenario for gold. To be fair, he did say that all investors should have a “very modest” exposure to gold as a hedge against extreme tail risks. But the gold rush is over, he said. What is your impression of Roubini’s thesis? Chris, do you and your father agree?

CB: With more evidence pointing toward deflation as opposed to inflation, I can see gold trading sideways until these dynamics change. That said, if you’re a believer in inflation getting out of control, perhaps sooner than many think, this is an ideal time to acquire both gold and silver bullion, as well as select junior mining equities involved in precious metal exploration.

MB: Roubini is wrong. Gold has stood the test of millennia. Since we discarded it in 1971, our economy has loaded up with debt and is now sick. I am not suggesting a gold standard or even a currency backed by gold, simply that gold will always hold its value in deflations (which I believe we are in now) and inflations (which is where we are likely going). I want gold in my portfolio under these circumstances.

TER: I’d like to ask about uranium. Its fate rests solidly on the nuclear power industry, which seems to be out of favor. I’ll ask you both, what is your case for uranium? What companies are interesting?

CB: I see uranium as the one contrarian opportunity among energy metals. The spot price of uranium has been hammered, excess supply has been dumped on the market and nuclear power is experiencing a crisis of confidence in the mainstream media in the wake of Fukushima.

That said, there are a number of reasons to be optimistic about nuclear power going forward and, by extension, demand for uranium. We are all aware of the fundamental reasons for this thesis, including the looming end of the Megatons to Megawatts Program, reactors in Japan coming back online over the next few years and the build-out of nuclear reactors in the emerging world.

In addition, we can’t forget that the nuclear power infrastructure in place today would be extraordinarily expensive to dismantle, and that process could last for years. I have seen estimates of anywhere from $500M to $1 billion to shut down and decommission a nuclear reactor. Who pays for this? Additionally, what will fill in for the base load power that a given nuclear reactor was generating? Wind and solar, with their intermittency challenges? What about the cost to build out a new infrastructure and integrate it into the existing electricity grid? Will governments pay for this? Utilities? Tax payers? The path of least resistance is to relicense existing reactors as a more cost-effective strategy for all involved.

Additionally, though this is debatable, the energy return on investment (EROI) is much more advantageous with nuclear than with most other forms of power generation. EROI essentially tells us what we “get” in energy returned for what we “put in” in investment. If economics come into question, nuclear power is, and will likely remain, a very compelling option despite some of the challenges that the industry faces.

Given this backdrop, we have seen a number of deals completed. Most recently, Energy Fuels Inc. (EFR:TSX) signed a letter of intent to acquire Strathmore Minerals Corp. (STM:TSX; STHJF:OTCQX). I have followed Strathmore Minerals Corp. for some time and always thought that the location of its deposits, plus the relationships it has with Sumitomo Corp. and Korea Electric Power Corp. (KEPCO) would make the company an ideal take-out candidate. Congratulations are in order for the Strathmore management team on its accomplishments.

Another company I am following and own shares in isUranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT). This company is a near-term uranium producer in Wyoming, and is particularly attractive due the fact that it is essentially derisked. Uranerz is exceptionally well managed and could be generating cash flow within a year. The company is fully permitted, has offtake agreements in place and should be receiving a $20M loan from the Wyoming Industrial Development Revenue Bond Program. The tolling agreement in place with Cameco Corp. (CCO:TSX; CCJ:NYSE) is another positive attribute for Uranerz. Given that the Russians (JSC Atomredmetzoloto or ARMZ) have taken Uranium One Inc. private, Cameco may look to consolidate the Powder River Basin in Wyoming and integrate Uranerz into its operations there.

Finally, European Uranium Resources Ltd. (EUU:TSX.V; TGP:FSE; EUUNF:OTCQX), another company I own shares in, continues to develop the Kuriskova deposit in Slovakia. This is a high-grade resource and its European location is ideal given the number of reactors in Europe and the fact that there is only one operating uranium mine in Europe. AREVA is a shareholder of the company, which is something we want to see—majors with “skin in the game.”

MB: No! I am against uranium-powered reactors. Uranium produces plutonium, which is toxic for thousands of years. It cannot be stored reliably. The Canadians had the correct idea with their CANDU reactor, in which the water is enriched and not the uranium. Uranium-powered reactor technology is old and dangerous. We must move to thorium technology in the next few decades if we plan to stay with nuclear energy as a prime source of power. There are more Fukushimas coming!

TER: Thank you, Mike and Chris.

CB: My pleasure.

MB: Thank you.

From 1982–1990, Michael Berry served as a professor of investments at the Colgate Darden Graduate School of Business Administration at the University of Virginia, during which time he published his book, “Managing Investments: A Case Approach.” He has managed small- and mid-cap value portfolios for Heartland Advisors and Kemper Scudder. His publication, Morning Notes, analyzes emerging geopolitical, technological and economic trends. He travels the world with his son, Chris, looking for discovery opportunities for his readers.

