January 5th, 2010
- Gold rose 2% yesterday and reached as high as $1,128 overnight and has steadied near these levels since.
- Data showing a rebound in manufacturing was greeted positively by both the equity and commodity markets (the S&P 500 rose 1.6%) and New Year optimism saw all markets rise. The weaker dollar and oil prices over $80 a barrel contributed to gold’s strength. Start of year asset allocation by funds likely also contributed to strength in the precious metal markets.
- The continuation of quantitative easing and continuing record low interest rates in the US is likely to see the dollar remain under pressure (with some periods of strength and counter trend rallies) and this will likely lead to another positive year for gold. Concerns about the deteriorating public finances and government borrowing in many industrial nations could see government bond markets come under pressure leading to further diversification into gold.
- “There’s money moving back into the marketplace from the funds for beginning-of-the-year investment,” said Ira Epstein, director of the Ira Epstein division of The Linn Group. There was tendency for this to happen at the start of the last few years, as large speculators returned to the marketplace after many had sold to exit positions and square books ahead of year-end, he said.
Tags: gold as an investment, Gold News, Gold price
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December 22nd, 2009
Gold is up 130% in the past five years, 29% in the past two years and broke through $1,000 an ounce last September and then tacking on another 20% from there.
Why will gold continue to rise? The basis of gold moving upwards is chiefly predicated on the U.S.’s serious financial heartaches, chief among them being:
–A soaring $12 trillion of debt.
–A ballooning $1.5 trillion budget deficit.
–Non-non-stop debasement of our currency by round-the-clock money printing by the Federal Reserve.
–A growing international lack of confidence in the greenback.
–The prospects that a number of countries, among them China, Japan, India and Russia, may no longer buy U.S. treasuries.
Tags: gold as an investment, Gold News
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December 22nd, 2009
- The number of homes in foreclosure topped one million for the first quarter ever, as delinquencies rose even among prime borrowers and nearly half of all holders of modified mortgages, whose monthly payments had been lowered, defaulted again. The depressing figures, released on Monday by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, restate the difficulty facing the real-estate market going forward, as continuously high unemployment makes regular mortgage payment difficult for millions of homeowners.
- The Federal Bureau of Investigation is probing a computer-security breach targeting Citigroup Inc. that resulted in a theft of tens of millions of dollars by computer hackers who appear linked to a Russian cyber gang, according to government officials.
- Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the third quarter of 2009. GDP was revised down from the advance estimated of 3.5% to the preliminary estimate of 2.8%, and now to 2.2%. You have to wonder how the government could be off by 1.3%. Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change. What this means is that Cash for Clunkers was an even larger factor than previously understood. As it stands, by a basic calculation without motor vehicle output, third quarter GDP would have been only 0.75%.
Tags: Economic News, economic recovery
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December 21st, 2009
- Regulators on Friday shut down two big California banks, as well as banks in Alabama, Florida, Georgia, Michigan and Illinois, bringing to 140 the number of U.S. banks brought down this year by the weak economy and mounting loan defaults. The 140 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the government-backed deposit insurance fund — which has fallen into the red — more than $30 billion so far this year. The failures compare with 25 last year and three in 2007.
- The gap between yields on Treasuries and so-called TIPS due in 10 years, a measure of the outlook for consumer prices, closed above 2.25 percentage points four days last week, the longest stretch since August 2008. That’s the low end of the range in the five years before Lehman Brothers Holdings Inc. collapsed, and shows traders expect inflation, not deflation in coming months, said Jay Moskowitz, head of TIPS trading at CRT Capital Group LLC in Stamford, Connecticut.
- The economy is still flat at best. The Commerce Department reported seasonally adjusted November retail sales up 1.3% from October. However, if you apply the average seasonal adjustments that were used during the years 2006 and 2007, which account for a normal spike in November sales due to the holiday shopping season, retail sales were actually down 1.3% in November.
- Former Federal Reserve Chairman Alan Greenspan said in prepared testimony the threat to U.S. fiscal stability is larger than ever. Averting a situation where the U.S. struggles to finance unprecedented budget deficits “is more urgent than at any time in our history,” he said in testimony Thursday before the Senate Committee on Homeland Security and Governmental Affairs.
