The first known coins were minted in the mid-seventh century B.C. Coins revolutionized the conduct of commerce.
Alexander the Great introduced a regulated and universal coinage throughout his empire. Coins were typically engraved with the likenesses of rulers and deities, providing a historical snapshot. Coin collecting started in Renaissance Europe. Wealthy
Europeans collected Greek and Roman coinage. The United States minted its first gold coin in 1795. From then until 1933, U.S. mints produced hundreds of styles and denominations of gold, silver and other coins. Dazzling pieces of artistry and history, collectible rare coins and bullion are among the most prudent additions to any quality investment portfolio.
A collection of coins and bullion could add value and stability to a portfolio. Investing a percentage of a diversified portfolio in gold, silver and platinum could act as a hedge against inflation. Gold can be viewed as an alternative asset class. Tangible assets are usually not as susceptible to the same market pressures as stocks and bonds. Typically, gold is not correlated to either the stock or bond markets.
Gold often trades inversely to the U.S. dollar, making it a useful hedge in times of dollar depreciation. The gold supply is limited - all the gold ever mined would fit into a storage room about 55 feet long, 55 feet tall and 55 feet wide.
Bullion is a term for coins, ingots, private issue, and so on that trade below, at, or slightly above their intrinsic metal value. Only the precious metals (gold, silver, platinum, and palladium) are included as bullion. A bullion coin is a legal tender coin that trades at a slight premium to its melt value.
Examples of bullion: U.S. Gold, Platinum and Silver Eagles, Canadian Maple Leafs, South African Krugerrands. A rare coin can be determined by several factors: mintage, grade, series. Values of coins are determined by both scarcity and grade.
Set building is the practice of collecting a complete series of coins representing all the different designs of a certain U.S. coin, for instance. It provides a systematic path for the collector.
Investors have frequently found that a carefully assembled set of coins is worth substantially more than the total of its individual pieces. Well-compiled sets have also tended to be more liquid than comparable accumulations of random coins. It can provide an exciting historical treasure hunt, as well as an investment instrument.
Set building provides the investor with the opportunity to define objectives and formulate strategy. Set building can be a life-long adventure. Sets can be collected by: type (which can be any particular design or denomination), series (all dates and mints struck of a denomination) or design type, commemorative issues, and more.
A key date coin is generally considered to be the most important coin in a particular series, usually the lowest-mintage and/or the most expensive. Rarity is based on the number of specimens extant of any particular numismatic item.
For protection, investors and collectors should only buy rare U.S. coins that have been graded and certified by the three leading independent coin-grading firms: professional Coin Grading Service (PCGS), numismatic Guaranty Corporation (NGC), independent Coin Grading Company (ICG). These organizations are recognized industry-wide for their accuracy, objectivity and high standards.
These services help to make the market in numismatic coins safer and more liquid. When a coin is graded, it is immediately encased in a tamper-resistant slab and sealed with its certification number and grade displayed.
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Monday, April 24, 2006
Sunday, April 23, 2006
Gold Bull with Numerous Legs
With the gold price past the $600 mark, many have asked how long the gold bull will run. Simply put, a long way. In fact, simply put, gold will continue to run and run hard as long as the USGovt and USFed resist change, resist a recession, resist a severe decline in the USDollar, and insist on relying upon the printing press to solve its economic and financial problems. These trends are nowhere in sight for change. Gold was doubted way back when it was vaulting past the $400 mark. The $500 mark was critical, passed last summer. Extremely powerful developments reinforce the gold bull, factors which are historically significant, items for the history books. The sign posts contained rather significant painted messages written in defiant language and bold tones, indicating global shifts, such as:
* "The Chinese delink from the USDollar"
* "King Abdullah Diversifies Toward the Euro"
* "Alan Greenspan to be Succeeded by Ben Bernanke"
* "M3 Money Supply Statistic No Longer to be Published"
These are very important developments, major events, financial equivalents of serious and damaging earthquakes which work to change the financial landscape. We have just began to dance on the FOREX dance floor. Last year, gold was stepping on euro toes and yen toes, wearing golden slippers and displaying some nifty foot work. In 2003 and 2004, gold stepped on USDollar toes repeatedly and without apology. The night is young, and gold is tireless. Fat and bloated, the USDollar, euro, and yen are fat hogs, slow afoot, clumsy in foot work.
THE NEXT LEG
The next chapter for gold has other strong messages, compounding the powerful forces pushing gold up. These almost as earth shaking as the above factor messages, indicating continued global shifts, such as:
* "The USFed is Almost Done in its Tightening Cycle"
* "The Perma-War Will Cost billion$ More"
* "The Gold Cartel Faces Billion$ in Hedge Book Losses"
Don't be too sure about USFed Governors will avert a mistake in hiking a few more times. They always do, and always will. That is what they do, their reason for being. They engage in blatant attempts to control the market with their "FedSpeak BS" tactics. See the clown Fisher for his "8th inning" analogous comment last summer. Now we have Yellin talking about being near the end of the tightening cycle, "which is data dependent." In other words, the USFed still requires concurrent signals as it ignores future signal, a key indicator of their incompetence and ineptitude. What do you expect from the American Politburo freaks anyway? They are driving a giant bus and ignore signs, preferring to drive until they recognize having gone over the cliff.
War costs huge sums of money and depletes huge supplies of commodities like oil, steel, and base metals. Lately, it seems our leaders refuse to negotiate and to prefer the push toward conflict, even citing opposing faction willingness to talk as a sign of weakness and a justification to cease those talks. War is good for business, certain businesses anyway. It sure does motivate big investments in gold across the globe. The USGovt can play its silly games of taking war costs off the budget, but continue to fund them. Heck, if they remove all expensive programs from the official budget, but continue to fund them, then these clowns can claim a surplus.
The hedge book losses for the gold cartel are real. Soon we should hear about declining jewelry sales (their favorite disinformation tactic), which is great news for gold, since investment demands overwhelms jewelry demand when the gold bull roars. Stated Barrick losses are historically without precedent, with greater losses than any mining company in history. One must wonder if certain connected bank & brokerage houses have the inside track on illicit bailouts on their hedge books. See JPMorgan. Recall the M3 money supply statistic is dead, and JPMorgan has essentially merged with the US Federal Reserve. No longer can the gold cartel expect grand favors by the central banks in official gold sales. Rumblings in the European Union signal a clear unwillingness to play that stupid game. Before long, the only gold left will be in Asian hands. Then comes the decade dominated by Asia, driven off a strong bank foundation.
Why is there no public outcry for the gradual merge of state and corporate interests? How is the public interest served by government when a large corporation has its mitts in there directing policy? Do corporations have the interest of the people close to their hearts & minds? Or do they have personal enrichment, control, and power as key motives? The claim of "government by the people" appears sorely missing. The Italian Fascism model is frightening in its political direction implications, yet has been sold so easily. Their giveaway for "dirty hands" is the infamous prevalent "no bid contract" doled out all too frequently. Amidst these additional current factors, gold will continue to shine with bright luster. Wait though, let's get back to the major signposts and their major bull market messages, since they will carry the traffic on the multi-lane golden highway, the one widened last summer. They ensure the multiple year bull market will not be denied, since too many unresolvable problems persist.
