Monday, 08 October 2012

Columbus Day Brings Gold Drop

Most people are off work today and celebrating Columbus Day in some aspect. That being said, this time the holiday brought with it a drop in the price of gold, as the yellow metal fell in price to come in at right around $1,775 for the day.

Last week’s good employment numbers strengthened the dollar, and while gold was still very strong through last week, it did have some affect on the price of the yellow metal today. That being said, gold is still trading at a very strong level and expects to do so for some time.

First-Strike

Spot gold was down by 0.3 percent on the day to come in at $1,775.70 an ounce, extending Friday's 0.5 percent drop. As you can see, the drop in the price of gold was minimal, but nevertheless, it was still a drop. Obviously better jobs data and better economical recovery may mean a stronger dollar, and while gold should remain strong even with a strong dollar, the yellow metal could slow down some as well.

"If we get slightly better U.S. data going forward, which gives more support for the U.S. economic recovery, we get a stronger dollar," Citigroup analyst David Wilson said.

"Obviously, Europe is still continuing to struggle, and that would suggest that the rally is done for the time being, although I'm not saying gold won't see more upside further out."

Gold has been on the move up ever since the Federal Reserve announced another stimulus package for the slow to recover U.S. economy. Basically they pledged in September to buy $40 billion a month in mortgage-backed securities to lower borrowing rates and keep credit flowing through the economy, as long as job creation remained sluggish. While this of course shot the price of gold up right away, and may help the economy in the long run, many analysts think this may just be another temporary fix.

Right now we have a mixture of people trying to sell their gold and reap the return of investment, as well as some hanging on to it as a safe haven while hoping it may go higher in price. While this is not out of the question, it may not hit the $1,800 mark until next year.

"It’s quite possible that we do see further follow-through selling because we had a sharp move up in the last quarter," said Mark O'Byrne, executive director at bullion dealer GoldCore.

"There is strong resistance at $1,800, so I wouldn’t be surprised if gold was to come back to $1,750 or $1,700, but in the long term, there is a secular bull market."

Gold has risen in price by an overall 13 percent in 2012, which puts the yellow metal on its way to a 12th straight year of gains.

Published in Gold Investing
Friday, 05 October 2012

Gold Drops on Surprising Jobs Data

Gold dropped some to end the week, as a surprising U.S. jobs data report was received and showed a drop in the unemployment rate for September. This was actually something that was not suspected, and while a drop in unemployment is always welcome, if gold doesn’t know it is coming, then it usually affects the overall price of the yellow metal.

Gold for December delivery fell by $12.40, or 0.7%, to come in at $1,784 an ounce on the Comex division of the New York Mercantile Exchange. This was only a day after the yellow metal hit an 11-month high and pushed the barriers of the $1,800 per ounce price mark. Overall for the week gold was still up by 0.6 percent.

First-Strike

The yellow metal has been on a tear lately, especially after the announcement from the Feds of monetary easing, as well as the announcement by the ECB of continued low interest rates. News like this has been coming not only from the U.S., but from other areas of the world as well, including the all important euro zone.

The U.S. Labor Department said the jobless rate fell below 8% for the first time since President Barack Obama took office. The economy created 114,000 jobs in September, and employment figures for August and July were revised up. See: Jobless rate falls to 7.8%, lowest since 2009.

So what really finally brought the U.S. stimulus measures after several months of trying to hold off? The minutes of the U.S. Federal Reserve’s September meeting showed policy makers finally decided to launch a third round of quantitative easing (stimulus) due to persistent sluggishness in the labor market and worries about Europe’s debt troubles, among other factors. While many, including myself, thought that this was just a quick fix, it has worked so far, but we will need to see how it plays out in the long run.

“This will prove to be most beneficial to the precious metals complex and specifically gold,” the strategistsat Deutsche Bank wrote in a research report.

“Seasonal factors may also come into play and encourage exchange traded fund flows into gold at the end of the year since there has been a tendency of the U.S. dollar to display weakness during December,” they added.

The yellow metal is still strong heading into the weekend, and those who bought low early on in 2012 are still reaping rewards.

