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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/01/2006 : 21:23:06
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The following post, if true, just goes to show you that ALL governments play games to get what they want. Just like in the book "The Man Called Intrepid" there are a lot of dirty deeds going on government wise that nobody ever knows about.
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Gold: Historic spike ahead?
by Brian Durrant
March 22, 2006
It is common knowledge that the British government sold more than half of the nation's gold reserves at the bottom of the market in mid-1999. It's less well-known why.
The Treasury sold 395 tonnes of gold from July 1999 to March 2002 at an average price of $275 per oz. The sale raised $3.5bn.
Why? The Treasury claimed that gold was expensive to store and keep secure. It was also inconvenient to trade if transactions involved a change of storage location. But in other words gold was too traditional and old-fashioned, an anachronism for New Labour.
Now gold is twice the price at which the government sold it. The cost to the taxpayer of this policy to "modernise our reserves" equals some £2 billion. You may recall that the Conservative Party irretrievably lost its reputation for economic competence in September 1992 when it spent £800m trying to keep the pound in the ERM. But alas, the media, the electorate and the opposition now take a kinder view of wasting taxpayers' money.
According to Tony Blair's comment to the House of Commons, the gold sale "was carried through perfectly sensibly and we actually got the best deal for the country". We know the second part of his statement was rubbish. But were the gold sales carried out sensibly?
Psst! Sell gold now...
On 7 May 1999 the government announced in advance that it would sell 415 tonnes of gold. This public announcement seemed to ensure that the UK would achieve the lowest possible price rather than the highest. The first auction of 25 tonnes in July was $26 per oz lower than the price at the time of the announcement!
In selling our gold the government was a great believer in overt sales. In other words, showing its hand to the market. The Treasury reckoned that predictability and transparency would increase revenue by increasing participation in the sale. The government bent over backwards to be "fair" to buyers of gold, wanting to maximise sales rather than striving to get the best price. The issue of "fairness" for the taxpayer took a back seat.
So is that the end of the story, just another example of government incompetence? Or was there a hidden agenda? There is an extremely controversial piece of research that, if true, suggests the British government is more knave than fool.
A recent report from metals and mining analysts at Cheuvreux -- part of France's largest bank, Credit Agricole -- says that the sale was in fact designed to keep the gold price down. The British Government's actions of mid-1999 are cited as clear evidence of a global conspiracy to rig the gold market.
Easy money... until gold took off
The conspiracy theory begins in the 1980s. Central banks began to lend or deposit part of their gold holdings with leading bullion banks like JP Morgan Chase, Goldman Sachs and Citibank. In return the central banks earned a fee known as the gold lease rate.
At the time this seemed a sensible use of gold. Otherwise it earned no income for the central banks. But the bullion banks who borrowed it then sold this gold into the physical market. There it was most likely turned into jewellery, and was lost from the global bullion market forever.
The bullion bank used the proceeds of these gold sales to buy a higher yielding asset like bonds. This was a classic "carry trade". Borrow at a low gold lease rate, lend at a higher government bond rate. Money for old rope, in fact... provided the gold you borrowed in the first place didn't rise in price.
Not surprisingly this transaction was very popular in the 1990s. The gold price was flat on its back. In fact, Cheuvreux reckon central banks loaned out between 10,000 and 15,000 tonnes more from their gold reserves than they've declared!
And you can see the problem. Sooner or later the bullion bank will be obliged to deliver the borrowed gold back to the central bank. It has to buy it in the physical market, incurring substantial losses at today's 25-year highs, and also squeezing the gold price higher still -- thus making the situation worse for other bullion banks that are also short of gold. The risk of a serious global 'crunch' becomes very real.
Huge short covering ahead
Was the Bank of England aware of the risks posed by a rising gold price? Cheuvreux's research cites a lawsuit filed in December 2001 by Reginald Howe, a member of the Gold Anti-Trust Action Committee (GATA), a group hitherto seen as on the lunatic fringe of the "goldbug" community, but now supported in its claims by the French bank's report.
Mr Howe charged the Bank of International Settlements, Alan Greenspan, the leading investment banks and many others with rigging the gold market -- which is illegal under US law. In his suit, he alleged that in 1999 the then Governor of the Bank of England, Sir Edward George, made the following comment to the Chief Executive of Lonmin, the gold mining company:
"We looked into the abyss if the gold price rose further. A further rise would have taken one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price and at any cost, the central banks had to quell the gold price, manage it. It was difficult to get the gold price under control but we have now succeeded."
What might Steady Eddie have been referring to? The UK government's announcement that it would sell half the nation's gold reserves came just eight months after the notorious bail out of Long Term Capital Management (LTCM) in September 1998. That collapse had indeed threatened the global banking system. Cheuvreux now claims there were strong rumours that LTCM, a hedge fund, was short of 300 tonnes of gold when the company crashed. This short position is thought to have been assumed by those banks involved in the bailout operation.
In other words, the new revelations from Cheuvreux add weight to the circomestantial evidence surrounding a global conspiracy to suppress the gold price. But history tells us that governments cannot rig prices forever. At some point, the free market will out.
The US could not hold the gold price down at $35/oz in 1971. The Tin Council failed to hold up the price of tin in 1985. And the British government, thankfully, couldn't stop the pound falling out of the ERM in September 1992.
Why gold shot higher last year
The scale of official gold reserves that have been lent on to bullion banks mean there is a huge 'short' position which needs to be covered by gold purchases in the physical market. Indeed, this short covering seems to be underway.
From mid-2004 to mid-2005, the central banks' official short position in the market fell by 2,430 tonnes. During the same period some 232 tonnes of new mined gold was delivered back to the central banks. So there was short covering of gold of some 2,198 tonnes. This figure dwarfs official central bank sales, which would have been 500 tonnes at most. No wonder the gold price shot up during this period!
And according to Cheuvreux there is much more short covering to come. Its conservative estimate of the central banks' total short position is 10,000 tonnes. Only a fraction of this will be met by new production. The rest will be made up of either physical purchases of gold or the bullion banks' cash settling. In either event, the central banks must give up any hope of getting their gold back.
Or so the story goes. What do other members of the gold market think of Cheuvreux's claim? There has been no official statement rejecting the thesis. But the word in the City is that no one in the gold market believes it. It's a crackpot piece of research playing into the hands of the conspiracy theorists.
Indeed, a spokesman at the World Gold Council believes the research has zero credibility. But what's for sure, is that the Cheuvreux story is not remotely priced into the value of gold today.
In other words, Cheuvreux's thesis may indeed be proved as nonsense. But the gold price will not flinch if this is the case. And you can conclude, as we did in 1999, that the British government was simply incompetent in disposing of half the nation's gold.
On the other hand, however, Cheuvreux's claims -- if correct -- mean that Britain sold gold to shore up the global financial system. The verdict of government incompetence would be changed to one of duplicity.
There are plenty of other reasons to hold gold -- as a hedge against inflation, an alternative asset to paper currencies, and as a safe haven in times of heightened geopolitical tension. But in holding gold you are also paying nothing for the option that Cheuvreux's controversial thesis might be true! If you haven't bought gold already, we advise you take a position in the physical market, buying gold coins that trade for a small premium to the spot price.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/01/2006 : 21:46:55
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Some good advice, just take with a grain of salt.
There is no rule or law that staes you must follow these instructions to the letter. Treat this as a road map, useful, but be prepared for any detours along the way.
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Ten Rules For Investing In Gold
by John Hathaway, CFA
"Gold is a controversial, anti-establishment investment. Therefore, do not rely on conventional financial media and brokerage house commentary. In this area, such commentary is even more misleading and ill informed than usual."
[No one whose writings have graced these pages at the Gilded Opinion has earned greater respect among our readers than has John Hathaway. Nor, for that matter, has anyone done a better job of articulating the often misunderstood, yet compelling case for owning gold. On top of a B.A. degree from Harvard College and an M.B.A. from the University of Virginia, John has 29 years of experience in the investment business. For the past four years, he has practiced his considerable talents at Tocqueville Asset Management where he is a senior partner and Director of Operations. -- Editor, The Gilded Opinion]
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Ten Rules For Investing In Gold
1. An investment in gold should be based on macroeconomic considerations. If one expects or fears rising inflation, destabilizing deflation, a bear market in stocks or bonds, or financial turmoil, gold should do well and exposure is warranted.
2. Understanding the internal dynamics of the gold market can be helpful as to investment timing issues. For example, the weekly position reports of commodity trading funds or sentiment indicators offer useful clues as to entry or exit points for active trading strategies. Reports on physical demand for jewelry, industrial, and other uses compiled by various sources also provide some perspective. However, none of these considerations, non monetary in nature, yield any insight as to the broad market trend. The same can be said for reports of central bank selling and lending activity. Central banks are bureaucratic institutions and in their judgements they are essentially market trend followers.
