Gold futures rose the most
in eight weeks on demand August 12, 2010
Bloomberg
Nicholas Larkin and Millie Munshi
Aug. 12 (Bloomberg) -- Robert Cohen, manager of Goodman & Co.'s Dynamic Gold & Precious Metals Fund, talks with Bloomberg's Julie Hyman and Mark Crumpton about the outlook for gold prices and some of the fund's gold-stock holdings. (Source: Bloomberg)
Gold futures rose the most in eight weeks on demand for a store of value amid signs that the global economic recovery is slowing. Platinum climbed, snapping the longest slump since July 2008.
U.S. equities declined after American jobless claims unexpectedly jumped to a five-month high. The Federal Reserve on Aug. 10 said “the pace of economic recovery is likely to be more modest in the near term than had been anticipated” in the U.S. Gold reached a record $1,266.50 an ounce on June 21.
“We’re seeing safe-haven demand come into gold,” said Jim Steel, an analyst at HSBC Securities in New York. “Despite the fact that some of this is deflationary, people are interested in buying gold.”
Gold futures for December delivery gained $17.50, or 1.5 percent, to close at $1,216.70 at 1:44 p.m. on the Comex in New York, marking the biggest gain for a most-active contract since June 17. Earlier, the price reached $1,218.50, the highest level since July 13. The metal is up 11 percent this year.
European industrial production unexpectedly declined in June, a report showed today. China said this week that output grew at the slowest pace in 11 months.
“Concerns over a slowdown in the global economic recovery are still haunting the broader market with macro releases still fairly downbeat,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. More “carnage on the broader market” would give “a small boost to bullion,” he said.
Fed Stimulus
Prices also gained after the Fed this week reversed plans to exit from aggressive monetary stimulus and decided to keep bond holdings level to support the U.S. economic recovery, Steel of HSBC said.
The central bank also maintained a commitment to keep its benchmark interest rate close to zero percent for an “extended period.”
Gold prices may rally to $1,300 in six months, driven by record low borrowing costs and the prospect of renewed quantitative easing in the U.S., Goldman Sachs Group Inc. said yesterday in a report.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose 3.04 metric tons to 1,285.79 tons yesterday.
Silver futures for September delivery rose 16.3 cents, or 0.9 percent, to $18.065 an ounce.
Platinum futures for October delivery climbed $11, or 0.7 percent, to $1,531.60 an ounce on the New York Mercantile Exchange, snapping a seven-session slump.
“There is concern over industrial demand for the metal, but emerging markets still remain strong,” Steel of HSBC said. “Platinum has good potential to move higher.”
Palladium futures for September delivery gained $6.35, or 1.4 percent, to $471.05 an ounce. The price dropped in the previous seven sessions, the longest slide since January.
Platinum and palladium are used in jewelry and pollution- control devices in cars.
This year, palladium has gained 15 percent, silver is up 7.2 percent and platinum has climbed 4.1 percent.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Millie Munshi in New York at mmunshi@bloomberg.net.
Gold best performing asset class over 6 months, 1, 3, 5 and 10 years
Over the past ten years gold's annual return has been 14.3% in sterling terms, compared with 5.9% pa from bonds, 1.6% in cash and just 1.2% in real estate. Equity returns were negative. MINEWEB Rhona O'Connell
Thursday , 29 Jul 2010
LONDON -
Over the most recent ten year period, in UK terms gold has outperformed its nearest competitor (bonds) by over 240%. As investors have paid the penalty for increasing risk exposure over the period, the presence of gold in a portfolio matrix has boosted returns into positive territory. Meanwhile ETF investment outstripped coin and bar demand last year.
At a recent presentation the senior analyst at ETF Securities produced a series of analyses that underpin gold's role as a hedge against risk and he was able to show that, not only has it been a hedge against risk in the recent - and medium term - past, it has for much of the time been the strongest performing asset class.
One of the quotes that ETF Securities likes to use regularly is this from Federal Reserve Chairman Bernanke; "Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars it wishes at essentially no cost".
This is seen as particularly relevant recently given the problems in the euro zone and the argument is given further strength by the fact that the official sector appears to be voting with its feet.
The body of the presentation included the following demonstrations.
RELATIVE PERFORMANCE
Over the past ten years, gold has outperformed the next best asset class by a factor of just over two. Its outperformance against equities has been consistent over past one, three, five and ten years and for that matter gold has also been the least volatile asset class. Its correlation with equities has remained zero or modestly negative, giving strong portfolio diversification. On an average monthly return basis gold tends to outperform when equities perform poorly. The presentation contained a fascinating table showing relative performance of different sterling based asset classes in each year from 2002 onwards and also showed that over the past ten years gold's annual return has been 14.3% in sterling terms, compared with 5.9% pa from bonds, 1.6% in cash and just 1.2% in real estate. Equity returns were negative.
PORTFOLIO ENHANCEMENT
Over the same ten year period, equities and bond portfolios have had a downward slope over past ten years, penalising investors for taking on extra risk. Adding gold to the portfolio has rendered the return positive - also the other precious metals, but gold especially so. Thus gold acts as a buffer for portfolios in times of high economic uncertainty.