Published in United States Economy
Thursday, 04 October 2012

Gold Hits 11 Month High on ECB News

Gold hit an 11-month high today, as the European Central Bank (ECB) has decided they would keep their interest rates at very low levels. Gold has already been pretty powerful over the last couple of months, hitting highs for 2012 several times. This news allows the yellow metal to now truly lock its sights on the $1,800 per ounce price mark.

Gold also remained this strong against a strong euro, which actually supported bullion some. ECB president Mario Draghi said the bank's debt-buying plan had reduced tensions, even though economic growth remained weak. Either way, the announcement of the continuation of the super low rates was apparently a welcomed one.

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Spot gold was up 0.6 percent to come in at $1,787.99 per ounce, having earlier hit an 11-month high at $1,794.40. U.S. gold futures gained 0.6 percent to come in at $1,790.30. As you can se, the day’s high put the yellow metal very close to the $1,800 per ounce price range. While the metal did end up falling some from that high, it still gained nicely, and may be able to hit $1,800 per ounce before the end of they year.

"The question is of when rather than if we break out," said Simon Weeks, director of precious metal sales at ScotiaMocatta.

"We've made about three highs in the low $1,790s. It needs to close above this resistance in the low to mid 90s, if we close above there, the next resistance is $1,815," he added.

The European Central Bank kept its main interest rate unchanged at 0.75 percent, while the Bank of England kept its rate on hold at a record low 0.5 percent and its quantitative easing policy intact. Both rates are welcome to stay around as far as most consumers and investors in the area are concerned.

On another note, it looks the Presidential debate did not really have an affect on the yellow metal one way or another, at least not at this point. Romney has stated he would remove Ben Bernanke from the Fed Chair position if he was elected, while Obama has not taken that stance at all.

While the election will probably affect the price of precious metals, it looks as though at this particular time that the low interest rate news coming out of Europe from the ECB is trumping anything else.

Published in World Economy

Gold was on the move upwards again today ahead of the Presidential debate. Most people don’t realize the affect that the Presidential race outcome will have on gold, but it indeed will. The yellow metal showed a nice gain today, as people are getting excited for the Presidential debate.

Gold for December delivery rose by $3.50 to come in at $1,779.10 an ounce at the Comex division of the New York Mercantile Exchange. Gold price traded as high as $1,784 and as low as $1,773 an ounce, while the spot price rose by $2.80.

First-Strike

As stated above, the Presidential race will actually affect the gold market quite a bit, as Romney and Obama are on two different sides of the fence when it comes to Fed Chairman Ben Bernanke. If Romney wins the election, he has already stated that he would remove Ben Bernanke as Fed Chair. Obama has not taken this stance. What this means for future quantitative easing is cloudy, as Bernanke is the one controlling most of that right now.

"I think here in the U.S. we're definitely focusing on the first presidential debate," said Tim Harvey, senior vice president at ETF Securities U.S. "If Obama wins, then I think most people think we're looking at ... not necessarily more quantitative easing, but more of the same."

We will have to see what happens with all this. Many (including myself) do not agree with the continued stimuli that the Feds have been giving. While they are usually good for a few months, they have yet to prove that they can really be a help in the long run. Reason being is that all the Feds are doing is printing more money, which is causing more inflation. The exception would be the AIG situation, in which the Feds were able to make several billion back to America, but that has been the only exception.

Some want Bernanke out now, others want him right where he is. We will have to see how all that plays out. Look for gold to remain steady this week, even after the Presidential debate tonight, as it is still only a debate, not the general election.

The yellow metal may spike up or drop down real quick tomorrow, but overall numbers should remain pretty constant for the rest of this week.

Published in Gold Investing

Gold and Silver American Eagle coin sales generated a huge spike in sales for the month of September. Demand for these wildly popular coins was the biggest since January of this year as increases of 5.1% for gold and 10% for silver have been reported.

