Wednesday, July 14, 2010
Friday, June 18, 2010
Monday, June 14, 2010
Gold Dealing Hits "Summer Lull" But Bullish Trend "Intact", Bank Analysts Forecast Rising Prices
Gold edged lower as the US Dollar also slipped early Monday in London, reversing a 0.5% rise in Asian trade as world stock markets rose with commodity prices.
Crude oil rose sharply to $75 per barrel. Major-economy government bonds fell in price, pushing 10-year interest rates above 3.25% on US Treasuries.
"Blame it on the World Cup or summer lull," says one Hong Kong dealer, "but gold is losing momentum and trading interest is subsiding."
"We're getting into the summer, so I wouldn't be surprised if things quieten down for a while," says Afshin Nabave, head of trading at Swiss refining group MKS Finance.
"But overall, as long as the economic and political situation continues, I think gold has good chance of eventually breaking the $1250-ish area and heading for $1300."
On the currency markets today, the Euro rose above $1.22 for the first time in a week after new data showed Eurozone industrial output rising more quickly than expected in April.
Auditors sent by the European Union and International Monetary Fund arrived in Athens this morning to judge progress in slashing Greece's budget deficit from 14% of GDP to the 2014 target – and EU limit – of 3%.
The British Pound meantime jumped towards 1-month highs above $1.47 after the UK's new, independent Office for Budgetary Responsibility cut the previous government's GDP growth target from 3.25% to 2.60% for 2011, but said the public deficit wouldn't be quite as bad as forecast.
Japan's new prime minister, Naoto Kan, warned in his first major speech on Friday that Tokyo's debt is at "risk of collapse".
"Our country's outstanding public debt is huge. Our public finances have become the worst of any developed country."
Gold priced in Japanese Yen ticked higher on Monday, with Tokyo Gold Futures ending 1% higher at €3645 per gram, some 1.5% below last week's 27-year high.
UK investors wanting to buy gold for Pounds today saw it drop 1.1% but hold well above Friday's 1-week lows beneath £830 an ounce. The Gold Price in Euros dropped the same proportion, falling to its lowest level since June 4th at €1001 per ounce (€32,175 per kilo).
"Higher highs and higher lows keep the bullish trend [in Dollar Gold Prices] intact," says technical analysis from bullion bank Scotia Mocatta, noting that Friday saw gold complete its third consecutive weekly rise.
"Silver lacks direction, but gold is in a bull trend, so we would expect the Gold-Silver Ratio to drift higher."
Historically set around 15 ounces of silver to one ounce of gold, the Gold-Silver Ratio averaged nearer 40 during the 20th century. It "actually dropped" last week, says Scotia, "from 69.64 to 67.27."
Silver Prices rose towards new June highs against the Dollar early in London on Monday, trading above $18.50 an ounce and pulling the Gold-Silver Ratio down to 66.57.
Agreeing with a note published today by Swiss bank UBS, analysts at Morgan Stanley "continue to like the outlook [for precious metals] in the coming months amid low global interest rates and unresolved Eurozone debt turmoil.
"We expect Gold Prices to rise on a quarterly average basis for the rest of the year."
Adrian Ash, 14 Jun '10
Gold edged lower as the US Dollar also slipped early Monday in London, reversing a 0.5% rise in Asian trade as world stock markets rose with commodity prices.
Crude oil rose sharply to $75 per barrel. Major-economy government bonds fell in price, pushing 10-year interest rates above 3.25% on US Treasuries.
"Blame it on the World Cup or summer lull," says one Hong Kong dealer, "but gold is losing momentum and trading interest is subsiding."
"We're getting into the summer, so I wouldn't be surprised if things quieten down for a while," says Afshin Nabave, head of trading at Swiss refining group MKS Finance.
"But overall, as long as the economic and political situation continues, I think gold has good chance of eventually breaking the $1250-ish area and heading for $1300."
On the currency markets today, the Euro rose above $1.22 for the first time in a week after new data showed Eurozone industrial output rising more quickly than expected in April.
Auditors sent by the European Union and International Monetary Fund arrived in Athens this morning to judge progress in slashing Greece's budget deficit from 14% of GDP to the 2014 target – and EU limit – of 3%.
The British Pound meantime jumped towards 1-month highs above $1.47 after the UK's new, independent Office for Budgetary Responsibility cut the previous government's GDP growth target from 3.25% to 2.60% for 2011, but said the public deficit wouldn't be quite as bad as forecast.
Japan's new prime minister, Naoto Kan, warned in his first major speech on Friday that Tokyo's debt is at "risk of collapse".
"Our country's outstanding public debt is huge. Our public finances have become the worst of any developed country."
Gold priced in Japanese Yen ticked higher on Monday, with Tokyo Gold Futures ending 1% higher at €3645 per gram, some 1.5% below last week's 27-year high.
UK investors wanting to buy gold for Pounds today saw it drop 1.1% but hold well above Friday's 1-week lows beneath £830 an ounce. The Gold Price in Euros dropped the same proportion, falling to its lowest level since June 4th at €1001 per ounce (€32,175 per kilo).
"Higher highs and higher lows keep the bullish trend [in Dollar Gold Prices] intact," says technical analysis from bullion bank Scotia Mocatta, noting that Friday saw gold complete its third consecutive weekly rise.
"Silver lacks direction, but gold is in a bull trend, so we would expect the Gold-Silver Ratio to drift higher."
Historically set around 15 ounces of silver to one ounce of gold, the Gold-Silver Ratio averaged nearer 40 during the 20th century. It "actually dropped" last week, says Scotia, "from 69.64 to 67.27."
Silver Prices rose towards new June highs against the Dollar early in London on Monday, trading above $18.50 an ounce and pulling the Gold-Silver Ratio down to 66.57.
Agreeing with a note published today by Swiss bank UBS, analysts at Morgan Stanley "continue to like the outlook [for precious metals] in the coming months amid low global interest rates and unresolved Eurozone debt turmoil.
"We expect Gold Prices to rise on a quarterly average basis for the rest of the year."
Adrian Ash, 14 Jun '10
Thursday, June 10, 2010
Insufficient Silver to Supply China’s Growing Demand
By: Richard Daughty, The Mogambo Guru
Most people have never heard of “the invisible hand” of the market, which is the surprising result of everyone working to get money with which to satisfy their own selfish interests, and it ends up benefiting everybody, a result that is so glorious that it seems that things are being guided by some “invisible hand.”
On the other hand, most people have heard the conundrum, “What is the sound of one hand clapping?” (Answer: a kind of “whoosh”), and they have heard the oxymoron “Hi. We’re from the government and we’re here to help you.”
Against those timeless phenomena, we have James A. Dorn of the Cato Institute writing about the “grabbing hand,” which is entirely familiar if you have kids who are always whining that they are always hungry because you spend all your income on gold, silver and oil in your fearful, panicky response to the Federal Reserve creating So Freaking Much Money (SFMM) and the Obama administration deficit-spending So Freaking Much Money (SFMM).
So you already know about how these ungrateful kids get “grabby” around the dinner table, and fight over any scraps that fall from your lips as you eat to complete satiety in order to keep your strength up.
Just as you would expect, then, Mr. Dorn says, “As the state’s ‘grabbing hand’ interferes with economic freedom, the ‘invisible hand’ of the market will suffer.”
