Sunday, November 8, 2009

Inside the Global Gold Frenzy

MENDRISIO, Switzerland

HERE, in a corner of Switzerland where Italian is spoken and roughly one-third of the world’s gold is refined into bars and ingots, business is booming. Every day, bangles, bracelets and necklaces arrive in plastic bags — from souks in the Middle East, from pawn shops in Asia and from corner jewelers in Europe and North America.

“It could be your grandmother’s gold or the gift of an ex-boyfriend,” said Erhard Oberli, the chief executive of Argor-Heraeus, a major refiner here that processes roughly 400 tons of gold a year. “Gold doesn’t disappear.”

Amid a global frenzy fed by multibillion-dollar hedge funds, wealthy speculators and governments all rushing to stock up on the precious yellow metal, the price of gold briefly surpassed $1,100 an ounce on Friday, a record high.

Long considered the ultimate refuge for nervous investors, gold has climbed as the dollar has steadily weakened, budget deficits have expanded in the United States and Europe, and central banks have continued to pump trillions of dollars into weak economies, creating fears of another asset bubble that will ultimately pop.

“It’s not that gold has changed, but gold buyers have changed,” said Suki Cooper, a precious-metals strategist for Barclays Capital. “It’s a structural shift we’re seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins.”

“Gold’s appeal has broadened,” added Ms. Cooper, who predicts that it will hit $1,140 an ounce by the second quarter of next year.

Indeed, last month, Harrods, the 160-year-old London department store, began selling coins as well as gold bullion ranging from tiny 1-gram ingots to the hefty, 12.5-kilogram, 400-Troy-ounce bricks that are so often featured in movies and stocked inside the vaults of Fort Knox. Harrods’s lower ground floor, where the gold is peddled, has been packed with interested shoppers.

“The response has been astounding,” said Chris Hall, head of Harrods Gold Bullion. “Bars are definitely more popular than coins. The 100-gram is the most popular.”

IN the United States, ads promising high prices for gold are regular fodder for late-night television spots, while buyers are setting up tables at shopping malls or hosting gold-buying gatherings at private homes — like recession-era Tupperware parties.

“Everyone and their grandmother has a sign out saying, ‘We buy gold,’ ” said Ron Lieberman, the owner of Palisade Jewelers in Englewood, N.J. He estimates that 10 times as many people come into his store to sell gold now as when the metal was selling for $300 an ounce at the beginning of the decade. “I hear people come in and say gold is going to $2,000.”

Jewelry store shoppers aren’t the only ones forecasting lofty prices. Jim Rogers, an investor who has made his name investing overseas and in commodities, predicted to Bloomberg Television last week that gold might reach $2,000 an ounce — prompting a rebuke from Nouriel Roubini, an economist who gained attention for his early warnings about the global economic crisis. At a conference in New York on Wednesday, Mr. Roubini described Mr. Rogers’s forecast as “utter nonsense,” saying that there aren’t any inflationary or economic pressures that would drive the price of gold to $2,000 an ounce.

Even the most bullish of gold lovers were surprised last week when the Reserve Bank of India stepped in and bought 220 tons of gold from the International Monetary Fund for $6.7 billion, a sign that other central banks might move away from dollar-denominated assets like Treasury bonds in favor of the precious metal. India’s huge purchase means that gold will now account for about 6 percent of India’s $285.5 billion of foreign exchange reserves — up from the previous level of about 4 percent.

“We have money to buy gold,” said Pranab Mukherjee, India’s finance minister. “We have enough foreign exchange reserves.”

On Thursday, Sri Lanka’s central bank disclosed that it, too, was buying gold, in a trend that could hurt the United States over time because it needs foreign bond buyers, especially central banks, to finance its growing debt. Gold closed at $1,095.10 an ounce on Friday, down from its intraday high but up nearly 5 percent for the week.

Adjusting for inflation, gold would have to top $1,885 to set an all-time record.

China has already doubled its gold reserves over the last six years, but the Indian move underscored how even the most traditional investors are shifting a portion of their assets into bullion.

“I have never been a gold bug,” Paul Tudor Jones, the prominent hedge fund manager, told his investors last month. “It is just an asset that, like everything else in life, has its time and place. And now is that time.”

Over all, in the second quarter of 2009, consumption of gold for jewelry plunged 20 percent, while investor demand for gold increased 51 percent, according to the World Gold Council.

THE Harrods gold line is made by PAMP, a rival Swiss refiner down the road here from Argor-Heraeus, in the nearby town of Castel San Pietro. And demand for bars weighing 100 ounces or less for individual investors is up 80 percent, said Marwan Shakarchi, the chairman of MKS Finance, a Geneva company that owns PAMP.

Inflows of old gold jewelry and individual investor sales are especially strong in the United States and Western Europe, a new phenomenon for MKS, Mr. Shakarchi said. In the past, hoarding gold as an investment was much more popular in the Middle East and Asia. “Europe and the United States are our emerging markets,” Mr. Shakarchi said.

In addition to high anxiety about the future, recent political trends may also be playing a part in the global gold fever. With a crackdown on tax havens worldwide and Swiss bankers handing over the names of wealthy American clients to authorities, some experts say rich people now prefer an investment that can easily be hidden from the prying eyes of tax collectors.

“In Europe, people want physical gold to store themselves, with no documents,” said Bernhard Schnellmann, director for precious-metal services at Argor-Heraeus. Often, the company doesn’t know the ultimate destination of the bars it makes, only the identity of the bank in Zurich or London that is handling the order.

The region surrounding Mendrisio has dominated gold refining for decades, profiting from its close proximity to northern Italy — which has a long tradition of jewelry-making and cheap labor — as well as from Switzerland’s own reputation for financial stability and discretion. The Swiss government has also nurtured the business, guaranteeing gold assays for purity and carefully regulating the industry.

One of the 100-gram bars that is produced here just about fits in the palm of your hand, with a satisfying metallic coldness that belies its $3,500 price tag. The standard 12.5-kilo, 400-ounce brick, on the other hand, is a monster, straining the wrist as well as the imagination: just one of these thick bars commands a higher price than a studio apartment in Manhattan.

Although India is now a far bigger consumer than Italy of gold for jewelry, the region around here has retained its distinctive status as the gold workshop of the world, with ore arriving from South Africa along with the old bracelets and necklaces destined for the crucible.

“If you give somebody a ton of gold, you don’t have to worry about it in Switzerland,” said Mr. Oberli, the Argor-Heraeus chief executive. Efficiency, another Swiss virtue, and speed are of the essence in the gold business, because prices change quickly and buyer and seller want to lock in their order quickly, Mr. Oberli explained.

“Everything that comes in has to go out,” he said. “It’s not our material.”

Perhaps as a result, the gold-refining fraternity is secretive, with verbal discretion as much a part of the culture as the high concrete walls that surround Argor-Heraeus and the metal detectors workers pass through when they go home for the day.

“Everybody is afraid someone else is chasing their customers,” said Mr. Oberli. “The banks don’t want us to know.”

Mr. Oberli is wary of walk-in clients and accepts orders from mines only when he can vouch for the origin of the ore, fearing “conflict gold” from rebel-held areas in Africa and elsewhere.

ARGOR-HERAEUS makes sure that even the tiniest amount of the precious metal doesn’t disappear during refining. Gold dust from the soles of workers’ and visitors’ shoes is scooped up on special mats when they leave. And, annually, the overalls that employees wear during manufacturing are burned to recover the smallest fleck.

At the airport in Zurich, where there are special vaults to hold gold, shipments of jewelry arrive daily on early morning flights before making their way here via a twisty, three-hour journey through the mountains on tightly guarded trucks. After the jewelry is unloaded, gold ingots, bars and other forms of bullion — already stacked like cordwood along the sooty corridors of Argor-Heraeus — are sent back to Zurich in the same trucks.

“The truck never drives back empty,” said Mr. Oberli. “Time is so important because the value of the material is so high.”