September sales of American Eagle silver coins came in at 3,255,000. This accounted for a 13.4% jump over the 2,870,000 sold in August. It was only the second time this year that the 99.9% fine silver coins made it past the 3 million mark. January continues as the 2012 frontrunner with 6,107,000, the second all-time monthly leader on the books. That being said, September was a solid month.

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September are not traditionally known for having huge sales figures for silver American Eagles. Last year remains the top September with sales of 4,460,500. Prior to that, orders during the month had peaked in 2010 at 1,880,000. As you can see, except for a few Septembers here and there, sales were always slow for this month.

The gold American Eagles did very well also in September. September sales of American Eagle gold coins came in at 68,500 ounces with every size — one ounce, one-half ounce, one-quarter once, and one-tenth ounce — gaining. It marks a 75.6% improvement over the 39,000 ounces sold in August.

Just like the Silver Eagles, the only better sales month for the coins in 2012 was January when 127,000 ounces were delivered. The same moth last year was also higher at 91,000 ounces.

Despite sales figures being way up in September, overall sales numbers for these coins, and almost every other coin, are still down for the year. As a matter of fact, we are currently running the lowest sales total through the first nine months of a year since safe-haven demand began climbing in 2008 with the Great Recession.

While coin sales are slowly recovering, many have chosen to slow down their buying of certain coins and try to focus on other investments that will help keep their money safe during these tough times. That being said, the spike in sales prices are also a sign that investors and collectors are starting to come back and realize that buying gold and silver coins is actually one of the very best ways to protect your money and invest for the future.

Published in Gold Investing

Don’t look now, but it seems as though many investors think that gold will hit the $1,800 per ounce price mark by the end of next week. Even though prices were down for today, and down a little overall for the week, most investors still think that gold will either hit (or come close to) the $1,800 per ounce price mark.

In my opinion this is a bit ambitious. However, as I always say, gold is a very volatile metal, and it could definitely go either way. I am wary of making hard line predictions on gold, as the yellow metal has too much of a history of not doing what market analysts and investors say it will. That being said, there is definitely a possibility of this happening next week, though my personal thought is that it won’t hit that price level by the end of next week.

First-Strike

As stated above, gold pries were down on the day and the week. The most-active December gold contract on the Comex division of the Nymex settled at $1,773.90 an ounce, which was down 0.23% on the week. December silver settled at $34.577 an ounce, which was also down 0.176% on the week.  On the month, gold rose 5.1% and silver gained 9.97%.

The yellow metal continues to look strong, but it will still be hard pressed to hit that $1,800 per ounce price mark next week. Even if it does, it may not be ready to stay in that area for long.

Many are pointing to the possible escalation of gold price to the fact that the debt crisis in the euro zone has once again escalated to the forefront of the news.

The debt crisis in the eurozone has escalated again, for example, as evidenced among other things by what are in some cases violent public protests against the new austerity packages in Spain and Greece,” said Commerzbank.

This escalating news may be one of the driving factors for gold to hit that $1,800 per ounce price mark, though I wouldn’t use this issue as a base for keeping the yellow metal at higher price levels.

We will see how things play out next week. Right now gold is strong and looks like it will continue to move up. How far up will it go in a short period of time? Well, that remains to be seen.

Published in Gold Investing
Friday, 28 September 2012

Gold Gains on China Stimulus News

After a couple of days of small losses, gold jumped back up into the positive after news came out that China may be entertaining a stimulus package of its own. China has been in the news the last year mostly for its bulk buying of the yellow metal, and it seems now they are entertaining the thought of a stimulus to help boost the country.

Today’s jump in gold price was the biggest in two weeks, as demand for the precious metal for storing value definitely came into play today. Gold futures for December delivery shot up by 1.5 percent to come in at $1,780.50 an ounce at earlier today on the Comex in New York. This was the yellow metal’s biggest gain since Sept. 13. Prices have risen 14 percent this year.

First-Strike

Of course, as mentioned above, China had a lot to do with this price jump today due to their announcement of certain stimulus measures that are probably forthcoming for the country.

“News out of China is positive for gold,” Carlos Perez- Santalla, a broker at PVM Futures Inc. in Hoboken, New Jersey, said in a telephone interview. “Prices continue to remain well supported from the Fed announcement.”

