It’s Starting Again!

17 Tuesday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, banking crisis, banks, Barack Obama, bear market, bull market, capitalism, central banks, China, commodities, Contrarian, Copper, Credit Default, Currencies, currency, Currency and Currencies, DGP, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gata, GDX, GLD, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, hyper-inflation, IAU, IMF, India, inflation, Investing, investments, Junior Gold Miners, Latest News, Long Bonds, Make Money Investing, market crash, Markets, mid-tier, mining companies, mining stocks, monetization, Moving Averages, palladium, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, rare earth metals, run on banks, silver, silver miners, sovereign, spot price, stagflation, Stimulus, Stocks, TARP, Technical Analysis, TIPS, Today, U.S., U.S. Dollar, XAU

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It’s starting again, time to get aboard now, next stop $1000 to $1500! Gold cleared the $950 price mark today with a vengeance. During trading today Gold was up over $970 oz and closing at $967.50 up $25.30. Today’s main headline on MarketWatch was “Bears test November lows- Technical support levels in peril; Investors pile into Gold, Treasuries”. As I have mentioned in a recent post about Gold if we successfully clear and close above the $950 – $960 level the Gold will zoom up and have a retest of the all time highs! To answer my question I posted here… Gold has passed it’s first test with an A++. If you haven’t already invested in gold and precious metals you definitely need to do so now! Some of the following articles explain why… – Good Investing – jschulmansr

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Here is where I buy my bullion:

Catch the New Bull! – Buy Gold Online –Get 1 Gram Free! Just for Opening and Account, No minimums, Buy Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Don’t Kick Yourself Later for Not Buying Gold and Silver Now – Seeking Alpha

By: Peter Cooper of Arabian Money.net

Gold is powering up towards $1,000 an ounce, and while the odd hesitation along the way is possible it will shortly cross this boundary, hit a new all-time high and then head upwards again.

A trend is your friend, especially if you take advantage of it. For gold the question is how best to leverage the up trend.

Gold and silver stocks are the answer. Conveniently precious metal stocks got really thrashed last autumn – along with gold and silver and every other asset class except bonds. So they are dirt cheap.

Rising prices

But will gold and silver equities not fall again if global stock markets tank, as they surely must with profit forecasts for the non-financials still ludicrously optimistic (face facts, for many major companies there will be losses and not profits in 2009)?

No they will not if precious metal prices are rising – and not falling as they did last autumn. And why will gold and silver prices keep on rising this time?

Well, investors are now very worried about bonds and currency rates, and that leaves gold and silver as the last safe haven in the investment universe. If there is only one investment class left to buy that ought to simplify things for investors.

Rising profits

Gold and silver producers are also big beneficiaries of falling energy prices this year, as up to a quarter of production costs go on energy. In addition, most mines are in non-dollar economies, so manufacturers have costs in depreciated currencies and income in the strong dollar.

That means that even if precious metal prices stagnate – and that looks highly unlikely – gold and silver producers are among the only commodity producers that will see profits jump in 2009.

My blog contains many articles on gold and silver which can point you towards some of the better, and riskier equity investments in this sector, and taking a risk in a rising market usually pays off handsomely.

The people who will be kicking themselves later in the year will be those who do not buy gold and silver stocks now.

This reminds me of my warning to those who did not buy Dubai property when they first had the chance, and even after a 50 per cent fall in house prices they are still 300 per cent up on their original investment!

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My Note: If you have been following my Blog “Dare Something Worthy Today Too!”, for any length of time this is exactly what I have been saying – many gold and silver stocks with production are still selling at or near book values! -jschulmansr

Catch the New Bull! – Buy Gold Online –Get 1 Gram Free! Just for Opening and Account, No minimums, Buy Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Gold Strikes Record Levels in Most Currencies – Seeking Alpha

By: Toni Straka of The Prudent Investor

With all equities markets deep in the red, MSM and bloggers have missed out on this easy scoop for several weeks: Gold currently strikes new all-time highs in most currencies. This sensational news, omitted in all those media that are normally quick to recommend this or that paper ‘asset’, which in the end is always only somebody else’s obligation, can be revealed at this blog exclusively, a Google news search shows. 😉

Gold traded for more than €771 and GBP 682 for the first time in history. The strong rise in the price of gold to new historic records in most countries except the USA is a logical reaction to the credit and solvency crisis that engulfs the globe as investors, nervous about a total market fallout, flee all paper promises and seek a truly safe haven.

Gold has never lost its value in more than 3,500 years, whereas no fiat currency survived longer than a human’s lifespan so far. Check out its resistance against inflation here.

click to enlarge

GRAPH: Gold priced in Euro has been on a tear since late November. It also outpaced all other asset classes. Chart courtesy of Stockcharts.com

I have been recommending investments in gold and mining shares since 2005. Licking my wounds from last year’s biggest and longest decline in this equity sector in 80 years, I will at least have a story to tell to my grandchildren.

But the fundamental outlook has only worsened in the past 4 years. Having correctly called for a sharp economic downturn in the USA since 2005, I nevertheless failed to recognize the dramatic situation in the Eurozone and the recent hard landing of China. This worsening global situation only underscores the value of holding the only asset that is not someone else’s obligation. The Euro is as doomed as are Federal Reserve Notes and nobody outside the UK cares about Sterling anymore.

We are about to witness the era of busted major fiat currencies that will go out the same way as did all unbacked fiat curencies in the past 1,000 years.

The Chinese tried it in the 11th century and it ended in a revolt. The same happened in France in the 18th century where it gave birth to the Republic. The decline of the Austro-Hungarian empire in WWI came on the heels of hyper-inflation and Germany’s fate could have taken another turn in the 1920s, if it were not for the hyper-inflation that paved the way for Adolf Hitler.

Unfortunately, we could very well end up as happened in past crises, with everyone a millionaire beggar.

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Bullish Long Term Outlook for Gold – Seeking Alpha

By: Peter Degraaf of pdegraaf.com

The long-term outlook for gold is very bullish, for to paraphrase Sir Winston Churchill’s famous remark, “never before in history have so many dollars chased so few ounces of gold (and silver)”.* The mountains of currency are rising, while the number of ounces of gold produced by gold mines is dropping.

The passing of the Stimulus Bill, referred to by some as the Porkulus Bill, will add billions of dollars to an already ballooning deficit. Instead of allowing the excesses in the credit markets to work themselves out by letting healthy institutions prosper, while allowing unhealthy institutions to fail, the new administration, aided by Congress, is throwing gasoline at the fire by rewarding shoddy business practices. People like Barney Frank and Christopher Dodd, who strong-armed the banking industry to make questionable mortgage loans, are now helping to shape the decisions that will prolong the problems. The foxes are still in the henhouse.

In the 1960’s it was James U. Blanchard III who pointed to the growing US deficits as the trigger that would cause gold prices to rise. In those days the deficits were still counted in millions of dollars. One wonders what Jim would say about deficits that are now counted in trillions of dollars. His advice would surely be: “Buy Gold”.

It was my pleasure to meet Jim Blanchard at one of his hard money conferences in New Orleans. Jim founded the National Committee to legalize the ownership of gold in the USA. In 1973, during the inauguration of President Nixon, Jim hired a small plane that flew near the inauguration site towing a banner that read: “Legalize Gold”.

Jim did everything with style and ingenuity. During one of his conferences he needed to move about one thousand of us from the convention hotel to a nearby convention center. He hired a marching band, and while police controlled several intersections the marching band led us to the center.

Let’s now look at some charts.

Featured is the chart (courtesy www.stockcharts.com that compares the price of gold to the XAU index (top), and compares this picture to the HUI index (bottom). The blue vertical lines draw your attention to a ‘link’ when the Gold/XAU rises above 5 and the HUI index begins a multi-month rise from a bottom. The red vertical line points to the only exception to this trend, since 2002. In that last seven years this early warning signal has worked 7 out of 8 times.

The last link is the ‘mother of all signals’, as the index rose to a record high of 11.5, while the Huey put in a four year bottom.

According to research done by John Hussman, in the past, when the gold/XAU ratio reached a point above 5, while the ISM purchasing managers index registers a reading below 50 (indicating the US manufacturing sector is decreasing), gold shares advanced at an annual rate of 125%. The current reading for the PMI is 35.6%, while the gold/XAU is at 7.2.

Featured is the ‘real interest rate’ chart, as reported by the Federal Reserve Bank of St. Louis. The bank shows the real rate at zero percent, having risen up from -3%. If we use the figures supplied by John Williams (see next chart), we arrive at a negative ‘real interest rate’ of -3.5%. Unless and until real rates turn positive by at least 2%, and for at least 6 months, we can depend on gold continuing its bull market rise.

This chart courtesy www.shadowstats.com compares the official CPI rate in orange to the John Williams interpretation in blue. With the Williams CPI-U at 3.5% and short-term bills at 0% interest, the ‘real interest rates’ are negative by 3.5%.

Featured is a chart (courtesy www.stockcharts.com) that compares the HUI index to the US dollar for the year 2005. For those who feel that gold stocks cannot rise unless the US dollar falls, this chart tells us that both gold stocks and the US dollar ended the year higher than at the start of the year.

As long as other currencies, such as the Euro, Yen, Pound and Canadian dollar are having problems of their own (caused by monetary inflation), the US dollar does not need fall, and gold and gold stocks can still rise.

Featured is the weekly gold chart (courtesy www.stockcharts.com). The blue arrows point to bottoms in the 7 – 8 week gold cycle. The last 3 cycles were short, thus the expectation is that we are due for a longer one, perhaps 9 or 10 weeks. The black arrow points to the upside breakout that occurred last week. This breakout came from beneath resistance that went back all the way to March 2008 AD. The green arrow points to the target for this breakout. The supporting indicators (RSI & MACD) are positive, with room on the upside.

The Gold Direction Indicator moved up from a reading of + 20% on Feb. 9^th, when gold bullion was 895.00, to the current reading of +60% with gold bullion at 941.00.

Featured is the weekly silver chart (courtesy www.stockcharts.com) . Price has risen four weeks in a row and is expected to meet resistance at the purple arrow. Once this resistance is overcome, the target is at the green arrow. The supporting indicators, (RSI & MACD), are positive with room to rise.

Featured is the price progression for silver during the past five years (annual average – data supplied by the Silver Institute).

Summary: Last week’s breakout by the gold price confirms that the Christmas rally that started in November is ongoing. In the short-term we can expect a lot of volatility, as commercial traders and bullion banks that are ‘short’ gold will do their utmost to suppress the price. They will do this by testing the current breakout. They will use the threat of ‘asset deflation’ (which has nothing to do with the effects of monetary inflation, which always leads to price inflation), and they will use the threat of IMF gold sales to try to cap the gold price rallies.

In the longer term the huge increases in currency (both paper and digital), on a worldwide basis, tell us that the gold bull still has a lot of running room left.

*(“Never in the field of human conflict was so much owed by so many to so few” – Sir Winston Churchill referring to the Battle of Britain).

DISCLAIMER: Please do your own due diligence. I am NOT responsible for your trading decisions.- P. Degraaf

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Catch the New Bull! – Buy Gold Online –Get 1 Gram Free! Just for Opening and Account, No minimums, Buy Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Upwrds momentum builds as gold breaches $950 – MineWeb

Source: MineWeb.com

EXPLOSIVE INCREASE AHEAD?

Upwards momentum builds as

gold breaches $950

The gold price this morning moved quickly through the psychological $950 an ounce level and predictions of $1000 gold being seen sooner rather than later seem far from far-fetched.

Author: Lawrence Williams
Posted: Tuesday , 17 Feb 2009

LONDON –

In what has been a relatively steady climb over the past few weeks, gold moved back well above the psychological $950 an ounce mark in this morning’s trading (over $960 at the time of writing) – the first time in seven months it has achieved this level – while silver was approaching $14 an ounce, being pulled upwards by the gold price. Platinum and palladium were also better as platinum maintained its differential price advantage over gold.

Indeed gold looked poised to move higher still with ETF inflows continuing and a glimmer of renewed demand interest in India as sentiment may be moving towards a growing feeling that the price is poised to increase further. Previously India, the world’s largest area of consumption, has seen gold sales and imports at their lowest level for some time with traders anticipating lower prices. Today, though, the gold price in rupees hit a new record at over 15,000 rupees per 10 grams and there has been wide expectation of the price moving to 16,000 rupees in the short term with open interest in metal for April increasing a little.

In the Far East in general there appears to be a movement into gold developing strongly as the stock market continues to drift downwards. The market has seen the dollar price gold consolidating above $930 of late and there has been a strong feeling that the metal is poised to move higher which is now turning into real purchases and becoming reality.

Bloomberg reports that there is also talk of Central Banks buying gold rather than selling . The newswire quotes Steven Zhu of Shanghai Tonglian Futures Co. as saying “There’s been a lot of talk about central banks buying but they are quiet about it because they don’t want to disrupt the market, so the market tends to react when there’s some fresh news.” There is also a report today that Russia’s Central Bank has raised gold’s share of its reserves and plans to continue doing so.

To an extent $950 an ounce is seen by some as an important trigger point towards the movement to $1,000 gold and it certainly seems that the momentum is with the yellow metal at the moment. Stock markets remain weak, and in reality there seems to be little but gloomy news ahead. Economies are very definitely in recession and confidence in the dollar is not strong. Gold is increasingly being seen by many as the best way of protecting wealth in the current environment.

The only weakness has been the fall-off in demand from the traditionally strong Eastern markets, and if the realization that gold is more likely to move higher than fall back takes serious hold there then, coupled with the continuing movement by western investors into gold, the price increase could accelerate. $1,000 gold may be with us again sooner than expected and this time there is a growing feeling that it could stay there for an extended period. Virtually no-one seems to be betting against this occurring in the very short term – indeed as momentum builds, which it appears to be doing, there could be an explosive price increase ahead in the months ahead.

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Catch the New Bull! – Buy Gold Online –Get 1 Gram Free! Just for Opening and Account, No minimums, Buy Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Remember: Don’t Forget about Silver too!

Listed Gold and Silver Stocks Soar – Mineweb

Source: Mineweb.com

SILVER BEST PERFORMING

Listed gold (and silver) stocks soar

Gold bullion, and listed gold stocks, decouple from a strange and troubled world.

Author: Barry Sergeant
Posted: Tuesday , 17 Feb 2009

JOHANNESBURG –

Precious metal prices moved strongly higher on Tuesday, led by gold bullion, which hopped more than USD 30 an ounce to above USD 970 at one stage, prompting yet another sparkling performance by listed gold equities. Gold bullion is currently trading around seven month highs, and just 6% below the record level it set in March 2008.

At just over USD 14 an ounce, silver is around 34% off its record highs, while platinum at USD 1,085 an ounce is 52% off, and palladium at USD 219 an ounce, a significant 63% off. Demand for platinum group metals has been deeply damaged by reduced demand from the auto sector, which uses the metals in auto catalysts.

Silver stocks, which command a combined global market value (capitalisation) of USD 13bn, currently rank as the best performing equity sub-sector in the world, led by stellar performances from Silver Standard, Fresnillo, and First Majestic. The global grouping of primary silver producers is relatively small, given that the majority of silver is produced as a byproduct at bigger mines; BHP Billiton, the world’s biggest diversified resources stock, ranks as the world’s biggest silver miner.

There are, however, hundreds of listed stocks that rank as primary gold producers. This global grouping currently carries a combined market value of just over USD 230bn, dominated by Tier I stocks; Barrick, the world’s biggest gold name by production and value, currently holds a market value of just below USD 34bn. This ranks Barrick as the world’s No 5 overall mining stock, after BHP Billiton, Vale, Shenhua, and Rio Tinto. Two other Tier I gold producers, Goldcorp and Newmont, now also rank as members of the world’s top 10 mining groups.

While silver stocks, as the small cousin of precious metals, may rank as top equity performers, on a relative basis, the Tier II gold grouping, seen alone, ranks as the world’s leading equity subsector. Some of the top performances in this grouping have been produced by recovery stocks such as Centerra, while JSC Polymetal represents the recovery Russian stock, from a jurisdiction where stock prices were savaged to an extent rarely seen elsewhere.

It is also of interest that some stocks in the global Tier II gold grouping are currently trading close to 12-month highs – a factor virtually unthinkable in any other sector – as seen in the cases of Iamgold, Eldorado, Red Back, and also Franco-Nevada, a royalty, rather than operating, company. It is of further interest that investors have at long last started to move back into Chinese gold stocks in the past few weeks, benefiting the likes of Zijin (Tier I), Zhongjin, and Shandong (Tier II), and Hunan Chenzhou and Lingbao (Tier III).

The SPDR Gold Shares exchange traded fund (ETF), which holds gold bullion on behalf of investors, rather than mining the stuff, is close to trading at all time record levels. The fund currently holds physical gold bullion worth just under USD 31bn; if it were an operating entity, it would rank second only to Barrick. However, if other gold ETFs around the world are also taken into account, the amount of bullion currently held on behalf of investors is worth well above USD 40bn. Silver ETFs, which are trading in price terms in line with silver bullion’s 34% discount from its record high, currently hold close to USD 4bn worth of physical metal.

In terms of individual performances by gold stocks, the top overall Tier I performance award is probably deserved by Kinross; the Tier II award is most difficult, but would likely go to Iamgold, while Novagold appears to be a clear winner among the Tier III grouping. Among developers and explorers, spectacular performances have been put in by La Mancha Resources, Azteca Gold, and San Anton Resource; Central Sun Mining has also shown radical price moves, possibly assisted by corporate action.

Global tier I gold stocks
	Stock	From	From	Value
	price	high*	low*	USD bn
Goldcorp	USD 32.66	-38.0%	136.0%	23.829
Polyus	USD 32.00	-60.0%	128.6%	6.100
Harmony	USD 11.96	-17.9%	118.6%	5.005
Lihir	AUD 3.47	-21.0%	128.3%	4.840
AngloGold Ashanti	USD 31.10	-20.5%	132.6%	10.995
Zijin	CNY 8.28	-62.4%	120.2%	12.475
Barrick	USD 38.71	-29.3%	124.1%	33.773
Newcrest	AUD 34.28	-15.4%	107.1%	10.502
Gold Fields	USD 11.47	-31.9%	147.2%	7.495
Kinross	USD 19.36	-29.3%	182.6%	12.875
Newmont	USD 42.60	-22.8%	101.2%	20.152
Buenaventura	USD 21.75	-49.3%	141.7%	5.979
Freeport-McMoRan	USD 27.89	-78.1%	77.6%	11.469
[[SPDR Gold Shares ETF]]	USD 95.28	-5.1%	44.4%	30.709
Tier I averages/total		-36.6%	126.6%	165.489
Weighted averages		-43.4%	122.9%

TIER II	Stock	From	From	Value
	price	high*	low*	USD bn
Zhongjin	CNY 50.48	-58.8%	121.4%	2.594
Iamgold	USD 8.24	-4.8%	271.3%	2.437
Simmer & Jack	ZAR 3.24	-48.7%	120.4%	0.335
Yamana	USD 9.42	-52.7%	184.6%	6.903
High River	CAD 0.13	-96.4%	212.5%	0.058
Eldorado	USD 8.68	-7.1%	264.7%	3.197
Agnico-Eagle	USD 55.42	-33.6%	165.5%	8.577
Centerra	CAD 5.23	-66.2%	481.1%	0.895
Randgold Resources	USD 48.49	-13.8%	117.6%	3.709
Shandong	CNY 66.94	-43.5%	153.6%	3.406
Peter Hambro	GBP 5.66	-63.3%	262.8%	0.785
Hecla Mining	USD 1.77	-86.5%	78.9%	0.385
Golden Star	USD 1.69	-60.9%	322.5%	0.315
Franco-Nevada	CAD 27.20	-0.1%	134.1%	2.158
Fresnillo	GBP 4.00	-30.4%	330.1%	4.094
JSC Polymetal	USD 5.30	-46.2%	430.0%	1.670
Red Back	CAD 8.50	-8.1%	197.2%	1.533
New Gold	CAD 2.93	-69.9%	211.7%	0.493
Northgate	CAD 1.74	-50.1%	159.7%	0.352
Tier II averages/total		-44.3%	222.1%	43.897
Weighted averages		-42.3%	188.1%

TIER III	Stock	From	From	Value
	price	high*	low*	USD bn
Western Goldfields	CAD 2.35	-40.8%	370.0%	0.254
Great Basin	CAD 2.10	-45.2%	130.8%	0.357
Sino Gold	AUD 5.59	-26.6%	135.9%	1.040
Alamos	CAD 8.25	-9.7%	135.7%	0.687
Highland	GBP 0.60	-72.0%	185.7%	0.278
PanAust	AUD 0.17	-86.8%	101.2%	0.167
Kingsgate	AUD 4.20	-33.3%	90.9%	0.249
Int’l Minerals	CAD 3.28	-50.7%	180.3%	0.243
Allied Gold	AUD 0.41	-50.3%	121.6%	0.107
First Uranium	CAD 5.15	-45.4%	404.9%	0.617
Novagold	CAD 4.75	-59.4%	900.0%	0.680
Gold Wheaton	CAD 0.29	-84.6%	1325.0%	0.213
Oxus Gold	GBP 0.08	-74.3%	113.9%	0.042
Pan African	GBP 0.04	-47.5%	113.3%	0.063
Citigold	AUD 0.23	-49.4%	50.0%	0.106
Jaguar	CAD 7.15	-47.7%	199.2%	0.362
Pamodzi Gold	ZAR 1.40	-88.3%	185.7%	0.013
Oceanagold	AUD 0.58	-81.9%	286.7%	0.060
DRDGold	ZAR 9.25	-9.8%	223.4%	0.340
Dominion Mining	AUD 4.82	-1.2%	152.4%	0.316
Avoca Resources	AUD 1.92	-34.2%	118.9%	0.338
Integra Mining	AUD 0.23	-67.6%	142.1%	0.057
Royal Gold	USD 43.33	-13.0%	90.5%	1.474
Hunan Chenzhou	CNY 12.84	-62.0%	115.8%	1.005
Aurizon	CAD 4.59	-15.5%	279.3%	0.538
Kazakh Gold	USD 6.80	-74.8%	209.1%	0.285
Gammon Gold	CAD 8.74	-22.0%	226.1%	0.829
Crew Gold	CAD 0.11	-94.6%	110.0%	0.071
Lingbao	HKD 2.42	-56.0%	202.5%	0.093
Zhao Jin	HKD 8.57	-54.7%	360.8%	0.483
Rusoro Mining	CAD 0.70	-63.7%	197.9%	0.216
Minefinders	CAD 6.59	-51.2%	97.9%	0.308
Andina Minerals	CAD 1.98	-57.3%	280.8%	0.125
Crystallex	CAD 0.36	-87.6%	260.0%	0.084
Ramelius Resources	AUD 0.57	-54.0%	52.0%	0.067
Tanzanian Royalty	CAD 4.96	-21.5%	149.2%	0.349
Minera Andes	CAD 0.64	-66.7%	100.0%	0.096
Semafo	CAD 2.07	-1.4%	176.0%	0.381
Tier III averages/total		-50.1%	225.7%	12.991
Weighted averages		-51.9%	170.0%

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In my opinion you need to move now and move quickly and get on this great Bull Market in Gold and ALL Precious Metals -jschulmansr

My Disclosure: Long Many of the Tier’s 1, 2, 3 mining stocks, Precious Metals Bullion, Long DGP,GDX, CES, ROY. You might say I am a Gold Bug and Proud of it! Good Investing! – jschulmansr

Catch the New Bull! – Buy Gold Online –Get 1 Gram Free! Just for Opening and Account, No minimums, Buy Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments, it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. – jschulmansr

Wake Up Call!

16 Monday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, Bailout News, banks, Barack Obama, bear market, bull market, capitalism, central banks, China, Comex, commodities, Copper, Currencies, currency, Currency and Currencies, depression, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures markets, GDX, GLD, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, hyper-inflation, inflation, Investing, investments, Japan, Jschulmansr, Junior Gold Miners, Latest News, majors, Make Money Investing, market crash, Markets, mid-tier, mining companies, mining stocks, monetization, palladium, Peter Brimelow, physical gold, platinum, platinum miners, precious metals, price, prices, producers, production, rare earth metals, recession, resistance, risk, run on banks, safety, Saudi Arabia, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, The Fed, TIPS, Today, U.S. Dollar, uranium

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The U.S. Markets are closed today yet something very interesting is starting to happen. Can you sense it? The shift from deflation to inflation. The “smart money” big investors are sensing it and starting to jump into Gold in a big way! Gold Prices are holding steady overseas above the $935 support level. Todays articles show the why and how of this move by big money into Gold, read on… and Good Investing! – jschulmansr

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Something still stirring in precious-metals pond – Market Watch

By: Peter Brimelow of Market Watch

With some wild swings, gold gained about 3% on the week, closing Friday at $941. The Phx Gold Silver Index (XAU:

Technicians were impressed. Long-term chartist Martin Pring is deflationary-minded at present. Two weeks ago, he remarked that if certain trend lines were broken, “I would be dragged kicking and screaming into the bullish camp”. But now he simply says in his recent weekly Intermarket Review: “Not much to add to my recent bullish comments. Both the metals and shares recently broke out of giant patterns … With our Global Gold Index at a new all-time high – enjoy the ride!”

Pring also flags a powerful conceptual reason for the gold move. Discussing a chart of the inflation proofed Treasuries, and using the iShares:Lehm TIPS TIPT as a proxy, Pring says: “Here we see the inflation protected bonds, or TIPs. Who needs these in a deflation? But look, the price just broke to the upside … and volume is expanding! When we look at the longer term we see it’s still in a primary bear market … However this week’s breakout suggests a turn is likely.”

In other words, the bond market is getting seriously concerned about inflation. See Website

The Privateer, being Australian, is even more direct in its weekly remarks: “Why is gold going up? It is certainly not in spite of the global mania for bailout programs now sweeping the world. It is because of these programs. The more ‘liquid’ the global financial powers that be make their money — by creating it in ever larger swathes — the more they run the risk that the world starts to look elsewhere for a viable and trustworthy way to exchange goods and services.”

The Privateer’s invaluable $US 5X3 point and figure chart has now broken above its last downtrend, although its proprietor would like more progress: “This week the chart got up to and just above the second of the two downtrends. The ‘poke’ above the line which came with Gold’s close above $U.S. 945 on Feb. 12 is not yet decisive, a close above $U.S. 960 would be.” See Website

Silver, which I reported last week was exciting the gold bugs by showing unusual leadership characteristics, persisted — rising 3.5% on the week, including on Friday despite gold’s fall, and pushing the Gold/Silver ratio to 68.9 from last week’s 69.5.

But the star of the week was the reported bullion holdings of Spdr Gold Trust. (GLD:

GLD is regarded with deep suspicion by the radical gold bugs who think the metal’s price is manipulated. But at the least it has to been seen as a measure of the Western Hemisphere investment appetite for gold.

In contrast, Le Metropole Cafe monitors Indian gold imports and reports that, unusual in the past few years, the world’s largest gold consumer is standing aside for now. See Website

Interestingly, two sentiment indicators did not react much this past week. Mark Hulbert’s HGNSI on Friday stood unchanged at 60.90%. MarketVane’s Bullish Consensus actually lost a point on Friday to 78%, gaining only 3 points on the week. See Website

In serious gold moves, MarketVane excursions into the 90s are reportedly common.

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Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Major Investors Piling into Gold – Seeking Alpha

By: James West of Midas Letter

Endeavour Financial Corp (TSX:EDV) closed a $100 million equity offering last week, and several other “bought deal” financings point to a strengthening trend: major investors are piling into gold.

The Offering was underwritten by a syndicate co-led by GMP Securities L.P. and Canaccord Capital Corporation (the “Underwriters”). Endeavour will use the funds to support its investment activity in the mining sector with an emphasis in the short term on precious metals.

The first quarter of 2009 has seen well over $1 billion flow into near term and existing mining companies, which is a reflection of the strong gold price amid safe haven demand. With estimates of U.S. government spending reaching as high as $2 trillion, large value investors are increasingly deterred by U.S. Treasury related securities in favour of precious metals.

Newmont Mining (NYSE:NEM), one of the world’s largest gold mining companies, raised US$1.7 billion in a combined common share/convertible debt deal which it will use primarily to fund the acquisition of the remaining 33.33% interest in the Boddington project in Western Australia that it does not already own and the additional capital expenditures that will result from its increased ownership in the Boddington project, as well as for general corporate purposes. Citigroup Global Markets and J.P. Morgan Securities led the placement.
Freeport McMoran Copper and Gold (NYSE:FCX) raised US$740 million through the issuance of 26.8 million common shares at $28 per share;
Kinross Gold Corporation (KGC) announced a “bought deal” financing for US$360 through the issuance of 24,035,000 million common shares US$17.25 per common share. The underwriters were led by UBS Securities Canada Inc.;
Osisko Mining Corporation (OSKFF.PK) entered into another “bought deal” led by Thomas Weisel Partners and BMO Capital Markets. The offering of 77 million units at $CA4.55 a share will gross CA$350.4 million. Osisko is developing the 6.28 million ounce Canadian Malartic Project Quebec.

Smaller deals are becoming more common for junior emerging gold companies as well. Among the recent actions:

Centamin Egypt (CELTF.PK) raised $CA69 million through the issuance of 106.2 million shares at CA$0.65 per share for development and construction of the Sukari Project in Egypt. This financing was led by Thomas Weisel Partners and Cormark Securities.
Romarco Minerals Inc. (TSX.V:R) announced a bought deal Friday worth $20 million for the development of the Haile Gold Mine in South Carolina. Romarco issued 54 million units at $0.38 each. The financing was led by a syndicate of underwriters led by Macquarie Capital Markets Canada Ltd. and including Paradigm Capital Inc. and GMP Securities L.P.
International Tower Hill Mines (THM) sold 2 million common shares at $2.50 per share for gross proceeds of CA$5 million, which will be directed towards further development of its projects in Alaska and Nevada. The placement was a “bought deal” led by a syndicate of underwriters led by Canaccord Capital Corporation and including Genuity Capital Markets and GMP Securities L.P.
Exeter Resource Corporation (AMEX:XRA) raised CA$25.2 million at $2.40 a share for development of its assets in Argentina and Chile.

And it isn’t just gold that is attracting big financing. On February 10th, Uranium One (SXRZF.PK) announced a $270 million investment by a Japanese Consortium comprised of Tokyo Electric Power Company, Incorporated (TKECF.PK), Toshiba Corporation (TOSBF.PK), and The Japan Bank for International Cooperation.

Concurrently with the execution of the subscription agreement, Uranium One has also entered into a long-term off-take agreement and a strategic relationship agreement with the Japanese consortium, both of which will become effective upon closing of the private placement.

The off-take agreement provides the consortium with an option to purchase, on industry-standard terms, up to 20% of Uranium One’s available production from assets in respect of which Uranium One has the marketing rights.

Junior Uranium company First Uranium Corp. (FURAF.PK) was also the beneficiary of a bought deal financing led by Macquarie Capital Markets this week, which saw First Uranium place 20.5 million units of its shares at $3.00 per unit for gross proceeds of $61.5 million. First Uranium will direct the funds towards the development of the Ezulwini Mine in South Africa.

Endeavour Financial is followed by many analysts and newsletter writers for its robust project pipeline.

Brien Lundin, who publishes the Gold Newsletter, says one of the main reasons he follows Endeavour Financials is because of management – especially Mr. Frank Giustra. He says this team now senses a market bottom, as they are raising capital to go after assets that now cost a fraction of what they did last year, or even six months ago. He intimates strongly that his subscribers should do the same, using Endeavour as their proxy. A mix of entrepreneurial expertise and value investing, he outlines what the smart money is doing now.

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Gold: Now Demonstrating Trust in Obama – Seeking Alpha

By: Boris Sobolev of Resource Stock Guide

Gold is Starting to Believe the Obama Administration

Despite making loud headlines about stimulating the economy, the US government has been unable to raise the level of optimism among the general public, while the stock market seemed to drop into a deep state of apathy.

Last week we received the long-awaited economic stimulus packet as well as the so-called plan for the rescue of the US financial system. We have already voiced our skepticism regarding the structure of the stimulus and its potential effect on the economy in a prior article.

As far as the size of the $787 billion package, it is clear that it is too small and too spread out into 2010 and beyond to be called a stimulus. $787 billion is just 5.6% of the GDP and when spread over two years will account for just 2.8% at a time when many industrial economies around the world are contracting by 5-10% per year. It can only be called a life support package, not a stimulus.

Japan, which got into a deflationary spiral as a result of a real estate bust, spent much more than 100% of its GDP since 1991 just to see its economy stagnate. Construction related investment alone ate up $6.3 trillion of public funds over the 17 years since 1991. Infrastructure spending accounted for $350 billion to $400 billion per year for the first half of the 1990s for an economy half the size of the United States.

The results of the Japanese fiscal stimulus were unimpressive, although it could be argued that without this stimulus, it could have been much worse.

With the United States facing similar post bubble dynamics as Japan did twenty years ago, how can we expect greater effectiveness of the Obama stimulus plan when it is insufficient and much of is clearly misdirected?

In reality, this economic stimulus package has to be viewed as only the first one of many yet to come. By having the US dollar as a world reserve currency, the US government can be much more effective than its Japanese counterpart in printing its own currency.

We will soon be quantifying the size of the government stimulus plans in trillions rather than in billions. Within the next 3 to 4 years, government spending can easily reach $10 trillion, doubling the size of the US government debt.

One of the main problems with this crisis is that the majority of the debt bubble is related to residential real estate, which does not produce cash flow, but only seems to eat it up. As home prices decline and unemployment rises, debt serviceability is worsening dramatically.

In order to avoid social unrest and to maintain popularity, the Democratic majority will face two realistic options which could begin to address the economic disaster:

Forgive portions of mortgage debt which cannot be serviced. But who will pay for the losses – clearly not the weak banks. Uncle Sam would pick up the tab by printing more currency.

Print new dollars to increase the nominal income of the indebted population through tax cuts, job creation, jobless benefits and various social spending.

There is no other politically possible way out of this mess other than to run the printing press. The way of the free market via bankruptcies is not popular so there is no sense to even discuss it.

Within hours President Obama will sign the stimulus into law, but we are sure that this is just the beginning of the government spending campaign.

As far as the US banks, the new US Treasury Secretary seems to be mimicking his predecessor, Hank Paulson. The essence of the announced “plan” is as follows: “We are absolutely sure that we will save our banking system, but are yet unsure of how we will do so. We will find out very soon, however. Stay tuned”.

While not knowing what to do with the banking system, the government is trying to temporarily act as one. The only specific point in Geithner’s announcement is the plan to increase the Term Asset-Backed Securities Loan Facility (TALF) facility from $200 billion to $1 trillion. This joint initiative with the Federal Reserve expands the resources of the previously announced, but not yet implemented TALF.

In essence, TALF will support the purchase of loans by providing the financing to private investors. In theory, this should help unfreeze and lower interest rates for auto, small business, credit card and other consumer and business credit. Treasury will use $100 billion to leverage $1 trillion of lending from the Federal Reserve. The TALF, which will potentially have greater effect than the stimulus plan, passed in a blink of an eye without any debate.

The markets around the world have deteriorated in deep state of indifference to the first round of actions of the new US government. Only gold is starting to demonstrate its trust in the Democratic majority. Since the inauguration, investors poured $6 billion into gold purchases through GLD alone. This is an increase of 210 tonnes in gold holdings or 24% in less than a month.

click to enlarge

Huge investment demand around the world has put an end to a steep gold correction of the second half of 2008. Most intermediate and long term technical indicators for gold have turned decisively bullish. A test of new highs by gold is very probable this spring.

In sum, gold investors are starting to believe that the Obama Administration sees one way out of economic problems which will for sure resurrect inflation.

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My Note: Did you catch that? They’re believing alright, not that Obama will get the situation fixed, just that he will cause inflation; yes even hyper-inflation , maybe even stagflation! Jump into Gold now before it’s too late… -jschulmansr

Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Moody’s, S&P Dole Out Global Downgrades – Time to Go Gold? – Seeking Alpha

By: Mark O’Byrne of Gold and Silver Investments

Gold rose again on Thursday, briefly rising above $950/oz and was up 0.6% on the day. Determined selling on the open in Asia saw gold fall and profit taking has seen gold fall in Asia and in early trading in London. This is to be expected as gold had risen by more than 15% in less than a month.