3. Excessive reliance on trading strategies to generate returns can be dangerous and counterproductive. Returns from a "buy and hold" strategy should be more than sufficient to compensate for the inherent volatility. Many who have tried to outsmart this market by hyperactive trading have under performed. Success is dependent in large part on the occurrence of "fat tail" events that lie outside the parameters of trading models.
4. A reasonable allocation in a conservative, diversified portfolio is 0 to 3% during a gold bear market and 5% to10% during a bull market.
5. Equities of gold mining companies offer greater leverage than direct ownership of the metal itself. Gold equities tend to appear expensive in comparison to those of conventional companies because they contain an imbedded option component for a possible rise in the gold price. The share price sensitivity to a hypothetical rise in metal price is related to the cash flow from current production as well as the valuation impact on proven and probable reserves.
6. The carnage of the last twenty years has simplified the task of individual stock selection because so few have survived the gold bear market. Although a rising tide may lift most boats, financial statements should be reviewed with special attention to hedging arrangements that could undermine participation in higher gold prices or even jeopardize financial stability. Individual stock selection is less important than identification of the primary trend.
7. Even though gold itself is a conservative investment, "gold fever" attracts a crowd of speculators, promoters, and charlatans who only want to separate investors from their money. Avoid offbeat "exploration" companies with little or no current production and gargantuan appetites for new money.
8. Bullion or coins are a more conservative way to invest in gold than through the equities. In addition, there is greater liquidity for large pools of capital. Investing in the physical metal requires scrutinizing the custodial arrangements and the creditworthiness of the financial institution. Do not mistake the promise of a financial institution to settle based on the gold price, for example, a "gold certificate" or a "structured note", (i.e. derivative), for the actual physical possession of the metal. Insist on possession in a segregated vault, subject to unscheduled audits, and inaccessible to the trading arrangements or financial interest of the financial institution.
9. Gold is a controversial, anti establishment investment. Therefore, do not rely on conventional financial media and brokerage house commentary. In this area, such commentary is even more misleading and ill informed than usual.
10. Don't settle for too little. Should outlier events now deemed unimaginable by consensus thinking actually occur, the price target for gold would be several multiples of its current depressed price. Gold represents insurance against some sort of financial catastrophe. The magnitude of the upside is a function of the amount of paper assets that would be converted to gold irrespective of price.
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deleted
479 Posts |
Posted - 12/02/2006 : 14:13:29
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First, Pencilman, I must say, that you do a lot of the leg work on this site, and I for one appreciate it.
Sure, I could find the same information IF I had the time.
Second, Rumour has it that the Gold isn't in Fort Knox anymore.
The rumour is on the DVD video "Money Masters" which you may have seen already. If you have not seen it, you should!
The rumour is that the FED lent money to the Treasury and the Treasury put up the Fort Knox gold as collateral.
Qwietly, indeed secretly, the Gold was trickled out of Fort Knox to some mysterious "undisclosed location"
My assumtion is that the gold is in Europe or Bermuda or something and NOT in Fort Knox.
Until the FK gold is audited, rumours are as good as truth.
A billiard ball dropped from 1,362 feet (height of the South Tower) in a
vacuum would require 9.22 seconds to hit the ground. How then did the
towers collapse in 10 seconds and 11.4 seconds, and why has not one
member of the mainstream media insisted on honest answers from the
government in this regard?
"The individual is handicapped by coming face to face with a conspiracy
so monstrous [that] he cannot believe it exists."
- J. Edgar Hoover |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/02/2006 : 14:45:08
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My thanks for the encouragement Atheist, always glad to pass on useful information.
Remember the slogan,
trust the rumor
not the government.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/02/2006 : 15:07:34
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This bit is something I found at the bottom of this link.
I cannot verify its accuracy, but I guess you could call it a possible half-truth.
It seems legitimate in its calculations...
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*** What’s ahead for the dollar?
Can’t all prices be figured as a product of supply and demand?
The feds stopped reporting the growth in M3, the principal measure of the U.S. money supply, earlier this year.
But Adrian Van Eck, who keeps track of these things, estimates that the world’s supply of dollars has increased by $3 trillion over the last three years.
That is an astounding figure.
But dollars have become such an abstraction.
..such whiffs of smoke...we don’t know what it means.
Let’s compare the figure to the world’s supply of gold.
Gold stocks grow at about 1.7% annually.
If the base of 155,000 tonnes above ground - the figure provided by the World Gold Council - is correct,
that means we only have to do a little math to know where we are headed.
Let’s see..
.there are 28.35 grams to the ounce..
.and 1,000 grams to a kilogram...
and 1,000 kilograms to a metric tonne.
If we’re doing the figures right, we end up with an above-ground supply of more than 5 billion ounces..
.which, multiplied by 1.7% over three years..
.gives us an addition to the world’s gold supply of about 25 million ounces over the last three years.
In other words,
for every ounce of gold added to the world supply over the last three years,
the United States has added $120,000..........(In fiat money)
But wait, we are talking about the world’s total supply of new gold.
So, in addition to the new supply of dollars, we have to include the increases in the rest of the world’s money supplies.
We won’t even try. Instead, we will guess that, altogether, the foreigners added about the same amount of new currency –
about $3 trillion worth.
Which gives us a total of about $240,000 for every ounce of gold added to the world supply.
What does this mean?
We don’t know, exactly.
But our guess is that the incremental dollar could be worth less than people think...
and the incremental ounce of gold a bit more.
After reading this, even if it isn't based on any analysis to independently verify, it sure does encourage the buying of more gold and silver.
Personally, I would like to see gold and silver prices rise slowly, at least for a few more months, for the following reasons:
1. It gives us all more time to acquire more precious metals at a good price.
2. If prices rise too fast too soon, it might cause the prices to crash as too many greedy speculators dump their positions.
3. Its fun to listen to the so called wizards on Wall Street talk down the metals while their “safe” stock picks go nowhere but down.
4. I have a CD coming due in January and I am reluctant to cash it in too soon. It is the only one I have left since I started moving more into the metals. I doubt the S will HTF before then.
I had heard from a coin dealer that in 2007 the capital gains tax for long term gains will be 5% and in 2008 it will be 0% I don’t know if that is true or not, but it will make for some interesting times in the years ahead.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/03/2006 : 19:32:41
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Gold May Rise for Third Week as Dollar Slide Spurs Metal Demand
By Choy Leng Yeong
Dec. 4 (Bloomberg) -- Gold may rise for a third straight week on speculation a slowing U.S. economy will erode the value of the dollar, increasing the appeal of the precious metal as an alternative investment.
Eighty-three percent of the 30 traders, investors and analysts surveyed by Bloomberg News from Sydney to Chicago on Nov. 30 and Dec. 1 advised buying gold, which rose 2.4 percent last week to $650.60 an ounce in New York. The percentage predicting a gain was the highest since the survey began in April 2004. Three respondents said to sell. Two were neutral.
Gold rallied 7.6 percent in November, the most since April, as the dollar slumped to a 20-month low against the euro. The U.S. this week probably will report the biggest drop in factory orders since July 2000, renewing speculation the Federal Reserve may trim borrowing costs next year to boost the economy. The prospect of an interest-rate cut has sent the dollar lower.
``People are seeking the safety of tangible assets of all sorts,'' said James Turk, founder of GoldMoney.com, which stores precious metals for investors. ``Gold and silver will continue to be driven higher by this money seeking a safe haven from a depreciating dollar.''
GoldMoney.com, based in Jersey, British Channel Islands, has doubled the amount of gold and silver in storage on behalf of its clients to more than $180 million, up from $78 million on Dec. 31, Turk said.
Extending Rally
Gold futures on the Comex division of the New York Mercantile Exchange have climbed 25 percent this year and are headed for a sixth straight annual gain. Prices reached a three- month high of $655.50 on Dec. 1, capping a weekly gain that was predicted by a majority of analysts surveyed on Nov. 22 and Nov. 23. The Bloomberg survey has forecast prices accurately in 83 of 136 weeks, or 61 percent of the time.
Silver prices on Comex have jumped 60 percent this year.
The appeal of precious meals has been bolstered by signs of a slowing U.S. economy. Factory orders probably fell 4 percent in October, according to the median forecast of 34 economists in a separate Bloomberg survey. Orders rose 2.1 percent in September. The Commerce Department is scheduled to release the report tomorrow.
Manufacturing unexpectedly shrank last month for the first time in more than three years, Institute for Supply Management data showed last week.
Weakening Economy
``The economy is weakening substantially,'' said Paul Yusem, an investor in Lombard, Illinois, who has traded gold futures for six years. ``The dollar is in real trouble,'' said Yusem, who predicted gold may reach $680.
Construction spending in October fell by the most in five years, led by a plunge in home building, the U.S. said last week. Fed Chairman Ben S. Bernanke said residential construction is likely to be a drag on economic growth into next year.
The Fed has maintained its interest rate for overnight loans between banks at 5.25 percent since August, after raising borrowing costs 17 times since June 2004 to curb inflation. Interest-rate futures indicate traders are unanimous in predicting a quarter percentage-point cut by March.