THE CHINA SYNDROME
These are truly significant signposts, without precedent in modern history. The Chinese had been rumored to delink their yuan currency for so long that many within the mainstream doubted the event would ever occur. They did. Now the big rumor is that the Chinese are busy cleaning up their banking system in a preliminary maneuver to set up a gold-backed currency. They pursue the optimal currency index to store their vast horde of reserves, which are expected to top $1 trillion sometime this year. Their piggy bank has just surpassed Japan's horde, over $850 billion in size. The next two key events are the foundation of the new pan-Asian credit market and the new payment system for international commerce in an indexed currency. The Asian credit market is in its formative stages. They are deciding up on a currency, and believe an index is most appropriate. Squabbles continue, like inclusion of the Taiwan Dollar. Beijing holds some sway in this region, still resentful of Taipei's independence. Look for the Chinese yuan (based in an index) to take over in the Asian credit market denomination choice. Also, expect major major major hostility and resistance and objection and sabotage from the US authorities. International commerce, like for oil or copper or iron ore or coal or grains begs for reform in its payment system. The Asian Development Group has suggested a currency index for large scale commodity purchase settlements. The Chinese yuan is the natural choice, an evolution which seems to benefit from their route for a managed practical currency index.
By its evolution as a balanced global index based upon Asian trade, the yuan is walking a clever path to displace the USDollar without the direct "in your face" challenge and insult to the United States. Any elevation and hoist of the yuan on a global platter of respectability and utility is an implicit supplant of the USDollar, a push off the table. Such evolution is monstrously bullish for gold, and such movement is very early, even embryonic. We are in the preliminary, not advanced, stages of removal of the USDollar from its place as world currency, from its place as the only petro-currency. Gold stands as the hidden "anti-US$" in function. In time, the yuan will serve that important role. In the tumultuous process, gold will gain respect, rise in value, and take center stage. Some foresee a time when both the Chinese yuan and the Russian ruble currencys are gold-backed.
ARAB REVOLT
The Western press seems to have attributed almost no importance to the death of King Fahd, the long ailing monarch from Saudi Arabia. Not me. It marked a sea change in the Persian Gulf. The newly anointed King Abdullah is much more a friend to Europe than to the United States, and maintains a quiet deep distrust for USGovt leaders and American culture generally. Abdullah has a stronger backbone, more willing to oppose the West. Within weeks he announced a desire to balance favor between Europe and the US, in commerce and in currency reserves management. The OPEC nations surrounding the Persian Gulf have been the beneficiary of doubled income since 2003 when crude oil sold for half the price. They have not materially changed in production output, hence revenues. They have gone nuts with a construction boom, have gone nuts with a boom and (in progress) mini-bust with their stock markets. As Saudi Arabia goes, so will many nations follow, like Kuwait, Qatar, United Arab Emirates, Bahrain, Oman. These guys are close friends. Since the EuroBond offers 1% less in yield versus the USTBond, money is directed toward gold purchase.
Arabs have a longstanding love of and trust in gold. The United States, England, and Europe have not acted like saints toward Arabs over the past century. Arab royals don't exactly trust the paper they are given in exchange for all the wonderful oil, lifeblood to our economies. Arabs take two steps to avert the long arm of the Western dominance. They purchase gold in Turkey. This eludes some detection, some formal accounting, and the clear snub to London and New York. They also handle brokered purchases of USTBond in London. This sidesteps any politically awkward gestures and reactions from neighbors Arab states. They can support the USTBond or not, with some measure of privacy. The London USTreasury data becomes thoroughly mixed with hedge funds and illicit USFed agency operations. If and when the permanent war spreads in the Persian Gulf region, if and when the Iraqi Civil War intensifies, if and when the Iran nation is attacked pre-emptively, if and when the Saudi gigantic oil operation facilities are attacked, look for gold to be purchased by Arabs, and their USTBonds to be sold, and even some of their EuroBonds to be sold. Gold held in the secure confines of Turkish bullion banks is far safer than London or New York in their eyes. War favors gold.
Whether you do or don't believe the war against radical Islam is for real and justified and managed with a deft hand in a capable manner, gold is an excellent hedge in an uncertain time of growing conflict. Whether you do or don't believe the USGovt leaders resemble the Three Stooges, incapable of wiring or plumbing your 2-bedroom home, gold is an excellent hedge in a time of unprecedented waste, record deficits, and horrendous management.
WEIMAR BEN, MASTER INFLATIONIST
The whole world was given adequate notice. Ben Bernanke, who believes in the low-cost inflation solution with all his heart, has succeeded Alan Greenspan as US Federal Reserve Chairman. Ben, who never ran a business, is at the helm. Ben, who never had responsibility in a financial business, is running the USFed. Ben, who had zero banking experience under his belt, is now the leader of the US central bank. Ben, who served for two years as apprentice on the White House Council of Economic Heretics, is given full trust for his aegis. Ben, who claims that printing money costs only pennies for bill, regardless of ($1, $5, $10, $20, $50, $100, $1000) denomination, has control of that printing press. Ben, who once claimed prudence in dropping money from helicopters on household lawns, is making decisions. Woe is the USDollar.
Ben Bernanke has big shoes to fill behind Greenspan, the falsely acclaimed maestro, who gave us crisis after crisis as the bitter fruit of his guidance, followed by ample liquidity to create the next bubble after the last bubble failed to survive more than a few years. The housing bubble has begun to fizzle. No, this Ben is "Little Ben" in my mind. The name of "Big Ben" goes to Ben Roethlisberger, who has a more impressive career so far as quarterback of the Super Bowl Champion Pittsburgh Steelers. In my mind, acting as Chairman to the Princeton University Economics Department is nothing more than an exercise in longwinded apologies for a debt-based USEconomy system and a debt-backed USDollar with adjoined banking system. While much useful theory and exercise takes place in Economics classrooms and faculty offices, most is a bunch of garbage. They spend so much time altering legitimate theory and practice, adopting new nonsense which has served as a series of one plank of mythology after another. With Ben Bernanke at the helm, an avowed advocate of inflation to cure all economic ailments and to treat all ills, trust in the USDollar is sure to wane. His denial of the importance of the Treasury yield curve is his first act and deed of heresy. Gold will thrive under Little Ben's leadership of the U.S.S. Dollar, the lost ship at sea. Ben has no keen sense of the role of golden ballast on the ship decks. Disrespect leads to crises in events and crises in confidence, both of which feed gold demand.
THE DEATH OF THE MONEY METER
Late last year, arguments read by Doug Noland about the changing nature of money creation temporarily seemed convincing. He expressed his view that we live in a different world which no longer can have money be monitored and measured accurately anymore. He thought it to be no big deal that the M3 money supply series was to be discontinued. While it might be true that banks are only part of the formula nowadays, this seems like a smoke screen. Sure, mortgage agencys create new loans against properties, home builders finance new home sales, car companies finance car loans, retail vendors finance sales for home electronics purchases, finance firms finance bond speculator margin in futures contracts and in carry trades, corporations float colossal debt for operations and pensions, and more. Ok, so plenty of new money created in the form of debt comes onto the books.
An M3 statistic which is imperfect might be better than none at all. Some reasonable justification is given for the numerous other non-bank sources. Credit is originating from other non-traditional sources, not just the bank intermediaries. This is without question. With all the imported products from Asia, why not discontinue the Consumer Price Index statistic? With all the outsourced jobs to Asia and Mexico, why not discontinue the unemployment rate statistic? With the prevalent usage of mutual funds and stock accounts and granted stock options to many levels of employees, why not discontinue the savings rate statistic?
No, the terminated M3 money supply statistic can next conceal an entirely new inflation campaign. USTBonds might be purchased with printed money. Fanny Mae mortgage bonds might be purchased with printed money. S&P stock baskets might be purchased with printed money. Margin posted for gold short futures contracts or crude oil short contracts might be purchased with printed money. Heck, even General Motors and Ford vehicle output might be purchased with printed money. For that matter, thousands of properties sitting idle on the housing market might be purchased with printed money. The withheld M3 money supply statistic can next hide a multitude of inflation sins, even fraud on a grand scale with corporations merged with the USGovt.