And for perhaps a good example of the “invisible hand,” Bill Bonner here at The Daily Reckoning notes that the Chinese premier Xiaoping is alleged to have said, “To get rich is glorious,” which could be the ultimate in selfishness, and thousands and millions and billions of Chinese people working to do that exact thing has resulted in the fact that “They got richer, faster than any people ever had. The economy is now 10 times larger than it was then; it grew 300% just in the last 10 years,” and, “Incomes rose every year!”
I am sitting here, stunned that a third of the world’s population has an economy that is tripling in ten years! Ten years!
As a result, “There are now more millionaires in China than in France. Three times as many as in Britain. And more people are becoming millionaires there than anywhere else on earth.”
And what does any of this have to do with anything useful to a greedy, grubby little weasel of a guy like me, who just wants to make a lot of money in a short period of time without working? I’m glad you asked!
In a word, silver. Silver is already so laughably under-priced, due to the slimy manipulations and illegal price-suppression short-selling scams and schemes exposed by GATA, Ted Butler and others, that it comes at the Perfect Storm moment that a third of the world’s population is going to need more and more silver to supply all those electronic and electrical goods they are going to demand, and all the other industrial and health applications that consume silver, only to discover that there isn’t any! Hahaha! Surprise!
The industrialization of Europe and the United States into mature, developed nations consumed all the silver that there was above ground, including the 9 billion ounces gradually dis-hoarded from strategic stockpiles since the ’60s, which makes you say to yourself, “Wow! That’s a lot of silver!”
Keep that fact in mind when you remember that a Chinese population, as big as Europe and the United States put together, is going to want just as much silver, to have just as much stuff that requires silver, but there isn’t any silver!
Without going into unnecessary details, that is just one reason why, among dozens of other reasons why, I am happily accumulating silver like a man possessed, driven by the certain knowledge of a Can’t Miss Thing (CMT), which is the best kind of thing! Whee!
By: Richard Daughty, The Mogambo Guru
Most people have never heard of “the invisible hand” of the market, which is the surprising result of everyone working to get money with which to satisfy their own selfish interests, and it ends up benefiting everybody, a result that is so glorious that it seems that things are being guided by some “invisible hand.”
On the other hand, most people have heard the conundrum, “What is the sound of one hand clapping?” (Answer: a kind of “whoosh”), and they have heard the oxymoron “Hi. We’re from the government and we’re here to help you.”
Against those timeless phenomena, we have James A. Dorn of the Cato Institute writing about the “grabbing hand,” which is entirely familiar if you have kids who are always whining that they are always hungry because you spend all your income on gold, silver and oil in your fearful, panicky response to the Federal Reserve creating So Freaking Much Money (SFMM) and the Obama administration deficit-spending So Freaking Much Money (SFMM).
So you already know about how these ungrateful kids get “grabby” around the dinner table, and fight over any scraps that fall from your lips as you eat to complete satiety in order to keep your strength up.
Just as you would expect, then, Mr. Dorn says, “As the state’s ‘grabbing hand’ interferes with economic freedom, the ‘invisible hand’ of the market will suffer.”
And for perhaps a good example of the “invisible hand,” Bill Bonner here at The Daily Reckoning notes that the Chinese premier Xiaoping is alleged to have said, “To get rich is glorious,” which could be the ultimate in selfishness, and thousands and millions and billions of Chinese people working to do that exact thing has resulted in the fact that “They got richer, faster than any people ever had. The economy is now 10 times larger than it was then; it grew 300% just in the last 10 years,” and, “Incomes rose every year!”
I am sitting here, stunned that a third of the world’s population has an economy that is tripling in ten years! Ten years!
As a result, “There are now more millionaires in China than in France. Three times as many as in Britain. And more people are becoming millionaires there than anywhere else on earth.”
And what does any of this have to do with anything useful to a greedy, grubby little weasel of a guy like me, who just wants to make a lot of money in a short period of time without working? I’m glad you asked!
In a word, silver. Silver is already so laughably under-priced, due to the slimy manipulations and illegal price-suppression short-selling scams and schemes exposed by GATA, Ted Butler and others, that it comes at the Perfect Storm moment that a third of the world’s population is going to need more and more silver to supply all those electronic and electrical goods they are going to demand, and all the other industrial and health applications that consume silver, only to discover that there isn’t any! Hahaha! Surprise!
The industrialization of Europe and the United States into mature, developed nations consumed all the silver that there was above ground, including the 9 billion ounces gradually dis-hoarded from strategic stockpiles since the ’60s, which makes you say to yourself, “Wow! That’s a lot of silver!”
Keep that fact in mind when you remember that a Chinese population, as big as Europe and the United States put together, is going to want just as much silver, to have just as much stuff that requires silver, but there isn’t any silver!
Without going into unnecessary details, that is just one reason why, among dozens of other reasons why, I am happily accumulating silver like a man possessed, driven by the certain knowledge of a Can’t Miss Thing (CMT), which is the best kind of thing! Whee!
How to Play Precious Metals in a Year of Recovery
Sara Nunnally, Senior Research Director, Taipan Publishing Group
Precious metals like gold, silver and platinum traditionally represent a “safe haven” for investors in trying economic times… So where are these metals headed in 2010 as the world’s economy is beginning to recover?
Find out how to play this market and see potential gains of 170.25%…
You may be considering adding precious metals to your investment portfolio this year. You may be knee-deep in research already, with several choice companies or ETFs blinking on your computer screen…
You may be reaching for your phone to call your broker…
Stop.
Back away from the phone and sit down. What I’m about to tell you might make you change your mind.
It’s certainly not the popular opinion, but I have to say it anyway.
Wait…
The main factors that drive precious metals prices are indicating a rise in the not-so-distant future, but there may be some great buying opportunities in the next few weeks. The U.S. Dollar Index’s futures have climbed drastically since December:
Image: U.S. Dollar Index Chart November 2009 to March 2010
This BarChart.com chart shows a climb of nearly 8% between Dec. 1, 2009, and June 1, 2010. In the world of currencies, that’s a monstrous move.
The U.S. Dollar Index compares the value of the U.S. dollar against a basket of other major currencies… In this light, we find one glaring thing: A rising dollar.
Obvious, yes, but how many times have we seen the Federal Reserve hold interest rates at essentially zero while flooding the market with more cash?
Since Dec. 17, 2008, the Fed has held rates near zero. In December 2008, the Fed reported that its “non-borrowed” cash reserves were $166.7 billion. By the beginning of 2010, that number grew to more than $1 trillion.
These are outrageous numbers, and yet, when we look at inflation, we’re seeing zilch!
And while it’s true that the U.S. dollar got whacked during the crisis, other currencies did too, and we’re now seeing the greenback make a comeback.
This defies all economic logic, but these are the facts, and low inflation and a climbing dollar do not spell gains for gold, silver or other precious metals.
Stagnant Prices
Gold is trading back at $1,200, off deeply from its recent record highs. Silver is trading well below its December highs above $19. Platinum fell more than $200 an ounce in just a couple of months this spring.The chart shows its weakness even as investors searched for safety during the European debt crisis.
Image: Gold (COMEX) Chart
It’s safe to say that since the dollar started to rebound in December, precious metals have not provided nearly the kind of returns investors expected. The long-standing correlations have broke.
And that takes the momentum right out of precious metals investing… But you wouldn’t have noticed by reading reports of how this sector performed in 2009, or by reading reports of investor demand for things like gold coins.