A SALVE IN TIMES OF UNCERTAINTY
During periods of high inflation gold returns are commensurately high, though the relationship is not strong when inflation is "normal", i.e. 1 - 5%. Currently there are growing concerns about future inflation, with US base money growth surging; last year it increased by over 100% and historically there is a strong lagged relationship between inflation and base money growth.
Furthermore - gold is often thought of as a US dollar hedge and typically there is an inverse correlation. Note now, though how the relationship has been positive as confidence wanes in the viability of the euro as a credible alternative reserve currency.
THE FUNDAMENTALS AND ETF FUND PERFORMANCES
While there have been outflows from the ETFs in the recent pullback in the gold price from over $1,200 to well below that level, there has been a very marginal decrease overall. Outflows over past couple of weeks have coincided with price falls, but the redemptions, especially when compared with the strong performance in the early part of the year, have been small at just 1% of total. Conversations with institutional holders have shown that these investors are staying loyal to their holdings, driven by the increased levels of uncertainty about international economic and fiscal conditions. These investors are in for the long haul.
These drivers, especially high government debt levels, point to gold as a hard currency, and a hedge against risk. By way of illustration, while credit default swap spreads have pulled back recently, they remain high.
NY Times: Gold Enjoys Resurgence Among Variety of Investors* June 12, 2010
The New York Times reports that global concerns about inflation, deflation, government borrowing, and sovereign debt have led private and institutional investors across the spectrum to develop "gold fever" as they seek an "age old refuge" from these economic crises. The Times article noted that gold's major supporters include liberal financier George Soros, Fox News personality Glenn Beck, and top New York hedge fund manager John A. Paulson who earned billions betting against sub-prime mortgages.
Among the people now moving to gold is Daniel J. Arbess, who manages more than $2 billion for a hedge fund. According to the Times, Mr. Arbess would not have taken a second look at gold a few years ago. Now he's a firm believer because of the risk to "fiat" currencies, i.e., currencies which are not backed by gold.
"'Indebted countries may soon be forced to choose among three politically difficult alternatives: sharp cuts in expenditures, debt default or printing money to pay off debt,' he said, with the last option the most likely outcome. Gold, he said, is a logical hedge against this risk, because firing up the printing presses ignites inflation."
(June 12, 2010, The New York Times, Uncertainty Restores Glitter to an Old Refuge, Gold)
Gold Higher on Euro Woes* MarketWatch
June 1, 2010
"The primal forces of economics, supply and demand, are arguing for an upward revaluation of gold" states billionaire and chairman of the Tigris Financial Group, Thomas Kaplan, in a recent Forbes commentary.
Dr. Kaplan explains that basic rules of supply and demand are driving gold higher as investor demand for currency diversification and capital appreciation combined with increased demand from central banks such as China and India create a "perfect storm" for gold. "I would argue that any time the consumers of the two largest countries in the world are competing for a scarce asset, the rest of us should consider owning it."
Fueled by a number of key factors, including ongoing euro concerns, gold spot and gold futures prices moved higher on the first trading day in June. The euro hit new lows as Spain’s bond rating was downgraded on Friday, May 28, and the European Central Bank warned the following Monday of additional future write-downs for euro-zone lenders.
"We're still trying to price in the euro problems," said Frank Lesh, a broker and analyst at FuturePath Trading in Chicago. Mr. Lesh added that investors are buying gold as an alternative to currencies.
Gold is up almost 12% as of June 1, 2010 but is still 34% below its all time inflation-adjusted high as it continues to rise on "safe-haven" buying from investors. (06/01/10, MarketWatch, "Gold futures climb while equities, euro slips")
Gold and Silver Insurance By Howard Ruff
The Ruff Times May 24 2010 1:59PM
Gold and Silver Insurance
You should always own gold and silver coins as an insurance policy. Like homeowners’ or automobile insurance, its purpose is to protect you against unpredictable economic and political calamities (like now), that you always hope would never happen.
It’s there to use as real money in the case of a worst-case, like an inflationary currency collapse, or terrorist hackers shutting down the power grid so no one has access to their dollars at the bank or at the ATM and they can’t open the supermarket cash registers. It’s in case the same terrorist-financed hackers break into the computers of the money-center banks where most of the world’s dollars are there in hyperspace, insert a destructive virus and the world’s dollars disappearing in a nano-second.
Remember, only about 5% of the worlds’ dollars are minted, printed or coined. The rest are only on the computers of banks. If the computer data is wiped out, there could go the monetary system of the world, because the dollar is the world’s reserve currency. This would mean the instant collapse of the American economy, and maybe Western Civilization. Then the world would instinctively go back to gold and silver as a means of exchange and store of value until the computers are fixed and a new paper-money system is cobbled together.
These things always seemed to be unthinkable in our otherwise comfortable world, but we have never lived through a period of Obamanomics, or had such an enemy as Islamo-fascism devoted to America’s destruction, with no regard for their personal comfort, wellbeing, or even their lives.