Chris Berry, with a lifelong interest in geopolitics and the financial issues that emerge from these relationships, founded House Mountain Partners in 2010. The firm focuses on the evolving geopolitical relationship between emerging and developed economies, the commodity space and junior mining and resource stocks positioned to benefit from this phenomenon. Chris holds a master’s degree in business administration (finance) with an international focus from Fordham University, and a bachelor’s degree in international studies from the Virginia Military Institute.

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DISCLOSURE:

1) George S. Mack of The Energy Report conducted this interview and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: Strathmore Minerals Corp., Uranerz Energy Corp., European Uranium Resources Ltd., Energy Fuels Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Michael Berry: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Chris Berry: I or my family own shares of the following companies mentioned in this interview: Uranerz Energy Corp., European Uranium Resources Ltd. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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Source: Alec Gimurtu of The Gold Report (6/12/13) – http://www.theaureport.com/pub/na/15360

The recent drop in gold prices is a confirmation, or a revelation, to investors of the battle between the physical and paper gold markets. In this interview with The Gold Report, Brien Lundin, editor of Gold Newsletter, predicts the timing of a handoff from Asian physical demand to Western speculative demand and assesses the readiness of the junior market to respond to a revival in commodity prices. Plus, in a tip to Father’s Day, he discusses his efforts to groom the next generation of investors.

The Gold Report: In your latest newsletter, you advocate that gold investors pay close attention to the Federal Reserve meeting taking place on June 18. What are you looking for out of that meeting?

Brien Lundin: The main driver for gold right now is quantitative easing (QE). An investor trying to figure out where the gold market is heading in the near to intermediate term needs to focus on QE. Investors should look for clues to the future prospects of the Fed’s QE program—that’s what’s going to drive gold in the short and intermediate term. The question really is: To QE or not to QE? The next Fed meeting will be a prime indicator of that, and the one after that and the one after that.

My general view is that the reports of a resurgent U.S. economy are way ahead of themselves and some data points are indicating that the recovery is not that robust and may even be in danger. The jobs numbers will shed some light on this. If such a scenario develops, then the snap back for gold would be pretty dramatic. A weakening U.S. economy would be bullish for gold because it’s bullish for continued QE, and that’s the real factor for gold going forward.

TGR: Besides the jobs numbers and the Fed meeting minutes, what indicators are you watching to get some insight into whether the economy really is improving?

BL: People need to listen to the Fed. The Fed is trying to be more open and transparent, despite the typical central banker doublespeak. But it is looking at two numbers right now: jobs and inflation. The jobs number is predominant because every indicator that economists currently use to measure inflation is showing no significant inflation. Now, the consumer price index (CPI) is not the CPI of our fathers, and it has been jiggered here and there to underreport price inflation. Regardless, until we start seeing price inflation in the CPI, the Fed will be more conducive to easing. The unemployment numbers, however, are where we’ll see some real action or perhaps some tapering if the unemployment rate starts to improve.

TGR: What’s your take on the price behavior in the precious metals markets? Where do we go from here?

BL: I think the big price action that’s happened in gold over the last six weeks or so is a big revelation. It has revealed the character of the modern gold market, which has developed into a West versus East or paper gold versus real gold market. In the West, there are speculators who invest in the future exchanges primarily. They are more concerned about the short-term direction for gold and the other precious metals. The future exchanges are really nothing more than an opinion poll on the price of gold. It’s not really a place where real metal gets bought and sold but, rather, the futures market is a place to trade derivatives. In a real sense, it is fractional reserve investing.

In mid-April, when we had the big smackdown in gold, over 400 tons sold on the Comex. In a matter of an hour or two the amount of metal sold exceeded, by over 100 tons, the amount of gold in the Comex warehouse. The Comex trading on that day had no relation to the physical markets. Conversely, the price drop resulting from that selloff spurred physical demand throughout the world, but particularly in price-sensitive markets in Asia.

One of the things people looked at throughout all of this was the big drawdown in the exchange-traded funds (ETFs) of physical gold. Since the beginning of the year, the remarkable drawdown in the ETFs amounted to around 370 tonnes of gold. Over that same timeframe, I estimate that more than 600 tonnes of gold have been consumed in China alone. And that doesn’t include the huge demand in India or the rest of Asia. It also doesn’t include the surging physical demand for gold in the Western markets or the renewed central bank demand. If you add it all up, I think that price smash in April did nothing but increase global gold demand.

TGR: How does an investor get data on increased physical consumption worldwide?

BL: It’s tough. I’ve tried to compile these numbers many times before. You get some information from the World Gold Council. Now, you get some information from the Shanghai Gold Exchange, which, although it’s a futures market, represents more of a physical market in China. You look at imports through Hong Kong into China. Indian import data is more difficult. And you have anecdotal reports of demand. The World Gold Council is the only group that actually tries to sum up all of these totals, and it doesn’t offer much in the way of real-time information. So it’s really tough, but there are seasonal trends that investors or retail investors need to keep in mind.

