This move in gold right now is acutely about the Middle East
“All the way to $1,440”
With all eyes on Libya and the threat of revolutionary contagion across the Arab world, gold roared past the key $1,400 level this week to just under December’s record high. What’s driving gold? “It is dominated by the Middle East fears and the weaker dollar,” said Standard Bank analyst Walter de Wet. “We think we could easily test the highs again for gold. It could go all the way to $1,440.” According to James Dailey of the TEAM Asset Strategy Fund, “This move in gold right now is acutely about the Middle East. The trade is about fear, but people are viewing it as an extension of the inflation trade.” Read more
“Nobody is looking for lower gold”
“The unrest and the fear in these countries is increasing,” said LGT Capital Management’s Bayram Dincer. “These uncertainties on the geopolitical risk side are driving the gold market. See how easily gold broke $1,390, $1,395, which were strong resistance levels, and now the $1,400 psychological level. It seems nobody is looking for lower gold prices.” Read more
$5 gas could tank our economy
If political unrest in Libya spreads to other oil-rich countries and the ensuing chaos disrupts crude production, gas prices could explode by peak summer driving season, analysts say. “If this thing escalates and there’s a good chance that there’d be a shift in supplies, $5 gas isn’t out of the question,” said Darin Newsom, senior analyst at energy tracker DTN. Deutsche Bank called the current $120 crude-oil futures price a “key threat to global growth.” The doomsday scenario here is if revolution topples the precarious monarchy in oil-rich giant Saudi Arabia. The ailing King Abdullah has just promised to spend $36 billion in emergency welfare measures to stave off riots in his nation. Will his bribe calm his desperate populace? We just don’t know. Read more
Yellow gold to outperform black gold?
Even if oil prices gain, Credit Suisse thinks bullion might do even better. “We see potential for gold to outperform oil over the coming months,” analyst Stefan Graber said. “We think an ounce of gold could potentially buy a few additional barrels of oil. This assessment is based on our positive view on gold versus a neutral view on the oil market.” Gold’s role as an inflation hedge will grow as consumer prices increase worldwide, he said. Read more
Gird up with gold during war
“Gold still represents the ultimate form of payment in the world. Germany in 1944 could buy materials during the war only with gold. Fiat money in extremis is accepted by nobody. Gold is always accepted.” So said former Federal Reserve chief Alan Greenspan in a widely known remark. “Gloom, Boom & Doom Report” publisher Marc Faber echoed Greenspan in a recent speech to investors in Bangkok. If war erupts from the metastasizing violence in the Middle East, gold and silver would be desirable investments to hold, said Faber, who is famous for predicting the 1987 stock-market crash. “The key is flexibility. We don’t know how the world will look in 10 years’ time,” he noted, saying U.S. Treasury bills might no longer be a sure bet against market volatility. Read more
Gold now carries “geopolitical premium”
“With regime change in the Middle East, we see gold rallying again,” HSBC chief commodities analyst Jim Steel said in a Feb. 22 CNBC interview. “There is no doubt there is a geopolitical premium I think in gold now. … These major geopolitical events that impact gold don’t happen all that often. We’re mostly used to watching inflation numbers, balance-of-trade issues, dollar-euro, Fed policy – things like that. … These geopolitical issues come along” rarely, Steel says, but “I think it could build a healthy premium, you know, probably for quite some time.” Watch video
“Currency of fear” feeds on uncertainty
Gold is “a currency of fear … when people see there are problems, they will tend to it,” Kingsgate CEO Gavin Thomas told CNBC on Feb. 22. “I think that these higher oil prices will bring on the specter of possible inflation. … And I think that all bodes well for gold in the near-term future.” Thomas predicts “gold will continue a long-term trend upwards.” Watch video
Domino-like debt bomb still looms
“Even without these tensions in the Middle East, we still expect a sovereign-debt crisis in the United States and in Europe, especially now with inflation rising,” Tyche executive Martin Hennecke told CNBC on Feb. 21. “Because we think there’s still this sovereign-debt crisis out there, we have maintained our high positions in precious metals, gold, and silver. … And those – while they are primarily on there as a hedge against the Western debt crisis, inflation, and on Asian demand – that at the same time also protects you somewhat from these Middle Eastern crises.” Watch video
U.S. budget disaster the next 9/11?