China has been buying up gold at a crazy rate over the last year or so. While there are many theories as to why the country has been doing this. The first thought that came to my head was that the country is simply trying to better position itself in the world of precious metals. This is a great thing to do, as gold will always have value.

Despite the mow credit rating that China has, they have an almost unlimited supply of cash. They have used this to their advantage. So much so that they have surpassed India as the worlds biggest holder of gold. What will they do with all this gold? They could use it to improve their credit rating, trade with other countries, or even cash it in the build. Whatever they use it for, they are sitting in a good place right now as far as precious metals go.

We will see what shakes out over the next couple of weeks as far the possible stimulus package for China goes. Right now investors are on a gold buying and trading high, and if news like this continues we may see gold hit that $1,800 per ounce price mark sooner than we think.

Published in Gold Investing

After two-months of gains and after setting yearly highs in price for 2012, gold has slipped some over the last few days and once again given us example of how volatile and unpredictable the yellow metal can be. While gold hasn’t lost too much ground, it did slide a bit under the $1,760 mark today, which would be its lowest point in two-weeks.

Outside pressure from a stronger dollar, along with a weaker tone to stocks markets and other commodities, combined with profit taking ahead of quarter-end to push the metal through key support. Recent easing measures by both America and Japan had worked great to drive gold upwards over the last couple of months and are sure to keep long-term interest rates low while stoking inflation fears and boosting liquidity. As I have stated before, theses easing measures do not often work in the long run, and only act as a temporary fix. However, we will have to wait and see how this one turns out.

First-Strike

Spot gold [XAU= 1752.60, -7.44  (-0.42%)] was down by 1.2 percent to come in at $1,739 an ounce, while U.S. gold futures [GCCV1= 1752.80, 11.10  (-0.63%)] were down by 1.1 percent to come in at $1,744. Earlier futures rose as high as $1,765.50, before reversing those gains to hit $1,740.70. This was mostly due to the dollar remaining pretty strong today.

"(The drop) has been brewing all week following the return of dollar strength," Saxo Bank vice president Ole Hansen said. "With activity fairly light, someone went looking for stops and found them below $1,755. With that support now removed, the true strength of the current rally is about to be tested."

"My feeling is that buyers will be lurking in the wings and this move was necessary to establish proper support following the run higher," he said. "With QE excitement disappearing fast, it is left to stand on its own feet and with the headwind from a stronger dollar it will be exciting to watch indeed."

It should be interesting to see how the rest of the week plays out. The dollar may remain strong, but gold has also been able to pull itself away from the dollar (at least some), so we may see gold hang on to its current strong price even if the dollar does continue to remain this strong.

Published in United States Economy

If you embrace a conventional investment outlook, you’ll want to beware of the gold market.  The price seems so high right now.  Besides, everyone knows what goes up just has to go down.

The problem with this argument arises when you attempt to define the word “up” in a commodity, especially in a precious metal.  Andreally, just how high is high?  If you’ve been attending gold concerts for the last twelve years, well of course!  The yellow metal just has to be exhausted.  And any continued performance or encore coming from gold justhas to be impossible.  Right?

Well, not quite.

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An investor who thinks this way about the gold market almost always approaches it with the mindset of a stock market investor. Because, even in this day and age, the stock market is what most investors know – or think they know.  A particular stock is tied to a company’s performance, its earnings per share ratio, its balance sheet or the public’s belief in its new product offering.  If a very talented CEO takes the helm of a public company, that company’s stock can soar.  Accordingly, if an inadequate CEO stays too long at the fair, that same company’s stock can plummet.

Gold, on the other hand, has a much more direct relationship with the global economy at large.  Asking how high gold can go is tantamount to asking how much paper currency is afloat in the world.  According to the publication Resource Investor, it’s perfectly reasonable to conclude that the latest Fed stimulus round (QE3) will enlarge its balance sheet from $2.7 trillion to $5 trillion during the next two years.  Keep in mind this activity is up from only $800 billion in 2008. 