U.S. Mint Makes Record Sales
Between Oct. 1, 2008, and Sept. 1, 2009, the U.S. Mint sold $1.69 billion in bullion – up an astonishing 78.6% from its fiscal year of 2008.
That’s a record… From the report:
Our bullion sales approached $1.7 billion, our highest total ever and nearly 80 percent above last year’s sales revenue. In FY 2008, bullion accounted for 34 percent of our total sales revenue. In FY 2009, it was 58 percent.
This growth was a 132.3% increase from FY2005 sales, and a total of 27.6 million ounces of gold, silver and platinum.
Interestingly, most of these gains came from the sale of gold and silver coins.
“The sales of American Eagle 22k gold bullion revenue increased 184.3% to nearly $1.28 billion in FY09, up from $449.6 million in FY08,” reports Dorothy Kosich for Mineweb.com.
What’s so surprising about this jump is that the U.S. Mint had suspended production of the American Eagle 22k coins in the beginning of 2009 and only started selling them again in October 2009.
Silver Eagles were cancelled too, though sales for FY2009 jumped to $372 million from $306.4 million the previous year.
With demand for U.S. Mint precious metal coins, and production shortages, it was no surprise that gold, silver and platinum prices also climbed in 2009.
The Run-Up
Here’s how gold did in 2009: On Jan. 2, 2009, its spot price was $874.50 an ounce (in London). On the last trading day in 2009, gold traded at $1,087.50… And that was down from the year’s high of $1,212.50.
And silver: It opened the year at $11.08 an ounce, and closed the year on Dec. 30, 2009, at $16.99 after touching a high of $19.18.
Platinum performed the best: On Jan. 2, 2009, it traded for $926 an ounce, and by the end of the year, it traded for $1,461 with a high of $1,494.
With gold climbing 24.4%, silver up 53.3%, and platinum up 57.8%, it’s no wonder that investors wanted to jump on the precious metals bandwagon… Particularly as the dollar fell 17% against the euro between February and December of 2009.
And given these statistics, from a technical aspect, it’s clear that precious metals needed a break from their astronomical climbs.
Seasonal Adjustments
Outside of the decidedly “wonky” movements of the U.S. dollar so far this year, the summer historically proves a great time to take advantage of rising precious metals prices.
Take silver for example.
“For the majority of the time, silver’s a great buy in the June/July time frame and a good time to be light is the winter time,” writes Bill Downey for GoldTrends.net.
Over the past 15 years, he says, the summer has been provided good results for silver bulls.
The same conclusion may be drawn for gold. The first quarter typically sees the lowest demand for the yellow metal, with the fourth quarter seeing the highest demand.
In 2009, we saw almost the reverse, with demand high in the first quarter, and decreasing as prices increased.
This trend was mainly due to extreme investments made by institutions and exchange-traded funds in the first quarter.
But as traditional demand (for jewelry in India, for example) fell when prices climbed, we’re now sitting near the bottom of the cycle poised to take advantage of rising demand and surging prices.
Typically prices fall through the first two quarters and bottom out during the summer.
How to Play Precious Metals
Now that I’ve given you the bad news, if you were considering putting precious metals in your portfolio, let me give you the good news.
The long-term fundamentals of precious metals are quite eye-catching.
At some point down the road, that Fed cushion of $1 trillion in “non-borrowed” (i.e. printed) reserves is going to send inflation to the moon, and the dollar to hell in a handbasket… complete with a white doily to wipe the mud off our faces.
The backward monetary policy only works in a failing economy.
As soon as real recovery sets in, real consequences for these policies will set in, and that will send precious metals prices soaring.
Our Largest Creditor
Take China, for instance. This country is our largest creditor, holding hundreds of billions of dollars in reserves. When the dollar was tanking, all of the sudden, talk of dumping the dollar ricocheted around the world… from China to Russia to India to Brazil.
Countries started increasing their gold reserves, and emerging markets like China have a ways to go when it comes to gold…
FinancialPost.com’s Peter Koven writes, “Chinese and Indian central banks remain extremely underweight gold, with only 1.5% and 4.1% of their total reserves in the precious metal. That compares to the European average of 54%.”
Not only will China continues its gold investments, but consumer demand will also continue to grow. In 2009, overall Chinese demand climbed 10%, including retail demand.
To play precious metals in a recovering economy where prices are falling and demand is still down, you have to broaden your time frame.
Instead of looking six months to a year down the road, you have to look five years down the road… and wait for your entry point.
Precious metals may bottom out in the next few weeks, and when they do, you’ll get a great entry point for a strong and safe investment for the next half a decade.
The Play
Now, you can invest in the traditional way, by buying gold and silver coins from the U.S. Mint, or other places, or you can buy gold mining companies – some of which are good choices.
If you go this route, take a look at how the company hedges its portfolio. Hedging can help in bad times, but the company loses a lot of upside when gold and silver prices rise.
Goldcorp (GG:NYSE) is an example of an un-hedged gold mining company.
Or you can buy gold and silver the easy way – through an exchange-traded fund.
You’ve heard of the top two: SPDR Gold Shares Trust (GLD:NYSE) and iShares Silver Trust (SLV:NYSE)… These two are very popular, and highly liquid.
But I want to take a look at the PowerShares DB Precious Metals Fund (DBP:NYSE).
This fund is composed of futures contracts for both gold and silver. It’s weighted about 80% gold and 20% silver, but it might be a good alternative to buying both a gold ETF and a silver ETF.
At around $41 for DBP versus a combined $136 for the two separate ETFs, you’ve got a “discounted” way to invest in gold.
According to the prospectus, for the first 12 months, DBP handed its investors a return of 34.05%... if the streak continues, a five-year return on this ETF could double your money with a gain of 170.25%.
But remember… If you’re buying now, watch for a dip through the third quarter and a strong rebound in the fourth…
Action to Take: Buy the PowerShares DB Precious Metals Fund (DBP:NYSE) below $45…
Publisher’s Note:
But wait... Here is another precious metal opportunity. While all eyes are on the big moves in the gold market, smart investors are instead turning to the “metals multipliers” for profit opportunities. By staying ahead of the crowd, Editor Kent Lucas has pinpointed two “metals multiplier” plays most likely to make you rich from Beijing’s “Secret Precious Metal Bullion Mandate.”
Sara Nunnally, Senior Research Director, Taipan Publishing Group
Precious metals like gold, silver and platinum traditionally represent a “safe haven” for investors in trying economic times… So where are these metals headed in 2010 as the world’s economy is beginning to recover?
Find out how to play this market and see potential gains of 170.25%…
You may be considering adding precious metals to your investment portfolio this year. You may be knee-deep in research already, with several choice companies or ETFs blinking on your computer screen…
You may be reaching for your phone to call your broker…
Stop.
Back away from the phone and sit down. What I’m about to tell you might make you change your mind.
It’s certainly not the popular opinion, but I have to say it anyway.
Wait…
The main factors that drive precious metals prices are indicating a rise in the not-so-distant future, but there may be some great buying opportunities in the next few weeks. The U.S. Dollar Index’s futures have climbed drastically since December:
Image: U.S. Dollar Index Chart November 2009 to March 2010
This BarChart.com chart shows a climb of nearly 8% between Dec. 1, 2009, and June 1, 2010. In the world of currencies, that’s a monstrous move.
The U.S. Dollar Index compares the value of the U.S. dollar against a basket of other major currencies… In this light, we find one glaring thing: A rising dollar.
