Wednesday, 17 October 2012

Gold Jumps on Weaker Dollar

Gold jumped back up today (Wednesday) on news of a weaker dollar. Growing progress toward a debt solution for Europe weakened the dollar, and gold took advantage, gaining over $6 for the day. While not a double-digit jump, it was nice to see the yellow metal still going strong.

Gold for December delivery GCZ2 +0.34% climbed by $6.50, or 0.4%, to come in at $1,752.80 an ounce. It traded as high as $1,755 earlier on the day, but dropped just a tad before finishing out the trading period on a high note.

Fiscal-Cliff

Gold has been in the driver’s seat lately. Except for three or four days over the last month, the yellow metal has been on the rise. Even on days when it had losses the losses were not significant, and they yellow metal was able to gain back the losses on the very next day. This is due in part to a number of current things happening, as noted by Chintan Karnani, chief analyst at Insignia Consultants in New Delhi. He sent this through an email:

“If the U.S. economy is strong, then fundamentally safe-haven demand should reduce and gold and silver should fall. However, higher gold investment demand at lower prices and central bank accumulation of gold [are] preventing prices from a fall.”

He added: “The fight between gold bearish fundamentals and bullish investment demand factor will increase intraday volatility. So despite the bullish trend, we prefer to be cautious on gold and silver for the short term.”

He finished by saying that Medium-term to long-term traders, “should hold on to their gold and silver investments.”  This is actually very good advice. If you can hold on to what you have, then you will continue to strengthen your portfolio, as well as make monetary gains over the long run.

Gold in India has been strong over the last week, and it is thought that the yellow metal will remain pretty strong there for the entire week. This will allow prices to remain high, as when India is showing demand for gold, then prices are usually strong during that period of time.

While India was once the biggest gold holder in the world (that honor now goes to China), the country still has a high demand for the product, and with that demand comes price gains. Look for gold to make more gains for the rest of the week as we head into the latter half of October.

Published in Gold Investing

Gold fell by a little over 1 percent today as U.S. retail sales data provided encouraging news. This encouraging news prompted many investors to curb their expectations for Federal Reserve's monetary stimulus that have boosted bullion prices. The current stimulus program put forth by the Feds has allowed the yellow metal to really skyrocket over the past month, but if positive data like this continues to come out, then they may be prompted to slow down or even cut the current stimulus program.

The yellow metal hit a one-week low today, as the above, coupled with European debt worries after euro zone officials said Spain could ask for financial aid from the bloc next month, both played major factors in the overall price of the yellow metal to start the week.

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Spot gold -16.65 (-0.95%) was down by 1 percent to come in at $1,737 an ounce, having earlier fallen to as low as $1,729.55, the weakest since Sept. 13. However, the yellow metal did manage to climb back up before all was said and done. The final price on the days still represents a one-week low for gold.

While the current Fed stimulus program has proved helpful (as witnessed in the price of gold), many still look at it as only a temporary fix for the economy and all that is going on. That being said, since a string of better U.S. economic indicators, including a surprisingly large drop in weekly jobless claims last week, called into question the possible extent of the Fed's latest bond-buying program. Some analysts said that the bond-buying program might be curtailed sooner than expected if economic data is positive enough.

Whatever your stance on the current Fed bond-buying stimulus program is, you have to admit that is has worked nicely over the last month or so. However, this isn’t to say that it will continue to work in the long run.

Whatever the outcome, the U.S. economy, and the rest of the world’s economies are going to need to continue to recover on their own, and Governments are going to need to make proper decisions to allow this to happen. While the Feds initially put in a stimulus program to help the U.S. recover faster, the bottom line is that they are simply printing up more money (in most cases) and this is not an ideal situation to be in after the fact.

Published in Gold Investing

Gold moved back up in price after having three straight days of losses. The yellow metal showed its strength against a dollar that was weakened against the euro. Gold has remained strong, even over the last three days of losses, and should continue to do so for the foreseeable future.

Gold for December delivery moved up by $5.50 to come in at $1,770.60 an ounce at the Comex division of the New York Mercantile Exchange. Gold price traded as high as $1,776.60 and as low as $1,760.20 an ounce, while spot price was up by $5.30. As you can see, the yellow metal has remained strong, but has struggled a bit to get close to the $1,800 per ounce price mark that it hit a week or so ago for a short time.

Fiscal-Cliff

The S&P(Standard & Poor’s) knocked down Spain's debt rating by two notches late Wednesday, but the euro chose to ignore that news and investors continued to be optimistic about the possibility of a bailout for the country. This possible bailout has been talked about for a while now, and while there has also been talk of it inside the ECB, no official word has come down as of yet.

