News and Views

October 6, 2010

Familiarity Breeds Ascent

It was “a familiar sequence of events” that led to another record high for gold, reports the Los Angeles Times:  “Central bankers pledge new moves to flood the financial system with more money. The dollar weakens. Buyers pile into gold and other hard assets as an alternative to paper currencies.”  And “silver was even hotter Tuesday, up 70 cents, or 3.2%, to a new 30-year high of $22.71 an ounce.” Related Links: The Street: Spot gold prices, silver rage higher Zero Hedge: Morgan Stanley boosts gold and silver price target FMMF:  S&P 500 priced in silver and gold Patrick Heller: Gold and silver prices jump; buyers and sellers start to get a little crazy Bloomberg: Silver to gain on investment, industry use, Deutsche Bank says ETF Trends: Behind silver ETFs’ meteoric rise Seeking Alpha:  Why did Japanese traders load up on silver recently? Telegraph: IMF chief fears risk of currencyContinue Reading
October 5, 2010

Homing In on Gold

Pragmatic Capitalism features the above chart on the home/gold ratio to illustrate how far the real estate market has fallen in “real” money.  It currently takes 144 ounces of gold to buy the median single-family home, compared to 601 ounces in 2001. But hedge fund operator John Paulson is recommending both investments. According to a Wall Street Journal column, which points out that Paulson said gold could go to $2,400 an ounce based on the fundamentals, and that momentum could carry it to $4,000,  “Among the New York commentariat there’s been a lot of head-scratching about Mr. Paulson’s take—especially this contrarian stance on housing.” But it concludes that “The odds have to be on his side. The reason is simple: Inflation.” Which, is “on the horizon,” according to a Bloomberg report that cites record gold prices. Related Links: MarketWatch:  Gold closes modestly lower on stronger dollar CNBC:  Jim Rogers: CommoditiesContinue Reading
October 4, 2010

Shelter From the Storm

As the 2009 and 2010 gold rallies are compared, Gold Scents‘ Toby Connor argues that “Gold is likely now in a runaway move higher. Smart money is using any and all pullbacks to get in ahead of the inflationary storm that’s coming. We saw it in the action yesterday. Gold briefly traded down to the $1300 level and miners briefly tagged 500. Buying pressure immediately came in at those levels.” About that “storm,” he reminds that Fed Chairman Bernanke “clearly stated he would print money if the economy didn’t improve. We know there is no way the economy can improve because we still don’t have the next ‘new’ industry to drive job creation. Folks this one is a no brainer. The Fed is going to print. That is going to cause asset inflation. The dollar is going to drop down into a yearly and three year cycle low. And theContinue Reading
As both gold and silver gain for the third straight week, an analyst at BNY ConvergEx, reasoning that “one home for any potential gold/silver bubble must be jewelry and coin dealers,” takes a “Trip to the Center of the Gold ‘Bubble’,” New York City’s 47th Street Diamond District, “the toughest, most aggressive retail/wholesale marketplace for jewelry, gemstones, and precious metals in the world.” She comes away thinking that while “Bubbles are clearly punctuated – and driven to their final  demise – by bad behavior on the part of market participants. My short, but colorful, excursion to the heart of the physical precious metals market revealed no such excess. Is that enough proof to eliminate the possibility of a gold  bubble? Of course not. But I think it is enough to characterize recent calls for the demise of the gold/silver rally as very much premature.”Continue Reading
Laying out what he sees as “The next phase of gold’s meteoric rise,” The Midas Letter’s James West, who was recently interviewed by The Gold Report, takes issue with an article on that makes “The case against gold.” West sees it as “designed to undermine the determination of gold accumulators who are genuinely frightened about the purchasing power of their dollars as their government ‘quantitatively eases’ the economy back onto its feet.” Related Links: Coin News:  Gold and silver prices rally in September, soar in 3rd quarter GoldSeek:  Wall Street Journal finally notices gold’s bull market GATA:  Murray Pollitt: As intervention fails, only gold market has a pulse Gold Alert:  Gold prices and a trade war? Bloomberg:  Geithner says no threat of China trade war or currency wars Reuters:  Currency tensions rising ahead of IMF meeting Mineweb:  Über hedge fund billionaire Paulson envisages $2,400-$4,000/oz gold Daily Reckoning:  Investing inContinue Reading
September 30, 2010

Gold to Grow?