Obvious, yes, but how many times have we seen the Federal Reserve hold interest rates at essentially zero while flooding the market with more cash?
Since Dec. 17, 2008, the Fed has held rates near zero. In December 2008, the Fed reported that its “non-borrowed” cash reserves were $166.7 billion. By the beginning of 2010, that number grew to more than $1 trillion.
These are outrageous numbers, and yet, when we look at inflation, we’re seeing zilch!
And while it’s true that the U.S. dollar got whacked during the crisis, other currencies did too, and we’re now seeing the greenback make a comeback.
This defies all economic logic, but these are the facts, and low inflation and a climbing dollar do not spell gains for gold, silver or other precious metals.
Stagnant Prices
Gold is trading back at $1,200, off deeply from its recent record highs. Silver is trading well below its December highs above $19. Platinum fell more than $200 an ounce in just a couple of months this spring.The chart shows its weakness even as investors searched for safety during the European debt crisis.
Image: Gold (COMEX) Chart
It’s safe to say that since the dollar started to rebound in December, precious metals have not provided nearly the kind of returns investors expected. The long-standing correlations have broke.
And that takes the momentum right out of precious metals investing… But you wouldn’t have noticed by reading reports of how this sector performed in 2009, or by reading reports of investor demand for things like gold coins.
U.S. Mint Makes Record Sales
Between Oct. 1, 2008, and Sept. 1, 2009, the U.S. Mint sold $1.69 billion in bullion – up an astonishing 78.6% from its fiscal year of 2008.
That’s a record… From the report:
Our bullion sales approached $1.7 billion, our highest total ever and nearly 80 percent above last year’s sales revenue. In FY 2008, bullion accounted for 34 percent of our total sales revenue. In FY 2009, it was 58 percent.
This growth was a 132.3% increase from FY2005 sales, and a total of 27.6 million ounces of gold, silver and platinum.
Interestingly, most of these gains came from the sale of gold and silver coins.
“The sales of American Eagle 22k gold bullion revenue increased 184.3% to nearly $1.28 billion in FY09, up from $449.6 million in FY08,” reports Dorothy Kosich for Mineweb.com.
What’s so surprising about this jump is that the U.S. Mint had suspended production of the American Eagle 22k coins in the beginning of 2009 and only started selling them again in October 2009.
Silver Eagles were cancelled too, though sales for FY2009 jumped to $372 million from $306.4 million the previous year.
With demand for U.S. Mint precious metal coins, and production shortages, it was no surprise that gold, silver and platinum prices also climbed in 2009.
The Run-Up
Here’s how gold did in 2009: On Jan. 2, 2009, its spot price was $874.50 an ounce (in London). On the last trading day in 2009, gold traded at $1,087.50… And that was down from the year’s high of $1,212.50.
And silver: It opened the year at $11.08 an ounce, and closed the year on Dec. 30, 2009, at $16.99 after touching a high of $19.18.
Platinum performed the best: On Jan. 2, 2009, it traded for $926 an ounce, and by the end of the year, it traded for $1,461 with a high of $1,494.
With gold climbing 24.4%, silver up 53.3%, and platinum up 57.8%, it’s no wonder that investors wanted to jump on the precious metals bandwagon… Particularly as the dollar fell 17% against the euro between February and December of 2009.
And given these statistics, from a technical aspect, it’s clear that precious metals needed a break from their astronomical climbs.
Seasonal Adjustments
Outside of the decidedly “wonky” movements of the U.S. dollar so far this year, the summer historically proves a great time to take advantage of rising precious metals prices.
Take silver for example.
“For the majority of the time, silver’s a great buy in the June/July time frame and a good time to be light is the winter time,” writes Bill Downey for GoldTrends.net.
Over the past 15 years, he says, the summer has been provided good results for silver bulls.
The same conclusion may be drawn for gold. The first quarter typically sees the lowest demand for the yellow metal, with the fourth quarter seeing the highest demand.
In 2009, we saw almost the reverse, with demand high in the first quarter, and decreasing as prices increased.
This trend was mainly due to extreme investments made by institutions and exchange-traded funds in the first quarter.
But as traditional demand (for jewelry in India, for example) fell when prices climbed, we’re now sitting near the bottom of the cycle poised to take advantage of rising demand and surging prices.
Typically prices fall through the first two quarters and bottom out during the summer.
How to Play Precious Metals
Now that I’ve given you the bad news, if you were considering putting precious metals in your portfolio, let me give you the good news.
The long-term fundamentals of precious metals are quite eye-catching.
At some point down the road, that Fed cushion of $1 trillion in “non-borrowed” (i.e. printed) reserves is going to send inflation to the moon, and the dollar to hell in a handbasket… complete with a white doily to wipe the mud off our faces.
The backward monetary policy only works in a failing economy.
As soon as real recovery sets in, real consequences for these policies will set in, and that will send precious metals prices soaring.
Our Largest Creditor
Take China, for instance. This country is our largest creditor, holding hundreds of billions of dollars in reserves. When the dollar was tanking, all of the sudden, talk of dumping the dollar ricocheted around the world… from China to Russia to India to Brazil.
Countries started increasing their gold reserves, and emerging markets like China have a ways to go when it comes to gold…
FinancialPost.com’s Peter Koven writes, “Chinese and Indian central banks remain extremely underweight gold, with only 1.5% and 4.1% of their total reserves in the precious metal. That compares to the European average of 54%.”
Not only will China continues its gold investments, but consumer demand will also continue to grow. In 2009, overall Chinese demand climbed 10%, including retail demand.
To play precious metals in a recovering economy where prices are falling and demand is still down, you have to broaden your time frame.
Instead of looking six months to a year down the road, you have to look five years down the road… and wait for your entry point.
Precious metals may bottom out in the next few weeks, and when they do, you’ll get a great entry point for a strong and safe investment for the next half a decade.
The Play
Now, you can invest in the traditional way, by buying gold and silver coins from the U.S. Mint, or other places, or you can buy gold mining companies – some of which are good choices.
If you go this route, take a look at how the company hedges its portfolio. Hedging can help in bad times, but the company loses a lot of upside when gold and silver prices rise.
Goldcorp (GG:NYSE) is an example of an un-hedged gold mining company.
Or you can buy gold and silver the easy way – through an exchange-traded fund.
You’ve heard of the top two: SPDR Gold Shares Trust (GLD:NYSE) and iShares Silver Trust (SLV:NYSE)… These two are very popular, and highly liquid.
But I want to take a look at the PowerShares DB Precious Metals Fund (DBP:NYSE).
This fund is composed of futures contracts for both gold and silver. It’s weighted about 80% gold and 20% silver, but it might be a good alternative to buying both a gold ETF and a silver ETF.
At around $41 for DBP versus a combined $136 for the two separate ETFs, you’ve got a “discounted” way to invest in gold.
According to the prospectus, for the first 12 months, DBP handed its investors a return of 34.05%... if the streak continues, a five-year return on this ETF could double your money with a gain of 170.25%.
But remember… If you’re buying now, watch for a dip through the third quarter and a strong rebound in the fourth…
Action to Take: Buy the PowerShares DB Precious Metals Fund (DBP:NYSE) below $45…
Publisher’s Note:
But wait... Here is another precious metal opportunity. While all eyes are on the big moves in the gold market, smart investors are instead turning to the “metals multipliers” for profit opportunities. By staying ahead of the crowd, Editor Kent Lucas has pinpointed two “metals multiplier” plays most likely to make you rich from Beijing’s “Secret Precious Metal Bullion Mandate.”
