Central Banks Printing More Money

Right now central bankers around the world claim we will not experience another inflationary crisis, but we’ve been here before, and there’s no reason to suspect it can’t happen again. Today our central bankers are as confident in their ability to control inflation (Mr. Bernanke claims 100% confidence) as they were in the soundness of the financial system in 2006. Yet history suggests they shouldn’t be, for inflation goes back almost as far as we do. While we’ve got a pretty straightforward “risk off” day in the works, at least we thought, another catastrophe hit North-east Burma rocked by two 7.0 magnitude earthquakes, close to the borders with Laos and Thailand, the US Geological Survey reports. If that’s not all, after this month’s disaster in Japan and Middle East tensions, there are the most recently signs that Portugal’s government will fall, potentially forcing the country into a European bailout, which has created some uncertainty in markets. Portugal’s debt crisis worsened after Prime Minister Jose Socrates quit–“Optimism over the state of the global economic recovery at the start of the year, which drove US real interest rates sharply higher – and gold prices lower – is continually tempered by the ongoing chaos throughout the globe, especially with events in the Middle East and North Africa (MENA) and Japan, sending the 10-year US TIPS yield down to near 80 bp, setting the stage for the next gold price rally. “We see strong upside to gold prices in the near term, but continue to expect rising US real rates to lead prices to $1690.” Says Goldman’s Jan Hatzius.

Gold rose for the sixth straight session, nearing a record in New York, as unrest in Libya and the Middle East and Europe’s lingering debt crisis spurred demand for the precious metal as an alternative investment. And while the U.S.-led alliance is preparing to direct more attacks against Libyan leader Muammar Qaddafi’s ground forces, as coalition members try to resolve disputes over who will take command, European leaders will meet this week to find a permanent solution to the region’s debt crisis, amid concern Portugal’s government to collapse. All this will keep “Gold prices to remain supported in the near-term by Middle East tensions,” Tom Pawlicki, an analyst in Chicago at MF Global Holdings Ltd. (MF), said today in a report, but “support could come from sovereign-debt worries as well in the euro zone. Worries over the safety of the euro could resume the push into commodities and hard assets as safe havens.” Gold may also rally to a record as investors from China, Japan and the Middle East buy the metal on expectations of “hyper inflation” created by central banks, according to Phoenix Gold Fund Ltd.

Real Drivers of Gold. “The real driver for gold is the ocean of new monetary reserves being created by irresponsible central banks around the world,” David Crichton-Watt, Kuala Lumpur-based manager of the $140 million fund, said in an interview. “Hyper inflation is a very likely outcome, so gold can go to any number of dollars.” Bullion may extend its 10th annual advance as demand for haven investments moves gold further North. Ron Fricke president of Regal Assets early this week said “Central banks globally are printing their currencies with no regard for the ramifications while behind the sidelines they are secretly amassing large holdings in gold.” And while European leaders will meet this week to create a permanent solution to the region’s debt crisis, Japan pumped a record 40 trillion yen ($494 billion) into the financial system since the temblor to soften the economic impact. “Western governments and Japan’s government are essentially bankrupt and have no intention of ever reducing their deficits or indebtedness,” Crichton-Watt, 63, said. “Once confidence goes, there will be a real panic.”

Mohendra Moodley, Sydney-based fund manager of Taurus Funds Management Pty, shares Crichton-Watt’s view that money supply has been very high in an attempt to repair the economies, while uprisings in the Middle East and Japan’s earthquake keep investors cautious. “Investors should continue to exercise caution, hold healthy positions in gold and keep portfolios relatively liquid,” Moodley wrote in a monthly report to clients yesterday. “Gold is nobody’s liability.” Bullion gained 30 percent in 2010 as central banks, pension funds and individuals sought protection against currency debasement and inflation after governments spent $2 trillion to salvage the global economy from the worst recession since World War II. There is an escalating Demand. “The demand for physical gold has been predominantly from China and the Middle East and I think this will continue and indeed escalate,” Crichton-Watt said. “Asia is where the money is, so this is where demand will center.”

“The market is not overbought much here, so I think it would have to go much higher before we have a major correction,” Crichton-Watt said. “Still, very few people own gold so the price will undoubtedly go much higher, and it will most likely end in a mania.” Institutional investors remain bullish on commodities. “Investors expect to see continued strong demand from emerging markets and they predict another strong year for commodities,” said Kevin Norrish managing director for commodities research at Barclays. “In addition, heightened geopolitical concerns, turmoil in the energy markets and rising inflation concerns will continue to cast commodity assets in a favorable light.”

