Gold is money

May 13th, 2010. Published under News. No Comments.

The Western financial world is officially in full panic mode. A nearly $1 trillion bailout of Greece confirms that fact. Our very own Federal Reserve is providing billions to the effort, but this is much more than a bailout for Greece. It is a bailout for banks holding Greek debt and the debt of other European nations teetering on default.

This bailout is not a fix or a cure for too much debt. People on both sides of the pond are simply spending more than they earn. The “fix” is a long painful road of consuming less and saving more, but that is not what this bailout represents. What the leaders of the Western World chose was the short painless path of money printing. You have to ask yourself where did they come up with nearly a trillion dollars in such a short amount of time?

If real assets were used for this bailout, it would not be done. Think about this for a minute. Let’s say for the American part of this rescue we had to put up half of New York State for collateral. Does the thought of that much prime land frittered away make you squeamish?  How about putting up 500 million barrels of oil out of the Strategic Petroleum Reserve? Too valuable you say? Then maybe a couple thousand tons of gold out of Fort Knox would be okay to use, after all, it’s just sitting there (I hope).  Doesn’t this sound absurd?  It sure does because these are real assets and printed money is not. This is why the U.S. Fed is using dollars created out of thin air to help bail out its banking buddies in Europe. It is the easy way out, at least at the beginning.

In the end, this kind of reckless desperation will cause every dollar you spend and save to be worth less. If the Fed prints too many dollars, then they’ll be just plain worthless. What do you suppose will happen when California, Illinois, Florida or any one of more than a couple of dozen U.S. states all gets into the same trouble as Greece? Do you think the Fed will let them fail or print more money and bail them out too? I’m going with a giant money printing bonanza right here in America. I covered some of this in a February post called “America Has Its Own PIGS.”

Gold buyers see what’s coming, and prices are being bid up.  Gold set a new all time high this week. Why? Money, or the buying power of money, is systematically being destroyed by current and coming bailouts. The new money is gold and Congressman Ron Paul agrees. He said earlier this week, “Gold, all of a sudden, started acting differently.  It started acting as a currency rather than just reacting to the value of the dollar or other commodities . . . Gold has been money for 6 thousand years and it’s going to remain that way, and it will rule the roost . . . It’s telling us that the dollar is actually very weak . . . when you measure it against gold.” Silver is also rising in price. When gold rockets high enough in price, then silver will also be considered money.

This so called bailout will just extend the game. The question is for how long? To be frank, I do not know how this will finally shake out. The two things you can count on for sure:  there will be some very big inflation–and gold is money. (more…)

After rallying toward record gold slips back below $1,200

May 7th, 2010. Published under News. 1 Comment.

After rallying toward record gold slips back below $1,200

The price of the yellow metal edged down in early trade on Friday after rising toward an all time high yesterday on escalating debt concerns and falling US stocks

Author: Lewa Pardomuan (Reuters)
Posted:  Friday , 07 May 2010 

SINGAPORE (REUTERS)  - 

Gold edged down on Friday after rising toward an all-time high the previous day on Europe’s escalating debt woes and tumbling U.S. stocks, but strong safe haven demand is likely to help the metal test new highs.

Gold has gained as much as 10 percent this year as investors spooked by potential contagion from the eurozone debt crisis rushed to buy to the precious metal, whose safe haven appeal tends to increase in times of economic and geopolitical crises.

Spot gold was at $1,199.50 an ounce at 0301 GMT, down $7.75 cents from New York’s notional close on Thursday, when it jumped 3 percent to its highest since December 2009 at $1,210.35 an ounce — marking its biggest one-day gain in more than a year. (more…)

scoinshop opens in London

November 25th, 2009. Published under News. 1 Comment.

Alan Demby speaks to Talk Radio 702 about the opening of the first ScoinShop out of SA

Gold hits record above $1120

November 12th, 2009. Published under News. No Comments.

Tokyo – Gold rose above $1 120 per ounce to hit a record high on Thursday for the second straight day as investors focused on the precious metal’s appeal as a hedge against a weakening dollar.

Improvements in the economic outlook also lent support to the precious metal. Gold is often seen as a hedge against energy price-led inflation.

Spot gold was at $1 119.65 an ounce as of 02:32 GMT after rising to a record $1 121.60, compared with New York’s notional close of $1 117.45.

Bullion has now renewed record highs for six out of the past eight sessions.

US gold futures for December delivery traded at $1 120.30 an ounce, up 0.5%. The contract earlier rose to a fresh record of $1 122.20. (more…)

The Frightening Spike in the Price of Gold

September 30th, 2009. Published under News. No Comments.

The price of gold has been hanging near its historic highs, selling for more than $1,000 per ounce. In times of crisis — the terrorist attacks of Sept. 11, 2001, the collapse of Bear Stearns in spring 2008 — gold has spiked, as fearful investors grabbed for something they could hold onto.

But that’s not the case today. The U.S. is technically out of its Great Recession, Fed Chairman Ben Bernanke recently said. New jobless claims unexpectedly fell last week. The stock markets are riding a 50 percent rally since March. And yet, gold keeps going up.