The European Central Bank will raise rates for the sixth time in a year to 3.5 percent on Dec. 7, according to the median estimate of economists in a Bloomberg survey. That would be the sixth increase in a year.
Gold also may get a boost on speculation that higher crude- oil prices will increase the appeal of the metal as a hedge against inflation. Oil may extend a rally to a two-month high on concern cold weather will reduce U.S. fuel inventories, according to a separate Bloomberg survey.
Price Forecasts
``Cold weather is coming into the U.S. Northeast, which is likely to keep oil prices high and support gold prices,'' said Mark Pervan, head of research at Daiwa Securities SMBC in Melbourne. The metal might reach $660, he said.
Some investors buy gold to preserve purchasing power in times of accelerating inflation. Gold futures surged to $873 in 1980, when a jump in the cost of oil led to a 13 percent annual rise in consumer prices. Gold has fallen 11 percent from a 26- year high of $732 an ounce in May, while oil dropped 19 percent from $78.40 a barrel, the highest ever, in July.
``Given that the dollar is so weak and crude oil is also firming up, investors most likely would want to see gold test $670 to $675,'' said Ng Cheng Thye, head of the precious metals- market desk at Standard Bank Asia in Singapore.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/03/2006 : 19:56:42
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I am putting this down only as information to consider, not necessarily to act on.
I know that there are several digital gold holding services out there, and I would like to believe that all of them are as honest as the day is long. But care should be taken in choosing any digital gold reserve, just as you would take care in buying the best bullion for the lowest price.
A story told to me from my late father.
When it became legal to own gold bullion again, there were several companies that not only sold gold but offered to safeguard it in their vaults.
A co-worker of my father went to one of these sellers that offered a vault to keep the gold purchases in.
The buyer, I think his name was Jimmy, wanted just one gold Krugerrand since that was all he could afford. The seller tried to talk Jimmy into keeping the coin in the company’s vault, but Jimmy refused since he just wanted one coin to own and carry around.
Jimmy did the wisest thing, since the company one day closed down and the gold it was supposed to be safeguarding was gone.
It turned out that the company only had 100 gold coins and was selling the same gold over and over to different buyers, each thinking the gold was theirs and safe in the safe, never trying to take the gold home or put into their own safe or safe deposit box.
Jimmy safeguarded his purchase by taking physical possession of the coin while other buyers relying on the integrity of the company lost out.
Again, I do NOT want anyone to think that the digital gold reserve companies are dishonest; it would be unfair to do so since there have been no reports of impropriety among digital gold companies and all they want to do is hold gold for their customers, nothing else.
Just keep in mind that there always seems to be one rotten apple to spoil the bunch.
Just be careful in your gold dealings, or as the new buzz word that everyone uses now says, use your due diligence.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/03/2006 : 20:39:12
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Strong silver price has Hecla re-exploring existing mining properties
(Mineweb.com) --Stronger and sustained higher silver prices have enabled Idaho-based silver producer Hecla to explore North American silver assets, which have not been drilled at the surface for decades.
In a presentation to the San Francisco Hard Assets Conference Monday, Phil Baker, Hecla President and CEO, told retail investors that Hecla’s reinvestment in exploration at or near its current operations is expected “to provide even more resources with the same risk/return profile as our current silver operations.” He explained that Hecla has exposure to five world-class mining districts.
During the first three quarters of this year, $20.7 million was spent on this exploration program. For instance, Baker said that the Lucky Friday Mine, which hasn’t seen a surface drill for 40 years, is now the focus of a new exploration program. The company intends to continue to focus its Lucky Friday exploration program, both to the east and to the west along strike of the currently identified resources.
As Hecla returns to exploring its Silver Valley roots, Baker said the results appear so promising that the company is considering reopening the Star Mine in Burke, Idaho. The deepest mine in North America at the time, the Star was shut down on 1982, reaching a depth of 8,100 feet.
If the infrastructure of the Star Mine can be rehabilitated, Baker suggested the ability to access ore from the mine may provide a platform to help explore a 20-square mile land package.
Meanwhile, Baker said Rio Tinto and Hecla are also busy expanding the resource basin within the Green’s Creek silver mine in Alaska. He noted that a 12-square mile land package exists at Green’s Creek that has only been minimally explored at the surface. He added that Rio Tinto is seriously considering developing a “Rio Tinto-sized” major mine in the area.
Baker predicted that the extensive surface exploration program being conducted at the San Sebastian silver mine in Mexico will yield results within a year.
Hecla’s exploration expenditures are being boosted by the fact the company will not be paying taxes for several years, due to net operating losses.
In the meantime, Baker forecast a total production of 7 million ounces of silver in 2007. This year, Baker expects a production of 6 million ounces of silver, 150,000 ounces of gold, 24,000 tons of zinc, and 23,000 tons of lead
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/03/2006 : 21:52:21
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Spot gold rebounds in Asia on weaker US dollar and firmer oil
Spot gold prices opened markedly higher Friday at $646.00-646.50/oz, up from Thursday's close of $637.90-638.40/oz.
Local traders said the spot gold price rebounded above $640/oz during the fairly active New York trade the previous night.
"The various US figures, including major statistics from Chicago, released yesterday were weaker than expected and the US dollar suffered," one trader said.
The trader added that major statistics on economy, industry and consumption from Europe were better than expected, thus giving the Euro the boost. "EC's GDP was also quite good and the Euro strengthened against the US dollar," he said.
"Some players were seen moving their funds into the gold market on the back of a weaker US dollar," he added.
Another trader concurred, adding that the oil price also firmed during the US trade. "The oil price rose to around $64/bbl and this has helped to pull the spot gold price up," he said. He noted that the spot gold climbed to a high of $648-649/oz on active buying but softened to close around $646-647/oz in US.
A third trader said the opening spot gold price in Asia inherited the strength from the New York trade the previous night.
"Despite the higher opening level, the Asia spot gold trade was very quiet. Maybe it is the start of the month and the weekend is near. Players are not taking any new positions currently. There are other major US statistics, including the unemployment rate, to be released next week and the US Fed will be will having a meeting too. I am not expecting much in the afternoon until the European players come into the market," the trader added.
Meanwhile, gold futures contracts trading on the Tokyo Commodity Exchange rose amid active trade. The most actively traded far forward October 2007 contract finished Friday's morning session at Yen 2,430 ($21.13)/g, up Yen 26 from Thursday's close. Turnover was 51,621 contract trades. The futures prices rose on the back of a $11/oz gain the COMEX gold futures on Thursday, and the firm spot bullion prices.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/04/2006 : 18:10:06
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Instead of news here is a golden tale for a change.
How to Invest in Gold
By Peter C. Cavelti
1979
Page 25-26
“When the Vietnam War came to an end and the Americans withdrew, leaving the entire country to the North Vietnamese, tens of thousands of refugees poured into North America. These people literally had one or two hours to get their most essential belongings together and whatever could not be carried had to be left behind when they boarded hopelessly overcrowded ships and planes. What could these refugees possibly bring with them? The wisest chose gold bullion. All realized that gold was the only medium in which they could carry a significant amount of wealth in a package the size of a chocolate bar. When they arrived at US Air Force bases, it did not take long for local authorities to realize what was needed. The State Department called in some gold dealers who, working with simple scales in primitive shacks and tents, purchased the gold in exchange for American Dollars. The gold bars were foreign, made by refiners in Saigon, Phnom Penh and Hong Kong, and the dealers had to charge for assaying and refining the metals. However, when measured against the convenience of being able to acquire local currency in an emergency, this was a small price to pay.
History is full of examples, all of which illustrate gold’s usefulness as a long term insurance against monetary and political uncertainty. The most recent example has been the tragic exodus of the “boat people” from Southeast Asia. How do they buy their way out of these countries? With gold. What do you think they can carry with them to start all over again in a new country? Gold. How do families in inflation-ridden countries protect their wealth? Where it is allowed, they own gold bullion Where that is forbidden, their women (buy) wear gold jewelry.”
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/04/2006 : 18:13:29
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Gold up as traders track dollar, economic data
The market really needs to see the U.S. economic data later this week "to get the trend going again" for gold, said Jon Nadler, an investment-products analyst at bullion dealers Kitco.com.
Gold for February delivery closed up 30 cents at $650.90 an ounce on the New York Mercantile Exchange after trading as low as $645.70. The contract fell Friday, but still ended last week with a gain of 2.5%. It's closed above the $650 level since the last day of November.
Most of the trading volume has moved to the February contract, but the December contract remained as the official benchmark for gold futures trading. That contract finished up 50 cents at $645.20 an ounce.
The dollar rose against major currencies Monday, consolidating after hitting a 20-month low versus the euro and a 14-year nadir versus the British pound on Friday.
Growing expectations the U.S. economy is slowing enough for the Federal Reserve to lower interest rates soon has put pressure on the dollar in recent days and helped fuel gold's recent climb.
