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 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 9th, 2009
- (Bloomberg) — Gold futures jumped to a record, topping $1,100 an ounce, on mounting speculation that low U.S. borrowing costs will drive down the dollar, boosting the appeal of the precious metal as an alternative investment. “Until Washington stops exploding the deficit, the dollar will continue to weaken, and gold is going higher,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
- (CNNMoney.com) — Gold rose to a record high Monday as the dollar weakened against rival currencies. Gold gained 5% last week on speculation that central banks around the world will begin buying more of the precious metal as an alternative to the dollar, which is the traditional global reserve currency. Gold has gained more than 23% this year, and many traders expect the rally to continue into next year given the outlook for continued weakness in the dollar.
- (New York Times) — Adjusting for inflation, gold would have to top $1,885 to set an all-time record. China has already doubled its gold reserves over the last six years, but the Indian move underscored how even the most traditional investors are shifting a portion of their assets into bullion. “I have never been a gold bug,” Paul Tudor Jones, the prominent hedge fund manager, told his investors last month. “It is just an asset that, like everything else in life, has its time and place. And now is that time.”
Tags: gold as an investment, Gold News, Gold price, Paul Tudor Jones
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November 3rd, 2009
The International Monetary Fund has sold 200 tons of gold to the Reserve Bank of India for $6.7 billion, quietly executing half of a long-planned bullion sale that has threatened to slow gold’s ascent.
The deal, which surprised traders who expected China to be the most likely buyer, will relieve the gold market of some uncertainty over how and when the IMF would sell 403.3 tons of gold, about one-eighth of its total stock. The deal will increase India’s gold holdings to the tenth largest among central banks.
It also fuelled speculation that other governments — including Beijing — may be ready to diversify their reserves even at near-record gold prices, helping soak up IMF supply that the fund may otherwise be forced to sell on the open market.
“It’s potentially bullish from several points of view,” said Commerzbank analyst Eugen Weinberg. “Gold was kept off the market and sold directly to central banks so potential sales on market are limited by this. Secondly, it showed large buyers are ready to accept the current price levels. Thirdly, the central banks are increasing their gold reserves. Last but not least the central bank gold agreement sales of 400 tons … is half empty already.”
***
The majority of participants at the LBMA Precious Metals Conference in Edinburgh were bullish for gold’s outlook going forward. The chairman of the London Bullion Market Association, Kevin Crisp, said that the environment for gold prices is set to stay positive as concerns over the stability of other markets fuel investment into hard assets. The conference heard how the European Central Bank believe that gold will remain an important asset for European central banks as risk diversification becomes a more significant issue. Paul Mercier, deputy director general of market operations at the ECB, said that “gold makes sense as a contributor to risk diversification.” He said the Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.
***
Tags: gold as an investment, Gold News, Gold price
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October 21st, 2009
- With oil and the dollar trading near their respective recent highs and recent lows, gold continues to be well supported. It appears to be consolidating after its recent break out above previous resistance around $1,030 an ounce. Should we have another sell off in stock markets (which looks likely) gold may also fall and be correlated in the short term. However, as seen in recent years gold will likely fall by less and recover quicker meaning that the correlation will be only in the short term. In the medium and long term, gold is inversely correlated to equities (and currencies) and this is why it remains an important diversification for prudent investors.
- David Einhorn, who runs Greenlight Capital with $5 billion under management, is investing in gold because he says the commodity tends to rally amid “when monetary and fiscal policies are poor and does poorly when they are sensible.” Einhorn is of the school that the low interest rate environment is not helping rescue the economy, but rather increasing the deficit and causing a serious inflation risk. As the dollar gets devalued, gold becomes a good investment. Bernanke, Geithner and the rest of the Obama economic team argue that the low rates are helping stimulate consumer demand again without inflaming inflation.
Tags: David Einhorn, Dollar News, gold as an investment, Gold News, Gold price, Greenlight Capital, oil prices
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September 8th, 2009
- Gold rose to the highest price since March 2008, passing $1,000 an ounce, while silver climbed to a 13-month high as a weaker dollar and concern that inflation may accelerate boosted the appeal of precious metals.
- Governments have cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against potential inflation and debasement of currencies.
- “There’s not many good options for investors to hedge against a declining dollar and rising inflation,” Hwang Il Doo, head of trading with KEB Futures Co., said today from Seoul. He expects gold will rise to $1,100 an ounce by year’s end.
- “The reasons to own gold as an investment make sense,” Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc strategist, said in advance of the metal’s gain to $1,000 today. “It is a hedge against policy makers losing control of fiscal and quantitative monetary policies.”
- The US Federal Reserve’s policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy. Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing.”
- “Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added. The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction.
Tags: credit easing, gold as an investment, Gold price, hedge against declining dollar, inflation, inflation hedge, quantitative monetary policies, weak dollar
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