"The S&P announcement on Spain probably has a lot to do with the return to the rally tracks," Chuck Butler, president of world markets at EverBank, wrote Thursday in a note.

Today (as stated above) gold was able to knock off a three-day slump (a week if you count the yellow metal simply hovering at one spot), and climb over $5 in price. Right after the Presidential debate a jobs report was released that showed great data for jobs. This was something that was unexpected, and while there are many theories to what happened, gold was not able to hang on to its high price against the news. It looks as though it has recovered now though from the news, and hopefully a jobs report featuring good news about jobs will only help the yellow metal price.

"As discussed recently, I was cautious to short term bearish on gold based on overbought sentiment mainly. If it can hold 1753, it has a chance to spring back over 1800," David Banister, chief investment strategist at Active Trading Partners, wrote in an email.

We will see how close the yellow metal gets back to the $1,800 per ounce price mark before the end of 2012.

Published in Gold Investing
Thursday, 11 October 2012

The October Price Dip

Taking its cue from the euro, Gold backed off its important $1,800 psychological level.  The yellow metal wasn’t helped at all by hedge fund selling.  As we’ve stressed a number of times here at The Investor’s Corner, hedge funds like to take short-term profits.  Hedge fund managers are highly opportunistic, and accumulation for the long term is ordinarily not part of their game.  Rather than be deterred by the price drop, you should view it as an opportunity.  Better to buy and wait than wait and buy.  Based on most current predictions by experts, the current price of $1,765 per ounce provides an excellent point at which to enter the market.  If you were fortunate enough to begin purchasing at $1,200 per ounce or even lower, you’d be wise to dollar-cost-average subsequent purchases as gold moves up.

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We should realize that gold is now hungry for some news in addition to quantitative easing to make another big move.   Another factor playing into the stall in gold is that the U.S. dollar made its most aggressive move up in over two months versus a basket of currencies.Although the  Fed’s reckless printing of money still remains the biggest catalyst for the gold price, investor patience can easily be distracted from the fundamentals during a short-term correction like this. 

Ultimately, the effects of quantitative easing will express themselves in terms of inflation.  What the careful gold investor needs to keep in mind during a dip in price are the sage words of Warren Buffett which we’ve quoted before:  “be fearful when others are greedy, and greedy when others are fearful.”

Much of gold’s hesitancy right now can be tied to the euro, since they both move inversely to the dollar.  And the euro is reacting to the reduced International Monetary Fund forecast of global growth from 3.5% to 3.3% for this year and 3.9% to 3.5% for next year.  The IMF also predicted a reduced growth percentage for the 17-country euro economy to 0.4% this year and 0.2% in 2013.

Through it all, the World Gold Council reports strong activity for gold on the demand side.  In August, central banks bought 15.2 metric tons of gold.  Most of this can be traced to the central banks of emerging markets.  Turkey bought 6.6 metric tons, the Philippines 4.6, the Ukraine 1.9, Kazakhstan, 2.6 and Taiwan 0.9.  These and other banks are careful to purchase on price corrections, so look for these and other central bank purchases to lend support to gold during price dips like the current one.

Meanwhile further monetary easing looms in the not-too-distant future.  Spain and Greece have still not come forth with an official request for a bailout.  But it’s just a matter of time.  Things are growing worse in both countries.  For many years, the Red Cross has appealed to Spaniards for money to help starving children in the Third World.  But, according to National Public Radio, the current European debt crisis has now brought about starvation in Spain itself.  .

The Spanish Red Cross today launched its first-ever fundraising campaign for Spaniards to donate directly to other Spaniards. The aid organization estimates that some 300,000 additional people in Spain are vulnerable to hunger because of the economic crisis.  The country reports an overall unemployment rate of 25%, and more than half of 20-somethings are unemployed.

The economy in Greece is just about as dismal.  Once the European Central Bank makes bailout funds available to both countries, expect the resulting monetary easing to ultimately reflect itself in the price of gold.

Published in From The CEO
Sunday, 07 October 2012

Gold and U.S. Unemployment

On Friday, October 5th, gold took a step back a few notches on a surprising announcement from The U.S. Bureau of Labor Statistics.  The September rate of unemployment in the U.S., decreased to 7.8 per cent, and the country added 114,000 nonfarm jobs.  For the first 8 months of 2012, the unemployment rate held to a narrow range between 8.1 and 8.3 percent.  The actual number of unemployed persons, at 12.1 million, decreased in September by 465,000.