"Much would have to change in the American economic picture, fiscal and especially monetary policy, and ultimately even in its foreign policy, for the U.S. currency to make a strong comeback and do away with most of the reasons for which more and more investors have been friendly towards gold," said Nadler, in e-mailed commentary.
With many analysts expecting further declines in the greenback, analysts have remained upbeat about gold's prospects.
"Dollar diversification will continue to be the main theme of the market with recent gains in ETF [exchanged-traded fund] holdings showing investors are keen to hold the yellow metal," said James Moore, an analyst at TheBullionDesk.com, in a note to clients.
Traders will look ahead to U.S. data on tap for this week for signs on the health of the dollar and the economy. Figures on productivity and factory orders are due Tuesday and the employment data are set for Friday.
Other metals closed higher Monday, with palladium leading the percentage gains. March palladium added $3.70, or 1.1%, to close at $336.45.
March silver closed up 5.5 cents at $14.245 an ounce after closing out last week with a more than 7% gain. March copper closed at $3.176 a pound, up 0.4 cent following a 1% gain last week and January platinum climbed $5.50 to end at $1,160 an ounce, recouping part of Friday's loss of over $22.
On the supply side, gold supplies were down 909 troy ounces at 7.49 million as of late Friday, according to Nymex data. Silver supplies were unchanged at 107.8 million troy ounces and copper inventories fell by 328 short tons to 31,299 short tons.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/05/2006 : 18:50:19
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Gold Prices Fall in New York as Dollar Rebounds Against Euro
By Claudia Carpenter
Dec. 5 (Bloomberg) -- Gold fell in New York and London after a rebound in the dollar against the euro eroded the appeal of precious metals as an investment alternative.
The dollar snapped a three-day slide after a report showed U.S. services industries unexpectedly strengthened.
...................(How very convenient for the greenback)
Gold traded in dollars usually moves in the opposite direction of the dollar against the euro. The metal had jumped 7.6 percent in November, the biggest monthly gain since April, as the dollar slumped.
Gold and silver ``appear stretched in the short term picture and are vulnerable to moves like this when the bulk of the market is all positioned the same way,'' said Michael Guido, director of hedge fund marketing at Societe Generale SA in New York. ``Both metals are still strong from both a technical and investor bias.''
Gold futures for February delivery fell $3, or 0.5 percent, to $647.90 an ounce on the Comex division of the New York Mercantile Exchange. Silver for March dropped 22 cents, or 1.5 percent, to $14.025 an ounce.
Gold for immediate delivery fell $3.45, or 0.5 percent, to $642.75 an ounce at 2:33 p.m. New York time. Prices have climbed 24 percent this year.
Spot gold had risen to a three-month high of $649.95 on Dec. 1 as declines in the dollar spurred investor demand. Gold has ``met strong resistance at the $650 level'' as traders track the dollar against the euro, James Moore, an analyst at TheBullionDesk.com, said in a report.
Jobs Report
The U.S. Labor Department will release the November jobs report, an indicator of the U.S. economy, on Dec. 8. Employers probably added 100,000 jobs last month, up from 92,000 in October, a Bloomberg survey showed.
``Gold's going to be locked in a narrow range of $640 to $648 until that figure comes out,'' Peter Tse, chief precious-metals dealer at ScotiaMocatta, the bullion arm of Bank of Nova Scotia, said in Hong Kong.
Gold will average $620 an ounce this quarter, down from $621 in the third, Barclays Capital in London said in a report yesterday.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/05/2006 : 21:11:17
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This post sounds like technical mumbo-jumbo, with (oh boy) charts and such.
However, if silver does go down because it Always goes down in December, then this is a good buying opportunity for buyers of the physical metal.
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Silver Topping Again?
By: Timothy Silvers
Excerpt
On September 17, I posted an article describing why I thought we were near an excellent buying point in silver. Hopefully, you bought during the several weeks of lower silver prices that followed and are up $3 an ounce since purchasing. If you are investing for the long term, you should not worry too much about the daily fluctuations of the silver price. It is more volatile than gold, but that volatility can also produce profits if you trade some of your position. I typically only trade no more than 15-20% of my total position when silver seems like it is overbought or oversold.
For a number of reasons, I have started taking profits on this latest silver rally and I think it could top out soon, and then correct to give us another buying opportunity. First, silver typically sees a correction of some kind every December. Not coincidentally, the RSI indicator is now above 70 (see chart below). When it exceeds this level, a correction tends to follow within 1 to 3 weeks. I expect silver will drop $1.50 to $2.00 this time and will find support around an RSI of 50. This will be a great opportunity to buy more in anticipation of a rally that will exceed the $15 highs of this past spring.
.............Maybe those who play the commodities markets sell off for December to close their financial books for the year. All the sme, as I said previously, the Commodities game is just like Monopoly, you quickly end up in jail or bankrupt.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/06/2006 : 17:41:11
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Report: Chinese gold consumption to grow 17 percent this year to record 350 tons
SHANGHAI, China: China will consume a record 350 tons of gold this year amid surging sales of gold bullion, up 17 percent from 2005, the official Xinhua News Agency reported Tuesday.
Gold output in China is likely to top 240 tons this year, with industry profits exceeding 5.5 billion yuan (US$700 million; €526 million), the report said, citing the chairman of the China Gold Association, Cheng Fumin.
China is the world's third-biggest consumer of gold after India and the United States. Gold use in 2005 exceeded 300 tons, 80 percent of which went to the jewellery industry, the report said.
Cheng said that surging gold prices had dented jewellery sales but were boosting purchases of bullion.
Gold prices surged to a record US$725 an ounce in May but have since fallen back to about US$650 an ounce.
Some economists have been lobbying for China to invest more of its foreign exchange reserves, now thought to top a record US$1 trillion, in gold to hedge against a weaker U.S. dollar. Much of China's reserves are in dollar-denominated Treasuries.
"If China adopts a long-term strategic approach, accurately predicts the market price of gold and purchases gold in a timely and reasonable manner, it can preserve and increase the value of gold," and improve the structure of its reserves, Gao Jie, a professor at the University of International Business and Economics, wrote in a commentary in the online edition of the People's Daily, a Communist Party newspaper.
According to the World Gold Council, China has 600 tons of gold holdings, equivalent to about 19.3 million ounces. Gold accounts for less than 1.3 percent of the country's foreign reserves, according to Gao.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/06/2006 : 17:47:04
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PRECIOUS METALS
What’s wrong with gold?
Gareth Tredway
Wed, 06 Dec 2006
Spot gold had fallen as much as $7.45/oz during early trade on Wednesday following Tuesday's fall on a stronger dollar in the US.
One trader told I-Net on Tuesday that gold's failure to track the recent weaker dollar had made position holders nervous.
"The dollar has weakened to such an extent, but gold hasn't rallied to the highs one would expect.
There is high scale up selling pressure and the longs are getting nervous,"
he explained on Tuesday, adding that a fall to $625/oz would not be a surprise.
On Monday, after six straight trading days of weakening against the euro, the dollar has ended each day stronger so far this week.
Gavin Friend, a currency strategist at Commerzbank Corporates and Markets, told AFP on Wednesday that markets would focus on the European Central Bank rated decision on Thursday.
"Profit-taking ahead of the conference may drag euro a tad lower towards 1.3250-80 dollars, but sentiment remains dull for the dollar," he added.
ISM manufacturing data released last week showed a contraction in output from the US, while the ISM services figure of 58.9 percent (released Tuesday) was higher than expected and showed growth in that part of the economy.
By 2.30pm gold was trading at $636.45/oz, down $5.50 on Tuesday's closing price.
James Moore, of TheBullionDesk.com, says more volatility can be expected this week as important economic news is released.
"The dollar remains a key factor in deciding market direction with this week's ECB rate decision and jobs data potentially adding further volatility in the second half of the week. Chart support is pegged at $638/635 while $650 remains the major upside obstacle," said Moore in his daily commentary.
Platinum was quoted at $1124.50/oz from a previous $1124/oz, while palladium was quoted at $328.50/oz, up $2 from its overnight close.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/07/2006 : 17:11:28
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Gold, silver rebound late on bargain hunt
NEW YORK/LONDON (Reuters) - Gold recovered earlier losses to end higher on Thursday, while silver clawed back to near $14 an ounce on strong demand from exchange-traded funds, as a decline in precious metals prices over the last two days prompted investors to bargain hunt.
At 3:57 p.m. EST (2057 GMT), gold <XAU=> was quoted at $631.40/632.90, higher than $630.60/632.10 an ounce late on Wednesday, when it fell nearly 2 percent.
Earlier, gold fell to $625.50/627.00 at 10:38 a.m EST, its lowest since November 22. The yellow metal had rallied to a 16-week high at $649.50 last Friday.
February gold at the COMEX division of the New York Mercantile Exchange <GCG7> settled up $1.10 at $637 per ounce, near its intra-day high of $637.50.
"The correction that we've seen over the past few days has essentially been profit taking, and it's run its course," said James Steel, metals analyst at HSBC.