Libya, Egypt, Bahrain, Yemen, Algeria, Morocco, and Saudi Arabia are not the only places in the world grappling with unrest. There’s also China, whose totalitarian state is cracking down on the threat of a “Jasmine Revolution” in its borders. And then there’s Wisconsin, whose unionized state employees are vehemently resisting proposed austerity measures. On NBC’s “Meet the Press” Sunday, CNBC’s Rick Santelli compared the budget crises affecting state and federal balance sheets to a Sept. 11-type attack on the nation. “If the country is ever attacked as it was on 9/11, we all respond with a sense of urgency,” Santelli said. “What’s going on on balance sheets throughout the country is the same type of attack.” Is the tense standoff in Wisconsin just a precursor of things to come for other cash-strapped states and cities in America? Read more
Pension burdens threaten state ratings
“Cash-strapped U.S. states and cities face the prospect of downgrades after Fitch Ratings changed the way it analyses their burgeoning pension bills,” according to London’s Financial Times. The rating agency’s potential downgrades might be a catalyst for the Fed to extend its gold-friendly quantitative-easing program for a third round. Slashed credit ratings among the states also might put more pressure on the debt-ridden federal government to come to the rescue with costly bailouts. Read more
“Get the heck out” of stocks
Paul Farrell at MarketWatch rocked the Web last week with his impassioned call to end the Fed’s power monopoly. Now he’s setting a deadline for an imminent stock crash. “Get the heck out of Wall Street’s stock market casino soon, maybe as early as July 4th, and definitely get out by Christmas, because soon all the lies, lying, and liars will stop working.” Farrell notes that “the market’s just a shade above its 2000 peak. Adjusted for inflation, Wall Street stocks have lost roughly 20 percent of your retirement money the past decade. Get it? Wall Street’s a big loser the past decade. And they’ll lose another 20 percent by 2020. Why? Because 93 percent of what comes from Wall Street is suspect, can’t be trusted.” Read more
New gold high “within shouting distance”
“Bullion is now back to within shouting distance of its early December high,” notes Mark Hulbert in a MarketWatch column. “The $64,000 question now, of course, is whether gold’s rally will soon take the yellow metal into new high territory. Contrarians are betting that it will.” Noting that “the average gold timer is still allocating more than half of his gold portfolio to cash,” Hulbert says “there is a lot of sideline cash ready at a moment’s notice to be shifted into the gold market to propel gold higher.” Could the spark for that move come from the Middle East’s explosive turmoil? We don’t know. Read more
Silver’s smoking-hot streak
On a tear unseen since the notorious Hunt brothers cornered the market in 1980, silver prices hit a series of new 31-year highs this week and indeed set a new all-time record when priced in euros. By the time you read this, the white metal may have already cracked the $34 mark. Hedge funds have helped boost silver by increasing their net-long positions on the Comex in the longest streak since September. “With the Middle East deteriorating, and the threat of inflation, you’ve got the big money flowing back into silver and precious metals,” said Matt Zeman of LaSalle Futures Group. Read more
Asian demand pumping up gold
A World Gold Council report illustrates the gold rush occurring in Asia’s rapidly expanding emerging-market economies, led by China and India.