US, UK Credit Ratings Look Set to Be Downgraded

The credit rating agency Moody’s has said that the UK and US credit ratings were being “tested”. In a novel and somewhat bizarre departure, Moody’s has split various “AAA” sovereign countries into three categories based on their strength in weathering the economic storm, denoting Ireland and Spain as the weakest, with the UK and US somewhere in the middle and Germany, France, Canada and the Scandinavian nations at the top.

This will in time be seen as gimmickry. Standard and Poor’s have already downgraded Spain to AA+ and did not create sub grades within the credit rating system.

Some have criticized Moody’s for being “unfair” to Ireland, Spain, the UK and US and have argued that these agencies previously gave almost everybody good ratings, and underestimated risks, but were now going to the other extreme.

This is errant nonsense and the unfortunate fact is that Moody’s, the other credit rating agencies and the vested interests in the financial services industry continue to underestimate risks, as they have done for months and years.

Given the massive deterioration in the public finances and economies of these nations, by right they should be downgraded and unfortunately in the coming months they will inevitably be downgraded.

But Moody’s and all the rating agencies realize that this would compound an already disastrous financial and economic crisis. Many pension funds internationally have mandates or investment guidelines to only invest in “AAA” rated government bonds and if these countries bonds were downgraded, they would be forced to sell those bonds en masse. This would likely see a crash in the already very overvalued government bond markets and see long term interest rates rise quickly and sharply.

The creditors of the US in Russia and China have rightly criticized the ratings agencies for their highly irresponsible practices in recent years and are increasingly nervous about their US denominated assets.

Ratings agency Standard and Poor’s in January downgraded Spain’s sovereign debt rating to “AA+” from “AAA” in January, citing insufficient means to deal with weak growth and a ballooning budget deficit. As they did the sovereign rating of New Zealand. The fiscal position in the UK and US is arguably much worse than in these two countries (Martin Wolf of the Financial Times recently said that major US banks, with their humongous Wall Street liabilities, are insolvent) and thus it seems inevitable that the UK and US will be downgraded in the coming months.

If the US is downgraded, then in effect the reserve currency of the world is being downgraded and this has huge implications for the international monetary system. Not surprisingly there have been op-ed pieces in the Financial Times and the Wall Street Journal calling for a return to some form of gold standard.

The governments of the world are nationalizing and socializing the meltdown in the shadow banking system and the international system with potentially disastrous consequences for us all.

Conditions are set to get markedly worse before they get better and the experience of Argentina and other previously wealthy South American countries may be instructive. The IMF is called in and there are structural adjustments, social services are affected or discontinued, banks nationalized, savings inaccessible, food and energy insecurity rise.

This is a potential reality for large western economies, especially if governments keep trying to inflate their way out of the current crisis. This is leading to massive currency debasement and will potentially lead to very significant stagflation and maybe even what could be called hyper stagflation.

Now more than ever, it is essential that individual savers and investors, companies, pension funds and sovereign wealth funds have an allocation to and directly own actual physical gold bullion. Paper exchange traded funds with all the attendant counter party, custodian, sub custodian, auditing and indemnification risk are speculative trading vehicles and not physical gold.

In these unprecedented economic times, it is irresponsible and extremely high risk not to have an allocation to gold bullion in an investment portfolio.

Disclosure: no positions

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My Note: No Positions??? Mr. O’Byrne I think you need to follow your own advice above! Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Is Gold the only salvation from this Financial Armageddon? – MineWeb

Source: MineWeb

Indications are that the global financial situation could yet get far worse before it starts getting better – particularly in Europe – and gold may again prove to be the only real way of protecting wealth in a continuing global financial meltdown.

Author: Lawrence Williams
Posted: Monday , 16 Feb 2009
LONDON –

“It ain’t over ’til its over” is one of the best known quotations from baseball catcher and coach Yogi Berra and as the global financial crisis unwinds it is very apposite yet again. We ain’t anywhere near the end yet and possibly the worst is yet to come as far as European banks in particular are concerned. Markets have breathed sighs of relief as various banks have been bailed out and stimulation packages are being approved if not already implemented.

But, one gets the feeling that any relief is premature. The debt situation in a huge number of debtor nations – virtually the whole of Eastern Europe falls into this category – is dire and has not really yet fallen into the sights of the investment world – but bankers must be quaking in their shoes as surely they are aware of the potential financial Armageddon that still lies ahead.

And this time it is the already shaky Western European banking sector that is most at risk. US Banks, accused of starting this all, maybe far less vulnerable to the times ahead. True the US financial sector may have got us into this mess, but European bankers followed suit and, in the event, may be shown to have behaved far more recklessly than their American counterparts. It would seem that some of the potential shortfalls being faced would be beyond the financial ability of Central Banks, Governments and transnational agencies like the IMF to sort out. The system is like a house of cards. One major failure could bring the whole house tumbling down.

This is the kind of situation that leads to global nightmares – wars even. Radical extremists get elected to positions of power – as with the rise of National Socialism in Germany after the crash of the Weimar Republic with its hyperinflation. We could be in for a very sticky time ahead as the real implications, and depth, of the financial meltdown catch up with us.

The problems ahead may not be beyond the wit of man to devise a solution which can ‘save the world’, but that is unlikely to come from UK Prime Minister Gordon Brown who appears to have laid claim to this cachet in a freudian moment of rhetorical madness. Don’t forget this is the same Gordon Brown who decimated the UK’s gold reserves by selling half of them off (395 tonnes) at gold’s low points from 1999-2002 – amounting to some $12bn at today’s prices – a sum the UK treasury would give its eye teeth for in the current financial crisis, although this is small beer relative to the sums squandered by the UK banks. But it is an indicator of Gordon Brown’s acumen, or lack of it, in dealing with global financial trends.

Indeed Gordon Brown’s thinking is probably echoed by many others in the European and perhaps the US financial hierarchy which doesn’t bode well for any rescue package that will actually work to stem the flow of toxic debt which has built up all around the world and may almost certainly amount in total to a greater sum than all the world’s financial reserves combined, But then that is the nature of banking. It only takes a run on almost any bank to bring the whole institution crashing down, and to allow any country to fail – and there are signs that the European Central Bankers may let some Eastern European states go under, thus triggering a domino effect of defaults worldwide, to bring the world banking system to its knees – or worse. There are even fears that past high flyers like the Irish Republic could be forced to default on its debts, and undoubtedly the situation for, say, the Baltic states is far worse still.

What solution is there out there. Printing money on an unprecedented scale will expose the world to huge inflationary pressures for years to come, but this may be the only way forward using more conventional solutions. Perhaps a huge revaluation in the price of gold could help bolster some treasuries and bring some confidence back into the system. And, as with any bank run it is confidence which is needed to stem the tide, not necessarily actual money!

But where does all this leave the investor? Not in a happy position. The logic of further financial collapses and bank failures would be to knock the markets down and down, which in turn takes wealth out of the system and decimates pensions upon which an increasingly aging society is dependent.

Buy gold may be an answer to protect oneself, but as we saw last year, gold too can be vulnerable as in times of reduced liquidity funds and individuals have to sell any liquid assets to cover their positions. But then gold is probably not as vulnerable as other assets – again as we have seen over the past year. Those who were invested in gold at the beginning of 2008, for example, and did not sell during the year, at least maintained the value of their holdings while virtually all other investment options crashed, although this was not true of most gold stocks.

Now we are seeing professional and institutional investors moving into gold in a big way just to try and protect their, and their clients’ wealth. As we have pointed out here frequently, gold ETFs are seeing an unprecedented inflow of funds, although there are those out there who would say it is better to hold physical gold than any form of paper gold because of a growing distrust of financial institutions and paper solutions.

And perhaps rather gold than other precious metals – notably silver. Silver would be sure to be dragged up on gold’s coattails, but perhaps not as much this time – even though history tells us that silver’s volatility leads it to perform better than gold in percentage terms on the upside and worse on the downside. We are in a different situation with silver not really a monetary metal any longer. Industrial demand pressures on silver may well mitigate any price rises here.

Gold’s performance, though, is perhaps also dependent on investment demand outstripping a fall off in the jewellery market and an increase in liquidation of such holdings into the scrap sector. If the big Asian economies like India and China, where mark-ups on gold jewellery are minuscule compared with the West, falter significantly then reduced demand and increased supply from this sector will need to be soaked up by the investment sector. At the moment this seems to be capable of doing this hence the recent gold price strength, but unless sentiment changes in India in particular, where buyers seem to be waiting for lower prices, the fall in gold purchases there may limit global gold price growth. If liquidity becomes a problem in the North American markets again, this could also dent upward movement.

But overall, physical gold, gold ETFs and selected gold stocks would seem to be the best wealth protectors out there. As commentators have pointed out, prices may remain relatively volatile, but currently the overall price trend tends to be upwards movement, followed by stabilisation, before the next upwards resistance levels are tested. Gold does look to be steadily climbing back towards the psychological $1,000 an ounce level but it has had trouble sustaining increases beyond this level in the past. Perhaps it will be third time lucky for the gold bulls.

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My Note: Prudence dictates at least 10% of your portfolio should be in Gold. Personally, I have that and also a lot of my discretionary funds invested in precious metals Stocks, ETF’s, Bullion…jschulmansr

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. – jschulmansr

GLD

GLD, , ) GLD . These rocketed a startling 13.7% to 985 tonnes, setting records each day.

XAU

Delayed quote dataHUI, , ) added 1.36% to 311.16. The stock market, in case you missed it, lost ground.

Commentary: Gold’s gains for week catch bugs’ interest

By Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) — Something was indeed stirring in the precious metals pond, as I reported a week ago. Key investment letters say it still is. See Feb. 8 column

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Taking a Quick Breather? – Gold and Silver News Today!

13 Friday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, bull market, capitalism, central banks, China, Comex, commodities, Copper, Currencies, currency, Currency and Currencies, DGP, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, financial, Forex, GDX, GLD, gold, Gold Bullion, Gold Investments, gold miners, How To Invest, How To Make Money, hyper-inflation, India, Investing, investments, Jschulmansr, Junior Gold Miners, Latest News, majors, Make Money Investing, Markets, mid-tier, mining companies, mining stocks, monetization, physical gold, platinum, platinum miners, precious metals, price, prices, producers, production, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, Technical Analysis, U.S. Dollar

≈ Comments Off on Taking a Quick Breather? – Gold and Silver News Today!

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As I am writing this post, Gold is taking a breather off $11.00 oz to $937 but still above the all important $930 to $940 level. I would say that we have a definite confirmation of a bull market rally in place should Gold close above $940 for the week. After all everyone deserves a breather once in a while! Today’s articles look at the dollar, gold-silver ratio, and more… Good Investing! – jschulmansr

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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Dollar Rises Gold Stays Up – Seeking Alpha

By: Dr. Duru of Dr. Duru One-Twenty

If you had told me late last year that we would soon see both the dollar and gold rally, I would have dismissed you as nuts. But this is exactly what happened after the dollar made a short-term bottom in mid-December. In early December, I suggested that the dollar had formed a double-top making it likely the dollar was headed lower. The dollar did sell-off, but it quickly rallied right back to the resistance formed by the double-top (click on chart to enlarge).

At the same time, gold has finally broken out of the pattern of lower lows and higher highs. It is now up almost 10% for the year. Last year, I said that gold would be my favorite place to be in 2009. So far, so good.

While gold was working off late 2008’s downtrend (click on chart to enlarge), I was fascinated by skeptics who observed that gold had “every reason to blast higher” given the world’s economic chaos and yet had done nothing. From a short-term trading perspective, such contrast certainly takes the gold trade off the table. But from the perspective of longer-term capital preservation on a planet where currencies are growing (or will be growing) on trees, the disconnect simply meant there were more immediate things on the collective minds of investors.

But we are only just getting started. It is nearly impossible to say when inflation will become a problem, only that it will likely be a problem once credit finally gets converted into investment and purchases again to take advantage of all the liquidity facilities being provided by the Federal Reserve. Some point out that Japan is an example where massive liquidity accomplished very little, and the same fate awaits the U.S. But from what I understand about the yen carry trade that took advantage of the low borrowing costs in Japan, Japan essentially EXPORTED inflation to the rest of the globe.

Investors took advantage of Japan’s cheap money to inflate assets all over the world where there was appetite to borrow, consume, and repeat. (Please correct me if I am wrong!). I am not yet clear how the U.S can export its inflation away when more and more central banks are dropping rates to rock bottom levels. In this scenario the supply of gold relative to paper money is rapidly decreasing. Moreover, America has been a global pioneer in financial engineering. I have full confidence that smart bankers are already mapping out long-term strategies for generating profits that will help drive future reflation.

I am focused now on just two other commodity plays for core positions: silver (SLV) and copper (FCX as an approximate proxy). SLV is up 20% this year while Freeport McMoran (FCX) has chopped around in a trading range. Late last year, I was premature in making bets in the falling knives of commodities like copper and steel. I ended up with a lot of profit in puts, but not quite enough to eliminate the pains in the related stocks. I plan to pick my spots for steel very selectively and for shorter-term moves. So far this year, I have liked playing Cliff’s Natural Resources (CLF) and Nucor (NUE) after sell-offs. I thought I would include U.S. Steel (X

) on this list, but it has been stuck drifting in a downtrend all year. My thinking is that I will not be smart enough or fast enough to time the switch from deflation to inflation; I just know I want to have at least a small core position ready for whenever that time comes. Outside of that, I am mainly biased short for now.

I will end with a quick look at the S&P 500. Since I still believe fresh 52-week lows are coming in the near future – news and rumors of government economic plans notwithstanding – I tread very carefully and selectively with any longs.

In the past month, we have had three separate high-volume selling events that have attempted to break the support that still holds from the “the December wash.” Each bounce from support seems to produce more hope that we are building a base for a sustainable bottom (click on chart to enlarge). There are also a good number of stocks that have hit fresh highs for the year just in the past week. But once it is clear that a modest recovery in the 2nd half of the year will not make its annually scheduled appearance, the major indices will be sold to fresh lows (I may have to make an exception for the NASDAQ which has proven particularly resilient so far in 2009). In the meantime, the stock market will continue to predict this imminent (soon to be elusive) recovery over and over and over again.

*All charts created using TeleChart

Be careful out there!
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Gold: nothing succeeds like success – MineWeb

Source: MineWeb.com

Listed gold (and silver) stocks continue to deliver price increases at an astounding pace, underpinned by continually robust gold bullion prices.

Author: Barry Sergeant
Posted: Thursday , 12 Feb 2009

CAPE TOWN –

Listed gold stocks continue to lead the attempted recovery in global stock markets, supported on Wednesday by a dollar gold bullion price that moved to seven-month highs, above USD 945 an ounce. Measured on an absolute basis, the market value of gold stocks listed around the world moved to well above USD 200bn, the highest level seen since October 2008, a month after erstwhile Wall Street investment bank Lehman Bros. filed for bankruptcy, triggering yet another stage of the most intense crisis in world credit and equity markets seen in decades.

Seen as a commodity, gold bullion has surrendered the least of its record price, seen in March 2008, and currently trades just 9% below that record price of just short of USD 1,033 an ounce. The ongoing recovery of gold bullion prices -which have moved below USD 700 an ounce since making record highs – has underpinned a recovery in listed stock prices for companies representing the metal, from explorers to miners. The extent of the recovery has left the vast majority of other mining stocks (with the narrow exception of silver stocks), and stocks of any other kind, far behind. While the MSCI Barra dollar index for all global equities has moved 12% above its lows, seen late in 2008, and emerging market stocks have “bounced” up by 26% from lows, gold stocks, measured on the weighted average value of 250 listed names, have risen 128% from low points, seen just months ago.

The Tier II gold stock grouping, led by names such as JSC Polymetal, Centerra, and heavyweights such as Yamana and Agnico-Eagle, has risen by a fantastic 173% from low points, also within just a few months. Silver stocks have outperformed gold stocks as an overall group, with a weighted average increase of 147% from lows, led by the likes of Fresnillo, and Silver Standard.

Spot silver prices are trading 36% below record highs, also seen in March 2008, but listed silver stocks have long traded in sympathy with trends in gold stocks, tending, however, to overshoot on the rise and also on the fall. However, while the global market value of listed gold stocks runs at well above USD 200bn, silver stocks are worth well short of USD 20bn.The majority of silver is produced as a by-product at mines primarily focused on other metals.

Seen as a grouping, listed uranium stocks are also outperforming most mining stocks, with First Uranium among those names that continue to deliver exceptional price increases. Meanwhile, the SPDR Gold Shares exchange traded fund (ETF), a security that holds physical gold on behalf of its investors, continues to attract significant investor inflows. The security, the biggest gold bullion EFT in the world, currently holds nearly 900 tons of physical gold, valued at nearly USD 27bn. In line with the price performance of dollar gold bullion, the SPDR Gold Shares ETF is currently just 8% below its record highs.

INDICES		From	From
	Points	high*	low*
MSCI world equities USD	846.42	-46.0%	11.5%
MSCI emerging markets USD	561.38	-55.2%	25.9%
S+P 500	828.08	-42.5%	11.7%
DJ Stoxx 600	192.11	-42.3%	7.9%
KBW banks	27.41	-69.5%	9.9%

STOCK	Value	From	From
GROUPS	USD bn	high*	low*
Dow Jones Industrial	2598.66	-42.6%	17.4%
Top 100 miners	873.36	-63.4%	78.7%
Oil stocks	1998.86	-48.4%	33.2%
S + P 500 Energy	1039.73	-46.3%	33.4%
Gold Tier I	160.36	-44.4%	117.2%
Gold Tier II	41.58	-45.3%	173.3%
Gold overall	225.39	-46.7%	127.7%
Silver stocks	12.46	-63.0%	147.4%
World banks (80)	1713.03	-62.6%	30.1%
Uranium stocks	14.95	-58.0%	81.8%
* 12-month
Source: market data; analysis by Barry Sergeant===================================================Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com======================================= The Gold:Silver Ratio – pointing to higher prices all round – MineWeb Source: MineWeb.com

Silver defies its fundamentals in maintaining a price ratio which relates to gold and the movement in this is taken by many silver investors as a guide to forward prices.

Author: Rhona O’Connell
Posted: Friday , 13 Feb 2009

LONDON –

Back in biblical times gold and silver prices were at parity although by the Roman era the ratio had widened to between 15 and 16. Silver backed major currencies right the way through to the nineteenth century although as economies evolved it tended to become the norm that silver was used for intra-national payments while gold was used for international transactions. India and China were among the last countries to remove the silver backing from their currencies, which is the reason why there have been substantial government sales of the metal from these two nations in particular although these sales have dwindled somewhat over the past two years or so. It is also the primary reason why the markets are uncertain as to the level of silver stocks, private or public, that lie in countries such as these.

Net government sales into the market reached a recent peak of 2,743 tonnes in 2003 (GFMS figures), but had halved by 2007 and it looks as if they halved again in 2008, with further reductions looking likely in the future, although since these sales currently comprise less than 5% of silver supply their further erosion is unlikely to make much of a difference to silver prices per se.

What has been making something of a difference recently is the rejuvenation of gold: silver ratio trading. Technical analysts have been looking favourably on silver since the start of the year and the gold: silver ratio has come increasingly onto the radar screens. Technically-driven trading of the ratio has also been important, with the ten-day and twenty-day moving averages defining the upper boundary of the ratio’s path. Once the ratio had severed support at 72 this trading gained considerable traction and within two days we were at 69, en route for a test of 67, the lowest since late September, when gold was at $740 and silver at just less than $11.

This time the activity in the market brought silver up to $13 while gold was easing from $920 to just below $900 and since then gold has taken up the reins to test $950 while silver has approached $14 then retreated towards $13.40. and the ratio has settled at around 70.

Obviously the ratio, of itself, does not drive markets. It is normally a result of the inter-related moves of both gold and silver, but every now and then it does have an impact on the metals’ prices – much more so on silver than on gold.

What has lain behind the changes in the ratio this time? Certainly not the silver market’s fundamentals in terms of marginal costs of production against the balance between industrial supply and demand (and this includes jewellery demand but not investor interest), which are not looking favourable. Silver may often be regarded as a precious metal by virtue of its historic connection with currencies and its lingering jewellery market but jewellery, silverware and coins+medals between them comprise less than 30% of silver demand as against more like 80% in the gold market); on a purely fundamental basis, therefore, silver belongs in the industrial camp.

Sentiment and perception are important market elements, however and silver’s long-standing relationship with gold is a vital influence on prices and investment activity. Essentially, because of silver’s intrinsically higher volatility than gold, some speculators and investors use exposure to silver as a means of gearing up their exposure to the latter. If gold is going up, silver typically goes up further, so a combination of the two is a stronger performer than gold on its own. This does not work for the whole time, obviously, but it is a well-entrenched mechanism and has been playing an important part in silver’s price performance over the past two months since the gold: silver ratio briefly exceeded 80.

This has been no more evident than in the exchange traded funds and the London ETC. When the gold:silver ratio reached its maximum in mid-December 2008, these funds harboured 7,661 tonnes of silver in their coffers. In the two months since then this has shot up to 8,734 tonnes, an increase of 1,073 tonnes and on annualised basis this is the equivalent of 6,096 tonnes per annum (196 million ounces) or almost 25% of global industrial demand. Over this period the silver price has increased by 21%, from just over $11 to just less than $13.40. Gold has risen by 13% and copper, 12% over the same period.

With this degree of uptake it is not surprising that silver has outshone gold recently and left copper some way behind. Although gold and copper have improved by similar amounts, silver’s correlation coefficient with gold over the period has been a healthy 90%, while that with copper, although still impressive, has been lower at 63%.

Speculative exposure on COMEX over the same period has also been increasing, although it is important to remember that this does not involve physical metal – but it can be very important in terms of price discovery. The net long speculative position rose from 3,849 tonnes on 9^th December to 5,158 tonnes on 3^rd February (latest available figures), with a goodly size of fresh longs entering the market, and only a small degree of short covering.

There is an old adage in the market that the gold:silver ratio only really counts in two places; the COMEX floor and the Indian market. In India it is by no means unusual for jewellery and investment holders to switch between gold and silver when they perceive that the prices are out of line. Certainly recently there has been a very healthy market in old gold scrap, but silver demand has remained slack in response both to high outright prices and the economic environment.

Silver’s outright fundamentals do not justify prices at these levels, but for as long as the market retains its bullish stance and investors keep coming for the metal then any industrial surplus this year stands a good chance of being absorbed and when investors like the look of gold, some of them will like the look of silver even more. This metal is, however, flying almost as high as Icarus and when that ratio starts to rise, then silver speculators had better be watching very closely.

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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Will Big Money Interest Propel Gold over Its Final Hurdle? – Seeking Alpha

By: Andrew Mickey of Q1 Publishing

Bloomberg declares:

Gold Soars to Highest Since July.

A Wall Street Journal headline proclaims:

Gold is Flirting with $1,000, Again; ‘There’s No Sign of the Market Tiring.’

On Wednesday, gold surged another $30 an ounce, surpassing $930 and now, the mainstream media is getting on board in a big way.

We can spend all day debating whether this is the time gold runs back to $1,000 and beyond, or whether this is just another short-lived bounce which could run out of steam at any moment. Frankly, the exceptional volatility of the gold market has taught me that only time will tell.

What I can tell you is that there has recently been a change in gold – a dramatic change -at least the perception of gold. This change could set gold and gold stocks on a long march higher, yet, the mainstream media have completely glossed over it. Let me explain.

Gold Goes Big

You see, gold’s a funny thing. It elicits such an emotional response. Gold has had a pretty volatile year. In 2007, the yellow metal started attracting a lot of attention when it passed the highs set in the early 80s and has been up and down since, although lately, it has had more ups than downs. Despite all the recent attention, we’re right back where we were a year ago, when gold passed the $900 mark.

Whether you’re an all out “gold bug” who has been waiting a long time for this run, you question the value of gold because it has very little industrial use (ala Warren Buffett), or somewhere in between, you’ve got to take a look at what has happened to gold in the past few weeks.

But here’s the thing, this time around there’s interest from some very big money investors, as it is now considering gold to be a viable investment again. It’s not just the hyperactive, hot money hedge funds batting around gold anymore. Now pension funds, mutual funds, and other institutional investors are betting on gold – in a big way.

That is the big difference this time around. The big money interest hasn’t been there for decades, and it looks like that’s quickly starting to change.

Big Money Bets on Gold

Unprecedented sums of money have been pouring into gold in the past few months. While many funds are licking their wounds from the recent downturn and facing ongoing redemptions, some still have money. Those that do are at least putting some of it, into gold.

Just look at the recent money, which has been put into gold companies across the board. They’re all getting new cash. Major miners looking for extra cash to fund takeovers, exploration, and mine development, along with small gold companies looking for one more financing to put themselves into production, are all getting it. There’s money out there for gold.

For instance, Newmont Mining (NYSE:NEM) is expecting at least $1.7 billion (or more depending on the final terms of agreement) in new cash in its coffers. The cash infusion will come from the sale of stock and convertible notes. That’s billion – with a ‘B.’

Leading the charge in putting this financing together was Citigroup (C), J.P. Morgan (JPM), and the Bank of Montreal (BMO). They’re the big money, and except for BMO, they wouldn’t have given gold the time of day when private equity players were chasing after real estate, Chinese companies, and other “hot” sectors over the past few years.

Of course, it’s not just one big deal though. It’s lots of them. Industrials may be going under because they can’t get financing, but when it comes to gold companies, suddenly, there appears to be plenty of available money. Over the past few months, there have been a slew of financings of gold companies. Yamana (NYSE:AUY), Agnico-Eagle (NYSE:AEM), and Kinross Gold (NYSE:KGC), combined have attracted more than $800 million in new money.

Even gold companies, which were pretty much left for dead during the credit crunch are getting the cash they need. Shares of Osisko Mining [TSX:OSK] dropped well below $2 per share in November amid concerns the company wouldn’t be able to get the cash necessary to move forward with its prospective gold mine. Three months later, its shares are trading above C$4 after hitting highs of over C$5 per share, and it now has the money it needs. NovaGold (AMEX:NG) went through a similar ordeal. Its shares dropped all the way to $0.37 only to climb back to close at $3.52, on Wednesday.

These are just some of the bigger deals. We could highlight the dozens of smaller deals which are or are about to get some new capital, but you get the point. There’s big money backing gold now. In a way, the whole gold situation may have changed.

A “Frightening” Change

Two weeks ago Peter Munk, the Chairman of Barrick Gold (NYSE:ABX) – the world’s largest gold mining company – identified an “unpleasant and frightening” trend. In an interview with Bloomberg, Munk said:

He has received an increasing number of calls from wealthy investors looking for ways to buy bullion. While that is positive for the metal market, it is a “sad part of a civilized society.”

“That’s not where you want to be, it’s alarming. Do I personally believe gold will break through $1,000? It’s not a question of if; it’s a question of how soon.”

You’ve got to remember that Munk is the chairman and founder of a gold company, so he has a lot of experience in gold. He has access to the inner workings of the gold market, and benefits from rising gold prices, as well.

Despite the potential conflict of interest, he is definitely correct in saying that change has taken place.

What Really Matters About Gold

As long time Prosperity Dispatch readers know, I hate talking about gold. When it comes to gold, everyone has an opinion, and it’s usually a very strong one, as there’s very little middle ground when it comes to gold.

Just to be clear though, I’m not a gold bug. I’m not about to predict gold is going to $1,000 before it goes to $800, as there are just too many variables driving gold lately. I think a world with $200 gold is a much better place to live in than a world with $2,000 gold, but the recent big money push into gold could mark a significant change in the prospects for gold.

In the end, it all comes down to whatever the markets believe. Perception is reality, and a lot of money is betting gold will be perceived as more dearly down the road, whether deflation or inflation, wins out.

Over the past few months, deflation vs. inflation has been a popular subject of debate. While $60 trillion of wealth has been wiped out in this downturn, central banks are going all out to print enough new money to prevent the inevitable deflationary effects of the losses. And as we’ve noted before, all speculative bubble-booms end in deflation.

That doesn’t matter now. The current theory is gold will win either way – deflation or inflation, it doesn’t matter. Gold wins during inflation because it’s a store of value, and it wins in deflation as central banks debase their currency. As a result, there’s demand from both the inflation and deflation camps. In the end, the perception of value is what really matters for gold (and every other financial asset for that matter).

For decades, the big money refused to view gold as anything other than something horded by conspiracy theorists. The lack of big money interest was a huge hurdle for gold. Now, with the billions of dollars headed into gold from leading U.S. institutions, it appears the hurdle may have finally been passed.

Disclosure: None

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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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ps- Gold is inching back now only down $7.00 to $942

Have a Great Weekend and Happy Valentines Day! – jschulmansr

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. – jschulmansr

Even if the velocity of money takes forever and a day to build up to inflationary speeds, I strongly suspect that the Federal government will attempt to inflate its way out of its massive debt. When the bills come home for all the financial repair work being done in this country, there will be little appetite for increasing taxes enough to pay down this debt in any significant way. The economic multiplier from stimulus programs will also not provide sufficient tax revenues. America’s biggest and most cooperative foreign creditor, China, has probably just served us notice that they will not help us more than they already are helping

. China currently holds 12% of the $5.75 trillion in U.S. marketable debt. Inflation will be the indirect tax that will confront lower legislative hurdles.

The fear of deflation and other assorted global economic calamities had everyone focused on taking shelter in U.S. Treasuries and the dollar. But as those fears slowly (very, very slowly) subside, more and more attention has turned to gold.

Shock and Awe! – Doug Casey

12 Thursday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, Bailout News, banking crisis, banks, Barack Obama, bear market, Bollinger Bands Saudi Arabia, Brian Tang, bull market, capitalism, central banks, China, Comex, commodities, Contrarian, Copper, Credit Default, Currencies, currency, Currency and Currencies, Dennis Gartman, depression, DGP, dollar denominated, dollar denominated investments, Doug Casey, economic, Economic Recovery, economic trends, economy, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gata, GDX, GLD, gold, Gold Bullion, Gold Investments, gold miners, hard assets, how to change, How To Invest, How To Make Money, hyper-inflation, IMF, India, inflation, Investing, investments, Jeffrey Nichols, Jim Rogers, Jschulmansr, Keith Fitz-Gerald, Latest News, Long Bonds, majors, Make Money Investing, Marc Faber, market crash, Markets, Michael Zielinski, mid-tier, mining companies, mining stocks, monetization, Moving Averages, palladium, Peter Grandich, Peter Schiff, physical gold, platinum, platinum miners, precious, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, resistance, risk, run on banks, safety, Sean Rakhimov, SEO, Short Bonds, silver, silver miners, small caps, sovereign, spot, spot price, stagflation, Stimulus, Stocks, TARP, Technical Analysis, The Fed, TIPS, U.S., U.S. Dollar, uranium, volatility, warrants, XAU

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Late Breaking: I came across this from the Contrarian Master Himself- Mr. Doug Casey. Here is his take for 2009 a must read for investors- especially Gold Bugs! Enjoy and Good Investing! – jschulmansr

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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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2009: Another Year of Shock and Awe – Seeking Alpha

By: Jeff Clark of Casey Research

In their annual forecast edition, the editors of BIG GOLD asked Casey Research Chairman and contrarian investor Doug Casey to provide his predictions and thoughts on issues everyone’s thinking about these days. Read what he has to say on the economy, deficits, inflation, and gold…

The $1.1 Trillion Budget Deficit

My reaction is that the people in the government are totally out of control. A poker player would say the government is “on tilt,” placing wild, desperate bets in the hope of getting rescued by good luck.

The things they’re doing are not only unproductive, they’re the exact opposite of what should be done. The country got into this mess by living beyond its means for more than a generation. That’s the message from the debt that’s burdening so many individuals; debt is proof that you’re living above your means. The solution is for people to significantly reduce their standard of living for a while and start building capital. That’s what saving is about, producing more than you consume. The government creating funny money – money out of nothing – doesn’t fix anything. All it does is prolong the problem and make it worse by destroying the currency.

Over several generations, huge distortions and misallocations of capital have been cranked into the economy, inviting levels of consumption that are unsustainable. In fact, Americans refer to themselves as consumers. That’s degrading and ridiculous. You should be first and foremost a producer, and a consumer only as a consequence.

In any event, the government is going to destroy the currency, which will be a mega-disaster. And they’re making the depression worse by holding interest rates at artificially low levels, which discourages savings – the exact opposite of what’s needed. They’re trying to prop up a bankrupt system. And, at this point, it’s not just economically bankrupt, but morally and intellectually bankrupt. What they should be doing is recognize that they’re bankrupt and then start rebuilding. But they’re not, so it’s going to be a disaster.

The U.S. Economy in 2009

My patented answer, when asked what it will be like, is that this is going to be so bad, it will be worse than even I think it’s going to be. I think all the surprises are going to be on the downside; don’t expect friendly aliens to land on the roof of the White House and present the government with a magic solution. We’re still very early in this thing. It’s not going to just blow away like other post-war recessions. One reason that it’s going to get worse is that the biggest shoe has yet to drop… interest rates are now at all-time lows, and the bond market is much, much bigger than the stock market. What’s inevitable is much higher interest rates. And when they go up, that will be the final nail in the coffins of the stock and real estate markets, and it will wipe out a huge amount of capital in the bond market. And higher interest rates will bring on more bankruptcies.

The bankruptcies will be painful, but a good thing, incidentally. We can’t hope to see the bottom until interest rates go high enough to encourage people to save. The way you become wealthy is by producing more than you consume, not consuming more than you produce.

Deflation vs. Inflation

First of all, deflation is a good thing. Its bad reputation is just one of the serious misunderstandings that most people have. In deflation, your money becomes worth more every year. It’s a good thing because it encourages people to save, it encourages thrift. I’m all for deflation. The current episode of necessary and beneficial deflation will, however, be cut short because Bernanke, as he’s so eloquently pointed out, has a printing press and will use it to create as many dollars as needed.

So at this point I would start preparing for inflation, and I wouldn’t worry too much about deflation. The only question is the timing.

It’s too early to buy real estate right now, although a fixed-rate mortgage could go a long way toward offsetting bad timing. It would let you make your money on the depreciation of the mortgage, as opposed to the appreciation of the asset. Still, I wouldn’t touch housing with a 10-foot pole – there’s been immense overbuilding, immense inventory. And people forget: a house isn’t an investment, it’s a consumer good. It’s like a toothbrush, suit of clothes, or a car; it just lasts a little bit longer. An investment – say, a factory – can create new wealth. Houses are strictly expense items. Forget about buying the things for the unpaid mortgage; before this is over, you’ll buy them for back taxes. But then you’ll have to figure out how to pay the utilities and maintenance. The housing bear market has a long way to run.

The U.S. Dollar and the Day of Reckoning

It’s very hard to predict the timing on these things. The financial markets and the economy itself are going up and down like an elevator with a lunatic at the controls. My feeling is that the fate of the dollar is sealed. People forget that there are 6 or 8 trillion dollars – who knows how many – outside of the United States, and they’re hot potatoes. Foreigners are going to recognize that the dollar is an unbacked smiley-face token of a bankrupt government. My advice is to get out of dollars. In fact, take advantage of the ultra-low interest rates; borrow as many dollars as you can long-term and at a fixed rate and put the money into something tangible, because the dollar is going to reach its intrinsic value.

The Recession

This isn’t a recession, it’s a depression. A depression is a period when most people’s standard of living falls significantly. It can also be defined as a time when distortions and misallocations of capital are liquidated, as well as a time when the business cycle climaxes. We don’t have time here, unfortunately, to explore all that in detail. But this is the real thing. And it’s going to drag on much longer than most people think. It will be called the Greater Depression, and it’s likely the most serious thing to happen to the country since its founding. And not just from an economic point of view, but political, sociological, and military.

For a number of reasons, wars usually occur in tough economic times. Governments always like to find foreigners to blame for their problems, and that includes other countries blaming the U.S. In the end, I wouldn’t be surprised to see violence, tax revolt, or even parts of the country trying to secede. I don’t think I can adequately emphasize how serious this thing is likely to get. Nothing is certain, but it seems to me the odds are very, very high for an absolutely world-class disaster.

Gold’s Performance in 2008

The big surprise to me is how low gold is right now. It’s well known that even if we use the government’s statistics, gold would have to reach $2,500 an ounce to match its 1980 high. I don’t necessarily buy the theories that the government and some bullion banks are suppressing the price of gold. Of course, with everything else going on, the last thing the powers-that-be want is a stampede into gold. That would be the equivalent of shooting a gun in a crowded theater; it could set off a real panic. But at the same time, I don’t see how they can effectively suppress the price. Either way, the good news is that gold is about the cheapest thing out there. Remember, it’s the only financial asset that’s not simultaneously someone else’s liability. So I would take advantage of today’s price and buy more gold. I know I’m doing just that.