Mr. Oberli is also confident that he is running a business that, even in the middle of one of the worst economic downturns of the last century, is relatively recession-proof and always of interest to investors.

“Gold has been around as an investment for 6,000 years,” Mr. Oberli said. “When there is no alternative, it’s there.”

http://www.nytimes.com/2009/11/08/business/global/08gold.html

Wednesday, November 4, 2009

Gold price hits record after IMF's India deal

The price of gold surged to a record peak of 1,095.80 dollars an ounce in trading here on Wednesday in the wake of the International Monetary Fund's massive sale of the precious metal to India.

Gold had already reached a record high of 1,087.80 dollars on Tuesday as the IMF said it had sold 200 tonnes of gold to India's central bank over a two-week period last month for 6.7 billion dollars to bolster its finances.

"Gold prices continue to march further into uncharted territory following the IMF's gold sale to the Reserve Bank of India," said Barclays Capital analyst Suki Cooper.

After spiking to a new high at 1545 GMT on Wednesday, gold later pulled back to 1,090 dollars in London.

"Gold is still benefiting from news that, at the end of October, India bought 200 tonnes of gold from the IMF at market prices," said Commerzbank analysts.

"This transaction is an indication that, despite the prevailing high price level, central banks from emerging economies are still willing to accumulate gold to diversify their currency reserves," they added in a note to clients.

Gold and other commodity prices have surged in recent months amid a move away from the dollar, which has been slumping. The move accelerated last month on a report that Gulf states may stop using the greenback for oil trading.

The metal is also winning support from fears over a possible spike in inflation, as gold is widely regarded by investors as a safe store of value.

Bart Melek at BMO Capital Markets said the big sale of gold to India gives credence to the theory "that there are official buyers waiting in the wings for large amounts of available gold.

"The question now is, who buys the rest of the IMF gold?" said Melek.

"We suspect it may be China, other Asian countries, Russia or even India again, as they hold relatively little gold relative to their very large foreign exchange reserves, and may want to diversify away from US dollars."

The sale to India was nearly half the 403.3 tonnes of gold that the IMF has targeted for sale over the coming years.

The Washington-based IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the United States and Germany.

India is the world's biggest consumer of gold, importing between 700 and 800 tonnes of the metal every year or 20 percent of global demand.

A senior IMF official said that the IMF was "lucky" in selling the 200 tonnes to India for roughly 1,045 dollars an ounce, compared with 850 dollars an ounce in April 2008.

Gold's price, which has risen more than 20 percent this year, has a bright future thanks to improving demand caused by the financial crisis, industry experts said this week.

"Although it's difficult to predict in the short term, the overall picture is very healthy," Mark Lynam, an executive for AngloGold Ashanti -- the world's third largest gold producer -- told the London Bullion Market Association annual conference in Edinburgh.

Plush London department store Harrods last month surprised the retail industry by starting to sell gold bars, with prices fluctuating according to the current market price.

Read it here

Wednesday, October 21, 2009

US gold futures rise as dollar drops

U.S. gold futures rose in quiet trade on Monday as a weaker dollar boosted bullion's
appeal as an alternative currency against a steadily falling greenback.

For the latest detailed report, click on [GOL/].

GOLD

* December gold futures GCZ9 up $1.90 at $1,053.40 an
ounce at 10:35 a.m. EDT (1435 GMT) in COMEX trade.

* Range from $1,048.60 to $1,057.80. December scaled a
record high $1,072 on Oct. 14.

* Dollar remains near recent lows on expectations that U.S.
interest rates will stay near zero.

* Gold's recent movements largely led by currency markets
rather than inflation.

* Any news to weaken dollar's reserve currency status would
be positive for gold - HSBC.

* Gold rise boosted by oil, which climbed above $79 per
barrel.

* Gold-to-oil ratio below 14 at 13.35, down tad from
previous session's 13.40.

* Pullback possible as noncommercial net longs hit record
high in week up to Oct. 13 - CFTC data.

* COMEX estimated 10 a.m. volume at 37,556 lots.

* Spot gold XAU= at $1,053.40 an ounce, against $1,050.80
late in New York in the previous session.

* London afternoon gold fix XAUFIX= $1,050.50.

Gold Futures

Friday, October 2, 2009

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Tuesday, August 18, 2009

US gold bounces, ends higher on dollar-hedge buying

U.S. gold futures ended higher on Tuesday, rebounding from the previous session's sell-off based on doubts about economic recovery, and the strength of the dollar could set the tone for bullion in the near term.

GOLD

* December gold GCZ9 settled up $3.40 at $939.20 an ounce on the COMEX division of the New York Mercantile Exchange.

* Trading in a tight $6 range from $935 to $941.60.

* Gold rose amid a mixed bag of news as the dollar weakened and the U.S. producer price index fell more than expected in
July - Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.

* The dollar is still the primary world currency, and the gold market's near-term direction could depend on its
interactions with the currency market and the overall economic sentiment - Perez-Santalla.

* The inverse relationship between gold and the dollar has been reasserting itself. Earlier this year, the traditional
link broke down because both assets benefited from a flight to safety amid economic fears - analysts.

* COMEX estimated final gold volume at 49,512 lots.

* Spot gold XAU= at $938.15 an ounce at 3:20 p.m. EDT (1920 GMT), against $932.80 in late Monday dealings in New
York.

* London afternoon gold fix XAUFIX= at $935 an ounce.

http://www.reuters.com/article/usDollarRpt/idUSN1843489020090818

Tuesday, April 21, 2009

Safety in Norway’s krone

The Norwegian krone might become the new Swiss franc as investors seek a haven from the turmoil engulfing the global economy, argues Axel Merk of Merk Investments.

“The world’s a mess and in our eyes policymakers are inadvertently doing their best to worsen a bad situation,” he says. “We are in a period where a depression, if not a long and drawn-out recession, is a very realistic probability. Where can investors hide?”

Mr Merk believes that recent actions by the Swiss National Bank have diluted the franc’s status as a haven currency.

“Investors put their money in Switzerland because of its safe haven appeal,” he says. “Now, the SNB intervenes in the currency markets to erode trust in the franc. The SNB is also more vulnerable as it engages in unconventional policies, from swap lines for eastern Europe to the issuance of US dollar-denominated Swiss Treasury bills.”

Mr Merk believes that Norway may replace Switzerland as the place to take refuge in Europe.

“Norway is a surplus country - an enviable position to be in should we face an extended depression - and it can afford to get through this crisis.

“The krone is not particularly ‘sexy’; if the markets recover, risk-friendly money may move towards other currencies again.

“However, in our assessment, the Norwegian krone may be the most appropriate depression trade.”

http://www.ft.com/cms/s/0/ca170f16-1239-11de-b816-0000779fd2ac.html?nclick_check=1

Monday, April 20, 2009

Dow plunges 290

as investors worry about banks.

Investors are back to worrying about banks. Long-present unease about soured loans bubbled over on Monday after Bank of America Corp. said it set aside $13.4 billion to cover lending losses even as it posted earnings that beat expectations. Other big banks have also increased loss provisions in the past two weeks.

Financial stocks suffered some of the day's worst declines and major market indicators tumbled more than 3 percent, including the Dow Jones industrial average, which fell 290 points.

Bank of America plunged 24.3 percent and Citigroup fell 19 percent as investors became worried that cleaning up bad loans from banks' balance sheets may have farther to go than many had anticipated.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said traders are now viewing bank earnings with more skepticism and believe that the better-than-expected profit reports may be disguising problems.

"They're looking at bank numbers and are saying they are not that great," Saluzzi said.

Even without growing anxiety about financial stocks, traders had been looking for some pullback after the Dow jumped 24 percent from 12-year lows in early March.

The renewed worries about banks' debt problems were aggravated by news reports that their lending remains tight and that the government may swap its debt in banks for ownership stakes as its $700 billion bailout fund runs down.

Because of the central role lending plays in keeping businesses of all kinds going, investors have been hunting for signs of a recovery in banks before they get more optimistic about the broader economy.