Insurance Action Steps
Each family should have at least one half-bag of pre-1965, commonly circulated, 90% “junk silver” dimes, quarters and halves (360 ounces of silver). Junk silver can be bought from any neighborhood coin dealer.
Due to Obamanomics and the inflation I expect, gold and silver will explode in value and your insurance coins will become a fantastic investment, which they may not have been when you bought them. In the case of less drastic events, such as mere rising-price inflation, they will also be very profitable.
Because of the critical supply/demand situation, as the holder of any form of physical silver, you will find the industries that need them will have to bid up the price until you are willing to part with yours. $100 an ounce, anyone?
Coin insurance is a buying decision for all seasons, and it only becomes an investment if bad or even mildly bad things (like rising inflation) happen in the world. This is not for short-term profit, but for long-term protection. You would really need it if a monetary crisis or a war gets bad enough and lasts long enough that we have started to universally use coins as the alternative “real” currency. It might even not take that long for merchants to get the drift. During the OPEC gas crisis in the ‘70s when inflation and silver were in a runaway mode and gas prices were exploding, a few enterprising gas-station operators were advertising gas for a dime a gallon -- pre-1965, 90% silver dimes -- because a silver dime was worth more than the posted gas-price-per-gallon.
Like all insurance, the coins are there to use when bad things happen which you hope won’t happen. All insurance is a bet that bad things will happen. You win your bet only if you have a car crash, or a fire, or if you die. With orthodox insurance, it doesn’t matter if you win or lose your bet, the premiums are gone forever. In the case of coin insurance, the premiums are still there forever and appreciating, no matter what.
By Howard Ruff
The Ruff Times
*****
Howard J. Ruff, the legendary author and financial advisor, has re-edited and re-issued his 1978 mega best seller, How to Prosper During the Coming Bad Years, still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times financial newsletter.
The newsletter is much more comprehensive and deals with a broad spectrum of middle-class financial issues and includes an Investment Menu from which you can build your portfolio. (You can learn about it here). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world. His updated and revised book, How to Prosper During the Coming Bad Years in the 21st Century.
You can get it free when you subscribe to The Ruff Times (www.rufftimes.com), or if you buy the book at your favorite bookstore, you can deduct $10 from the subscription price.
Gold's Future is Bright Forbes May 24, 2010
"The primal forces of economics, supply and demand, are arguing for an upward revaluation of gold" states billionaire and chairman of the Tigris Financial Group, Thomas Kaplan, in a recent Forbes commentary.
Dr. Kaplan explains that basic rules of supply and demand are driving gold higher as investor demand for currency diversification and capital appreciation combined with increased demand from central banks such as China and India create a "perfect storm" for gold. "I would argue that any time the consumers of the two largest countries in the world are competing for a scarce asset, the rest of us should consider owning it."
According to Dr. Kaplan, "Gold has been the safest and most profitable financial asset in the world over the last decade" and investors and bankers now recognize gold's value as an asset with intrinsic value that is not dependent on obligations from other parties to pay off. ("Gold Will Keep Going Up", Forbes.com, May 24, 2010)
Read full article here.
David Rosenberg: Euro Breakdown Could Drive Gold to $3,000
Thursday, 06 May 2010 10:20 AM By: Julie Crawshaw
Gluskin Sheff analyst David Rosenberg says the breakdown of the euro could well drive the price of gold to $3,000.
"The case for gold heading to $3,000 an ounce is getting stronger by the day," Rosenberg writes in a note to investors.
"The euro has already broken below 1.30 to the U.S. dollar and there is plenty of room for additional decline going forward."
"It's only at a one-year low — wait until it moves to a decade low."
The European Central Bank, Rosenberg notes, has been forced to water down its charter as it permits sub-investment grade Greek bonds as collateral.
“Sadly, the central bank is not a remake of the Bundesbank and the Euro is less of a “hard currency” than its architects could have ever envisaged a decade ago,” Rosenberg says. “Now there is talk that the ECB is contemplating a quantitative easing plan.”
“Contagion risks” from the Greek financial crisis loom, “and there are simply not enough trees on the planet that can provide enough paper currency to backstop countries like Portugal and Spain,” Rosenberg says.
“And let’s not forget about Italy — its public finances are less dire but still fragile”— all of which make this a great time to buy gold.
Gold was rising Thursday as investors bought gold as a safety net against the sinking euro, Greece riots and spreading Portugal debt fears.
Gold delivery for June was rising $10.30 to $1,185.30 an ounce at the Comex division of the New York Mercantile Exchange. Gold prices Thursday have traded as high as $1,187.30 and as low as $1,173. The euro kept making new one-year lows, falling to $1.27 against the dollar.
Gold is an appealing investment during times of financial crisis and currency debasement as a form of money that doesn't lose value. But investors' need for cash beat out bargain-hunters and gold prices fell.
Published: Thursday, 22 Apr 2010 | 5:22 AM ET By: CNBC.com
Current economic policies are not sustainable and the world faces doom because "the governments are taking over", said Marc Faber, editor & publisher of The Gloom, Boom & Doom Report.