Gold Volatility

Gold will remain volatile but trend upward. I don’t pay attention to daily fluctuations, which can be caused by any number of trivial things. Gold is going to the moon in the next couple of years.

Gold Stocks

Last year, it seemed to me that we were still climbing the Wall of Worry and that the next stage would be the Mania. But what I failed to read was the public’s indirect involvement through the $2 trillion in hedge funds. On top of that, while the prices of gold stocks weren’t that high, the number of shares out and the number of companies were increasing dramatically. Finally, the costs of mining and exploration rose immensely, which limited their profitability.

The good news is that relative to the price of gold, gold stocks are at their cheapest level in history. I still have my gold stocks and the fact is, I’m buying more. I’m not selling, because I think we’re starting another bull market. And this one is going to be much steeper and much quicker than the last one. I’m not a perma-bull on any asset class, but in this case I’m forced to go into the gold stocks. They’re the cheapest asset class out there, and the one with the highest potential.
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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Enjoy and Good Investing – jschulmansr

Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. – jschulmansr

Gold’s Big Test – Will it Pass?

12 Thursday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, Bailout News, banking crisis, banks, Barack Obama, bull market, capitalism, central banks, China, Comex, commodities, Credit Default, Currencies, currency, Currency and Currencies, DGP, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, futures markets, GDX, GLD, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, hyper-inflation, IMF, inflation, Investing, investments, Jschulmansr, Junior Gold Miners, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, palladium, physical gold, platinum, platinum miners, precious metals, price, prices, producers, production, rare earth metals, recession, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, TARP, The Fed, Today, U.S. Dollar, uranium

≈ 1 Comment

Sorry for the late post today, as I am writing gold closed today at $949.20 up another $4.70 oz. We are now at Gold’s big test, if it can successfully clear and close over $950 -$960 oz. then ther is nothing stopping it to go for a new test of the all time highs. Today’s action was a feint like a boxer about to deliver the knockout punch! However a word of caution if Gold fails after 2-3 attempts at clearing the $950 level then a retracement back to the $875-$890 level will occur. It will consolidate and then come back up to retest the $950 level. Personally however, in my opinion I think this is it the 2nd successful close over $940, I think we are getting ready to see Gold go back and test all time highs. If you hurry you can still get aboard! – Good Investing! – jschulmansr

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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Stocks Are Doomed, Only Cash or Precious Metals May Survive – Seeking Alpha

By: Doctor O of Sell The Rally

President Obama, his administration, and the Democratically controlled Congress are working as quickly as possible to spend as much money as possible on their constituent base, to consolidate their stranglehold on power. There is still no bank rescue plan, nothing in the “stimulus” bill to create or even slow job losses, and seemingly no understanding about the enormous amount of bad debt that is rapidly losing value and destroying the financial system from the inside out.

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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Will Gold Hit $1,000 – Seeking Alpha

Gold prices broke out Wednesday and traded above $940/ounce. This is a new 6-month high! In my article last week, on 2/4/09, I said:

Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Just open an Account, Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

In the three months ending January 31, SLV led its benchmark index by nearly 25%, trumping PowerShares’ DB Silver offering, DBS, by a narrow 1.25%. If analyst predictions play out, the demand for silver could continue to grow in upcoming weeks, even as a dismal holiday season for jewelry persists well into the new year. In a recent report, UBS upped forecasts for both silver and gold, citing expectations of speculation and investor interest, as uncertainty still reigns in U.S. markets.

Supporting the hypothesis that the flight to precious metals still results from investor uncertainty is UBS strategist John Reade, who noted that “purchases of physical gold have jumped over the past six months as investors’ fears about the current financial crisis and the possible outcomes from government efforts to support banks and economies have intensified.” UBS also estimates that investor interest in precious metals such as gold will double in 2009, compared with 2007. If this prediction plays out, gold could reach an average of $1,000 before interest wanes.

Shares of SLV track the spot prices of silver and are backed by physical silver reserves. On February 3, New York–based SLV announced that the bullion holdings for the fund rose 77 tons, approximately 1%. This increase puts the fund at a record 7,530.2 tons of bullion, up 11% since January 2. While other factors come into play during the intraday trading of SLV shares, increasing stocks of bullion underscore the growing interest that SLV is seeing in 2009.

Futures, currency and commodity prices are extremely volatile and unpredictable, so understanding the reasons behind silver’s recent spike is an important step in avoiding the swell and vacuum of SLV’s swings. As currency concerns continue to plague investors worldwide, an increasing number of people have turned to silver as a “why-not” alternative to investing in unpredictable notes. India, whose citizens seize silver as a tangible alternative to currency, imports an average of 3,000 tons of silver per year. The Economic Times recently reported that banks may not be able to import regular amounts of silver in the future, a factor that could drive silver prices there drastically higher in black market arenas.

So what makes SLV stand apart from the ever-expanding sea of commodity ETF choices? Its track record, size, and liquidity are all comforting factors for investors looking to jump into the silver fray. With 245 million shares outstanding and an average of 6 million shares traded per day over the last three months, SLV simply dwarfs peers such as DBS. Launched in January 2007, DBS has a three-month average daily trading volume of nearly 200,000—a factor that makes SLV a more liquid choice in white-knuckle times.

Investors should also be wary because while SLV tracks the spot price of silver, other important factors come into play during the intraday trading of the ETF. In addition to reflecting the price of physical silver, SLV also takes into account counterparty risk and the ever-changing emotions of investors in the open marketplace. While the silver is likely “there,” the ratings on even the most venerable of banks—like SLV keeper Barclays—could come into question in perilous economic conditions. Success in the fund is also contingent on the increasing price of silver. Placing funds in SLV is not the same as under the mattress—management fees and “iShares Silver Trust expenses” are exacted by the issuer on a regular basis, slowly eroding the value of one’s investment over time, if the price of silver does not continue to rise.

The longer the economic stimulus plan is stripped and scrubbed across the floor of the Senate, the more investors could continue to pile into a tangible investment like SLV until the storm passes. When the outcome becomes clearer, one-tune investments like SLV may become a more proportionate segment of portfolios and lose steam as the attention that has prompted their rise refocuses on other sectors.

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Will Gold Reach $5000 an Ounce? – Seeking Alpha

By: Mark O’Byrne of Gold and Silver Investments

Gold surged a further 3.3% yesterday to $942.45 (as did silver) as worries about the US and global financial system and economy continue to grow and governments print money on an unprecedented scale to combat the economic crisis. Asian and European stock markets are again under pressure this morning.

The strong close above $930/oz yesterday should see us once again challenge the record highs of $1,003/oz seen last March (March 17th) when Bear Stearns collapsed.

We have since had a long period (nearly 12 months) of correction and consolidation and thus a solid foundation has been built from which the next leg of the bull market will likely be launched. Our forecast at the beginning of the year for gold to rise as high as $1,250/oz looks increasingly conservative.

Gold Surges to New Records in Euros and Sterling as Crisis Deepens

Gold continues to surge to record highs in other major currencies (the London AM Fix this morning was at $944.00 USD, £666.33 GBP and €737.04 EUR. Worries about the health of the financial system and economy in the UK and EU are leading to weakness in the euro and sterling that has seen them fall in value versus gold. Gold has surged to €737/oz and over £666.33/oz (see charts below).

Gold to Reach $5000/oz According to Respected Goldcorp Founder

The respected founder of Goldcorp (GG), Rob McEwen told Bloomberg how he sees gold rising to as high as $5,000/oz in the next four years. Goldcorp is the second largest gold mining company in the world by market capitalization.

As governments increase the money supply to combat recession, bullion will more than double to $2,000 an ounce by the end of next year. “Politicians around the world are listening to cries from their electorates and they’re giving money to all callers,” McEwen said yesterday.

McEwen has more than $100 million in gold investments and said he also has a “big, big” holding in bullion. McEwen said he started buying bullion in August 2007, at the beginning of the subprime mortgage crisis. “I realized we had reached an inflection point regarding money,” McEwen said. “It was all about protecting money, and gold served that purpose.”

The recent trend of fiat currencies falling vis a vis gold looks set to continue for the foreseeable future. McEwen’s bold prediction looks outlandish now (as did predictions of gold at over $1,000/oz in 2001) but given the confluence of extremely strong fundamentals, gold will likely rise to levels in the coming years that seem unfathomable today.

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My Note:- I think a more realistic view would be Gold at $2500 to $3000 in next 2-3 years. However if everything goes to H*** in a Handbasket then yes $5000 and more! – Good Investing! – jschulmansr

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Silver The Other Precious Metal – Seeking Alpha

By Don Dion of Fidelity Independent Advisor

In a global economic crisis for which the media has seemingly exhausted its cache of negative adjectives to describe the meltdown, one is hard-pressed to find an example of success in the quagmire that has become the marketplace. When scanning the ranks of the ETF Sector Momentum Table, however, one fund’s sweeping forward progress makes it a glinting example among its peers. iShares’ Silver Trust (SLV) vaulted from the No. 60 position in the rankings on December 2, 2008, to the No. 14 spot on February 3, 2009. If precious metals continue to outpace agricultural commodities, and the “flight to safety” extends into a probable “odyssey toward conservative investing,” SLV will be an interesting fund to track in upcoming months.

“We’ll wait for GLD to confirm that $88 will hold. Above $90, we should see more buyers coming in. March in-the-money calls are reasonably priced. AEM is another good vehicle to play gold. Although it is very volatile, it is a momentum stock and can run up fast!”

GLD successfully tested $88 and closed above $90 on Tuesday. On Wednesday, it jumped on high volume, more than twice the average volume!! GLD closed at $92.29, up +2.31%. AEM also did well, gaining +6.58%, or $3.48, finally breaking above $55.

click to enlarge

GLD

GLD added $2.08 to close at $92.29. It jumped on very high volume Wednesday. It closed just below the resistance at $92.5. This is only a soft resistance. The nearest hard resistance is between $95-$97.5.

Compared to the stock market, which had been treading water in a tight range since November last year, GLD had done much better. We can see a big divergence in this comparson chart:

The SPX has basically traded flat. On the other hand, GLD has risen nearly +30%, from $72 to $92!

GLD’s chart is still very strong. Its daily MAs are curving higher and still holding a bullish formation. The MACD is also turning up. I think GLD can easily revisit $100 within the next few months, which means gold can retest $1,000, and likely go above. Again, March “within-the-money” calls are reasonably priced. If GLD goes to $100 within the next few weeks, these options will probably double.

Good day and HappyTrading! ™.

Disclosure: no positions

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My Note: Yes! Gold will hit $1000 in fact will go and test the $1050 level. I n the case above the writer Mr Wang did an excellent forcast but notice no positions! I hope he follows his own advice and jumps on either (GLD) or if you want more bang for the buck (DGP). My disclosure I am Long (DGP), and (GLD). Also Long Bullion, Large, mid-tier and junior mining shares in the whole Precious metals spectrum including Rare Earths and Strategic Metals. Also Don’t forget silver as the next article points out. Finally do not forget Platinum and Palladium their time is coming too, mark my words! – jschulmansr

Home foreclosures are accelerating. We await a tidal wave of personal and corporate bankruptcies and the implosion of the commercial real estate market that will trigger more massive losses in the banking system.

In short, I have no confidence in the U.S. Government to “solve” the current depression. In fact, they will no doubt make it worse by socializing the economy and spending money obscenely. No wonder the only thing that’s working is precious metals.

I cannot consider investing in any stock until this virulently anti-business administration is either voted out of office or starts to see things more rationally.

The Last Depression, Coming to a Town Near You

Keep Away from U.S. Stocks as They Cascade Down

Gold Threatening to Break Out To New Highs Against the U.S. Dollar

No Stimulus Here!

11 Wednesday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, bull market, capitalism, central banks, China, Comex, Currency and Currencies, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, futures, futures markets, GDX, GLD, gold, Gold Bullion, Gold Investments, gold miners, How To Invest, How To Make Money, hyper-inflation, IMF, inflation, Investing, investments, Jschulmansr, Junior Gold Miners, Latest News, Long Bonds, Make Money Investing, market crash, Markets, mining companies, mining stocks, palladium, Peter Grandich, physical gold, platinum, platinum miners, precious metals, producers, production, recession, silver, silver miners, spot, spot price, stagflation, Stimulus, TARP, The Fed, TIPS, U.S. Dollar

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After yesterday’s almost 400 point drop on the Stock Market we know what traders think of the stimulus plan… No stimulus here! Gold is up another $8 and is looking like it’s getting ready to test $930 then $950. The treasury has the money presses running full steam and Inflation will be the end result. Smart Investors are starting to realize there is only one place to be and that is Gold and Precious Metals. A good place to start, is where I get my bullion,and get a free gram of Gold to boot just for opening an account… Good Investing – jschulmansr

Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Source: Mineweb.com

VM GROUP BRIEFING

IMF may no longer need to sell its gold

The IMF does well in difficult times for the global economy as its income to meet its internal budgets arises from loans to nations in economic difficulties. In such times IMF loans increase, as does its income, which could mean there is not such a pressing need for the Fund to sell its gold says London’s VM Group.

Author: Lawrence Williams
Posted: Wednesday , 11 Feb 2009

LONDON –

Some two years ago the gold price was hit, albeit temporarily, by the announcement that the International Monetary Fund would sell 403 tonnes of gold as the basis of an endowment, the interest on which would be used to help defray the shortfall in the IMF budget. Indeed, at the time the Fund was suffering as its loan book was shrinking, eventually falling to SDR5.8bn at the end of the first quarter of 2008. The IMF does well when the world economy does badly, but conversely does badly when the world economy does well and at that time the global economy seemed to be riding high.

The reason the IMF does badly when the world economy does well is a simple one. The Fund relies on income from the loans it puts out to countries in economic difficulties for its day to day running expenses. When the Global economy is strong, countries can repay these loans and there are few takers for new ones, so income shrinks. After several years of strong global growth the Fund’s loan book had shrunk – hence the need for the new source of funding recommended by the IMF’s Committee of Eminent Persons to Study Sustainable Long Term Financing of IMF Running Costs, chaired by Sir Andrew Crockett, former head of The Bank for International Settlements (BIS). This is the Committee which recommended the sale of IMF gold reserves, the interest on the revenue from which could be used to plug the Fund’s own internal budget deficit.

But, since the middle of last year the global economy has been in virtual freefall and the IMF has again been called upon by a number of countries to help prop up their economies with major loans. From the low of SDR5.8bn noted above, at the latest count the IMF now has loans out totalling $17.8 bn – and this figure is much more likely to rise than fall for the foreseeable future. Indeed it may well double or more.

In a briefing to clients from London’s VM Group, the Group’s analysts suggest that, with the increase in income currently being generated, the IMF no longer has a short term need to boost its income in other forms – such as with interest from the proceeds of a gold sales programme – and there will be certainly less urgency to implement such a programme.

Notwithstanding the IMF’s improved internal funding circumstances the VM Group believes though, that “the Fund would still like to sell, largely because the Crockett Committee pinpointed some structural problems in the way the IMF financed itself. The Committee criticised the IMF’s funding strategy, not just on the ground that it no longer covered its expenditure, but because it was too concentrated, wasn’t related to its expenditure (in that other functions were covered by unrelated interest income), and – crucially – that it lacked predictability, soaring in bad times and falling in good times.”

But – and the VM group reckons this is an important ‘but’ – “..the Fund is not the only interested party in the question of IMF gold sales. It was always considered the US’s share of IMF votes, has an effective veto. In the past, Congress has been against gold sales, not just because of the impact on the gold price (and gold-mining in the US and elsewhere), something the Committee was at pains to say would be minimised, but also through general unease about funding commitments to international financial institutions. Some US legislators will certainly pose the question …. now that the IMF’s income is much better, does it really need to sell any gold? Moreover, the Fund might possibly have too much money after the financing reforms, if its loans were to continue to increase.”

This is obviously a speculative assessment, but not one without merit. A major improvement in IMF finances may well lead to a ‘no sale’ directive by the US Congress given that there will likely be many in the legislature uncertain of the impact of such sales on an already very fragile economic system. Leave well alone may be their feeling if the IMF is seen to be fully self funding again.

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My Note: Is the Treasury Bubble Getting Ready to Burst? Read between the lines in this next article and you decide… jschulmansr

China Needs U.S. Guarantees for Treasuries, Yu Says

Source: Bloomberg.com Worldwide

By Belinda Cao and Judy Chen

Feb. 11 (Bloomberg) — China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank

The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt.

Benchmark 10-year Treasury yields climbed above 3 percent this week on speculation the government will increase borrowing as President Barack Obama pushes his $838 billion stimulus package through Congress. Premier Wen Jiabao said last month his government’s strategy for investing would focus on safeguarding the value of China’s $1.95 trillion foreign reserves.

China may voice its concerns over U.S. government finances and the potential for a weaker dollar when Secretary of State Hillary Clinton visits China on Feb. 20, according to He Zhicheng, an economist at Agricultural Bank of China, the nation’s third-largest lender by assets. A People’s Bank of China official, who didn’t wish to be identified, declined to comment on the telephone.

Clinton Talks

“In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.”

Chinese Foreign Ministry Spokeswoman Jiang Yu said yesterday that talks with Clinton would cover bilateral relations, the financial crisis and international affairs, according to the Xinhua news agency.

The dollar fell 0.6 percent to 89.96 yen today on concern that the U.S. government’s bank-rescue plan will fail to revive lending. Treasuries declined as investors prepared to bid for a record $21 billion sale of 10-year notes today. The yield on the benchmark 10-year note rose three basis points to 2.83 percent.

Currency Reserves

“These comments are some sort of a threat but of course China can never get such a guarantee,” said Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore. The U.S. may assure China that it will clean up the financial system and that it “won’t push for a weaker dollar but they can’t promise not to increase the fiscal deficit,” he said.

U.S. government bonds returned 14 percent last year including price gains and reinvested interest, the most since rallying 18.5 percent in 1995, according to indexes compiled by Merrill Lynch & Co. Concern that the flood of bonds would overwhelm demand caused Treasuries to lose 3.08 percent in January, the steepest drop in almost five years, Merrill data show.

China’s loss of more than $5 billion from investing $10.5 billion of its reserves in New York-based Blackstone Group LP, Morgan Stanley and TPG Inc. since mid-2007 may increase its demand for the relative safety of Treasuries.

“The government will be a net buyer of Treasuries in the short term because there’s no sign they have changed their strategy,” said Zhang Ming, secretary general of the international finance research center at the Chinese Academy of Social Sciences in Beijing. “But personally, I don’t think we should increase holdings because the medium- and long-term risks are quite high.”

Fed Buying

Bill Gross, co-chief investment officer of Pacific Investment Management Co., said on Feb. 5 the Federal Reserve will have to buy Treasuries to curb yields as debt sales increase. Fed officials said Jan. 28 they were “prepared” to buy longer-term Treasuries.

“The biggest concern for China to continue buying U.S. Treasuries is that if Obama’s stimulus doesn’t work out as expected, the Fed may have to print money to cover the deficit,” said Shen Jianguang, a Hong Kong-based economist at China International Capital Corp., partly owned by Morgan Stanley. “That will cause a dollar slump.”

China’s foreign-exchange reserves grew about $40 billion in the fourth quarter, the least since mid-2004, as an end to yuan appreciation since July prompted investors to pull money out.

The world’s third-biggest economy grew 6.8 percent in the fourth quarter, the slowest pace in seven years. Policy makers announced a 4 trillion yuan ($585 billion) economic stimulus plan in November to spur domestic demand.

Linking Disputes

Yu said China has no plans to channel its reserves toward stimulating its own economy because its trade surplus is sufficient to fund any import needs. China’s trade surplus was $39 billion in January.

China “should diversify its reserves away from U.S. Treasuries if the value of China’s foreign-exchange reserves is in danger of being inflated away by the U.S. government’s pump- priming,” he said.

China may try to link trade and currency policy disputes to its future investment in Treasuries, said Lu Zhengwei, an economist in Shanghai at Industrial Bank Co., a Chinese lender partly owned by a unit of HSBC Holdings Plc.

U.S. Treasury Secretary Timothy Geithner accused China on Jan. 22 of “manipulating” the yuan to give an unfair advantage to its exporters. The currency has dropped 0.16 percent this year to 6.8342 per dollar, following a 21 percent gain since a peg against the dollar was abandoned in July 2005.

“China can also use this opportunity to get a promise from the U.S. not to make inappropriate requests on bilateral trade and the Chinese yuan,” Lu said. “We can’t afford more yuan appreciation as the economy is facing a serious slowdown.”

To contact the reporters on this story: Belinda Cao in Beijing at lcao4@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.

Last Updated: February 11, 2009 04:04 EST

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Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

Steve Palmer: Juniors Staged to Climb from New Ground Floor? – Gold Report

Source: The Gold Report

Whether irrational exuberance or the faltering dot-com industry triggered it, the economic downturn of 2001 hit junior resource companies hard. They bounced back in a big way. “Downturn” understates the current scenario, but AlphaNorth Asset Management President and CEO Steve Palmer sees similarities. He looks forward to taking advantage of opportunities “to get in on some of what has now become the new ground floor” and make some “tremendous gains.” While he anticipates more bad news on the employment front, he also tells The Gold Report followers that he believes “we’ve avoided the abyss” and confidence is returning.

The Gold Report: Tell us about your outlook for the natural resource sector for 2009 and your thinking about the primary market of commodities—precious metals, base metals and so forth. Also, are these markets separate or all tied together?

Steve Palmer: 2008 was clearly a disaster for almost everybody. I manage a generalist fund, so it’s not focused only on resources. At the beginning of 2008, I was fairly cautious on resources. I thought the easy money had been made and the risk-reward wasn’t that good compared to some other sectors. However, with the pullback in many of the commodities, many of the resource companies are back to marginal cost of production and the share prices have been pounded so much—in many cases, below their cash value—that those resource opportunities are much more interesting at this stage.

The index I track for the small-cap focused fund I manage is the TSX Venture Index, which is the most comparable benchmark. This index has declined about 80% peak-to-trough. I think it peaked in the spring of ’07 and last year was down over 70%. That’s probably one of the worst-performing indices in the world as it’s heavily weighted toward resources. A lot of the junior companies in Canada are resource companies, probably a little more than 50%. So I think it’s a great opportunity to get in on some of what has now become the new ground floor.

The last time this occurred, back in ’01, I was managing a small-cap fund at a major financial institution that was invested heavily in the junior technology and biotech stocks. There was a significant correction; the NASDAQ declined by 80% over a two-year period and dragged the small caps down with it. The small cap fund I was managing at the time went through a rough patch and bottomed in April 2003, but was up more than 900% over the next four years. So when I look forward from where we are today, I see a similar opportunity for a period of tremendous gains, significantly above what you’d normally expect on a long-term basis.

TGR: But it’s such a different market now. Part of what drove the commodities move earlier in this decade was global growth. What’s the driver going to be in ’09?

SP: I think stabilization. The areas of big scares in the fourth quarter—the financial system and credit markets—needed to stabilize and that seems to have occurred. Credit spreads have come down and indicators of panic (such as T-bills with a negative yield) have subsided. People aren’t panicking like that anymore; it seems we’ve avoided the abyss and we have moved on to addressing the economic downturn.

TGR: Are you looking for a rebound?

SP: Not that we’re out of the woods yet, but there could be a big bounce. Governments are being very aggressive in trying to get things moving again. The stock market hits bottoms before you see the worst of the job numbers, though, many months before. That’s occurred almost every time in the past. This time, too, we can expect to see unemployment keep getting worse after the market has long since bottomed.

TGR: Do you think we saw a bottom in November and December, particularly in the junior resource sector?

SP: I definitely think it was a bottom, at least a short-term bottom. The level of panic was unprecedented. Compounding that was the timing of tax-loss selling that had to be done before year-end, so some stocks plunged to insanely low levels. This wasn’t due to fundamentals—it was all liquidity-driven, tax-loss selling driven and forced selling by various funds.

But as I said, I think most of that’s behind us. We’re in a more normal market and people are starting to look at fundamentals again. From the bottom that the TSX Venture hit, we’ve already had a nice little bounce, more than 25%, in just a few weeks. The larger-cap stocks bounced, too, but only half as much.

TGR: What about the broader markets, the S&P and Dow? Have they bottomed, too?

SP: I focus more on the Canadian markets. With the narrow number of stocks and the way the index is calculated, I think the Dow is an irrelevant benchmark. I don’t even look at that index. The S&P is a broader measure of U.S. large caps. I don’t expect it to go rocketing back up, but the bottom from November has held. I do a lot of technical analysis work and the charts are indicating to me now that, after the initial January bounce, we’ve pulled back fairly significantly. A lot of people are calling it a re-test of the low. It looks as if the S&P has bounced off 800 and it wouldn’t surprise me if it traded up to 1,000 before heading back down again in the spring. It will probably trade in a channel this year.

TGR: Harking back to your stability theme.

SP: Yes. And once we have some stability, people will regain confidence. There’s going to be a lot of money made in some areas of the market. Recently the golds have done really well, and takeouts will occur, especially when we have the very depressed juniors.

Greed will come back quickly, as well. We’ve had several greed cycles just in the last decade. We had the whole junior bull market around Bre-X in 1987. That whole thing imploded. The benchmark at the time was the Vancouver Stock Exchange Index, which was the measure in Canada of all these resource plays. It declined 75% after the Bre-X blew up. It wasn’t long after that when everybody scrambled to buy technology stocks in ’99, and then they imploded. Then in 2002, we started the latest bull run in commodities. So we’ve had three major up-and-down cycles in the last 10-12 years. It will occur again.

TGR: Does your technical analysis give you an idea where the various commodities will be in 2009?

SP: Yes. I use the charts a lot because commodity prices are so hard to predict; so many factors are involved. Those who set commodity price targets are wrong 80% of the time. If you’re contrarian, too, it usually works. For example, during a broker-sponsored dinner with 30-plus portfolio managers at the Prospectors & Developers Association of Canada (PDAC) convention in early March last year, they went around the table and asked everyone what they thought gold would be at the next PDAC. Gold was around $960 at the time and everybody was forecasting prices of $1,500 to $2,000. It’s almost a year later now and the 2009 PDAC convention is coming up. So we’re almost there right now and there were only two people at that dinner—I was one—who predicted a lower gold price. I picked $885. Where it makes sense, I like to go against the crowd. It looks to me like many of the commodities are going to lift in the short term. I wouldn’t be short.

TGR: So where do you see gold going in ’09?

SP: I trade gold almost exclusively—on technicals. It’s very much correlated inversely with the U.S. dollar. One gold analyst plotted the correlation since January ’06 and it was minus 0.926, almost perfectly inversely correlated since January ’06. All you need to do is put up two charts side by side—gold and the U.S. dollar—and you can see it clearly. You don’t need to calculate any fancy correlation numbers.

TGR: So you expect gold to be good going forward, considering all the troubles the U.S. dollar has?

SP: I have been quite negative on the U.S. dollar and thus quite bullish for most of the past few years on gold. I picked a lower gold price a year ago for two reasons: 1) the USdollar had made a significant move lower and was due for a rebound (technicals), and 2) it was a contrarian call as everyone was bullish. However, the direction of the U.S. dollar seems harder to predict now; it could be in for a period of strength. If the U.S. economy leads the way out of this global mess, the U.S. dollar will be strong and that’s not good for gold.

TGR: So if the U.S. leads us out of this global problem, you’re saying the U.S. dollar will be strong and that would put negative pressure on gold?

SP: Yes. That may be offset somewhat by inflation concerns or the “fear” trade persisting for a period of time. I’m not predicting that gold’s going to collapse or anything, but I’m not a super bull like a lot of people. We see a fair number of gold bugs around.

TGR: What about some specific stocks that you’d have The Gold Report readers take a look at?

SP: Colossus Minerals Inc. (TSX:CSI) is one I really like. They’ve been getting some phenomenal grades drilling on their property in Brazil. Garimperos had been hauling gold out of a big pit created there; it’s thought that they took 2 million ounces of gold out of the pit; very high-grade zones of several thousand grams per ton in some cases. After the pit got flooded, it was in limbo with the locals for many decades. Colossus got their hands on it a couple of years ago and went back and started doing re-assays of some of the historical drilling results and re-drilling, as well. The grades they’re getting are quite good. It’s not just gold; they have very high platinum and palladium grades, as well.

TGR: So Colossus came in, acquired the property, got rid of the water and—

SP: No, the water’s still there. It’s like a little lake, actually, in the pit. I think they’re drilling southwest of the pit, and the gold zone continues there. They’re currently considering drilling from a barge, too, to see if they can intersect some of the zones that were being mined before.

TGR: How deep is the lake?

SP: It’s probably about 100 meters deep. That’s another thing. The gold zones are very near surface, which lowers the mining costs significantly, as well. So it would be a very profitable operation because it’s so shallow and very high grade.

TGR: Do they have a 43-101 on this?

SP: No, they’re working on that. They just started Phase II drilling and will be doing a 43-101 report this year. The company has enough money to carry out their Phase II over the balance of this year. The market cap is about $70 million. They could have several million ounces of gold equivalent there. I would consider a takeout highly likely once they get a little more advanced.

TGR: By one of the majors?

SP: Yes, I think several of them have been on the property already.

TGR: Interesting. Another company to look at?

SP: Orko Silver Corp. (TSX.V:OK) is another, a $50 million market cap company. They have a property in Mexico they’ve been drilling, and should have an updated 43-101 report out any day now. It should add to the current inferred resource of 103 million ounces. A lot of the more senior names have done quite well recently. Some of them have doubled in the last couple of months. People are starting to look lower down on the market cap scale at some of the ones that haven’t moved as much. So I think companies in the range of $50 million (where Orko is) and $70 million (where Colossus is) will be on people’s radar screen, as well.

TGR: How far advanced is Orko? Is it close to other mines?

SP: Of course, Mexico is noted for its silver, and it has many, many silver mines. Orko is in an area with many mines around. They’re at the stage now where they’re proving up a resource and then they’ll do a scoping study.

TGR: Do they have sufficient cash in the bank?

SP: They have $3 million in cash right now. They raised money last summer at $1.65 and the stock is 55 cents now.

TGR: Looking at the technical chart, they seem to have been building a base since October. It hasn’t had the move that a lot of other juniors have.

SP: Exactly. That’s why I like it. We’ve been picking away at it recently because I think it’s good for a move. It could double quite easily in the next couple of months. Most of the precious metal names, like this one, I typically don’t hold for many years unless it’s a story like Colossus where I have a lot of conviction that they’re building something that’s going to be big and maybe taken over one day. Some of my positions, as with Orko, are initiated on technical analysis work but are also supported by fundamentals. Combining the commodity and the stock, this one looks like a good opportunity to get in on a timely basis and possibly double your money and move on.

TGR: Any others?

SP: Another one that has a similar chart is Silverstone Resources Corp. (TSX.V:SST). It’s a royalty company, similar to Silver Wheaton, where they take the silver and gold from companies that have producing base metal mines with silver and gold as byproducts. So they typically buy the silver at $4 and the gold at $300 and then they can sell it into the market. There’s little overhead required and you get your exposure to the commodity. In this case, with only $100 million market cap, Silverstone Resources is less liquid and trades at a much lower multiple than Silver Wheaton. I think Silver Wheaton’s trades around 15 times cash flow and this one is close to three times 2009 cash flow.

TGR: And like Silver Wheaton, Silverstone Resources either has capital or access to capital?

SP: It’s small working capital, but they have agreements to buy from these three mines and then they resell. It’s just the timing of when they get paid, really. There’s not much capital required. It’s a royalty play at the moment. It’s a very low cash flow multiple, lower risk. They probably would need to raise a little more capital on the back of a new off-take arrangement, which would be another avenue or catalyst to move the stock higher in the future.

TGR: What about any energy plays?

SP: One of my favorite energy names would be Sea Dragon Energy Inc. (TSX.V:SDX). They’re currently drilling a well in the Gulf of Suez that we should have results on in a matter of weeks. It has a one-in-three shot at success. It IPO’d at 60 cents. It’s currently trading at 14 cents. After they spend the money on the well, the cash per share will be 17 cents, so it’s trading below cash, assuming a failure. So there could be some significant gains if they hit on this well.

The management team has done it before: The same guy (Said Arrata, Sea Dragon Chairman and Director) was behind Centurion Energy, which was a huge success and taken out for over a billion dollars a year or two ago. He’s very well connected in Egypt. Sea Dragon is looking at other opportunities to get in on where junior companies are starved for cash, given that they have a significant amount that they raised on their IPO, $35 million I think. Even after drilling this well, they’ll still have a lot of cash left and could get in very cheaply on other opportunities in the area.

Steve Palmer and Joey Javier, an investment team since 1998, took three key assets—their excellent track record, their experience and their belief that exploiting inefficiencies in the Canadian small-cap universe would produce superior long-term equity returns—to AlphaNorth Asset Management, launching the Toronto-based investment management firm in August 2007. By year-end 2007, the long biased small-cap hedge fund they built made its debut. Until Lehman Brothers’ liquidated, credit markets froze, massive investor requests for redemptions forced hedge funds to sell out of their positions and “volatility” no longer came close to describing the frenzy in financial centers, the fund was flush and its investors were as happy as clams. Its first seven months netted a return of 35.6%, significantly outperforming the major Canadian indices. During that period, the TSX Venture Index declined by 3.7% and the TSX Composite Index rose by 7.4%.

Steve, who is a Chartered Financial Analyst, earned his BA in Economics at the University of Western Ontario. After starting in the investment community as a research associate, he moved to a major financial institution in mid-1998, where he met Joey and built his career. As Vice President of Canadian Equities, he managed assets of approximately $350 million, including a pooled fund that focused on small-cap companies.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

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Gold Is Entering An Accelerated Trend Channel – Gold Report

Source: The Gold Report – from/by: Oliver Tischendorf of Tischendorf.com

Gold has history on its side. It is a proven way to preserve one’s wealth over time. It acts like an insurance and it is highly unlikely mankind’s behavior during the last 6,000 years is going to change anytime soon. Some things never change. Two of those things are human nature and gold’s capacity to preserve one’s purchasing power.

That said gold has recently reached new highs in various foreign currencies. The chart of gold in Euro terms tells the story of what is to come. Don’t take this lightly. This is an important event as new highs typically attract more buying. If the Europeans start allocating more funds to physical bullion demand will increase drastically and gobble up supply. It is reasonable to expect additional upward pressure for the price of gold. Physical accumulation is accelerating on a worldwide basis. Keep in mind gold is a very tiny market compared to the equities market. A change in asset allocation resulting in a small increase to bullion exposure could easily double worldwide demand for gold bullion investment purposes.

A story hitting the wires recently is that: Greenlight Capital’s founder, David Einhorn, is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending. Einhorn fund’s recent decision to invest in physical gold bullion is testament to increased awareness of gold’s bullish long term trend and it looks like this is only the beginning to added buying pressure for gold bullion.’ For full coverage of the story click here.

It looks like the price of gold in US Dollar terms is merely lagging other currencies as the US Dollar has been very strong lately. It is still early to draw conclusions as the US Dollar could stay stronger than most people expect but the new accelerating trend channel looks to be a valid one.

So what it all comes down to is that worldwide accumulation of physical gold is accelerating. Hence the odds the gold price is going to accelerate as well are rather high.

If you haven’t built a physical bullion position yet now is a good time to think about doing so. I typically recommend holding at least 5% of one’s liquid net worth in gold bullion held in your own possession. Increasing that percentage up to 20% isn’t that bad an idea either. Although the markets look like they might want to stage some kind of rally right now taking a longer term perspective indicates the gold trend is going to make you more money than buying the S&P500 via the SPY.

Gold should reach new highs in US Dollar terms soon following the lead of foreign currencies like the Euro, the Canadian Dollar, the Australian Dollar, the Swiss Franc and the British Pound Sterling to name a few. As long as the lower trend line of the new dotted trend channel is not breached ‘the trend is your friend’ and you should hold on to your gold bullion position. You could use that level to protect your position with a stop loss.

If you want to be more aggressive you should consider buying silver bullion. The silver market is much smaller than the gold market so the market is considered to be a riskier one. But once the public is going to stress silver’s monetary significance as opposed to viewing it simply as another commodity silver prices will increase significantly and should ultimately outperform gold. I recommend closely watching the gold – silver ratio for clues. Historically the ratio has showed to be lower than the actual one. Watch for the ratio to go back to the 55 level and overshooting to the downside as soon as silver garners more interest.

