Wednesday, 11 June 2014

Gold Bulls Regain Some Traction

Whether you call it a correction or a relief rally, this week certainly comes as a relief to gold bulls — and the sudden turnaround in gold prices lets me hold my analyst head a little higher, though gold is still solidly down on the 30-day chart.
Published in Gold Investing
Wednesday, 07 May 2014

Gold Tests $1,300 Support Level

Heavy outflows from gold ETFs, and a sag in demand for physical bullion, pushed gold prices back below $1,300 in mid-week trading. Gold is currently down $11.44 to $1,296.30, and silver followed gold lower by $0.18 to $19.38. 

Gold pushed below the $1,300 support level despite a weaker U.S dollar, which usually tends to lift gold prices. The price move boosted the Dow/Gold Ratio to 12.71, up from 12.6, which indicates that investors are continuing to leave gold on the sidelines to move money into equities.

Published in Gold Investing
Gold prices bounced off their lows of the month to stabilize around the $1,248 an ounce mark, but there’s nothing to indicate commodities, including gold and silver, have found a floor. It’s probably little comfort to investors that the weakness in prices are reflected across a broad range of commodities including crude oil, gasoline, industrial metals, and food products.
Published in Gold Investing
Monday, 02 December 2013

Gold Continues Lower

Asian demand for physical gold stepped up to slow the fall of gold and silver prices, as demand for bars, coins, and jewelry picked up in China — but it wasn't enough to reverse the recent downtrend. In early trading on Thursday, gold was down another $33.16 to $1,241.74 an ounce; and silver prices firmed up just under $20.
Published in Gold Investing
Wednesday, 23 October 2013

Uncertainty Driving Gold Markets

With the Federal Reserve in a state of transition, with new leadership coming to the helm and the clown show we call Congress taking the country to the brink of a catastrophic default, gold prices are on a tear this week. Gold is up $48 an ounce for the week so far, completely erasing losses for the month; and the uptrend looks to finish the week out on a high note. 
Published in United States Economy

1. Stocks are more profitable in the long run.

Which stocks? General Motors, maybe? True, that's a stock that has performed nicely this year. But need we remind you GM went bankrupt as recently as three years ago? If you don’t mind looking over your shoulder at the competitive Japanese car market and the labor problems that dogged GM for a long time, go ahead — take your chances.

Or did you mean Blockbuster, Inc.? How’d that one work out for you? Why pick and choose among paper investments when you can buy an investment which individuals and nations have depended on for thousands of years?

Published in Gold Investing
Thursday, 17 January 2013

The Gold Capitol of the World

If there’s a contemporary city capitol for gold, it’s Kerala, India. Some might think that New York should wear such a crown, with Wall Street, the Federal Reserve and other massive stores of wealth on the island. However, though such wealth is clearly evident in the Big Apple, the prevalence of gold among the populace doesn’t hold a candle to Kerala.

Not a small city by any stretch, Kerala’s 33 million residents represent2.76 percent of India’s entire population. Why then does the city consume 20% of the nation’s gold annually? In fact, with India being the largest consumer of gold in the world, claiming 30% of the total demand, Kerala represents 6% of total world consumption.

Published in World Economy
Thursday, 20 December 2012

Japan Pension Funds Embracing Bullion

Over a decade ago goldbugs were sounding the alarm, attempting to help others understand that gold had been ignored and the dollar had been debased for far too long. Since gold had retracted from its soaring heights in 1980, little movement had taken place. However, inflation had never abated, which offered what appeared to be a no-brainer when it came to gold.

At the time, what to buy was a big question. Some advocated bullion, others graded coins. With the euro seeming to gain new ground, many thought that European coins would be the next best thing, since they’d been largely ignored in comparison to their U.S. counterparts.


Of course, slabbed (graded) coins were part of the package as well, offering stability and confidence for the average investor. Still, one had to be careful since many dealers sold coins with claims of greater value than the current market would bear. And a couple of grading agencies started up that were far less scrupulous than PCGS and NGC.

Just when it seemed that the only way to own gold and silver was to either take delivery or pay for storage, ETFs started emerging. The most famous of these is GLD, with SLV offering silver. Basically, these offer the investor shares in gold stored in vaults. The idea is that it makes it easier to trade without the costs of shipping or risks of storing. However, unlike personal delivery or storage, neither of these vehicles ever has anywhere close to the amount of metals represented by their shares. Furthermore, both have decay built into their pricing in order to cover overhead. The decay is minimal, but present and must be considered.

When the financial crisis struck in 2008, pension funds around the globe took a substantial hit. Few of them were prepared to weather a storm of such magnitude, with the better ones experiencing losses of only 5%. Some saw losses in the neighborhood of 50%. Gold, however, managed to end the year with a slight gain, and hasn’t looked back since.
Since then, hedge funds have taken gold more seriously. The ETFs have added to this ability; however long-term holders are becoming more aware of their exposure to possible problems due to lack of allocated metals. Now we see a new customer lining up for gold – pension funds.

While private pension funds are noted for their ability to assess markets and diversify portfolios well, public pension funds are noted for wasting resources and focusing too much on bonds and other government issued opportunities. Perhaps that will never change.