"They will all bankrupt us and expropriate us, but it may not happen tomorrow. They'll give us something to play with, until the whole system breaks down...they'll just print money and print more money," he said on CNBC Thursday.
"What I object to the current government intervention in so-called 'solving the crisis', (is that) they haven't solved anything. They've just postponed it."
Faber warned that the "ultimate armageddon" would be much worse the next time around, as "governments will go bust", which would lead them to print more money.
He also warned that China's growth was "completely unsustainable in the long run," highlighting the red-hot property sector.
"I think Goldman Sachs is a very honest firm. They have a very strict compliance department compared to the others — they're like an angel. But they targeted Goldman as it stands as a symbol of Wall Street," Faber said.
With U.S. President Obama's ratings sliding due to the health care reforms, the government was going after the investment bank to distract the attention of the people, he claimed.
"Maybe the intention is not to hurt Goldman Sachs, but just to gain popularity with the middle class and the lower class of America, so they will perceive Mr. Obama to have done something against the evil of Wall Street."
Cash Will be 'A Disaster', Accumulate Gold
In light of the current economic environment, investors should not own cash as it is going to be 'a disaster', said Faber.
"If you print money like in Zimbabwe... the purchasing power of money goes down, and the standards of living go down, and eventually, you have a civil war," he added.
Faber warned that the mood has turned very very negative among certain groups of society.
Instead of holding cash, Faber, commonly referred to as 'Dr Gloom', advised investors to "gradually accumulate physical gold and silver" while those who want exposure to shares of gold exploration companies should buy them from time-to-time when they become cheap.
"Some of them still have reasonably good value at the present time. This is a long-term strategy because in an environment where governments will print money — and I'm convinced they're gong to bailout Greece, which means you transfer essentially bad assets on to the balance sheet on the government," he said.
When that happens, Faber warned the purchasing power of paper money will go down, rather than an appreciation of precious metal prices.
"Paper money (will go) down relative to precious metals. So in that environment, I think you...should all accumulate some gold."
WSJ: World Gold Council Partners With China's ICBC To Promote Gold Investment - Exec By Jason Dean
DOW JONES
May (April ) 1, 2010
The World Gold Council has signed an agreement with Industrial & Commercial Bank of China Ltd. to cooperate on developing new gold investment products and programs for the Chinese lender's clients, council chairman Ian Telfer said in an interview.
The arrangement with ICBC, China's largest bank by assets, is designed to promote continued strong demand for gold in China at a time when the country's recent rapid growth in gold production seems likely to slow, creating more need for imports, Telfer said Wednesday....
China's demand for gold has grown an average of 13% annually for the last five years, reaching about 443 metrics tons last year, second only to India. About 80% of China's annual gold consumption goes toward making jewelry. The World Gold Council, established by a group of large mining companies to stimulate demand for the yellow metal, wants to increase demand for gold in China for investment purposes.
ICBC has more than 16,000 branches in China and more than 200 million individual clients. One program the council hopes to promote as part of its deal with the bank is a "gold accumulation plan," in which investors give the bank money which it uses to buy gold on their behalf in daily increments over a period of time. The goal is to smooth out price differentials for investors, so they aren't put off from investing by gold's daily price volatility. The World Gold Council started a similar program about 20 years ago in Japan, which has worked well, said Albert Cheng, managing director for the Far East....
But gold is getting harder to find. At current rates of production, China would exhaust its known gold reserves in about six years, he said. While that doesn't mean China will have to stop mining in six years--it is highly likely to find more gold in the meantime--the figure nonetheless underscores the metal's scarcity in China. Telfer said the comparable figure in most countries with large gold reserves is about 15 years....
Telfer said China is likely to buy more gold from abroad in future years. "I see that import number increasing and increasing, because the demand continues to strengthen but the supply will be flattish," he said...
Think Outside the Box: Maverick Investing in the Age of Obamanomics Howard J. Ruff
Feb 24 2010 4:37PM
The most important thing you need to know about investing in the Age of Obamanomics is: invest in inflation. Consider two key investments that are perfect for the Age of Obamanomics: precious metals and carefully selected stocks. When we’re done with this chapter, you’ll know exactly what to look for and how to avoid the pitfalls.
Your investment program should be based in coins and bullion. Invest at least one-third of your assets in gold and silver coins or bars.
Precious Metals Are Basic to a Ruffonomics Portfolio
Gold and silver are perfect pure inflation hedges. Strictly seen as an investment, as the dollar shrinks in value, gold will be worth thousands of dollars an ounce and silver will be worth hundreds of dollars an ounce. Glenn Beck, one of my favorite talk show hosts, said he is “not buying gold as an investment, although it will be a good investment, but as insurance.” He doesn’t tell us what he is insuring against, but I’ll tell you. He’s insuring against the plummeting loss of purchasing power of all dollar-denominated investments, even the possible collapse of the dollar.
Precious metals feel so solid. When I was in South Africa, I went ten thousand feet down in a gold mine, and then came up to visit where they were producing gold bars. I held a new gold bar in my hands. It felt like wealth. It was real.
Then I went to the mint that manufactured krugerrands, South African gold coins, and we were permitted to handle these coins. Same feelings. I understand why people killed for them.