Source: http://goldcoinblogger.com

The Joy of Gold & Silver

Hear the word inflation, and your mind turns back to textbooks on economic principles, and sees solutions that did apply in the past but do not apply today. That is in the developed world. These solutions will work still in China, where incomes are soaring, GDP growth is in double figures and money supply needs to expand to accommodate tremendous economic development. In the developed world where inflation has passed the poor levels of economic growth and interest rates, the scene is totally different.

China will overcome their rising inflation as those suffering it are seeing their incomes rise rapidly and the impact of inflation negligible. As their costs rise, their income rises faster, leaving little pain. Interest rate rises benefit the vast majority of Chinese, who are by nature savers as they increase income to them. But even they can see that inflation is making a mockery of interest rates returns (after bank charges). The combination of poorer returns, in the current inflationary environment is beginning to make the Chinese saver realize he is better off with gold than deposits at the bank.

In the developed world the same should hold true. Negligible returns from interest rates, after bank charges, are far below growing inflation levels resulting in a drop in total savings, now needed more than ever to live on. While gold does not give a return it does rise faster than inflation, far faster and reflects unstable economies and uncertainty. With the benefit of hindsight we can see that gold has multiplied almost five times since the turn of the century, only 10 years plus a little. Savers who went for Gold Bullion are far richer now than they were then, in real terms. As to the future, it seems that interest rates will not overtake inflation so ensuring that bank deposits returns after bank charges will continue to yield negative returns. If interest rates do rise it is likely that the bond markets will collapse, thus making these forms of (near) cash, inadequate investments. Gold is international cash and will flourish while bond markets collapse and will flourish while bank deposits (after bank charges) fail to perform like gold or Silver Investing.

Should the economy fail to reach higher levels of growth, equity markets will, at best stall, even if they do not fall. Rising interest rates will bring them down. The prospects in a stagnating inflationary environment will be for gold and silver to rise as they protect wealth, while other markets don't. If as is a most likely prospect currencies tend to weaken, then gold and silver will remain internationally acceptable, while they rise against all currencies.

To put it in a nutshell stagflation is where economies do not grow or fall, while money cheapens persistently, ensuring no protection against wealth attrition. Investors who wish to guard against this have to flee such environments while they still can. Gold and silver, inside a country suffering stagflation, bring the same benefits as though that wealth were held offshore in nations where the economy is growing interest rates are real and the currency appreciating. The joy of gold and Silver Investing is that you do not have to worry about government actions, because they have no government!

In the developed world one sees limp economies, interest rates at such low levels that allow economies to grow very slowly still (raising interest rates would choke off that growth) and rising levels of inflation that are now undermining what little growth there is. Even though these economies are growing, that growth is hormone free and very limp. It does not matter that the inflation rates are low historically, but it does matter that they are reducing economic activity and causing rising resentment. Food and energy inflation are doing the same as raising interest rates would. That kind of global inflation is acting like the imposition of additional taxes, reducing the already low levels of discretionary income. Since 2007 people in the developed world have seen cutbacks in their income or stagnation at best. They have been through a real struggle to pay off debts so their tolerance to a cut in their income again, is dropping fast.

The old and retired are living off savings. Inflation reduces the buying power of these funds, persistent inflation impoverishes them. The only beneficiaries of rising and persistent inflation are debtors who see the real value of that debt diminish. People living off the interest on deposits have seen that income decimated with negligible returns on those deposits. Now inflation is eating into what little they get, with little prospects of rising interest rates to compensate. Inflation will gobble up whatever interest they earn anyway as money loses buying power, steadily.

Wage earners are more than likely to see static incomes and feel more job insecurity in the next year or two. Any inflation, even low levels, will just eat away at their income breeding the sort of resentment that creates social unrest in poorer countries. Politicians will be overwhelmed by the temptations to cater to those being hurt by stagflation.

Worse still, rising gasoline prices will result in lower economic activity as they move higher, moving towards the last peak of $150 if more bad news comes our way. No doubt we will then see another recession.

What has become a real factor in people's perception of the future is the discouragement factor on consumer's perceptions. It causes more saving to be made, more debt to be paid off, more acceptance of harder times, making the consumer pull in his future hopes. Spending then suffers when consumers might well be able to spend more, because they don't want to be caught in the debt trap again.