That means a growing number of investors, traders — and, most troublingly, foreign governments — don’t believe in the strength of the U.S. dollar, analysts warn. People buy gold when there’s fear.

“It’s not the fear of an event of some sort,” such as a terrorist attack, said Peter Boockvar, equity strategist at Miller Tabak, whom I spoke to this week. “It’s the fear that the piece of paper in your pocket you call money will devalue over time.”

To stave off a liquidity crisis last year, Bernanke’s Fed turned on the money spigot, flooding the system — and world — with dollars. In the short term, that helped avert a second Great Depression. But in the long term, with each new dollar introduced into the system, each dollar you hold becomes worth less. That’s more than just inflation, which we think of as simply rising prices. That’s debasement of not only our currency, but the globe’s reserve currency. And that makes countries like China — which holds the greatest percentage of U.S. debt — very nervous.

“It amazes me that any self-respecting central banker is not alarmed that gold is over $1,000 and the dollar is trading at all-time record lows,” Boockvar said.

Let’s back up here for a minute and consider gold itself. It’s a complicated metal, and people buy it for a lot of reasons that have nothing to do with what it’s worth.

Gold is a commodity, just like soy beans or wheat. But soy beans have no romance, no feeling of permanence, no surprising heft when you lift them. Spanish conquistadors did not pursue the New World’s soy. There was never a James Bond villain called Wheatfinger. Gold is freighted with more meaning, really, than value.

People who want something to pass down to their grandchildren, for instance, buy gold coins.

People who want to diversify their investments buy gold.

People who fear inflation buy gold as a hedge.

But when foreign nations that hold billions of dollars in U.S. debt start buying gold because they fear the value of the dollar will go down, that’s when the rising price of gold becomes more than a novelty.

The massive economies of China and India, as well as several emerging economies, are increasingly hoarding gold, said Michael Dudas, gold analyst at Jefferies Asset Management, whom I spoke to this week.

The argument shared by China and by other investors who have been loaning money to the U.S. during this crisis is simple, Dudas said: “They’re looking at us and saying, ‘If you keep printing too much money, what you owe me is not worth as much.’ “

In periods of intense crisis, it’s probably best not to use a gold price spike as a barometer, as people do not act rationally in a crisis. But in non-panic situations, such as the one we’re in now, gold is a more useful barometer. And here are two readings from the barometer: The U.S. Mint has actually sold out of gold products in the past year. More importantly, non-commercial net long positions on gold are at an all-time high, the Commodities Futures Trading Commission said recently. Translation: Investors think the price of gold will continue to rise.

You can buy gold in a couple of different ways. You can buy jewelry or gold coins or actual gold bullion and store it in a physical location — a safety deposit box, buried in your back yard, hidden under your bed. But that kind of gold is heavy and hard to move, which limits your use of it. For instance, there was $104 million worth of gold bars in vaults below the World Trade center, which could not be recovered until several weeks after the 9/11 terrorist attacks.

Physical gold is mostly for hoarders, and that’s one kind of gold-lover: the person who fears the monetary system will break down one day, either from calamity or chaos, and paper money and wealth will become worthless. Some of the more extreme of these folk foresee a barter economy as an inevitability.

Most investors, however, buy gold through gold certificates, or in exchange-traded funds (ETFs), or buy options on gold, which let you trade the precious metal with the ease of stocks but theoretically with the security of gold. These investors tend to be less apocalyptic in their thinking but still like the idea of something that will hold its value simply because of its physical nature and scarcity, like diamonds or expensive art.

But there’s a dichotomy at the heart of gold: Even though there is a finite amount of it that has been mined and is still buried in the earth, there is a massive oversupply of the metal.

Only 158,000 metric tons of gold have been mined in all of history, the World Gold Council estimates, 65 percent of which has been mined since 1950. Production is currently down and analysts expect it to remain flat for years to come, owing to the absence of major finds in recent years. (Consider the “rushes” of 1848 in California and 1886 in South Africa.)

About 3,000 metric tons of gold are produced each year, through mining and scrapping (melting old gold into new).

The world’s central banks, such as the Federal Reserve, hold about 20 percent of the world’s above-ground stock of gold, or about 30,000 metric tones. Here’s where the massive oversupply kicks in: If the central banks decided to sell their gold, it would flood the market with a 10 to 1 supply to demand. And that would crater the price of gold. (The European central banks have been slowly selling their gold since the adoption of the euro.)

So that’s something to keep in mind if you’re thinking about becoming a gold investor: Unlike many other commodities, whose value depends on how much is farmed (soy beans) or drilled (oil), the value of gold is largely dependent on how much of what already exists is put into circulation. So there’s an extra influence on supply and demand. (It’s true that oil cartels “park” tankers full of oil to drive up the price per barrel. But nowhere near 20 percent of the world’s supply. Further, there’s a lot more oil in the world than gold, with massive new finds popping up frequently.)

Industrial production — gold used in spacecraft and semiconductors, for instance — accounts for only about 10 percent of all annual gold use. So if you’re buying gold thinking a lot more of it is going to be used in the future to build things, that’d be reaching.