Sunday, May 16, 2010
Saturday, May 15, 2010
In the precious metals markets this week . . .
GOLD:
Monex spot gold prices opened the week at $1,196 . . . traded as high as $1,247 on Wednesday and Friday and as low as $1,194 on Monday . . . and the Monex AM settlement price on Friday was $1,229, up $33 for the week. Gold support is now anticipated at $1,217, then $1,210, and then $1,192 . . . with resistance anticipated at $1,250, then $1,275, and then $1,300.
SILVER:
Monex spot silver prices opened the week at $18.53 . . . traded as high as $19.83 on Thursday and as low as $18.45 on Monday . . . and the Monex AM settlement price on Friday was $19.19, up $.66 for the week. Silver support is now anticipated at $18.92, then $18.69, and then $18.40 . . . and resistance anticipated at $19.42, then $19.90, and then $20.52.
PLATINUM:
Monex spot platinum prices opened the week at $1,695 . . . traded as high as $1,751 on Wednesday and as low as $1,687 on Tuesday . . . and the Monex AM settlement price on Friday was $1,716, up $21 for the week. Platinum support is now anticipated at $1,705, then $1,685, and then $1,645 . . . and resistance anticipated at $1,755, then $1,790, and then $1,810.
PALLADIUM:
Monex spot palladium prices opened the week at $528 . . . traded as high as $549 on Wednesday and Thursday and as low as $515 on Tuesday . . . and the Monex AM settlement price on Friday was $527, down $1 for the week. Palladium support is now anticipated at $505, then $492, and then $465 . . . and resistance anticipated at $555, then $579, and then $605.
GOLD:
Monex spot gold prices opened the week at $1,196 . . . traded as high as $1,247 on Wednesday and Friday and as low as $1,194 on Monday . . . and the Monex AM settlement price on Friday was $1,229, up $33 for the week. Gold support is now anticipated at $1,217, then $1,210, and then $1,192 . . . with resistance anticipated at $1,250, then $1,275, and then $1,300.
SILVER:
Monex spot silver prices opened the week at $18.53 . . . traded as high as $19.83 on Thursday and as low as $18.45 on Monday . . . and the Monex AM settlement price on Friday was $19.19, up $.66 for the week. Silver support is now anticipated at $18.92, then $18.69, and then $18.40 . . . and resistance anticipated at $19.42, then $19.90, and then $20.52.
PLATINUM:
Monex spot platinum prices opened the week at $1,695 . . . traded as high as $1,751 on Wednesday and as low as $1,687 on Tuesday . . . and the Monex AM settlement price on Friday was $1,716, up $21 for the week. Platinum support is now anticipated at $1,705, then $1,685, and then $1,645 . . . and resistance anticipated at $1,755, then $1,790, and then $1,810.
PALLADIUM:
Monex spot palladium prices opened the week at $528 . . . traded as high as $549 on Wednesday and Thursday and as low as $515 on Tuesday . . . and the Monex AM settlement price on Friday was $527, down $1 for the week. Palladium support is now anticipated at $505, then $492, and then $465 . . . and resistance anticipated at $555, then $579, and then $605.
Wednesday, May 12, 2010
The European Union and the International Monetary Fund’s $1 trillion loan package and sovereign debt purchase program (essentially the European version of TARP) may have temporarily eased concerns over the European credit crisis and stabilized markets across the globe, but incurring more debt to repay debt is a temporary fix and will likely lead to a new set of problems down the road. One of the main concerns is that the quantitative easing and debt monetization planned could mean added massive inflationary pressures to the global economy that has already seen a record jump in money from past efforts to combat the financial crisis and recession.
But while the proverbial piper has to be paid later, expectations for potentially rampant inflation is tailwind for an asset that we have long recommended. That of course, is gold. The record price for gold (set, by the way, only last December) was broken yesterday, but the yellow metal set another new high today and should repeat the feat more times this year as the $1,300 mark could easily be eclipsed with all the tailwinds for the metal.
While equity markets teeter-tottered over recent weeks, first sliding and then staging a massive one-day rally on Monday fueled by euphoria over the European bailout, gold has been a consistent performer, highlighting its defensive properties in addition to its strong fundamentals during inflation. In the last two and a half weeks, not even including today’s action, gold prices have climbed 6.5 percent, compared to a 5 percent drop in the S&P 500 index over the same period.
Gold’s recent strength, of course, is just part of the overall long-term bullish trend we have anticipated. The only scenario in which gold underperforms is during periods of strong growth and low inflation such as we experienced in the 90’s, a not-very-likely scenario to repeat in today’s world. Although gold prices have gained good ground in recent trading, gold has by no means reached its ceiling. Expect some temporary corrections along the way, but the trend is clearly up and you definitely want to have a mix of gold and gold miner stocks. Please see our various portfolios for recommendations.
There also has been ongoing consolidation in the sector, which points towards the value that larger miners see in their smaller peers. Newcrest (NCMGY) reached a cash-and-stock agreement to buy Lihir Gold (LIHR) for A$9.5 billion in early May. Under the terms of the deal, Lihir shareholders will receive Newcrest shares plus cash considerations. Besides becoming the fourth largest gold miner in the world (and the largest in the Asia Pacific) in terms of reserves by way of the merger, the acquisition also makes sense for Newcrest because it diversifies Newcrest’s portfolio with more foreign assets not subject to the new proposed 40 percent tax on miners’ profits—Lihir’s main mine is located in Papua New Guinea. Lihir shareholders get the benefit of a premium for their shares (which had already rallied sharply on a previous offer), as well as shares in the new company. We view the merger as a positive for Newcrest, while it also underscores the value of gold reserves in general.
Until next week,
Stephen Leeb, Ph.D.
Editor
The Complete Investor
But while the proverbial piper has to be paid later, expectations for potentially rampant inflation is tailwind for an asset that we have long recommended. That of course, is gold. The record price for gold (set, by the way, only last December) was broken yesterday, but the yellow metal set another new high today and should repeat the feat more times this year as the $1,300 mark could easily be eclipsed with all the tailwinds for the metal.
While equity markets teeter-tottered over recent weeks, first sliding and then staging a massive one-day rally on Monday fueled by euphoria over the European bailout, gold has been a consistent performer, highlighting its defensive properties in addition to its strong fundamentals during inflation. In the last two and a half weeks, not even including today’s action, gold prices have climbed 6.5 percent, compared to a 5 percent drop in the S&P 500 index over the same period.
Gold’s recent strength, of course, is just part of the overall long-term bullish trend we have anticipated. The only scenario in which gold underperforms is during periods of strong growth and low inflation such as we experienced in the 90’s, a not-very-likely scenario to repeat in today’s world. Although gold prices have gained good ground in recent trading, gold has by no means reached its ceiling. Expect some temporary corrections along the way, but the trend is clearly up and you definitely want to have a mix of gold and gold miner stocks. Please see our various portfolios for recommendations.