Unfortunately, although we’ve had tremendous physical demand providing an underpinning for the market recently, we’re entering the seasonal slow period of early to mid-summer for physical gold demand. One of my concerns is that as physical demand lessens, we may see some resulting price weakness in gold.

TGR: That was the commodity, but what about the miners? During this pullback, have most miners mirrored the underlying commodity?

BL: Yes, mirrored and magnified. The good thing about the mining equities is that they tend to leverage the moves in gold and silver. The bad news is that they tend to leverage the moves in gold and silver. In this cycle, as the metals have dropped, the equities have absolutely been lambasted. I tell my readers that there is too much uncertainty in the near term.

The longer-term picture remains very bright for the metals because the world’s governments are going to continue to float their economies on an ocean of new liquidity for the foreseeable future. So the fundamental economic backdrop for gold and, ultimately, the equities remains bullish. But in the near term, especially as we get into the seasonal slow period for physical demand, too much risk exists out there. I’m advising people to keep their heads low, be patient and wait for mid to late summer before they make any new purchases.

TGR: It’s a little bit of a risk-off trade for the mining equities. Does that mean you are weighted toward producers rather than explorers?

BL: In a very general sense, the producers will benefit much more quickly from a rebound in the precious metals. With that said, there are specific juniors that are hot on the trail of big, new discoveries and/or are expanding discoveries with the drill bit right now. The juniors have always been more of a news-driven sector. So looking at the broad sector, it will take a while for enthusiasm to filter down through the producers, through the majors and down to the juniors, but specific companies could have significant and company-making news in that meantime.

TGR: You mentioned juniors and then producers. One company that has attributes of both that you have followed for a long time is New Gold Inc. (NGD:TSX; NGD:NYSE.MKT). It was a junior several years ago, and grew into a midtier. It recently acquired Rainy River Resources Ltd. Is this the start of a new trend in consolidation in the sector?

BL: I hope so, but New Gold is kind of a special case. It’s a very well-run, very aggressive company. Our readers in Gold Newsletter have benefitted from that for years, as that company has been one of our recommended producers. It is much more aggressive than the rest of the producer flock, but that’s really not saying a lot because nobody has been very aggressive recently. I hope it’s the beginning of a trend, but New Gold has always been a bit of a special case. It has been able to move quickly to secure companies and projects that have turned out to be very economic. You see the opposite by some of the larger majors having reached, in the past, too far and too aggressively and paid too high a price for projects that did not turn out to be as economic. I’m very bullish on New Gold, and I do hope it’s the beginning of a trend.

TGR: What are your thoughts on silver?

BL: I’m very bullish on silver. Silver offers optionality to gold. Silver equities offer optionality to silver, so you can really get a lot of bang for the buck through some really well-run, well-positioned silver producers.

I like Silver Standard Resources Inc. (SSO:TSX; SSRI:NASDAQ), SilverCrest Mines Inc. (SVL:TSX.V; SVLC:NYSE.MKT), Endeavour Silver Corp. (EDR:TSX; EXK:NYSE; EJD:FSE) and Great Panther Silver Ltd. (GPR:TSX; GPL:NYSE.MKT). There is a nice selection of companies out there on the smaller end of the scale, companies that have good, solid production growth profiles.

TGR: Do you have a forecast or an expectation of silver prices?

BL: Not to any decimal places, but silver will track gold. And silver will move more quickly than gold in whatever direction gold is headed. I’m bullish on gold, so I have to be bullish on silver.

TGR: Across the industry, pundits are talking about the death of the junior mining sector. Is the death of the junior mining sector exaggerated?

BL: I don’t think the junior sector is dead, although it may be comatose. The thing that will surprise the people who are waiting for further and further levels of capitulation in the junior market is how quickly this market can wake up. I’ve seen worse days. If you look in the late 1990s and even the very early 1990s or late 1980s, you’ll see times when the market was comparatively worse off. In those days, the financing infrastructure was limited relative to where it is today. Since then, capital markets have matured. With the money available from the previous rounds of QE, a lot of money is available to come into the junior market when that market turns around.

TGR: Positives include financial infrastructure, a large investor community, positive fundamentals and money on the sidelines.

BL: Absolutely, but first we need a turnaround in prices to start a rally.

TGR: For juniors, where do you see good risk-reward opportunities now?

BL: I see the best investments in the sector on a case-by-case basis. I don’t do a lot of macro-level analysis because once you start off with the big picture, then drill down to a more focused picture and down to the project level, there are lots of places to make false assumptions. Rather than top down, I like to take things on a story-by-story basis and see if a company, particularly in the juniors, has a shot at finding an economic deposit. That analysis is somewhat independent of the global economic picture. A good deposit or a great deposit can overcome a lot of other problems.

With that said, I’m turning more bullish on uranium lately. After looking at that story, I believe that we’re going to go into a supply deficit toward the end of this year or early next year. That’s a very powerful story that we’ll start seeing develop over the coming months.

