“Amateurs want to be right. Professionals want to make money.” — Warren Buffett

I’ll give you the answer straight-up to the question posed in the title of this blog piece in just a moment. Bear with me for a minute though.

Sixty years ago, a freelance writer named Darrell Huff published a book called How to Lie with Statistics. It became a classic — one of the most widely sold how-to books ever. In fact, the title is so hypnotic that it almost makes you not want to buy the book because you’re dead sure what it would say once you started reading it. Still, that would probably not be a good idea, because the subtlety of the book’s message would be lost on you if you choose not to buy the book.

Published in Gold Investing
On Wednesday, the Federal Reserve announced it would keep its rates low for a while to allow the economy to recover. The thinking behind the announcement is that with lower rates in effect, businesses would be more inclined to invest, thus stimulating economic activity. The day after the announcement, gold bolted $41.40 to $1,340 an ounce, and silver $0.87 to $20.65 per ounce. Although precious metals are in a customary slow phase as the summer months take hold, investors clearly saw that maintaining a cash position would yield them little or no interest, so they jumped on the opportunity to pick up precious metals at low prices.
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

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

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.

First-Strike

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 dot.com 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
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

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

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
Sunday, 16 September 2012

Where Do We Go From Here?

Last Thursday, Ben Bernanke sang, and the global economy danced to his tune.  After the Fed’s announced the guarantee of monetary easing for -- let’s face it -- as long as it now pleases, gold futures surged to a high of almost seven months.

Then today, the yellow metal decided to rest down $14.70 for a close of $1758.50 per ounce.  Markets go up; markets go down.  Without a close look at what’s happening at a particular stock or commodity, it’s easy for the ordinary investor to become over-optimistic when that stock or commodity flies up, or over-pessimistic when it retreats. 

First-Strike

But we know what’s happening with gold.  A printing press without a slow gear sports a built-in invitation to debased currency and, ultimately, inflation.  It’s only natural, therefore, for investors to move cash from paper assets to hard assets.  Commodities will be reaping the rewards of this move for months and years to come.  And gold, the perennial safe haven of choice when central bankers become promiscuous at the presses, will lead the commodities pack on the way up.

How should we react then when gold closes down by almost $15.00?  Clearly this is not the time for precious-metals pessimism or groaning.  You should view such an event the way a market technician views it – as a period of profit taking and consolidation.  Even though you want to accumulate gold for the long haul, you should realize that professional traders are being opportunistic and looking for short-term profits.  In the most aggressive bull market, there are always breathers, just as in an auto race there are always pit stops.

The professional gold buyerknows this, looks at the fundamentals and then takes advantage of the pit stops on the way up.  The lay gold buyer sweats the small stuff, and tries to time the market or nab the perfect price.  What’s a “perfect price” though -- $34 per ounce just after President Franklin Roosevelt’s executive order to buy all gold from US citizens? Or are youlooking for $287 per ounce – the price of gold a few days after Y2K? 

The point is that it’s naïve or simply stubborn to leave money on the table because you yearn for an opportunity that could have been, and so choose not to act at all.   Do you really need a ticket with a clearly market destination (say $3,500 per ounce) – or, in this case, the guarantee of a particular profit at the end of the line? 

If you wanted that sort of financial arrangement, you would have bought a bond.  But just the other day you were privy to a startling revelation from the world’s king of bonds, Bill Gross of PMCO in Newport Beach.  Gross is now counseling investors to buy gold instead of bonds.

So where do we go from here when we buy gold?  Well, with the Fed manning the presses, a $2,000-per-ounce price for the yellow metal looks pretty good from where we now sit in the market.  And many are predicting it to head to $3,500 from there.

But if you buy gold now, you’ll have its fundamentals on your side.  And you’ll also have its history on your side.  Or, you could choose not to buy gold at all right now.  But if gold goes to $2,000 per ounce and beyond, maybe it’s time to remind yourself of the meaning of the phrase, “opportunity cost.”  Here’s a hint:  “opportunity cost” is the economist’s definition of the road not taken.  You chose not invest in gold so that you could invest in something else, or not invest in anything at all.  Good luck with that one.

Published in From The CEO
Monday, 24 September 2012

Weak Commodities Cause Gold to Drop

After hitting a near seven-month high last week, gold finally dropped last week as broadly lower crude oil and grain prices prompted investors to take profits. This is the first time in a while that outside commodity trading has hurt the yellow metal, and while the drop was small, it was still a drop after gold had put on an impressive run over the last couple of months.

Traders agree that volatility could increase ahead of Tuesday's U.S. COMEX gold option expiration, while open interest in U.S. gold futures rose to a one-year high for a third straight session. This shows us that even with the drop, gold as a whole is still very strong.

First-Strike

While the yellow metal may be showing some signs of fatigue because of so many weeks of price gains, the fact of the matter is that most investors have been waiting for this. While gold may indeed show some fatigue, it is still going to make a run at that $1,800 per ounce price mark before the end of 2012. Whether it gets there or not remains to be seen.

"There is no question that gold is consolidating its recent gains, but every dip seems to be bought," said Anthony Neglia, president of Tower Trading and COMEX gold options floor trader.

Spot gold was down 0.6 percent to come in at $1,762.20 an ounce earlier today. On Friday, gold hit a high of $1,787.20, just short of this year's peak of $1,790.30 reached on February 29. That peak was reached during the early months of 2012 when the yellow metal was breaking records.

U.S. COMEX gold futures for December delivery settled down $13.40 an ounce to come in at $1,764.60. Trading volume totaled around 150,000 lots, in line with its 30-day average. This according to preliminary Reuters data.

Despite Monday's pullback, the price of gold has gained more than 10 percent since Ben Bernanke and the U.S. Federal Reserve said it would buy $40 billion a month in mortgage-backed debt until the job market outlook improves substantially. That announcement was made earlier this month.

"A lot of (investors) bought ahead of the announcement, and now they're selling out again to lock in the gains," HSBC analyst Howard Wen said.

We will see how it plays out, but don’t be surprised if gold continues to remain strong and climb toward that $1,800 per ounce price mark.

Published in Gold Investing
Page 1 of 7