The market has been encouraged by early indications that a government drive for lower interest rates has been helping banks step up lending, but investors are still sensitive to any signs of trouble.

Now they're on high alert about what the government will say in two weeks when it reports results of in-depth examinations to see which banks might need more help to stay afloat if the economy gets even worse.

Energy and materials companies also fell along with the prices of key commodities they rely on such as crude oil.

The market declines were broad and deep, outweighing what would otherwise be positive news about a step-up in deal activity. After a deal with IBM Corp. didn't work out, troubled technology company Sun Microsystems found a buyer in Oracle, a leading maker of business software, while PepsiCo Inc. said it would bid $6 billion to buy its two biggest bottlers.

According to preliminary calculations, the Dow fell 289.60, or 3.6 percent, to 7,841.73.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 37.20, or 4.3 percent, to 832.40, and the Nasdaq composite index fell 64.86, or 3.9 percent, to 1,608.21.

About 10 stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.8 billion shares.

Concerns about the sustainability of bank earnings weighed on financial stocks. Citigroup Inc. lost 19.5 percent, JPMorgan Chase & Co. fell 10.7 percent and American Express Co. fell 13 percent.

Jeffrey Frankel, president of Stuart Frankel & Co. in New York, said the retreat in financial stocks is welcome after their massive gains from early March — he said too sharp a rise could endanger a long-term advance. Many bank stocks have doubled in only weeks.

"These banks have had a tremendous run," Frankel said. "Now you're hearing the bearish camp speak up a little bit."

Investors are also cautious about financials after The New York Times reported that the government might be forced to find ways to stretch the $700 billion allocated for the government's bank rescue fund by converting the government's loans into common stock. Such a move would give the government a controlling stake in banks and hurt existing shareholders by reducing the value of their shares.

Separately, The Wall Street Journal reported that banks receiving government bailout money are having a hard time making loans.

Wall Street was more upbeat about the Oracle deal, which carries a 42 percent premium to Sun's Friday closing stock price of $6.69. Sun jumped 36.8 percent, while Oracle slipped 1.3 percent.

Beverage and snack maker PepsiCo offered to acquire Pepsi Bottling Group and PepsiAmericas in a move to cut costs. Pepsi lost 4.4 percent, while Pepsi Bottling jumped 22 percent and PepsiAmericas surged 26 percent.

In earnings news, drug maker Eli Lilly & Co.'s first-quarter earnings rose 24 percent on higher sales of the antidepressant Cymbalta and as costs for Humalog, a form of insulin Lilly makes, remained flat. Shares slipped 2.3 percent.

Light, sweet crude fell $4.45 to $45.88 a barrel on the New York Mercantile Exchange.

Occidental Petroleum Corp. lost 6.3 percent, while Dow Chemical Co. fell 9.1 percent.

In other market moves, the Russell 2000 index of smaller companies fell 26.88, or 5.6 percent, to 452.49.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.85 percent from 2.95 percent late Friday. The yield on the three-month T-bill was unchanged at 0.13 percent.

The dollar was mostly higher against other major currencies. Gold prices rose.

http://news.yahoo.com/s/ap/20090420/ap_on_bi_st_ma_re/wall_street

Saturday, April 11, 2009

Gold standard debate roars on

A few months ago, Terry Smith, head of Tullett Prebon, the interdealer broker, chaired a panel at the World Economic Forum meeting in Davos which was asked to produce one concrete recommendation to fix the global financial crisis.

The top pick? Not anything on toxic assets or fiscal spending. Instead, this gaggle of leading financiers called for a new reserve currency, akin to an old-style gold standard.

“Two-thirds of the world’s assets are denominated in a fiat currency issued by a country whose authorities are taking policy actions which seem inevitably to lead to its debasement,” explains Mr Smith, noting that “it seems . . . the Chinese have now concluded that this is not acceptable”.

Just a bit of pie-in-the-sky posturing of the sort that often occurs in high-altitude Davos? Perhaps. But Mr Smith is hardly a do-gooding, state-loving dreamer; on the contrary, Tullett Prebon is about as ruthlessly free-market as they come.

Moreover, these musings about a gold standard are currently cropping up in all manner of unlikely places. One savvy European property developer (who aggressively sold most of his holdings in early 2007) recently told me that he is now moving a growing proportion of his assets from government bonds into gold, even at today’s elevated prices.

“The logical conclusion of where we will end up eventually is with some type of gold standard,” he explains, arguing that future inflation will almost inevitably cause a future collapse in government bonds.

Half a world away in the Middle East, some sovereign wealth funds now say that they are stocking up enthusiastically on food and gold, due to similar reasoning.

Meanwhile, in New York a (still) formidable American hedge fund recently circulated private research that echoes the reasoning of Mr Smith. Most notably, this hedge fund points out that since the world abandoned the gold standard on August 15, 1971 credit creation has spiralled completely out of control.

But this four-decade long experiment with fiat currency is not just something of a historical aberration, it argues – but potentially very fragile too. After all, the only thing that ever underpins a fiat currency is a belief that governments are credible. In the past 18 months that belief has been tested to its limits. In coming years it could be shattered, particularly if the current wave of extraordinary policy measures unleashes a wild bout of inflation.

Hence the chatter about a gold standard. Indeed, as the debate bubbles up, some financiers are now even emailing each other an extraordinary little essay that Alan Greenspan himself wrote in support of a gold standard back in the 1960s, called “Gold and Economic Freedom”*.

In the years since he penned this essay, Greenspan has partly backed away from those ideas (and he blatantly ignored their implications when he was at the Fed.) But now they look prescient.

“Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets . . . [but] in the absence of the gold standard . . . there is no safe store of value,” Greenspan wrote back then, pointing out that without a gold standard in place, there is little to prevent governments indulging in wild credit creation. “Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

Of course, for the moment all this muttering about gold is simply wild speculation. Even if western leaders suddenly were to decide they wished to turn back the clock, the logistics of embracing a new gold standard would be mind-boggling. UBS, for example, calculates that the US reserve of gold are so small, relative to its monetary base, that a price above $6,000 an ounce would be needed to reintroduce a gold standard. To implement that standard in Japan, China and the US, the price would be more than $9,000. Moreover, right now few western governments have any motive to even entertain the debate, given that inflation may soon seem the least bad way to tackle the current overhang of debt.

But what this debate does show is just how much cognitive dissonance – and utter uncertainty – continues to stalk the markets. It might seem almost unthinkable to propose a return to a gold standard, in other words. However, the key point is that the last 18 months have already produced a stream of once unimaginable events.

Given that, shell-shocked investors are increasingly reluctant to rule anything out, as they stare at such uncharted waters. So while I would not bet today on a gold standard returning any time soon, I would also not bet that the debate dies away. Nor would I bet that the gold price crashes too far from its current rate of $900, while so much fear continues to stalk the world.

Financial Times

Thursday, April 9, 2009

Gold falls as investors turn to stock market rally

Commodity prices ended mixed Thursday as a stock market rally cut into demand for safe-haven investments like gold.

Gold prices fell $2.60 to settle at $883.30 an ounce on the New York Mercantile Exchange. Meanwhile, the dollar rose against other major currencies. Gold can fall when the dollar rises because investors use the metal as a hedge against inflation, which can be caused by a weak dollar.

The gyrations came in a shortened week and as stocks bounded higher. Markets are closed for Good Friday.

Stocks jumped Thursday after banking giant Wells Fargo & Co. surprised investors with the prediction it would earn $3 billion for the first quarter because of a strong increase in its lending business. Major stock market indexes rose more than 3 percent Thursday.

A sharp rise in stocks has weighed on demand for gold in recent weeks. Prices have fallen since early March when Wall Street began a rally that lifted major stock market indicators more than 20 percent in less than a month from 12-year lows.