There also has been ongoing consolidation in the sector, which points towards the value that larger miners see in their smaller peers. Newcrest (NCMGY) reached a cash-and-stock agreement to buy Lihir Gold (LIHR) for A$9.5 billion in early May. Under the terms of the deal, Lihir shareholders will receive Newcrest shares plus cash considerations. Besides becoming the fourth largest gold miner in the world (and the largest in the Asia Pacific) in terms of reserves by way of the merger, the acquisition also makes sense for Newcrest because it diversifies Newcrest’s portfolio with more foreign assets not subject to the new proposed 40 percent tax on miners’ profits—Lihir’s main mine is located in Papua New Guinea. Lihir shareholders get the benefit of a premium for their shares (which had already rallied sharply on a previous offer), as well as shares in the new company. We view the merger as a positive for Newcrest, while it also underscores the value of gold reserves in general.
Until next week,
Stephen Leeb, Ph.D.
Editor
The Complete Investor
Silver Price Jumps to 2010 Peak
Silver has taken off since last Thursday as growing concerns over Euro Zone debt pushed risk adverse investors away from paper currencies and into the precious metals. This flight to safety and the global surge in economic activity have sent silver to a recent peak of $18.89 an ounce, touched yesterday. The precious metal’s previous high was reached last December.
Concerns that Europe’s strides to keep Greek debt in check would fall flat permeated the global markets. The resulting dive by stock indices and high market volatility drove investors to safe-haven investments, including silver.
Silver has enough momentum to resist downside from the latest announcement that Mexico would ramp up silver production. With the market focused on the long-term outlook, recent trends in physical supply have had limited influence on current day prices.
For the July contract, the metal is getting critical support at $18.595, a level analysts say could drop to the $18.50 level if the Greenback holds its strength and the US equity market turns negative. In the near-term, the largest risk the silver market faces is a mass liquidation. In order for this to happen, the US equity market would have to be on the brink of collapse, and the Euro Zone crisis would have to worsen. Last night when fears over the Euro Zone hit the markets, a significant decline in stocks of 1.2 million ounces happened overnight. Upon market opening, silver still held support at $18.55 an ounce.
The opposite, optimistic outlook is just as likely to hit the silver market. Many analysts claim that a corresponding flight away from debt laden paper currencies could provide tremendous upside to the silver market.
Company News
Goldcorp (NYSE:GG; TSX: G) will sell its Escobal silver project to Tahoe Resources, a new private company lead by former Goldcorp CEO Kevin McArthur. The sale is for $505 million; in addition, Goldcorp will receive shares equal to 40 percent of Tahoe, which is planning an initial public offering in Canada, and the balance in cash of at least $230-million, depending on the results of the offering. The deal should close by June 8, the firm said.
Tahoe said separately that it has filed a preliminary prospectus for the IPO, and will use the proceeds to cover the cash portion of the Escobal acquisition, and for engineering studies and continuing exploration of the Escobal project. The Escobal deposit in Guatemala was discovered by Goldcorp in 2007 and the company has since outlined an indicated resource of 130.1-million ounces, plus 187.5-million ounces in inferred resources. In addition to silver, the deposit also contains some gold, lead and zinc. The sale has been approved by Goldcorp’s board, but remains conditional on Tahoe completing its IPO.
Silver America (OTCBB: SILA) has acquired the Keeno Strike Property silver and gold project in Clark County, Nevada. The project’s exploratory work program will test ~1.1 million ounces of gold and ~69.0 million ounces of silver unavailable to the industry at the time these properties were initially developed. If the above estimates are proven and added to the additional mineral deposits of lead, zinc, and copper, the property could contain an estimated equivalent gross in situ value in excess of $3 billion. The Keeno Strike Property is located roughly 30 miles southwest of Las Vegas in the Goodsprings/Yellow Pine Mining District, which, in addition to containing deposits of copper, cobalt, nickel, zinc and lead, has produced significant quantities of gold and silver.
Due to a delay in the auditing process, US Silver Corporation’s (CVE:USSIF) year end 2009 statements will not be released for another week. The 2009 results were due for release by the close of business on April 30, 2010. Both the Company and the auditors are working diligently to complete the audit process. The Company is not aware of any financial or operational events of a material nature other than those previously disclosed. US Silver Corp owns and operates the Galena Mine in the historic Silver Valley of North Idaho. The Galena Mine and Mill, along with the Coeur Mine and Mill and the Caladay Project were acquired from Coeur d’Alene Mines Corp (NYSE:CDE) on June 1,2006.
Permalink: "Silver Price Jumps to 2010 Peak"
Tags: (OTCBB: SILA, CVE:USSIF, ETFs, gold and silver, junior silver miners, NYSE:CDE, NYSE:GG, precious metals, silver, silver and gold, Silver Company News, silver demand, silver futures, silver market, Silver Market News, silver miners, silver mining, silver mining news, silver news, silver price, silver prices, silver value, TSX:G
Concerns that Europe’s strides to keep Greek debt in check would fall flat permeated the global markets. The resulting dive by stock indices and high market volatility drove investors to safe-haven investments, including silver.
Silver has enough momentum to resist downside from the latest announcement that Mexico would ramp up silver production. With the market focused on the long-term outlook, recent trends in physical supply have had limited influence on current day prices.
For the July contract, the metal is getting critical support at $18.595, a level analysts say could drop to the $18.50 level if the Greenback holds its strength and the US equity market turns negative. In the near-term, the largest risk the silver market faces is a mass liquidation. In order for this to happen, the US equity market would have to be on the brink of collapse, and the Euro Zone crisis would have to worsen. Last night when fears over the Euro Zone hit the markets, a significant decline in stocks of 1.2 million ounces happened overnight. Upon market opening, silver still held support at $18.55 an ounce.
The opposite, optimistic outlook is just as likely to hit the silver market. Many analysts claim that a corresponding flight away from debt laden paper currencies could provide tremendous upside to the silver market.
Company News
Goldcorp (NYSE:GG; TSX: G) will sell its Escobal silver project to Tahoe Resources, a new private company lead by former Goldcorp CEO Kevin McArthur. The sale is for $505 million; in addition, Goldcorp will receive shares equal to 40 percent of Tahoe, which is planning an initial public offering in Canada, and the balance in cash of at least $230-million, depending on the results of the offering. The deal should close by June 8, the firm said.
Tahoe said separately that it has filed a preliminary prospectus for the IPO, and will use the proceeds to cover the cash portion of the Escobal acquisition, and for engineering studies and continuing exploration of the Escobal project. The Escobal deposit in Guatemala was discovered by Goldcorp in 2007 and the company has since outlined an indicated resource of 130.1-million ounces, plus 187.5-million ounces in inferred resources. In addition to silver, the deposit also contains some gold, lead and zinc. The sale has been approved by Goldcorp’s board, but remains conditional on Tahoe completing its IPO.
Silver America (OTCBB: SILA) has acquired the Keeno Strike Property silver and gold project in Clark County, Nevada. The project’s exploratory work program will test ~1.1 million ounces of gold and ~69.0 million ounces of silver unavailable to the industry at the time these properties were initially developed. If the above estimates are proven and added to the additional mineral deposits of lead, zinc, and copper, the property could contain an estimated equivalent gross in situ value in excess of $3 billion. The Keeno Strike Property is located roughly 30 miles southwest of Las Vegas in the Goodsprings/Yellow Pine Mining District, which, in addition to containing deposits of copper, cobalt, nickel, zinc and lead, has produced significant quantities of gold and silver.