Why Gold and Silver Now?
In these current circumstances, not buying gold or silver is one of the dumbest money decisions you can make in 2009-2010. Here are just a few reasons why this is so:
1. Obamanomics: Socialist states always inflate the paper currency. Obama, Congress, and the Federal Reserve are diluting the dollar like never before by creating more of it. Accommodating Obama and Congress, the Fed has manufactured trillions of dollars out of nothing at by far the fastest pace in history, and it’s accelerating. The government has given trillions to the big banks, which will loan the dollars into circulation or give them to politicians to spend into circulation. This money expansion currently dwarfs several times over the monetary explosion that led to the Carter-driven metals bull market in the ‘70s. I can’t overstate what is happening. Economists may call this monetary-expansion process “inflation” but it really should be called “dilution”—dilution of the money supply and consequently its value. Inevitably, sooner or later, consumer prices rise and laymen then mistakenly call that “inflation.” Calling rising prices inflation is like calling falling trees hurricanes. When will the public catch on? Price inflation and gold prices are the chief measurements of public awareness. Sooner or later, awareness becomes a critical mass, the public catches on, and the metals go through the stratosphere.
2. Real money: Gold and silver (especially silver) have been real money over and over again, in all ages of time and on all continents. Ever since Gutenberg invented the printing press 400 years ago, the world has been littered with worthless dead paper currencies every seventy-five to eighty years, due to runaway money printing. Every time the dominant currency has been inflated, gold and silver coins have become hugely profitable investments, and sometimes the only surviving currency.
Throughout history, each time a paper currency finally caved in to inflation, gold and silver (especially silver) became the only universally acceptable coin of the realm. Gold and silver as a means of exchange and a store of value have always survived. They have always been symbols of wealth, far more precious in our consciousness than any mere paper.
During periods of hyperinflation, there always comes a time when people refuse to accept more and more counterfeit, inflated money or base-metal coins in return for their hard-produced goods and services. At that point, society instinctively turns to gold and silver. It has happened over and over again, and as George Santayana said, “Those who cannot remember the past are condemned to repeat it.”
3. It’s early in the game: Gold and silver are early in an historic bull market (in fact, as this is written, it’s only a Golden Calf), making this a low-risk investment with an awesome upside for the long-term investor. Especially silver. This gold and silver bull market will dwarf the last great one in 1973-80, when fortunes were made by relatively small amounts of money invested by amateur investors (many of them my readers). All of the factors that created the last bull market are here again, only amplified several times.
4. Supply and demand: Both metals are far rarer than most people know. All the gold ever mined since the dawn of history, including that in Central banks, gold fillings, and sunken shipwrecks in the Caribbean, etc. would cover a football field about four-feet deep. It would make a cube about the size of a typical 8-room house. Demand is now leaping past new supplies.
Likewise, most of the easy silver has been mined over the centuries, even with primitive methods. For example, during the Roman millennium, they used silver coins for currency and exhausted the Spanish silver mines.
Now that prices are high enough to make gold and silver mining profitable again, it will take as much as seven to ten years to develop new mines, and stagnant supply and rising demand have made higher prices inevitable for the imminent future.
By Howard Ruff
The Ruff Times
*****
Howard J. Ruff, the legendary author and financial advisor, wrote How to Prosper During the Coming Bad Years in 1978. It is still the biggest-selling financial book in history, with 2.6 million copies in print.
His new book, How to Prosper in the Age of Obamanomics is free when you subscribe to The Ruff Times (www.rufftimes.com), or if you buy the book at your favorite bookstore, you can deduct $10 from the subscription price.
Howard is founder and editor of The Ruff Times financial newsletter. This article is from a recent issue of The Ruff Times. The newsletter deals with a broad spectrum of middle-class financial issues. (You can learn about it at www.rufftimes.com). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world.
TRACKING the numerous ongoing bullish factors for Gold Prices is quite a chore, says Jeff Clark, senior editor of Casey's Gold & Resource Report.
Because there are, quite literally, so many compelling arguments for holding our favorite metal. So many, in fact, that I used to catalog them each month in our letter.
The reason there are so many "reasons" is because Gold Bullion is unlike any other asset. It...
responds to its own supply and demand;
protects against short-sighted government actions and interventions;
is a bellwether of market sentiment and economic outlook;
protects against currency devaluation and inflation;
is global;
is one of the most beautiful metals ever found in the earth's crust;
is a store of value;
is timeless;
is money.
How many assets can you say have all those characteristics?
In spite of the Gold Price's recent correction, the reasons haven't decreased. In fact, the case for Buying Gold and holding it is stronger than ever.
And over the past two weeks, a few "reasons" have surfaced that have fallen mostly under the radar. These, I believe, portend a higher Gold Price. In fact, it is catalysts like these that could end up in our children's history books that, in retrospect, were obvious to see...
#1. China is Buying Gold
China has begun investing the SPDR Gold ETF, the trust-fund proxy for gold exposure. Their sovereign wealth fund, China Investment Corporation, recently invested $155 million in the ETF. The amount represents only 0.05% of the sovereign funds' $300 billion, meaning there's a lot more where that came from.