"The gold market did find some technical support around $625 and it held from there," said Steel. "It looks relatively encouraging from here."
The euro rose initially and was little changed against the dollar after the European Central Bank said it expected inflation to ease in 2007, suggesting that it may not raise interest rates as soon as expected.
"Gold is looking to the U.S. dollar, really," said Matthew Turner, precious metals analyst at Virtual Metals.
"The sentiment is positive but in the absence of the dollar weakening further, it would be quite difficult for gold to go back to $700 an ounce," he added.
A weaker greenback makes gold, which is priced in dollars, more attractive for holders of other currencies.
"Much depends on oil prices and the dollar. If, for whatever reason, they provide a very strong support, then there might not be too much selling," Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus, said.
"The market is going to stay volatile. Until Christmas, I don't think volatility is going to die down."
Oil prices bounced back to trade slightly higher after it fell below $62 a barrel earlier.
Gold is generally seen as a hedge against oil-led inflation.
"The thoughts were that we would be looking to test and break through $650 again and probably up toward $675," said Darren Heathcote of Investec Australia.
"Given we're sort of below that, I would think investors might be a little bit more cautious."
SILVER RECOVERS
In other metals, platinum <XPT=> was quoted at $1,122/1,127 an ounce after falling to a five-week low of $1,094, against $1,120/1,125 late Wednesday.
Platinum, used to make jewelry and clean car exhaust emissions, has lost more than 20 percent in value since spiking to a record high of $1,395 on November 21.
But analysts remained positive toward the metal.
"Underlying supply and demand factors should support platinum, with limited supply and decent Chinese jewelry and industrial interest around," John Reade, head of metals strategy at UBS Investment Bank, wrote in a daily report.
Silver <XAG=> pared early losses and was last quoted at $13.88/$13.95, above $13.57/13.64 an ounce late on Wednesday but off Tuesday's six-month high of $14.17.
The metal has been supported by speculative buying from investment funds through silver exchange-traded funds (ETFs).
"Silver has done a very good job. It's being supported by very strong demand through the ETFs. There is certainly no early sign that it's going to abate. It appears to be very popular," said HSBC's Steel.
Palladium <XPD=> was at $325/329 an ounce, versus $326/329.
.............The Key word here is volitility. No one knows what the US Dollar or US Economy will do or how the Fed will react.
Expect prices to bounce around for a while. Buy on the dips and hang on for a bumpy ride.
(Additional reporting by Lewa Pardomuan in Singapore and Risa Maeda in Tokyo)
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/08/2006 : 19:06:10
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'Alleged lunatic fringe' sees $1,000 gold
ANDREW ALLENTUCK
Bug -- it's not a bad word among those who believe gold is the uber commodity of all times, and will soon soar to rule world markets. Confident that the yellow metal will shoot past its high, achieved in 1980 at $872 (U.S.) an ounce, gold bugs labour to explain why it has not already done so and when it will break the record.
John Embry, chief investment strategist for Sprott Asset Management Inc. in Toronto, is widely seen as the leading exponent of the theory that it is not markets but governments that are restraining the price of gold from rising to $1,000 or more. Currently, he heads the $650-million Sprott Gold and Precious Minerals Fund, which produced a 73.4-per-cent return for the 12 months ended Oct. 31. That was a first-quartile finish among the 18 funds in the field. However, Mr. Embry's real tour de force was in 2002, when he piloted the RBC Global Precious Metals Fund to a 153.1-per-cent gain, double the median return of peer gold funds in the period and the top return among all 3,299 portfolios in the Canadian mutual fund industry for that year. He is confident he could do it again.
"We have prospects of having a triple-digit return year within the next couple of years," Mr. Embry said.
His record gives him a credibility that is the envy of other gold fund managers who moil through mining company annual reports.
Yet there is a difference between the Embry approach to gold investing and what the also-rans do.
In the Embry view, gold should have and would have reached a price in the thousands of dollars per ounce
were it not for a cabal of central banks who hold down the price of gold.
As he explained in an October article he wrote for the Northern Miner, a trade paper,
too much paper currency and commercial credit ultimately debase conventional money.
Precious metals, mainly silver and gold, "will soar as investors come to realize the decline of fiat money," he predicted.
Gold, currently at $647.90, should hit $1,000 an ounce once barriers to its correct pricing are removed,
Mr. Embry has argued. "Some investors believe the price of gold has been and continues to be artificially depressed," he wrote in a report, prepared with colleague Andrew Hepburn in 2004 entitled,
Not Free, Not Fair: The Long-Term Manipulation of the Gold Price. "
As significant gold owners ourselves, we firmly side with the alleged lunatic fringe on this contentious topic."
A major rise in the price of gold is inevitable, Mr. Embry explained. But there will be costs.
A leap in the price of gold would discredit central banks,
create a flight from paper money to gold,
destabilize world trade,
and force the United States to pay its huge foreign trade bills with gold rather than cover its deficit with U.S. Treasury bonds that lose value against other major currencies.
All that is keeping the price of gold from rising drastically is a so-called "Plunge Protection Team," or PPT, crafted by U.S. monetary authorities in 1989 to ensure world financial markets do not get too far out of line with the political needs of their masters, he noted.
Critics of the price suppression theory dismiss the existence of a formal PPT.
According to Caroline Baum of Bloomberg News, the alleged power of the PPT gains credibility with repetition. "They swap the same fish tales back and forth with the stories acquiring respectability through frequent repetition among believers," she wrote.
For his part, Mr. Embry isn't budging. Gold stocks will thrive because the total being dug up and what central banks sell is falling behind demand for investment purposes. "The price of gold will head up over $1,000 when lack of physical supply held by central banks is insufficient to meet the mounting investment demand for gold," he said. "That should happen within the next six months. The gold price will swiftly head up over the 1980 high and go up to four figures," he added.
............(No matter how you slice it, gold is going up in value as paper cuurencies go down in value. If there is some sneaky gob'ment interference going on, it actually is to our betterment as it gives buyers a chance to buy more gold at affordable prices.) |
Edited by - pencilvanian on 12/08/2006 19:07:42 |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/08/2006 : 21:32:15
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Gold and silver are down again (groan) due to a little bit of good news for Wall Street, speculators taking their profit, end of the year selling to balance seller's books for tax purposes, and the idea that the dollar looks less awful than it really is, it Only lost most of its vlaue, its not completely worthless (yet).
Lower prices means more can be bought for current dollars.
An earlier post mentioned that silver usually goes down in December, maybe it is the same for gold. Either way, it is one more chance to buy that nice bit of bullion for your hoard before the price goes up in the coming years.
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Analyst: Gold will top $1,000 an ounce
........................................(When?)
SPARKS, Nev. (AFX) - Gold prices will top $1,000 an ounce in two to five years because of a currency crisis fueled by a continued devaluation of the dollar, a leading analyst and investor said.
Paul van Eeden of Toronto told Western mining interests he does not expect gold prices to fall below $400 an ounce again.
"I say with a very high level of confidence that gold prices will go to $1,000 an ounce in the next two to five years," he said Thursday at the Northwest Mining Association's annual convention in Sparks.
Billed as the second-largest annual mining convention in the U.S., the five-day gathering drew 1,800 people before it ended Friday.
Industry officials said van Eeden is among at least three dozen analysts who have predicted gold prices would surpass $1,000 an ounce over the next five years.
Gold prices have soared since hitting a 10-year low of $252.80 an ounce on July 20, 1999. They closed at $631 an ounce Friday on the New York Mercantile Exchange, down from a high of $725 an ounce on May 12.
Nevada is the world's third largest gold producer behind South Africa and Australia.
Laura Skaer, executive director of the mining association, said van Eeden's projection didn't surprise her as the industry is enjoying an unprecedented boom cycle.
"It makes sense economically given the political unrest around the world," she said. "Gold over the last 200 years has been the preferred currency. It's where people go in times of uncertainty."
But John Dobra, an economics professor at the University of Nevada, Reno, said he does not foresee enough devaluation in the dollar to push gold prices above $1,000 over the next five years.
"Anything is possible, but I think the dollar will probably not depreciate the 30 to 40 percent required to get us there," he said. "That big a change in that short period of time is not likely based on historical experience."
Russell Fields, president of the Nevada Mining Association, also was unsure whether gold prices would reach $1,000 an ounce by then.
"I've seen gold prices do different things other than what some of the best forecasters have predicted," he said.
Van Eeden said rising gold prices have been tied to the dollar's devaluation. The dollar has dropped an average of 10 percent this year compared with the pound, franc and euro.
Van Eeden said he expects America's increasing trade deficit to lead to an overall 35 percent drop in the value of the dollar against other currencies over the next two to five years.
"If that happens as I expect, gold prices will go over $1,000 an ounce," he said.
Van Eeden said he was fully invested in mining exploration stocks from 1998 to May, when he sold half of the stocks.
"I thought gold prices were overextended. Always hedge your bets," he advised the audience.