In my opinion the USFed under Little Ben will next transfer risk from the USTreasury Bond to the USDollar from rampant inflation. One must recall that the USGovt sells debt, and their debt securities must be kept legitimate with a viable functioning market. If push comes to shove, and the USGovt is demanded to support stocks, bonds, housing, and industrial output, be sure that #1 on the list of rescued and subsidized assets is USTBonds. They are likely to support stocks with ongoing Plunge Protection Team activities. However, bonds are king. It seems the path has been laid for perhaps colossal bond monetization, under the cover of the terminated M3 series. With the Bank of Japan starting up a tightening cycle, the yen carry trade to undergo an unwind reversal, mountains of USTBonds are to be sold. On the other side of the table, with failed GM corporate bonds, and profitable credit default swaps redeemed, huge demand for USTBonds will come to the table. A storm in USTBonds is assured, with plenty of large powerful cross currents.
CONCLUSION
This gold game is only heating up. In no way is it in a final chapter, its last leg. The gold bull is in the early part of a middle stage, an important phase. Disinformation continues against the merits of gold in a disgusting consistent unethical and perverse manner. Two factors work to the benefit of gold and silver investors. IN NO WAY IS THE GREAT GOLD BULL (OR SILVER BULL) ON ITS LAST LEGS, LONG IN THE TOOTH, OR WOBBLY IN ITS GAIT. Expect to see a $700 gold price before the end of 2006, easily. Wall Street is only beginning to sense that gold is far more than an inflation hedge. They are recognizing the geopolitical threat with the stench of war constantly in the air, actively pursued. They are detecting stress in the monetary system, with the world's money printing presses overheating and straining in nonstop operations. They might actually awaken to the reality that Asia is not purchasing USTreasury Bonds anymore, despite all the data to reinforce that reality which stares them in the face. Let's hope Wall Street takes a few more years to comprehend that gold has more value than for its vacant yield. Gold has given big capital gains, in fact four times what the crappy S&P500 index has given from its low since the gold bull awakened in 2001.
As the price of crude oil, natural gas, and diesel rises, so does the cost of mining gold, silver, copper, and other crucial metals. If energy and steel prices remained flat, then mining costs would remain steady for producers. But they are not flat. Against this backdrop, gold output has barely risen by a mere 2% in 2005. The easy mine properties have been largely drained and picked clean. More challenging properties remain. A much higher gold price will be required in order to bring new gold to market, in order to offset the higher energy and construction costs. Demand rises for a host of reasons, not the least of which is the corrupted nature of money. We are fast approaching a monetary crisis, one of failed confidence in paper money. The market must work toward balance of supply and demand. Too much artificial supply has corrupted the market from gold cartel subversion. Their corrupt efforts have backfired. That phony supply is drying up. We are left with a ground swell of rising physical demand. The gold price must rise in order to achieve balance and deliver supply (gold bullion) to market at the prevailing price. Supply is losing the battle. A higher gold price awaits.
Investment opportunities react to the rising gold price. Mothballed properties come into focus, mines which were uneconomical just years ago suddenly come to the fore. A mine in Nevada or British Columbia or Peru or Mongolia or Congo or East Armpit, which offered no profit with a gold price under $550 now has profitable prospects. A mine which offered no profit with a silver price under $9 now has profitable prospects. Some have mills adjacent. These properties have stocks living in a coma, now emerging as viable and hugely profitable as investments. As the gold and silver price rises further, wave after wave in new rounds of discovered stocks are potential treasure troves for the intrepid vigilant investor. More profits lie directly ahead.
* "The Chinese delink from the USDollar"
* "King Abdullah Diversifies Toward the Euro"
* "Alan Greenspan to be Succeeded by Ben Bernanke"
* "M3 Money Supply Statistic No Longer to be Published"
These are very important developments, major events, financial equivalents of serious and damaging earthquakes which work to change the financial landscape. We have just began to dance on the FOREX dance floor. Last year, gold was stepping on euro toes and yen toes, wearing golden slippers and displaying some nifty foot work. In 2003 and 2004, gold stepped on USDollar toes repeatedly and without apology. The night is young, and gold is tireless. Fat and bloated, the USDollar, euro, and yen are fat hogs, slow afoot, clumsy in foot work.
THE NEXT LEG
The next chapter for gold has other strong messages, compounding the powerful forces pushing gold up. These almost as earth shaking as the above factor messages, indicating continued global shifts, such as:
* "The USFed is Almost Done in its Tightening Cycle"
* "The Perma-War Will Cost billion$ More"
* "The Gold Cartel Faces Billion$ in Hedge Book Losses"
Don't be too sure about USFed Governors will avert a mistake in hiking a few more times. They always do, and always will. That is what they do, their reason for being. They engage in blatant attempts to control the market with their "FedSpeak BS" tactics. See the clown Fisher for his "8th inning" analogous comment last summer. Now we have Yellin talking about being near the end of the tightening cycle, "which is data dependent." In other words, the USFed still requires concurrent signals as it ignores future signal, a key indicator of their incompetence and ineptitude. What do you expect from the American Politburo freaks anyway? They are driving a giant bus and ignore signs, preferring to drive until they recognize having gone over the cliff.
War costs huge sums of money and depletes huge supplies of commodities like oil, steel, and base metals. Lately, it seems our leaders refuse to negotiate and to prefer the push toward conflict, even citing opposing faction willingness to talk as a sign of weakness and a justification to cease those talks. War is good for business, certain businesses anyway. It sure does motivate big investments in gold across the globe. The USGovt can play its silly games of taking war costs off the budget, but continue to fund them. Heck, if they remove all expensive programs from the official budget, but continue to fund them, then these clowns can claim a surplus.
The hedge book losses for the gold cartel are real. Soon we should hear about declining jewelry sales (their favorite disinformation tactic), which is great news for gold, since investment demands overwhelms jewelry demand when the gold bull roars. Stated Barrick losses are historically without precedent, with greater losses than any mining company in history. One must wonder if certain connected bank & brokerage houses have the inside track on illicit bailouts on their hedge books. See JPMorgan. Recall the M3 money supply statistic is dead, and JPMorgan has essentially merged with the US Federal Reserve. No longer can the gold cartel expect grand favors by the central banks in official gold sales. Rumblings in the European Union signal a clear unwillingness to play that stupid game. Before long, the only gold left will be in Asian hands. Then comes the decade dominated by Asia, driven off a strong bank foundation.
Why is there no public outcry for the gradual merge of state and corporate interests? How is the public interest served by government when a large corporation has its mitts in there directing policy? Do corporations have the interest of the people close to their hearts & minds? Or do they have personal enrichment, control, and power as key motives? The claim of "government by the people" appears sorely missing. The Italian Fascism model is frightening in its political direction implications, yet has been sold so easily. Their giveaway for "dirty hands" is the infamous prevalent "no bid contract" doled out all too frequently. Amidst these additional current factors, gold will continue to shine with bright luster. Wait though, let's get back to the major signposts and their major bull market messages, since they will carry the traffic on the multi-lane golden highway, the one widened last summer. They ensure the multiple year bull market will not be denied, since too many unresolvable problems persist.