You can easily keep track of the three charts and how they evolve over time by visiting my public list.

Subscribers to my free newsletter get an email notice whenever I buy or sell stocks.

Olivier Tischendorf
http://www.tischendorf.com/

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As the last article said now is time to accumulate Gold, do so here and Get 1 Free Gram just for Opening an Account!

Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

Good Investing! – jschulmansr

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Can’t Keep A Good Investment Down?

10 Tuesday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, Bailout News, banking crisis, banks, bear market, bull market, capitalism, central banks, Comex, commodities, Copper, Credit Default, Currencies, currency, Currency and Currencies, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, GDX, GLD, gold, Gold Bullion, Gold Investments, gold miners, How To Invest, How To Make Money, hyper-inflation, inflation, Investing, investments, Japan, Jschulmansr, Junior Gold Miners, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, Moving Averages, palladium, Peter Grandich, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, Technical Analysis, TIPS, U.S. Dollar

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Austrian school, Bailout News, banking crisis, banks, bear market, Bollinger Bands Saudi Arabia, Brian Tang, bull market, central banks, China, Comex, commodities, Copper, Currencies, currency, deflation, Dennis Gartman, depression, dollar denominated, dollar denominated investments, economic, economic trends, economy, Federal Deficit, financial, Forex, futures, futures markets, gata, GDX, GLD, gold, gold miners, hard assets, hyper-inflation, India, inflation, investments, Jeffrey Nichols, Jim Rogers, Keith Fitz-Gerald, majors, Marc Faber, market crash, Markets, Michael Zielinski, mid-tier, mining companies, monetization, Moving Averages, palladium, Peter Grandich, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, recession, risk, run on banks, safety, Sean Rakhimov, silver, silver miners, small caps, sovereign, spot, spot price, stagflation, Technical Analysis, TIPS, U.S., U.S. Dollar, volatility, warrants, XAU

As I write Gold has come screaming back like a rocket to the moon! Currently Gold is up $20 oz back to $913 an oz. Today we here from Peter Grandich on new all time highs for gold are just around the corner. We’ll take a look at Silver, oh we can’t forget about Platinum too! There’s still time but the Precious Metals Bull Train is about to leave the station-Hop aboard! – Good Investing – jschulmansr

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Gold All Time Highs – Not If But When – Grandich Blog

By: Peter Grandich of Grandich Blog

February 10th, 2009

They say in life only death and taxes are guaranteed. They send you to jail if you guarantee an investment and it fails. With both things in mind, I believe we “should” make a new, all-time nominal high in gold before too long.

After putting a strong bottom in at $700, gold has made a series of higher lows while the $930-$940 area remains resistance. Despite an incredibly strong physical market, the paper market at the Comex seemingly trades to a different “drummer”. That’s okay as physical demand eventually overtakes paper markets.

Gold continues to be my most favorite play, followed by being long the Canadian dollar and then oil. But remember, I was also a NY Jets fan for 35 years.

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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What’s Going on With the Dollar and Gold? – Seeking Alpha

By: Tim Iacono of Iacono Research

Those of you who have noticed that the U.S. dollar and gold have been moving in the same direction over the last few weeks are not alone. In fact, the two have moved together eight days in a row and nine out of the last ten, something that is quite unusual.
When looking at the PowerShares DB U.S. Dollar Index Bullish ETF (PCX:UUP) and the SPDR Gold Shares ETF (PCX:GLD), it’s clear to see how different the last couple weeks have been as compared to earlier in the year.

Based on the data for these ETFs (which, unfortunately only goes back to early 2007 for UUP), the two have moved in the same direction on just 150 out of 490 days – about 30 percent of the time.

As shown in the chart below, the recent surge to much higher levels has not happened in at least two years, probably much longer.

The only other time that something similar happened was back in January of 2008.

What else happened in January of 2008?

Ahhh… How soon we forget…

From the St. Louis Federal Reserve website:

January 11, 2008

Bank of America announces that it will purchase Countrywide Financial in an all-stock transaction worth approximately $4 billion.

January 18, 2008
Fitch Ratings downgrades Ambac Financial Group’s insurance financial strength rating to AA, Credit Watch Negative. Standard and Poor’s place Ambac’s AAA rating on CreditWatch Negative.

January 22, 2008
In an intermeeting conference call, the FOMC votes to reduce its target for the federal funds rate 75 basis points to 3.5 percent. The Federal Reserve Board votes to reduce the primary credit rate 75 basis points to 4 percent.

January 30, 2008
The FOMC votes to reduce its target for the federal funds rate 50 basis points to 3 percent. The Federal Reserve Board votes to reduce the primary credit rate 50 basis points to 3.5 percent.

This was the really steep part of the rate reduction cycle – 125 basis points in just over a week.

Whether any of this has any real significance remains to be seen, but, the fact that, last time around, the gold price then surged to over $1,000 an ounce should not be ignored.

I, for one, will be happy to see the inverse relationship between the dollar and gold go the way of the dodo bird, never to affect twitchy traders again.

As noted here on many occasions before, there is no fundamental reason for this relationship to exist. If the dollar strengthens against the euro, why should that make the gold price go down? Because gold, priced in dollars, has become more expensive in Europe?

Despite hearing that ad nauseum in the financial media, that really doesn’t make any sense when you think about it.

Full Disclosure: Long GLD, no position in UUP

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Silver Surges but Remains Undervalued Compared to Gold – Seeking Alpha

By: Mark O’Byrne of Gold and Silver Investments.com

Gold fell some 1.5% last week as investors tookgl profits with gold having been up some 10% in the previous three 3 weeks. But the short and medium term prospects look sound in the light of strong fundamentals and some important indicators – silver was up by another 4.2% last week and the gold mining indices were also higher (XAU +4.6% and HUI +2.3%). The mining indices are often a leading indicator and silver usually underperforms gold in the early stages of rallies and outperforms in the latter. Silver’s recent strength (up by some 15% since the start of the year) may be a prelude to higher gold prices in the coming weeks.

The recent sharp rally in the US dollar appears unsustainable and the USD Index was down 0.64% last week and US bonds also fell again – the 10-Year bond sold off again and the yield rose another 4.75% (from 2.9% to 2.979%). As ever, the bond market remains of fundamental importance and nervousness about the humongous size of the Obama bailout and stimulus packages and talk of central banks printing money to buy government bonds is not helping sentiment here. And government debt issuance is set to surge in the coming weeks and there is a real concern that there simply will not be enough buyers – meaning that bond prices may fall from their lofty heights and long term yields and interest rates begin to rise again.

The gold/silver ratio has fallen to around 70 ($905oz/$13/oz = 69.6) today from around 80 in mid January. The long term historical average is 15:1 and this is because it is estimated that geologically there are some 15 parts of silver in the ground for every one part of gold. It is important to note that silver, unlike gold, besides being a safe haven investment is also used in industry and it is believed that since the dawn of the industrial revolution some 95% of the world’s silver has been used up in industrial applications. Because of gold’s much higher value, it gets recycled and all the gold mined in the world ever is still with us but photography and other industrial uses makes silver like oil – when used it is gone forever.

The 1970s saw an average gold to silver ratio of around 25:1 and fell below 20:1 when silver rose to over $45/oz nominally. Thus it seems very likely that in the coming years, silver may well return to its long term historical average of closer to 15:1. This means that silver is likely to continue to outperform even gold in the coming weeks and months. Silver may return to its recent highs of over $20/oz in 2009 due to very strong supply demand fundamentals. It is also important to note that the CFTC investigation into artificial manipulation and suppression of the silver market could potentially lead to a massive short squeeze.

All investors should diversify within the precious metals allocation in their portfolio and own silver as well as gold. Gold remains the ultimate safe haven while silver is a safe haven but has the potential for very significant returns and growing wealth in the coming months.

Stock position: None.

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Bullish for the Short Term But Consider Gold, Platinum as Well – Seeking Alpha

By: Jeffrey Saut of Raymond James

Excerpt from Raymond James strategist Jeffrey Saut’s latest essay, published Monday (February 9th):

…[I]n last Tuesday morning’s verbal strategy comments we noted that since the inception of the S&P 500 futures contract there have been five instances when the futures slid by 2% (or more) on back-to-back days and then gapped lower by 1%+ the following session. On EVERY one of those occasions the S&P 500 (SPX/868.60) was at, or within one day, of beginning a decent rally. Further, last November we opined that at the November 20, 2008 “price low” the DJIA was 34% below its 200-day moving average [DMA] and consequently very oversold.

According to Susan Berge, of the Berge Report, that reading was greater than the momentum low occurring in October 1974 of 27%, as well as the 24% reading during the 1987 crash. Even after the rally we have experienced since the November “lows” during the recent downside re-test of those November’s “lows” the differential was still a massive 25%. Subsequently, we advised buying the exchange-traded fund [ETF] of your choice, which in our case was the recommendation of the ProShares Ultra S&P 500 (SSO) that is “geared” two-to-one on the upside. We further suggested that the more timid types might want to consider hedging these positions to minimize the downside.

Accordingly, the Dutiful Dow sprinted 141 points in Tuesday’s session, but gave back most of those gains on Wednesday’s wilt (-121). Therefore, in Thursday morning’s strategy comments, we said that if our upside rally “call” was going to play ,the equity markets would need to shake off Thursday’s worse than expected employment claims number, as well as the anticipated worse than estimated employment numbers on Friday. BINGO, for indeed the late week numbers were much worse than expected, yet the DJIA shook them off and rallied. How far the rally will carry is anyone’s guess, for while we are bullish on a short-term basis, it would take a closing price above 8375 on the DJIA to turn us merely “neutral” on an intermediate-term basis.

However, if the DJIA (8280.59) can close above its January 6, 2009 closing high of 9015.10, with a like close by the D-J Transportation Average [DJTA] (3203.70) above its 1/6/09 closing high of 3717.26, it would be a Dow Theory “buy signal” according to our interpretation of Dow Theory; and should be viewed as a pretty bullish occurrence. Moreover, as stated in previous missives, so far what we have seen is a downside non-confirmation, with the DJTA breaking below its November 2008 “low” without a similar breakdown by the DJIA; and, you should read that bullishly.

Meanwhile, there was an interesting rotation last week with the Commodity Research Bureau Index “up,” the Dollar Index “down,” bond prices “down” (read: higher interest rates), and Dr. Copper “up” nearly 11%. This action, if it continues, suggests the potential for the return of inflation and the potential for a stronger economy. If so, in addition to our recommendation on gold, participants might want to consider investments in platinum. Indeed, unlike gold, platinum is not only a precious metal, but is used heavily in industry due to its tensile strength characteristics…

Typically, platinum sells at a substantial premium to gold, but because of the collapse of the auto industry platinum is approaching parity with gold for the first time since the early / mid-1990s. Investors, therefore, might want to consider platinum in addition to their gold positions, for they will be purchasing a relatively “cheap” metal with a “call” on an auto industry rebound. Our vehicle of choice for this theme is the iPath Dow Jones AIG Platinum ETF (PGM).

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Late Breaking Intelligence Report…

MineWeb Gold News – Japan Investors Turn To Gold! – MineWeb

Source: Reuters

TREND SPREADING

Japan investors turn to gold

Online traders are turning to commodities from FX, stocks and gold is the most popular commodity product for online retailers.

Author: Chikako Mogi
Posted: Tuesday , 10 Feb 2009

TOKYO (Reuters) –

Japanese retail investors are stepping up their online gold investment in a trend that is unlikely to be reversed, an executive at a top online commodity trading firm said on Tuesday.

As the country’s retail investors catch up with global trends of asset diversification, they are hunting for alternative investments to enhance returns, and the trend is spreading outwards from the rich to engulf ordinary people.

Japan’s risk-averse retail investors are estimated to hold an eye-popping $16.4 trillion, more than half of it in cash and deposits, Mizuho Bank, the country’s second-largest lender, says.

Although the global financial crisis hit the real economy and battered commodities directly linked to the economy, gold remains unscathed by such declining industrial demand while retaining merit as an asset.

“Given its relatively stable value, interest in gold will persist for a while and the market will remain bullish,” Naoaki Kurumada, chief executive of Dot Commodity, Inc, told Reuters.

“Gold is our main commodity product — by purchasing gold, investors can start including commodities in their portfolios.”

Since its establishment in 2005, the company has grown as Japan’s top online commodity trading firm, with about 20,000 accounts against some 50 initially, and assets of 8 billion yen ($87.45 million) by October. It is also second in the online commodity trading industry in volume terms.

The company is drawing interest from seasoned online traders who are turning to commodities for high returns, as Japanese stocks have plunged and the yen has strengthened.

“I expect online accounts to increase, given the strengthening appetite for asset diversification and more people finding commodity trading interesting,” Kurumada said.

There are two key kinds of investors who use the firm’s services. One of them has experience in trading currency or stocks online and can analyse technical charts or moves in other markets to aim for high returns amid price fluctuations.

“Some are day traders, others more longer term, like a few weeks. They are largely in their 30s and 40s,” Kurumada said.

The other type is non-traders interested in commodity investment who buy gold as a start, he said.

Reflecting the popularity of the yellow metal as an investment, the open interest in the gold mini contract, launched in July 2007, hit a record high 83,428 contracts on Jan. 8, according to Tokyo Commodity Exchange Inc (TOCOM), exceeding that of the standard gold contract.

TOCOM will extend trading hours of all derivatives contracts later this year to boost liquidity after Japan’s main commodity market launches upgraded trading systems in May.

Kurumada said this would help attract more investor interest to commodity investment and trading, as it would allow players to cut losses timely or swiftly react to overseas market moves.

“We hope that the environment will be set so traders can reap profits just like in currency and stocks,” he said.

While Japanese retail investors are waking up to the attraction of commodity investment, the pace of growth may be moderate.

About 20 percent of those investing in gold, for instance, are investing in TOCOM’s gold mini contract and about 10 percent are actively trading. The rest are investing in such products as gold savings plans, Kurumada said.

“Retail investors jumped on the gold mini contract a year after its launch. It takes time for them to catch up,” he said. ($1=91.48 Yen) (Editing by Clarence Fernandez)

© Thomson Reuters 2009 All rights reserved

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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That’s It for Now- I close with this quote below- Good Investing! – jschulmansr

“Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. “Stand and Deliver or Go Home” should be the rallying cry of the gold longs to the paper gold shorts.” –Trader Dan Norcini

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. – jschulmansr

Murphy’s Law? – What is Gold doing?

09 Monday Feb 2009

Posted by jschulmansr in Bailout News, banking crisis, banks, Barack Obama, Comex, Copper, Currency and Currencies, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, financial, Fundamental Analysis, GDX, GLD, Gold Bullion, Gold Investments, gold miners, How To Invest, How To Make Money, hyper-inflation, inflation, Investing, investments, Jschulmansr, Junior Gold Miners, Make Money Investing, Markets, mining companies, mining stocks, palladium, physical gold, platinum, platinum miners, precious metals, price, prices, producers, production, rare earth metals, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, U.S. Dollar

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Austrian school, Bailout News, banking crisis, banks, bear market, Bollinger Bands Saudi Arabia, Brian Tang, bull market, central banks, China, Comex, commodities, Copper, Currencies, currency, deflation, Dennis Gartman, depression, dollar denominated, dollar denominated investments, economic, economic trends, economy, Federal Deficit, financial, Forex, futures, futures markets, gata, GDX, GLD, gold, gold miners, hard assets, hyper-inflation, India, inflation, investments, Jeffrey Nichols, Jim Rogers, Keith Fitz-Gerald, majors, Marc Faber, market crash, Markets, Michael Zielinski, mid-tier, mining companies, monetization, Moving Averages, palladium, Peter Grandich, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, recession, risk, run on banks, safety, Sean Rakhimov, silver, silver miners, small caps, sovereign, spot, spot price, stagflation, Technical Analysis, TIPS, U.S., U.S. Dollar, volatility, warrants, XAU

As I write todays post Gold is testing support around the $895 level. Mr. Murphy is laughing today as you can tell by today’s articles. However, I still feel this is another buying opportunity to add more, especially among the Gold mining Stocks. Many of the producers are still selling at or near book value. Pull up a chair, take a bite, you won’t be eating humble pie! – Good Investing! -jschulmansr

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Gold Charts Are Plugging Along – Seeking Alpha

By: Jeff Pierce of Zen Trader

I realize there’s been a lot of talk about gold putting in a top, and I’m aware that we are at longer term resistance on a multi-year chart, however short term I’m still seeing bullish charts. Take a look at the following 15 min chart on a few random gold stocks and you’ll see a very bullish constructive chart. It moves up 3 steps, and gives back 2. The moving averages have a nice flow to them as the stock continues to push higher and volume seems to favor the bulls. I’m a big fan of the 15 min chart and I always look at it to see which way the smaller trend is moving and until I see these charts roll over on this time frame, then the longer term time frames should be safe for now.

One note of caution. This picture can change very quickly so you have to stay on top of it. Be on the lookout for double topping patterns and use it in conjuction with a 15 min of GLD while looking for breakdowns in the ETF.

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Gold poised, Experts predict $1000 plus – Mineweb

HIGHER INFLATION FOR YEARS TO COME

Many analysts and bankers now expect gold to break through $1,000 in the near term and probably go higher on financial instability and potential US dollar weakness.

Author: Pratima Desai
Posted: Monday , 09 Feb 2009

LONDON (Reuters) –

Gold prices are set to jump towards $1,000 an ounce and probably beyond to new records as droves of investors fearing financial instability and surging inflation pile into the precious metal.

Expectations of a weaker dollar, which makes gold priced in the U.S. currency cheaper for holders of other currencies, will also help boost prices of the precious metal seen as a store of value during uncertain times.

Strong investor interest in the precious metal can be seen in the record holdings above 867 tonnes of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust.

“The core problem for investors is financial instability, if you look at the IMF numbers, we are only halfway through the non-performing loan cycle,” said Ashok Shah, chief investment officer at fund manager London & Capital.

The IMF last month declared losses on U.S. loans and securitised assets were likely to reach $2.2 trillion (1.5 trillion pounds), up from an October estimate of $1.4 trillion.

These losses replicated in other major developed economies have frozen bank lending to corporates and consumers and led to recession in the global economy.

In an attempt to kick-start bank lending and activity central banks have slashed interest rates. Governments have pumped large amounts of money into the global economy and more is planned.

“Governments are supplying liquidity into the system and unless they sterilise it (issue bonds) they are laying the foundations for much higher inflation for years to come … These are the things gold thrives on,” Shah said.

“More corporate, financial and economic bad news will do the trick. Once it gets a foothold and picks up momentum gold can easily break through to new highs.”

Spot gold hit a record high of $1,030.80 an ounce in March 2008 and is now at around $910, a gain of more than 10 percent since the middle of January.

INSURANCE POLICY

Potential inflationary pressures can be seen in the growth of money supply. January M1 rose about 20 percent year-on-year in the United States where a stimulus plan of about $800 billion is in the works.

“M0 is growing at about 9 percent worldwide,” said Angus Murray, founder of fund manager Castlestone Management.

“People need a real asset to offset inflation. Investors are putting gold into their portfolios as an insurance policy. In 24 or 36 months time, gold will be higher by a minimum of the growth rate in money supply.”

Also on the horizon is a weaker dollar, which in recent weeks has risen against the euro and pound, partly because U.S. investors have been taking their money home, fund managers say.

“When that repatriation reverses the dollar will weaken. Let’s call it 14 or 16 percent — in dollar terms gold will rise by that much again,” Murray said.

UPSIDE RISK

Bank analysts too, for similar reasons have changed their gold price forecasts. But they expect prices to peak this year.

Swiss-based UBS (UBSN.VX: Quote) expects gold prices to average $1,000 an ounce this year from a previous forecast of $700 and $900 in 2010 from $700 an ounce.

“Gold has rallied in most major currencies despite a firm US dollar, a sign of strong buying interest in the metal,” UBS said in a note this week.

Gold priced in euros hit a record of above 726.89 an ounce early this week and in sterling it touched a record above 660 last month.

U.S. bank Goldman Sachs (GS.N: Quote) followed with a forecast of $1,000 an ounce in the next three months from $700 previously.

“If financial risks … remain high, gold prices could remain higher for longer, presenting upside risk to our forecasts,” Goldman said.

“The recent strong demand for gold has not been irrational but rather pretty much in line with the probabilities of financial and sovereign default.”

(Editing by Sue Thomas)

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Brian Tang: Bullish on Finite Resources – The Gold Report

Source: The Gold Report

Since 2003, Fundamental Research Corp. (FRC) has been focusing on companies not widely followed by brokerage firms, bringing investors and undervalued small and micro cap companies together. In this exclusive interview with The Gold Report, FRC founder Brian Tang and his crew forecast the primary driver of base metal prices in 2009, the future of gold and copper and the infinite upside of investing in finite resources.

The Gold Report: Brian, could you give us a summary of your firm and its business model? You have strong opinions about how individual investors should approach paid-for research.

Brian Tang: Sure. I founded the firm in 2003. At that time, a lot of the investment banks were being scrutinized for producing research that was tied to corporate finance and I was also in corporate finance—but more on the debt side. On the debt side, all research is paid for. Firms like Moody’s and Standard and Poor’s will charge firms money, and then issue a credit rating on them. So given that the corporate finance model was being scrutinized, I thought why not apply the debt model simply to the equity side, where we would charge a fee to issue a rating on the equity of companies?

Of course, there is the potential for a conflict in that type of situation. What we’ve done is instigate policies to mitigate those conflicts; for example, we only charge our fees flat and in advance and we don’t accept stock, so the companies have to pay in full before we get started. We sign agreements with the companies that basically relieve us from any liability for negative reports. They agree that they will not sue us for negative comments. Once we’re engaged, we have to finish the contract. They cannot prevent us from publishing further research. And, if you look at the distribution of our ratings—where 25% of our ratings are hold, sell or suspend—I think you can get an idea that our analysts are truly independent. We’ve issued sell ratings right off the bat, and that company has paid, we’ve done our due diligence, and we didn’t like the company; so we initiated coverage at a sell. So that is the business model. Also, if you look at our performance on Investars, you will see we have done quite well in the past.

In terms of our focus, we focus on small and micro cap companies that aren’t widely followed by brokerage firms. We think by focusing on companies that no other analysts are following, we can add value by discovering these undervalued companies.

Currently, a lot of our coverage is in the natural resource sector—mining, oil and gas—and the other two sectors that we cover are industrials and healthcare. From time to time, we publish special reports, industry reports, on topics of interest that we think investors would like to read about.

TGR: In this market, many people are suggesting that people avoid the micro small caps because of the shakeout in the marketplace. In essence, avoid the juniors and focus on the producers. What insights can you provide to our investors regarding that?

BT: I definitely think that, in this type of environment, the producers or the near-term producers will do better just because there’s less risk to them. Also, it really depends on what type of company you’re looking at. If the company is well financed, we don’t see that as a problem. We have downgraded some companies to sell recently because they were not well financed; we think they might run into some liquidity problems, so definitely I would avoid those kinds of companies. It also depends on what kind of commodity they’re in. I’d look for some commodities that are better than others.

But, also, small caps tend to recover first when a bull market does resume, and they also tend to do worse when a bear market starts, simply because they’re more levered in terms of operating leverage. They’re smaller, so they get affected more by swings in the economy. They recover first, but they falter first, as well. So if you avoid them totally, I would say you would miss out when the economy starts to turn again. And because nobody can predict when that will happen, I would not totally avoid them, but I would be very selective.

TGR: In the research you do and provide to subscribers, do you give specific sell-hold recommendations and pricing?

BT: Yes. We issue buy, hold or sell recommendations. We don’t call it a target price; we call it a fair value, and we also issue a risk rating from very low risk to highly speculative. We’re registered as a securities advisor with the BC Securities Commission.

TGR: Could Siddharth Rajeev, your head of research, give us your global outlook for what will happen in commodities in 2009? Specifically base metals, precious metals, and gold-silver?

Siddharth Rajeev: The primary factor that we believe is going to affect the pricing of base metals is the global GDP growth assumptions; and we believe that in 2009 we are going to see a significant drop in GDP growth. For example, the International Monetary Fund (IMF) forecasts global GDP growth of 2.2% in 2009; and that was about 5% in 2007 and 3.7% in 2008. And then most of the developed economies like the U.S., Japan, Europe and Canada are expected to be in a recession in 2009, while emerging countries like China, India, Brazil and Russia are not in a recession (but they are expected to have a significant drop in their growth rate). So we believe that these reductions in the GDP growth rates will affect demand growth for most of the base metals.

We have a long-term positive outlook on copper, primarily because we still believe in the Brazil, Russia, India and China (BRIC) countries’ growth; so we believe that, in the long term, they will achieve growth. Those countries will drive the demand for base metals.

BT: Also, if you look at current commodity prices, they have declined a lot from the peaks—but those peaks were not necessarily based on fundamentals. I think they were based more on speculation. If you look at where the price is today compared to historical averages, the prices are still much higher. For example, we have a long-term forecast (2012+) for gold of $600 per ounce. Even though that’s lower than today’s prices, it’s still double the historical average. Gold has historically averaged only about $300 per ounce, and that’s the same with oil prices.

SR: For gold we expect prices to converge to $600 per ounce in the long term. But in the near term, we are bullish on gold, especially because we expect the U.S. dollar to depreciate due to the slowdown in the U.S. and the negative real interest rates in the U.S. And we expect inflation to creep in once the effects of the large stimulus package are felt. So, it’s because we expect the U.S. dollar to depreciate and we have seen in the past that gold prices have had a negative correlation with the U.S. dollar. Other reasons that we’re bullish include higher cash costs, as well as relatively flat supply. So we’re bullish on gold in the near term; but in the long term, we expect prices to converge to $600 once the global economy improves and the U.S. dollar recovers.

TGR: Do you have some specific companies you can share with us that you feel are getting some good financing and are close to production, which you feel our investors should know about?

SR: One of our top picks is called SilverCrest Mines Inc. (TSX.V:SVL). They have three silver-gold projects in Mexico with 43-101 compliant resources, and then they are planning to put their main project, the Santa Elena project, into production later this year. Based on our evaluation, our valuation of the company is $1.98 per share while the shares are trading at 45 cents.

In terms of comparables, their enterprise value (EV) to resource ratio is just 25 cents per ounce, while our estimate of the average ratio of its peers is over $2. So we like the company, number one, because we have a positive outlook on both silver and gold; number two, they’re closer to production; number three they have a favorable valuation; number four, and most important now, is that they are in a decent cash position. The second company I want to talk about, that we’re currently doing due diligence on, is called Gold Resource Corp. (OTCBB:GORO) (FSE:GIH). They have four high-grade silver-gold projects in Mexico.

They’re planning to put their main project in Mexico into production mid-2009, and their plans are to produce 70,000 ounces of gold in the first 12 months of production. And the best part is that management estimates that their cash cost is going to be just $100 per ounce.

TGR: Wow. For gold?

SR: Yes. So they’re aiming to be one of the lowest-cost producers around. That’s one of the companies that we think investors could track.

TGR: Do they have the management team or the production team to start producing gold there, or will they be joint venturing?

SR: No, no. They have the management team, and they are arranging the financing now. Recently, they had announced a strategic alliance with Hochschild Mining (LSE:HOC). They hold 5% of equity in them and they are planning to do another 10%. So, even though they have to raise capital, we don’t think it will be that tough compared to a lot of companies. Management is also expecting a payback of less than a year, which is pretty good.

TGR: I know one of the companies you’re following is Commerce Resources Corp. (TSX.V:CCE) (PK SHEETS:CMRZF). Can you comment on them?

BT: Vincent, our geologist, will discuss Commerce.

Vincent Weber: With regard to Commerce, they’re focusing largely on their Upper Fir project. They did 131 HQ diameter drill holes totaling just over 26,000 meters in their last phase of drilling, and they’re targeting carbonatites that host tantalum and niobium mineralization. Tantalum is used for capacitors, like those used in cell phones; niobium is used for special alloys for steels. They just put together a 2,000-ton bulk sample on the Upper Fir Carbonatite, which they’re sending to a company in Richmond, B.C., for sampling to characterize the deposit. They’re also going to put together a flow sheet and a pilot test plant to try and determine the appropriate recovery method.

SR: We believe that Commerce is one of the companies that raised capital at the best time—when the market was at a peak, so based on their latest financial statements, they had about $22 million in cash at the end of July 2008 and that’s like 20 cents per share. Share prices are currently 24 cents per share, so the market value is very little for their projects.

TGR: What’s the burn rate?

SR: Burn rate, based on the last financial statement, was around $700,000 per month in the second half of 2008. If they continue to spend at the same rate, we are expecting at least $15 million in cash right now, which is like 13 cents – 14 cents per share; so it shows that the market values their project at 10 cents per share and they have over 100 million shares outstanding, which is like $10 million for their projects.

TGR: You just issued an update on Castle Gold Corporation (TSX.V:CSG). Can you share with us any insights on that company?

SR: Yes, they have two producing projects; and, in our valuation, we actually raised our fair value estimate to $1.67. Currently shares are trading at 46 cents. We like the company because it’s currently producing, generating cash flows and is expecting to reduce operating costs next year. This year, the company had very high operating costs; but they expect to reduce costs in the next year, which will help them generate positive cash flows starting in ’09.

BT: The El Castillo mine experienced operating costs of $685 per ounce, which was higher than expected, and the reason for that was they incurred a high strip ratio of 1.55. They were expecting only .6. This strip ratio is waste to ore. When we spoke to management, the company said that they expect operating costs to decrease in 2009 by improving mine efficiencies, which would include utilizing larger equipment and also using that larger equipment to increase their gold production from the mine.

TGR: Where are they currently producing, and do you expect them to spend a lot on capital investments in ’09?

BT: Guatemala and Mexico. In our models for ’09, we estimated a capex budget of $2.15 million. Our models are showing that, in 2008 and 2009, they should be cash flow positive.

TGR: Are there any other base or minor metals or gold or silver companies that you currently like?

VW: Another project that I’m currently doing some due diligence on, which is an intriguing deposit, is West High Yield Resources (TSX.V:WHY). They have a large magnesium deposit that they’re exploring in British Columbia; that’s a different type of metal from all the other companies.

TGR: What is magnesium used for?

VW: It’s used for lightweight alloys. That’s one of the main uses.

TGR: What is the outlook for minor metals in 2009?

SR: In terms of minor metals, I can give a general idea on where those metals will perform in 2009 – 2010. Basically, for several minor metals, including molybdenum, manganese, chromium, vanadium, these companies serve the steel sector and most of these metals had a good run in 2007 primarily because of a significant increase in steel production in China; and, of course, their forecast at that time of steel production was very optimistic, which is why we believe that those metals had a good run in 2007.

But now, as we expect the global GDP growth to slow down, we expect steel production also to slow down, which will affect the demand side of all these metals. So we are expecting all these metal prices to stay soft in 2009 and 2010, just like our outlook for base metals.

TGR: Do you think the stimulus package that Barack Obama is proposing will have an impact on that?

SR: It will have a positive impact on it, but then we think that in 2009 – 2010 the GDP growth drop will have a stronger effect, which will push down the prices or soften the prices. Beyond that point, once the infrastructure and the BRIC country GDP growth starts to improve, we expect the demand for these metals to improve then.

TGR: Thanks so much for your time today. We really appreciate it.

Brian Tang, BBA, CFA, founded Fundamental Research Corp. in 2003, and has successfully led the firm to be recognized as on of the fastest growing companies in the province of B.C. Prior to Fundamental Research Corp., Brian was an analyst in the corporate banking group of one of the world’s largest international banks where he performed fundamental analysis on Financial Post 500 companies (the Canadian equivalent of the Fortune 500). Prior to this, he worked at a financial advisory firm where he analyzed and published research on Canadian equity mutual funds.

Fundamental Research provides institutional quality equity research coverage on small and micro cap companies through its extensive distribution network. Its major institutional delivery channels include institutional sites such as Reuters, retail sites such as Stockhouse, and subscribers. Fundamental Research’s performance has been highly ranked in the past by Investors.

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

As I said Mr. Murphy is smiling this morning! – I still thing $950 is opur next target, if that level is broken then we are on our way to $1000+. Good Investing!- jschulmansr

Are you Secure? and Latest Gold Investing News

04 Wednesday Feb 2009

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Are you secure? If not, you need to be! It’s a dangerous world out there! An unprotected computer is like leaving your keys in the ignition and walking away! Today’s articles include the latest reviews of Security Suites for your computer and latest Gold news. Gold yesterday tested the lower end of support at the $885 oz to $895 oz levels. Today Gold has come roaring back up $16 oz to $908.50. I think we are about to retest the $930 level and if we break that then $950. If we clear those hurdles then the next stop will be $1000 + oz. I am buying on any dips and you should be too! – Good Investing! – jschulmansr

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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The Best Security Suites for 2009 – PC Magazine

by Neil J. Rubenking of PC Magazine

Which suite will be best for keeping you safe and not slowing you down this year? We’ve tested them all, and the answer might surprise you!

The list of available 2009-model security suites is now essentially complete. A running theme in this year’s suites is the promise that these new versions will do more for your security while tying up fewer system resources. It’s about time: Users have had it with suites that offer security but bog down the computer. Several vendors have introduced new “in the cloud” technologies to keep up with the accelerating growth of new malware. And many have redesigned their user interfaces to be more attractive and look lighter and faster. Some are new, innovative, and speedy. Others haven’t kept pace. Which are which? I put them all through grueling tests to find out.

Performance Testing

Starting with the 2009 crop of suites, I added an entire day of performance testing per suite to my already lengthy set of evaluations. I wrote and gathered a collection of batch files, scripts, and freeware components to measure how long a number of common activities take on the computer. I ran the scripts many times on a system with no suite installed and then on that same system with each suite installed. Averaging the results let me see just how much each suite affected system performance.

I get a lot of complaints about how long PCs take to boot up in the morning, and many users blame their security suites for lengthening the process. The first part of my test script, therefore, calculates the time it takes from the start of the boot process (as reported internally by Windows) to the time when the system is completely ready to use. “Ready” is a fluid concept—I defined it as meaning that 10 seconds have passed with CPU usage under 5 percent. I ran this test 50 to 100 times and averaged the results; the test system with no suite installed takes almost exactly 60 seconds to boot. Norton Internet Security 2009 and Kaspersky Internet Security 2009 added only about 15 seconds to the boot time. That’s not bad!

Some of the other suites added significantly to boot time. F-Secure Internet Security 2009 and McAfee Total Protection 2009 nearly doubled it, and BitDefender Total Security 2009 more than doubled it. The timings for Webroot Internet Security Essentials (WISE) averaged even higher—almost 2.5 times the baseline. However, the data set included a number of unexplained instances when booting up took 5 or even 10 minutes. Eliminating those quirky outliers brought the average boot time for WISE (the smallest suite) a bit below that of McAfee (the largest suite)—still not impressive.

Real-time malware scanners can kick in on any kind of file access and can slow ordinary file operations, especially if they redundantly scan the same file more than once during the operation. I set up a series of file move and copy actions using a variety of file types and timed how long it took with and without a security suite. Kaspersky added just 2 percent to the time required for this test, and Trend Micro Internet Security Pro added 6 percent. Norton and Panda Global Protection 2009 came in between those two. On the slow side, the system running ZoneAlarm Internet Security Suite 2009 took half again as long to perform the test.

Another of my new tests zips and unzips large groups of files, and my testing showed that this activity takes more of a performance hit from most security suites than moving and copying do. Panda had the lightest touch here, adding just 8 percent to the baseline time. Norton, Kaspersky, Trend Pro, and Webroot all added in the neighborhood of 25 percent to the time. Under ZoneAlarm the zip test took twice as long, and under BitDefender it took 2.5 times as long. That’s dreadful!

Your suite has to keep careful track of software installations so it can prevent malware from installing. I measured the time required for repeated automatic installation and uninstallation of several large Windows Installer packages. Most of the suites added from 20 to 30 percent to this test’s time. Panda excelled again, adding just 6 percent. ZoneAlarm and WISE caused the most drag, adding 63 percent and 71 percent, respectively.

Acting on some reports of problems with media files, I included a test that times some elaborate media file format conversions. None of the suites slowed this test significantly. Their effects ranged from a negligible 1 percent increase by WISE, Panda, and Norton to a still minor 8 percent hit from ZoneAlarm.