The only factor that would cause gold prices to drop is if an over-valuation in the price of base metals forces a selloff of all metals, including gold, van Eeeden said.
"If not for that risk, I'd be 100 percent invested" in mining stocks, he said.
Jonathan Price, Nevada state geologist, said the industry is enjoying its greatest gold boom ever.
The 200 million ounces of gold produced mostly in Nevada since 1981 is more than the 29 million ounces produced during the California Gold Rush and the 95 million ounces produced in various areas of the U.S. from 1895 to 1920, Price said.
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Gold Declines in New York After Dollar Rebounds Against Euro
Dec. 8 (Bloomberg) -- Gold prices fell in New York as a rebound in the value of the dollar against the euro eroded the metal's appeal as an alternative investment.
Gold, sold in dollars, generally moves in the opposite direction of the U.S. currency, which headed for a weekly gain against the euro after touching a 20-month low on Dec. 4. The metal is up 22 percent this year, while the dollar has fallen 10 percent against the euro.
``I remain bearish,'' said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp. ``The dollar's recent fall has been too steep and gold's rally too sharp, so I expect the correction to continue.''
Gold futures for February delivery fell $6, or 0.9 percent, to $631 an ounce on the Comex division of the New York Mercantile Exchange. Prices are down 3 percent this week after climbing 4.5 percent in the previous two weeks.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Gold's failure to rally this week after the dollar traded near a 20-month low against the euro signals a lack of investment demand, some traders said.
In 2006, every 1 percentage-point decline in the dollar triggered a 3 percentage-point gain for gold, said John Reade, head of metals strategy at UBS Investment Bank in London. That ratio shifted in the past three weeks with the dollar dropping 2.8 percent against the euro and gold gaining only 1.4 percent.
`No Buying'
``There's almost no buying from our private clients'' in the spot market, Reade said. ``I expect them to be back, but if it doesn't happen by the end of January, then I will start to worry gold has lost its investment interest and will simply be a play on the currency markets.''
Some analysts say the rally isn't over for gold. A slowing economy may force the Federal Reserve to keep rates unchanged at 5.25 percent next week. The European Central Bank raised rates to 3.5 percent yesterday, the sixth increase in a year.
Gold has gained every year since 2001, moving in tandem with the euro from 2002 to 2004. Gold gained 18 percent last year, even as the dollar gained 14 against the euro.
``The fundamental piece of news for gold is the dollar,'' said John Crowley, who helps manage $93 million at Lake Hill Partners Inc. in Brooklyn, New York.
``Expect another $20 to $30 drop from here, and that's it.''
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/09/2006 : 19:22:45
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Gold and Dollar Decoupling
Occasionally in the financial markets an event happens that generates enough interest to transcend the usual sector boundaries. It captures the attention of contrarians and mainstreamers alike, and leads to universal discussions on its implications. The recent sharp slide of the US dollar is looking like one of these events.
While the dollar has hit record lows against some currencies, the metric of choice for following the dollar is generally still the US Dollar Index.
Several decades old, it is a geometrically-weighted average of the dollar's exchange rate with six major world currencies.
It is dominated by the euro, which accounts for about 58% of its weight. Next comes the yen near 14%, the British pound around 12%, and the Canadian dollar near 9%.
Since mid-October, the USDX has plunged by 5.4%. Fully two-thirds of this sharp decline occurred between mid-November and this past Monday.
Now for stock traders who can sometimes see 5% swings in the opening minutes of a trading day this doesn't sound particularly impressive.
But for currencies
that typically move with glacial slowness,
the dollar has seemingly just plummeted over a steep cliff.
This sharp decline is all the more noteworthy since the US Dollar Index is geometrically averaged.
As traders of the pre-July-2005 CRB Commodities Index remember, the math under geometric averaging aggressively smoothes out underlying component volatility.
So the dollar really has to get hit hard in most of the six currencies for its index to slide as sharply as it has in recent weeks.
The implications of this dollar slide are legion and many essays could be written barely scratching the surface of discussing them all.
As a gold investor and speculator though there is one in particular that I find exceptionally provocative today.
All over the contrarian world in recent weeks, people are ascribing gold's recent strength to dollar weakness.
While no doubt a material factor,
we are no longer in the purely mechanical dollar-weak-equals-gold-strong world of a few years ago.
Interestingly, gold's potential is "sold short"
in a proverbial sense by relapsing into the old gold and dollar paradigm that defined the initial years of gold's current secular bull.
Back then, gold was only strong when the dollar was weak.
Then the dollar was indeed the primary driver of gold.
But over the last 20 months or so, gold has increasingly been decoupling from the dollar.
Now pure investment demand is gold's primary driver.
This may seem like a trivial distinction at first glance, but it is not.
If gold is still dominated by the dollar, then the only way that this gold bull can continue is if the dollar bear keeps spiraling lower.
Of course like all fiat-currency experiments in world history the US dollar is ultimately trending towards its true value of zero,
but this process will probably take many decades. After all, it took many centuries in ancient Rome for its own empire-ending currency debasement to fully run its course.
Believing that the dollar is still the key to gold is no longer technically correct as I will illustrate below.
Understanding this could have major psychological implications for gold investors and speculators.
If they still believe the dollar is the key, they could risk getting discouraged and selling out far too early because the dollar happens to bounce in a bear-market rally.
But if they realize it is investment demand,
not the dollar,
driving gold, then they are freed from the tyranny of cowering each time the dollar flexes its muscles.
Despite the recent strong negative correlation between gold and the dollar that conjures up memories of years past, gold and the dollar are either in the process of decoupling or essentially decoupled.
Investors are now buying gold around the world for its own merit.
Gold's own independent supply and demand is driving it today and the relentlessly inflating US dollar has been relegated to mere peripheral status.
This thesis is considered controversial, even heretical, among certain sects of gold investors. I would have a hard time believing it myself if I hadn't personally done the underlying research over the last couple years. But when you actually look at gold's price behavior compared to the dollar's over gold's bull to date,
it is crystal clear that the dollar is fading in importance.
Like it or not, gold and the dollar are really decoupling.
Before we get into the charts, it is essential to understand the concept of a decoupling. Several years ago gold and the dollar had a strong negative correlation. If one was up the other was down or vice versa.
A decoupling doesn't mean the opposite, a prevailing positive correlation,
but actually no correlation.
In a decoupled no-correlation environment there will be times when both gold and the dollar are up, both are down, or they are moving in opposite directions.
The key to a no-correlation environment is none of these tactical correlation conditions will last for long. Since any price can only move up or down, there are only four combinations of how two prices can interact.
They are up up, down down, up down, and down up.
So even assuming these are randomly distributed over time, in a no-correlation environment the dollar and gold could still move in traditional mirrored opposition 50% of the time (up down and down up, two of the four possibilities).
As this first chart of the US Dollar Index and gold shows, this decoupling probably started in Q2 2005. I was studying it back then when it happened and have written quite a bit on it since. While the decoupling wasn't as clear at first, the deeper we march into this gold bull the more readily apparent it is becoming. The decoupling is rendered on this chart as the dotted-yellow line at the beginning of Q2 2005.
(Chart wouldn't paste, sorry)
While the gold bull was stealthily born in April 2001, the beginning of the parallel dollar bear is not as well-defined. The once mighty dollar initially topped in the summer of 2001 but recovered to carve a double-top in early 2002. As such, most technicians including me tend to see the dollar bear as officially starting on January 31st, 2002, the last time it closed above 120. Since then it has been a long grind lower.
With the world's reserve currency having a vastly larger global market than gold, it is useful to view the early years of our gold bull through the lens of the dollar bear. From 2002 to Q1 2005, seemingly the only time when gold could catch a bid was when the dollar was weak. This strong negative correlation led to the widespread belief today that dollar weakness is still essential in order to see gold strength.
During those initial several years, gold carved five major interim highs as its bull market gradually clawed higher. They are all numbered above.
The interesting thing to note is that every one of these major interim gold highs, without exception,
occurred right near the end of a long slide in the US Dollar Index.
Thus gold uplegs only happened during dollar downlegs. And during dollar bear-market rallies gold subserviently corrected.
This powerful negative correlation is very evident visually as well as mathematically. On the visual side, check out the precisely mirrored price patterns of gold and the dollar until Q2 2005.
This tendency was so strong and so ironclad in these years that successful gold trading systems often watched the dollar to know when to trade gold. Not only were price patterns mirrored, but the opposing moves were proportional and the interim extremes were roughly synchronized. Gold made highs near dollar lows and vice versa.
Mathematically this correlation was every bit as strong as it is visually. The daily closes of the US Dollar Index and gold had an utterly massive negative correlation of -0.956 up until Q2 2005. Squaring a correlation gives an r-square value, which statisticians use to explore potential causation. Until the decoupling, gold and the dollar ran a stellar r-square of 91.4%! Thus over 91% of the daily price action in gold could be statistically explained by and/or attributed to the dollar! The dollar truly was the primary driver of the gold price.