THE CHINA SYNDROME
These are truly significant signposts, without precedent in modern history. The Chinese had been rumored to delink their yuan currency for so long that many within the mainstream doubted the event would ever occur. They did. Now the big rumor is that the Chinese are busy cleaning up their banking system in a preliminary maneuver to set up a gold-backed currency. They pursue the optimal currency index to store their vast horde of reserves, which are expected to top $1 trillion sometime this year. Their piggy bank has just surpassed Japan's horde, over $850 billion in size. The next two key events are the foundation of the new pan-Asian credit market and the new payment system for international commerce in an indexed currency. The Asian credit market is in its formative stages. They are deciding up on a currency, and believe an index is most appropriate. Squabbles continue, like inclusion of the Taiwan Dollar. Beijing holds some sway in this region, still resentful of Taipei's independence. Look for the Chinese yuan (based in an index) to take over in the Asian credit market denomination choice. Also, expect major major major hostility and resistance and objection and sabotage from the US authorities. International commerce, like for oil or copper or iron ore or coal or grains begs for reform in its payment system. The Asian Development Group has suggested a currency index for large scale commodity purchase settlements. The Chinese yuan is the natural choice, an evolution which seems to benefit from their route for a managed practical currency index.
By its evolution as a balanced global index based upon Asian trade, the yuan is walking a clever path to displace the USDollar without the direct "in your face" challenge and insult to the United States. Any elevation and hoist of the yuan on a global platter of respectability and utility is an implicit supplant of the USDollar, a push off the table. Such evolution is monstrously bullish for gold, and such movement is very early, even embryonic. We are in the preliminary, not advanced, stages of removal of the USDollar from its place as world currency, from its place as the only petro-currency. Gold stands as the hidden "anti-US$" in function. In time, the yuan will serve that important role. In the tumultuous process, gold will gain respect, rise in value, and take center stage. Some foresee a time when both the Chinese yuan and the Russian ruble currencys are gold-backed.
ARAB REVOLT
The Western press seems to have attributed almost no importance to the death of King Fahd, the long ailing monarch from Saudi Arabia. Not me. It marked a sea change in the Persian Gulf. The newly anointed King Abdullah is much more a friend to Europe than to the United States, and maintains a quiet deep distrust for USGovt leaders and American culture generally. Abdullah has a stronger backbone, more willing to oppose the West. Within weeks he announced a desire to balance favor between Europe and the US, in commerce and in currency reserves management. The OPEC nations surrounding the Persian Gulf have been the beneficiary of doubled income since 2003 when crude oil sold for half the price. They have not materially changed in production output, hence revenues. They have gone nuts with a construction boom, have gone nuts with a boom and (in progress) mini-bust with their stock markets. As Saudi Arabia goes, so will many nations follow, like Kuwait, Qatar, United Arab Emirates, Bahrain, Oman. These guys are close friends. Since the EuroBond offers 1% less in yield versus the USTBond, money is directed toward gold purchase.
Arabs have a longstanding love of and trust in gold. The United States, England, and Europe have not acted like saints toward Arabs over the past century. Arab royals don't exactly trust the paper they are given in exchange for all the wonderful oil, lifeblood to our economies. Arabs take two steps to avert the long arm of the Western dominance. They purchase gold in Turkey. This eludes some detection, some formal accounting, and the clear snub to London and New York. They also handle brokered purchases of USTBond in London. This sidesteps any politically awkward gestures and reactions from neighbors Arab states. They can support the USTBond or not, with some measure of privacy. The London USTreasury data becomes thoroughly mixed with hedge funds and illicit USFed agency operations. If and when the permanent war spreads in the Persian Gulf region, if and when the Iraqi Civil War intensifies, if and when the Iran nation is attacked pre-emptively, if and when the Saudi gigantic oil operation facilities are attacked, look for gold to be purchased by Arabs, and their USTBonds to be sold, and even some of their EuroBonds to be sold. Gold held in the secure confines of Turkish bullion banks is far safer than London or New York in their eyes. War favors gold.
Whether you do or don't believe the war against radical Islam is for real and justified and managed with a deft hand in a capable manner, gold is an excellent hedge in an uncertain time of growing conflict. Whether you do or don't believe the USGovt leaders resemble the Three Stooges, incapable of wiring or plumbing your 2-bedroom home, gold is an excellent hedge in a time of unprecedented waste, record deficits, and horrendous management.
WEIMAR BEN, MASTER INFLATIONIST
The whole world was given adequate notice. Ben Bernanke, who believes in the low-cost inflation solution with all his heart, has succeeded Alan Greenspan as US Federal Reserve Chairman. Ben, who never ran a business, is at the helm. Ben, who never had responsibility in a financial business, is running the USFed. Ben, who had zero banking experience under his belt, is now the leader of the US central bank. Ben, who served for two years as apprentice on the White House Council of Economic Heretics, is given full trust for his aegis. Ben, who claims that printing money costs only pennies for bill, regardless of ($1, $5, $10, $20, $50, $100, $1000) denomination, has control of that printing press. Ben, who once claimed prudence in dropping money from helicopters on household lawns, is making decisions. Woe is the USDollar.
Ben Bernanke has big shoes to fill behind Greenspan, the falsely acclaimed maestro, who gave us crisis after crisis as the bitter fruit of his guidance, followed by ample liquidity to create the next bubble after the last bubble failed to survive more than a few years. The housing bubble has begun to fizzle. No, this Ben is "Little Ben" in my mind. The name of "Big Ben" goes to Ben Roethlisberger, who has a more impressive career so far as quarterback of the Super Bowl Champion Pittsburgh Steelers. In my mind, acting as Chairman to the Princeton University Economics Department is nothing more than an exercise in longwinded apologies for a debt-based USEconomy system and a debt-backed USDollar with adjoined banking system. While much useful theory and exercise takes place in Economics classrooms and faculty offices, most is a bunch of garbage. They spend so much time altering legitimate theory and practice, adopting new nonsense which has served as a series of one plank of mythology after another. With Ben Bernanke at the helm, an avowed advocate of inflation to cure all economic ailments and to treat all ills, trust in the USDollar is sure to wane. His denial of the importance of the Treasury yield curve is his first act and deed of heresy. Gold will thrive under Little Ben's leadership of the U.S.S. Dollar, the lost ship at sea. Ben has no keen sense of the role of golden ballast on the ship decks. Disrespect leads to crises in events and crises in confidence, both of which feed gold demand.
THE DEATH OF THE MONEY METER
Late last year, arguments read by Doug Noland about the changing nature of money creation temporarily seemed convincing. He expressed his view that we live in a different world which no longer can have money be monitored and measured accurately anymore. He thought it to be no big deal that the M3 money supply series was to be discontinued. While it might be true that banks are only part of the formula nowadays, this seems like a smoke screen. Sure, mortgage agencys create new loans against properties, home builders finance new home sales, car companies finance car loans, retail vendors finance sales for home electronics purchases, finance firms finance bond speculator margin in futures contracts and in carry trades, corporations float colossal debt for operations and pensions, and more. Ok, so plenty of new money created in the form of debt comes onto the books.
An M3 statistic which is imperfect might be better than none at all. Some reasonable justification is given for the numerous other non-bank sources. Credit is originating from other non-traditional sources, not just the bank intermediaries. This is without question. With all the imported products from Asia, why not discontinue the Consumer Price Index statistic? With all the outsourced jobs to Asia and Mexico, why not discontinue the unemployment rate statistic? With the prevalent usage of mutual funds and stock accounts and granted stock options to many levels of employees, why not discontinue the savings rate statistic?
No, the terminated M3 money supply statistic can next conceal an entirely new inflation campaign. USTBonds might be purchased with printed money. Fanny Mae mortgage bonds might be purchased with printed money. S&P stock baskets might be purchased with printed money. Margin posted for gold short futures contracts or crude oil short contracts might be purchased with printed money. Heck, even General Motors and Ford vehicle output might be purchased with printed money. For that matter, thousands of properties sitting idle on the housing market might be purchased with printed money. The withheld M3 money supply statistic can next hide a multitude of inflation sins, even fraud on a grand scale with corporations merged with the USGovt.