While the money supply doubled since 2008, so did the price of gold.  If the doubling of the Fed balance sheet to $5 trillion is a reliable indicator of gold’s climb, the yellow metal certainly does have an encore left in its repertoire.  If one uses the $1,720 gold price as the base level just before the Fed’s announcement, the next leg up for gold is plausibly $3,440 during the next two years.

Resource Investor further points out that gold, more often than not, “front runs” an aggressive growth in money supply.  This makes consummate sense, since once inflation kicks in and the public panics, the price of gold can rapidly go beyond the $3,500 – 4,000 level as soon as the public begins moving from paper currency to gold as a safe haven. 

So as you asses the possibilities of gold for your portfolio, don’t compare the price climb of gold to that of stocks.  Look to the Fed money supply and the exhaustion of the dollar for a true measure of gold’s possibilities.  And don’t be fooled by periodic drops in price, such as gold’s September 24 descent to $1,768 per ounce.  With a new support of $1,757 per ounce in place, gold is an excellent buy right now.  And with the Fed pumping in $40 billion into the economy until some unspecified time down the road, the yellow metal has plenty of encore performances left in the not-too-distant future.

Published in From The CEO

After last week’s Easy Money (Q3) announcement by the Fed, gold is looking very fine today indeed at $1,773 per ounce.  Still, it has some work cut out for it.  Next stop is $1,920 per ounce.  But why $1,920?  Why not simply $2,000.  After all, isn’t $2,000 what the precious metals pundits have been targeting?  Isn’t that where the market is headed?  Why split hairs for the extra $80.00 per ounce.

Well, as it happens, $1,920 per ounce is a key number for the yellow metal.  On September 6th of 2011, gold hit that benchmark after a spectacular surge, day after day, once it had reached $1,540 in July.  From there, it was a straight flight to the $1,920 mark – and then, wham!  Gold backtracked to $1,540 per ounce a week later.  What in Sam Hill was going on?  In retrospect, what  we make of this?

First-Strike

Markets have memory.  The numbers in this particular case are simply memory markers for the gold market.The $1,920 figure represents the all-time high for gold, and is now labeled gold’s new “resistance” – the highest number world traders at the time felt it made sense to execute a buy order.  Once the market fell back, $1,540 became the new “support,” the number a consensus of buyers felt was the most attractive low price – a new “bottom,” if you will.

And as for that $1,920 resistance, can gold now take that number out?Absolutely! Gold now has more fire power than it’s had in a very long time.  As you’re painfully aware, gold now has the help of monetary easing – our Fed’s license to print paper money with virtually no end in sight.  It has a very similar mandate from the European Central Bank.  And, just this morning, The Bank of Japan threw its hat in the ring with an asset purchase of $10 Trillion ($126 billion).  In so doing, the BOJ took analysts completely by surprise.  While they were anticipating such a move, they didn’t expect it until next month.

The kicker in all this is summed up eloquently by financial specialist Chris Martenson in his current article in Resource Investor:

‘In order to believe that the Fed or any other central bank can get us back to “normal,” you have to believe that it is normal for borrowing to exceed income and (here's the kicker) that it can do so forever.’

Getting back then to what is going to drive gold past its $1,920 resistance then, we should ask ourselves how long can “borrowing exceed income?”  With interest rates near zero, and the dollar plummeting on the announcement of Q3, how long will investors remain in dollars before they move over to the world’s most reliable safe haven?

Now let’s get back to last year’s $1,540 support level.  What does that actually mean?  Well, it represented a consolidation, or a time for gold to suck up momentum.  Picture a SWAT team with orders to break down a heavy steel door on a drug bust.  And say the team consists of six strong men who take a battering ram to the door.  The door doesn’t budge.  So what does the team do?  They move back further for more momentum so they can move forward faster and harder to knock down the door.

And this is why the market price of gold fell last year.  The market had to step back to find a point of momentum.  Now with the momentum of monetary easing around the world, and with the BOJ grabbing hold of the battering ram, can there be any question that gold will soon push past its new $1,920 resistance?

Published in From The CEO