But in Q2 2005 a peculiar thing happened.
The dollar surged but gold held its own.
It kind of reminded me of a boxing match where a beaten-up underdog cowers through several rounds of brutal punches from the champion but then in round four the underdog suddenly stands up and blasts the champion in the jaw. In Q2 2005, for the first time in this bull, gold was holding its own.
Gold stood up to its dollar dominator and scoffed.
Now this event was anticipated, we were looking for it in advance at Zeal and were ecstatic to finally see it arrive.
Great gold bulls have three stages.
The first third or so is currency-devaluation driven, and indeed this happened in our bull when gold only rose when the dollar fell.
But this currency devaluation merely primes the pump for the much larger second stage, when gold rises on its own intrinsic merits on ever-increasing global investment demand. In Stage Two gold decouples from the dominant currency and its bull really starts thriving.
Before this decoupling I was trying to figure out how to know when it arrived, and after much research I decided on watching gold denominated in euros for the most likely sign. Euro gold had challenged €350 and failed to break above it for several years in a row. So I figured when euro gold finally broke €350 it would unleash a surge of gold investment demand from old pro-gold European money and would ignite Stage Two where gold decouples from the dollar.
This awesome €350 breakout happened in Q2 2005.
The €350 breakout was so crucial because until that point non-American investors largely believed the so-called gold bull was really just a dollar bear. Gold was only moving locally in dollar terms as it responded to a dollar devaluation.
But when euro gold broke out and started to carve new highs, they were forced to acknowledge this bull as the real deal.
European (and global) capital starting bidding on gold and this marginal demand caused it to rise despite the dollar. This created a virtuous circle where more gold demand created a stronger gold-dollar decoupling enticing in new investors to buy ever-more gold.
So the Stage Two transition started in mid-2005 and has only gathered steam since.
There is all kinds of evidence that the gold bull since Q2 2005 is radically different than the one before the decoupling. Visually it is readily apparent that gold's latest massive upleg that ended in May was an entirely new beast compared to its earlier comparatively anemic bull-to-date uplegs. In six months gold soared 54% while the dollar merely fell 8%. The previous years' proportional opposing moves had totally vaporized.
In addition, note that the biggest upleg of the bull to that time, the one that led to interim high 6 earlier this year, happened during the biggest dollar bear rally of its entire bear.
By the time gold surged through $550 the dollar was actually in a minor pullback in a major bear rally, not at the end of a long downleg as it had been near all previous major interim gold highs. The dollar was thankfully losing its influence over the gold bull.
But the most telling evidence for gold's decoupling from the dollar is not visual but mathematical. From April 1st, 2005 until this week, the daily correlation between the dollar and gold plummeted to a mere -0.400. This is a breathtaking decrease. The r-square of this is a trivial 16%, not at all correlated. Prior to Q2 2005, 91% of the daily moves in gold could be explained by opposing dollar moves, but since then only 16% of gold's moves are explainable by or statistically attributable to the dollar.
Now as a life-long speculator I effectively gamble for a living, I love risk more than most folks love oxygen. While I would not hesitate to bet when my odds for success are 91% in my favor, I wouldn't bet in a million years if I only had a 16% chance of winning. The old dollar-weak-gold-strong thesis of past years was very true a few years ago, but this thesis is no longer valid.
Hence it isn't wise to trade on it today. We are now in a brave new Stage Two world where gold's supply and demand is independent of the dollar's machinations. Gold and the dollar have decoupled!
The moral of this story is don't get too eager to ascribe all gold's strength of recent months to dollar weakness. While a falling dollar does get more investors interested in gold and hence probably drives indirect gold demand, gold is trading independently of its old nemesis these days in Stage Two.
I am pretty convinced right now that the dollar could bounce and surge yet gold's new upleg would continue higher on balance with nary a worry. Gold just finished a necessary consolidation in early October so it is technically ready to rise regardless of the fortunes of the dollar. So there is really no reason for gold investors to get particularly excited about a dollar downleg in Stage Two nor get worried about the consequences when the dollar inevitably bounces in its next major bear-market rally.
Our most successful trading tool for gaming gold back in Stage One that netted us enormous realized profits in gold stocks in the early years was a comparison of gold and the dollar relative to their respective 200-day moving averages. Per my Relativity trading theory, dividing each by its own 200dma creates horizontal trading bands. In effect the 200dmas of gold and the dollar are flattened to horizontal and each price is charted over time as a continuously comparable multiple of its 200dma. You can see this in the next chart.
The decoupling seen above in the raw dollar and gold price data is even more striking in Relative Dollar and Relative Gold terms. For whatever reason in Q2 2005 the character and nature of our gold bull radically changed and it hasn't looked back since. The once-king dollar-dominated-gold paradigm is no longer valid. Gold is marching to the beat of its own supply/demand drummer now.
.............
I believe that understanding this new gold-dollar paradigm is very important for a couple reasons.
First, the better we understand the markets the higher our odds are of successfully buying low and selling high.
People who remain stuck in the obsolete dollar-dominated Stage One paradigm today risk making poor decisions if they are still operating under now-faulty Stage One logic.
The dollar is no longer gold's primary driver.
Second, if gold investors continue to give the dollar more reverence than it is due they risk getting psychologically whipsawed as soon as the dollar inevitably bounces.
Sure, it is fun to watch gold rise as the dollar falls. But when the dollar bounces is it a good decision to immediately sell all gold-related speculations? Almost certainly not! Gold is rising today because investors are buying it after a necessary consolidation. While the dollar may be a factor in some of these decisions, it no longer steers gold.
The bottom line is gold has decoupled from the US dollar. While the dollar will ultimately migrate down to its true value of nothingness since it is backed by nothing but faith in Washington, gold is no longer dependent on that long slow slide.
Investors around the world are increasingly discovering gold again and bidding it up for its own merits. The dollar really doesn't matter all that much anymore in a Stage Two gold bull.
Thus, it is probably prudent not to get too caught up in the latest dollar slide. While it certainly doesn't hurt gold, the last couple years have proven that gold doesn't need a weak dollar anymore to rocket higher on its own accord. Today gold investment demand is gold's primary driver, not dollar weakness.
................(A good read, I must admit. Part of the reason I posted this here is to show you how a chartist can be blinded by their own charts. He goes on and on as to this correlation to that correlation,
completely ignoring the facts:
Inflation is eating the dollar's buying power
Out of controll deficits can't go on forever, and the US dollar is propped up not by assets, but by fear of world wid depression if it falls
Times are uncertian and scary and people want something they can hold onto in scary times
i.e. gold
The Euro and the Yuan are the currencies of choice since they both are backed by governments with much much less debt.
The foreign buyers of gold are not buying because they don't like the dollar, they are buying gold because history has taught them that gold always comes out the winner in both inflationary and deflationary times.
Maybe this is why Washington makes so many wrong decisions, it relies on chartists too much.
Would you rely on a chartist as a wheatherman?
The chart says it won't snow, so don't worry about being stuck in a blizzard. ignore the flakes coming down, that is just an anomoly.)
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Edited by - pencilvanian on 12/09/2006 19:31:27 |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/09/2006 : 19:44:37
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The price in gold in the US may be lower, but that doesn't mean gold is down everywhere
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Gold & silver shine as dollar runs for cover
MUMBAI: Taking a cue from firm global trend, the local bullion market on Friday snapped its three-day long losing streak with both the precious metals — gold and silver — ending higher as stockists and investors turned active buyers.
In overseas market, prices of yellow metal jumped more than 1% as the dollar ran for cover. However, a section of marketmen feels the metal’s gain would be limited. “Physical buyers will stay away from purchases due to its higher prices and hence stockists will offload stocks in near future,” a local bullion dealer told ET.
In local markets, silver stole the show after fresh enquiries from industrial units. Jewellery fabricators also increased buying in the wake of on-going marriage season. In Chennai, spot silver (.999) gained the most, where the metal soared to Rs 20,835, revealing a whooping gain of Rs 365 in a single day.
In Delhi, the metal closed Rs 300 higher at Rs 20,200 per kg on good demand at the lower level. In Mumbai, ready silver bounced back by Rs 190 at Rs 20,405, while in Kolkata it added Rs 50 before closing at Rs 19,650 per kg. London silver rose to $13.90/13.97 an ounce from $13.87/13.94 in New York.
In London, at the time of going to press, spot gold was quoted at $637.2/637.9 an ounce, compared with $630.9/632.4 in New York on Thursday, when it had dropped to a two-week low of $624.9.
Back home, in Delhi spot gold (99.5) improved by Rs 45 at Rs 9,263, followed by Mumbai where the precious metal rose by Rs 15 to settle at Rs 9,170 per 10 gm respectively. In Kolkata, the metal inched by Rs 10 at Rs 9,320, while in Chennai the metal closed Rs 5 lower at Rs 9,300.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/11/2006 : 20:56:05
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Not much to say tonight, gold and silver seem to be taking a breather. Just as well as I could do with a breather myself posting what is going on, precious metals wise.