In my opinion the USFed under Little Ben will next transfer risk from the USTreasury Bond to the USDollar from rampant inflation. One must recall that the USGovt sells debt, and their debt securities must be kept legitimate with a viable functioning market. If push comes to shove, and the USGovt is demanded to support stocks, bonds, housing, and industrial output, be sure that #1 on the list of rescued and subsidized assets is USTBonds. They are likely to support stocks with ongoing Plunge Protection Team activities. However, bonds are king. It seems the path has been laid for perhaps colossal bond monetization, under the cover of the terminated M3 series. With the Bank of Japan starting up a tightening cycle, the yen carry trade to undergo an unwind reversal, mountains of USTBonds are to be sold. On the other side of the table, with failed GM corporate bonds, and profitable credit default swaps redeemed, huge demand for USTBonds will come to the table. A storm in USTBonds is assured, with plenty of large powerful cross currents.
CONCLUSION
This gold game is only heating up. In no way is it in a final chapter, its last leg. The gold bull is in the early part of a middle stage, an important phase. Disinformation continues against the merits of gold in a disgusting consistent unethical and perverse manner. Two factors work to the benefit of gold and silver investors. IN NO WAY IS THE GREAT GOLD BULL (OR SILVER BULL) ON ITS LAST LEGS, LONG IN THE TOOTH, OR WOBBLY IN ITS GAIT. Expect to see a $700 gold price before the end of 2006, easily. Wall Street is only beginning to sense that gold is far more than an inflation hedge. They are recognizing the geopolitical threat with the stench of war constantly in the air, actively pursued. They are detecting stress in the monetary system, with the world's money printing presses overheating and straining in nonstop operations. They might actually awaken to the reality that Asia is not purchasing USTreasury Bonds anymore, despite all the data to reinforce that reality which stares them in the face. Let's hope Wall Street takes a few more years to comprehend that gold has more value than for its vacant yield. Gold has given big capital gains, in fact four times what the crappy S&P500 index has given from its low since the gold bull awakened in 2001.
As the price of crude oil, natural gas, and diesel rises, so does the cost of mining gold, silver, copper, and other crucial metals. If energy and steel prices remained flat, then mining costs would remain steady for producers. But they are not flat. Against this backdrop, gold output has barely risen by a mere 2% in 2005. The easy mine properties have been largely drained and picked clean. More challenging properties remain. A much higher gold price will be required in order to bring new gold to market, in order to offset the higher energy and construction costs. Demand rises for a host of reasons, not the least of which is the corrupted nature of money. We are fast approaching a monetary crisis, one of failed confidence in paper money. The market must work toward balance of supply and demand. Too much artificial supply has corrupted the market from gold cartel subversion. Their corrupt efforts have backfired. That phony supply is drying up. We are left with a ground swell of rising physical demand. The gold price must rise in order to achieve balance and deliver supply (gold bullion) to market at the prevailing price. Supply is losing the battle. A higher gold price awaits.
Investment opportunities react to the rising gold price. Mothballed properties come into focus, mines which were uneconomical just years ago suddenly come to the fore. A mine in Nevada or British Columbia or Peru or Mongolia or Congo or East Armpit, which offered no profit with a gold price under $550 now has profitable prospects. A mine which offered no profit with a silver price under $9 now has profitable prospects. Some have mills adjacent. These properties have stocks living in a coma, now emerging as viable and hugely profitable as investments. As the gold and silver price rises further, wave after wave in new rounds of discovered stocks are potential treasure troves for the intrepid vigilant investor. More profits lie directly ahead.
Wednesday, April 19, 2006
My Gold and Silver Price Prediction
By year end, gold should hit USD$690 and silver USD$20. So what are you waiting for? This is the chance of a life time. Buy now and reap the profit. If you are into shares, but Silver Wheaton (SLW). Do it now while the price is still cheap!
I See a Silver Moon Rising
On January 28th, here is how I responded on a public forum to someone who wondered aloud as to whether silver might break through the $10 price level by the end of 2006: "This year!?! How about this next week? $20 silver by year end, perhaps even summer, is looking more and more likely to me. And just think, if it goes there then you will be able to say to yourself: 'I did know what would happen!' If it does dip back down at any point, back up the truck because you won't get another chance. History will show today's price to have been a bargain and last year's price as a ridiculous aberration, a result of illegal government market rigging. Mark my words well."
Y'know, when your investments are going your way, it is easy to make the mistake of believing you are a financial wizard. I harbor no such illusions, despite my BA in Finance, MBA in Accounting, law degree and the fact that, at one time, I aspired to become a Specialist (stock exchange market maker) on Wall Street. I've lost way too much money over the past decade.
What is happening today has been obvious for over ten years - that was just about the time that the Plunge Protection Team heaved into action, a response to the Reagan and Bush excesses, all of which continued in spades under Clinton. For the next eight years or so, all my accounting and financial analyst training and experience told me one thing while the markets did exactly the opposite. I lost a lot of money during that time; first in S&P futures, but more recently in contrarian funds like BEARX. For that, I have mightily damned Clinton, Bush and, especially, Greenspan.
Now, however, market forces have grown too large for even the mighty central banking oligopoly to control... except the general level of the stock market, of course. Inflate the money supply as Easy Al and WhirlyBen have done and you guarantee the market never has to decline, regardless of what may be going on elsewhere. Of course, you end up destroying the value of your currency, but nobody ever got fired for doing that.
I give up. Now I expect the stock market never again to decline, at least not for long. However, an 11,000-plus Dow in the future's dog dollars is... how much, again? And your house - suppose its price never goes down, but the purchasing power of today's dollar goes to 10 cents due to WhirlyBen's helicopter-based monetary policy... doesn't that look a lot like the 90% real estate price declines of Depression I?
About that Jan 28 forum posting: Silver actually took two weeks to hit $10. Last week, Silver vaulted over $11, then hit a high spot bid close of $11.54. At the end of the week, though other metals got hammered in the PPT's predictable fashion, silver dipped only a nickel.
Do I smell a correction in the air? Maybe. Or, maybe this is the big wave, at last. We will see. But, this isn't day trading. You've got to be in the game to play the game, so think twice before taking profits. As for myself, I think silver is a no-brainer long-term hold. And gold, platinum, palladium and all the base metals. All commodities, in fact. But, especially, silver.
If the economy goes south, silver goes up as people retreat to it as a hedge.
If the economy goes up or sideways, silver goes up due to industrial demand and the new EFTs.
If we go to war against Iran, silver goes up. If we don't go to war, silver goes up.
If Bush gets impeached (be still, my beating heart), silver goes up. If Bush continues as the Clown-in-Chief, silver goes up.
If the dollar crashes, silver launches Moonward.
Only if the dollar strengthens in the face of both the massive debt buildup that has been occurring and foreign rejection of the dollar's role as the world's reserve currency, does silver maybe decline some... and, in the immortal words of Clint Eastwood, that ain't gonna happen. WhirlyBen Bernanke said so, loud and clear. A stronger dollar will require higher interest rates - much higher interest rates - and economic pain unlike anything ever imagined by anybody alive today in America whose first language is English. Pain which will cause a rush to silver, among other things.
As I said: a no-brainer.
When I wrote the chapter entitled "Money's End Game: Depression II," for my book, Defensive Racism, I made a strong pitch for silver, even over gold. Silver then was at about $4.50 an ounce and gold was hovering around $300 per ounce. In that chapter, I summarized my detailed analysis as to why I thought gold would skyrocket, saying "I believe gold will spike to as much as 3 or 4 thousand dollars per ounce in terms of today's (2004) dollar, no later than 2010 and probably much sooner, then settle in at around $1500." You see, I was hedging my bet, at the behest of one early proofreader - I actually thought (and still do) gold would/will spike to $10,000, then settle in at around $3,000 to $5,000 in 2004 dollars (not tomorrow's dog dollars, either).