Other metals were mixed Thursday. May silver fell 1 cent to $12.33 an ounce, while May copper futures rose 7.25 cents to $2.071 a pound.

http://www.google.com/hostednews/ap/article/ALeqM5jND4r3B-VBZu2Ogg2_yzjYnPIP8gD97F6NQO1

Saturday, March 28, 2009

Gold, other commodities retreat as dollar advances

Gold prices retreated Friday, as a stronger dollar sapped demand for commodities.

Energy and agriculture futures also fell.

A resurgence of the dollar, which gained against the euro, the British pound and the Japanese yen, put pressure on commodities Friday. A weak dollar makes commodities cheaper in other countries, which can potentially boost demand. At the same time, demand for gold often increases when the dollar is weak since investors tend to use the yellow metal as a hedge against inflation.

James Steel, an analyst with HSBC in New York, said the dollar's advance against the euro was sparked by comments from the German finance minister that the 16-nation currency could be threatened if euro zone countries take on too much debt.

Gold prices have oscillated in recent days as investors weigh concerns about the long-term potential for inflation — which is a boon for gold — against economic data indicating that demand for goods of all kinds remains weak.

In Britain, economic output contracted 1.6 percent in the fourth quarter, more than expected, according to statistics released Friday. Meanwhile, in the U.S., the Commerce Department said consumer spending edged up a modest 0.2 percent in February, as expected. Personal incomes fell, however.

"The growth in prices is low, that's for sure," said Steel. "The deflationary pressures are likely to keep precious metals down."

Last week, gold surged after the Federal Reserve said it would buy up to $300 billion worth of long-term Treasurys and $1.25 trillion in mortgage-backed securities. That sent the dollar tumbling and rekindled fears about inflation.

Gold for June delivery dropped $16.90 to settle at $925.30 an ounce on the New York Mercantile Exchange. Prices finished the weak down 3.2 percent.

Other metals prices also fell. May silver fell 35.7 cents to $13.2630 an ounce, while May copper futures slipped 1.9 cents to $1.8360 a pound.

On Wall Street, stocks finished lower, but managed their first three-week advance of 2009. Analysts said the day's pullback was expected after the market's big climb this month. The Dow Jones industrial average fell 148 points to finish at 7,775 and the Standard & Poor's 500 index shed 16 points to 815.

Energy prices tumbled on the Nymex, as investors worried that oil's recent gains aren't sustainable amid lingering doubts about the economy.

http://www.iht.com/articles/ap/2009/03/27/business/NA-US-Commodities-Review.php

Tuesday, March 24, 2009

Investor Demand Could Push Gold To Record In 2009

The rising economic uncertainties related to recessionary conditions and increasing joblessness, ever more volatile and vulnerable financial markets and weakening economic conditions that helped spur strong investment demand for gold in 2008 could send gold to record highs above $1,000 this year, CPM Group said Tuesday.

"Investors are concerned about the preservation of the value of their assets amid the massive destruction of wealth over the past year," the commodities research and consulting firm said in this year's closely followed CPM Gold Yearbook.

http://online.wsj.com/article/BT-CO-20090324-715826.html

Sunday, March 22, 2009

Gold: Financial Q&A: Some price advice for investors about to join the gold rush

Q: What is the best way to purchase 100 percent gold coins, what kind are best, and from whom should one buy?

A: Gold-coin and gold-bullion dealers can be found in nearly every major city as well as on the Internet. All are happy to sell you gold, as will the US Mint (usmint.gov).

Because gold is soft and can get damaged in handling, the closest you'll actually come to 24-karat pure gold is 99.99 percent pure. In this arena, the most popular choices are Canadian Maple Leafs and US Buffalos, says David McCarthy, senior numismatist at Kagin's, a coin-and-gold dealership in Tiburon, Calif. Each coin is minted by their respective governments.

The biggest selling coin, however, is the 22-karat American Eagle. Because it is less pure, it weighs slightly more than one ounce. But it still contains precisely one ounce of this increasingly popular metal.

Because all of these coins, as well as the South African Krugerrand, contain one ounce of gold, their price calculations are fairly easy. Other coins may have a lesser content or a lower karat weight, so you'll need a calculator whenever you try to peg it to the commonly traded price of one troy ounce.

After you find a seller, determine which coins you want and the price. This is a very volatile market, and Mr. McCarthy says that a quoted price is basically good for as long as you hold the coin in your hand. If you see a price you like, be prepared to act.

But more important, ask the dealer how much of a premium he'll assess. McCarthy says he typically charges a 2-to-3 percent markup over his cost of a coin. He's seen it 10 percent or more elsewhere. One ad, for example, listed a Gold Eagle at $1,025, or 11.8 percent more than the going rate of $916 per ounce as of March 7.

Gold prices are set twice daily by the London Bullion Market Association, at lbma.org.uk, or throughout the day by the Comex division of the New York Mercantile Exchange, at nymex.com.

Q: Can one own too many charitable annuities? It seems a wonderful way to donate to worthy causes and help them over the long term, especially since the funds (in my case) are directed to them. For me, the added quarterly or monthly income is welcome. I'm now considering this type of donation to a summer camp program for children. That would make it No. 4. Is that too many?

A: It's perfectly fine to have several gift annuities. In fact, it isn't uncommon for a single donor to have 20 or even 30 gift annuities at a time, says Johni Hays, an attorney with Stelter Co., a Des Moines-based firm that supports the charitable giving industry.

Briefly, a charitable gift annuity involves donating funds to a qualified charity of your choice – a college, hospital, or summer camp, for example. In return, donors will likely be entitled to a tax break for their gifts, and the charity will give them a predetermined amount of money each year. When a donor dies, the nonprofit keeps any of the original gift amount that remains.

Ms. Hays says these annuities have become popular because they provide higher rates of return than a typical stock dividend or savings account. And the repayment amount rises with your age.

The underlying question to ask might be more about how much of your total net worth is comprised of gift annuities. Because you no longer have access to the principal once it's given to a charity in exchange for a charitable gift annuity, Hays says that you'll want to be certain that you still have access to other funds in the event you might need them later on.

http://www.csmonitor.com/2009/0323/p15s02-wmgn.html

Special gold nanoparticles show promise for 'cooking' cancer cells

Researchers are describing a long-awaited advance toward applying the marvels of nanotechnology in the battle against cancer. They have developed the first hollow gold nanospheres — smaller than the finest flecks of dust — that search out and "cook" cancer cells. The cancer-destroying nanospheres show particular promise as a minimally invasive future treatment for malignant melanoma, the most serious form of skin cancer, the researchers say. Melanoma now causes more than 8,000 deaths annually in the United States alone and is on the increase globally.

The topic of a report presented here today at the American Chemical Society's 237th National Meeting, the hollow gold nanospheres are equipped with a special "peptide." That protein fragment draws the nanospheres directly to melanoma cells, while avoiding healthy skin cells. After collecting inside the cancer, the nanospheres heat up when exposed to near-infrared light, which penetrates deeply through the surface of the skin. In recent studies in mice, the hollow gold nanospheres did eight times more damage to skin tumors than the same nanospheres without the targeting peptides, the researchers say.

"This technique is very promising and exciting," explains study co-author Jin Zhang, Ph.D., a professor of chemistry and biochemistry at the University of California in Santa Cruz. "It's basically like putting a cancer cell in hot water and boiling it to death. The more heat the metal nanospheres generate, the better."

This form of cancer therapy is actually a variation of photothermal ablation, also known as photoablation therapy (PAT), a technique in which doctors use light to burn tumors. Since the technique can destroy healthy skin cells, doctors must carefully control the duration and intensity of treatment.

Researchers now know that PATs can be greatly enhanced by applying a light absorbing material, such as metal nanoparticles, to the tumor. Although researchers have developed various types of metal nanoparticles to help improve this technique, many materials show poor penetration into cancer cells and limited heat carrying-capacities. These particles include solid gold nanoparticles and nanorods that lack the desired combination of spherical shape and strong near-infrared light absorption for effective PAT, scientists say.

To develop more effective cancer-burning materials, Zhang and colleagues focused on hollow gold nanospheres — each about 1/50,000th the width of a single human hair. Previous studies by others suggest that gold "nanoshells" have the potential for strong near-infrared light absorption. However, scientists have been largely unable to produce them successfully in the lab, Zhang notes.