TGR: The big player in uranium is Cameco Corp. (CCO:TSX; CCJ:NYSE), which has a large majority of the production globally. Apart from it, most of the other players are explorers. Does that mean that you’re interested in uranium explorers?

BL: To some degree, as I say, the ones that have very good individual stories. The last time we had a really rollicking bull market in uranium and uranium juniors was about five years ago. They called it uranimania back then, and any company that had some version of the word uranium in its name and its property position could have a $20 million ($20M) market cap. The companies that have survived from then are the better-run companies with the better prospects, and a number of them are in production or are about to get into production. So they are very highly exposed to the uranium price.

Uranium Energy Corp. (UEC:NYSE.MKT) is one, as is Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT). On the exploration front are the Alpha Minerals Inc. (AMW:TSX.V) and Fission Uranium Corp. (FCU:TSX.V)stories. And I think that’s going to get much bigger. One of the better stories out there, and a story many are overlooking, is Kivalliq Energy Corp. (KIV:TSX.V).

TGR: You’re not concerned, with the names that you just mentioned, that near-term or short-term new production will come on-line to flood the market?

BL: No, I don’t think that a big flood of new production will swamp the market, at least not enough to overcome the deficit position. The Highly Enriched Uranium agreement with Russia that’s ending this year is going to take 15–20 million pounds off the market and most likely put the global market into a significant deficit position.

TGR: Besides uranium, you like the fundamentals for platinum. Do you want to talk about that?

BL: I cover Prophecy Platinum Corp. (NKL:TSX.V; PNIKF:OTCPK; P94P:FSE). Where else in the world do you have a high-grade, bulk mineable, platinum-palladium project? There isn’t one, especially in a geopolitically reliable region. Wellgreen is an extraordinary project; plus, platinum and palladium have positive fundamentals that are tremendously powerful right now. The key to that project is that the preliminary economic assessment (PEA) that came out was good and was economic.

However, the size of the project assumed in the PEA presented challenges. It was neither small and quick to production nor large enough to bring long-term production forward. It was right in the middle and showed a mine life of 37 years. For Wellgreen to work best, it needs to be either much larger or significantly smaller than what the PEA showed. In this market, I think it needs to rework that plan to show it as a smaller project with lower capital expense and, therefore, a much higher rate of return. With that said, it’s still very large and still has the potential to grow significantly with this season’s drill targets. The deposit has a lot of allure for a major company.

TGR: What would Wellgreen’s path to production look like?

BL: Prophecy itself could develop and finance a smaller project focused on some higher-grade starter pit scenarios, and it has gone a long way in trying to identify those starter pits. It could end up joint venturing with a major to develop a slightly larger scenario or it could get sold off to a major for a much larger scenario.

TGR: You also cover several companies with projects in Mexico. What are the highlights there?

BL: Mexico is a great place geologically and a fairly good place politically. The country has a long history of mining and mining laws are well established. The business climate helps companies work and secure land title. Its more streamlined path to production is a great benefit to the smaller producers. Mexico offers a lot of great opportunities and many discoveries are yet to be found.

TGR: Any specific names?

BL: I like Cayden Resources Inc. (CYD:TSX.V; CDKNF:NASDAQ). For a junior, Cayden offers a lot to like, including a good share structure and money in the bank. The company sold a small portion of its project in the Guerrero Gold Belt to Goldcorp Inc. (G:TSX; GG:NYSE) for approximately $16M. That will fund exploration on its primary projects for the next two years. One highlight is the El Barqueño project, which is showing impressive trench results, including 21 meters at 8.3 grams per ton. Cayden should be able to start drilling that target in the near term.

TGR: You also watch companies in the Yukon. The latest Yukon gold rush, which started in 2009, brought high expectations that haven’t been fulfilled. Can you give us an update? Are there some exploration opportunities that have stood the test of time?

BL: When the Yukon erupted with Underworld Resources Inc.’s Golden Saddle discovery, Gold Newsletter was the only publication to recommend Underworld, and we did it before that discovery. It turned out to be a very profitable experience for our readers. Along with a couple of other projects, Golden Saddle really ignited a gold rush in the Yukon.

Along the way, there were some speed bumps. People didn’t realize how long it takes to develop prospects and get them to drill-ready status. In that environment, the shortened drill season affects project speed—you can only explore one season a year. As a result, development has taken longer, and it is much more difficult than people had imagined. When you combine the slow project progress in the Yukon with the correction in the junior market, the net result is that some companies that have already made discoveries are selling for fractions of what their ultimate worth will be.

One example of this is Kaminak Gold Corp. (KAM:TSX.V) with its Coffee project. At today’s prices, it represents real value. Eventually, I believe it will be taken out at a multiple to today’s price.

I’m interested in and have been recommending Comstock Metals Ltd. (CSL:TSX.V) as well. I’m a fairly large shareholder in the company. Comstock’s project is interesting for many reasons, including that it may be an extension off the same structure as Underworld’s Golden Saddle discovery. It had interesting drill results last year. Comstock is following up with its VG zone this year and, hopefully, will be able to advance some of other targets to drill-ready status before the season is over.