Have absolutely no doubt that it is a job-secure, house-secure, cash-secure consumer that will be the backbone of a real recovery. Until he is a common sight, any recovery will continue to be limp. If he now has to savor low inflation as well, he will hunker down until the horizon looks far brighter than it does now. The current situation, although not exactly 'stagflation', feels like it is. This scene may well persist for a year or two, or more still. Once this 'tone' of stagflation reaches the political arena, anger will replace hope and social turmoil follow. While some may feel that overall we are seeing a failure of capitalism (except for those in a position to take advantage of it), we are in fact seeing a failure of the global monetary system as described by rising precious metal prices.

But the greatest danger is that the buying power of the US Dollar and its international value continues to fall, without any effort whatsoever by the US government or Fed to act to improve its value or stop the slide. As a consequence of far greater proportions than low internal inflation will be the rising inflation due to the falling Dollar. That will cause a broad rise in prices across the board of imported goods. These are cheaper than home produced ones usually and preferred by cost-conscious consumers.

For so long the US monetary authorities have been mesmerized by their internal financial problems that the international consequences of their actions have been ignored. The falling Dollar and its lessening role as a global reserve currency will shortly deliver the consequences of this myopia. Add these events to the current financial ails and you have a financial situation beyond the power of both the government and the monetary authorities to rectify. It may well be that gold could add lost credibility to creditworthiness and tempt governments to confiscate their citizen's gold and perhaps, eventually, silver.
Source: http://goldnews.bullionvault.com

Silver to play a major role in Japan recovery

TOKYO (Commodity Online) : Silver, which fell marginally along gold Thursday, is going to play a significant role in Japan’s efforts to steady its economy, experts believe.

Silver in particular is going to capitalize on the unfortunate situations in Japan, world’s third largest economy, they said.

Japan requires heavy investments to maintain its infrastructures and silver is going to play a role in it though not like that of steel and some other metals.

Silver isn’t just a precious metal, it is also one of our main industrial metals. One of the most conductive substances known to man, it’s used in everything from photography, to compact discs, to semi-conductors, to medical equipment.

Basically, if something is high-tech, it contains silver and Japan is a high-tech country.

Japan may require lot of the white metal to make damaged electrical lines and other related items especially in areas where radiation threats are high.

The wonderful electrical conductive ability of silver is used in producing electrical switches, electrical circuits.

As silver has a long lasting ability even in high temperatures, they are used for producing certain moving items and ball bearings.

Silver is also utilized to manufacture brazing and soldering metal items due to its ability of withstanding corrosion, large tensile power, antibacterial property and conductivity.

The white metal is able to disturb the cellular actions of bacteria which are necessary for their living. Hence, several hospitals are using silver coated surgical devices and other materials to eliminate any contamination.

Silver ions are also used for purifying water in many water pool, spas, hospitals etc, which Japan desperately required at the moment.

At present, silver extended losses, following its glittering cousin gold on speculative selling by some traders fearing escalating Japan troubles.

However both silver and gold will bounce back to attract the safe-haven buying once the over- leveraged longs have finished unwinding their positions, analysts said.

The white metal hitting an intraday low $33.70 before recovering to $34.02 an ounce.

Analysts said investors prefer other commodities over silver and gold and sold metals to cover losses.They added that both silver and gold look vulnerable to further selling.

Source: http://www.commodityonline.com

In India Post Office is selling gold coins like hotcakes

From the humble post office to the bank, Indian consumers are lining up to buy gold. While coins are a current favourite to give-away during festivities, investors fearing the worst are hoarding gold bars

Author: Shivom Seth

MUMBAI  - 

The humble post office is the latest organisation to get into the gold act in India. Standard 24 carat gold coins have been selling like hotcakes at over 466 post offices dotted throughout the country. 

Despite the current high price, Indian consumers have been buying small quantities of coins to give as gifts during the festival season. With the spring, harvesting and wedding season all in full swing in India, demand for the yellow metal has shown a substantial climb.

The gold coins are manufactured by Valcambi in Switzerland. ``Apart from enhancing the revenue of the postal department and services, the move has enabled us to usher in a new image of the India Post as a modern and relevant organisation. Gold coins are showing to have an immense pull-factor with the younger generation,'' said a postal official, requesting anonymity.

Keeping in mind the excitement that has been generated and the great sales, the Indian government has extended its novel scheme to sell gold coins through almost all the post offices in various states across the country.

The Department of Posts introduced the project through select post offices in October 2008. At that time, demand was slow but slowly the idea appears to have caught on.

In the first phase of the project, gold coins in the denomination of half gram, one gram, 5 grams and 8 grams were sold in over 100 post offices in Delhi, Tamil Nadu, Maharashtra and Gujarat. The initiative was then introduced in Punjab, Andhra Pradesh and Rajasthan.