After years of research toward this goal, Zhang announced in 2006 that he had finally developed a nanoshell or hollow nanosphere with the "right stuff" for cancer therapy: Gold spheres with an optimal light absorption capacity in the near-infrared region, small size, and spherical shape, perfect for penetrating cancer cells and burning them up.

"Previously developed nanostructures such as nanorods were like chopsticks on the nanoscale," Zhang says. "They can go through the cell membrane, but only at certain angles. Our spheres allow a smoother, more efficient flow through the membranes."

The gold nanoshells, which are nearly perfect spheres, range in size from 30 to 50 nanometers — thousands of times smaller than the width of a human hair. The shells are also much smaller than other nanoparticles previously designed for photoablation therapy, he says. Another advantages is that gold is also safer and has fewer side effects in the body than other metal nanoparticles, Zhang notes.

In collaboration with Chun Li, Ph.D., a professor at the University of Texas M.D. Anderson Cancer Center in Houston, Zhang and his associates equipped the nanospheres with a peptide to a protein receptor that is abundant in melanoma cells, giving the nanospheres the ability to target and destroy skin cancer. In tests using mice, the resulting nanospheres were found to be significantly more effective than solid gold nanoparticles due to much stronger near infrared-light absorption of the hollow nanospheres, the researchers say.

The next step is to try the nanospheres in humans, Zhang says. This requires extensive preclinical toxicity studies. The mice study is the first step, and there is a long way to go before it can be put into clinical practice, Li says.

http://www.eurekalert.org/pub_releases/2009-03/acs-sgn030909.php

Gold May Rise on Demand for Dollar Alternative, Survey Says

Gold may rise for a second straight week as the slumping dollar boosts demand for the precious metal as an alternative investment.

Twenty-one of 28 traders, investors and analysts surveyed from Tokyo to Chicago on March 19 and March 20 advised buying gold, which rose 2.8 percent last week to $956.20 an ounce in New York. Five said to sell, and two were neutral.

Last week, the dollar dropped 4.8 percent against the euro, the most since December. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has jumped 41 percent this year to a record.

Most traders surveyed on March 12 and March 13 anticipated gold’s gain last week. The survey has forecast prices accurately in 151 of 254 weeks, or 59 percent of the time.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAEQMMKIFNZ8&refer=home

Wednesday, March 18, 2009

Economy fuels gold rush _ Tupperware party-style

The women gathered in the kitchen, enjoying brie and chocolate tortes as they told stories about their high school rings and pieces of jewelry given to them by ex-husbands and boyfriends. But they weren't just reminiscing for old times' sake.

The guests at Cheryle Podgorski's "gold party" were there to trade in their old jewelry for cash.

Gold parties — the recession answer to Tupperware parties — have become increasingly popular around the country as people cast about for ways to raise money. A professional gold buyer tests and appraises the guests' jewelry and then pays them on the spot.

Guests say getting together with friends in somebody's living room makes it a fun, social occasion, and feels more respectable than hocking their rings, necklaces and brooches at seedy pawn shops or selling them back to jewelry stores.

"It's terrific because it's a little bit intimidating to think about walking into a jewelry store, even though they may be heavily advertising it, and, you know, to someone that you don't know and turning over your valuables to them," said Pat Walsh, a 56-year-old retired store manager from Simsbury, Conn.

Walsh went home with $286 after selling a pinky ring she received as a wedding favor 35 years ago, circle-linked bracelets, broken necklaces and a few large, mismatched or outdated earrings.

Gold prices are close to their highest levels on record, hovering around $900 per ounce, up from $400 five years ago. Analysts say investors looking for a safe haven for their money while the stock market is in a meltdown could keep gold prices high for some time.

That — together with aggressive advertising by online scrap gold buyers, jewelry stores and gold party organizers — has led many people to clean out their jewelry boxes and dresser drawers.

Several companies are mining the phenomenon, which first began to thrive in Michigan a couple of years ago amid the struggles of the auto industry. My Gold Party LLC now has at least 35 representatives running parties in 21 states and is looking for more, said January Thomas, co-owner of the Grosse Pointe Woods, Mich.-based company.

"It's definitely a growing trend. I mean, the economy is not getting any better," Thomas said.

The gold buyer at Podgorski's party, Maggie Percival, said she started organizing parties this year as a representative of My Gold Party to raise money to send her son to college. She soon learned that gold parties can carry an element of risk for organizers.

"I've actually given money to people for stuff that isn't gold because I didn't test it properly. That was when I was a newbie. I've gotten much better at it," Percival said. "I had to pay the price for that one."

In front of the guests, Percival uses a jeweler's magnifying loupe to assess the gold, a digital meter to test whether it is real, and an electronic scale to weigh it.

At Podgorski's party, women laughed as they narrated stories behind their jewelry, which included gifts from ex-husbands and boyfriends who no longer inspired fond memories, 1960s cocktail rings that a man gave to his wife before they divorced, and a souvenir from a high school trip to Russia.

"Somebody at a party last week had a pre-engagement ring from her boyfriend before her husband, and her 14-year-old daughter wanted the ring, and she said, `If your father ever saw you with that ring on you, he'd kill me,' so she sold it," Percival said.

The gold-buying services typically are not interested in the jewelry itself. Instead, they sell the items to gold refiners to be melted down.

The gold party host and gold buyer generally get a 10 percent cut. Podgorski made $300 at her party, which she said she donated to a charity she runs that provides free prom dresses to high school girls who cannot afford one.

"It's fun, it's something different. It's not a Tupperware party, it's not Pampered Chef," said Jennifer Phillips, a 39-year-old high school suspension supervisor and mother of six, who made $321 on her gold sales.

Alona Bloom, a 34-year-old mother of two and a teacher's assistant in Pittsburgh, recently sold old jewelry at a friend's gold party. Bloom thought she would leave with $100 but walked out with $700.

Now, she is now working to organize her own party to earn the 10 percent commission. She would like at least 10 sellers but has found just eight so far.

"A lot of people have already sold their gold," Bloom said.

http://www.google.com/hostednews/ap/article/ALeqM5jIp0tAwji4FcFpnO1PlqEmq-jJOgD970K8EG0

Tuesday, March 10, 2009

Gold Is Ready To Go Very High Very Fast

It appears that gold is ready to go very high very fast, as measured in all currencies of the world. It seems that gold is in the process of completing the mega cup and handle pattern that started to form in 1980 when gold was at about US $850. The interesting part is the fact that it seems that we are in the final phase which should take us to about US $ 1 300 (about R 14 000) and eventually to about US $ 1 700 (about R 18 760) in a very short time relative to the 29 years since 1980. Do not be surprised to see $50, $100 and more up days, should key levels be broken.

The correction to about US $900 (and so far reversal to US $ 939) was the confirmation that the pattern is still very much on course. It seems that all major corrections, as is the nature of this pattern, are now completed. It now needs to get up to US$ 1000 and just above in a short period (with very brief minor corrections on the way there. For more on this cup and handle formation see the article by Jordan Roy-Byrne/Trendsman.

I have to state that it is not the potential high paper prices that make me bullish about gold, but its fundamental nature, and the current situation the world finds itself in. It is not the paper price, but what you can buy with it that matters.

During the correction, it was an opportune time to remind myself of why I am storing my wealth in gold and silver.

This is some of what I came up with: (please note that I am mostly repeating what I wrote previously, but that is exactly what I was doing - reminding myself)

Gold and silver is money and money is gold and silver, and money (real, not paper) is the safest and most consistent store of wealth over long periods of time and is especially important during times of uncertainty. There is a lot of fear and uncertainty today, therefore I store what little wealth I have in money, I store it in gold and silver.