TGR: If investors were looking for, in the best possible sense, the next Yukon or the next underappreciated region that has potential to be a world-class district, where would they look?

BL: Let me share some of the key takeaways of going through a few cycles in the precious metals market. One of the things we saw in the early 1990s was the perception of a revolution of freedom across the world. New regions opened to modern mineral exploration. Two examples were Southeast Asia and Indonesia—and then came the Bre-X scandal. Another example was Venezuela—and then came the leftist Hugo Chavez. The Next Big Thing is a moving target. Success breeds, in some cases, envy and expropriation. I stress to investors that they don’t need to be pioneers—it’s the pioneers who get the arrows in the back. Investors don’t have to take on added geopolitical risk when we have well-positioned companies with proven deposits and proven exploration teams that are selling at huge historic discounts.

TGR: Is there anything else you want to say?

BL: Looking at the general market, the concern I have right now is that we’re beginning to see speculative demand in the West come back into gold. We’re beginning to see some short covering by Western speculators. While that is positive in the short term, we may see a falloff in physical demand as we get into summer. I’m not sure that the strong physical demand that we’re seeing now will be handed off in an orderly fashion to the Western speculators. If so, we could have some further weakness in gold going into midsummer. And that’s why I am targeting around the end of July as a good time for investors to come back into the market and pick up some bargains.

TGR: I noticed that you have expanded the scope of attendees that you are welcoming to the next New Orleans Conference. As Father’s Day approaches, can you talk about this?

BL: A few weeks ago, I was on the phone with Frank Holmes, the CEO of U.S. Global Investors, discussing ideas for the next New Orleans Investment Conference. Frank came up with an idea that hit me like a thunderclap: Let parents bring their kids to the conference for free. I love the idea. This would encourage more attendees to bring along their kids, to show them the benefits of free markets, expose them to the constant threats to their liberty, reveal the hidden dangers of on-going monetary debasement and teach them how to protect their money and freedoms. I’m always searching for ways to expand our unique experience and outlook to younger people who rarely get exposed to the free market ideals that we promote.

We wrapped up the idea as a limited-time special opportunity between Mother’s Day and Father’s Day, but I decided to extend it through the end of June. And, incidentally, it also applies to children who want to bring along their parents.

Interested investors need to call our offices at 800-648-8411 to take advantage of this special opportunity.

TGR: That’s a great way to get the next generation introduced to the investment markets. We look forward to speaking with you again.

BL: Thanks, it was great to speak with you.

With a career spanning three decades in the investment markets, Brien Lundin serves as president and CEO of Jefferson Financial, a highly regarded publisher of market analyses and producer of investment-oriented events. Under the Jefferson Financial umbrella, Lundin publishes and edits Gold Newsletter, a cornerstone of precious metals advisories since 1971. He also hosts the New Orleans Investment Conference, the oldest and most respected investment event of its kind.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:

1) J. Alec Gimurtu conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Gold Report: Silver Standard Resources Inc., SilverCrest Mines Inc., Great Panther Silver Ltd., Cayden Resources Inc., Prophecy Platinum Corp. and Goldcorp Inc. Uranerz Energy Corp. and Fission Uranium Corp. are sponsors of The Energy Report. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Brien Lundin: I or my family own shares of the following companies mentioned in this interview: New Gold Inc., Fission Uranium Corp., Kivalliq Energy Corp., Uranerz Energy Corp., Prophecy Platinum Corp., Cayden Resources Inc., Kaminak Gold Corp. and Comstock Metals Ltd. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By JW Jones – OptionsTradingSignals.com

By www.CentralBankNews.info Here’s today’s Central Bank News’ link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By The Sizemore Letter

Watch Charles Sizemore chat with CNBC’s Oriel Morrison about the Japanese markets and the potential for a full-blown capital markets meltdown.

By The Sizemore Letter

Back in April, I asked if E-Cigarettes would relight Big Tobacco’s prospects.   I had my doubts.

E-cigs seemed to be a more pleasurable version of a nicotine patch: something that an existing smoker might switch to for health reasons but not exactly an attractive or glamorous product for someone who doesn’t already smoke.  (Humphrey Bogart would not have been as cool in Casablanca with an e-cig dangling between his lips.  This is an indisputable fact, not an opinion.)

It certainly made sense for Altria ($MO), Reynolds American ($RAI) and the rest of Big Tobacco to get in on the action; it’s better to extract a little more revenue from defecting cigarette smokers than to lose them altogether.

But investors should be realistic about the potential for e-cigs to make Big Tobacco a growth industry again.  It’s not going to happen.  Though there are hundreds of millions of tobacco users worldwide (the World Health Organization puts the number of tobacco users at over 1 billion), public health campaigns, legal restrictions, and changing consumer tastes have put cigarette smoking in terminal decline in the developed world.  As a sobering (no pun intended) case in point, American teenagers are more likely to use illegal drugs than to light up a cigarette.