Modern suites look at your browsing activity in a number of different ways. They block drive-by downloads, check for fraud, and perhaps block inappropriate content for your kids. To see whether this analysis slows down the browsing experience, I used an ActiveX control that measures when a page has completely loaded, along with a script that launches dozens of URLs with lots of content.

Norton had the least impact on surfing speed, adding 13 percent to the time required for this test. WISE doesn’t do any page analysis beyond checking a blacklist, but it still added 25 percent. Kaspersky and Panda, which did well on most of my other performance tests, slowed browsing by 64 percent and 92 percent, respectively. But McAfee had the worst impact, more than doubling the time required for the surfing test. Given the amount of time the average person spends surfing the Web, this is a bad test to fail.

Check our security suite performance test chart to get full details on each product’s individual scores. Note, though, that in addition to these tests, I considered various other factors. Does the product make a good impression with a speedy and undemanding install process? Is the scan for malware especially fast or slow? Does the spam filter appreciably slow down the process of downloading mail? Are there special features that demonstrably work to minimize performance impact? All these factors go into the final score. In next year’s round of testing I hope to add even more performance tests. In the meanwhile, I’m very interested in getting your feedback on this year’s tests. —next: Security in the Cloud >

Featured in this Roundup:

BitDefender Internet Security 2009

$69.95 direct; 3-pack, $79.95
BitDefender has added a ton of new features—online backup and remote configuration, for example. It includes all the expected security elements, with decent performance from most of them. It’s a reasonable choice if you’re excited by those extra features.

F-Secure Internet Security 2009

$75.90 direct; 3-pack, $79.90
F-Secure Internet Security 2009 is easy to use, without complicated settings and extras. But installing it was a nightmare, and it took too long deleting inactive malware. The firewall is old-fashioned, and the antispam and parental-control apps are ineffective. The suite hasn’t kept up with the times.

Kaspersky Internet Security 2009

3-pack, $79.95 direct
Kaspersky Internet Security’s new user interface hides messy security details but leaves them accessible to power users. The new application-filtering feature renders the suite smart enough to make its own decisions without hassling the user. As long as you don’t plan to rely on it for spam filtering or parental control, Kasperksy’s suite is a good choice.

McAfee Total Protection 2009

3-pack, $79.99 direct
McAfee’s latest suite has improved malware detection, and its spam filter is also much better. But its overabundance of features hasn’t changed at all; its UI is sluggish; and it saps system performance.

Norton Internet Security 2009

3-pack, $69.99 direct
This is definitely the slimmest, most unobtrusive Norton ever. Its protection is top-notch where it counts, though antispam and parental controls are still weak. As the best all-around security suite to date (I’ll be installing it myself), it’s our new Editors’ Choice.

Panda Global Protection 2009

$69.95 direct; 3-pack, $89.95
Except for the new main screen, Panda’s 2009 suite doesn’t look much different. Its collective intelligence promises better protection, but its action is spotty: Spam filtering got much better; spyware protection got worse. And it’s expensive! Wait for next year’s version if you’re thinking of switching to Panda.

Trend Micro Internet Security Pro 2009

3-pack, $69.95 direct
Trend Micro Internet Security Pro v2 is a big improvement over last year’s edition. It’s an effective anti-malware tool, and it’s loaded with Pro features that are truly useful. If you’ve sworn a lifelong grudge against Norton (our Editors’ Choice suite), give Trend Pro a try.

Webroot Internet Security Essentials

3-pack, $59.95 direct
WISE omits features that other suites include yet still slows down system performance. Its malware protection is excellent, and it delivers 2GB of online backup, but its firewall component doesn’t do the job. Spend $10 more and get Norton or Trend Pro!

Scheduled Scanning ZoneAlarm Internet Security Suite 2009

$49.95 direct; 3-pack, $69.95
ZoneAlarm is strong on defense. It has a tough firewall and keeps malware totally out of a clean system, but it’s less effective in cleaning up entrenched malware, and some of its features are antiquated. ZoneAlarm is still a fine choice, but I had hoped for a makeover that would be more than skin deep.

CA Internet Security Suite Plus 2009 CA logo

5-pack, $79.99 direct
There’s little to love in this Frankenstein’s monster of a suite. Patched together from many separate mediocre tools, it put the biggest drag on system performance of any suite tested. Save ten bucks and get Norton’s suite (or Trend Micro’s) instead.

Comodo Internet Security 3.5 Comodo

Free
For free security Comodo’s firewall is still a sound choice, but the antivirus and antispyware parts of this suite just don’t do the job. If you need free security, get the firewall alone and add avast! or AVG for free virus/spyware protection.

Security In The Cloud

The number of different malware threats and variants released every day is increasing exponentially, and with it the size of the signature files needed by security software to detect these threats. Security vendors have handled this problem in part by using heuristic techniques that allow one signature to match multiple threats. This year several vendors have introduced new technology that moves the signature database at least partially off your local computer and into the cloud. All of these technologies require an Internet connection to function, of course.

Panda calls its new cloud security technology collective intelligence. The suite retains a local malware database of the most common threats and threats that can propagate without an Internet connection. For files not identified by the local list, Panda Global Protection 2009 sends a tiny checksum to the online database to see if it matches the checksum for a known bad program. It’s a good idea and may work eventually, but I didn’t see evidence of improved malware detection when testing Panda.

The Artemis technology in McAfee Total Protection 2009 aims to eliminate the gap between detection of a new threat and protection against that threat. When the local McAfee installation detects slightly suspicious behavior in a file that’s not in its local database of threats, it shoots a checksum off to the Artemis database of known good and known bad files. It’s similar to Panda’s system, but, unlike Panda, McAfee showed a marked improvement in its malware detection.

Symantec’s Norton Insight takes a rather different approach. It leverages data collected from over 25 million Norton users to create a database of known programs and uses proprietary statistical analysis to assign a trust level to each. Skipping known trusted programs markedly speeds up scanning. Symantec researchers believe that statistical methods may in time completely replace familiar signature-based malware detection. It’s certainly effective in combination with regular signature-based detection: Norton scored better than any other suite or standalone antispyware utility on the current round of tests. —

next: Makeovers, Shallow and Deep >

Security suite vendors have finally caught on to the fact that most of their users aren’t security geeks. Users want the product to work; they want it to show that it’s working; but they don’t want any interruptions or confusing queries. Judging from what the vendors have done this year, they also want it to look nice. Many of the suites discussed here have significantly changed their main windows since last year. Click on our security suites interface slideshow to see how the suites have changed.

F-Secure and McAfee bucked the makeover trend. Other than a minor change in color palette, F-Secure looks exactly the same, and only the sharpest eye could detect any difference in McAfee’s 2009 edition. The biggest change for Trend Pro is a new My Home Network tab on the main screen; other changes are relatively minor.

Kaspersky moved things around and smoothed out the overall visual effect, but it’s not too different. BitDefender—the quick-change artist of the group—has undergone some big changes. The 2008 edition swapped 2007’s blocky, utilitarian look and red and silver color scheme for a super-simplified big-button view reminiscent of Microsoft’s OneCare, and the 2009 edition of BitDefender is another complete makeover.

ZoneAlarm has changed the most of all. For years, it has used an awkward dual-tab system, which left some users confused about where to find features, and a hodgepodge of bright-colored icons. ZoneAlarm 2009’s interface is much more coherent, both in function and appearance. Norton has made some big changes, too, getting rid of the confusing separate “Norton Protection” tab. Check the slideshow for before and after pictures.

So, do these radical changes in appearance represent big improvements in functionality? In most cases, no. The biggest exception is Norton: In addition to merely cosmetic changes, it has also streamlined its protection and added visuals for performance-related features such as Norton Insight and the handling of security tasks in idle time.

In the past I’ve given each security suite separate ratings for Firewall, Antivirus, Antispyware, Antispam, and Privacy/Parental Control. With this round of suite reviews I’ve added a Performance category and separated Privacy and Parental Control. Of course, some components are more important than others. I give much more weight to the firewall, antivirus, and antispyware components, as well as to the new Performance index. The attached chart pulls together the individual component ratings for the 2009 suites, so you can focus on choosing one that’s strong in the areas you need most.

Norton Internet Security 2009 excelled in the most important areas—firewall, antivirus, and antispyware—and it did so with little affect on performance. Its antispam and parental-control elements are dismal, but many users don’t need those. Norton remains our Editors’ Choice for 2009. Those who’ve sworn off Norton’s suite for life (there are some who can’t get beyond its past performance problems) should consider Trend Micro Internet Security Pro 2009. Its scores are impressive, if not quite as high as Norton’s, and it does well in all areas, including those where Norton falls down. Click the links below for full reviews.

Suites Keep Coming

The number of players in many industries keeps shrinking as small vendors fail or get eaten by bigger ones, especially in the current financial climate. Not so with the makers of consumer-side security suites! Some vendors take a single-focus product, such as an antivirus or a software firewall, and parlay it up into a suite. Others modify their Enterprise-level products hoping to generate a separate revenue stream on the consumer side. These new suites haven’t necessarily settled into the “fall model year” schedule adopted by their existing competitors. In fact several have popped up since my roundup of 2009 suites. The current top suites don’t have to worry about the competition yet-all three of these newcomers need work-but the category as a whole is clearly healthy.

TrustPort is well-known for its Enterprise and gateway products but hasn’t been a force in the consumer market. Recently the company quietly released a consumer version of its TrustPort PC Security 2009. The product has some features not usually found in consumer products-one, an antivirus/antispyware solution runs multiple detection engines, another provides a feature for managing Public Key Infrastructure encryption. But the PKI features really need Enterprise-level support, the virus/spyware protection isn’t top-notch, and the firewall manages to be both obtrusive and ineffective. Not only that, the suite seriously slows system boot time and Web browsing. Consumers want a suite that does the job quietly and without generating problems-this isn’t it.

Comodo added virus and spyware protection to its existing Comodo Firewall Pro-thus was born Comodo Internet Security 3.5, a minimalist suite that doesn’t include antispam, privacy protection or parental control components. It does have the virtue of being free, though. But while the firewall module is admirable, the added virus/spyware protection just doesn’t do the job. The product scored dismally in my malware-removal test, did a poor job of keeping malware out of a clean system, and popped up multiple alerts for many perfectly valid programs. And it had more impact on system performance than I expected for such a lightweight suite. If you need free security, use the Comodo firewall and get your virus and spyware protection elsewhere.

CA (formerly Computer Associates) isn’t new to the security-suite market, but its latest version is significantly changed. Unfortunately, the changes in CA Internet Security Suite Plus 2009 went in the wrong direction. The software is weak in almost every area. Its completely separate virus and spyware scanners scored poorly both at malware removal and at keeping rogue software out of a clean system-only Comodo scored lower. The firewall resists malware attacks but bothers the user with many queries; with its Safeguard features enabled it seriously interferes with many valid programs. This pieced-together collection of security elements offers so-so protection while putting more of a drag on system performance than any other suite I’ve tested

Click here to compare the security suites featured in this roundup

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My Note: Well there you have it. This year at least I don’t have to run out and buy new Security Software, I use Trend Micro which is ranked second. -jschulmansr

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Gold and Oil Top Peter Grandich’s Shopping List – Seeking Alpha

Source: The Gold Report

Peter Grandich, creator and producer of The Grandich Letter for a quarter century, allied himself with AGORACOM in October, bringing his well-known and oft-quoted commentaries to a far wider audience than his subscriber base and financial media such as The Wall Street Journal, MarketWatch, CNN, GlobeInvestor, Financial Post and BNN. Breaking away briefly from his recent blogging, the veteran Wall Street watcher and investment advisor tells The Gold Report readers what he likes looking forward—gold (up to $1,000) and oil (between $35 and $40). Also high on his list: uranium (for the nuclear renaissance), junior miners (a select few), and Canadian banks (pretty much all of them).

The Gold Report: Judging from opinions you’ve expressed in recent newsletters and blogs, you clearly believe we will be testing the November lows during the first quarter this year. What is some of the logic behind why you think that will happen?

Peter Grandich: My belief has been that if and when the U.S. stock market bottoms, along with the economy, it will be an L-shaped bottom, not the V that so many on Wall Street keep talking about. The problems that brought us here persist. In fact, they’ve gotten worse over time, which gives me even more reason to believe that we’re going to bottom eventually but not go far off that bottom once we do. The logical viewpoint for us to take at this point is to look for a market to make at least a double bottom, if you don’t believe it’s a V bottom. Obviously, if it’s a V, you only have one time you’re at that low.

The November lows are, I suspect—as I’ve said recently—are not a question of “if” but “when.” A strong bounce is likely to come off that because the remaining bulls who aren’t totally bloodied would look and hope for that to be an opportunity to get more long if they’re not already 100% long.

The view we’ll have to take after that is watch the bounce, see what type of volume and breadth it has. The problem with rallies we’ve had all through this decline is that neither their volume nor breadth has been half as strong as in the declines; that is always an earmark that the bear market is continuing and that rally is a countertrend. So that’s another thing to look for when and if we catch those lows.

TGR: You mentioned that maybe we should be looking for a double bottom. If we go back and re-test the November lows, is that our double bottom? Or would you expect to go through the November low?

PG: I still suspect we’re going to go through it, but we have to be able to change our views as the markets change. The only way bouncing off that bottom and then turning up past 9000 on the Dow—that would be the only technical factor that would suggest to me that the bear market was over. My feeling is that even if we do hold that November low, we are going to have a very long trading range on the Dow of somewhere between 7500 and the 9000 that we rallied to twice the last year but have failed to go through.

Rather than trying to catch a falling sword and usually getting their hands sliced by it, quite frankly I think what’s best for investors would be to be certain or fairly certain that a bottom is put in and miss the first 10% or 20% to the upside. I think if and when we do break out above those numbers, we’ll also be hearing things on the economic side getting better.

Now, that’s not my bet right now, but I think you always have to have a plan to possibly change your view and be set for it if certain things happen. My most likely scenario continues to be that this economy will be very weak throughout 2009, and not just the first half that the bulls keep talking about. And we don’t have any real hope of a sustained equity bull market at least until 2010 at the earliest.

TGR: Your writing is bullish on oil, though.

PG: Yes. We suggest that people contain any oil purchases between $35 and $40—not above $40 at this point. Oil longer term is far more likely to be higher than that level than equities looking out the same timeframe. If people are still willing to look out three to five years versus three to five days, I think oil is a better risk-reward at this point than the U.S. equity market.

TGR: Are you talking about buying oil as a commodity or purchasing oil equities?

PG: Both. What I do like especially about Exchange Traded Funds now is the ability to have a bunch of oil stocks within them. No-load funds are still a good way to go with equities for those who are very long-term oriented. But ETFs are a better vehicle for investors because you can buy and sell as many times as you want during the day, not just get the end-of-the-day price when you sell your mutual fund. Both are useful. But either way, I think you need to track the actual commodity as well as oil stocks.

TGR: Your blogging suggests that you think precious metals sector also will do well, even in 2009?

PG: Yes, I continue to believe that; in fact, I believe the best investment right now is gold. Not because I think the world’s coming to an end; quite frankly it won’t matter if you have gold if there’s truly an end-of-the-world scenario. And I am not a gold bug; I’ve been bearish on it at times.

Nevertheless, thanks to the credit crisis, which is taking place in all four corners of the world, I do believe people around the globe are realizing that paper money may not be the best safe-haven investment. And although gold did not go up in 2008, it did serve its purpose by being an insurance hedge. Whether they’re professionals or just individual investors, no one I know would mind having been even for 2008 versus the heavy losses they took. So, gold did its job; those who put money in gold didn’t see the losses that everybody else suffered.

But I believe now that we’re going to see capital gains opportunities in gold for 2009 and into the foreseeable future. The market has all the fundamentals that one would want right now. There’s a declining supply, which will decline even further because those who normally look for gold, the junior resource stocks, have been so hammered that we’re not going to see a lot of new exploration for some time.

The few companies that will be going into production will be a premium. The excess supply that used to come into the market, particularly from central banks, has dried up. We’re also seeing tremendous physical demand; in fact, throughout 2008, it was very difficult for people to acquire physical gold. Coins and bars that used to be readily available were in such demand that there became a shortage. In fact, if you wanted to purchase physical bullion, you were paying 10% or more above the spot price.

People say that should have caused a dramatic rise in the gold price. The paper market is still driven by the COMEX, where the futures trade. Unfortunately, some people claim, that market has been manipulated. I can simply say that the paper market has not mirrored the physical market. I believe the physical demand eventually will overrun what is not happening in the paper market. Once that occurs and once we’re above a $1,000 and stay there for more than a week or a month, I think we’re going to see a lot more money pour into gold. I don’t know about $2,000 an ounce for gold, but once that money starts to pour in I still think $1,200 gold and $1,400 gold— even $1,500—is a very variable, useful and likely target.

TGR: For 2009?

PG: More likely in 2010. The only way I see it happening in 2009 is if we really see worse economic conditions and financial Armageddon. Right now thanks to this historical presidential election in the U.S., there is a mild—if misplaced—hopefulness that somehow the new administration can magically do something in a week or a month or a couple of months that the group before couldn’t do in several months, if not years. Once this hopefulness wears off and people realize they face the same difficulties in fixing a horrendous problem, we could see even more pressure in the credit market and in the equity market. If that’s the case, money has to go somewhere.

What’s been most interesting, a couple of weeks back, the Treasury market—where most people ran to in the last downturn—actually started selling off, especially on the longer end. I think part of that money is going to find the gold market.

TGR: Are you looking at gold as a precious metals purchase as in physical gold or ETFs? Or in this case do you see plays to be made in equity shares?

PG: There are equity plays to be made. I think first you want to have some physical bullion. One of the things I learned as a hard lesson—and as many other people did in 2008—sometimes mining shares, particularly the juniors, don’t track gold. During a large-scale liquidity crisis, people sell everything they own, including juniors. Even so, I think we’ve seen the industry destroyed as much as it possibly can be. The companies that have managed to stay around, particularly those that are going into production soon or are already in production, will have a big bounce back. Unfortunately, many of the pure exploration companies that haven’t come close to identifying a mine may not survive—but those failures actually enhance the prospects of the survivors. Money will flow into them long before it flows into the small exploration companies.

TGR: Do you have any favorites as you’re looking at these near-producing or producing companies?

PG: Sure. In fact, we’ve just been engaged by Hawthorne Gold Corp. [TSX.V:HGC] to help with corporate development services. I have to point out that I have a prejudice there simply because I’ve been aware of the management team for years. When I was a fund manager and a hedge fund manager, I purchased and did very well with the companies they were involved with. I am speaking of El Dorado Gold Corporation (EGO) and Bema Gold. Both principals at Hawthorne Gold were founders of those previous companies and helped develop mines. Hawthorne Gold has made a series of acquisitions and is going into production, apparently in 2009. As I said earlier, those are the types of companies that I think are going to be attractive first and are likely to see a big rebound, even though they have suffered in seeing their share price decline.

And Hawthorne has the management team, has the finances, and is mining in an area of the world where they don’t have to worry about political problems. British Columbia, most of Canada, and even the U.S. are probably the safest places to explore and mine right now. And, of course, that’s where they’re concentrated on. So they seem to have all the ducks in order and have the ability to prosper at the expense of some others who are not in the position that they are.

TGR: A big focus now for people who are investing now in equities are the balance sheets, specifically cash in the bank and how long a company can survive without going to the capital markets. Can you speak a bit about that regarding these companies?

PG: There’s no question that financing has all dried up in every sector, and the junior market is no different. The good news is that El Dorado has been able to raise enough capital to see themselves through production. Once production starts, obviously cash flow becomes important. I believe we’ll see a lessening of that tightness in those companies that are looking particularly for gold or precious metals as their main focus because of the expectation that the gold price is going to rise and attract people’s eyes while everything else is seemingly not moving in the world.

So, I think if we look into the second half of 2009 and 2010 when companies like Hawthorne may need to come back to the market, I think the market will be more conducive to raising money than it has been or is now.

TGR: How was El Dorado able to raise money to go through production?

PG: Both Mike Beley and Richard Barclay were senior managers and directors at El Dorado in its early days. (Both Beley and Barclay are Hawthorne Directors; Beley is also Chairman, while Barclay is also President and CEO.) They helped raise a lot of money and bring mines into production. They also were able to do the same thing with Bema, which Kinross Gold Corporation (KGC) eventually bought for something like $3 billion.

When financiers look at companies, they’ve learned that the real important thing in juniors is management. Metals mining has a few different ways to go at it and all, but it’s not very exotic. So the likelihood of seeing their monies do well is really going to fall on the management team’s shoulders. It stands out when you have a management team that has demonstrated at least once—and these gentlemen have done it twice—the ability to develop a company and bring it into production. And let’s not forget that for every little junior that looks for metals and goes into production, 95 or so don’t go the whole nine yards. That stands out. That is always what impressed me about these gentlemen, why I used to be involved, and put money in El Dorado and Bema, and why I would want to associate with their company now. They are clearly standouts as managers in an industry where failure is the norm.

TGR: What do you think about Bravo Venture Group [TSX.V:BVG]?

PG: There is another company that’s made just outstanding discoveries and demonstrated an understanding of the deposits. They continue to put out great drill results—excellent results of deposits that are developing very nicely. And also, it’s a company with the ability to demonstrate that they have enough support out there despite terrible financing conditions. They’ve been able to complete a financing recently that is going to move them forward. And they’re in a very good area of the world; as I said earlier, Canada and America are the safest places to look right now. So Bravo Ventures, too, I believe is one of the companies that will move forward to production. I suspect that they may not want to run the production, though, so there may be a sale or some type of a joint venture.

TGR: How about Bravo’s management team?

PG: Really what got me interested is somebody I worked with in the past and offered me an opportunity to do so again. As I said, I make my bets on management, and even some great management teams still don’t go all nine yards. But just like the quarterback is the most important position on a football team, management is in juniors. I go a long way back with Robert Swenarchuk, who’s head of Bravo’s Corporate Development and a member of Board of Directors. He is the one who made me interested in this and showed me why this deposit could develop. He was right. I’m a people better, and especially in the junior markets, and there again is another reason—because I have such faith in somebody who has an active role in the company.

TGR: You also follow ATW Gold Corp. [TSX.V:ATW].

PG: Just like you find out who your real friends are during tough times, you learn which people really know what they’re doing during tough times. It was easy when everything was flying; even the pigs were flying. ATW was able to secure a very advanced-stage mine that its previous owners had to liquidate because they had financial problems, and then brought in a very top-line management team that had experience in that area. On top of that, several months ago they switched their currency from Australian dollars to Canadian dollars. So they used the currency situation to make a gain of almost $1.5 million and at the same time avoid having to go the market and advance their project.

Here, too, is management. I’ve known Graham Harris, one of ATW’s Directors, for almost 20 years. He’s always been a straight shooter, particularly when he was in the financial arena, and finding a straight shooter in the financial arena is like finding a needle in a haystack. So I’ve always had confidence in his honesty. He was very excited about this project. He brought me in about a year ago; it just keeps being advanced. We should be in production there in short order. If you notice, I’m trying to concentrate on companies that are either close to going into production or are in production now.

And there again, in my opinion, they are going to be a survivor of the juniors’ dismay and then be there when the market eventually rebounds and comes into a bull market again. They will be among the leaders in the juniors segment.

TGR: Do you have any other companies under that umbrella?

PG: My favorite, favorite company—and it is my largest personal holding so I speak from a biased standpoint—is Northern Dynasty Minerals Ltd. (NAK). It has the largest undeveloped copper-gold deposit in the world. It’s in Alaska. The numbers are crazy—94 million ounces of gold, 72 billion pounds of copper. It is currently in a venture with Anglo Gold (AU) where Anglo can purchase 50% of the project by spending up to $1.4 billion. They’ve already spent a couple hundred million in further developing the project and advancing it to a pre-feasibility study.

It also has a 19.9% ownership by Rio Tinto (RTP). It had a 10% ownership by Mitsubishi, but Mitsubishi has been buying shares continuously in the open market lately. I suspect they’re heading to 19.9% ownership too.

If and when the market returns to people interested in precious metals or even base metals, there’s no question that at least one of those companies will want to own at least half, if not the whole deposit. Northern Dynasty’s stock came down a lot because all stocks came down. It is ridiculously priced at few dollars a share, but I believe when this eventually is done it will sell for multiples of where it is now.

TGR: Why wouldn’t Anglo buy it now while the price is depressed?

PG: Like everybody else, they don’t think time is against them. They realize this is a bear market. They also realize that they’re going to need current management’s support. Current management has about 20% of the stock; and as I said, their opposition—which are competitors—Rio has almost 20%. So unless they made a very favorably valued price, they’re not going to be able to buy it at current prices or anything close to that.

Hunter Dickinson, which manages this Northern Dynasty, is one of the biggest players in the junior- to-mid-size producers and exploration companies. They know they have to work with all these potential bidders; so they have not really played one against another—but sooner or later it will be one against another. So no one is rushing to drive the price up, but if Mitsubishi is able to acquire 20%, and Rio and management have 20% each, if and when a bidding war starts, there’s only about a 40% float out there. That will be when we really prosper as a shareholder. You need to sit back and accumulate a stock like this now and go on that expectation of what I said turns out be true.

TGR: So, how close is Northern Dynasty to production?

PG: It’s approaching pre-feasibility. We won’t see production for a few more years at least, but it’s so large. It’s 25% of the copper needs for the United States, and it’s on the top of every major producer’s list. We could still see someone else come out from left field that currently doesn’t have a position, but the ones I’ve mentioned certainly have the lead in potentially acquiring the additional stake. The problem for all three of them is that they know they can’t make a low-ball bid, but when they do make a bid for it, they want a bid that’s not going to cause a battle. Since nothing is moving now, they’re just waiting until someone else makes the first move. That’s the difficult part, but you have to speculate that eventually someone will. And when they do you’re going to get a multiple return on what you’re paying for it now.

TGR: In a worldwide recession, given the price of copper, wouldn’t the copper component discount the gold?

PG: The beauty of having so many million ounces of gold is that you can sell the copper for whatever you get, and you get the gold for almost nothing. It’s such a huge deposit; it’s been described that they still will not find the whole deposit by the time our grandchildren are adults. That’s how huge it is. We’re all living on the expectation that someday things will get better than they are now. If and when they do, the demand for the metal will come back again.

There’s an interesting thing about the base metals and even copper. Despite a tremendous slowdown in the world, copper has managed to still be about twice the price it was at the lows of the last big recessions in the ’80s and ’90s. One of the reasons I think that has happened is that most of the major, highly valued deposits had been discovered and drilled off. So one of the reasons copper is not dropping so much is because the operational costs to develop copper is higher than it was several years ago. We’re probably within 10% or 15% of that absolute bottom. It doesn’t mean you start buying now, because it may be a while before it can raise its head. But we’re closer to the end of the decline in copper than we are in the U.S. stock market.

And I must make the point that even if and when I become bullish on equities again, someone is going to have to be over-weighted in foreign stocks. One of the first things I’m looking to do once I believe markets have bottomed is to buy Canadian banks.

TGR: What is it you like about the Canadian banks?

PG: Of all the banking systems around the world, the Canadian banks (outside of Toronto Dominion (TD)) is the only group of banks that didn’t get heavily involved in all the CDS markets and all these derivatives. So the Canadian banking system is one of the places I think will be fairly safe to enter once the equity market has bottomed. They’re on my shopping list right now to eventually look at, but I think they will continue to decline somewhat until the markets themselves bottom.

TGR: One of your blogs suggests that uranium has bottomed out and we’re going to see it up in triple digits in 24 to 36 months. What about this year?

PG: I don’t know so much about the price in 2009. Uranium has seen its worst days in my view. I do believe we’ve seen the bottom and I believe it can tick up. The real factor will be how much the new U.S. administration is truly going to look at alternative energy. It’s one thing to say it during a campaign, but how much will Obama turn to alternative energy? When oil was hitting $140 and $150 and Congress was hauling in the principals of oil companies at $150, they can’t haul them in any more at $40. So I don’t know if they’re going to do what so many other administrations have done—and that is to kick the can down the road and let somebody else worry about energy concerns.

That said, it seems to be a serious concern of the current administration, and I think people will realize when all is said and done that the most efficient and effective and perhaps fastest way to increase abilities of getting energy outside of fossil fuels is nuclear energy. And it’s certainly happening around the world. Therefore, I think the uranium price will work its way higher, and I also think it’s only a question of when we’re going to see more nuclear plants built in the United States. Not so long ago, people thought we’d never see that.

A Bronx native, Peter Grandich hit Wall Street 25 years ago after starting an investors’ club while working as a warehouse manager and launching his now-famous publication, The Grandich Letter, which grew to become a leading newsletter analyzing the metals and mining sectors within global stock and bond markets. After only three years on Wall Street, Peter was Vice President of Investment Strategy for Philips, Appel and Walden, a top New York Stock Exchange member firm. He was dubbed “the Wall Street Whiz Kid” after he forecast the 1987 stock market crash weeks before it happened. He then predicted that the market would reach a new all-time high within two years. It did. He said that 2000 would see the end of great mega bull market of the ’80s and ’90s. It was. As long ago as 2001, he thought U.S. banks had gone “overboard in making loans that required near-perfect economic conditions in order to avoid substantial bankruptcies” and expressed concern that some of them “seem to have hidden their problems from the average investor.” In October 2007, he warned investors to “man your battle stations” and prepare for the “unprecedented economic tsunami” that would hit America beginning in 2008. Jay Taylor (Gold, Energy & Technology Stocks newsletter publisher) considers Peter “most remarkable for a successful Wall Street pro…unashamedly independent and outspoken about his views, which frequently are anything but politically correct.”

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Nothing in today’s post should be considered as an offer to buy or sell or as a recommendation for any securities or other investments, it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. – jschulmansr

Can You Sense It? The Calm Before The Storm

03 Tuesday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, Bailout News, banking crisis, banks, bear market, capitalism, China, Comex, Credit Default, Currencies, Currency and Currencies, deflation, depression, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, hyper-inflation, India, inflation, Investing, investments, Junior Gold Miners, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, oil, palladium, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, recession, run on banks, Saudi Arabia, Short Bonds, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, TARP, The Fed, Today, U.S. Dollar, Uncategorized

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agricultural commodities, alternate energy, Austrian school, Bailout News, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, Dennis Gartman, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, Federal Deficit, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, Marc Faber, Mark Hulbert, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Brimelow, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

Can you sense it? There seems to be an eerie calm in all of the markets. Could this be the calm before the coming financial storm round 2? Since Gold is considered a safe haven investment in times of financial uncertainty, it would seem to tell us something is about to break wide open. As I enter this post Gold is up $5 oz to $912.50. We saw some retracement yesterday but support levels at $900 oz held. It appears that prices are taking a breather. This comes after an approximate $95 dollar an oz rise in just the past 14 days! As I mentioned in my post from a few days ago It’s Official Gold is in a new Bull Market.

Quick sample of some recent headlines:

The Associated Press writes, “Gold Prices Soar as Investors Flee Wall Street.”

The Bullion Vault claims, “Gold Prices Poised to Move Higher.”

Forbes observes, “Gold Prices Resume Long-Term Uptrend

So What’s next? Read on…-Good Investing! -jschulmansr

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Gold Prices Could Hit $1500, fears Merrill Lynch CIO- Business 24/7

By: Shashank Shekhar of Business 24/7

Gold prices may hit $1,500 (Dh5,509) an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.

Dugan termed his apprehensions of gold striking such a high as a “fear” that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.

With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of “the most trusted currency”, Dugan said. “We have never seen such a rush to buy gold. It’s bringing in security and it’s still affordable.”

Merrill Lynch commodity price forecast authored by Dugan showed that gold prices can rise from the currently prevailing $913/oz to $1,100/oz in the first quarter of 2009 and to $1,150/oz in the second quarter. “While demand for gold has been rising production has been declining. South Africa, which accounts for the major share of global gold production, is facing political issues and has energy problems,” Dugan said.

With reports of declining returns from other investment options, “cash” – keeping money safe in banks and investing in government bonds – is the option in front of investors, Dugan said.

“Fear” and eventual decline of the greenback are the two factors that will drive gold prices, he said. While commodity markets could also bounce back in the first half of the year, a rebound is likely to be short-lived in the absence of strong US consumer demand.

Precious metals, led by gold, could enjoy a more sustained rally with gold benefiting from a weakening of the dollar in the second half of the year, Dugan said.

Dugan said the greenback, which has been strengthening for the past few months, will decline in value by the middle of this year. “That’s when people will begin to realise that President Obama’s policies are not having the desired impact,” he said.

Investors could also look to private equity, which produced strong returns during the downturns in 1991 and 2001, on an opportunistic basis. Some hedge fund strategies may be worth following but hedge funds should be treated with caution, Dugan said.

Returns from private equity should remain in single digits in 2009 and a return of beyond 10 per cent should be treated as “fair value”, he said. “Investors should remain cautious. They need to be prepared to take profits. We think any such rally would run out of steam by the second half of the year.”

Low risk assets could offer private investors the best prospects of attractive returns in 2009 as the world’s leading industrialised nations face recession, Dugan said. With governments around the world striving to tackle the economic crisis, private investors could find value in a cautious approach towards asset allocation. Options include high-grade corporate bonds and high-quality, high-yielding equities in defensive industries.

“Investors will look to long-term US government bonds as an important barometer of the progress of global recovery,” said Dugan. “Sharply rising bond yields will show that the governments have overspent.”

While earnings downgrades are likely to dominate the first quarter of 2009, a rally in global equity markets could be on the cards for the first half of the year with consumer and cyclical stocks among the potential beneficiaries, Dugan said.

Broad equities indices could also offer trading opportunities to private investors. “Equities could outperform as an asset class in 2009 unless there is a serious deflation risk. Our view is that deflation will be avoided,” he added.

Selective investment in high-grade corporate bonds could also provide attractive returns, Dugan said.

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Is a New Cyclical Bull Market on It’s Way? – Seeking Alpha

By: Simit Patel of Informed Trades.com

Puru Saxena of Money Matters recently wrote an article entitled ‘Birth of a New Cyclical Bull?‘ in which he offers arguments for why we may see 2009 be a bullish year for equities. His basic points:

Inflationary actions by the Fed and a declining TED Spread have proven effective in fighting falling asset prices and reducing risk

Treasury bonds need to have higher yields or money will go into equities
Equities have “overshot” to the downside, thus resulting in excessively low valuations

I agree with Saxena’s basic premise that the Fed’s actions will be successful in creating inflation in the aggregate; it is only a matter of which asset class will reap the benefits of that inflation, and who will pay for it. The chart below compares various asset classes against one another for the month of January.

click to enlarge

A key question we may wish to begin asking and examining is just how much inflation the Fed has really created for us, something that will become more apparent as lending resumes and money that is “on the sidelines” returns to the game. I’m of the viewpoint that the global economy is currently improperly structured, and needs a complete restructuring, one that will likely require abandonment of the US dollar as world reserve currency, a corresponding decline in US consumption, and a significant restructuring of the FIRE (finance, insurance, real estate) economy in the United States.

From that perspective, an equities rally will be unsustainable, unless there is currency debasement to the extent that all markets rise nominally. If that is the case, though, the inflation will result in significant dollar devaluation.

Trading Implications: The fall in Treasuries was the story for January, and will be of importance so long as it continues. If money comes out of Treasuries and into equities and commodities, it increases the likelihood of seeing consumer price inflation. As I’ve stated before, though, I expect commodities to outperform equities once money comes out of Treasuries and dollar devaluation resumes. And as all currencies around the world are having trouble, gold will rise as fiat currencies continue to struggle.

Disclosure: Long gold.

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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U.S. Debt Default, Dollar Collapse Altogether Likely – Seeking Alpha

By: James West of Midas Letter

The prospect of the United States defaulting on its debt is not just likely. It’s inevitable, and imminent.

The regulatory black holes into which sanity and reason disappear on a daily basis are soon to collapse under the mass of their sheer size. The circle jerk going on among G7 governments has to end – the steady advance of gold, even in the face of a managed price, exposes the real value of the U.S. dollar, as opposed to its apparent value expressed in the dollar index.

Is 2009 the year that the United States formally defaults? And with that, will the dollar collapse be rolled back ten for one or more?

There are a lot of reasons to support that theory. To Wall Street economists, such an event is heresy and therefore unthinkable. Yet Wall Street is the very La-la-land that bred the idea of a perpetually indebted nation in the first place.

Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.

Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.

Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009. The further out the maturities on notes, the more bearish the sentiment towards them. The only way to entice buyers is through the increase in yields.