As time passes, more people are realising the fact that the world's monetary system is fraud and that gold and silver is real money and not the paper money that the world uses today. The traffic is one-way, more, not less people come to the realisation that paper money is fraud and ditch it for gold and silver (the potential is huge). Maybe, right now someone who is reading this is ditching paper money for gold and silver. This fact is what makes me most bullish about silver, since it is the form of money that has the greatest potential due to the fact that it has more room to move from where it is (a demonetized monetary asset) to a fully monetized asset.

The debt levels in the world are enormous, and it is an inescapable fact that debt can only be properly and fully settled with real assets. Some assets are better than others when it comes to discharging debt. Gold and silver are real assets, and due to the fact that they are money, they are the ultimate form of payment and settlement of debt.

Due to these enormous debt levels, assets that are acceptable as proper settlement of debt will be in huge demand if these debts are to be properly settled; and this hold true whether debt levels are extinguished by default as well. Gold and silver is in huge demand, and this will accelerate.

Should the big debtors of the world attempt to "settle" their debt with more debt (inflationary) such as paper promises (like what is currently happening), then paper prices of real assets will explode, with gold and silver leading the way.

Paper money, bonds and other promises to pay are all subject to possible default, and during these times, default is a very common occurrence. Real assets are not subject to default, and gold and silver are real assets that you can hold in your hand, and are financially liquid (liquidity is even more essential during such times).

Paper money, bonds and other promises to pay are certainly at risk of impairment during these deflationary times, due to possible partial default or delays due to lack of debtors' ability to pay on time due to liquidity constraints. Remember an assets' value to you is less if you are not able to use it when required.

During inflationary times you are at risk, because though you might get the promised payment, but by the time you get it, it has lost a lot of its value and basically all of its value during hyperinflation.

This is all I have time for now, however it is enough to help me confirm that gold and silver is the best option when it comes to storing my wealth.

http://www.gold-eagle.com/editorials_08/moolman030909.html

Friday, February 27, 2009

Nothing Shines Like Gold

The S&P 500 is making new bear market lows today. The Dow Jones Industrials did that last week. There's only one risky investment doing well: gold.

A week ago gold traded above $1,000 per ounce, coming within spitting distance of the all-time highs made last March. It's pulled back now to about $940. But still — what other investment other than riskless government bonds can you point to that's so near all-time highs?

Amazingly, just a month ago, gold and the S&P 500 were trading at about the same price — gold at $854, the S&P 500 at 840. From there, stocks have fallen 10% to near their bear-market lows of last November, while gold has risen as much as 16%. That's a divergence of more than 25%, in just a single month.

Readers of this column know that I've been touting gold for quite a while. I think the bull case for gold still holds, and I would be a buyer of any pullback. I think it's highly likely that gold will be at new all-time highs within the next several months.

If that happens, it will be great for my portfolio. But you have to be careful what you wish for. The force driving gold is the prospect of inflation. So if gold breaks new all-time highs, the bad news is that it will be a scary signal of inflation to come.

It's a mistake to think of gold as a barometer of global wealth. Sure, when people get rich they like to buy more gold jewelry. But global wealth is collapsing now, and yet gold is near all-time highs. So there must be another explanation.

It's also a mistake to think of gold as a panic asset — something that people hoard because they think the world is going to come to an end, and gold will be the only thing left of any value at all. In the all-out financial panic that started last September and climaxed at the stock market bottom in November, the price of gold collapsed, too. It fell almost as much as stocks. The real panic asset is cash, not gold. When things get scary enough, people will sell their gold to get it. So now with stocks back to the same levels as last November's lows, there must be another explanation for why gold is near all-time highs.

As Sherlock Holmes said, when you rule out the impossible, whatever's left — however improbable — must be the solution. Thus: inflation.

I admit that seems improbable. Yet it is the answer.

I say it seems improbable because all the other evidence all around us is pointing to deflation, not inflation. That is, falling prices, not rising prices.

The simplest evidence of that is the Consumer Price Index. It's been showing deflation more intense than that experienced in the middle of the Great Depression. You have to go all the way back to 1921, the great deflation that followed the end of World War I, to find the equivalent.

Yet still, gold is signaling inflation. I think the reason why is that the gold market understands that Federal Reserve Chairman Ben Bernanke will do everything he can to keep deflation from worsening or persisting. Bernanke knows that in times like ours, when households and institutions are struggling with dangerous debt burdens, deflation is the worst thing that could possibly happen.

The reason why was first explained in a 1933 paper by the famed economist Irving Fisher, in an attempt to understand why the Depression was so severe. Fisher noted that when investors hold assets financed by debt — whether its banks holding toxic securities, or individuals holding expensive homes — deflation destroys in two ways at the same time. First, in a deflation the prices of assets fall — so the value of your portfolio, or of your home, collapses. At the same time, your debt burden gets worse, because you are committed to make loan payments in dollars which are becoming increasingly valuable in deflation-adjusted terms.

Bernanke is a student of the Depression, and knows Fisher's work well. So he'll do anything — including causing a lot of inflation — to prevent deflation. And that's exactly what he's doing. Never before in history has the Federal Reserve printed so much money so fast.

It's not showing up in inflation indexes like the CPI, because banks and households are so terrified right now they're just hoarding all that money the Fed is printing. But at some point, the fear will ebb, or just stop getting worse. And all of a sudden everyone is going to decide to do something with all that money — like spend it. And then we're going to see extremely bad inflation.

But if the alternative is deflation, then extremely bad inflation is actually extremely good inflation.

But it's still inflation. Which is why gold is testing the $1,000 level again, and why I think it's highly likely to punch through it.

When gold does that, and the threat of deflation is replaced by the reality of inflation, then the economy and the stock market should stabilize. So if you agree with me that gold is destined for new highs, that ought to at least make you a cautious optimist on stocks at this point, even as stocks make new lows.

But don't get carried away. Inflation is only good because the alternative — deflation — is unspeakably worse. Inflation is still bad. And if financial history teaches us anything, it's that stocks do poorly in general during periods of inflation — such as the 1970s — and well during periods of stable prices, such as the 1990s.

Then when you add to all that the reality that the new president is trying to take America back to the 1970s in other ways — more regulation, bigger government, higher taxes and all the rest — it's not exactly a formula for excellent long-term equity performance.

I think it's time to set aside all the religiosity about “stocks for the long run,” because right now the long run doesn't look so great. Maybe now's the time for “stocks for the short run.” And gold.

http://www.smartmoney.com/Investing/Economy/Nothing-Shines-Like-Gold/

Wednesday, February 25, 2009

Gold prices lose further ground as stocks rally

Gold fell for the second day in a row Tuesday as investors flooded back into the stock market, roused by Federal Reserve Chairman Ben Bernanke's remarks that the recession could end this year and that regulators aren't planning to nationalize banks.

Other commodities, including energy and agriculture futures, rallied along with Wall Street.

Most commodities, with the exception of gold, have taken a beating this year due to investors' unrelenting concerns about the eroding economy. Prices for raw materials including corn, wheat and copper have moved largely in tandem with the stock market.

On Tuesday, stocks rebounded after days of heavy selling that left the major indexes down near 12-year lows. The Dow Jones industrial average ended up 236.16 or 3.32 percent at 7,350.94.

Bernanke, in remarks to Congress, predicted the economy is likely to keep contracting in the first six months of 2009, but that "there is a reasonable prospect" the recession will end this year.

As bargain-hunting traders moved back into equities, gold prices suffered. Investors often use gold as a safety net in times of market turmoil.

Going in to Tuesday's session, gold prices were up 12.5 percent for the year, and had logged a 5.6 percent increase in just five sessions. Prices are still up about 10 percent in 2009.

Gold for April delivery fell $25.50 to settle at $969.50 an ounce on the New York Mercantile Exchange.

Other metals were mixed. March silver dropped 45.5 cents to $13.9950 an ounce, while May copper futures rose 4.9 cents to $1.50 a pound.

The dollar was mixed against other major currencies. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.80 percent from 2.76 percent late Monday.

Energy prices benefited from the gains in the stock market. Light, sweet crude for April delivery rose $1.52 to close at $39.96 a barrel.