The postal department had also entered into a tie-up with Reliance Money to sell gold coins at discounted prices. The discount offers have been encouraging people to buy more of the precious metal.

``The move ensures pure gold and makes it available to a larger set of consumers, in lower denominations, at a convenient price point. It can also be sold in what were earlier considered remote locations. All of this boosts the demand for gold significantly,'' said V Gurnani, director of Reliance Money, which has teamed up for the venture.

Moreover, with the India Post offering 5% discount to its customers during the festive season, the move has prompted a large number of customers and small investors to queue up to get gold coins.

Post offices have also been selling gold at a 5%-7% cheaper rate than banks such as ICICI Bank, Axis and HDFC Bank, all of which has helped the growth momentum.

Indians consider it auspicious to buy gold during the festive season, and especially when the goddess of wealth, Lakshmi, is worshipped.

Given the huge demand from its customers, the government has taken the initiative to keep post offices open on most festival days to sell gold coins to interested customers.

Banking initiative

It is not just India's gold merchants in the post offices that have been expecting a sustained pick-up in sales during festival times. The banking sector too has seen a renewed demand.

``There are several factors that aid sentiment - a reviving economy,  prosperity and higher savings are changing the way Indians perceive gold,'' said Shreevardan Shetty, a senior official in a prominent gold importing bank.

He added that the investment demand was more a function of disposable income as the overall savings of the country has seen an increase.

On Friday, both the precious metals, gold and silver, recovered sharply on the bullion market buoyed by a firm global trend. Trading sentiments have turned bullish for the yellow metal after it advanced in the global markets, triggered by the unrest in Middle East and Japan's nuclear crisis. All these developments have boosted demand for the precious metals as an alternate investment.

Banks have been reporting good sales despite high gold prices and mainly due to the geopolitical situation and a weakening dollar. Inquiries at banks reveal that there is a growing demand for gold bars - from 1gm to 117 gm, with the bullion continuing to be a safe haven for many discerning investors.

``While there are a lot of buyers for finished jewellery, there is clearly a renewed interest in gold coins and gold bars,'' another banker said.

Several Indian banks offer term deposits banked by deposited gold in amounts as small as 500 grams. Banks also offer loans for purchasing gold jewellery. These loans are generally targeted at the working woman between 18 and 55 years of age.

Bankers said many speculators have been creating fresh positions on the back of a firming global trend. They added that trading sentiment climbed even as allied aircraft began to enforce a no-fly zone over Libya.

``Investors' taste buds for precious metals, especially gold, have been whetted because the value of these metals has increased substantially over the years and especially during political turmoil. The political conditions across the world and the Libyan crisis are all set to hike prices further,'' said another banker.

He added that several investors have been buying gold and other precious metals as a hedge against inflation, market uncertainties, and the fear of a stock market crash.

Source: http://www.mineweb.com

Does Disaster Drive the Gold Price?

IT'S NOW a media tradition for moves in the Gold Price to be related to some political event, natural disaster or civil war, writes Julian Phillips at the GoldForecaster.

We find this habit unfortunate, because it is misleading. For instance, last week we were informed that the Gold Price had risen in the Dollar, because of Japan's earthquake and tsunami. In fact it was almost entirely accounted for by the fall in the Dollar against the Euro.

The Gold Price shows its market movements most clearly in the Euro, not in the US Dollar. A glance across the Euro gold price of the last week reinforces that statement, whereas the Gold Price in the Dollar clearly shows the movements in the Euro plus the moves of the US Dollar against the Euro.

This piece looks at some of the worst of the misleading statements that may confuse or misdirect gold and silver investors, should they add credence to these statements. It also looks at what pieces of news will move gold and Silver Prices.

What does not affect the gold and Silver Prices? Investors should stop for a moment when they read a headline attributed to affecting the Gold Price and ask, "What investor will go into the gold market, sell his currency and buy or sell gold or silver, because of a demonstration in the Yemen, or a bomb in Bali?" How will that event feed through to cause this unrelated market to react to such news through the buying or selling of that metal? The event must initially cause a financial ripple causing uncertainty globally or instability, to the extent that it will affect the global centers of finance. No matter what sympathies one may or may not have with the cause involve, unless they feed through to global financial markets, they will not cause an investor to buy or sell any unrelated financial product.