- Zhu Min, Deputy Governor of the Chinese Central Bank, issued comments at an economic forum in Beijing yesterday in which he stated that the U.S. dollar is set up to go lower and that foreign buyers will become a lot more reluctant to buy more U.S. Treasury bonds: “When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken.”
Tags: Economic News, economic recovery, global economic recovery
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December 21st, 2009
Tags: Gold News, Gold price
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December 16th, 2009
- The federal government decided to give up billions of dollars this week when the IRS issued an exception to its tax rules allowing Citigroup (and a handful of other companies partially owned by the federal government) to hold on to billions of dollars in tax breaks that would otherwise lose value when the government sells its shares to private investors. The IRS has changed several rules to reduce tax burdens on financial companies during the economic crisis. Officials said the ruling will benefit taxpayers because the public’s shares in Citigroup will be more valuable and the company will be able to pay the government back on time. “The government is consciously forfeiting future tax revenue. It’s another form of assistance, maybe not as obvious as direct assistance but certainly another form,” an expert on tax accounting said.
- The Arab states of the Gulf region have agreed to launch a single currency modeled on the euro, hoping to blaze a trail towards a pan-Arab monetary union. The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts.
Tags: Economic News
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December 16th, 2009
Gold is currently trading $9 higher at $1,133 due to dollar weakness ahead of the FOMC meeting later.
Traders await the FOMC rate decision and statement this afternoon which will likely be the primary driver of the markets today. It is expected that the FOMC will hold the key short-term federal-funds rate within a record low range of 0% to 0.25%, where it has been since December 2008. Continuing record low interest rates are the primary reason that gold has yet to reach the bubble phase. In the 1970s, interest rates had to be increased to well into the double digits prior to the gold bubble bursting.
US equities fell on Tuesday as a climb in producer prices raised inflation concerns. Expectations are that the CPI data may be higher than expected after the stronger than expected PPI data and this should support gold. Bernanke’s view and the consensus amongst analysts is that the recovery is very fragile and thus the stagflation scenario of runaway prices and higher interest rates remains unlikely at this time.
Tags: CPI, FOMC, Gold News, Gold price, PPI
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December 9th, 2009
“Gold bubble? I regard such talk as nonsense . . . . Gold is about 52% higher than the peak weekly average price of January 1980. The US CPI is 177% higher, US M-2 Money Supply is 464% higher, and the S&P is 892% higher. I don’t think it untoward to suggest gold is badly lagging a number of important yardsticks and at these levels has some catching up to do.”
Bull markets like this gold bull market come along, if we’re lucky, once or twice in a lifetime. I’m talking about bull markets that can make you rich. But there’s something very different about this gold bull market. It can do two things — it can make you rich and it may save you from a disaster in your other investments.
As I see it, the trend is in place. The rush to own gold is on. It’s starting very slowly and conservatively with gold increasing against fiat currencies by 2% to 5% a week. To many people, gold seems “too high,” “too expensive.” The poor ignorant fools don’t see or understand that fiat currency is being denigrated before our eyes, and it is doomed. The fact is that it’s really the currencies created by the central banks that are far too expensive. In fact, the real question is — five or ten years from now, will fiat currencies be worth anything at all?
Gold may need a rest — it’s been higher on 17 of the last 20 sessions. Analysts are still watching supply-demand equations for gold, hoping that this will give them hints as to where gold is going. In doing so, they are treating gold just like any other commodity — like copper or zinc. Wrong; gold is money and a safe haven alternative to fiat money. No wonder the Fed and the central banks fear and despise gold. When gold rises, as it’s been doing, it tells us that the world distrusts fiat money, and that people are turning in their central-bank created “junk money” for the real thing, time-honored true wealth better known as gold.
Tags: Dow Theory Letters, Gold News, Gold price, Richard Russell
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December 9th, 2009
- Sovereign debt markets remain nervous with concerns about the fallout from Greece’s downgrade and how this will affect the already damaged balance sheets of some European banks. Bearish analysts who were calling gold a bubble when gold traded at $700 and at $850 are becoming more vocal again but they are likely to be proved wrong again as this has all the hallmarks of another correction and consolidation. Especially as physical demand for bullion remains very robust and will likely continue to do so as long as there are sovereign debts risks, risks of double dip recessions and as long as investors remain concerned about the medium to long term inflation threat posed by the continuing unprecedentedly loose fiscal and monetary policies.