But with yields at 1.82 per cent, five-year notes were met with a demand for 1.98 times the amount offered – the lowest bid-to-cover ratio since September. A sell-off in treasuries began in earnest upon the conclusion of that auction.

The U.S. Federal Reserve suggested last week that it was going to step up its treasury-buying activity, and the mainstream media interprets this as a form of market support. What it actually is evidence of growing anxiety and desperation on the part of the Fed as the realization dawns that demand for treasuries is progressively evaporating.

The increased demand for gold as an investment witnessed throughout the last two weeks that has pushed gold to a 4 month high is further evidence that investors across the board are gravitating more towards gold and away from U.S. debt.

So what is the catalyzing event that will precipitate outright capitulation?

I think the spin-controlled version of events will make the collapse of the derivatives market the red herring that facilitates the aw-shucks-we-have-no-choice shoe-gazing moment possible, and that’s exactly the parachute the government needs to retain a veneer of credibility – at least in its own delusional mirror.

The announcement that the CFTC was about to become the target of a regulatory overhaul supports this theory. Consistent with his unfortunate proclivity to hiring foxes to guard chickens, Barack Obama’s choice for CFTC commissioner Gary Gensler was the undersecretary of the U.S. Treasury when the Commodity Futures Modernization Act of 2000 was passed, and is one of its architects. This was the piece of legislation that was put forth to appease the opposition to “dark market” trading in certain OTC derivatives first noisily derided by CFTC commissioner Brooksley Born in 1998.

Ignoring Born’s admonishments with this act, it exempted credit default swaps (CDO’s) from regulation, resulting in the somewhere between 58 and 300 trillion dollars in value presently under threat if the positions were to be unwound. Because of their unregulated status, counterparties in the largest transactions can simply “roll forward” contracts, instead of the losing party in the transaction covering their loss with a transfer of money. It is this massive “nominal” value that could be the Achilles heel of what’s left of the U.S. banking system, and by extension, the U.S. dollar.

I don’t arrive at this conclusion because I like making catastrophic outlandish predictions. Its merely the result of following certain logical paths to their most likely outcome based on what has happened in the past.

In discussions on this topic with editors of top tier financial publications, such speculation is dismissed out of hand, and the argument to refute the likelihood of such outcomes is never brought forward.

Gold exchange traded funds (ETFs) are now the largest holders of physical gold, and as a proxy for investors who don’t want to be encumbered with taking delivery of the physical, provide a simple way to participate in the gold market.

United States citizens should bear in mind, however, that should the banking system be brought down completely by the collapse of the futures market, proxies for gold such as ETF’s and bullion funds could theoretically be targeted by a government desperate for possession of value. The risk from security in holding physical bullion is matched by the risk of confiscation by government in these volatile times. Don’t forget, the government confiscated and outlawed private ownership of gold in 1933 in support of an ill-conceived gold standard, which to some extent, was that era’s spin to halt the flight of gold (and real value) from U.S. soil.

Don’t think for a minute such drastic events are outside the realm of possibility. If somebody had told you in 1998 that a bunch of angry crazy pseudo-Muslims were going to fly jetliners into the World Trade Center, what would you have said?

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My note: Very Scarey, 10-1 Trade In on Dollars? Gold Confiscated? This is one of the reasons why I use Bullion Vault, check them out for the details…jschulmansr

Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

Good Investing! – Jschulmansr

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Gold Taking a Breather but Fundamentals are Stronger!

02 Monday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, banking crisis, banks, bear market, bull market, capitalism, central banks, China, commodities, Copper, Currencies, currency, Currency and Currencies, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, India, inflation, Investing, investments, Junior Gold Miners, Latest News, Long Bonds, Make Money Investing, market crash, Markets, mining companies, mining stocks, Moving Averages, palladium, physical gold, platinum, platinum miners, precious, precious metals, price, price manipulation, prices, producers, production, SEO, Short Bonds, silver, silver miners, spot, spot price, stagflation, Stimilus, Stimulus, Stocks, TARP, The Fed, U.S. Dollar, Uncategorized

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Currently Gold is down $14-$15 dollars per oz. around the $914 level. As I wrote in my last post if we hold this level then $950 will be our next target. If it fails here then we may have a test back to $885 – $890. Either way I’m taking the opportunity to buy on dips since long term inflation is certainly due to happen and Gold is where you want to be when that happens. Personally, I think $900 to $925 is the new base and we have avery real possibility of $1000+ Gold price before the summer truly begins.- Good Investing – Jschulmansr

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Update on the Gold Trade – Seeking Alpha

By: Trader Mark of My Mutual Fund

Last Friday we said gold might finally have it’s real breakout here [Jan 23: Could be the Real Breakout in Gold] I wrote:

Things to like:
1) a series of higher lows
2) the trendline of lower highs has been penetrated

Things to see for confirmation:
1) any pullback is bought
2) price prints over October 2008’s highs, signaling the end of “lower highs”

This was what the chart looked like at the time:

Now?

Without benefit of the orange line – you can see condition #1 has been fulfilled – we “backfilled”, tested the area we broke out of and people were eager to buy. On that, an aggressive trader would be buying. A reader mentioned this outcome last week.

For someone more conservative in orientation, you want to see #2 “a price point over October 2008’s highs” – then we end our half year of lower highs. We are withing spitting distance here with GLD at $91.40 and the October intraday high at $92.

It’s hard to get behind gold fully because there is no “earnings” behind it; it’s all about sentiment. But the theory is that as all the world’s troubled countries race to devalue their currencies (print, print,print) to “save the system,” a hard asset should retain its value. Silver is likewise breakout out, although silver has a lot of industrial uses as well.

I hate to chase a move, but from a technical set up, a lot of institutional money could be set to finally jump in here….

Now the question of what instrument to use – keep it simple or go with a miner? etc.

Disclosure: No position

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My Note- Great call by Trader Makr but I have to ask, why no position Trader Mark? – jschulmansr

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Fed Monetizes Debt Leading Investors to Embrac Gold – Seeking Alpha

By: Boris Sobolev of Resource StockGuide.com

In January gold rose significantly against all major world currencies. In most currencies except in the US dollar and the Japanese yen, gold actually made an all-time-high.

January Performance

GOLD / USD 5.3%

GOLD / EUR 16.7%

GOLD / AUD 16.5%

GOLD / JPY 4.4%

GOLD / GBP 5.8%

GOLD / CHF 16.3%

10-Yr Yield 13.0%

click to enlarge

At the same time, most capital markets have been falling.

January performance

DOW -11.5%

S&P -11.4%

NASDAQ -9.0%

FTSE -6.4%

DAX -9.8%

Nikkei -9.8%

Shanghai -9.3%

The governments around the world are trying to take initiative while private capital is sitting on the sidelines, preferring the safety of government bonds and precious metals.

Investors typically do not trust the governments to implement any effective economic solutions. Moreover, this lack of faith in central planning continues to grow since the US government has no other plan of action than to save the old, compromised and untrustworthy financial system.

What the Federal Reserve together with the Department of Treasury has shown is that they will inject a vast amount of newly created money into a hugely ineffective financial system.

While in the fall of last year, in fear of devastating deflation, analysts were competing in downward projections for the price of gold, now the competition is to estimate the amount of losses incurred by the financial institutions around the world. The maximum assessment is now at $4 trillion, with Nouriel Roubini coming in close second at $3.6 trillion.

But the main problem is not so much in the amount of credit losses or the amount needed for recapitalization efforts but in that the new government is committed to continue to transfer huge capital into the hands of the same group of people who were largely responsible for the world financial crash in the first place. Wall Street, though transformed, will remain in control.

The lack of trust in the ability of insolvent financial institutions to run the modern financial system is moving investors into gold.

An even more important gold catalyst was the Federal Reserve. In comparing the two latest Fed statements, two things stand out. Here is the evolution in wording:

December Statement: “In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.”

January Statement: “In light of the declines in the prices of energy and other commodities in recent months and the prospects for considerable economic slack, the Committee expects that inflation pressures will remain subdued in coming quarters. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”

December Statement: “The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.”

January Statement: “The Committee also is prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets.”

First, the FOMC sees a threat of deflation and second it is prepared to counter this threat by purchasing longer-term treasuries.

Purchases of long term bonds is the most inflationary move that a central bank can undertake because it represents direct monetization of the government debt and hence an unconcealed debasement of national currency. (This is happening at the same time as the new Secretary of Treasury is chastising China – the main US creditor – for currency manipulation.)

Why did the Fed make such a determined statement, with one member even voting to begin long term treasury purchases immediately? First and foremost, the real estate market is not showing any signs of life. House prices are falling, time required to sell new homes is rising and most importantly, after a steep fall in December, average mortgage rates began to rise again, reaching 5.34% as of last Friday.

Since mortgage rates are closely tied to the 10-year treasury yield, the Fed stands ready to buy government debt and help make housing more affordable via low mortgage rates. The hope is that such action would help put an end to a decline in asset prices and stop the deflationary spiral.

In fact, the latest Fed balance sheet showed that long term treasury purchases have already started, with around $1 billion in notes (5-10-year maturity) purchased for the week ended January 21^st. This is a modest amount, but it is a statement that the Fed is ready to do more than just talk. Traders have indeed sensed this development and Treasury Inflation-Protected Securities (TIPS) (TIP) are also beginning to reflect greater inflation expectations.

Gold investors are also sniffing out the coming price reflation as they piled into the SPDR Gold Shares (GLD) at an increasing rate.

For the month of January, GLD gold holdings rose 8.2% or close to a record setting 63 tonnes. At this rate, GLD will soon surpass Switzerland in its gold holdings, thus becoming the world’s sixth largest gold owner after the US, Germany, the IMF, France and Italy.

If the Fed continues to purchase long term treasuries, it is clear that there is only one way for gold and gold stocks and it is up.

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Gold as Part of a Portfolio – Seeking Alpha

By: San Olesky of Olesky Capital Management

Many investors have been thinking about gold recently. Some have considered it because it has been a relatively strong performer with the iShares COMEX Gold Trust (IAU) closing up 5.4% in 2008. It’s up 2% year-to-date as of Wednesday’s close. The iShares S&P 500 Index ETF (IVV) was down 36.94% in 2008 and is down 6.17% year-to-date as of Wednesday’s close. Other investors or traders have bought or considered gold as a classic safe haven.

My inclination is to refute the efficacy of buying or holding gold for security either in the form of an ETF or, more so, in the case of gold bullion bars or gold coins. However, as the financial crisis became more severe last year, a couple of clients approached me about adding gold to their portfolios. Rather than diplomatically rejecting the proposal, I told them that I would investigate the historic effects of holding gold in a portfolio. Long story short, I found that adding a small, reasonable allocation to gold reduced portfolio volatility substantially and increased return slightly.

A simple diversified portfolio consisting of 1/3 S&P 500, 1/3 Real Estate Investment Trusts (REITs), and 1/3 10 year U.S. Treasuries would have produced a compound annual growth rate (CAGR) of 8.47% with 11.15% volatility (standard deviation – SD) from 1993 to 2008. For comparison, the S&P 500 produced a 6.67% CAGR with a 20.16% SD. Although few investors would implement this 1/3 – 1/3 – 1/3 allocation, diversification is proving its strengths here. All of these statistics incorporate rebalancing annually.

Let’s take the same 1/3 – 1/3 – 1/3 portfolio and alter it to include a relatively small allocation to gold. That allocation will be 30% S&P 500, 30% REITs, 30% Treasuries, and 10% gold. Over the same timeframe the portfolio with gold produced an 8.49% CAGR with a 9.86% SD. The portfolio with gold produced a slightly better CAGR with volatility that was 11.6% lower than the 1/3 – 1/3 – 1/3 portfolio. The diversified portfolio with gold produced a CAGR that was 27.3% higher than the S&P 500 and 51.1% less volatile than the S&P 500. The S&P 500 had 4 losing years with the worst being a loss of 37% last year. The 1/3 – 1/3 – 1/3 portfolio had 3 losing years with the worst being a loss of 18.15% last year. The portfolio with gold had only 2 losing years with the worst being 15.74% last year.

In constructing sound and productive portfolios we would like to include assets that have high returns, low volatility, and low correlation to the other assets in the portfolio. Looking at gold’s average annual returns, relative volatility, and relevant correlations, one should expect that gold would be a constructive addition to many portfolio allocations. In fact, gold even has a relatively low correlation with commodities in general (S&P Goldman Sachs Commodity Index). However, we should learn from the past but not expect it to repeat itself exactly. There is much to be learned from historic returns, volatilities, and correlations of asset classes. With all due respect to history and math, we must use reason when constructing portfolios. I view gold as a very narrow and idiosyncratic asset. So, I do not feel that it is wise to strategically allocate as much as 10% to the asset although the historic, mathematically optimal amount would be higher in the context of some portfolios.

What did I do? Based on my tests and observations, I bought a little gold last year for some of my clients. I have incorporated a small allocation to gold into their continuing strategic allocations.

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My Note: This is great news even the Non Gold Bugs are become cautiously bullish!-jschulmansr

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Finally and extremely interesting article you want to read! Be sure to click on the chart links too…- jschulmansr

Economy Watch: What if Stocks Were Priced in Gold?- Seeking Alpha

By: Paco Ahlgren of Ahlgren Multiverse

“Everything has its limit — iron ore cannot be educated into gold.”

— Mark Twain

Several charts have been floating around the Internet for some time, showing the historical Dow Jones Industrial Average, priced in terms of gold. The simplest explanation entails thinking of the Dow divided by one ounce of gold; if the Dow is at 5000, and gold is at 500, then Dow-to-gold is 10. But it’s important to remember as you’re considering this ratio that the Dow is calculated in terms of dollars. So essentially, when we determine the Dow-to-gold ratio, it’s not just a simple ratio of gold to shares in the Dow, but rather it is a three-part ratio — Dow, expressed in dollars, to an ounce of gold.

Wouldn’t it just be easier to express gold in terms of dollars, or the Dow in terms of dollars? Well, those are certainly useful ratios — and we use them all the time — but what we’re really going after when we look at a historical Dow-to-gold chart is how well the Dow has performed, relative to the dollar, and relative to gold. What have inflationary pressures done to the Dow, in terms of gold and the dollar, over the past century? How have the three components moved in the various historical boom-bust scenarios? The results are interesting.

Let’s shift gears for a moment. Just off the top of your head, what would you expect stocks to do in periods of inflation? The dollar loses value rapidly, right? And that means prices of goods and services move higher, presumably with wages. So wouldn’t it stand to reason, intuitively, if corporations were making more money as prices increased, profits would increase too? And if profits increase, shouldn’t share prices go higher in response?

It turns out that inflationary price increases are bad for the stock market, and no period in history establishes this more concretely than the late 1970s and the early 1980s. Interest rates and prices soared, along with the price of gold, but stocks were flat. I want you to think about what I’m saying here: prices in general were going up, and yet the stock market was not. What this means is while stocks, in nominal terms, looked to be relatively stagnant, in real terms they were getting crushed. This is why the Dow-to-gold ratio is so significant as an indicator of relative value.

There is an elegant, simple truism that comprises every single transaction between buyers and sellers, and yet most people don’t even think about it: whenever you buy something, you are selling something else. When you buy corn, you are selling dollars. When you buy a Ford, you are selling dollars. If you are in Mexico and you buy a chicken, you are selling pesos. Of course, if you came from the U.S., you first sold dollars, bought pesos, and then sold pesos to buy the chicken. I know most of you already understand this concept, but I’m trying to emphasize that even when currency is used, every transaction is merely a trade; that is to say, the transaction is nothing more than negotiation that results in the exchange of two things — whether goods, services, or currency.

With that in mind, consider this: when prices rise because of inflation (printing of money), it isn’t so much that goods and services are getting more valuable — rather it’s much more accurate to say the currency is simply getting less valuable relative to everything else. If the dollar collapses, for instance, and the cost of a loaf of bread goes from $1 to $20 at the same time a share of Microsoft (MSFT) goes from $20 to $30, then Microsoft is severely under-performing — in inflation-adjusted dollars. A loaf of bread will cost you 20 times what it used to — not because it is more valuable, but because the dollar is less valuable. Meanwhile Microsoft is worth only 50% more. Relative to the dollar, shares of Microsoft are actually losing money — in a big way.

If you look at a chart of inflation from 1978 to 1982, you’ll notice a huge spike. If you look at a chart of the Dow Jones Industrial average during the same period, you’ll see that stocks traded sideways in a fairly well-defined range over the same period. But that doesn’t tell the whole story; if you adjust for the meteoric rise in prices during that five-year period, the stock market actually performed much worse than the nominal dollar fluctuations presented in the historical chart. In other words, the price of just about everything was going up dramatically, but stocks were not. So if you adjust prices back to “normal” levels, and adjust stocks accordingly, the picture for equities would have been horrible.

Now for the pièce de résistance…

Here is a series of charts of historical nominal gold prices (not adjusted for inflation), in several different currencies — the first of which is U.S. dollars. Take a look at the spike in the price of gold from 1977 to 1981. Now, if we go back to our original chart above, showing the Dow Jones Industrial Average, in direct relation to an ounce of gold (Dow-to-gold), you can see that the ratio went roughly 1:1 in 1980 — at the peak of the inflationary price surges. To clarify, the Dow was at about 750, as was gold.

But didn’t we say that, relative to rising prices, the Dow actually underperformed dramatically? So if you bought gold in the mid-1970s, not only was your investment skyrocketing, but the stock market — which was flat in nominal dollars — was actually doing very poorly relative to rising prices. Bear in mind that both the Dow and gold were priced in terms of nominal dollars at the time; they essentially “cancel out” — that is to say, relative to rising prices, gold also failed to perform as well as the nominal dollar-price. Still, it did offer an excellent hedge against rising prices, and even outperformed during the period.

What does all this mean? Well, for starters the average Dow-to-gold ratio over the last century has been about 9.5, and we are currently at about 8.5. So you’re probably thinking we’re oversold and due for a correction. In other words, the Dow-to-gold ratio is probably going higher, right? Well that was my first conclusion too, but actually on closer examination it turns out that’s probably not right at all.

For much of the last century the dollar was tied to gold, and while the relationship was never perfect — and the U.S. government betrayed the union many times, in many different ways — there was at least some relationship, which helped pull the ratio down. Eventually, excessive inflationary printing caught up with the government in the 1960s, and it became clear it wouldn’t be able to honor redemptions against the dollar at the price it had fixed. Nixon essentially defaulted on the U.S. promise to redeem dollars for gold by taking the U.S. off the standard in the 1970s — and this, more than anything else, allowed inflationary pressure to drive general prices into the stratosphere. This was the moment the Dow-to-gold ratio approached 1:1. To fight rising prices, Paul Volcker, the Fed Chairman at the time, pushed the Fed’s target interest rate past 20% and barely saved the U.S. economy from collapse.

For most of the next 20 years, gold fell and stock prices rose. Meanwhile, the U.S. government capitalized on the lie it had created and printed more and more money. Who really cared? Everyone was making money in the stock market, and prices remained relatively stable. In fact, every time prices failed to act “correctly,” the Fed simply changed the rate at which it would lend to banks. But the illusion of the monetary policy game couldn’t last forever; people used easy money printed by the government to buy assets they couldn’t afford throughout the economy — especially houses. Finally the pressure was just too much, and everything started unraveling in 2007. But the gold market seemed to understand the game couldn’t last, and around 2000 it started a slow, steady rise.

Relative to everything, the number of dollars in the system in early 2009 is almost incomprehensible. Once de-leveraging reaches its nadir — and it’s coming soon — those dollars are going to hit the economy and drive prices much higher.

What have we learned about stocks in such periods of rising prices? Not only do they fail to perform, but adjusted for inflationary price pressures, they actually under perform. General prices and unemployment will continue to rise. The consumer will continue to be unable to consume. Corporate earnings and dividends will continue to collapse as a result. Stocks are going lower — probably much lower.

And what about the price of gold? It will almost certainly continue to increase — not only because people will flock to its long historical stability and consistency, but also because there are simply so many more dollars (and yen, and rubles, and euros) in the world. Remember, the U.S. isn’t the only country printing innumerable sheets of currency. And in that context, remember also that inflationary price increases have almost nothing to do with increased demand, but rather they are the result of currency devaluation and destruction — through printing.

I just want to share two more charts with you. The first should give you a little perspective — it is a historical chart of gold, in both nominal and real dollars. Notice the real price of gold in 1980 (in 2007 dollars) was $2272 per ounce. If I’m correct about inflation and the fate of the dollar — and I’m confident I am — then we are nowhere near the historical high in gold. But I don’t think we’re merely going to re-test that high — I think we’re going to blow through it as the dollar loses value.

In the 1930s, as corporate earnings and dividends disintegrated, the Dow lost nearly 90% of its value from peak to trough. The U.S. was a creditor nation with a huge manufacturing base. The dollar was tied closely to gold. Since its peak in October 2007, the Dow has lost less than 50% of its value. The U.S. is a debtor nation with a relatively small manufacturing base. I can’t say it enough: we borrow profusely, we manufacture very little, and we consume gluttonously. Nonetheless, the consumer has now lost almost all his purchasing power, and corporate earnings and dividends are going to suffer massively as a result.

In 2007, the Dow peaked at about 14,150. To give you some perspective, an 85% drop in the Dow from peak to trough would put it at about 2100.

I know it’s easy to imagine the Fed has magical powers. I’ve fantasized about such things myself at times of extreme weakness — that maybe the Fed will “somehow” figure out a way to fight and defeat the unprecedented evil specter of inflation it is foisting on its unsuspecting children. Sometimes I do believe that our Lord and Savior Barack Obama will wave his charmed “unicorn horn of change” and all will be well again. Likewise, at times I feel like I could let Uncle Ben Bernanke take me just about anywhere in his helicopter of prosperity. My faith in the reverend John Maynard Keynes runs deep, as I hope, and hope, and hope. I find myself gleefully clicking my heels together and repeating, “the dollar is almighty, and the Stars and Stripes will prevail.” And when I am in this wonderful place, I have confidence that someday soon, we’ll all be buying houses with no money down, and with no jobs. Our driveways and backyards will once again overflow with boats, motorcycles, and sports cars.

Then I think about the 1930s. And suddenly I am wide-awake.

Let me ask you a simple question, and I want you to actually think about it. Do you really think we can’t get to the 1930s again? Do you really think that we’re going to return to the exuberant excess of the past few decades? If so, let me disabuse you of the notion: the United States was in much better shape, economically, going into the Great Depression than it is now. Prosperity is not coming back to the U.S. as we know it. We are in a lot of trouble.

Is a Dow-to-gold ratio of 1:1 so incomprehensible? Again, it has happened before — several times. But I’ll even take it a step further: what about a Dow-to-gold ratio of .5? Or less? I promise you, if the Fed fails to soak up all the dollars it’s putting in the system, that’s exactly where we’re going. And what, you may ask, does the Fed use to “soak up dollars?”

I’ll be glad to tell you that too. When the Fed needs to take dollars out of the system, it sells Treasuries (which means it buys dollars). The problem is, the U.S. debt-load is astronomical. Who, exactly, is going to buy that debt from the Fed? And at what interest rate? Remember, if the Fed is desperately trying to take dollars out of the system, there can be only one reason: it is scared of rising prices caused by inflation. But if the Fed floods the market with Treasuries, it will achieve exactly the opposite effect it’s looking for — it will cause rates to rise, probably dramatically. Do you really think the Chinese and the Japanese are going to buy Treasuries at a 2% yield if the Fed is panicking and trying to buy dollars to stop an inflationary price explosion? If so, you’re delusional. Chinese and Japanese people are smart. They’re not going to fund an inflationary dollar at 2%. Ever.

In the past it might have worked. Of course, in the past, the U.S. money supply was much smaller, and our ability to borrow was much stronger. But those days are gone.

As if I haven’t terrified you enough, the last thing I’m going to leave you with is really scary. It is a link to an excellent article by Mark J. Lundeen, whose insight into this economic catastrophe has been stupefying since long before all of this even started. Embedded in the article is a chart that shows historical dollars-in-circulation, relative to U.S. gold.

With that, I think I’ll let you do the rest of the math. Sleep well.

Disclosures: Paco is long gold.

Copyright 2009, Paco Ahlgren. All Rights Reserved.

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If you have done the math…

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That’ it for now – Good Investing – Jschulmansr

It’s Official- The New Gold Rally Has Begun!

30 Friday Jan 2009

Posted by jschulmansr in Austrian school, Bailout News, banking crisis, banks, bear market, capitalism, central banks, China, Comex, Copper, Currencies, currency, Currency and Currencies, deflation, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, Finance, financial, Forex, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, How To Invest, How To Make Money, India, inflation, Investing, investments, Junior Gold Miners, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, palladium, physical gold, platinum, platinum miners, precious metals, price manipulation, prices, producers, production, Prophecy, resistance, Siliver, silver, silver miners, spot, spot price, stagflation, Stocks, TARP, Today, U.S. Dollar

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As it write this Gold is up $22.50 oz to $929.00! It absolutely smashed thru the $920 resistance! If we hold here $950 -$975 is the next level. Barrick Gold CEO Munk says China to be a big buyer of gold as confidence is lost in the U.S. Dollar. The treasuries bubble is starting to burst and money is pouring into gold!- Good Investing! – jschulmansr

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Source: MineWeb.Com

WORLD ECONOMIC FORUM

Munk forecasts currency, economy fears will send gold to new record highs

Whether it’s the currency effect or a reaction to a feeling of uncertainty, Barrick Gold Chairman Peter Munk says gold is more likely to go up than down.

Author: Barbara Lewis
Posted: Friday , 30 Jan 2009

DAVOS, Switzerland (Reuters) –

Gold is likely to hit new record highs, spurred by serious concern about the U.S. currency and doubt about the state of the world economy, the chairman of Barrick Gold Corp. said on Thursday.

There was even a possibility, although not a probability, central banks, including China’s, might start to switch from dollar holdings to gold, which could cause the metal’s price to treble or more.

From a gold producers’ perspective, one negative is that the cost of bringing on production has remained high, even as other raw materials, including base metals and energy, have slumped.

“Gold is at record levels in every currency except dollars. Even within dollar terms it is within a few percentage points of an all-time high at a time when all the other major commodities are falling,” Peter Munk told Reuters at the World Economic Forum meeting in Davos.

“Whether it’s the currency effect or a reaction to a feeling of uncertainty, gold in my opinion is more likely to go up than down,” the chairman and founder of the world’s largest gold mining company said.

Spot gold was at $902.80/904.80 at 1817 GMT. It hit a record high of $1,030.80 an ounce in March last year.

Munk stressed he was merely weighing the odds.

“It would be stupid to assume commodities prices can only go one way,” he said, adding physical demand for gold jewellery was not high during the economic downturn.

Gold has been one of the best-performing assets of late, rising in value by nearly 17 percent since late October.

Investors have bought heavily into physical bullion in the form of coins and bars and physically-backed assets such as exchange-traded funds as a safe store of value at a time of increased volatility in other asset prices.

Munk said downward pressure on the dollar, partly because of massive U.S. spending to stimulate the economy, would increase gold’s attractions as an investment further.

Gold usually moves in the opposite direction to the dollar, as it is often bought as a hedge against weakness in the U.S. currency.

“My personal feeling is that with the rescue packages calling for trillions, not billions… the value of the (U.S.) currency has to go down,” said Munk.

DUMB TO HEDGE

His company did not hedge its output for now — meaning it does not use derivatives to insure against a fall in price — and relied instead on the price climbing. In the past its successful hedging allowed it to make the acquisitions that helped to make it the world’s biggest gold miner.

“It would be dumb to hedge,” Munk said of the current climate.

His bullishness was underscored by the possibility central banks, including that of major dollar asset-holder China, might start buying gold.

“If they decide to diversify, we assume into gold, then we start to talk about a trebling or quadrupling of the gold price. It could be followed by Russia or Kuwait.

“I don’t think it’s likely, but it’s more likely. I would not have said it two years ago …I’m not a gold bug …but it’s more likely than it was two years ago.”

A strong price climate has meant ongoing investment in bringing on new gold, Munk said.

“In every other mining area, people are cancelling mines.”

But declines in other commodities have yet to have a major impact on cost.

“Marginally yes, but substantially no. For some reason cash costs are tending to continue to increase,” he said, when asked whether investment costs were falling.

“Energy costs have gone down. It does help, but labour costs are consistently increasing.”

The one way to reduce production costs is to invest in efficient new mines, Munk said, citing two major new projects in Nevada and the Dominican Republic and a smaller one in Tanzania.

(Reporting by Barbara Lewis, additional reporting by Jan Harvey in London; editing by Anthony Barker)

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Hedge Fund to Measure Returns in Gold Rather Than Currency – Seeking Alpha

By: Todd Sullivan of Value Plays

This is a pretty stunning move. What is even more alarming is the reasoning given.
From the FT:

A hedge fund has begun offering investors the chance to have their investment denominated in gold, as worries grow over governments debasing their currencies by printing money.

Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than U.S. dollars, sterling or euros.

The move follows a surge in investor demand for small gold (GLD) bars and coins held by individuals and gold-backed exchange-traded funds that are holding a record amount of bullion.

Chris Kuchanny, Osmium chief executive and a former London ABN Amro trader, said he was putting almost all his personal wealth into the new share class: “Investors have voiced concerns that they’re overly exposed to the major fiat [paper] currencies in an environment where the fundamentals of those currencies are clearly deteriorating with governments assuming more debt and having lower revenue and more expenditure.

This shows a stunning lack of confidence in currencies. It also says that the fund is anticipating inflation to rear its ugly head in a scary way. When it does, the value of the currencies will plummet and gold will rise.

What is to watch now is whether or not other funds begin to follow. If this becomes a movement rather than an individual act, the crash in currencies could be expedited in a nasty way. Stay tuned…

Disclosure: No position in gold… yet.

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My Disclosure: Long Gold , Gold Etf’s, Gold Miners/Producers, Long Silver, Silver Miners/Producers, Platinum and Paladium Miners/Producers- jschulmansr

More to follow later today…

Are You Ready For This? – It’s Back and Ready To Rally!

29 Thursday Jan 2009

Posted by jschulmansr in Bailout News, banking crisis, banks, bear market, bull market, capitalism, central banks, China, Comex, commodities, Copper, Currencies, currency, Currency and Currencies, deflation, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, How To Invest, How To Make Money, India, inflation, Investing, investments, Jim Rogers, Jim Sinclair, Latest News, Make Money Investing, Marc Faber, Mark Hulbert, market crash, Markets, mining companies, mining stocks, palladium, Peter Brimelow, physical gold, platinum, platinum miners, precious, precious metals, price, price manipulation, prices, producers, production, protection, run on banks, safety, Saudi Arabia, security, silver, silver miners, spot, spot price, stagflation, Stimulus, Stocks, TARP, Technical Analysis, Today, U.S. Dollar

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Are You Ready For This! You are asking yourself “am I ready for what?””What’s ready to Rally?” Gold my friend is the answer! As I write Gold is consolidating right around the $900 level. If you had listened to me you would be sitting on profits of $50- $100 oz. already! Well don’t worry Gold still has plenty of room to move as you will see in today’s post. – Good Investing! – jschulmansr

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Gold Price Could Double – World Gold Council

Source: World Gold Council

The value of gold could soar due to increased demand following the global financial crisis, it has been suggested.

According to Citigroup, the price of gold could double by the summer, the Daily Mail reports.

“We continue to remain unequivocally bullish on the medium to long-term view on gold and still believe that we can ultimately see levels in excess of $2,000 (?1,398),” the firm told the paper.

Such levels would mean the price of gold would more than double its current value.

The paper notes that since September, the value of the precious metal has already risen by $122.

Citigroup added that price rises will either come via inflation following liquidity injections by governments around the world, or by continuing investment from those who view gold as a safe haven.

In related news, a recent poll conducted by Bloomberg showed that 28 of 31 traders, investors and analysts questioned said now is a good time to purchase gold.
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$850B Stimulus Plan Signals Gold Take-Off – Seking Alpha

By: Peter Cooper of Arabian Money.net

Last night the US passed its much anticipated $850 billion Obama stimulus package, representing another huge monetary expansion. Countries all around the world have been at it, and the volume of money in circulation is increasing at a record level.

Meantime, gold prices have been perky and past $900 earlier this week. Now gold has fallen back a little. The gold chart has completed an almost perfect inverse head-and-shoulders pattern which should mark the reversal of the falling trend that started at $1,050 an ounce last March.

Gold technicals

Aside from the technicals of the gold chart, let us also get back to fundamentals: the supply of gold and silver is pretty much fixed. Money supply is undergoing huge and unprecedented expansion.

At present, governments are printing money like fury and little is happening to their economies because banks, companies and individuals are hoarding cash. But eventually pulling on this string will work, and money will flood into the economy in an uncontrollable way.

It is at this point that gold prices will go ballistic. That should not be more than nine months to a year away based on past precedent.

However, before that golden age occurs there will be increasing speculation about the future of the gold (and silver) price. More and more investors will read articles like this one and be impressed by the argument – which is far sounder than trying to come up with a new bull market for equities, bonds or real estate.

Bond crash

Sometime soon the bond markets of the world are also going to weaken much further, and that will give precious metals another reason to rise in value as an alternative safe haven class.

For investors in precious metals then it is just a matter of holding on and taking advantage of price dips to stock up with bullion and shares, although it is surely arguable that the best buying opportunities are behind us now as the price trend is about to head back up.

Trying to time the market exactly or using borrowed money is not a clever approach in volatile markets, but a diversified precious metals portfolio is going to be a winner over the next two years.

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Gold $2200: What’s in a number? – Seeking Alpha

By: Adrian Ash of Bullion Vault

Gold must hit $2,200 an ounce to match its real peak of Jan. 1980. Or so everyone thinks…

WHAT’S IN A NUMBER…? Ignoring the day-to-day noise, more than a handful of gold dealers and analysts reckon gold will hit $2,200 an ounce before this bull market is done.

Why? Because that’s the peak of 1980 revisited and re-priced in today’s US dollars.

Which sounds simple enough. Too simple by half.

First, betwixt spreadsheet and napkin, there’s often a slip. Several targets you’ll find out here on the net put the old 1980 top nearer $2,000 in today’s money. Another Gold Coin dealer puts the figure way up at $2,400 an ounce.

Maybe they got the jump on this month’s Consumer Price data. Maybe $200 to $400 an ounce just won’t matter when the next big gold top arrives. But maybe, we guess here at BullionVault, an extra 20% gain (or 20% of missed profits) will always feel crucial when you’re looking to buy, sell or hold. Perhaps that’s the problem.

Either way, having crunched (and re-crunched) the numbers just now, even we can’t help but knock out a target…

To match its inflation-adjusted peak of $850 an ounce – as recorded by the London PM Gold Fix of 21st Jan. 1980 – the price of gold should now stand nearer $2,615.

Second, therefore, the lag between current Gold Prices and that old nominal high scarcely looks a good reason to start piling into gold today. “Ask the investor who rushed out to Buy Gold precisely 29 years ago, at $845 an ounce, about gold as an inflation hedge,” as Jon Nadler – senior analyst at Kitco Inc. of Montreal, the Canadian dealers and smelters – said on the 29th anniversary of gold’s infamous peak last week.

“They could sell it for about $845 today…[but] they would need to sell it for something near $2,200 just to break even, when adjusted for inflation.”

This lag, of course, can be turned any-which-way you like. For several big-name Gold Investment gurus, including Jim Rogers and Marc Faber, it mean gold has got plenty of room left to soar, compared at least with the last time investors began swapping paper for metal in a bid to defend their savings and wealth.

But for the much bigger anti-gold-buggery camp – that consensual mob of mainstream analysts, op-ed columnists, news-wire hacks and financial advisors – gold’s inflation-adjusted “big top” just as easily stands as a great reason not to Buy Gold. Ever.

“An investor in gold [buying at the end of 1980] experienced a reduction in purchasing power of 2.4% per annum,” notes Larry Swedroe, a financial services director at BAM Services in Missouri, writing at IndexUniverse.com and recommending Treasury inflation-protected TIPs instead.

“[That was] a cumulative loss of purchasing power of about 55%…Even worse, that does not consider the costs of investing in gold…[and] while gold has provided a slightly positive real return over the very long term, the price movement is far too volatile for gold to act as an effective hedge against inflation.”