Those mainstream lemmings who predicted China was done Buying Gold now have to deal with the reality that this move more likely signals they are closer to the beginning ? and not the end ? of a long-term strategy to diversify into gold.
#2. India is About to
The Prime Minister's Office in India is creating a stream-lined process so that the country's state-owned corporations can "aggressively pursue the acquisition of strategic mineral resources."
The Indian government, normally known for thick-layered bureaucracy, has created a centralized body that will have "rapid strategic and decision making powers." This is telling, both from the perspective that they see some urgency to the matter, and that the acquisition targets are minerals.
Given the country's historic propensity to own gold, it's not a stretch to think the yellow metal will be high on the list of "strategic investments". Recall their government purchased almost half the IMF gold for sale last year in one fell swoop.
The upshot? Don't be surprised to soon hear of India following China's lead of buying precious metal companies and resources.
#3. "Iran is Now a Nuclear State"
So declared President Ahmadinejad last week. The Islamic republic has produced its first batch of high-level enriched uranium, which they claim is solely for electricity purposes but can also be used to create material for atomic weapons if enriched to 90%. In response, the US imposed new sanctions, and the United Nations is considering adding more of its own sanctions, too.
The West recently proposed that Iran export its uranium for enrichment and then have it returned as fuel rods for a reactor. Iran demanded changes to that plan, which were rejected, so claimed they had "no choice" but to start enriching to higher levels on their own. "God willing," declared Ahmadinejad, "daily production will be tripled."
I'm sure this will all just blow over, right?
#4. The US Government Must Inflate
Here's another reason we think that sooner or later inflation trumps deflation: By 2020, government economists project that entitlement benefits (Social Security, Medicare, etc.), along with interest payments on the national debt, will devour 80% of all federal revenues.
This assumes entitlement benefits don't grow, which, of course, they will. The overall national debt, meanwhile, will rise to 100% of GDP within a few years, an alarming level by any measure. Even Moody's warned that our credit status could lose its triple-A rating if the nation's finances don't improve, an unheard-of prospect just a few years ago.
So, we're abruptly fleeing our debt-adding habits, right? As you probably heard last month, Obama signed legislation that raised the cap on government debt from $12.4 trillion ? already close to being breached ? to $14.3 trillion to permit more borrowing. As Doug Casey has pointed out numerous times, this is the exact opposite of what the government should be doing and will have serious inflationary ramifications.
There's only one way out: devalue the Dollar to reduce the debt burden. And the direct result of that is a rising Gold Price for US investors. We may very well see another round of deflation, but the endgame is inflation.
What I would point out is that any one of these reasons would be sufficient for wanting to put some gold in your portfolio. It's the cumulative effect that's potentially scary, one that argues we should be overweight precious metals at this point in history. The reasons are numerous and, in my opinion, overwhelming.
Physical Gold Bullion and select Gold Mining investments should be a cornerstone in everyone's portfolio, we believe.
Gold's Hungarian Friend Did George Soros try to game the gold market
by calling it "the ultimate bubble
"HE WHO HAS a Hungarian friend has no need of an enemy," runs the old saying ? a nice racial slur that gold investors might feel true of George Soros right now.
The billionaire hedge-fund legend declared Gold Investment to be "the ultimate bubble" at January's World Economic Forum in Davis, Switzerland.
Yet the latest US filings show that Soros Fund Management LLC more than doubled its stake in the SPDR Gold Trust ? a near-proxy for gold ownership ? between Oct. and Dec. last year, taking its stake to nearly 2% of the ETF's total stock in issue.
What's going on?
Soros may have less day-to-day control over the fund than its name suggests, of course. And that holding of 6.2 million shares in the world's largest Gold ETF, worth some $663 million by Dec. 31st, may have been sold before Soros spoke to CNBC four weeks later.
But if you actually hear what George Soros said ? rather than taking headline writers for gospel ? gold's Hungarian friend is less of an enemy than he appears.
"When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold."
"I don't know what was in the great man's head when he said this," confessed Paul Tustain, founder & CEO of BullionVault after newspapers and finance sites worldwide screamed how "Soros Says Gold is Now Ultimate Bubble" last month.
"But it's just possible he was making rather more accurate use of the English language than [British journalists]..."
"Ultimate" means final. So does the Hungarian translation, végs?. It does not mean "mother-of-all"...not outside what was once called Fleet Street, that rat-run of hacks now scattered along the Thames but still a very long way from the language schools of Budapest.
It's also worth noting, perhaps, that after escaping Nazi deportation in 1944, and fighting the occupation a year later, Soros is reputed to have begun his financial career trading currencies and jewelry amid the hyperinflation which then swept Hungary as its war-time economy and fascist puppet-government collapsed.
By July 1946, the "ultimate" stage of that currency event ? the worst-ever recorded inflation in history ? shop prices were doubling every 15 hours. One gold Pengo coin, minted in 1931, was worth 130 trillion paper Pengos...