What has changed is that we are now seeing Japanese pension funds turn toward gold in an effort to protect their portfolios. They’ve diversified in currencies for years. But today we find them including real money in the portfolios as well. Kosaku Narioka’s WSJ article offers this insight

“In some ways, Japanese pension funds are merely tracking a trend that has already been seen in other developed markets, industry watchers say. Gold's potential to offset inflation-linked losses has already prompted some U.S. and European pension funds to buy small volumes.”

With the trend becoming ever more obvious, investors should take note. While most do not have pensions, an IRA or 401K serves a similar purpose. And, thanks to the ability to hold allocated precious metals in self-directed IRAs, the average investor can obtain equal, or even superior, protection of their portfolios through allocated precious metals diversification.

Published in World Economy

As we move closer to the end of 2013, and official fiscal-cliff argument toggles back and forth, it’s all too easy to sink into despair. Particularly if you’re a precious metals investor.  What in the world happened to gold predictions of $1,800 by the end of this year?  And what in blazes became of silver predictions surpassing the all-time high of $52 per ounce reached in 1979?  Are precious metals about to tank?

We need to step back and look at the total picture.  In doing so, as recently as a month ago, analyst Jeff Clark offered a graph of the gold price vs. an adjusted monetary base.  His conclusion?  He’s not at all deterred by a short-term consolidation.  His gold prediction for the end by year-end 2014 logs in at $2,500 per ounce.  Given gold’s current tendency to tightly cling to the low $1,700 level, Clark’s gold prediction makes classic sense.


His reasoning is that as long as the Fed sustains quantitative easing “through eternity,” continued printing of money puts an upward pressure on gold prices.  Clark observes further that as prices rise and attract many more investors, supplies will become limited, thus driving up prices even further.  Premiums on coins, he also mentions, tend to rise at times like this. 

Since the great mass of investors waits until prices move very high before buying, others will crowd into the market like sheep, concludes Clark.  “The average investor won’t want to be left behind,” he reasons.  This kind of behavior is generally true of investing in general.  The mania of the 1990s is a good example.  People rush into a market based on rumor and saturated media coverage.

Peter Krauth, the global resources specialist for Money Morning, is even more ambitious about his silver predictions.  He bases them on a common pattern that’s evident in the relationship between gold and silver.  Although silver moves “almost in sync with gold,” it does so dramatically.  Krauth sees silver as “gold on steroids.”  Consequently, he predicts that the gold/silver ratio will move to 20 in the long term.  Today the ratio of gold-to-silver runs about 52.68.  A move to 20 would suggest silver will move up much faster than gold.  So if gold indeed goes to $2,400 per ounce in 2014, look for silver to move to $120.00 per ounce.

Given this background, we interpret the sluggishness of gold and silver prices as a bullish sign.  Metals have not tanked at al.  Gold and silver are holding their support levels.  This suggests that investors are watching and waiting.  Some may, as UBS suggests, be looking for a better deal.

If you’ll forgive us the play on words, everything now hangs on the fiscal-cliff discussions.  The fundamentals remain in place.  So do not short-change your own gold and silver predictions. Once again we stress, don’t wait to buy.  Better to buy and wait.  Beat the herd.  The precious metals bull market is far from over.

Published in From The CEO

Isn’t it always the case?  The price of gold dips, and investors new to the yellow metal begin panicking. And media pundits begin moaning that it’s all over for gold. Seasoned gold investors know better though.  True to form in the last few days, gold took quite a dip, flirting with a downward slide to the 1600s on the exit of longs and an increase in short positions.  Yet here we are after a quick turnaround late Friday and a healthy follow-through today.  And here gold sits at $1,713, up $9.00 per ounce.

What in Sam Hill happened?  Well, for one thing, the economic community is anticipating Ben Bernanke’s announcement of continued quantitative easing at The Fed’s FOMC meeting this Wednesday.  This anticipation is based less on inside information than on the widespread assumption that The Fed Chairman doesn’t want to be the bad guy to slow down the economy just in case President Obama and House Speaker John Boehner finally come up with optimistic news during fierce fiscal-cliff battle.

So it seems reasonable to expect an announcement this week that the dollar printing presses will be alive, well and turned back on at full speed.  What’s particularly significant is that the announcement of an improvement in the nation’s employment numbers didn’t suppress the gold market back for a second.  Total nonfarm payrolls rose by 146,000 jobs in November.  From Ben Bernanke’s past comments, we can safely infer that this number is insufficient for The Fed to put a stop to quantitative easing.


To compound the difficulty, the country is now undergoing a dramatic drop in its consumer spending.  This is particularly bad news during the final quarter – news that certainly won’t be lost on The Federal Reserve FOMC when it convenes Wednesday.  Meanwhile, while we hold out for optimistic news from the hill on fiscal cliff negotiations, an article in yesterday’s Wall Street Journal suggests we might not want to hold our breath:

“Democrats say they are waiting for Republicans to agree to raise tax rate on the highest-earning households, and Republicans say they are waiting for Democrats to agree to cuts in safety-net programs.”

All of this economic uncertainty is definitely encouraging news for gold.  Particularly in the wake of increased gold buying by central banks, observant investors are fast becoming persuaded that the economy is far from entering a recovery mode.

Under the circumstances, it’s time for you to look at your own portfolio. You’ve seen where gold’s been, and you know where it can go.  Don’t bet against an $1,800 price per ounce in the next several weeks.  Time to start accumulating.

Published in From The CEO