Perhaps most damaging, new “plain packaging” rules are directly assaulting the single most valuable assets of Big Tobacco companies: their brands.

In Australia, all cigarette boxes look identical, regardless of brand: plain white boxes with the brand name written in a uniform font, size, and placement.  Oh, and the same graphic photos of people dying of lung cancer on the back.

Similar rules are being considered in Canada, India, the UK and the European Union.  Big Tobacco is fighting it tooth and nail on trademark and intellectual property grounds, and I consider their objections valid.  But the assault on branding seems to be the next front in the ongoing war of attrition between public health advocates and Big Tobacco, and if history is any guide, the public health advocates will win.

This brings me back to e-cigarettes.  Altria is jumping into the e-cig market with a new product under the brand name Mark Ten.  Nowhere on the packaging will there be any prominent mention of Altria or its best-known brand, Marlboro.

I’m left scratching my head here.  There are over 250 e-cigarette brands currently on the market.  While I don’t see a smoker paying a large premium for a Marlboro-branded e-cig, I would certainly expect them to gravitate to a brand they already know.  In failing to use the Marlboro name, Altria seems to be neutralizing its single biggest strength: a consumer brand that is behind only Coca-Cola ($KO) and Anheuser-Busch InBev’s ($BUD) Budweiser in name recognition.

This would be tantamount to calling Diet Coke “Healthy Pop” and leaving all mention of the Coke brand off the can.  It’s madness.

If Big Tobacco is wanting to start fresh with new branding because of the toxic association between the existing brands and those filthy, old traditional cigarettes, they are wide off the mark.  Their market is existing smokers, not nonsmokers.  Unless they brand e-cigs as “portable flavored hookahs” or something with novelty appeal, it’s hard to imagine this product appealing to a young, unbiased consumer.

And this actually brings me to a related topic.  I noted last month that marijuana stocks were a terrible investment.  The companies engaged in legal production and marketing are small, poorly capitalized, and not likely to still be in business five years from now.

But as the legal regime surrounding their product continues to be relaxed, there may be room for a large, well-capitalized company to sweep in and take over the market.  Big Tobacco’s massive production and distribution machine could be easily tweaked to sell packaged marijuana cigarettes—which could be branded under familiar brand names such as Marlboro or Camel.

A lot of Americans would be put off by this, of course.  Fully 49% of Americans are against marijuana legalization for very valid reasons.  But the question Big Tobacco needs to ask is this: can their reputation get any worse than it already is?

Big Tobacco is already a pariah industry under constant attack.  What would they have to lose by marketing marijuana cigarettes in Colorado and Washington?  It’s hard to see a loyal cigarette smoker kicking the habit because “their” brand has now been tarnished by tie-dye wearing hippies.

At any rate, if Big Tobacco is going to continue to be a good investment for its shareholders, management needs to focus on leveraging their core brands.  The alternative is to slowly fade away.

By Chris Vermeulen – TheGoldAndOilGuy.com

The two most popular investments a few years ago have been dormant and out of the spot light. But from looking at the price of both gold and oil charts their time to shine may be closer than one may thing.

Seasonal charts allow us to look at what the average price for an investment does during a specific time of the year. The gold and oil seasonal charts below clearly show that we are entering a time which price tends to drift higher.

While these chart help with the overall bias of the market keep in mind they are not great at timing moves and should always be coupled with the daily and weekly underlying commodity charts.

Now, let’s take a quick look at what the god father of technical/market analysis shows in terms of market cycles and where I feel we are trading… As I mentioned last week, a picture says a thousand words so why write when I can show it visually.

John Murphy’s Business Cycle:

Mature Stock Market:

Commodity Index Looks Bullish and Should Rise:

Gold & Silver Seasonality, Price Charts w/ Analysis:

 Precious Metals like gold and silver are nearing a bounce and possible major rally in the second half of this year.

Crude Oil Seasonality, Price Chart w/ Analysis:

Crude oil has been a tough one to trade in the last year. The recent 15 candles have formed a bullish pattern and with the next few months on the seasonal chart favoring higher prices it has been leaning towards the bullish side.

Commodity, Gold & Oil Cycle and Seasonality Conclusion:

In short, I feel the equities market is nearing a significant top in the next couple weeks. If this is the case money will soon start flowing into commodities in general as more of the safe haven play. To support this outlook I am also factoring in a falling US dollar. Based on the weekly dollar index chart it looks as though a sharp drop in value is beginning. This will naturally lift the price of commodities especially gold and silver.

It is very important to remember that once a full blown bear market is in place stocks and commodities including gold and silver will fall together. I feel we are beginning to enter a time with precious metals will climb but it may not be as much as you think before selling takes control again.

Final thought, This could be VERY bullish for the Canadian Stock Market (Toronto Stock Exchange) as it is a commodity rich index. While the US may have a pullback or crash Canadian stocks may hold up better in terms of percentage points.