Gasoline futures rose 3.26 cents to $1.076 a gallon, while heating oil rose 3.35 cents to $1.2089 a gallon.

Grain prices moved higher on the Chicago Board of Trade.

May wheat futures gained 4.75 cents to $5.2625 a bushel, while corn for May delivery rose 2.25 cents to $3.63 a bushel.

May soybeans added 7.5 cents to $8.8350 a bushel.

http://www.iht.com/articles/ap/2009/02/24/business/NA-US-Commodities-Review.php

Wednesday, February 11, 2009

Silver and Gold will make you more attractive

02/11/09 Tampa Bay, Florida SilverForecaster.com announces that “silver has done well” recently, as far as its price is concerned, which is almost certainly explained by the old demand-versus-supply market-clearing pricing mechanism, which means that since the price went up, then demand must be up, too, and more than supply is up; or it means that supply is down more than demand is down; or it means something else entirely, maybe, since I have seemingly confused myself.

But since the recent moves in price are not that spectacular, my attention wavered and I casually looked around the press room, and I noticed that there was a pretty new reporter who was young and cute, which is such a depressingly stark contrast with my being, you know, old and ugly.

I sighed and began to daydream when I suddenly realized the cosmic universality that demand and supply applied even to pretty girls! We testosterone-besotted males of the species ensure a constant high demand for them, yet with a low supply of the little cuties, the price is high! Hahaha!

And, to balance things out, I realized that pretty young girls constantly demonstrate that there is no demand for creepy old men, but yet since we exist in such huge supply, we have zero value, or perhaps even negative value, considering the phrase, “I would rather eat poison and die a horrible painful death rather than even feel your bad breath touching my skin, or even acknowledge your foul existence, Old Mogambo Creep (OMC)!”

But, as with silver and pretty girls, it is this selfsame mechanism of balancing supply with demand that determines the prices of everything else in the Whole Freaking Universe (WFU), so why not this, too?

So, I was about to interrupt to lecture GoldForecaster.com about my little revelation, perhaps to garner a little of the attention that I so desperately crave, when I realized that they had anticipated my observation that silver going up in price meant that demand is greater than supply when they verified it by saying, “Investment demand for silver leapt a huge 309 tonnes last week, a tonnage we have never seen before in such a short time!”

I notice the phrase “never before!” which includes an exclamation point to indicate special emphasis, as seems befitting of “never before”, not only because of this sudden huge demand for silver, but the cute little reporter had just coincidentally used that very phrase when she said to me, “Begone, Mogambo! Never before have I felt such revulsion! I feel soiled and sickened just from being in the same room with you!” which, alas, also contains an exclamation point.

Mr. Phillips and Mr. Spina both pretend that they did not hear me get insulted, and go on to suggest that despite being completely humiliated by this conceited girl, if I buy silver now, I will soon be rich as hell and I will have beautiful ladies hanging all over me all the time, every one of them so beautiful that they will make this little bit of fluff look like a pig, as they conclude from the data that “heavy investment demand is flowing into silver [and gold] in quantities sufficient to ensure this trend is long-term.”

And I agree with them, as inflation in prices is going to be roaring soon, and for the long-term, as the laughable Obama administration is firmly united in announcing grand plans for years and years of huge amounts of new spending and huge amounts of new debt that is supposed to save us (pardon me for laughing right in your face “hahahaha!”) from the collapse caused by the preceding “too much new debt, too much new money and too much new spending” over the last few decades that produced the inflationary booms in the prices of stocks, bonds, houses and size of government that are now going, predictably, bust and causing all the headaches

That is why it is so alarming that Total Fed Credit last week actually went down by a gigantic $149.1 billion in ONE FREAKING WEEK (OFW), instead of increasing in the same OFW, which it must do if all of this deficit-spending is going to be accomplished!

And as if this $149 billion in OFW was not enough to make your heart start fibrillating and make you start puking your bloody guts out in fear, this is, I remind you, Total Fed Credit, which is that magical, out-of-thin-air money that appears, thanks to the Fed arbitrarily creating it in the accounts of the banks, ready for lending to somebody at huge multiples of the amount of additional credit originally deposited in the banks.

In short, we’re talking HUGE amounts of money! HUGE! Huger than huge! FREAKING HUGE!

And what makes it all the scarier is that this TFC is, even with this $149.1 billion drawdown, still totals a hefty $1.84 trillion, which is DOUBLE what it was last year, which demonstrates a huge, huge, HUGE increase in the monetary base, which is now at $1.7 trillion, which is ALSO double what it was last year! Yikes! We’re freaking doomed!

If you buy gold, silver and oil, then you will not personally be doomed, understand, but everyone else soon will be. Bummer for them, huh?

http://www.dailyreckoning.com/silver-and-gold-will-make-you-more-attractive/

McEwen, Goldcorp Founder, Bets Crisis Will Drive Gold to $5,000

Goldcorp Inc. founder Rob McEwen, who has more than $100 million in gold investments, said he expects the metal to top $5,000 an ounce as governments increase the money supply to combat recession.

Bullion will more than double to $2,000 an ounce by the end of next year before rising to McEwen’s target by the end of the cycle, which could take an additional four years, the investor said.

“Politicians around the world are listening to cries from their electorates and they’re giving money to all callers,” McEwen said yesterday in a telephone interview from Toronto.

McEwen, who founded what is now the world’s second-largest gold producer by market value, owns stakes in three Canadian precious-metal explorers worth more than $100 million. He said he also has a “big, big” holding in bullion. Gold gained for the eighth straight year in 2008 amid investor concern the economy would collapse and government efforts to prevent that would increase inflation.

Gold futures for April delivery rose $29.10, or 3.2 percent, to $943.30 an ounce at 11:51 a.m. on the Comex division of the New York Mercantile Exchange, the highest for a most-active contract since July 23. The metal climbed to a record $1,033.90 on March 17.

McEwen said he started buying bullion in August 2007, at the beginning of the subprime mortgage crisis. Gold has jumped 40 percent since Aug. 1 of that year, touching a high of $948.20 today, while the Standard & Poor’s 500 Index has dropped 43 percent.

“I realized we had reached an inflection point regarding money,” McEwen said. “It was all about protecting money, and gold served that purpose.”

McEwen is the largest shareholder in Lakewood, Colorado- based U.S. Gold Corp., Vancouver-based Rubicon Minerals Corp. and Spokane, Washington-based Minera Andes Inc. Vancouver-based Goldcorp is the world largest gold producer by market value after Toronto-based Barrick Gold Corp.

http://www.bloomberg.com/apps/news?pid=20601082&sid=adHg7t8BL5Bg&refer=canada

Tuesday, February 3, 2009

Gold drops 2 percent but financial fears buoy sentiment

Mon Feb 2, 2009

Gold dropped more than 2 percent on Monday, holding just above $900 an ounce as short-term investors took profits on signs of weak jewelry demand and selling related to technical resistance.

Analysts, however, say prices will be underpinned by investors looking for a safe place to park their assets, away from the turbulence in equity markets.

"Gold is currently working as a 'fear indicator', signaling risk aversion of market participants," said Eugen Weinberg, commodities analyst at Commerzbank.

"Strong investment demand should help gold prices to stay around $900 in coming days ... Over the last few weeks the gold price has increased despite a significantly stronger dollar and news about a massive fall in Indian gold imports."

Spot gold traded $904.10 an ounce at 2:17 p.m. EST, down 2.4 percent from the last trade $927.00 on Friday in New York.

U.S. gold futures for April delivery settled down $21.20, or 2.3 percent, at $907.20 an ounce on the COMEX division of the New York Mercantile Exchange.

Traders said profit taking after gold's recent run higher was behind lower prices on Monday.

India's gold imports plunged more than 90 percent to just 1.2 tonnes in January from 18 tonnes in the same month last year.

India is the world's largest gold consumer and its jewelry sector accounts for almost 70 percent of global bullion demand.