Gold Trends: The Mirage of Wealth
By Chris Vermeulen
Benzinga
December 27, 2009
How did your Dad pay his college tuition with a part-time summer job? Why does it take two breadwinners to support a family these days? What with all the recent fuss about gold?
The answer to these seemingly unrelated questions have a common answer.
Cause and Effect
Governments have a curious tendency to run deficits; and when they do, they have two options.
1) Decrease disbursements...
2) Increase receipts...
3) Monetize the difference...
So what is the effect of money creation?
Inflation....
Gold Trends
This explains why even though we are being paid more, our standard of living is plummeting. Mom and Dad have to work full time to make ends meet. Summer earnings become insufficient to cover tuition and students are forced to take out massive student loans. The benefactors are the politicians who get their hands on the hot-off-the-press cash while it still has full value. By the time the new money gains velocity and consumer prices rise sharply they are long out of office collecting their pension checks.
This vicious cycle has perpetuated itself for decades and is reaching a tipping point in many countries. The United States in particular has raised the stakes with bailouts, stimulus packages and promises to insure virtually every American mortgage and bank account. Of course, tax hikes and spending cuts are not funding these bold initiatives; the monopoly-money maker at the Fed is.
Unless the fundamental laws of economics are magically repelled, inflationary pressures will ultimately engulf deflationary ones. Unfortunately, no nation is immune from the cause and effect nature of economics. Governments who venture away from the principals of sound money and create grotesque amounts of unbacked cash are locking their currency into a long-term downward trajectory.
Hyper inflation has many precedents in modern society and has crippled a myriad of robust economies.
Gold Holds Value
Gold
Gold is a dynamic metal. Aside from being industrially useful, gold has a variety of attributes that naturally lend itself as a medium of exchange. Gold is easily divisible, fungible, has a superb value to weight ratio and never decays or rusts. It is rare, difficult to mine, nearly impossible to counterfeit, and has a magnificent track record of holding its value.
In fact, according to Jeff Clark at Casey Research, in 1935, when an ounce of gold was worth $35, you could buy:
• a top-quality tailored suit for $19.75 – or 0.56 ounces of gold
• a family car for $500 – or 14.3 ounces of gold
• a house for $7,150 – or 204.2 ounces of gold
Today, with an ounce of gold worth north of $1000 an ounce:
• that same top-quality, tailored suit costs $600 – or 0.56 ounces of gold
• the family car now costs $15,000 – or 14.2 ounces of gold
• the house averages $181,100* – or 204.6 ounces of gold*
• *average house price from 2008 / gold at 2008 price of $880/ounce
If your grandfather locked $7,000 USD – the approximate value of an early 20th century home- in a vault when he was young, the state-run printing press would relentlessly dilute the purchasing power of his saved money. 75 years later, you would be hard-pressed to find a decent used car for the same amount. Conversely, if he instead purchased 200 one-ounce gold coins with his $7000 in cash and locked it in the same vault, his hard earned wealth would be remarkably preserved. With proceeds from your grandfathers gold coins you could buy an average American house, just like he could have back in 1935....
In essence, the fuss about gold is really just a reaction to drastic government spending programs...
The prospects of gold look increasingly bullish.
• Gold as a hedge against inflation is becoming more mainstream. It is only a matter of time before inflation rears its ugly head.
• Central banks are expected to be net buyers of gold in 2010 for the first time in decades.
• Gold production is in a state of perpetual decline...
• China is allowing and even encouraging its citizens to buy physical gold....
This all adds up to gold turning the corner in 2010 and cementing its bull-market status...
Now, gold coins from United Nations CommodityOnline
December 19, 2009
Now, the United Nations is also lured by the glitter of gold. In a bid to raise money for its projects, United Nations has licensed the minting of gold bullion coins bearing its logo to provide a public option world savings currency.
Oro gold coins are hoped to contribute to making the UN better funded by 2015, with revenue rising by ten to 15 per cent.
The coins are set to be produced in Europe and then distributed globally, with any licensee able to produce such bullion under contract....
UN coins were previously made purely for commemoration in the 1970s, but they hold no monetary value.
Bank of America/Merrill Lynch Commodity Strategist
2010 Commodity Outlook
December 9, 2009
...We forecast an average WTI crude oil price of $85/bbl in 2010 and believe oil will break through $100/bbl as we approach 2011... Our $1500/oz target for gold over the next 18 months remains intact...
We expect the Fed and other G10 Central Banks to maintain a very lax monetary policy in 1H10 to fight off deflation. In our view, an important side effect of these policies could be further gold purchases by Emerging Market central banks. In turn, the greatest global fiscal and monetary policy stimuli ever should result in a sharp rise in energy and industrial metals consumption, particularly in Emerging Markets, lending support to spot prices....
6.1 Gold
As we first discussed in our October 13 2008 Metals Strategist, the price of gold can reflect several macro variables at once. This is because gold has been the ultimate store of value over thousands of years. In the last decade, we found that three variables alone could explain fluctuations in the price of gold: risk, currency and commodity prices. In a nutshell, our analysis showed that gold is sometimes a currency, sometimes a commodity and sometimes a store of value...