Get My Daily Video, Updates & Alerts Here:

www.TheGoldAndOilGuy.com

Chris Vermeulen

London Gold Market Report
from Ben Traynor
BullionVault
Thursday 13 June 2013, 09:00 EDT

GOLD PRICES rose as high as $1394 an ounce during Wednesday’s Asian trading, before easing back by lunchtime in London, as European stock markets also fell, following selloffs in the US and Asia.

Silver dropped back below $21.90 an ounce after briefly touching $22, while other commodities were also down on the day.

“The trend is still bearish [for gold and silver],” says technical analysts at Scotia Mocatta.

Japan’s Nikkei 225 fell 6.4% Thursday, taking the index down to more than 20% below last month’s five-year high, and thus fulfilling a common definition for a bear market. Thursday’s fall comes two days after the Bank of Japan decided not to announce any additional stimulus measures at its policy meeting.

“There’s a global selloff in risk assets,” says Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors in Sydney.

“Short term there was froth and that needed to come out, especially in Japan.”

Emerging market stock indices have also been hit in recent weeks, as have emerging market bonds

“Safe assets are not entirely safe anymore,” says Jeffrey Shen, head of emerging markets at the world’s biggest asset manager BlackRock.

“There’s nowhere to run and nowhere to hide,” agrees Jack Deino, senior money manager who overseas emerging market assets at Invesco in New York.

“There’s been just a lot of money out there looking for yield. Part of the selloff is attributable to the [potential] pulling back of [Federal Reserve quantitative easing], and you can’t do anything about that.”

The Dollar meantime has lost ground against major currencies since the start of June. The Euro has rallied to touch a four-month high above $1.33 this morning, nearly 3% up on the month. The Pound is up 3.1% on the month at just below $1.57, while the Dollar has also lost ground against the Yen, falling to ¥94 to the Dollar this morning, down from last month’s five-year high of ¥103.

The Dollar’s depreciation in recent weeks has broadly coincided with falls in global stock markets, with the Dollar having strengthened during much of May as stocks also gained. The 30-day correlation between the US Dollar index and the S&P 500 rose to its highest level since October 2008 at the end of last month, Bloomberg reports, arguing that this is “a sign that traders are gaining confidence in the sustainability of the US recovery”.

“The way the Dollar is trading relative to risk is totally different [to its behavior in recent years]…the whole nature of the Dollar as a funding currency is breaking down,” says Jen Nordvig, global head of foreign exchange strategy at Nomura Securities in New York, referring to a phenomenon whereby traders have taken advantage of low US interest rates to borrow in Dollars to buy high yielding assets elsewhere.

Over in India, traditionally the world’s biggest gold buying nation, imports of gold have “come down significantly” since the government raised the import duty to 8% last Wednesday, according to Bhaskar Bhat, managing director at the country’s biggest jeweler Titan Industries, whose shares are down nearly 25% since the hike was announced.

“Gold imports have sharply come down,” finance minister P Chidambaram told reporters Thursday.

“Net gold imports averaged $135 million a day in first 13 business day in May till May 20. However, in the subsequent 14 business days, it averaged only $36 million…I would be happy if they come down even further.”

When asked if the government is planning any further duty hikes however Chidambaram replied that he does not want to become too unpopular.

Ben Traynor

BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By www.CentralBankNews.info     The Philippines’ central bank held its main policy rates steady, along with its Special Deposit Accounts (SDA), saying inflationary risks were evenly balanced and domestic growth was robust.
    The Central Bank of the Philippines (BSP) kept the rate for its overnight borrowing, or reverse repurchase facility (RRP) at 3.50 percent and the rate on its overnight lending, or repurchase facility (RP), at 5.50 percent. Its last rate change was in October 2012 when it cut rates by 25 basis points.
    The BSP said it would pay close attention to price and output conditions as well as asset markets to ensure its rates were consistent with price and financial stability while supporting economic growth.
    While keeping its main rates steady this year, the central bank has been cutting the SDA rate by 150 basis points – most recently by 50 basis points in April – to make it less attractive for foreign funds to park their money at the central bank. This has put upward pressure on the peso and not resulted in the funds being used to stimulate economic activity
    But since early May, and especially since May 22, when U.S. Federal Reserve Chairman Ben Bernanke said the U.S. may soon start to wind down its asset purchases, the peso – along with most other emerging market currencies – has weakened sharply.
    A drop in the peso can fuel inflation through higher import prices, but the BSP said the inflationary environment remained benign and inflation is forecast to remain within target for 2013 until 2015.
    “The modest pace of global economic activity could continue to temper the broad outlook for inflation,” the BSP said, adding that potential upside pressures could arise from power rate adjustments and the upward impact of sustained capital inflows on domestic liquidity.
    It added that maintaining rates would also allow the central bank time to assess the impact of its recent fine-tuning and global financial market developments also support and unchanged policy stance.
    The peso has depreciated 4.4 percent since May 22, trading at 43.01 to the U.S. dollar today. In 2012 the peso rose by almost 7 percent against the dollar but since mid-March it has been falling.
    In May, the Philippine inflation rate was unchanged at 2.6 percent from April, well below the central bank’s target of 4.0 percent, plus/minus one percentage point. In April the BSP raised its forecast for 2013 inflation to 3.3 percent.
    The Philippines’ Gross Domestic Product expanded by 2.2 percent in the first quarter of this year, up from 1.9 percent in the fourth quarter, for annual growth rate of 7.8 percent, up from 7.1 percent.
    The government has forecast 2013 growth of 6-7 percent, stable from 2012’s 6.6 percent.
   