Gold dropped by almost $20.00 on this news because the markets reacted to what seemed like good news after more somber expectations of the employment market.  The country has been locked into its gloom from the highest unemployment rate since the Great Depression; and the fact that no modern president has been re-elected with an unemployment rate above 7.2 percent has been dogging the White House.  Under the circumstances, what constitutes good news turned out to be more like a sip of water to someone stranded in the desert when what he really needed was a full glass of water followed by some rest in an air-conditioned hotel.

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Markets have a way of correcting for impulse.  So once it became clear that the optimistic BLS figure had more to do with improvement in government employment rolls rather than with jobs in the private sector, gold rapidly regained another $10.00 per ounce.

While it seems clear that traders and investors are not yet giving gold the momentum to break the $1,800 per ounce resistance barrier, the market is maintaining a strong bottom, despite the conspicuous addition of some short positions.

Another way to read the current gold market is that traders remain unconvinced that the Fed will read the figures as sufficient reason to back off QE3 anytime soon.  Significant resistance now holds firm between the psychological $1,800 mark and the August, 2011 high of $1,817. The US job figures also motivated a sell off of the US dollar, while the euro held above 1.3000.  Meanwhile European Central Bank President Mario Draghi announced that the bank would be willing to purchase short-dated bonds once Spain makes the formal announcement that a bailout is indeed open to them.

The BLS announcement then was treated by gold as a hiccup.  Quantitative easing remains the primary engine of the market.  As long as it holds, perhaps corrects a bit, and doesn’t sink, the gold market still holds promise for a world economy wracked by debt and the prospect of inflation.  While the yellow metal continues to flirt with resistance at the $1,800-per-ounce level, you would still be advised to continue to accumulate.  Inflation is just a short distance down the road.  Haveyou noticed gas and food prices lately?

Published in From The CEO
Wednesday, 10 October 2012

US Coin Production Has Huge September

Coin production in the United States had a huge September, especially when compared to August numbers. While September wasn’t the biggest month of 2012 (as it relates to coin production), it was one of the bigger ones, and with the huge jump from August it was a nice sign for United States coins.

More pennies, nickels, dimes and quarters were struck in September for use by the American people. The new quarter depicting Denali National Park in Alaska and have not been issued yet. Even though the new quarter was not issued, it was still counted as part of the number of coins struck and it will be released shortly.

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New figures for coin production just hit the wire, and they place the monthly production total at 905.34 million coins, the third highest this year and well above the 811.42 million from September of last year. As you can see, coin production was in full swing last month and may continue that way for the last three months of 2012.

Here are some monthly comparisons dating back a year from September:

September 2011 - September 2012 Coin Production Figures

Month Mintages Rank
September 2012 905.34 M 3
August 2012 655.55 M 11
July 2012 906.62 M 2
June 2012 975.59 M 1
May 2012 819.86 M 5
April 2012 858.04 M 4
March 2012 781.70 M 8
February 2012 579.86 M 12
January 2012 802.50 M 7
December 2011 431.78 M 13
November 2011 715.96 M 9
October 2011 690.66 M 10
September 2011 811.42 M 6


As you can see, September ranks third overall for the year, yet coin production for each coin was up overall for the month when compared to August.

  • 33.7% for Lincoln cents,
  • 98.5% for Jefferson nickels,
  • 11.2% for Roosevelt dimes, and
  • 96.7% for America the Beautiful Quarters

Coin production in the U.S. is very strong right now. The huge jump in numbers from August to September may have something to do with the stimulus that was presented by the Feds, or it may just be that September happened to be a very strong month for coin production.

Either way, we should continue to see strong coin production numbers for the rest of 2012 and into the early part of 2013. How strong? One can never be too sure, but numbers comparable to these September’s numbers seem very possible.

Published in United States Economy
Tuesday, 09 October 2012

Gold Drops For a Third Straight Day

Gold prices fell for a third straight day today, as global-growth concerns and nervousness ahead of the corporate-earnings season preoccupied traders. The dollar also remained strong, which contributed to the factor and helped suppress gold for a third day in a row.

Gold for December delivery was down by $10.70, or 0.6%, to come in at $1,765 an ounce on the Comex division of the New York Mercantile Exchange. The drop was the biggest drop of the last three days, and the yellow metal had actually traded even lower early on before gaining some of its lost price back.

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It seems as though gold was getting mixed messages today and didn’t really know whether to go up or down in price. As silly as that sounds, some inflationary forces were at play, but amid equity weakness and dollar strength it could not get much traction. The International Monetary Fund on Tuesday also  released news that it cut its forecast for global growth yet again, to 3.3% this year from a forecast of 3.5% made in July. The bank predicted growth of 3.6% in 2013, from a prediction of 3.9% in July.