- President Barack Obama outlined new multibillion-dollar stimulus and jobs proposals Tuesday, saying the nation must continue to “spend our way out of this recession” until more Americans are back at work. The Government will continue debasing the U.S. dollar by printing as much money as it takes to try and create jobs. Inflation is coming and now is the time to prepare your portfolio.
- Goldman is forecasting no Fed rate hikes until 2012. That means over two more years of ultra-low interest rates.
***
- Moody’s fingered the U.S. and U.K. among top-rated sovereign borrowers, saying the two must prove they can reduce their bulging deficits or risk a downgrade to their AAA credit ratings. Moody’s called the pair merely “resilient” rather than “resistant,” a label it applied to Canada, France and Germany.
- Fed chief Ben Bernanke said Monday the economic recovery still faces “formidable headwinds” and warned unemployment will likely remain elevated, cooling speculation of an early increase in interest rates. A surprising decline in the U.S. jobless rate Friday spurred concerns the Fed might move quickly to raise rates, but Bernanke said the Fed was sticking to its pledge to hold borrowing costs at exceptionally low levels.
- Analyst Meredith Whitney says the government is now out of bullets to support the economy. She says if the economy doesn’t slow down now, it will in Q1. Whitney said nothing has changed other than the banks refinancing themselves. Whitney says the overall market is extended. Meredith said she is 100% confident that the consumer is not getting any better and since 70% of the economy is supported by the consumer, the S&P 500 will likely fall in 2010.
- Dennis Gartman on jobs report: Workers simply have become discouraged and are still pulling themselves out of the job market, thus forcing the participation rate, as it is known, to its lowest level in two decades. Further… and this really does cause us some confusion and casts doubt upon the veracity of Friday’s report… the civilian labor force was actually reported to have fallen when mere demographics… mere arithmetic… said it must increase instead.
Tags: Ben Bernanke, Gold News, Gold price, Meredith Whitney, Moody's
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December 3rd, 2009
- There are many institutional and central bank buyers on the sidelines at these prices but they will provide strong support with many waiting to buy on the dips.
- December is seasonally a strong month for gold with jewelry demand for Christmas and then the increasingly important Chinese New Year demand and this means that any price correction is likely to be reasonably shallow.
- “Gold continues to defy gravity and for good reasons: The shift out of fiat currency such as the dollar is happening at a swifter pace than most imagined it would,” said Kevin Kerr, president of Kerr Trading International.
- Gold has risen by more than 7 percent since touching a low of $1,136.80 last Friday on now-waning fears that the Middle Eastern emirate Dubai might default on its debt, which spurred investors to sell the metal to raise cash to cover losses.
***
Gold has long been favored by some elements of the investment world, but this year, some of the world’s leading hedge fund managers have loaded up on the precious metal amid concern that government efforts to avoid another Great Depression could undermine major currencies and fuel inflation.
- “There is investment demand for gold from everywhere,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “The dollar has pushed gold to new highs.”
- “I have never been a gold bug,” Paul Tudor Jones, chairman of hedge fund giant Tudor Investment Corp., wrote in an Oct. 15 letter to investors. “It is just an asset that, like everything else in life, has its time and place. And now is that time.”
- John Paulson’s Paulson & Co. — one of the world’s largest hedge fund firms and one that made billions betting against subprime mortgages — became a huge gold investor this year and plans to start a new gold fund next month.
- Greenlight Capital, run by David Einhorn, reversed a long-time aversion to gold, while Kyle Bass’s Hayman Advisors held more than 15 percent of its portfolio in gold and other precious metals this year.
- “I can’t remember in 20 years so many respected investors focused on a single strategy,” said Bradley Alford of Alpha Capital Management, which invests in hedge funds. “It’s a losing proposition to bet against guys like that. They aren’t billionaires because they make bad bets.”
Tags: gold as an investment, Gold News, Gold price
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