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 21st, 2009
Tags: Gold News, Gold price
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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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November 23rd, 2009
- Gold has rallied to new record nominal highs in dollars with geopolitical concerns about Iran escalating and the dollar falling again. Possibly of more importance are increasing concerns about the unprecedented and huge public debt levels in large industrialized nations and the as of yet remote possibility of sovereign default.
- Research analysts at Deutsche Bank suggest the bull market in gold may endure even if inflation never emerges or the U.S. dollar happens to strengthen. They argue that central banks around the world are using the precious metal as a backup “reserve currency.”
- A U.S. Congressional panel approved a measure to open the Federal Reserve’s monetary policy decision to government audits. This is a further slap at the U.S. central bank following a Senate overhaul proposal aimed at stripping the Fed of its regulatory authority. Fed Vice Chairman Donald Kohn said back in July that “history provides numerous examples of non-independent central bankers being forced to finance large government budget deficits. Such episodes invariably lead to high inflation.”
- The World Gold Council reported that investment demand for gold bars increased to 81.2 tons in the third quarter, compared to just 57.7 tons in the previous quarter. The WGC also highlighted that central banks bought 15 tons more gold than they sold during the period, another positive for gold.
- Global economic uncertainty has fueled demand and has caused gold coin production at Britain’s Royal Mint to quadruple in the third quarter, having reached 32,735.8 ounces from 7,500 ounces during the same period of 2008.
Tags: golbal economy, gold as an investment, Gold News, Gold price
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November 18th, 2009
- Gold continues to climb a wall of worry with many analysts bearish and much of the public remaining on the sidelines due to misplaced fears that gold is another asset bubble. These fears are understandable given investors’ painful experience of the bursting of the real estate and equity bubbles, but the fears are misplaced and come about due to a fundamental lack of knowledge of the still very strong supply and demand factors driving the gold (and silver) market.
- The dollar is due a short term rally but any bounce is likely to be short term in nature as the Federal Reserve remains in a ‘catch 22’ needing to raise interest rates to contain inflation in the medium and long term, and protect the dollar, but realizing that an increase in interest rates will likely snuff out the tentative economic recovery.
- The government says consumer prices edged up slightly faster than expected in October, driven higher by another increase in energy prices and the biggest increase in new car prices in 28 years.
Tags: economic recovery, Gold News, Gold price
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