“The chance of unlimited, cheap central bank liquidity and strong exchange-traded-fund inflows suggest that the price might soon rise towards $1,800,” the analysts at Commezbank wrote. Continuing strikes in the South African gold sector are another supportive factor, they noted.

South Africa gold production has also come into play here. Currently three mines are striking and it is hurting gold production. The nation used to be the largest gold producer in the world. While they are not number one in that regard anymore, they are still fifth in the world as far as gold production goes, which has still helped the yellow metal overall. These strikes need to be resolved.

“Every ounce which is lost to strikes exacerbates the supply bottlenecks, and since the beginning of September, (exchange-traded funds) have been absorbing virtually half of the global mine production during this period,” they said.

We will see how the rest of the week plays out. After jumping in price daily for almost a month straight, the yellow metal has now endured three straight days of losses. While the losses are not considered to bad, it is still a trend that investors do not want to see, as this will halt them from trading.

Published in Gold Investing
Thursday, 04 October 2012

Gold at the Crossroads

Although our glorious Fed has given gold a ticket to ride with quantitative easing, nobody said it would be an easy ride.  As we’ve pointed out on numerous occasions here at The Investor’s Corner, there will be encouraging starts and disheartening stops along the way.  In the parlance of market technicians, those starts and stops express themselves numerically as support and resistance points.   But make no mistake – support and resistance points invariably relate to market developments and events.

Gold’s challenge this morning weighs in at a $1,780 per ounce price for gold.  That number now asserts itself as an interim support level.  And the corresponding development for that number comes from the U.S. Department of Labor today which reports that the economy added 114,000 jobs last month and the unemployment rate fell to 7.8%.  Keep in mind that the yellow metal traded aggressively to $1,791 per ounce just before this report was issued.

Fiscal-Cliff

Investors and market watchers have little doubt that it’s the world imperative of the world’s major economies to print money that providesthe principal engine fueling the gold market.  But, as we’ve pointed out previously, professional investors will always look for short-term opportunities to take money off the table.  Although they know that gold is on a long-term tear, they’re going to watch intermediate developments closely as well. 

In The London Gold Market Report of October 5th,David Govett at the commodities broker Marex Spectron is quoted as saying “the 1800 level may not be the most important figure technically, but … if we can break above and hold, this should give us impetus toward the mid-1800s.”

What we’re seeing now in the gold market then is range trading.  The $1,780 -- $1,791 per ounce range is really a crossroads for gold.  If that range holds, we can feel confident of a breakout soon.  The battering-ram analogy I’ve used before in these articles, though highly informal, is still helpful in understanding gold prices in their present state.  Think of that $1,791 resistance level as a door that has to be broken down.  If five strong and determined SWAT team members run up against that door with a battering ram, they’re presented with two options if the door seems to budge but fails to collapse.  They can add another SWAT team member or two for more force, or they can drop back at a greater distance to gain more momentum for the next attempt.

In terms of gold prices, think of yet another event in the geo-political arena as one more SWAT team member holding the battering ram to help take down the door.  Now suppose Israel bombs Iran’s nuclear enrichment facilities.  Fears proliferate that the price of oil will soar, and then economiespanic.  Now we have additional muscle manning the battering ram.

But suppose the gold price keeps banging up against the $1,791price per ounce, the market tires and no geo-political events occur significant enough to drive gold past that same $1,791 resistance level.  The market corrects – drops back to say the $1,650 level of new support, just like the team holding the battering ram, to gather new momentum for the next shot at the door.

Either way, there’s no reason you have to play the role of professional trader while gold range trades.  Just hold on to your gold, and keep buying more at current prices.  When gold breaks through resistance, your portfolio will be in good shape.

Published in From The CEO

In some investor circles it’s been an article of faith that there’s some magic relationship between gold and oil.  Many have felt if one of these hot commodities starts a ride up in price, we should look to the other for an equivalent bump.  And the reverse has been held to be true also. If one of these commodities slides in price, we should look to the other for an equivalent ride down.

This relationship is most often explained as being represented by a ratio.  And the magic number most often put forth for the ratio is 14.  So when the price of gold is $1,774 per ounce and the price of crude oil is $126.71 per barrel, all is supposed to be right with the world.   Accordingly, as soon as gold reaches $2,000 per ounce, we should look for forward to the world price for crude oil price to reach $142.86 per barrel. 