The three stages of gold price appreciation to $1500/oz
Departing from this analytic framework, we argued back in October 2008 that gold prices would move up to $1500/oz in three steps. The outburst of the credit crisis in August 2007 marked the start of the first stage, with gold rising from $650/oz to about $950/oz. The second stage of gold price appreciation, we argued well over a year ago, would primarily be about USD weakness and lack of confidence in fiat currencies. We argued gold could break through $1200/oz in this second stage and strengthen against all currency crosses. The third and final stage will be driven, in our view, by a strong cyclical recovery in energy and commodity prices.
... we find that USD depreciation and currency risk have been the key contributors to higher gold prices in the last eight months... the weak dollar is pushing gold prices higher in USD, and the increase in global money supply is driving gold prices up in every currency.
Compared to the expansion in the money supply ...
In our view, the massive expansion in money supply observed in 2008 represents a competitive debasement of fiat currencies relative to gold (Chart 66). With the exception of the JPY, broad money in local currency expanded at rates between 8.5% for the EUR and nearly 25% for the TRY, compared to an expansion in the global stock of gold of 1.18%. For the time being, however, the rapid increase in real money has not been accompanied by a broad-based increase in consumer prices as the credit multiplier has remained rather muted in most countries.
...there is just not enough gold to go around
Top holders of currency reserves like China, Russia or India will likely need to increase their exposure to gold (Chart 67) as the value of fiat currency reserve holdings like the USD or the EUR comes into question. The obvious problem with Emerging Market Central Bank (EM CB) diversification is that there is simply not enough gold to go round...
Further USD weakness requires a CNY revaluation
Of course, further dollar weakness may be required to drive gold prices higher, but there are natural limits to floating G10 currency appreciation against the USD. Our EM Fixed Income and FX Strategy team argues for EM FX appreciation against G10 currencies (and against the USD) next year. But most floating EM FX currencies have already surged tremendously in recent months. In the case of the commodity exporters, the risk of catching the “Dutch disease” is increasing very rapidly. In our view, further weakness in the trade-weighted dollar would require a CNY revaluation. In turn, as EM CBs can not accumulate CNY, the only practical way to avoid adding EUR at these levels to EM CB portfolios is to buy gold.
The point of fiat currencies is to debase them as needed
While some investors remain concerned that lax monetary policy could end up resulting in inflation sometime down the road, we would argue instead that the whole point of having a fiat currency is to be able to debase it when the economic conditions require it (Chart 68). As the combination of monetary and fiscal policy measures help create an upswing in economic activity over the next two years, cyclical pressures will come back into the system, likely resulting in a lot more money chasing the same oil barrels. As we expect gold to maintain its long-run relationship with other commodities, we see a third stage of gold price appreciation where prices push above $1500/oz on the back of higher oil and commodity prices.
On My Mind Be Prepared for the Worst Ron Paul, 10.29.09, 09:20 AM EDT Forbes Magazine dated November 16, 2009
The large-scale government intervention in the economy
is going to end badly.
Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan's excessively low interest rates: the housing bubble, the explosion of sub-prime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble's collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve's balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small up-ticks in a handful of economic indicators are a sign that the recession is over?
What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.
Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury's program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person's pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.
The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.
Ron Paul is a Republican congressman from Texas.
Why Gold Investing is Crucial By Brent Lichtman
International Business Times
August 10, 2009
Gold investing is going to be the only investing in a short while. Wait just a minute, you exclaim! What in the world are you talking about? How could gold investing be the only investing? That makes no sense at all! Well, the answer to that question may seem like it doesn't come from this world, and that is partly correct. The world as we know it is about to change and gold investing is going to become the only investing!
The U.S. Dollar is being destroyed by the government and the Federal Reserve. The policy that the Fed has introduced, quantitative easing, is going to insure inflation in the the years ahead and for years to come. Gold will be the beneficiary of this misguided policy and that is why gold investing will be the only investing for the next couple of years.
Gold is real money, real wealth. The reason that gold is real wealth is because it is in limited supply, in great demand and it cost a lot to coax it out of the ground. In essence it is the anti-fiat currency. It is the direct opposite of everything that paper money is. Fiat currencies are printed for next to nothing and they can be expanded on a whim. Governments can do whatever they want with paper money and pass the consequences on to the taxpayer with out calling it a tax increase. The best of both worlds for the bloated ever expanding government. This is one more reason why, soon, gold investing will be the only investing.
Now is the time to be gold investing, because the dollars that are put into gold now will come back triple fold. Physical gold, coins and gold bullion, are your security blanket that will keep you warm when things get cold out there. Investing in gold stocks allows you to leverage your money and go for the moon shot when the dollar really takes a dive!
Most people are never willing to see the dramatic changes that are on the horizon, but rather prefer to live in the world of it can't happen here. Those that venture into the world of gold investing and stay the course, will reap substantial rewards in the very near future. In the old days the standard was to have 10 percent of your portfolio in precious metals... It is always wise to remember that the trend is your friend, and right now the trend is changing to gold investing!
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-1.65 (-1.04%) 
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were merely an excuse to print more money.