Volatility in Gold can’t be denied. Indeed, it’s the only thing we ever promise to users of BullionVault. (They can judge our security, cost-efficiency and convenience for themselves.) Traditionally twice as volatile as the US stock market, the price of gold has become five times as wild since the financial crisis kicked off. But price volatility has also leapt everywhere else, not least in the S&P 500 index – now 8 times wilder from the start of 2008. The Euro/Dollar exchange rate is more than four times as volatile as it was back in Aug. ’07, when the banking meltdown began. Even Treasury bonds have gone crazy, making daily moves in their yield more vicious still than even the Gold Price or forex!

So putting sleepless nights to one side (you may need to ask your pharmacist), the key point at issue remains “long term” inflation.

This chart shows the value of Gold Bullion – measured in terms of purchasing power, as dictated by the official US consumer price index – since the data series begins, back in 1913. (Hat-tip to Fred at the St.Louis Fed; the current CPI calculations and headline rate might bear little resemblance to personal experience of retail inflation, but for long-run data where else can we go?)

Starting at 100, our little index of gold’s real long-term value has then averaged 97.8 over the following 96 years…pretty much right where it began. As you can see, however, that long-term stability includes wild swings and spikes. And whether gold is tied to official government currency (as it was pre-1971) or allowed to float freely on the world’s bullion market, volatility looks the only sure thing.

The starting-point, 1913, just happens to be when the Federal Reserve was first founded. It was given the easy-as-pie challenge of furnishing the United States with an “elastic currency”.

Okay, so it ain’t quite made of rubber just yet. But the Dollar’s own value in gold – by which it used to be backed, pre-1971 – just keeps brickling and bouncing around like it’s being used to play squash.

What the chart above offers, however, is a picture of gold’s real long-run value outside of Dollar-price fluctuations.

“With the right confluence of economic and geopolitical developments we should see gold break through $1,500 and then $2,000 and then possibly still higher round numbers in the next few years,” said Jeffrey Nichols, M.D. of American Precious Metals Advisors, at the 3rd Annual China Gold & Precious Metals Summit in Shanghai last month – “particularly if we get the type of buying frenzy or mania that often occurs late in the price cycles of financial and commodity markets.”

“This is hardly an audacious forecast when looked at relative to the upward march in consumer prices over the past 28 years. After all, the previous high of $875 an ounce in January 1980, when adjusted for inflation since then, is today equivalent to more than $2,200.”

Audacious or not, as Nichols points out, the thing to watch for would be a “buying frenzy” – a true “mania” amongst people now Ready to Buy Gold that sent not only its price but also its purchasing power shooting very much higher.

Because for gold to reach $2,200 an ounce in today’s money (if not $2,615…) would mean something truly remarkable in terms of its real long-run value.

Inflation-adjusted, that peak gold price of 21 Jan. 1980 saw the metal worth more than 5 times its purchasing power of 1913;
In March 2008, just as Bear Stearns collapsed and gold touched a new all-time peak of $1,032 in the spot market, the metal stood at its best level – in terms of US consumer purchasing power – since December 1982;
Touching $2,200 an ounce (without sharply higher inflation undermining that peak), gold would be worth almost 6 times as much as it was before the Federal Reserve was established in real terms of domestic US purchasing power.

“I own some gold,” said Jim Rogers, for instance, in an interview recently, “and if gold goes down I’ll buy some more…and if gold goes up I’ll buy some more.

“Gold during the course of the bull market, which has several more years to go, will go much higher.”

But “much higher” in nominal Dollar terms is not the same as “much higher” in terms of real purchasing power, however. More to the point, that previous peak of $850 an ounce – as recorded at the London PM Gold Fix on 21 Jan. 1980 – lasted hardly two hours.

Defending yourself with gold is one thing, in short. Assuming gold is the perfect inflation hedge is quite another. And taking peak profits in gold – as with any investable asset – is surely impossible for everyone but the single seller to mark that very top price.

That doesn’t diminish gold’s real long-term value to private investors however, as we’ll see in Part II – to follow.

Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Is Gold Really Pausing? – MarketWatch

By: Peter Brimelow of MarketWatch.com

Will Mark Hulbert’s recent column, pointing out that the Hulbert Gold Newsletter Sentiment Index (HGNSI) was over-extended, signal an important top? Or just a ripple? See Hulbert’s Jan. 27 column.

Either way, there will be a group of angry readers. Of the 220 comments about the column, as I write, the furious bulls outnumber the fanatical bears about 3 to 1.

But both sides are pretty riled up. This is only money, people!

Early Monday in New York, gold cleared $915. But Wednesday evening, it was down $30-plus from its high. And the US$ 5×3 point and figure chart kindly supplied by Australia’s The Privateer service has turned down. See chart.

There is a possibility that the action around the weekend was a false breakout.

If it turns out to be a bull trap, GoldMoney’s James Turk will turn out to have been wise in his latest Freemarket Gold & Money Report. Turk accepts the radical thesis that the price of gold is manipulated by an alliance of private and public sector actors.

He writes: “Gold must still contend with the gold cartel and its ongoing efforts to cap the gold price. It may try to ‘circle the wagons’ above $900, which would seem a logical point for them to make another stand now that $850 has been exceeded. If the gold cartel is successful in stopping gold for any length of time, new longs may get discouraged by the lack of progress and take profits. That selling, along with new shorts by the gold cartel, could begin a cycle of selling that gains momentum and drives gold back to its last level of support, which is $850.” See GoldMoney Web site.

Will gold stumble? In favor of the bears, oddly enough, is the section of Bill Murphy’s radical goldbug LeMetropoleCafe Web site that follows India. The Indians are definitely out of the world gold market, it appears. On downswings, their support is usually crucial. See LeMetropoleCafe Web site.

But the radical gold bugs think strange things are happening. Murphy’s site noted Tuesday that the extraordinary premiums being paid in the West for gold items did not go away on this month’s rise. And the Comex gyrations, closely examined, continue to suggest the presence of large, determined buyers.

For perspective on Mark Hulbert’s HGNSI, look at MarketVane’s Bullish Consensus for gold. This surveys futures traders. It peaked at 74% on Monday, and came in tonight at 72%.

Sometimes gold peaks do occur with this reading in the 70s. That happened at the turn of the year, and again last September.

But the normal behavior, especially before a big sell-off, is for the upper 80s at least to be reached. Last February/March, as gold attempted $1,000, the Bullish Consensus spent no less than four weeks in the 90s. See MarketVane Web site.

So the radical gold bugs conclude that gold may pause. But it’s not seen a major blow-off yet.

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Gold headed south for the short term?- MarketWatch

By: Mark Hulbert of MarketWatch.com

ANNANDALE, Va. (MarketWatch) — Gold certainly deserved a rest Wednesday.

After all, it had mounted an impressive rally over the previous two weeks, gaining some $100 per ounce. So we can definitely excuse gold bullion for forfeiting $9 in Wednesday trading.

The more crucial question, however, is whether the decline was merely the pause that refreshes, or the beginning of a more serious drop.

Unfortunately for those hoping gold’s recent rally to continue, the conclusion of contrarian analysis is that the metal’s short-term trend is more likely to be down.

Consider the latest readings of the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold-market exposure among a subset of short-term gold-timing newsletters tracked by the Hulbert Financial Digest. As of Tuesday night, the HGNSI stood at 60.9%.

This is identical to where the HGNSI stood at the end of December, when I last devoted a column to gold sentiment. ( Read my Dec. 29 column.)

Over the two weeks following that column, of course, bullion dropped by around $70 an ounce.

Contrarian concern about gold’s short-term trend isn’t just based on this one data point, however. I have more than 25 years of daily data for the HGNSI, and rigorous econometric tests show that the inverse correlation between HGNSI levels and the gold market’s subsequent short-term direction is statistically significant at the 95% confidence level.

This is why the HGNSI’s current level is so ominous.

To put it in context, consider that this sentiment gauge’s average reading over the last five years has been 32.6%, only slightly more than half where it stands now. Over the last five years, furthermore, the HGNSI has been higher than where it is now just 13% of the time.

This does not mean gold can’t go higher from here. But it does suggest that the odds are against it doing so.

Lest I incur undeserved gold-bug wrath by writing that, let me hasten to add that this bearish conclusion applies to just the next several weeks. Sentiment affects the short-term trend of the market, not the long term.

So my conclusion is entirely consistent with gold being in a major, long-term bull market.

But even if it is, the implication of my contrarian analysis is that gold is not ready, at this very moment, to commence on that march upward.

Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.

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My Note- While feeling that Gold price make take a breather here consolidate and maybe even drop a little, both Mark Hulbert and Peter Brimlow agree; Gold is in a long term Bull Market! Any dips in price should be taken as an opportunity to buy more gold!…

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That’s all for now, hit the subscribe button to keep up with all the latest Gold, Market News and more…Enjoy! – jschulmansr

Today’s Technical Corner – Gold Whats Next?

28 Wednesday Jan 2009

Posted by jschulmansr in agricultural commodities, Bailout News, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, Copper, Currencies, currency, Currency and Currencies, deflation, depression, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, India, inflation, Investing, investments, Jim Sinclair, Junior Gold Miners, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, Moving Averages, oil, palladium, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, TARP, Technical Analysis, U.S. Dollar, Uncategorized

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As I write Gold is currently down $10.80 at $886.90, taking a much needed breather from its recent upward thrust. If Gold can hold and consolidate around this level the next target will be $920 and then $950. Today’s post contains articles on how to trade gold for those who don’t like risk, much tecnical analysis and more… -jschulmansr

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A Guide To Buying Gold for the Risk Averse – Seeking Alpha

By: J Clinton Hill of Hillbent.com

Lately, there has been plenty of talk about gold and a growing consensus that favors bullish fundamentals. Here’s my take on gold based upon the Spyder Gold Trust ETF (GLD) and its most recent wave, i.e. from its 1-15-09 bottom at 78.87 to its 1-26-09 top at 90.19.

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That’s it for today click on one of the subscribe buttons to receive all the latest news for Gold and Precious Metals, and much more!

Good Investing! – Jschulmansr

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Hourly Action In Gold From Trader Dan

Source: Trader Dan Norcini of JRMineset

Gold appears to have run into resistance near the $920 level which is blocking its upward path for now. Since we know that the funds are purely technical traders and have been buying, both adding new longs and for those who were short, getting out by covering, while open interest has been steadily increasing, it is safe to say that the bullion banks are the ones blocking the upward trajectory. Nothing new there and it does not take much observation for those who have been watching gold the last 8 years to know this.

The inability of the mining shares to continue higher yesterday, even in the face of a much higher bullion price, gave some paper longs at the Comex a reason to cash in some profits and emboldened the bears to dig in their heels.

To show you how fickle these markets have become, do you remember when gold was following the equity markets around not all that long ago. They went down – it went down. They went up – it went up. It was all about the famous “risk aversion” or deleveraging trade. Now the exact opposite seems to be happening. The equities go up and gold goes down. Well guess what they have come up with to now explain this turn of events? Yes – risk aversion!

Here’s the latest – equities are going up because supposedly some of the news from the banking sector is not as dire as many have come to expect. The bearish sentiment in the equity markets is misplaced. Gold has been going up because of banking sector fears and currency risk. Ergo – gold should now go down as those fears are overblown because the risk averse psychology has become too excessive. In other words – all’s clear and the water is just lovely so dive on in!

I could not make this stuff up if I tried.

Had enough – how about this one? – Gold has now broken its relation to the Dollar. The fact that the Dollar was being bid up was evidence of a panic into safety. Now that the Dollar is going down it means that the panic is subsiding. Therefore gold should go down as well which means the inverse relationship between gold and the Dollar has been severed.

Again, I am just repeating the latest mantra du jour.

Just wait and see – when gold starts going up as the Dollar starts going down the same guys who came up with the latest explanations will be singing how the historic relationship between gold and the Dollar has been restored once again. No matter what happens – they will have proven to be right! Geniuses all!

It reminds me of the global warming crowd. When droughts were springing up and record highs were being shattered it was called global warming. When record snowfalls suddenly showed up and record lows were being set as people all over the globe freezing their keisters off, it morphed into climate change. No matter which way the temperatures go, that crowd will always be right! Shame on you climate destroyers for not cramming your family into something that more closely resembles a go-kart rather than an automobile on your assorted trips around town. If you had any concern for the planet you would be riding a horse to work. Then again that creature gives off methane gas which is actually being seriously considered as a pollutant and thus liable to be taxed by the idiots in Washington DC, so no matter what you do, you are royally screwed. It’s too bad that there remains no undiscovered country where freedom loving people who believe in honest money and limited government could sail off to and found a nation where the money changers and government control freaks would be banned from entering.

By the way, did you notice that the new President just signed the death sentence for the US automotive industry yesterday by mandating new mileage efficiency standards – all in the name of saving us from a problem that does not exist? Yep – nothing like telling an industry already on life support that their most profitable units, the bigger and safer vehicles, will have to go in favor of smaller, less profitable ones. Don’t touch the unions however whose demands have forced the US auto industry into concentrating their efforts on the more profitable lines (the larger vehicles) in an effort to offset the financial drain imposed upon them by the exorbitant salaries and benefits that they are forced to pay these same unionized workers.

Remember that big move up in Copper yesterday? Remember how the existing home sales number ran all the shorts out and pushed the market right into technical chart resistance threatening an upside breakout? Well, that is history today as it went “KERPLUNK”! To show you how utterly insane these markets have become and the farce that the hedge funds have turned them into, consider this – Copper closed at 1.4720 on Friday. On Monday it rallied sharply blasting upwards closing at 1.5865 reaching a high of 1.6310. Today it collapsed making a low of 1.4545 and closed at 1.4850, down 10 cents a pound. In other words, it went NO WHERE in TWO DAYS but in the process it careened all over the place blowing out upside buy stops before triggering a wave of downside sell stops today. And to think this hedge-fund created madness has become the price discovery mechanism by which commercial producers and end users are somehow supposed to be able to enter into contracts and hedge risk to ensure profitability. I have been watching these futures markets for more than 20 years and I have never seen such idiocy. This is what happens when computers have taken over trading decisions based on nothing but the latest price tick. I know it sounds excessive to some, but I honestly have come to believe that the entire futures industry is very close to being destroyed by these out of control hedge funds. A commercial entity simply cannot use these markets to hedge and without commercials these markets cannot survive since they will serve no useful purpose whatsoever as all that will be left is hedge funds trading their algorithms against the algorithms of other hedge funds with the commercials using forward contracts amongst themselves and bypassing the futures markets altogether.

Back to gold – technically gold still looks very good although it has stalled just below the $920 level. Ideally, it would hold support on any subsequent RE-test of the Downsloping trendline of the wedge formation on the weekly chart which is drawn off the July and October highs. That comes in near the $880 level. I would prefer to see it consolidate above the $880 level but would view an ability to hold above the $870 level as still friendly. Failure at $870 would give the shorts enough impetus to try to shove it back to $850- $840.

Upside resistance remains near $920 while more formidable resistance comes in near the $945-$950 region. That corresponds to both Downsloping trendline resistance drawn off the peak high made back in early 2008 and the July high which also happens to be the highs made back in October last year. Those are the parameters we are working with technically.

On the daily chart, all of the major moving averages, including the 100 day moving average are all now trending solidly upwards. The 10 day is close to making a bullish upside crossover of the 20 day which will give some trend following funds a reason to buy while the RSI remains below the 70 level. So we have room to run to the upside IF, and this is a big IF, the market can push through the bullion bank selling near $920. The inability of the mining shares to continue moving higher does concern me however. In an ideal bullish environment for gold, the shares move higher alongside the bullion price.

It looks to me like the weakness in crude oil today is contributing some downward pressure in gold as many of those fund algorithms use its price action as a factor in their selling or buying of commodities. Weaker crude oil prices give rise to the deflation scenario and that still leads some to sell gold because of misguided notions of how it will perform during periods of general price deflation. Again, gold is primarily a currency – not a commodity, and it will rise when faith in paper currencies falters, all of the arguments of the deflationists notwithstanding. When governments slash interest rates to NOTHING and issue more and more paper IOU’s, the sheer supply guarantees that they will lose value meaning that investors seeking wealth preservation are buying scraps of paper that pay zero return and lose any “value” that they might have once possessed. Gold thrives in such periods as it is solid, substantial and cannot be diluted by conniving Central Bankers. Which would you rather have in your hand during times of financial chaos and upheaval – a promise by a politician or a metal which has stood the test of 6,000 years? If you have any problem making a decision, I suggest you take a good look at the price chart of the British Pound and especially the price of gold in Sterling terms.

The HUI and the XAU were unable to manage strong closes above their former double tops make back in mid-December of last year and early January of this year in yesterday’s session meeting up with selling from the opening bell and never quite being able to shrug that off. Still, their charts look good as they are consolidating right around that former double top. I would like to see them hold above the 10 and 20 day moving averages near the 115 – 116 level in the XAU and 279 – 282 in the HUI.

Bonds finally saw an up day today which is to be expected given the beating that they have taken of late. The downdraft in bonds could be called “parabolic in reverse”. Jim likes to call it a “waterfall”, which is an apt description considering the fact that if one were long while this has occurred, they have indeed taken a bath in their trading accounts or better yet, drowned under a sea of red ink.

The Dollar is generally weaker today although it has bobbed back and forth between a small gain and a small loss. The charts still appear to show a technical failure near the 88 level. It is treading water above the 50 day moving average (barely) while the 100 day lies near the 83.50 level. A breach of that level and it should move back down to retest 80.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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1. Before 2009 is out the next major economic shock will become obvious. There is not one major funded retirement program intact thanks to the manufacturers and distributors of OTC derivatives. The unfunded ones are a total loss. Retirement in the future is totally out of the question. Many now retired will end up in the same situation as those trying to live off fixed income. Both categories are being culled from the human gene pool.

2. By my 68th birthday Obama will recognize his position as a bagged President, knowing then that the economic situation does not have any practical solution.

3. By July 4th, 2009 the rally in the US dollar will have become a simple hope for the lows to hold.

4. My long held targets of $1250 and $1650 for Gold that were once laughed at as outrageously high can now be laughed at for being painfully too low.

5. Only gold and related shares are insurance against the economic cataclysm now taking place.

Everyone is looking for where and when the top in gold will come. Will it be Jim’s $1650 or Alf Field’s $10,000 plus before it comes back down?

To put it nicely, you are all wrong. Gold is going up and STAYING up.

There is no top to look for because like all things people strive for, the top does not exist.

Gold will trade within $200 of a given point as a product of the Master of the Financial Universe, Paul Volcker, taking control when all this is totally out of control. He will instate the revitalized and modernized Federal Reserve Gold Certificate Ratio, not gold convertibility, and not tied to interest rates as an automaticity. Only then can Volcker put in place policy backed by the sitting administration that has a provable history of starting the change from deficit to surplus, his price of saving the world one more time.

The Gold mining business will then be the best business there is and the highest dividend paying monetary utility.

Respectfully yours,
Jim
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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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The Resurgence of Junior Gold Miners – Seeking Alpha

Junior mining stocks were all the rage back in the early stages of the gold bull market. During the time frame of 2002-2006 many junior miners were putting in annual gains of 200%, 300% or more. Some junior miners like Seabridge Gold (SA) produced 3-year returns in excess of 1500%! It seemed like you could close your eyes and randomly point your finger at a list of junior gold miners, buy the stock and sell a few weeks later for a gain of 30% or more. No feasibility study, no permits, no management experience or path to production… no problem!

But volatile stocks are volatile in both directions and when the gold market corrected, junior miners lost all of those gains and then some. Amateur investors that were patting themselves on the back and recommending investments to their buddies based on their recent success were caught off-guard by the severity of the decline in the junior mining sector and suddenly found that they gave back most or all of their gains. To be sure, some booked profits and got out before the ship sank, but most were caught unsuspecting and unwilling to believe the party could be over so quickly. Many junior miners lost 80% or more of their market cap during the past year or two.

Precious metals investors have a sour taste in their mouth in regards to junior miners and have largely dismissed the entire sector as too risky. For many investors, junior miners have been removed from their portfolios, watch lists and consideration set for future investments. Newsletter writers and analysts that couldn’t contain their excitement over the next “5-bagger” rarely mention a word about juniors these days. While much of this condemnation is warranted, I think we should be careful not to throw the baby out with the bath water.

While I will acknowledge that 75% or more of junior mining companies are not good investments and many will go out of business with credit markets contracting, there are still quite a few impressive juniors that deserve a second look now that the dust has settled. Mine production is decreasing and the larger miners will need to acquire junior miners with quality properties in order to add to their pipeline and keep their production numbers growing. After a massive sell-off that brought the entire sector crashing down, some of the most promising juniors have finished a bottoming pattern, consolidated and have already began moving up very impressively. Cash-strapped investors and weak hands have been shaken free of their junior mining shares as the focus has shifted to more “safe” and liquid investments. Has this produced an opportunity for savvy precious metals investors to pick up quality mining companies at undervalued prices? Here are my main criteria for selecting which junior mining companies are worth my investment dollars.

Already producing or moving toward production in the next 1-2 years
Quality properties in politically-stable areas with necessary road access
Proven and probable resources that justify a higher market cap
Seasoned management that has a track record of bringing projects to production
Healthy balance sheet with cash on hand and/or the ability to raise capital easily

Many of the companies that meet most or all of the criteria above have already bottomed and are quietly posting exceptional gains that outpace those of the major producers. Even with today’s decline in gold equities, many of my favorite juniors are up 100% or more since their respective Q4 2008 lows. A few of these companies were recommended in the premium subscription service and have been masked out of respect to paying subscribers. All of the gains listed below were produced in just 1-3 months and illustrate the explosion in junior miners that most analysts and newsletter writers seem to be missing.

click to enlarge

As the entire gold and silver sector has done well over the time period, I have included the PHLX Gold and Silver Index (XAU) index at the bottom for comparison sake. While the XAU is up 85%, the average gain for the junior mining companies that we track over the same time period is 171% or double the gain of XAU. Junior miners are not only joining in this latest rally, they are leading the rally and gaining at twice the pace of the major gold mining companies.

Those that are comfortable with a higher risk/reward proposition might want to take a second look at junior mining companies during 2009. If the trend continues or accelerates as investors warm back up to juniors, we could see the return of another explosive few years for junior mining companies as gold pushes above $1,000 on its way towards its inflation-adjusted high of $2,300.

Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Now From One of the Masters’ Himself Jim Sinclair

Jim’s Outlook On 2009

First, to keep things in proper perspective, GLD has already appreciated 27% since Nov 12, 2008. Also, let us not forget that central banks have a perverted sense of humor and plenty of “funny money” and other diversionary tricks up their sleeves to defer the inevitable arrival of inflation. With this as our background, I will jump right into my strategic analysis for trading or investing in gold.

GLD hit resistance at 90.19, has retreated and appears headed to test support at 86.50 with the possibility of also filling a minor gap at the 85 level.

If support holds, the natural inclination is to buy (entry at 86.75 with a stop loss at 84.12 for -3% maximum loss). Assuming one is playing this trade for an exit at its most recent resistance, i.e. at 90.19, the risk to reward ratio is only at 1.33. In a fear-driven market environment, I am strongly inclined to pass on these odds (even with beer goggles).

Ideally, a trade with a minimum risk to reward ratio at 3 or 4 is much more seductive, even in interesting times like these. However, to find the ideal opportunity, one needs to be patient and think counter-intuitive to the buy low and sell high paradigm. Hypothetically (I only say “hypothetically” because I have been long GLD at 74.85 since Oct 29, 2008), I would wait for GLD to break above its resistance at 90.19 and buy at $90.50. This would confirm that there is additional demand and fresh support at this level.

Here is where the trade can get a little tricky. There is some resistance at the 92 level and one should probably anticipate a minor pullback and retest of the newly established level of support at the 90 area. However, if support is violated, I am willing to accept a stop loss at 89 for a -1.5% maximum loss of capital. In the majority of instances when support fails the “retest”, this signals a false breakout.

Now let’s get to the good part. If the breakout is legitimate, then GLD should run to the 97.50 area, which is its next level of major resistance and also where I would definitely be inclined to book some short-term profits or at least hedge my position with long puts and/or short calls. Under this scenario, this trade presents a much more attractive risk to reward ratio at 5.24.

Gold certainly has both technical and fundamental positives going for it. The short, intermediate, and long term are all trending upward while the monetary policies of global central banks reflect a desperate willingness to accept future inflation to avert the immediate threat of deflation. Another tail wind, also aiding gold’s bullish movement, is the recent weakness and apparent correction in the U.S. Dollar Index.

In summary, the example of the above trading strategy is an opinion on how to play gold for those who are risk averse and can ill afford to lose more capital. Otherwise, for those turned on by a fundamentally bullish or bearish bias towards the precious metal, assume the position (pun intended) and enjoy the ride along with all its ups and downs. Yeah Baby!!!

Disclosures: Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports

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Is this the Move? Gold is Breaking Out!

26 Monday Jan 2009

Posted by jschulmansr in agricultural commodities, banking crisis, banks, bear market, bible, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, Copper, Currencies, currency, Currency and Currencies, deflation, Dennis Gartman, depression, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, gold miners, hard assets, How To Invest, How To Make Money, id theft, India, inflation, Investing, investments, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, natural gas, oil, palladium, physical gold, platinum, platinum miners, precious, precious metals, price, price manipulation, prices, producers, production, silver, silver miners, small caps, spot, spot price, stagflation, Stimilus, Stimulus, Stocks, TARP, Technical Analysis, timber, Today, U.S. Dollar, Uncategorized, uranium, volatility

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As I write Gold currently is up another $9.30 oz today! Even more importantly it is well above the psychologically important price level of $900 oz. A new high will confirm the breakout and BANG! we’re off to the races. Todays past has some good articles detailing why could could be breaking out here. Enjoy and Good Investing!- jschulmansr

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Could There Be a Real Breakout In Gold?— Seeking Alpha

By: Trader Mark of Fund My Mutual Fund

After a series of head fakes much of the past half year, the most watched move in the market might finally be “real” this time. With all the world’s printing presses going on overdrive, and currencies being mocked – gold “should” have been rocketing. Many theories persist on why it hasn’t, but really it does not matter. The price action is all that matters and this type of movement will get the technicians very interested.

Things to like
1) a series of higher lows
2) the trendline of lower highs has been penetrated

Things to see for confirmation
1) any pullback is bought
2) price prints over October 2008’s highs, signaling the end of “lower highs”

When last we looked about 6 weeks ago [Dec 11: Dollar v Gold – Can we Trust this Change?] , it was just another headfake – this formation on the chart does look more promising.

These are 2 names; one in gold and one in silver we’ve had our eyes on.

Or just play it simple and go double long gold

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Happy Days For Gold? —Seeking Alpha

By: Jeff Pierce of Zen Trader

Gold was in the spotlight on Friday in a big way, nearly moving $39. Is this a hat tip to the big move that many goldbugs have been anticipating? Is all the money printing that the Federal Reserve finally catching up with the US Dollar? Should you have bought gold on Friday because it’s a straight line up from here? Let me preface my answers by saying that I’m a short term trader that will sometimes allow a trade to turn into a longer term trade but that doesn’t happen very often. I’m currently flat precious metals but will be looking for a good risk/reward, but for anybody reading this know that this analysis is from a momentum based perspective.

So the answers to the previous questions I believe are yes, yes, and no.

I’m a big fan of gold for a number of reasons (fundamental, technical, historical) but I know from experience that it trades much different from a momentum point of view. It tends to sell off once it goes outside it’s upper bollinger band as seen by the arrows above. Just when it looks like gold is going to bust out and move to blue skies it seems to run out of buyers and reverses. As you can see GLD and many individual gold miners moved outside this indicator on Friday and I expect a small pullback before it begins a new wave up.

Judging by the negative divergence on the RSI you can easily see that momentum is waning. As the stock has been making higher highs, the RSI has not been confirming the move. We could possibly move up to the 92 level before profit taking hits, but I just don’t see a good entry at this point if you’re not already invested in these stocks. It would be more prudent to wait for a slight low volume pullback before entering. The only problem with this way of thinking is there could possibly be many with this outlook and that could actually propel gold to higher levels, but I’m willing to risk that because if it does move up even more, then that will confirm the strength and I’ll buy even more on the eventual dip.

If you are long from lower levels I would consider taking some profits off the table now to prevent yourself from giving up any of your gains.

“I made all my money selling to soon.” ~ JP Morgan

I like silver’s chart a tad better from a technical aspect as the base that it’s been building since last September seems a little more stable. The RSI trendline has been steadily moving higher as the price has been trending higher which is very bullish. I think we’re a tad overbought here and will be looking to get long stocks such as PAAS, SLW, and SSRI when we pullback or move sideways for a week or two.

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Now- Some Commentary by Dennis Gartman

Dennis Gartman on Gold, Oil, Government and the Economy- Seeking Alpha

Source: The Gold Report

With a real roller-coaster year behind us, how would you characterize your macro overview of major economic trends for 2009?

Dennis Gartman: It’s abundantly clear that we have been in recession; we’re in a recession; and we’re likely to remain in a recession through the greatest portion of 2009. The monetary authorities around the world have done all the things they’re supposed to do, which is during a period of economic weakness throw liquidity in the system as abundantly, as swiftly, as manifestly as possible and expect the liquidity eventually to wend its way through the economy and strengthen economic circumstances. That may be sometime late in 2009. In the meantime, we’ll see continued bad economic data and continued increases in unemployment. It’s going to seem like things are really, really, really bad.

But let’s remember that things are always their worst at the bottom. By definition, recessions begin at the peak of economic activity when all economic data looks its best. So while things will start to look very bad through the rest of 2009, I bet that by late this year and early 2010 we will start to see economic strength coming at us because of the liquidity injections going on everywhere.

TGR: What will be the first signs that we’ve reached the bottom in terms of the recession and are starting to turn around?

DG: The signs of a turnaround will be that everybody believes that there are no signs of a turnaround. We’ll see Newsweek writing a series of cover stories talking about the end of Western civilization. The Financial Times of London headlines will read, “The Recession Seems Endless” and “Depression Is Upon Us.” Every day’s Wall Street Journal articles will be just manifestly bleak in nature. That’s what the signs will be.

And then all of a sudden, things shall begin to turn around. But the signs are always their worst at the bottom. That’s how things function.

TGR: So the popular press is in essence on a delay mode.

DG: Oh, it always is.

TGR: By three months, by six months, by a year?

DG: It’s probably a little less slow to react than it used to be, but let’s say three months.

TGR: So you like the fact that the monetary authorities have put liquidity into the system?

DG: Absolutely.

TGR: And it sounds as if you think it just takes time to work through the system.

DG: Always has; always will. That’s how these things go about. You have recessions because you had an economic advance where, in Greenspan’s terms, “irrational exuberance took over.” You have to dash that irrational exuberance and make it into irrational depression. Irrational, manifestly bleak, black philosophies have to make their way to the public. That’s just how these things happen; it’s happened time and time again.

The recession that I recall the most clearly is that of ’72-’74. We have to remember that unemployment was high up in double digits. We saw plenty of articles in the press about the new depression. If you go back and read articles from July through September of 1974, you will be convinced that we will never have an economic rebound in our lives again. Well, clearly, that’s just not the case.

TGR: What about the bearish people who say we’ve never seen worldwide conditions like this and that we’re in the “new era”?

DG: We probably haven’t seen the world going into recession at one time such as we are now. But I think that’s simply indicative of the fact that today’s communications are so much better. People in the United States or Canada or Europe really never would have known much about a recession in India 20 years ago, because the news media would not have covered it. Nothing told you about economic circumstances abroad. Now, with the Internet, information comes at you absolutely one-on-one.

All correlations have gone to one in this present environment. When stocks go down in the United States, they go down in India. When they go down in India, they go down in Vietnam. When they go down in Vietnam, they go down in Australia. That wasn’t the case 20 years ago; you didn’t have the small world united through communications that we have now. And now the correlations of emerging markets and large markets have all come together.

TGR: If that’s true, and worldwide financial markets are all tied together, could any given country “emerge” as a growth country while the rest remain in recession?

DG: Oh, it’s possible, but I don’t think we’ll call them “emerging markets” anymore. You’ll just find that one country pursued better economic policies, probably by cutting taxes or increasing government spending or doing away with some onerous legal circumstance that might have previously inhibited economic activity. The Chinese are doing any number of good things at this point, and that country may just have been more enlightened and it may come out of the recession faster than the others do. But now they won’t do it on their own, and anybody who does do it will be watched and understood much more swiftly than in the past. For example, did you ever know what was going on in Iceland 10 years ago? Of course not; but now you do.

TGR: Right. The only emerging markets we heard about were China and India. No one ever discussed South America.

DG: And now they’ve emerged. But now we understand. We hear news from Venezuela every day. Now we hear news from Sri Lanka every day if we want it; we can get it very easily. We couldn’t do that 10 years ago; 20 years ago clearly we couldn’t. That’s been the big change. Information travels so much more rapidly. That’s why all the correlations have gone to one. We are now one large economic machine that maybe one of the component parts does a little bit better, but it won’t shock anybody, and there won’t be anything “emerging.”

TGR: Back to the bear people. You referenced the ’72-’74 economy, but this time, many are pointing to the debt situation that the U.S. and probably a bunch of the world economies are in and the fact that we’re committing to billions—and in the U.S., trillions—of dollars more. Won’t that influx of new money have some kind of significant bear impact going forward?

DG: No, it will have a bullish impact. Unless all the rules of economics have been rescinded, money pushed into a system will push economic activity higher.

TGR: But it will also push inflation higher.

DG: Oh, that’s very likely to happen. The question is whether it will be inflation of 1%, 2%, 5%, or will it be a Zimbabwean-like inflation? The latter isn’t going to happen, and 1% isn’t likely going to happen. But 2% to 5% inflation? Yes, that’s likely to happen several years down the line.

TGR: Gold bugs are saying, “Buy gold now.” What would be your advice under these circumstances?

DG: I happen to be modestly bullish on the gold market, but not because of inflationary concerns. It’s more that I think gold has quietly moved up the ladder of reservable assets, a reservable asset being one that central banks are willing to keep on their balance sheets, all things being equal. Dollars are still the world’s dominant reservable asset. The Euro is next and gold is probably the third.

The Fed has thrown off a lot of other assets and taken on securities, debt instruments, mortgages and the like, but I think they’re doing exactly the right thing. Some central banks with a lot of U.S. government securities on the balance sheet may decide that going forward, they may buy more gold rather than more U.S. government securities if they’re running an imbalance of trade surplus. For instance, if I’m the Bank of China and I hold a minuscule sum of gold, maybe I should own a slightly larger minuscule sum.

TGR: That’s really diversifying your monetary assets.

DG: I think that’s all that will drive the gold prices quietly higher. I am not a gold bug; I don’t think the world’s coming to an end. I think the history of man is to progress. And yes, we have relatively large amounts of debt, but you can go back to the recession of 1974; you can go back to 1980-81; you can go back to the recession of 1907, and you will see the same arguments—that the world is too debt-laden. And the same arguments, the same language, the same verbiage was always written in exactly the same circumstances. Guess what? We moved on. This time might be different, but I’ll bet that it won’t be.

TGR: What would your recommendation for investors to do in gold? If they want to do any type of holding assets in monetary value, should they be looking at holding physical gold or buying ETFs or buying into the equity?

DG: For the past several years, I’ve told people that if they’re going to make the implied bet on gold, bet on gold. The gold bugs tell you that you have to own bullion. I say, no, you should really own the GLD, the ETF. It trades tick-for-tick with gold. If some truly untoward chaotic circumstance ran through the world’s banking system I guess maybe GLD and bullion would diverge at some point, but we’d have other problems long before that would occur. So if you’re going to make the implied bet on gold, bet on gold. Do the GLD.

TGR: But not physical gold?

DG: I do own some physical gold. But do I own a lot of it? No. And quite honestly, I hope I lose money on the physical gold I have. It’s an insurance policy. Nothing more than that.

TGR:: Are you looking at physical gold as the insurance policy or any investment in gold as an insurance policy?

DG: There’s the old saying, “Those aren’t eatin’ sardines; them is trading sardines.” Some gold I consider to be tradable, and that’s ETF-type stuff, and I have a small amount in the lockbox in the form of gold coins. That’s my insurance policy.

TGR: That would be what the typical investment broker might advise, 5% to 10% in gold.

DG: That’s it. Exactly, that’s it. Don’t get overwhelmed by it.

TGR: How about mining stocks?