China: Gold investment in China jumped 70 percent last year and consumption by the jewelry sector gained to a record as investors stepped up purchases of the precious metal as a store of value, the council reported. Read more
India: Gold imports by India, the largest consumer, climbed to a record in 2010, driven by a surge in jewelry demand and amid expectations that the 10-year rally in prices would extend, the council said. “The rising price of gold, particularly in the latter half of the year, created a ‘virtuous circle’ of higher price expectations among Indian consumers, which fueled purchases, thereby further driving up local prices.” Read more
“The fire of the love trade”
Fear but also love motivates people to snap up gold, notes U.S. Global Investors chief Frank Holmes in analyzing the council’s report: “The love trade is significant and unique to gold. People buy gold out of love and those in emerging markets are especially amorous of the metal. In fact, the four strongest markets for gold jewelry demand (India, Hong Kong, China and Russia) accounted for 60 percent of the entire jewelry market in 2010. … If countries like China and India continue to grow by 7 to 9 percent a year, the corresponding rise in incomes should keep the fire of the love trade burning. In this scenario, gold can continue to slowly appreciate.” Read more
A “staggering” Chinese gold standard
“China’s grab for gold is accelerating at a rapid pace, and it’s raising questions about the country’s ultimate intentions,” notes Alix Steel of The Street. “It’s unknown how much of that gold was consumed by citizens or its central bank, but the question still remains: What will China do with all that gold? There is a controversial theory percolating in the gold community that China wants the yuan to become the world’s reserve currency and is buying gold and silver in order to do it. A Chinese gold standard? The idea is staggering and not to mention fraught with difficulties.” Read more
“Disgust” drives states back to gold
China’s not alone in recognizing the stability granted by gold-backed money. “Legislators in a dozen states are looking at legislation about gold- or silver-based currency, including, right now, Utah, South Carolina, Virginia and New Hampshire,” notes Ralph Benko of the American Principles Project. “States haven’t issued money for over a hundred years. So … why now? There is disgust by state legislators with the federal government’s promiscuously printing money. This reflects the views of those who wrote and adopted the United States Constitution.” Read more
Silver miner tarnishes U.S. dollar
Pan American Silver Corp., the world’s fourth-largest silver producer, said it’s shifting its currency holdings into Canadian dollars, betting the U.S. dollar may fall further. The world’s reserve currencies are struggling to maintain their value amid “ridiculous” debt levels, chief executive Geoffrey Burns said. “We diversified some of our currency holdings into Canadian dollars away from U.S. dollars to provide more stability in the event we do see continued weakness in the U.S. dollar.” Read more
Rising inflation fans gold’s flames
“One of the key forces contributing to expected gold-price strength is the acceleration in inflation now underway around the world,” writes Jeffrey Nichols of American Precious Metals Advisors. “Today’s global inflation is largely a consequence of U.S. monetary policy and the unbridled flood of dollars into the world economy. … It’s no wonder that smart savers and investors in China and India are buying hundreds of tons of gold a year – and will most likely continue to do so even as gold prices move significantly higher. … [The Fed’s monetary policy] must eventually result in a significant erosion in the greenback’s purchasing power brought on through a depreciation of the U.S. dollar in world currency markets and an acceleration of inflation here at home.” Read more
Era of getting rich in America is over
As our standard of living declines and Asia’s increases, we’re seeing a paradigm shift, and Western investors should focus on keeping wealth, not gaining it, says Dow Theory Letters publisher and gold bull Richard Russell. “Up to 2009 I think the idea in America was to make as much money as you could and to live as well as you could. The U.S. was the land of leveraging, borrowing, credit, and opportunity. From 1982 to 2007 the stock market climbed steadily higher, and those who owned stocks prospered. After 2009 it was a different story. I believe that from now on, the idea will be to hang on to as much of our wealth as we can. In other words, from here on the trick will be to avoid losing money. He who loses the least will be the winner.” Read more
“Rare collector coins in all grades” are going up
Precious metals are one solid way to preserve your wealth. And diversifying your metal holdings with rare coins can even help you grow your wealth, not just preserve it, according to Professional Coin Grading Service numismatist David Hall. “What’s going up [in price]? Rare collector coins in all grades. So you’ll see some of the early Bust coinage, some of the Liberty Seated coinage – the better dates – doing very, very well. You’ll see the extreme grades for all series doing very, very well. The nonmodern stuff, that is, the pre-1964 stuff, the pre-1965 stuff, when we had silver in our coins. That’s doing very, very well. So basically the last 12 months – very positive for rare coins. … We’re in the midst – and have been for over 10, 15 years, in my opinion – of a coin-collecting renaissance.” Read more