Fiscal-Cliff

Given this argument, we’re hard put to tell the horse from the cart.  Does the gold price pull the oil price along with it?  Or does the price of oil drive the price of gold?  And does it also mean that every time it makes sense to invest in gold, we should also feel comfortable investing in oil – and vice versa?

Life isn’t that simple – at least not in the world of money.  While today’s price of gold is, in fact, $1,774, the price of crude oil today is $92.21.  You can forget about the 14 to 1 ratio.  The ratio, based on today’s prices works out to slightly more than 19 to 1.  I wouldn’t look for a correction in that ratio anytime soon.  The gold market and the oil market are being fueled by different forces.

As we’ve pointed out many times in the Investor’s Corner, gold is now being driven by wide-scale quantitative easing.  Our Fed is pumping $45 billion into the economy until some unspecified time in the future.  And Europe, China and Japan have followed suit with their own aggressive programs.    While you could argue that both gold and oil are responding to inflation, the move up in the gold price is principally dollar driven, whereas the move up in oil is a classic supply-and-demand scenario.  One that’s about to end soon.

In a recent article at thebulliondesk.com, financial historian Christopher W. Mayer argues that the bull market in oil is on its last legs.  The largest economies in the world, the U.S., China and Japan are all contracting.  Regardless of this contraction, the price of gold continues to increase because of currency debasement.  But as economies contract, the price of oil will go down as the need for oil decreases.  Mayer also points to new rich new sources of supply in Alberta oil Sands, West Africa, Brazil and Bazhevnov Shale in Russia.

One should not inflexibly invoke a gold/oil ratio to blind oneself to the differences between investing in oil and investing in gold.  Besides, here at the Investor’s Corner, we’ve always recommended investing in the physical metal.  Investing in oil doesn’t lend itself to actual physical possession.  If you keep your eye on the fundamentals driving gold and don’t worry about what oil does, you’ll be invested safely and profitably for years to come.

Published in From The CEO

You’ve been watching gold for a long time now, and it’s hard to believe this bull market’s going to last.  You’ve also been listening to the buzz from well-respected gold gurus about how the price of gold is headed to the moon.  In fact, just this morning you might have spotted a quote from noted French investment fund manager, Jean-Marie Eveillard who, in an interview with King World News assures us that “$15,000 gold would not be absurd.” 

No, that’s not a misprint.  You read it right -- $15,000 per ounce!  Now Eveillard is nobody’s fool.  He’s received two prestigious awards from Morningstar:  Stock Manager of the Year in 2001, and Fund Manager Lifetime Achievement Award in 2003.  And suddenly this guru, noted for his excellence in choosing stocks, has put forth a possible target price for gold that dwarfs the price quoted by most of the gurus you’ve been reading.

Fiscal-Cliff

But what if Eveillard is dead wrong?  And what if the other gold gurus are all wrong too? If you’ve been on the planet long enough, investment experts with egg on their face shouldn’t surprise you.  After all, tomorrow is given to no one; and what goes up in a fury might just as easily fall flat on its face. 

But here’s some sobering news for you.  Gold will probably go down.  Now if that sounds out-and-out contradictory to what you’re used to reading here in The Investor’s Corner, rest easy.  It’s not.  We often discuss the ups AND the downs in the gold market.  But when faced with a market decline, you have to distinguish between a temporary sell off and a market turnaround.

We’ve been advising you to buy physical gold on a long-term basis for asset protection and as a hedge against your paper assets.  It’s important to understand that the world market is replete with professional traders who buy gold opportunistically.  As soon as the market surges (for instance gold at $1,576 per ounce), they buy in large quantity.  When the market reaches a resistance point (say at $1,780 per ounce), they sell off at a profit, and buy back as soon as the market retreats again to a support level.  In trading parlance, this technique is known as “back and fill.”

The point is the bullish story about gold remains the same.  Short-term price retracements don’t change that story.  Gold is on its way up – big time!  Just recently, the yellow metal took out all the major moving-day averages technical analysts closely consider:  the 100, 200 and 400 moving-day averages.  The Fed’s initiative of Quantitative Easing (QE3) remains firmly in place, along with the Eurozone’s and China’s own wide open liquidity programs.  As a result, world currencies are moving into a debasement phase.  Once the general public “gets it,” and starts buying gold with a vengeance, you’ll see the prices soar in bigger increments each day.

We continue to recommend you buy and hold for the long term, and leave intermediate buy-and-sell techniques to the professionals.  It’s not our purpose here to burden you with the technical details of the gold market.  Professionals will rock and roll the market a bit by manipulating those details for short-term gain.  Just keep your eye on gold’s long-term picture and you’ll grow wealthier while you also sleep much better at night.

Published in From The CEO