DG: If you’re going to bet on gold, there’s nothing worse than being bullish on gold and owning some mine—especially in some junior fly-by-night—and walking in one morning and finding out that the mine you thought you had got flooded or all of your workers were unionized and walked off or management was somewhat derelict. You may have been right on the direction of gold, but your stock went down. So I’ve told people to stay away from the juniors; that’s a terrible bet on gold. If you’re going to bet on gold, bet on gold.

Maybe you’ll want to start punting on Barrick Gold Corporation (NYSE: ABX) or Newmont Mining Corp. (NYSE: NEM) or the real large names, rather than the juniors. There’s just too much risk in the juniors. Yes, everybody says, “I bought this junior at a nickel and now it’s at 15 cents.” Well, jolly for you, but you probably bought 15 others at a nickel, and they’re all bankrupt. If you’re going to bet on gold, bet on gold.

TGR: So you’re saying with that advice that if you want to bet on gold equity, bet on blue-chip gold equity stocks that have just been hammered down through the market.

DG: That’s correct, Agnico-Eagle Mines (TSX: AEM), ASA Ltd. (NYSE: ASA), the Newmonts, the Barricks, that sort of thing.

TGR: If we take that logic and look across the broad array of sectors, would you also recommend looking at other blue chips that have just been battered? Or do you think that some sectors will recover faster than others? Such as the financial sector, the energy sector, the housing sector, the precious metals sector?

DG: I’m really quite bullish on infrastructure—the movers and the makers of the things that if you drop them on your foot, it will hurt. I think I want to own steel and copper and railroads and tractors because I think we’re going to be building roads and bridges. That’s probably one of the things that probably will bring us out of the economic morass. Along those lines, I wouldn’t mind owning a little bit of gold at the same time.

TGR: Unlike gold that you can buy and own, if you look at steel and copper, are there specific companies and equities that are appealing to you?

DG: Again, as in gold, if I am going to buy gold equities, I’m going to buy the biggest names. If I’m going to buy steel, I’m going to buy the biggest names. U.S. Steel comes to mind. That’s the easiest; that’s the best; that’s where liquidity lives. It has been bashed down from the highs made last July; it’s down—what?—75% from its high. Recently it stopped going down and is in fact starting to go up now on bad news. So if you’re going to buy steel, buy the most obvious ones—U.S. Steel or buy Newcorp.

TGR: You talked about the energy market being weak in one of your recent newsletters. Do you see this weakness continuing or do you see a turnaround happening in ’09?

DG: The one thing that we can rest assured in the rest of the world is that OPEC chiefs cheat on each other—they always have and they always will. So when OPEC says that it’s cut production, that’s a lovely thing. No, they haven’t, and they don’t. Because the problem OPEC has is they’ve all raised their standards of living and the expectations of their people, and they all have cash flow requirements. You have to sell three times as much $50 crude oils as you sold $150 crude oil to meet the demands of your populace that you have increased. So the lovely thing from a North American perspective is that Chavez finds himself in a very uncomfortable position and needs to produce a lot more crude oil to keep his public happy. It’s rather comical, isn’t it, that Chavez was giving crude oil away to the Kennedy family to be distributed to people in the Northeastern United States until two weeks ago when he had to stop. He had to stop because he needs the crude oil on his own to sell, not to give away, to meet cash flow demands.

Iran is in exactly the same position. Isn’t it lovely to see that Putin, who was really feeling his military oats six months ago with $150 oil, has to pick fights with Ukraine and smaller countries now with crude at $45 a barrel? Where is crude going to go? I wouldn’t be surprised if we make new lows.

TGR: Will there be new lows for ’09? Are you buying into this whole peak oil argument that production eventually will be unable to meet demand?

DG: Do I believe that we’re going to run out of crude oil in the next 100 years? Not on your life. Sometime in the next 10,000 years we probably will run out of crude oil. In that instance, I am a peak oil believer. It’s not going to happen soon though. I remember they told me when I was in undergraduate school back in the late ’60s that we would be out of crude oil by 1984.

TGR: Do you mean out of oil? Or at a point where demand exceeds production?

DG: We would be out! Gone, done! There would be no more. Isn’t it interesting? We’ve pumped crude oil for 28 more years. This is an interesting statistic: We have either seven or eight times more proven reserves now than we had in 1969. And I think we have used a bit of crude oil between now and 1969.

TGR: Just a wee bit.

DG: A wee bit, and yet we have seven or eight times more proven reserves. Every year we have more proven reserves. So, yes, I’m a peak oil believer. Sometime in the next 10,000 years we will run out of crude.

TGR: With Obama now in office and talking about getting off our reliance on foreign oil, what’s your view of the future on all the alternative energies that are being so pushed by many people in the U.S. government?

DG: I think it’s wonderful job-creation programs, none of which will prove to be of much merit at all. All of the Birkenstock-wearing greens will feel very good about having their rooftops covered by solar panels, but is that going to resolve any energy problems we have? No. No. Nuclear power will do that. Maybe using the oceans will do that, but wind power, probably not. Solar power, probably not. It makes everybody feel good, but are we going to power our cars in the next 40 years with solar power? I doubt it. Do I expect some sort of material technological breakthrough in the next 100 years that will change what we use as energy? Oh, absolutely. Do I have any idea what it will be? Of course not.

TGR: If the price of oil if it remains low, is there a role for nuclear in the next 50 years?

DG: Oh, absolutely.

TGR: What will drive that?

DG: It’s absurd that we don’t use nuclear energy. Even the French derive 80% of their electricity from nuclear energy, cleanly, efficiently, without any problems whatsoever. Why we don’t do the same in the United States other than the left and the eco-radicals keeping us from doing it is really quite beyond me.

TGR: So, given that we still have eco-radicals and a big push toward alternative energies, do you see anything happening in the U.S. in nuclear in the near future?

DG: Yes, actually. It’s interesting. There are a lot of new nuclear facilities on the drawing boards, and they’re probably going to be approved. If there’s going to be one surprise by the Obama Administration, it will be that you don’t get nuclear energy advances under a right-wing government; you always get them under a left-wing government. Obama will be smart enough to understand that that’s the only way—that’s the best and cleanest methodology to use. And the left won’t argue with a fellow leftist pushing for nuclear energy. Only Nixon could go to China; only Obama can push nuclear energy.

TGR: And you think that he will?

DG: Oh, yeah, he’s smart enough to understand that.

TGR: Going back to your investment strategy, which big blue chip players in oil and nuclear would you point out as good investments?

DG: In oil, I’d want to take a look at companies such as ConocoPhillips (NYSE: COP), which dropped 70% from its highs. How can you go wrong with the Conocos and the Marathons and the large oil companies whose price-to-earnings multiples are down to at single digits and their dividend streams are 5%, 6%, and 7%? Why would you not want to own those? That’s the best investment.

And at the same time, the volatility indices on the stock market are so high that, gee, you can buy Conoco, get the dividend, and sell out of the money calls at very high premiums and ramp your dividend yield up. It’s like a gift; it’s like manna.

TGR: Well, what about in terms of the nuclear sector and uranium?

DG: I really don’t understand uranium. I don’t know where to go, and I don’t how to buy it yet. So I’ll just say there’s a future for it, but I don’t know what to do with it.

TGR: What other sectors should be looking at for 2009?

DG: Banks, banks.

TGR: They’re making a comeback. Do you think there will be more consolidations?

DG: There will be more consolidations; there has to be. But look at the yield curve—what a year to be a bank! The overnight Fed funds rate, the rate banks are going to pay depositors for their demand deposits or checking accounts is zero. And you’re going to be able to lend that out to hungry borrowers at 7%, 8%, 9%, 10% and 12%. The next three years will be the greatest three years banks have ever seen. Banks will just make money hand over bloody fist in the next three years.

TGR: Are you talking about the big boys?

DG: No, I’m talking about the regionals. The big boys have problems in toxic assets. I am not even sure there is a Peoples Bank & Trust in Rocky Mount, North Carolina, but a bank like that—or the First National Bank of Keokuk, Iowa or the First National, or the Peoples Bank & Trust of Park City, Utah—those are the banks that are going to make lots of money.

TGR: Do you see an explosion in regional banks? Will move of them come into the marketplace?

DG: I think we’ve probably got all we need. It’s just that they’re very cheap.

TGR: What will the role of the international banks be?

DG: Mopping up the disasters that they’ve created for themselves for the past decade, trying to survive, being envious of the decent regional banks that are going to be earning enormous yields on this positively sloped yield curve and wishing they were they.

TGR: Do you see a role long term for international banks?

DG: Oh, sure, of course. How could there not be? It’s a smaller world; it’s an international world; it’s a global world. International banks will be back in full force a decade from now. They’ve got some wound-licking to do, and they’ll do it.

TGR: In addition to regional banks as being a great play to look at for ’09, ’10, any other interesting plays to bring up?

DG: You want to own food and grains again.

TGR: Are you talking about grains or food producers like Nabisco?

DG: No, I think you want to own grains. If you’re going to make a speculation, I think you want to own on the grain markets again.

TGR: Grain for human consumption or grain for livestock consumption?

DG: Yes and yes.

TGR: Are you looking at buying that on the commodities market?

DG: You can actually buy that on ETFs now. The wonderful world of ETFs is just extraordinary. You can actually buy a grain ETF now. DBA (DB Agriculture Fund) is one; JJG (iPath Grains) is another. Those are basically long positions in the grain market. Wonderful things to use.

TGR: You like ETFs; but the naysayers will say that ETFs could be encumbered and there’s actually no guarantee that they hold any assets.

DG: That’s true; that’s correct.

TGR: But you’re comfortable that people should go into an ETF for grains?

DG: I didn’t say that. What I said is if you wish to trade in grain, there are ETFs that will do that. Do I know for sure that they will all perform perfectly and that if the world were to come to a chaotic banking circumstance that there wouldn’t be problems? I don’t know that. Does that bother me? No. It doesn’t bother me even slightly.

Should you worry about [not trading] an ETF just because there might be some problem under an untoward economic environment? No, it’s illogical. And shame on those people who say those sorts of things or who tell you not to use them because they ETF may not function properly if there is some total breakdown in the banking system. Well, if that happens, we have other problems.

TGR: And what’s your projection for the overall investment market? We’ve been hearing speculation that it will rise through April, bottom out even deeper than it is today, and then a slow climb in 2010.

DG: Gee, I have no idea. I just think that stock prices will be higher six months from now than they are now, much higher 12 months than they will be six months from now, and higher still in 24 months than they will be 12 months from now. But where will they be in April? Golly, I don’t know. I think the worst is far behind us and better circumstances lie ahead. And that’s the first time in a loooonnnng while that I’ve said that.

TGR: Yeah, now if the media will just catch up with you, we can enjoy watching it again.

DG: It won’t. Watch the news; it will just get bleaker and bleaker as the year goes on. And watch the unemployment rate; it’s going to be a lot higher.

TGR: Other than Barack Obama saying we’re going to start building infrastructure, do you anticipate any dramatic changes in the U.S.? Right now we’re a services country, and we need to move back to being a manufacturing country.

DG: We’ll never move back to being a manufacturing country. Won’t happen. Here’s an interesting bit of data. Do you know what year that we had the absolute high number—not just as a percentage of population—but the absolute high number of manufacturing jobs was in the United States?

TGR: Somewhere around the World War II era.

DG: Very good, 1943. We have lost manufacturing jobs since 1943. I think that’s a fairly well-established trend.

TGR: Is there a future for the services sector, though? That’s the key.

DG: It will be larger. And so what? It’s like saying we need more farmers. No. We need fewer farmers. We have one-hundredth as many farmers as we had at the turn of the 20th century. We now 500 times more grain? Seems to me every time we lose a small farmer, we get better. So, we need fewer farmers. And we need fewer manufacturing jobs.

TGR: But doesn’t that put the onus on the United States as the economic world leader? Considering the fact that, as you mentioned, information now is instantly available everywhere, just in terms of worldwide confidence; it seems like every time we hiccup, the planet hears it?

DG: There is probably some truth to that fact. But it is probably not us that will lead; it’s probably Australia or New Zealand or the Baltic States or some smaller country that actually changes policies and frees up markets and cuts taxes, and all of a sudden their economy starts to turn around. Then people elsewhere will say, “Oh, look! That’s the right thing to do. Let’s us go do that.”

TGR: Really? Economic recovery worldwide will not come from the United States?

DG: Well, if we don’t recover, the rest of the world won’t, but we won’t be the first. What I am saying is that some smaller country will do the right things faster than we do.

TGR: Isn’t what Australia does irrelevant to what the U.S. needs to do?

DG: No, it’s dramatically relevant. If Australia starts to do things properly—if Australia were to suddenly come out and slash taxes and go to a flat tax and cut paperwork by 50% and it’s economy starts to turn higher, wouldn’t that be a good incentive for us to do the same thing?

TGR: But that implies that every country should use the same economic strategy; that we’re all basically at the same state in our economic development. That what will work for Zimbabwe or China will work for the U.S.

DG: I think anywhere in the world that you have smaller government, lesser taxes—every time you do that, that economy, no matter where it is, does better. It does better. And anywhere you put higher taxes and more government, that economy usually does worse. It does; it just does.

TGR: You’re looking at it from a macro point of view.

DG: I’m looking at it just from an economic point of view, whether macro or micro. Look at Ireland, for example. Why was Ireland for many years the “Celtic Tiger” of Europe? Their tax regime was lower than the rest of Continental Europe. The Germans and the French, who are statists, who are collectivists, instead of emulating the Irish, kept trying to drag Ireland down to their level. Now, that was stupid, wasn’t it? That didn’t work.

My favorite example is New Zealand back in the 1980s. Every year from the 1970s through the 1980s, New Zealand ran a budget deficit and a trade deficit. Every year the IMF said, “You must raise your taxes and cut the value of your currency to try to balance your budget and run a trade surplus.” So New Zealand would do that, and every year the deficit got worse and their trade imbalance grew larger. They did this for five or six years and it got worse every time they did it—every time they followed the IMF tactic of raising taxes and cutting the value of the currency.

Finally New Zealand Treasury Secretary Graham Scott (Secretary from 1986–93) told the IMF, “Don’t ever come back here. Everything you’ve told us to do has proven to be utterly worthless. We’re going the other way. We’re slashing taxes.” From I think a 75% marginal tax rate, over the course of five years, they cut it to like 18%. And every year they took in more money—more money—every time they cut taxes they took in more money. And when they strengthened their currency, their exports picked up; as their currency got stronger, they exported more stuff. Isn’t it fascinating?

TGR: That’s the paradox.

DG: It got to be so interesting—it wasn’t Gordon Campbell—I’m trying to remember; I just went blank for his name. But he passed the baton on to a woman by the name of Ruth Richardson, who was a little more leftwing than her predecessor—the tax rate was down to a flat 18%. They asked her if she was going to cut it again, and she said, “You know, I don’t think I can cut it any more; I can’t spend the revenue I am taking in now.” It’s a classic line. So, what does she do? They actually started raising the tax rates again, and what happened? Tax revenues fell.

But New Zealand had taught a lot of people that cutting taxes and strengthening your currency is the best thing you can do. And as they were cutting taxes, they kept cutting prohibitions and regulations; they kept chopping them back. They were the real precursors of the Free Market Movement that developed in the early ’90s and the early ’00s.

TGR: Let’s hope the United States learns from that. Obama announced his tax cuts; we’ll see what comes of that.

DG: He said entitlements are even on the table. Can you imagine a Republican ever making that statement? They would boo him. But here’s a leftist who puts it on the table. He can say that.

Irreverent, outspoken, entertaining, sardonic and—in his own words, a “glib S-O-B,” Dennis Gartman has been producing The Gartman Letter for more than 20 years. His daily commentary on global capital markets as well as short- and long-term perspectives on political, economic and technical circumstances goes to leading banks, brokerage firms, hedge funds, mutual funds, energy companies and grain traders around the world.

A 1972 graduate of the University of Akron (Ohio), he undertook graduate studies at North Carolina State University in Raleigh (where he remains involved as a member of the Investment Committee.

Before devoting himself full-time to The Gartman Letter, Dennis analyzed cotton supply and demand in the U.S. textile industry as an economist for Cotton, Inc.; traded foreign exchange and money market instruments at North Carolina National Bank, went to Chicago to serve as A.G. Becker & Company’s Chief Financial Futures Analyst and then become an independent member of the Chicago Board of Trade, dealing in treasury bonds and notes and GNMA futures contracts; and moved to Virginia to run Virginia National Bank’s futures brokerage operation.

In addition to publishing The Gartman Letter, Dennis delivers speeches to audiences around the world (including central banks, finance ministries, and trade groups), teaches classes on derivatives for the Federal Reserve Bank’s School for Bank Examiners, and makes frequent guest appearances on CNBC, ROB-TV and Bloomberg television.

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Finally for the Technical Analysis Junkies (like me!) here is an awesome article!

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Market Leaders Hesitate on Stimulus Plan— Seeking Alpha

By: Chris Ciovacco of Ciovacco Capital Management

Proposed Economic Stimulus Plan May Not Stimulate Much

The new administration is proposing an $825 billion “stimulus” plan. Most of the package is geared toward helping existing or expanded programs such as unemployment assistance, law enforcement, food stamps, etc. Much of this spending will “save” existing jobs or keep existing programs already in place. This may help prevent things from getting worse, but it will offer little in the way of providing new stimulation for the economy. Another large portion of the stimulus plan is in the form of tax cuts. While depreciation incentives may spur some new business spending, credits to individuals may offer little incentive to spend given the state of their balance sheets and concerns about employment. After all the hype about infrastructure spending, only about 25% of the package is geared toward this area.

Tug of War Between Liquidity and Economic Weakness

The chart below was created on the website of the Federal Reserve Bank of St. Louis. It shows the eye-popping expansion of the money supply as financial institutions have swapped securities and other “assets” for cash via borrowing from the Federal Reserve. Borrowing prior to this crisis is barely visible on the graph. Recent borrowing is an extreme example of the term “spike” on a graph. Despite the never before seen tapping of the Fed, financial assets show little evidence of reflation taking place.

Borrowing From FED U.S. Stocks: Downtrend Remains In Place

If you compare the long S&P 500 ETF (SPY) to the short S&P 500 ETF (SH), it is clear the short side of the market is in better shape. There is little in the way of fundamentals, except hope of government bailouts, to expect any change to these trends.

S&P 500 ETF - SPY - Long Recent weakness in the S&P 500 Index leaves open the possibility that we will revisit the November 2008 lows around 740 (intraday). If those lows do not hold, a move back toward 600 becomes quite possible. On Friday (1/23/09) the S&P 500 closed at 832. A drop back to 740 is a loss of 11%. A move back to 600 would be a drop of 28%. These figures along with the current downtrend highlight the importance of principal protection and hedging strategies. SH, the short S&P 500 ETF, can be used to protect long positions or to play the short side of the market.

2009 Investing Deflation Inflation Outlook Strategy Gold & Gold Stocks Still Face Hurdles

Friday’s big moves in gold (GLD) and gold mining stocks (GDX) have some calling a new uptrend. While recent moves have been impressive some hurdles remain.

Gold stocks (GDX) look a little stronger than gold, but any entry in the market should be modest in size. If $38.88 can be exceeded, our confidence would increase and possibly our exposure.

2009 Investing Deflation Inflation Outlook Strategy Run In Treasuries Is Long In The Tooth

Investments with the highest probability of success are those with positive fundamentals and positive technicals. Conversely, the least attractive investments have poor fundamentals and poor technicals. With the U.S. government issuing new bonds at an alarming rate, a continued deterioration in the technicals could signal the end of the Treasury bubble.

2009 Investing Deflation Inflation Outlook Strategy TBT offers a way to possibly profit from the negative forces aligning against U.S. Treasury bonds.

2009 Investing Deflation Inflation Outlook Strategy Strength In Bonds Shows Little Fear of Price Inflation

The government’s policies are attempting to stem the tide of falling asset prices. They hope to reinflate economic activity along with asset prices. The charts here show:

- A weak stock market (see SPY above), and
- An improvement in many fixed income investments (below: LQD, AGG, BMT, PHK, and AWF).

Weak stocks and stronger bonds tell us the government’s reflation efforts are thus far not working. If concerns about deflation remain more prevalent than concerns about inflation, fixed income assets may offer us an apportunity. With money markets, CDs, and Treasuries paying next to nothing, we may be able to find improved yields in the following:

- LQD – Investment Grade Corporate Bonds
- AGG – Investment Grade Bonds – Diversified
- BMT – Insured Municipal Bonds
- PHK – High Yield Bonds
- AWF – Emerging Market Government Bonds

With the economy in a weakened and fragile state, we need to tread carefully in these markets. Some key levels which may improve the odds of success are shown in the charts below. Erring on the side of not taking positions is still prudent. The markets remain in a “prove it to me” mode where we would like to see the markets move through key levels before putting capital at risk.

2009 Investing Deflation Inflation Outlook Strategy U.S. Dollar Remains Firm

From a technical perspective, the dollar continues to look strong. Its strength supports the continuation of concerns about deflation, rather than inflation.

Disclosure: Ciovacco Capital Management (CCM) and their clients hold positions in SH, GLD, and PHK. CCM may take long positions in GDX, TBT, LQD, AGG, BMT, and AWF.

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Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments, it is presented for informational purposes only. As a good investor, consult you Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information before you make any investments. – jschulmansr

Scary, they’re actually Going to Pass This?

24 Saturday Jan 2009

Posted by jschulmansr in Austrian school, Bailout News, banking crisis, banks, Barack Obama, bear market, capitalism, central banks, Comex, commodities, Copper, Currencies, currency, Currency and Currencies, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, gold miners, hard assets, How To Invest, How To Make Money, inflation, Investing, investments, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, platinum, platinum miners, precious, price, price manipulation, prices, producers, production, recession, risk, run on banks, safety, silver, silver miners, small caps, sovereign, spot, spot price, stagflation, Stimilus, Stimulus, Stocks, TARP, Technical Analysis, U.S. Dollar, volatility

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agricultural commodities, alternate energy, Austrian school, Bailout News, banking crisis, banks, bear market, Bollinger Bands, bull market, bullion, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, depression, diamonds, dollar denominated, dollar denominated investments, economic, Economic Recovery, Economic Stimulus, economic trends, economy, Federal Deficit, financial, Forex, futures, futures markets, gold, gold bars, gold coins, gold miners, goldbugs, hard assets, heating oil, hyper-inflation, India, inflation, Investing In Gold, investments, Keith Fitz-Gerald, Marc Faber, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Schiff, physical gold, platinum, platinum miners, precious metals, Precious Metals Investments, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Stimulus, TARP, Technical Analysis, timber, U.S. Dollar, volatility, volatility index, warrants, Water

Curious?… to find out what I am talking about? Read On… Congress shouldn’t be allowed to do this! Not only am going to include the TIME magazine article, I am including the actual link to the bill itself, the press release version. The coming runaway Inflation Train and what to do to protect yourself! Read Below…Good Investing! – jschulmansr

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First Here are the links…

The American Recovery and Reinvestment Bill of 2009

The American Recovery and Reinvestment Bill of 2009 Press Summary

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A Guide to Reading the America Recover and Reinvestment Bill- TIME MAGAZINE

Source: Time Magazine

Brendan McDermid / Reuters

“Madness is to think of too many things in succession too fast, or of one thing too exclusively” — Voltaire

The American Recovery and Reinvestment Bill of 2009 should be required reading for every citizen from billionaires to the average person. It was issued by The Committee On Appropriations and is the road map for the $825 billion that the Congress and Administration intend to put into the U.S. economy to jumpstart the economy out of the recession.

The most important part of the document may be the description of how the country was dragged into the worst economic period in its history. ( See pictures of the Top 10 scared traders.)

At the beginning of the bill, the authors write: “Since 2001, as worker productivity went up, 96% of the income growth in this country went to the wealthiest 10% of society. While they were benefiting from record high worker productivity, the remaining 90% of Americans were struggling to sustain their standard of living. They sustained it by borrowing … and borrowing … and borrowing, and when they couldn’t borrow anymore, the bottom fell out.”

If that analysis is true, then two other things must be accurate. The first is that the cause of the recession was Americans becoming overextended in their use of credit. The other one, which is a consequence of the first, is that if the government can facilitate future consumer borrowing, the economy will be righted again in short order. That would mean that more complex methods of solving the problems of the recession, such as spending money on infrastructure, would be unnecessary. It would be simpler to take $825 billion and make it available for home equity loans, enlarge credit card lines, and auto loans.

But, the authors of the bill are not willing to follow their own logic, so they have crafted another plan. The first assumption of what the program will do, and among the most important of its goals, is only mentioned in passing. “This package is the first crucial step in a concerted effort to create and save 3 to 4 million jobs.” This is a little twist on what is being said in public.

The general assumption about job creation under the program is that it will add 3 to 4 million jobs. But in the introduction to the bill the assumptions about job loss are laid out quite clearly: “Credit is frozen, consumer purchasing power is in decline, in the last four months the country has lost 2 million jobs and we are expected to lose another 3 to 5 million in the next year.”

The mathematics of the two sets of employment analysis taken together would show then that no new jobs would be created. The three million or so jobs which will be lost in 2009 will simply be replaced by three million new ones. The jobs lost late in 2008 will not be replaced in this program, leaving a two million job deficit Joblessness will stay at about 7.2%

Other than those details, the money will be well spent.

The states need help, and the federal government means to provide it: A sum of $79 billion in state fiscal relief will be provided to prevent cutbacks to key services

After the plans to help the states, cut taxes, and provide new infrastructure for the nation, the programs get a little off track.

The bill means to spend $44 million to repair the U.S. Department of Agriculture’s headquarters. About $400 million will go to repairing national monuments in Washington, which are somehow considered essential to national infrastructure.

Additionally, Congress plans to pay out $200 million to provide financial incentives for teachers and principals to do their jobs better. Another $100 million will be used to establish a set of grants to provide $100 to local governments and nonprofit organizations to remove lead-based paint hazards in low-income housing.

Perhaps the best investment in the bill is for $80 million to ensure that worker protection laws are enforced as recovery infrastructure investments are carried out. In other words, there will be a police system set up to make sure that no one with a new job working on national infrastructure with money provided by the government will have his or her rights violated.

The bill calls for over one hundred programs which Congress plans to enact. These include addressing problems as diverse as community block grants, upgrading the forestry service, bridge removal, and NASA research funding. The remarkable thing about the legislation is that almost every program is ill-defined and subject to broad interpretation and a wide variation as to how it might be enacted.

In a sentence, The American Recovery and Reinvestment Bill of 2009 will have to build a bureaucracy larger than any ever created by the US government in order to manage its many parts.

The first sentence of the bill reads “The economy is in a crisis not seen since the Great Depression.” If it requires all of these plans to get America back on the road to recovery, the process will take a decade.

— Douglas A. McIntyre

See pictures of the global financial crisis.

For constant business updates, go to 24/7wallst.com.

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*** My Cure for the coming runaway inflation train? Read below…

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Gold Will Shine Again in 2009 – Seeking Alpha Part 1

By: Sean Hyman of mywealth.com

I think this one may be a shocker to many…that gold is going to be much higher at the end of 2009 than it is right now. I think it will take out its highs just above $1,000 an ounce and will head for at least $1,250 an ounce. (Gold is presently trading around $853 an ounce.)

When I was a stock broker, I hated gold. To me it was the dumbest investment on the planet. Of course I worked as a broker when gold was in a multi-year bear market.

But the more that volatile booms and busts have caused the need for more government intervention, the more of a believer I’ve become in gold.

Let’s look at several of the dynamics that have helped to form my view for gold in 2009.

South Africa is home to some of the biggest gold mines in the world. In 2008, their gold output shrank as exploding input costs caused them to close some of their most expensive mines. (Produce less of the metal and the speed of the supply shrinks which helps to support the price.)

This has been one dynamic that has helped to support prices in 2008 and that has kept gold in an 8 year bull market. Even in 2005 and 2008 when the dollar rallied, gold still held its ground. This shows a lot of strength for the metal since the dollar and gold largely trade somewhat opposite of each other (being that gold is denominated in dollars and when the dollar is rising, it tends to calm the fears for the currency which typically dulls the demand for the precious metal).

In fact, had it not been for tons of hedge fund failures and liquidations, I think gold would actually be much higher than it is right now.

Helicopter Ben & Obama will do their part to help gold out!

With the credit crisis in full swing, the Fed has responded by turning on the printing presses at full speed. This enormous increase in the money supply (which is temporarily clogged up in the banks) will eventually be unleashed on the economy. Once this happens, you will quickly see deflation erased and we may actually move into a period of hyper-inflation.

Why would I go so far as to think that? Heck, the Obama administration may print as much as a few trillion dollars to help out the banks according to former central banker Volcker.

We’ve also got another stimulus package coming within weeks according to the Obama administration.

Another reason why I feel that a huge bout of inflation will return is because of interest rates. If you’ll remember, Congress got pretty harsh with Alan Greenspan for taking rates down to 1%. They even went so far as to accuse him of causing the recent bubbles in the economy, which he denies.

Well, if the “1% cheap money” inflated things into the stratosphere, what do you think will happen with Ben Bernanke’s interest rate range of 0% to 0.25%? Could you say it would have any less of an effect? No, it will have an even greater “bubble effect” in time as the cheap money actually is released out into the economy.

Tomorrow, I’ll continue with “Part 2” of this “gold story”… So stay tuned!

Gold Will Shine Again in 2009 Part 2

by Sean Hyman

Get ready for the “economic pipes” to be unclogged and for a tidal wave of inflation to head our way!

I assure you that Obama’s economic advisors will be the “drain-o” that gets the pipes unclogged. When this happens, the Fed knows that it will have to “mop up” this excessive liquidity in the financial system.

However, here’s what I predict will happen: The Fed, while it wants to be a forecaster of the economy really just ends up becoming a “responder” after the fact to what’s going on in the economy. Therefore, between the time that the Fed starts to see the inflationary signs in the economy and starts the process of draining the excess liquidity from the economy, it will be too late. The hyper inflationary effects will already be in play. They will be “late to the ball game” yet again.

When all of this starts to happen (and possibly a bit beforehand), savvy gold investors will sense it coming and will buy up gold ahead of time…positioning themselves like a surfer that gets out ahead of the coming wave that will propel him forward.

The Fed will do its best at that point to drain the money supply and hike rates, but there are delays from when they start to act and when it actually starts to effect the economy. This “lag time” will cause a huge return of inflation in a big way that will propel gold ever higher and will eventually dilute the dollar as well.

You see, when there’s more of something in existence, it begins to hold less value. So as the money supply is quickly increasing, the dollar will eventually feel the effects of it. Remember, there’s that delayed “lagging” period which is why it hasn’t already been felt even now.

However, as sure as the sun is coming up tomorrow…it’s coming. So get prepared ahead of time. For, the key to successful investing is to buy just ahead of the massive move. This requires an investor to “think ahead”. You can’t just see what’s happening at present and prosper like you should in your investing. It requires one to be “forward looking” and thus “forward thinking”.

When all of this unfolds, investors will buy gold (which is essentially exchanging their dollars for gold) as they seek safety, liquidity and an “insurance policy” against runaway inflation.

Gold production will continue to shrink and Central Banks will hold onto their gold in 2009!

So with the economy deeply damaged, unemployment claims hitting almost 600k as of this writing, there’s not going to be a huge incentive for investors to sell gold. That’s why gold has only come off of its top by 17.9% and stocks have been 40+% off of their highs on average. You can see its underlying strength just in that fact alone.

Also, remember that gold supplies will continue to tighten in 2009 just as they did in 2008. Why? Africa’s production of gold sank 14% which was the lowest levels since 1899. That’s serious! But it’s not just a South Africa story. U.S. gold production fell 2% last year. While China (which has now become the world’s biggest producer of gold) had their production rise 3% last year, the “net” result collectively among all countries is a net slowdown in gold production.

Central bank selling in gold was down a full 42% last year. And you’d be an idiot of a central banker to sell a bunch of gold in 2009 with the U.S. and global economy still hobbling along. Therefore, you can count on these guys not adding to the selling.

Therefore, get ready to buy gold, sell dollars and buy foreign currencies like the euro and especially the Aussie dollar which is greatly helped by rising gold and other commodity prices.

Most of the increase in gold and selling of dollars may come more in the 2^nd half of the year than the 1^st half due to the delayed effect of Fed policy and as the Obama administration starts to get its feet wet in tackling the economic woes.

But be aware and watch for the change just in case it happens even a bit sooner than I think.

Gold consolidates its multi-year gains as it catches its breath and prepares to run “ever higher” in 2009!

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2009 Gold Outlook

2009 Gold Outlook

How To Invest in Gold in 2009

By Luke Burgess
Monday, January 5th, 2009

The investment markets are yielding to the fact that the global economy will remain weak for the better part of 2009.

As a result, investors will continue to seek safe havens.

Under normal conditions, these safe haven investments would include land and real estate. These assets have intrinsic value; or in other words, their value will never fall to zero. But with falling prices, investing in real estate is out of the question for most people right now. And there’s little doubt that investors will look elsewhere for safety against financial crisis.

The best safe haven asset in the world right now is still gold because it is never considered to be a liability.

And we believe that safe haven investment demand will drive gold prices during 2009. With this in mind, we would like to present a broad overview of Gold World‘s 2009 gold outlook. But before we get into that, let’s review what happened to gold prices in 2008.

Gold Was One of the Best Investments of 2008

In March 2008, gold prices hit a record high of $1,033 an ounce as the gold bull market entered its seventh year of life. This was followed by a normal 18% correction, which drove gold prices back down to $850 an ounce.

Gold prices subsequently rebounded and were once again closing in on the $1,000 level in mid-July. At the same time, however, the fundamental and psychological effects of the slowing housing and credit markets were just beginning to devalue significantly the investment markets across the board.

As a result, many long gold positions had to be sold in order to cover losses from investments in other markets. Over the next several months, this forced selling pressure pushed gold prices down.

Gold prices were also held down during the second half of 2008 as the U.S. dollar enjoyed a +20% rally. Foreign governments, institutions, and banks began buying the U.S. dollar, which despite a legion of problems continues to be the world’s most important reserve currency, as a hedge against domestic economic turmoil.

These factors contributed to a significant drop in the price of gold, which officially bottomed out for the year at an intraday low of $683 an ounce in October 2008.

Gold prices have subsequently bounced off of the $700 level as major selling has dried up, and fresh buying has come into the market.

Despite three 20% corrections and serious deflation in the market, gold exited 2008 with a positive 5.4% gain for the year. Although subtle, this gain outperformed every major equity index and commodity in the world. Here are just a few examples…

Index/Commodity	Percent Change During 2008
Dow Jones	-34%
NASDAQ	-41%
S&P 500	-39%
TSX	-35%
TSX Venture	-74%
Oil	-55%
Silver	-23%
Copper	-54%

Gold	+5%

This made gold one of the best investments of 2008.

And the 2009 gold outlook looks just as strong.

Despite a bit of downside in the immediate future, we expect gold to have a stellar year.

Global economic turmoil and deflation will undoubtedly continue to influence gold prices in the near-term. A short-term pullback in gold prices from current levels to $800—maybe even a bit lower—before a recovery is not out of the question. However, we expect gold prices to break new records during 2009.

For our current perspective, we expect gold prices to reach as high as $1,300 during 2009, which would be a profit of over 50% from current levels.

Gold prices in 2009 will be supported more heavily by supply/demand fundamentals than in the previous years of this gold bull market.

As we’ve previously discussed, during the third quarter of 2008, world gold demand outstripped supply by 10.5 million ounces. This deficit was worth $8.5 billion and was the largest supply/demand deficit since the gold bull market of the 1970s.

Official 4Q 2008 world gold supply/demand figures will be calculated and reported later this month. Gold World will report them to you when the data is released.

In the meantime, though, all estimates suggest that there will be another very large deficit in world gold supplies from the fourth-quarter, with investment demand continuing to drive the market.

We expect that a continuing surge in investment demand could push gold prices as high as $1,300 at one point during 2009.

There will likely be a bit more volatility in the gold market in 2009 as more and more speculators come into the market. It is likely that the gold market will experience three or four price peaks (selling points) during 2009.

How to Invest in Gold for 2009

As we expect a near-term drop in gold prices as a result of continuing deflation, we are advising our readers to hold off on any physical gold buying for the immediate future. As previously mentioned, gold prices could dip back down to $800 before recovering again.

Nevertheless, we expect 2009 to be another great year for gold investors.

Good Investing,

Luke Burgess and the Gold World Research Team
www.GoldWorld.com

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Tomorrow we’ll check on what’s the latest on the Obama eligibility issue.

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