Today, in Japan, the company that owns the nuclear reactors is down 23% in price. Companies that make cars and rely on the power company for power are down 6% and more , because they have closed down. This identifies clearly how the ripple of disaster will cause those companies in losses. Thus the damage is priced in reasonably. However, does Japan's disaster affect the Dow Jones or the FTSE or the CAC40? No, of course not, so why should it affect the gold and Silver Prices? This is what you the investor must filter out.

How could Japan's disaster affect the gold and Silver Price? To the extent the disaster affects the value of the Yen in international markets, yes, it may prompt investors to place some Yen investments into gold, but we believe this will depend on the impact the additional liquidity the Bank of Japan has pumped into the markets and its cheapening affect on the Yen, more than the disaster itself. It sounds callous, but sad to say money has little emotion if any.

What news does affect the gold and Silver Prices? The US Dollar exchange rate moves against the Euro produce an almost immediate change in the Dollar Gold Price. The same will apply to the Gold Price in local currencies against the Dollar and in turn the Euro. This is because the market records real changes in Gold Prices in the Euro not in the US Dollar.

The same is true of Gold Prices in any other currency, although they tend to reflect the change against the US Dollar, which then moves against the Euro.

Many used to believe that the oil price was a Gold Price determinant, until the oil price popped its cork and ran up to $145 in 2007. It was then realized that the oil price, insofar as it measured instability or uncertainty, affected the Gold Price, but not in a direct, fixed ratio. Of course, had the demonstrations in Egypt led to the closure of the Suez Canal, an oil crisis across the globe would have been precipitated. Riots in Yemen, where there is no significant oil will not affect the oil price, nor precious metals. But if the riots in Bahrain affect oil production there, or lead to them crossing the causeway into Saudi Arabia and led to a cut in oil production there, then there would be a global oil crisis and all global financial markets would react strongly. This is because of the volume of oil that could not be produced and the ripple through to the global economy. The precious metal prices would then soar for as long as the crisis remained unresolved.

Should high oil prices persist and not simply be a 'spike', then they will heavily impact inflation worldwide. This will cause gold and silver to rise as money cheapens.

The switch from the pricing of oil from only the Dollar to any currency or even a basket of selected currencies would undermine the US Dollar in the monetary world and lead to a strong upward rise in the gold and Silver Prices.

A significant purchase of gold by a signatory of the Central Bank European Gold Agreement would change the world's perspective on gold in the monetary system.

Any news that directly affects the structure of the global monetary system would have a rapid and deep impact on precious metal prices.

Confirmation of the decay in the global monetary system (such as a failure of Ireland to renegotiate its 'bailout' terms) would indicate that Irish debt would have no market and threaten the stability of the Eurozone. This would prompt precious metal buying to escape the damaging impact on the Euro and on the future of the global monetary system.

China selling US Treasuries on a persistent ongoing basis would do the same as this would directly indicate the slow demise of the US Dollar as a credible global reserve currency.

As to day to day news, much as it may make an appealing story, most supposed drivers of day to day gold and Silver Prices do not drive people to Buy Gold or silver.

In the Far East the emerging (India, China etc) more than the developed nations (Japan) look at gold and silver as financial security, some way above government or bank investments or equity investments. There, the ongoing realization that gold and silver are real money, drive gold and silver markets more than any sudden event.

However, there are times when an investor may rely on the emotional appeal of a piece of news rush into the gold market only to find the market did not react subsequently. The media are there to 'sell' stories, but investors have to discern the impact if they are to maximize profits.

Source: http://goldnews.bullionvault.com

Expecting gold price to peak near $1700 in 2012

Top US investmernt bank, Goldman Sachs, sees gold at $1,480 in 3 months and hit $1,690 in 12 months ahead of a rise in U.S. interest rates it expects to see at around that time

NEW YORK (Reuters) - 

U.S. investment bank Goldman Sachs Group Inc (GS.N) said it forecast gold prices rallying to a record $1,480 an ounce in three months on declining U.S. real interest rates.

The bank said in a note sent on Friday it still expects gold prices to reach a peak in 2012 as U.S. interest rates are set to rise with the economy continues to recover. Goldman has a six-month gold view at $1,565 an ounce, and a 12-month forecast at $1,690 an ounce.

"Given the decline in U.S. real interest rates, we see the recent retracement in gold prices as offering a good buying opportunity, and maintain our long gold trading recommendation as we expect gold to rally to our three-month price target of $1,480 an ounce," it said.

Bullion XAU= rose more than 1 percent Friday to $1,418 an ounce on lingering political uncertainty despite Libya's declaration of a cease-fire. It hit a record high of $1,444.40 an ounce on March 7.