Two years ago, in that same chapter, I said the following about silver: "Silver, in particular, seems poised for a serious breakout once the rigging stops, as stop it inevitably must. Though bulky to store and handle, silver actually is a much better bet than gold."
Last fall, on October 7, once again I pitched silver, via "Peak Silver," in which I stated: "Silver's relative scarcity is a vitally-important concept that simply has yet to sink into the minds of almost everybody in the world today. Else, why does silver trade for only $7 and change per ounce, versus nearly $470 per ounce of gold? Stand by, because all that is about to change." At that point, I traded my gold for silver and recommended that others do the same. Since then, gold has climbed 24%, a remarkable performance, while silver has shot up an astounding 60%. I concluded my article with the following observation: "To the Moon, Alice. That's where the price of silver is headed, now that we have hit Peak Silver. To the Moon."
How high is the Silver Moon? We barely have attained low orbit, folks - well below the deadly Van Allen radiation belt. We still are retracing the steps of silver held back by artificial government manipulation. Next comes the increase due to rarity, vis-a-vis gold, not to mention industrial shortages. Finally, when Depression II really takes hold (unemployment will go from the current real 12% to beyond last century's Depression I mark of 25%), the premium of silver as a refuge will go into effect, thus the relevance of the song snippet recited at the outset of this piece.
People who spoke of $100 silver (again, not in tomorrow's dog dollars, either) used to be seen as loons. No more. Well, at least, not so much.
On January 28, in "Paper Bad - Metal Good," once again I recommended silver, as its spot price closed at $9.57 bid, up about a dollar from a month earlier. Last week, of course, it closed up almost another $2 per ounce since the end of January. That's a 2006 "run-rate" of a buck a month. Lessee now, December 31 price of $8.50 plus $1 times 12 months ... ... hmmmmm... .why... .that's $20 and change! Hey - am I psychotic, or what?
If you haven't yet bought silver with every spare dollar you can scrape up, I can only ask when you're going to trust the force, Luke. Last summer, despite the worried look in my wife's eyes, I refinanced our house mortgage, taking out $100,000, all of which I invested in gold, silver and palladium stocks. That $100,000 has become $250,000 today. I expect it to pay off the mortgage altogether before summer's end. Once again, I am her knight in shining armor.
Under WhirlyBen, the dollar easily could slip to half its current purchasing power by this time next year. Guess what happens to silver in that case?
Another clear tip: most analysts are, as always, calling for a major correction in precious metals and screaming, "Sell, sell, sell... " Lessee now, they're the same ones who always get us to buy high and sell low, now, aren't they? The ones who get paid to shovel us that dreck. I must be doing God's work here, because there is no way I get paid for what I tell you.
If there is another correction, that is all that it will be. Remember that the word correction implies an eventual, if not quick, recovery, usually to higher levels. Don't try to day trade metals. This is a loooonnnnnng bull market for metals that we just recently entered, make no mistake. So long, in fact, that I doubt I will outlive it.
I'll say it again: $20 per ounce silver by year's end. Mark my words well. I'm willing to be wrong, but I don't think that will happen.
Y'know, when your investments are going your way, it is easy to make the mistake of believing you are a financial wizard. I harbor no such illusions, despite my BA in Finance, MBA in Accounting, law degree and the fact that, at one time, I aspired to become a Specialist (stock exchange market maker) on Wall Street. I've lost way too much money over the past decade.
What is happening today has been obvious for over ten years - that was just about the time that the Plunge Protection Team heaved into action, a response to the Reagan and Bush excesses, all of which continued in spades under Clinton. For the next eight years or so, all my accounting and financial analyst training and experience told me one thing while the markets did exactly the opposite. I lost a lot of money during that time; first in S&P futures, but more recently in contrarian funds like BEARX. For that, I have mightily damned Clinton, Bush and, especially, Greenspan.
Now, however, market forces have grown too large for even the mighty central banking oligopoly to control... except the general level of the stock market, of course. Inflate the money supply as Easy Al and WhirlyBen have done and you guarantee the market never has to decline, regardless of what may be going on elsewhere. Of course, you end up destroying the value of your currency, but nobody ever got fired for doing that.
I give up. Now I expect the stock market never again to decline, at least not for long. However, an 11,000-plus Dow in the future's dog dollars is... how much, again? And your house - suppose its price never goes down, but the purchasing power of today's dollar goes to 10 cents due to WhirlyBen's helicopter-based monetary policy... doesn't that look a lot like the 90% real estate price declines of Depression I?
About that Jan 28 forum posting: Silver actually took two weeks to hit $10. Last week, Silver vaulted over $11, then hit a high spot bid close of $11.54. At the end of the week, though other metals got hammered in the PPT's predictable fashion, silver dipped only a nickel.
Do I smell a correction in the air? Maybe. Or, maybe this is the big wave, at last. We will see. But, this isn't day trading. You've got to be in the game to play the game, so think twice before taking profits. As for myself, I think silver is a no-brainer long-term hold. And gold, platinum, palladium and all the base metals. All commodities, in fact. But, especially, silver.
If the economy goes south, silver goes up as people retreat to it as a hedge.
If the economy goes up or sideways, silver goes up due to industrial demand and the new EFTs.
If we go to war against Iran, silver goes up. If we don't go to war, silver goes up.
If Bush gets impeached (be still, my beating heart), silver goes up. If Bush continues as the Clown-in-Chief, silver goes up.
If the dollar crashes, silver launches Moonward.
Only if the dollar strengthens in the face of both the massive debt buildup that has been occurring and foreign rejection of the dollar's role as the world's reserve currency, does silver maybe decline some... and, in the immortal words of Clint Eastwood, that ain't gonna happen. WhirlyBen Bernanke said so, loud and clear. A stronger dollar will require higher interest rates - much higher interest rates - and economic pain unlike anything ever imagined by anybody alive today in America whose first language is English. Pain which will cause a rush to silver, among other things.
As I said: a no-brainer.
When I wrote the chapter entitled "Money's End Game: Depression II," for my book, Defensive Racism, I made a strong pitch for silver, even over gold. Silver then was at about $4.50 an ounce and gold was hovering around $300 per ounce. In that chapter, I summarized my detailed analysis as to why I thought gold would skyrocket, saying "I believe gold will spike to as much as 3 or 4 thousand dollars per ounce in terms of today's (2004) dollar, no later than 2010 and probably much sooner, then settle in at around $1500." You see, I was hedging my bet, at the behest of one early proofreader - I actually thought (and still do) gold would/will spike to $10,000, then settle in at around $3,000 to $5,000 in 2004 dollars (not tomorrow's dog dollars, either).
Two years ago, in that same chapter, I said the following about silver: "Silver, in particular, seems poised for a serious breakout once the rigging stops, as stop it inevitably must. Though bulky to store and handle, silver actually is a much better bet than gold."
Last fall, on October 7, once again I pitched silver, via "Peak Silver," in which I stated: "Silver's relative scarcity is a vitally-important concept that simply has yet to sink into the minds of almost everybody in the world today. Else, why does silver trade for only $7 and change per ounce, versus nearly $470 per ounce of gold? Stand by, because all that is about to change." At that point, I traded my gold for silver and recommended that others do the same. Since then, gold has climbed 24%, a remarkable performance, while silver has shot up an astounding 60%. I concluded my article with the following observation: "To the Moon, Alice. That's where the price of silver is headed, now that we have hit Peak Silver. To the Moon."
How high is the Silver Moon? We barely have attained low orbit, folks - well below the deadly Van Allen radiation belt. We still are retracing the steps of silver held back by artificial government manipulation. Next comes the increase due to rarity, vis-a-vis gold, not to mention industrial shortages. Finally, when Depression II really takes hold (unemployment will go from the current real 12% to beyond last century's Depression I mark of 25%), the premium of silver as a refuge will go into effect, thus the relevance of the song snippet recited at the outset of this piece.