Due to a delay in the auditing process, US Silver Corporation’s (CVE:USSIF) year end 2009 statements will not be released for another week. The 2009 results were due for release by the close of business on April 30, 2010. Both the Company and the auditors are working diligently to complete the audit process. The Company is not aware of any financial or operational events of a material nature other than those previously disclosed. US Silver Corp owns and operates the Galena Mine in the historic Silver Valley of North Idaho. The Galena Mine and Mill, along with the Coeur Mine and Mill and the Caladay Project were acquired from Coeur d’Alene Mines Corp (NYSE:CDE) on June 1,2006.
Permalink: "Silver Price Jumps to 2010 Peak"
Tags: (OTCBB: SILA, CVE:USSIF, ETFs, gold and silver, junior silver miners, NYSE:CDE, NYSE:GG, precious metals, silver, silver and gold, Silver Company News, silver demand, silver futures, silver market, Silver Market News, silver miners, silver mining, silver mining news, silver news, silver price, silver prices, silver value, TSX:G
Tuesday, May 11, 2010
Gold Heats up as Athens Burns
John Browne
Posted May 6, 2010
In the decades that preceded Greece's adoption of the euro in 2001 the country papered over its chronic inefficiency and lack of competitiveness with its northern neighbors through regular devaluations of its currency, the drachma. But as a prerequisite to join the Euro Zone, the dominant powers of the Continent, most notably Germany, required financial housecleaning and promises of fiscal discipline. When these goals were apparently met, the Greeks came aboard.
With the benefit of hindsight it is now widely understood that Greece, in common with some other 'Club Med' countries, 'distorted' its financials (largely through accounting gimmickry dreamed up on Wall Street) in order to qualify for entry. No doubt the influx of more than 100 million citizens from these countries swelled the economic heft of the Euro Zone. But these benefits came with a price.
At its core, the euro is a Germanic currency. Similarly the European Central Bank (ECB) has an institutionally Teutonic preference for sound money. Once within the euro, countries such as Greece, Spain, Portugal and Italy, were bestowed a monetary respectability that was previously unavailable to them. But they were no longer able to print their own money, and were therefore unable to camouflage their economic deficiencies with currency devaluation.
In the first decade of the 21st Century, the euro gathered strength as the economic power of the union increased and investors grew nervous about the fate of the dollar. As the relative value of the euro rose, the uncompetitive economies in the euro zone were conferred a wealth that their economies could not justify or maintain. In order to keep the wheel spinning these governments incurred ever greater amounts of debt. But, by issuing bonds denominated in the highly regarded euro, rather than their former currencies, borrowing costs for these nations came down. It was good fortune...while it lasted.
However, when the world's recession began, countries with the heaviest relative debt loads experienced the unforgiving brutality of reverse leverage. Now that payback time has arrived, not just individuals and corporations, but nations are threatened with default.
Originally, the Greek rescue package was billed at $12 billion, then at $30 billion, with Germany providing the lion's share. Today, The Wall Street Journal reports that the rescue package for Greece will total some $133.14 billion over three years. According to IMF estimates, in 2009 the Greek economy accounts for just 2 percent of the European Union's. If the larger economies of Spain, Portugal and Italy need financial bailouts, the sums involved may amount to trillions of dollars.
Following World War I, Germany was crippled by the payment of the massive war reparations which forced it to print many millions of deutsche marks. The result was the notorious 'Weimar Inflation,' which at its height pushed the price of a single loaf of bread to 1 Trillion deutsche marks. In the end, many Germans fired their heating boilers with paper currency, which was cheaper than coal or wood. Gold however, held its value. As a result, its local purchasing power rose dramatically. It was said that at one point a single one-ounce gold coin could buy an entire city block of Frankfurt.
While the current round of printing by the Federal Reserve and other major central banks does not yet match the relative speed and intensity undertaken in Weimar Germany, there are many indications that we are headed in that direction. The world is now awash with excess paper currency which threatens heightened inflation on a global scale. But inflation is not the only problem. Financial collapse once thought impossible now is looming.
If the number of countries needing bailouts continues to grow, the amount of new paper money that will likely be issued will skyrocket from today's levels. Debt ratios of the UK and the US are among the worst in the developed world. Should they require financial rescue, the bill may very well reach tens of trillions of dollars. If that happens investors will likely demand gold with extreme urgency.
Athens and the seats of power of other profligate governments appear ready to crumble under the heat of the political austerity brought on by the threat of financial collapse. As a result, gold seems to be heating up.
Posted May 6, 2010
In the decades that preceded Greece's adoption of the euro in 2001 the country papered over its chronic inefficiency and lack of competitiveness with its northern neighbors through regular devaluations of its currency, the drachma. But as a prerequisite to join the Euro Zone, the dominant powers of the Continent, most notably Germany, required financial housecleaning and promises of fiscal discipline. When these goals were apparently met, the Greeks came aboard.
With the benefit of hindsight it is now widely understood that Greece, in common with some other 'Club Med' countries, 'distorted' its financials (largely through accounting gimmickry dreamed up on Wall Street) in order to qualify for entry. No doubt the influx of more than 100 million citizens from these countries swelled the economic heft of the Euro Zone. But these benefits came with a price.
At its core, the euro is a Germanic currency. Similarly the European Central Bank (ECB) has an institutionally Teutonic preference for sound money. Once within the euro, countries such as Greece, Spain, Portugal and Italy, were bestowed a monetary respectability that was previously unavailable to them. But they were no longer able to print their own money, and were therefore unable to camouflage their economic deficiencies with currency devaluation.
In the first decade of the 21st Century, the euro gathered strength as the economic power of the union increased and investors grew nervous about the fate of the dollar. As the relative value of the euro rose, the uncompetitive economies in the euro zone were conferred a wealth that their economies could not justify or maintain. In order to keep the wheel spinning these governments incurred ever greater amounts of debt. But, by issuing bonds denominated in the highly regarded euro, rather than their former currencies, borrowing costs for these nations came down. It was good fortune...while it lasted.
However, when the world's recession began, countries with the heaviest relative debt loads experienced the unforgiving brutality of reverse leverage. Now that payback time has arrived, not just individuals and corporations, but nations are threatened with default.
Originally, the Greek rescue package was billed at $12 billion, then at $30 billion, with Germany providing the lion's share. Today, The Wall Street Journal reports that the rescue package for Greece will total some $133.14 billion over three years. According to IMF estimates, in 2009 the Greek economy accounts for just 2 percent of the European Union's. If the larger economies of Spain, Portugal and Italy need financial bailouts, the sums involved may amount to trillions of dollars.
Following World War I, Germany was crippled by the payment of the massive war reparations which forced it to print many millions of deutsche marks. The result was the notorious 'Weimar Inflation,' which at its height pushed the price of a single loaf of bread to 1 Trillion deutsche marks. In the end, many Germans fired their heating boilers with paper currency, which was cheaper than coal or wood. Gold however, held its value. As a result, its local purchasing power rose dramatically. It was said that at one point a single one-ounce gold coin could buy an entire city block of Frankfurt.
While the current round of printing by the Federal Reserve and other major central banks does not yet match the relative speed and intensity undertaken in Weimar Germany, there are many indications that we are headed in that direction. The world is now awash with excess paper currency which threatens heightened inflation on a global scale. But inflation is not the only problem. Financial collapse once thought impossible now is looming.
If the number of countries needing bailouts continues to grow, the amount of new paper money that will likely be issued will skyrocket from today's levels. Debt ratios of the UK and the US are among the worst in the developed world. Should they require financial rescue, the bill may very well reach tens of trillions of dollars. If that happens investors will likely demand gold with extreme urgency.