If, however, you want to buy gold because you’re worried about the fate of the dollar, then you’re in smart — and worried — company.

– Frank Ahrens

Article from Washington Post:

http://voices.washingtonpost.com/economy-watch/2009/09/gold_is_atnear_a_historic.html?hpid=news-col-blog

Gold price could hit $1,300/oz in 2011-BMO Capital Markets

September 8th, 2009. Published under News. No Comments.

BMO Capital Markets asserts the market has become quite divided on the outlook for gold and gold stocks with no clear consensus on the gold outlook.

Author: Dorothy Kosich
Posted:  Monday , 07 Sep 2009 

RENO, NV - 

BMO Capital Markets suggests the bear case could see the gold price retreating to US$750/oz in 2010 while the bull case hints the price could reach US$1,300/oz in 2011.

In a recently published report, BMO analysts David Haughton, Andrew Breichmanas and Bart Melek advised silver could outperform in a bull case gold scenario perhaps reaching $22.03 next year.  In a bear case, silver could be as low as $11.45/oz in 2010.

While the analysts expressed concern disinflation and a firm dollar could keep gold range-bound well into 2010, they advise, “The metal will likely be energized again late in 2010 amid a weakening greenback and rising inflation concerns, as the U.S. economic recovery takes root and as post-recession growth becomes entrenched. At that time, risk taking should accelerate and with it BMO Research expects a weaker dollar as capital increasingly moves away from the safety of the treasury market.” (more…)

gold edges toward $1,000

September 7th, 2009. Published under News. No Comments.

Ines Schumacher | Fri, 04 Sep 2009 10:11
[miningmx.com] — ANALYSTS expect the gold price to push through the magical $1,000/oz soon, but they fear the move is driven by short-term factors and is not sustainable in the long-term.

Gold is currently hovering just below the $1,000/oz barrier at $987/oz in early morning trade. It managed to reach $991/oz on Thursday.

“Gold will quite likely breach $1,000/oz if not today in the next few weeks,” CEO of metals consultancy firm GFMS Paul Walker said.

He said it would be extremely challenging for the gold price to remain over this psychological hurdle since it is currently being driven by short-term investment flows. (more…)

If it’s not the Chinese, what’s driving the price of gold?

September 7th, 2009. Published under News. No Comments.

If it’s not the Chinese, what’s driving the price of gold?

ALEC HOGG: Well, that gold price is now trading at $990/oz. It has suddenly come to life. Paul Walker is the chief executive of GFMS, and he joins us from Paris. Paul, on Mineweb, Moneyweb’s international website today, Lawrie Williams wrote a story about China pushing the idea of buying gold to its 1.3bn population. There was a programme on Central China Television explaining to the public how easy it is to buy gold, and this is being interpreted – in some quarters, anyway – as part of the reason why the gold price seems to be sprinting towards $1000. Is that wishful thinking?

PAUL WALKER: Well, I don’t think as much as wishful thinking – it’s actually been a story that’s been around for some time. If you have a look at GFMS data on China, it’s been the one outstanding growth market throughout this bull rally. It’s outperformed every other gold market both in value and, most important, quantity terms from the perspective of supply and demand balances in this market. So it’s already to an extent in the price and there’s no doubt that growth in China, ongoing (more…)

we could see $1200 by end of 2009

September 3rd, 2009. Published under News. No Comments.

Bullish on gold since it carried a $400-per-ounce price tag, Blue Phoenix Chief Investment Strategist John Licata expects the king of metals to ring in the New Year with a $1,200-per-ouncecrown. Interview with The Gold Report.

TGR: Speaking of metals, your outlook for gold?

JL: I continue to maintain that we could see $1,200 gold prices by year-end. I think gold is very much on the way to hitting that pretty aggressive price target. The miners themselves seem pretty confident on the upside for gold. We’ve been hearing CEOs from various gold companies, including Goldcorp (TSX:G) (NYSE:GG) and Agnico-Eagle Mines (TSX:AEM), saying that we’re probably going to end the year with gold north of $1,000.

TGR: In April, you described gold as one of the best asset plays in the world and your recommendation to investors was to focus initially on physical gold. Have you changed that viewpoint? (more…)

Gold eases from 7-week high

August 4th, 2009. Published under News. No Comments.

Tokyo – Gold eased on Tuesday from a seven-week high marked in New York the previous day as waning investor appetite for the precious metal capped gains despite the dollar remaining close to this year’s low.

Bullion rose to $962.10 an ounce in New York on Monday, its highest since June 10, boosted by a weaker dollar, which lost some of its safe-haven appeal in the face of a rally on Wall Street and encouraging economic data.

Kazuhiko Saito, chief analyst at Tokyo’s Fujitomi Co Ltd, said that while a weaker dollar was continuing to lend support to gold, the precious metal was showing signs of being top heavy.

“Gold has lost some of its appeal as a safe haven… and it’s no longer such an attractive investment instrument,” he said.

Investment money was shifting out of gold, he said, which was underscored by a decline in holdings in gold-backed exchange-traded funds, which have been mostly on a downtrend since June. (more…)