People who spoke of $100 silver (again, not in tomorrow's dog dollars, either) used to be seen as loons. No more. Well, at least, not so much.
On January 28, in "Paper Bad - Metal Good," once again I recommended silver, as its spot price closed at $9.57 bid, up about a dollar from a month earlier. Last week, of course, it closed up almost another $2 per ounce since the end of January. That's a 2006 "run-rate" of a buck a month. Lessee now, December 31 price of $8.50 plus $1 times 12 months ... ... hmmmmm... .why... .that's $20 and change! Hey - am I psychotic, or what?
If you haven't yet bought silver with every spare dollar you can scrape up, I can only ask when you're going to trust the force, Luke. Last summer, despite the worried look in my wife's eyes, I refinanced our house mortgage, taking out $100,000, all of which I invested in gold, silver and palladium stocks. That $100,000 has become $250,000 today. I expect it to pay off the mortgage altogether before summer's end. Once again, I am her knight in shining armor.
Under WhirlyBen, the dollar easily could slip to half its current purchasing power by this time next year. Guess what happens to silver in that case?
Another clear tip: most analysts are, as always, calling for a major correction in precious metals and screaming, "Sell, sell, sell... " Lessee now, they're the same ones who always get us to buy high and sell low, now, aren't they? The ones who get paid to shovel us that dreck. I must be doing God's work here, because there is no way I get paid for what I tell you.
If there is another correction, that is all that it will be. Remember that the word correction implies an eventual, if not quick, recovery, usually to higher levels. Don't try to day trade metals. This is a loooonnnnnng bull market for metals that we just recently entered, make no mistake. So long, in fact, that I doubt I will outlive it.
I'll say it again: $20 per ounce silver by year's end. Mark my words well. I'm willing to be wrong, but I don't think that will happen.
Indian Gold Demand/Oil Crisis
Indian Demand
The Indian economy itself continues to enjoy growing wealth. A holding back of investment into gold has been because of the price. The enrichment of all Indians will over the longer term, be to the benefit of the gold market. The acquisition of wealth will lead to greater consumer goods being purchased, but gold is the destination of savings and investments away from the visible economy too, so gold will remain a major feature of Indian's lives.
As the wedding season kicked off on the 14th April, we expect the break through the Rs. 27,000 to spur buying, as the realisation that the high prices are here to stay. Yes, there is dishoarding and it is growing. Indian demand has reached 1,000 tonnes a year in the past of which 850 tonnes was imported previously. Imports this year are close to zero and even now wedding purchases of gold are down 30 to 50% so far, but that leas 50 - 70% of normal gold buying continuing. This could well lead to Indian imports even below 400 tonnes this year if this continues, but this is clearly not slowing the price rise of gold.
Those staying out of the market have and will miss out on these rises unless they change their stance. It appears that small retailers and their clients will adjust their view, so we do expect them to return to the market once they realise that prices are not going to come down.
How can we be so certain? A family Elder in India is cautious in the face of the price rises in the market. Imagine him going home and telling his wife and daughter that because the gold price has risen 20 or 30% he is going to break the age-old tradition of buying gold for the daughter on her wedding day to provide financial security for the couple. He would risk a lynching for sure. No, we expect that after six months of waiting, he will go to the market and buy gold, albeit in smaller volumes. There are signs that this is now happening.
One dealer said the current prices were sustainable. "People now have a little more confidence in high prices," said one dealer in Mumbai. Consumers are used to high prices it seems?
The Oil Crisis
Perhaps this title is an understatement, because we are facing far more than simply an oil crisis. The difference between the price of Brent Crude and West Texas is disappearing as supplies are rapidly being overtaken by demand.
The capacity cushion in the entire oil industry was at 1.7 million barrels, 1.5 million of which sits with OPEC. We believe this has dropped to perhaps below 1 million barrels per day by now and dropping fast. The questions we have to ask now are:
1. The interruption in supplies from the Nigerian Delta region are continuing, that's up to 600,000 barrels down on global supplies. What will happen if supplies from Nigeria, Iran or places like Venezuela are interrupted?
2. Chad is threatening to hold back 160,000 barrels a day.
3. What if suppliers turn to exclusive contracts with individual nations like China to the detriment of other buyers?
4. To what extent will individual nations go to, to secure their own supplies of oil?
5. Just how far will the U.S. go to, to ensure continued supplies from the Middle East?
Clearly we are on the brink of a global oil shortage.
Iran
A strike against Iran is close to a certainty now. Few doubt this it seems. But we have to ask why? Yes, the nuclear enrichment programme is a focal point, but far more is at stake here. And we are not talking about political factors or nuclear threats. We are talking of the consequences of these actions. We are not here to moralise, to justify or support or oppose any of these actions. We are here to help our Subscribers assess the consequences and their effect on the gold market primarily, through the events that take place in this globe of ours.
One of the immediate consequences is rising levels of tension, as war raises its ugly head. Should there be a strike against Iran's nuclear facilities, Iran is unable to react, effectively, militarily. Their 'revenge' will probably only be seen in its control of its own oil supplies. It has always had the option of diverting all its production to the East, to attempt to keep the oil price rising. But such ploys will lead to three figure oil prices and elevated levels of global tension.
On top of this the possibility of sectarian violence lies ready to persuade the Middle East in its entirety, to expand sectarian violence, causing supply ruptures thereby eliminating any remaining surpluses.
The Indian economy itself continues to enjoy growing wealth. A holding back of investment into gold has been because of the price. The enrichment of all Indians will over the longer term, be to the benefit of the gold market. The acquisition of wealth will lead to greater consumer goods being purchased, but gold is the destination of savings and investments away from the visible economy too, so gold will remain a major feature of Indian's lives.
As the wedding season kicked off on the 14th April, we expect the break through the Rs. 27,000 to spur buying, as the realisation that the high prices are here to stay. Yes, there is dishoarding and it is growing. Indian demand has reached 1,000 tonnes a year in the past of which 850 tonnes was imported previously. Imports this year are close to zero and even now wedding purchases of gold are down 30 to 50% so far, but that leas 50 - 70% of normal gold buying continuing. This could well lead to Indian imports even below 400 tonnes this year if this continues, but this is clearly not slowing the price rise of gold.
Those staying out of the market have and will miss out on these rises unless they change their stance. It appears that small retailers and their clients will adjust their view, so we do expect them to return to the market once they realise that prices are not going to come down.
How can we be so certain? A family Elder in India is cautious in the face of the price rises in the market. Imagine him going home and telling his wife and daughter that because the gold price has risen 20 or 30% he is going to break the age-old tradition of buying gold for the daughter on her wedding day to provide financial security for the couple. He would risk a lynching for sure. No, we expect that after six months of waiting, he will go to the market and buy gold, albeit in smaller volumes. There are signs that this is now happening.
One dealer said the current prices were sustainable. "People now have a little more confidence in high prices," said one dealer in Mumbai. Consumers are used to high prices it seems?
The Oil Crisis
Perhaps this title is an understatement, because we are facing far more than simply an oil crisis. The difference between the price of Brent Crude and West Texas is disappearing as supplies are rapidly being overtaken by demand.
The capacity cushion in the entire oil industry was at 1.7 million barrels, 1.5 million of which sits with OPEC. We believe this has dropped to perhaps below 1 million barrels per day by now and dropping fast. The questions we have to ask now are:
1. The interruption in supplies from the Nigerian Delta region are continuing, that's up to 600,000 barrels down on global supplies. What will happen if supplies from Nigeria, Iran or places like Venezuela are interrupted?