With the Gold to Go ATMs set to debut in the U.S. by the end of this year, it’s predicted that “these new coin machines will work to really develop an interest in precious metals among even the most retail of investors. Today, the gold and silver markets are very much an institutional exchange.  Banks and billionaires know the value of gold and silver, but few on Main Street have even given them a chance at a mere percentage of their portfolio.” The Mises blog has more on the gold ATM, which Wall Street Journal’ gold derider, Matt Phillips, sees it as a yet another sell signal. Related Links: MarketWatch:  Gold extends record run as Fed policy sinks dollar Coin News:  One more record for gold, silver prices touch $22 Bloomberg:  Gold/silver ratio drops below 60 for first time since October 2009 Silver Coins Today:  U.S. Mint sales:  Silver coinsContinue Reading
As silver pierces the mainstream, with an ABC News report asking, “Is Silver the New Gold?,” the gold/silver ratio drops to 61, and “Technically, the ratio seems to be aiming for the 50-to-1 area,” according to Hard Assets Investor.  But, “a tumble to that level won’t happen tomorrow, if it happens at all…. A reach to the 50x multiple won’t necessarily be easy, either. There’s some key numbers along the way that need to be punched through.” And as Hinde Capital’s Ben Davies points out that “Within a single week 25 nations have deliberately slashed the values of their currencies,” Fund My Mutual Fund sees “a conundrum… gold and silver continue to rocket for good reasons. No one can find a reason that gold should go down anymore because of what central banks are engaging in. But now everyone is on the same side of the trade (know any goldContinue Reading
September 28, 2010

Fed Up

The Telegraph’s Ambrose Evans-Pritchard apologizes to readers “for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing. My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off deflation, not to create inflation. If the Federal Open Market Committee cannot see the difference, God help America.” And he further extends the mea culpa to “all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal, [you] were right all along. The Fed is indeed out of control.” Related Links: Reuters:  Gold and bonds soar as Fed’s purchases eyed Bloomberg:  Gold advances for fourth session onContinue Reading
September 27, 2010

QE2 the Moon!

After conducting “a rough analysis on how QE2 will reshape the Fed’s balance sheet,” Zero Hedge was “stunned to realize that over the next 6 months the Fed may be the net buyer of nearly $3 trillion in Treasurys, an action which will likely set off a chain of events which could result in rates dropping all the way to zero, stocks surging, and gold (and other precious metals) going from current price levels to well in the 5 digit range.” And, writes the Mad Hedge Fund Trader, “If you had any doubt about what the driver has been for gold’s meteoric rise to $1,300, take a look at the [above] chart showing the spike right at the Fed’s announcement that QE2 was in the cards.” He goes on to suggest that “Peak gold may well be upon us,” calling the current supply “not much when you have the entireContinue Reading
September 25, 2010

Gold Crosses the Line

Silver hit a 30-year high on Friday, and before settling at $1,298, gold briefly topped $1,300, which one analyst called “the line in the sand between bulls and bears.” Asking, “What’s driving $1,300 gold?,” Frank Holmes refers to a Financial Times article that cites “competitive currency devaluation” as possibly the most important driver in precious metals investing. And David Rosenberg predicts that gold “is likely to remain in this secular uptrend for quite a while longer. We’re talking years. We’re still talking $3,000/oz. Gold has made this transition this year away from being a strict commodity towards a role befitting a monetary metal that is no government’s liability.”Continue Reading
September 24, 2010

Precious Meddling?

As a Seeking Alpha post argues that “Gold bulls needn’t fear noise about government confiscating gold,” MarketWatch reports on Thursday’s Energy and Commerce subcommittee hearing on the “Precious Coins and Bullion Disclosure Act.” The hearing included testimony from Goldline’s Scott Carter (above), who defended his company’s practices and explained its advertising strategy, after a New York neurologist (above right) testified that he lost $60,000 in converting his $140,000 IRA into gold coins. The committee’s Web site has video and testimony from the hearing. Related Links: Reuters:  US gold ends up, near $1,300 as data disappoints Marketwatch: Silver back at 30-year high Silver Investing News:  Silver at $21 an ounce: Buy, sell, or hold? Daily Reckoning:  Undervalued silver in a government spending frenzy Coin News:  US Mint sales: Bullion coins robust, silver products rally ChartFacts: Thursday’s economic data supports the case for gold Financial Times: Few obstacles in path of bullionContinue Reading
September 23, 2010

Solar-Charging Silver

In his recent interview with The Gold Report, David Morgan noted that “There’s a big impetus by several governments … to install more green energy. Solar is at the top of that list. Silver plays an important part in that story.” In late June, Bloomberg reported statistics compiled for The Silver Institute, that “Half of silver demand, or 435.1 million ounces, goes into industrial applications including electrical conductors, alloys, solar panels and batteries,” compared to 12 million ounces for gold. The article cited a trade group’s estimate that in Europe, where solar is booming, installations may increase 44 percent this year, and quoted an industrial buyer of silver as saying that “Probably the biggest jump we’ve seen is in the demand for the metal for photovoltaic systems.” And China, in addition to having the world’s “largest solar-powered office building,” recently announced plans for what it’s claiming will be the world’sContinue Reading