I suspect with the holidays approaching that gold/silver will trade in a narrow range and possibly a small selloff at the end of the year to close out everybody's financials.
As usual, don't sell too soon, we haven't reached the peak yet. |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/12/2006 : 19:56:50
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Gold futures pare losses after Fed decision
Excerpt
SAN FRANCISCO (MarketWatch) -- Gold futures extended their losses from Tuesday's regular session into electronic trading, but pared declines after the U.S. Federal Reserve decided to leave overnight interest rates unchanged at 5.25%.
"Gold's reaction was slightly positive as it gives investors a reason to want to hold long positions," said John Person, president of National Futures Advisory Service.
"The economy is still at risk to inflation,
the Fed did not raise rates and thus it can foster the opportunity to fall behind the inflation fighting campaign, especially if the inventory of homes decreases and if energy prices escalate," he explained.
"Gold should be a buying opportunity based on today's announcement," he said.
Prices of the precious metal continued lower, but off their lows in after-hours trading after the Fed decision. .... The decision came 45 minutes after the official close of regular-session metals trading in New York.
The February contract for gold futures last traded at $634.30 an ounce, down 50 cents in electronic trading after reaching a low of $630.90 earlier.
Ahead of the Fed decision Tuesday, gold for February delivery had ended its regular trading session at $631.70 an ounce on the New York Mercantile Exchange, down $3.10. On Monday, the contract closed higher, recovering some of last week's 3% loss and supporting metals and mining shares.
The dollar spent much of Tuesday trading higher against the yen after the Commerce Department said the U.S. trade deficit narrowed by 8.4% in October to $58.9 billion, its lowest level since Aug. 2005. See Economic Report. But by late Tuesday, the dollar traded nearly flat against most of its rivals.
Other metals ended the regular session lower, with the exception of platinum, which saw its January contract add on $5.80 to close at $1,115 an ounce.
March silver futures closed down 4.5 cents at $13.98 an ounce, March palladium dipped $2.85 to end at $330.90 an ounce and March copper fell by 3.9 cents to close at $3.0945 a pound.
On the supply side, gold inventories were flat at 7.49 million troy ounces as of late Monday, according to Nymex data. Silver supplies were flat at 110.6 million troy ounces and copper supplies rose by 442 short tons to 32,651 short tons.
Metals shares continued lower along with gold, but some closed off their worst levels of the day after the Fed announcement.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/12/2006 : 20:01:04
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Gold 2007: Shiny opportunity or fool's prospect?
Gold is currently down 14% from its $732 May high, but according to analysts surveyed late last week by Bloomberg its six-year rally is far from done.
One factor juicing gold prices is the weak U.S. dollar.
Louise Yamada of Yamada Technical Research says, "Gold is the purest play against the dollar," as countries trying to diversify dollar holdings buy gold.
She sees gold above $730 next year and $3,000 gold within a decade.
Deutsche Bank AG's chief metals economist Peter Richardson says made gold his favorite pick for 2007.
JPMorgan Chase & Co. analysts John Normand and Jon Bergtheil on Dec. 7 said, "If you can only make one commodity investment," gold is the "choice for 2007."
Five of the past six bear dollar markets led to a gold rally, and with the dollar now down 13.8% against the euro, it is in for its worst year since 2004.
Gold is up 22% on the year and headed for its sixth straight annual gain, a streak unmatched since it was unpegged from the dollar in 1971.
Gold bears cite the unlikelihood of gold continuing to outperform indefinitely, hidden strength in the dollar, or the possibility that the dollar/gold relationship will undo.
But bulls say gold remains cheap relative to other assets: Gold's $850 high in 1980 is equivalent to $2,100 of today's dollars.
Seen another way, an ounce of gold was worth 23 barrels of oil in 1980; today's it's worth just 10.
Of the 30 traders interviewed, 12 advised buying gold, 10 said to sell, and 8 were neutral.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/14/2006 : 16:35:29
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SAN FRANCISCO (MarketWatch) -- Gold futures fell Thursday, but closed above the $630-an-ounce level, caught between pressure from a rising dollar and support from a rally in oil prices.
It's "no coincidence" that the earlier strength in gold prices "coincided with a 1.9% cut in production (engineered to sustain prices) agreed upon by OPEC," said Jon Nadler, an investment-products analyst at bullion dealers Kitco.com.
Gold prices found earlier support on concerns about rising energy prices Thursday. Crude futures rallied to a two-week closing high after the Organization of the Petroleum Exporting Countries said it would cut production by 500,000 barrels per day, starting on Feb. 1, 2007 in an effort to balance supply and demand. See Futures Movers.
But "since the same strategy cannot be applied to the bullion market, gold's immediate price prospects continue to depend on the dollar," said Nadler.
Gold for February delivery closed down $1.50 at $630.90 an ounce on the New York Mercantile Exchange, retreating from a high of $633.40. In Wednesday's trading, the contract closed higher, buoyed by rising oil prices.
The dollar gained Thursday following higher-than-expected import prices for November, dulling demand for gold as a safe-haven investment. See Currencies.
The Labor Department said that prices of goods imported into the U.S. rose 0.2% last month, while economists had expected import prices to be unchanged. See full story.
"While the metal has found strong support at the $623 chart level, the lack of fresh dollar weakness is putting the breaks on the metals rally, suggesting further consolidation short-term around $625-$635," said James Moore, an analyst at TheBullionDesk.com, in a note to clients.
Dennis Gartman, editor of The Gartman Letter, said thinning gold-market conditions as the year-end holiday season approaches have been creating volatility in gold prices. He pegged the next real support level for gold at $615 an ounce.
"It is not at all unreasonable to expect that these latter levels of support shall be tested," he said in his daily newsletter. "At that point, our bullish interest shall likely be piqued once again; until then, we'll stand firmly upon the sidelines, watching. We're comfortable there for the moment at least."
Other metals closed higher Thursday. March silver futures moved up 3.5 cents to end at $13.95 an ounce, while January platinum added $4.90 to finish at $1,112.70 an ounce and March palladium closed $1.35 higher at $331.05 an ounce. March copper futures added 2.45 cents to close at $3.0575 a pound after closing Wednesday at its lowest level since late June.
On the supply side, gold inventories were unchanged at 7.49 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies were down 582,153 troy ounces at 109.9 million, with copper supplies higher by 1,675 short tons to stand at 34,326 short tons.
In equities, most metals-mining shares closed modestly higher, in tune with the modest gains seen in most of the metals futures.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 12/15/2006 : 17:32:50
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Gold and silver are down again (Groan) But this is to be expected.
As posted on this topic section on Dec 5, Silver usually goes down in December and gold most likely does too.
The price decline is caused once again by the little bit of good news for wall street to push up expectations that all is well.
Meanwhile inflation is still rising, the dollar's buying power is still falling, The deficit is still growing and fiat currencies still collapse evetually.
Best bet, buy on the dips.
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Gold touches four-week lows on dollar rise
LONDON, Dec 15 (Reuters) - Gold fell to its lowest in nearly four weeks on Friday as a rally by the dollar prompted bullion investors to leave the market.
"Prices are down because the dollar is stronger today," said Michael Widmer, director of metals research at Calyon Corporate and Investment Bank.
"Gold has come off quite a bit in the last few days. There should be some people getting back into the market and buying the dips," he said.
The dollar rose as currency investors pocketed profits from the euro's big run up and reversed an initial dollar sell-off after a tame reading of November inflation.
Gold often moves in the opposite direction to the dollar. The metal also generally is seen as a hedge against inflation.
The only prevailing factor these days is definitely the dollar strength or weakness. Gold is trading in a range," said Frederic Panizzutti, analyst at MKS Finance.
Gold has fallen steadily since rallying to a 16-week high of $649.50 on Dec. 1 as players locked in profits ahead of the Christmas and New Year holidays. The metal was trading well below the 26-year high of $730 hit in mid-May.
"While the mid- to longer-term outlook for gold remains bullish due to increasing investor interest and speculation of institutional dollar diversification, the market short-term is still at risk to pockets of long liquidation ahead of year end," TheBullionDesk.com said in a daily report.
The physical sector had seen light buying at lower levels in the past few days, which helped push up premiums for gold bars to 30 U.S. cents an ounce to the spot London price in Hong Kong from 10 cents last week <GOLD/ASIA1>.
Volatile gold prices in November resulted in a 5.7 percent drop in jewellery exports by Turkey, a leading bullion market, to 9.5 tonnes from a year earlier. January-November exports fell 24 percent to 77.11 tonnes. [ID:nL15768191]
In other precious metals, platinum <XPT=> dropped to $1,104/1,109 an ounce from $1,108/1,118 late in New York, while silver <XAG=> fell to $13.57/13.64 from $13.76/13.83.
Palladium <XPD=> was down $1 at $325/330 an ounce. (Additional reporting by Lewa Pardomuan in Singapore and Chikafumi Hodo in Tokyo)
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Bullion Prices, Hang Tight
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