A stronger U.S. currency would normally weigh on gold as it makes the precious metal, priced in dollars, more expensive for holders of other currencies.

SCALE OF INTEREST

But over the last few days both the dollar and gold have moved in the same direction. Data showing falling consumer spending and income in the United States did little to dampen investor interest in the dollar.

"People are looking at the longer-term prospect. Everything is in trouble now, and who knows what's going to happen to the dollar in the longer run. So, gold is perceived to be safer," said one precious metals broker in New York.

The scale of investor interest can be seen in the world's largest gold-backed exchange-traded fund (ETF), the SPDR Gold Trust, which as of January 29 held a record 843.59 tonnes of gold, up 10.71 tonnes from January 27.

Whether gold can reach its record high of $1,030.80 an ounce, hit last March, is still under debate and opinions, as seen in a recent Reuters survey, are varied.

The survey of more than 50 precious metals analysts showed a range of between $650 and $1,150 an ounce for this year.

For platinum, the range for this year is $750 to $1200. The metal, used in autocatalysts to help clean car emissions, is down nearly 60 percent since a record high of $2,290 an ounce March.

Recession and slumping car sales around the world and expectations of worse to come for the auto sector will keep prices low, analysts say.

Spot platinum traded at $968.50 an ounce, down 1.7 percent from its last finish of $985.

Silver was at $12.38 an ounce, down 2 percent from its previous close of $12.63, and palladium was at $195.00 an ounce, up 2.1 percent from its previous close $191 on Friday.

http://uk.reuters.com/article/hotStocksNewsUS/idUKTRE5115EL20090202

Monday, February 2, 2009

Gold ready to rumble

Today we've got falling prices. Many pundits are saying that today's falling prices are caused by deflation. Well whatever they're caused by it's hard to argue against gold being clearly the winning investment. With the price of gold hovering around $900 it's definitely living up to its oft proven history of preserving purchasing power.

Gold's rise in purchasing power compared to the price drop in other commodities is lowering the cost of energy and other capital and material costs for gold producers. Pretty sweet to be a producer with rising product prices because of investor demand, tightening supply and dropping production costs!

And our gold producers are quickly becoming market darlings. This is happening right now because dropping prices makes mining, milling and G&A costs a lot cheaper. It directly effects their bottom line making them suddenly attractive to main stream investors whose normal stocks are a whole lot less attractive.

But what if we're not seeing deflation, a decrease in the money supply, but a temporary slowdown in the velocity of money? "The velocity of money is the average frequency with which a unit of money is spent in a specific period of time." Wikipedia

In other words prices are falling because demand has dried up, not from a decrease in the money supply. People get some money and they're holding onto it. Plus by far the largest percentage of the bailout money is still locked in bank coffers. Sooner or later, in my opinion much sooner than later, people will start spending and banks lending, money will flow. I believe the plan to get the worlds economy back on track by massive monetary stimulation will work, as a matter of fact I believe it'll work so well we're heading, over the next few years, to a massive hyperinflationary blow-off, Weimar Germany style.

Consider the following:

* The US is going to issue untold trillions to pay for the bailout programs. As of now this money is sitting in bank coffers unused and providing the banks no return. Since banks are in the habit of making money by lending money this money won't be gathering dust for long. And with the multiplier effect will become many times over what they now have on their ledgers.
* Medicaid and Medicare have no money in their respective accounts.
* Social Security is broke and the first baby boomers are starting to retire at the same time the workforce is shrinking. And increasing the number of government workers doesn't count towards filling the gap necessary to fully fund retirements as government workers are paid by taxing existing workers or creating money to pay them.
* World wide infrastructure building and improvement plans costing trillions of dollars. This will be paid for in large part by the spending of US $'s held in Foreign Reserve accounts. That means a lot of dollars are going to be coming home to roost. The United States will pay for its programs and multi trillion dollar deficits for years to come by printing money.
* Existing wars, future planned and unplanned wars, escalation of wars. War on drugs, war on terror, resource wars etc etc etc.
* And lets not forget one of President Obama's first acts was pissing off the Chinese by calling them currency manipulators. Are they going to continue supporting US spending by continuing to purchase their debt? If they stop then the US has to monetize its debt, buy it themselves, which is the most inflationary thing a country can do.
* Tax cuts.

What happens to our gold investments, the ones that are looking pretty good right now, when "deflation" turns to inflation? And since the broad money supply is growing at a rate of +13% a year and the monetary base has gone pretty much parabolic, doubling in a year, which is to say the dollar you held last year has had its value effectively cut in half today. I think it's a safe conclusion we're headed for a price reversal sooner rather than later. Does gold serve us as well in an inflationary environment as it's serving now?

Gold shines brightest in inflationary times. The ongoing deflationary scare is a buying opportunity for gold and gold company shares. The real threat facing us today is the coming massive rise in prices right across the board caused by the ongoing world wide increase in the monetary base. I'm not sure how long it will take for all the money creation to work its way through the pipeline but its coming and with trillion dollar deficits being promised for years to come once it starts it isn't going to stop anytime soon. When investors wake up to this fact we'll see a flood of money into all things gold.

That deluge of money will start hitting the major gold producers and ETF's first then trickling down to the mid tiers then into brownfield juniors well along the track to developing a deposit, those with 43-101's and then into raw greenfield exploration companies.

With world wide gold production down so drastically and the dramatic disruption of the junior markets last year, and continuing still, supply and demand is going to be completely out of whack. There will be fierce competition for stable safe ozs in the ground by producers having to replace their reserves in an extremely competitive environment.

Today many of our larger gold companies are taking advantage of our present "deflationary" conditions and their strong share prices by selling stock and cashing up their treasuries so they can begin buying up the smaller companies and their deposits. There aren't very many decent sized deposits, ones over two million ozs, left in politically stable countries.

Now I'm not a licensed financial planner, a broker, an analyst, a geologist nor an economist. I'm just an investor who likes junior exploration companies looking for precious metals. And I like them, my juniors, to be in the post discovery resource definition stage. I think gold juniors, without a base metal component to their prospective deposit, are going to be the most rewarding, the most lucrative way to garner the huge rewards from the coming freight train rush to gold. Those golden tracks are being laid today using the world's currencies as ballast. It truly is going to be a time of generational wealth creation for many.

The most profitable, rewarding way to get involved is to own gold shares. And the best gold shares to own will be the shares of companies owning deposits gold producers want to buy. I mentioned "post discovery resource definition stage." These companies have already found something and are working to see exactly what they have. A lot of the risk, and a lot of waiting time for the company to actually make a discovery worth looking at has been removed for us, the investor.

With good drill results and the junior successfully moving the project along the development path towards a mine hopefully a majors interest will be sparked. If this all happens according to plan your payback as an investor during this stage can be a many fold return of invested capital.

Let's step back for a moment and consider what happens if I'm wrong about falling prices and are they here to stay. Well that's the beauty of gold. It works well in either situation, better in inflation but still very good in a falling price regime as its doing today. Add in geo-political tensions, falling supply and it seems like a perfect storm is developing for gold. Whichever way the wind blows from this point in history gold and its related investments should do well.

At Ahead of the Herd we believe there is opportunity in times of crisis, that the set of circumstances we find ourselves in are better than they have ever been for astute and courageous investors. Are you going to be part of the group that plans to take advantage of the tremendous opportunity being presented for extraordinary gains?

http://www.midasletter.com/commentary/09012901_Gold-ready-to-rumble.php

Thursday, January 22, 2009

Gold ends higher as investors seek a safe haven

Gold futures ended higher Thursday, as investors sought a safe haven amid grim economic data and falling U.S. equities. Gold for February delivery rose $8.70 to end at $858.80 an ounce on the New York Mercantile Exchange. Earlier, the contract had fallen to an intraday low of $844.40.

http://www.marketwatch.com/news/story/gold-ends-higher-investors-seek/story.aspx?guid=%7B07F7C29F-F195-4F7A-8B6E-C1A294300E8B%7D&dist=msr_5

Sunday, January 11, 2009

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