2. Chad is threatening to hold back 160,000 barrels a day.
3. What if suppliers turn to exclusive contracts with individual nations like China to the detriment of other buyers?
4. To what extent will individual nations go to, to secure their own supplies of oil?
5. Just how far will the U.S. go to, to ensure continued supplies from the Middle East?
Clearly we are on the brink of a global oil shortage.
Iran
A strike against Iran is close to a certainty now. Few doubt this it seems. But we have to ask why? Yes, the nuclear enrichment programme is a focal point, but far more is at stake here. And we are not talking about political factors or nuclear threats. We are talking of the consequences of these actions. We are not here to moralise, to justify or support or oppose any of these actions. We are here to help our Subscribers assess the consequences and their effect on the gold market primarily, through the events that take place in this globe of ours.
One of the immediate consequences is rising levels of tension, as war raises its ugly head. Should there be a strike against Iran's nuclear facilities, Iran is unable to react, effectively, militarily. Their 'revenge' will probably only be seen in its control of its own oil supplies. It has always had the option of diverting all its production to the East, to attempt to keep the oil price rising. But such ploys will lead to three figure oil prices and elevated levels of global tension.
On top of this the possibility of sectarian violence lies ready to persuade the Middle East in its entirety, to expand sectarian violence, causing supply ruptures thereby eliminating any remaining surpluses.
For Gold, Everything's Coming Up Roses
Gold bugs' only problem on Monday was trying to determine which of a myriad of bullish factors best explain yet another move to fresh 25-year highs. The usual suspects -- inflation, geopolitical tensions, and a weak dollar -- were all present after a three-day weekend.
Most visibly, crude oil topped $70 a barrel amid heightened concerns about Iran's nuclear ambitions. Crude finished the session on a gain of $1.08 at $70.40 a barrel.
Gold for June delivery surged $18.70, or 3.1%, to $618.80 an ounce, off an earlier 25-year high at $619.30. Other metals followed gold's lead, with silver rising 51 cents to $13.36 an ounce, off a 22-year high of $13.38. Copper finished up 7.95 cents at $2.895 an ounce, after hitting yet another all-time high at $2.935.
Ali Larijani, Iran's National Security Council Secretary, said Western requests that Iran stop its nuclear-enrichment program are "illogical," according to Iranian news agency ISNA.
The standoff between Iran, the world's fourth-largest producer of crude oil, and Western countries has sparked concern over supply disruption. Crude oil prices are at levels unseen since last September when Hurricane Katrina disturbed Gulf Coast production.
Gold's surge so far this year has been fueled both by rising geopolitical tensions, as the precious metal serves as a safe haven, and by the inflationary pressures from surging energy prices, as gold also acts as a hedge against inflation.
Other metals have mostly followed gold's lead, but with their own twists. Silver has been surging even more amid expectations that a soon-to-be-launched exchange-traded fund (ETF) will boost demand for the metal. The fund, much like the streetTRACKS Gold (GLD:NYSE - commentary - research - Cramer's Take) ETF, should make investing in the commodity easier for retail investors.
Copper, meanwhile, has reached new highs amid continued signs of global economic growth.
China reported first-quarter GDP growth of 10.2% on Friday, which sent copper sharply higher while U.S. markets were closed, according to Nell Sloane, metals analyst at NSFutures.com. "It certainly feels like the flow of money toward all metals is accelerating," she wrote in her daily commentary.
Gold and metals, which are dollar-denominated, also received a boost Monday from dollar weakness. A weak greenback normally boosts the value of dollar-denominated commodities, as it takes more dollars to buy the same amount of goods.
The dollar index, which measures the U.S. currency vs. most key world currencies, fell 1% Monday. The drop came after a Wall Street Journal article on Friday suggested that the Federal Reserve is not committed to hiking interest rates beyond May 10.
Markets are also eagerly awaiting the release of the minutes from the Fed's March 28 meeting, due Tuesday, which might provide clues about the intentions of central bankers.
Gold bugs have long speculated that a sharp slowdown in the U.S. economy will weaken the dollar this year, further boosting the precious metal's value.
Those theories appeared validated after more bearish news from the U.S. housing market. The National Association of Home Builders said its housing market index dropped to 50 in April, its lowest level in four and a half years.
So far, the dollar has remained supported by the Fed's 15 successive rate hikes since June 2004. But once the Fed stops, the dollar will have to weaken to rebalance the soaring U.S. current account deficit, gold bugs believe.
What has kept the dollar afloat to date has been continued inflows of foreign capital into U.S. assets -- providing the "funding" of the current account deficit. On that front, the dollar received support on Monday after a report showed foreign investment into U.S. assets had increased in February.
Most visibly, crude oil topped $70 a barrel amid heightened concerns about Iran's nuclear ambitions. Crude finished the session on a gain of $1.08 at $70.40 a barrel.
Gold for June delivery surged $18.70, or 3.1%, to $618.80 an ounce, off an earlier 25-year high at $619.30. Other metals followed gold's lead, with silver rising 51 cents to $13.36 an ounce, off a 22-year high of $13.38. Copper finished up 7.95 cents at $2.895 an ounce, after hitting yet another all-time high at $2.935.
Ali Larijani, Iran's National Security Council Secretary, said Western requests that Iran stop its nuclear-enrichment program are "illogical," according to Iranian news agency ISNA.
The standoff between Iran, the world's fourth-largest producer of crude oil, and Western countries has sparked concern over supply disruption. Crude oil prices are at levels unseen since last September when Hurricane Katrina disturbed Gulf Coast production.
Gold's surge so far this year has been fueled both by rising geopolitical tensions, as the precious metal serves as a safe haven, and by the inflationary pressures from surging energy prices, as gold also acts as a hedge against inflation.
Other metals have mostly followed gold's lead, but with their own twists. Silver has been surging even more amid expectations that a soon-to-be-launched exchange-traded fund (ETF) will boost demand for the metal. The fund, much like the streetTRACKS Gold (GLD:NYSE - commentary - research - Cramer's Take) ETF, should make investing in the commodity easier for retail investors.
Copper, meanwhile, has reached new highs amid continued signs of global economic growth.
China reported first-quarter GDP growth of 10.2% on Friday, which sent copper sharply higher while U.S. markets were closed, according to Nell Sloane, metals analyst at NSFutures.com. "It certainly feels like the flow of money toward all metals is accelerating," she wrote in her daily commentary.
Gold and metals, which are dollar-denominated, also received a boost Monday from dollar weakness. A weak greenback normally boosts the value of dollar-denominated commodities, as it takes more dollars to buy the same amount of goods.
The dollar index, which measures the U.S. currency vs. most key world currencies, fell 1% Monday. The drop came after a Wall Street Journal article on Friday suggested that the Federal Reserve is not committed to hiking interest rates beyond May 10.
Markets are also eagerly awaiting the release of the minutes from the Fed's March 28 meeting, due Tuesday, which might provide clues about the intentions of central bankers.
Gold bugs have long speculated that a sharp slowdown in the U.S. economy will weaken the dollar this year, further boosting the precious metal's value.
Those theories appeared validated after more bearish news from the U.S. housing market. The National Association of Home Builders said its housing market index dropped to 50 in April, its lowest level in four and a half years.
So far, the dollar has remained supported by the Fed's 15 successive rate hikes since June 2004. But once the Fed stops, the dollar will have to weaken to rebalance the soaring U.S. current account deficit, gold bugs believe.
What has kept the dollar afloat to date has been continued inflows of foreign capital into U.S. assets -- providing the "funding" of the current account deficit. On that front, the dollar received support on Monday after a report showed foreign investment into U.S. assets had increased in February.
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