    www.CentralBankNews.info

By www.CentralBankNews.info     Indonesia’s central bank raised its benchmark BI rate by 25 basis points to 6.0 percent in what it described as a pre-emptive move to “rising inflation expectations and to maintain macroeconomic stability and financial system stability amid increasing uncertainty in global financial markets.”
    The rate hike by Bank Indonesia follows Tuesday’s 25 basis point increase in its overnight deposit rate to 4.25 percent, underlining authorities’ determination to defend and stabilize the rupiah, which has come under pressure along with the exchange rates of most Asian and emerging market currencies in recent weeks.
    “Pressure on the rupiah was associated with the repositioning of financial assets from emerging markets in line with the possibility of monetary policy adjustments by the Fed and negative sentiment towards domestic fiscal and current account deficits,” Bank Indonesia said.
    “Bank Indonesia continues to maintain the stability of rupiah exchange rates in line with its economic fundamentals and provides adequate liquidity in the foreign exchange market,” it added.
    The rupiah has been steadily depreciating since hitting a recent high of 8,455 to the U.S. dollar in August 2011, down 16.8 percent to 9,877 rupiah per dollar today.
    But since May 22, when the U.S. Federal Reserve chairman said the U.S. may reduce its asset purchases “in the next few meetings,” the decline in the rupiah’s exchange rate has accelerated and trading has become volatile with rupiah forward rates falling as foreign investors withdraw money.

    “Rupiah depreciation pressure increased in May,” Bank Indonesia said, noting it had declined by 0.74 percent to the U.S. dollar.
    Earlier this week, when Bank Indonesia raised its deposit rate, it said that it was “fully prepared to take necessary measures to stabilise monetary conditions in light of recent rupiah depreciation.”  
    The rupiah has been under pressure for a while due to uncertainty over the government’s plan to cut popular fuel subsidies that have boosted the budget deficit. The delay in cutting those subsidies has unnerved foreign investors while the plan to cut subsidies has driven up inflationary expectations. Last month Standard and Poor’s revised its outlook on Indonesia to stable from positive.
    “Going forward, Bank Indonesia believes that the financial stability will be maintained with banking intermediary function at a moderate level in line with a decelerating economic performance,” the central bank said.
    Last month the central bank warned that it would not hesitate to adjust its policy rate and was closely monitoring inflationary pressures from the plan to cut fuel subsidies, which would lead to higher fuel prices. The bank has often expressed its concern over the impact on inflation from such a move and a deputy governor signaled in late May that the central bank was shifting to a tightening bias.
    Bank Indonesia’s previous change in its rate was in February 2012 when it cut the BI rate by 25 basis points from 6.0 percent.
    Indonesia’s inflation rate eased slightly in May to 5.47 percent from 5.57 percent in April but the central bank repeated that inflation expectations have been rising ahead of the anticipated government policy on fuel subsidies with higher administered prices due to higher electricity tariffs and a disruption in the supply of propane.
    Bank Indonesia targets inflation of 4.5 percent, plus/minus one percentage point.
    The central bank’s new governor, former finance minister Agus Martowardojo who took over three weeks ago, has warned that inflation could surge to as high as 7.76 percent if the government raises subsidised fuel prices.
    Growth in Indonesia’s economy in the second quarter of this year is forecast to be in the lower bound of the bank’s forecast of 5.9-6.1 percent due to slower global growth due to Europe’s continuing crises and a slowdown in China, the bank said.
    “These conditions restrained the growth of exports and investment, especially non-construction investment,” the central bank said, adding that growth continues to be driven by strong household consumptions and investment in construction.
     In the first quarter, Indonesia’s Gross Domestic Product eased to annual growth of 6.02 percent, slightly down from 6.11 percent in the fourth quarter. Last month the central bank forecast 2013 growth in the lower range of its 6.2-6.6 percent forecast compared with 2012’s growth of 6.2 percent.
    Indonesia’s balance of payments is expected to improve in the second quarter, the bank said, due to surplus in the capital and financial accounts despite a deficit in the first quarter. Exports are still subdued due to weak external demand and lower global commodity prices while imports continue to rise.
    Indonesia’s international reserves were US$ 105.1 billion at the end of May, the bank said, the equivalent of 5.8 months of imports and debt service payments.
    “Going forward, Bank Indonesia believes that the financial stability will be maintained with banking intermediary function at moderate level in line with a decelerating economic performance,” the central bank said.

    www.CentralBankNews.info