Athens and the seats of power of other profligate governments appear ready to crumble under the heat of the political austerity brought on by the threat of financial collapse. As a result, gold seems to be heating up.
Monday, May 10, 2010
A Time for Gold
The frightening financial gyrations unleashed by the unrest in Greece, and compounded by the mysterious kinks of electronic stock markets, have quickly reintroduced naked fear into the hearts of investors. Not surprisingly, while these concerns throw into question the safety of just about every asset class, gold and silver are beckoning once again as a means to help protect purchasing power.
We are now in the early stages of what I believe will be a global sovereign debt crisis. With Greece, Portugal and Spain, we are seeing the results in what might be considered the “subprime” nations struggling with overly burdensome debt payments. However, just like in the mortgage crisis, many “prime” nations, like the United States and Great Britain suffer from the same disease. It is just that for these countries it will take a bit longer before the symptoms materialize.
The bottom line is that many nations, including the United States, have simply borrowed more than their citizens can realistically repay. For many such countries, default may be the only way out. The only question is how to do it. Will governments simply refuse to pay, or will they pretend to pay by printing money? I believe either option would be very bullish for gold and silver. If nations default, gold and silver prices should rise, if they inflate, they should soar.
Today the collective governments of the European Union, who had been following a more responsible policy than the United States, decided to capitulate. With their massive $900 billion dollar bailout package to any euro zone country that needs help financing their debt, the Europeans have decided to follow the path blazoned by the Federal Reserve. All debt problems, on both sides of the Atlantic, will now be monetized with a printing press.
While gold sold off on the bailout news, there is no question in my mind that the development is extremely bullish for gold. Germany has caved and the inflationists have prevailed. The moral hazard of the bailout will mean bigger deficits in more euro zone countries. Eventually even Germany itself will succumb and join the party. To defend the euro and sterilize their bond purchases the ECB will have to sell dollars. But to whom? The U.S. is certainly not buying.
If Europe, like America, becomes a net foreign borrower, the industrialized West must expect emerging markets to pick up the tab for both America and Europe! After all not every nation can ride the debt wagon; someone has to pull the cart. This will mean that China in particular will have to buy even more foreign exchange to prevent a collapse of both the euro and the dollar. This may push them to the breaking point much sooner than many like to think.
Last Thursday as the Dow Jones plunged 1,000 points, gold surged $35 to just under $1,200 per ounce. Yes, gold and silver may already be “hot”, but I believe there are still great quantities of kindling now lying around which could fuel a continuing fire.
I do not think you should wait for the sovereign default disease to spread. I do not think that it is too late to buy physical gold and silver. Once more people comprehend the magnitude of the problem, I believe prices may go higher than they are today.
We are now in the early stages of what I believe will be a global sovereign debt crisis. With Greece, Portugal and Spain, we are seeing the results in what might be considered the “subprime” nations struggling with overly burdensome debt payments. However, just like in the mortgage crisis, many “prime” nations, like the United States and Great Britain suffer from the same disease. It is just that for these countries it will take a bit longer before the symptoms materialize.
The bottom line is that many nations, including the United States, have simply borrowed more than their citizens can realistically repay. For many such countries, default may be the only way out. The only question is how to do it. Will governments simply refuse to pay, or will they pretend to pay by printing money? I believe either option would be very bullish for gold and silver. If nations default, gold and silver prices should rise, if they inflate, they should soar.
Today the collective governments of the European Union, who had been following a more responsible policy than the United States, decided to capitulate. With their massive $900 billion dollar bailout package to any euro zone country that needs help financing their debt, the Europeans have decided to follow the path blazoned by the Federal Reserve. All debt problems, on both sides of the Atlantic, will now be monetized with a printing press.
While gold sold off on the bailout news, there is no question in my mind that the development is extremely bullish for gold. Germany has caved and the inflationists have prevailed. The moral hazard of the bailout will mean bigger deficits in more euro zone countries. Eventually even Germany itself will succumb and join the party. To defend the euro and sterilize their bond purchases the ECB will have to sell dollars. But to whom? The U.S. is certainly not buying.
If Europe, like America, becomes a net foreign borrower, the industrialized West must expect emerging markets to pick up the tab for both America and Europe! After all not every nation can ride the debt wagon; someone has to pull the cart. This will mean that China in particular will have to buy even more foreign exchange to prevent a collapse of both the euro and the dollar. This may push them to the breaking point much sooner than many like to think.
Last Thursday as the Dow Jones plunged 1,000 points, gold surged $35 to just under $1,200 per ounce. Yes, gold and silver may already be “hot”, but I believe there are still great quantities of kindling now lying around which could fuel a continuing fire.
I do not think you should wait for the sovereign default disease to spread. I do not think that it is too late to buy physical gold and silver. Once more people comprehend the magnitude of the problem, I believe prices may go higher than they are today.
It Is Good To Own Gold
07.05.2010 | Author: Kathryn Smith | Posted in Investing
Gold is the asset that one must go for in these times. Despite the ongoing Greek financial crisis and the rise of the dollar, gold is doing really well on the market.
Because of the credit downgraded of Spain and Portugal, the yellow metal has managed to gain even more ground. The precious metal is known to be a hedge against inflation because the price of gold rises as inflation rises. The precious metal has created so much excitement around it that people are now trying to come up with the money to invest in it.
Very many banks have began to buy gold, following the example of India who has bought last year 200 tons of the International Monetary Fund’s glittering metal. China is another example where gold is bought massively. The Chinese Government has advised the citizens to start investing in the precious metal. Economists believed that China will buy the rest of the International Monetary Fund’s gold but the country did nothing. The reality is that China was in fact buying its own gold using its own currency. It is well known that the country has set its goal in surpassing American in the gold reserves sector.
The world’s largest gold consumer, India, has also begun to seriously invest in the glittering metal. The Indian Central Bank representatives declared that they are searching to diversify their assets and this is the only reason why they are buying gold.
If the Central Banks are investing so much in the precious metal, than so should we. If you cannot afford to buy gold bars and coins just yet, then you should take into consideration investing in gold by the gram. It is not expensive and it is a good way to protect your savings.
Gold is the asset that one must go for in these times. Despite the ongoing Greek financial crisis and the rise of the dollar, gold is doing really well on the market.
Because of the credit downgraded of Spain and Portugal, the yellow metal has managed to gain even more ground. The precious metal is known to be a hedge against inflation because the price of gold rises as inflation rises. The precious metal has created so much excitement around it that people are now trying to come up with the money to invest in it.
Very many banks have began to buy gold, following the example of India who has bought last year 200 tons of the International Monetary Fund’s glittering metal. China is another example where gold is bought massively. The Chinese Government has advised the citizens to start investing in the precious metal. Economists believed that China will buy the rest of the International Monetary Fund’s gold but the country did nothing. The reality is that China was in fact buying its own gold using its own currency. It is well known that the country has set its goal in surpassing American in the gold reserves sector.
The world’s largest gold consumer, India, has also begun to seriously invest in the glittering metal. The Indian Central Bank representatives declared that they are searching to diversify their assets and this is the only reason why they are buying gold.
If the Central Banks are investing so much in the precious metal, than so should we. If you cannot afford to buy gold bars and coins just yet, then you should take into consideration investing in gold by the gram. It is not expensive and it is a good way to protect your savings.
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