"Optimism over the state of the global economic recovery at the start of the year, which drove U.S. real interest rates sharply higher, has been tempered by the ongoing events in the Middle East and North Africa and Japan...setting the stage for the next gold price rally," Goldman said.

(Reporting by Frank Tang; Editing by Marguerita Choy)

Source: http://www.mineweb.com

What really affects gold and silver prices - and what does not

It has become a media tradition for moves in the gold price to be related to some political event or a civil war or a major tragedy such as the earthquake in Japan, when the events should actually have a negligible effect on those markets.   We find it unfortunate that this happens because it is misleading.  For instance,  we were informed by the media yesterday that the gold price had risen in the dollar, because of Japan's earthquake and tsunami.   In fact it was almost entirely accounted for by the fall in the dollar against the euro.   The gold price shows its market movements most clearly in the euro, not in the U.S. dollar.   A glance across the euro gold price of the last week reinforces that statement, whereas the gold price in the dollar clearly shows the movements in the euro plus the moves of the U.S. dollar against the euro.  

This piece looks at some of the worst of the misleading statements that may confuse or misdirect gold and silver investors, should they add credence to these statements.  It also looks at what pieces of news will actually move gold and silver prices.

WHAT DOES NOT AFFECT GOLD AND SILVER PRICES?

Investors should stop for a moment when they read a headline attributed to what is affecting the gold price and ask, "what investors will go into the gold market, sell his currency and buy or sell gold or silver, because of a demonstration in the Yemen, or a bomb in Bali?"   How will that event feed through to cause this unrelated market to react to such news through the buying or selling of that metal?   The event must initially cause a financial ripple causing uncertainty globally or instability, to the extent that it will affect the global centers of finance.   No matter what sympathies one may or may not have with the causes involved, unless they feed through to global financial markets, they will not cause an investor to buy or sell any unrelated financial product.

In Japan, the company that owns the nuclear reactors is down 23% in price.   Companies that make cars and rely on the power company for power are down 6%+ , because they have closed down.   This identifies clearly how the ripple of disaster will cause those companies losses.   Thus the damage is priced in reasonably.   However, does Japan's disaster affect the Dow Jones or the FTSE or the CAC40?   No, of course not, so why should it affect  gold and silver prices?    This is what you the investor must filter out.

How could Japan's disaster affect gold and silver prices?   To the extent the disaster affects the value of the Yen in international markets, yes, it may prompt investors to place some Yen investments into gold, but we believe this will depend on the impact the additional liquidity the Bank of Japan has pumped into the markets and its cheapening affect on the Yen, more than the disaster itself.   It sounds callous, but sad to say money has little emotion if any.  

 WHAT NEWS DOES AFFECT GOLD AND SILVER PRICES?

The U.S. dollar exchange rate moves against the euro produces an almost immediate change in the dollar gold price.   The same will apply to the gold price in local currencies against the dollar and in turn the euro.   This is because the market records real changes in gold prices in the euro not in the U.S. dollar.

The same is true of the gold price in any other currency, although it also tends to reflect the change against the U.S. dollar, which then moves against the euro.

Many used to believe that the oil price was a gold price determinant, until the oil price popped its cork and ran up to $145 in 2007.   It was then realized that the oil price, insofar as it measured instability or uncertainty, affected the gold price, but not in a direct, fixed ratio.   Of course, had the demonstrations in Egypt led to the closure of the Suez Canal, an oil crisis across the globe would have been precipitated.  

Riots in Yemen, where there is no significant oil will not affect the oil price, nor precious metals.   But if the riots in Bahrain affect oil production there, or lead to them crossing the causeway into Saudi Arabia and lead to a cut in oil production there, then there would be a global oil crisis and all global financial markets would react strongly.   This is because of the volume of oil that could not be produced and the ripple through to the global economy.   The precious metal prices would then soar for as long as the crisis remained unresolved.

Should high oil prices persist and not simply be a ‘spike', then they will heavily impact inflation worldwide.   This will cause gold and silver to rise as money cheapens.

The switch from the pricing of oil from only the dollar to any currency or even a basket of selected currencies would undermine the U.S. dollar in the monetary world and lead to a strong upward rise in the gold and silver prices.

A significant purchase of gold by a signatory of the Central Bank European Gold Agreement would change the world's perspective on gold in the monetary system.

Any news that directly affects the structure of the global monetary system would have a rapid and deep impact on precious metal prices.

Confirmation of the decay in the global monetary system [such as a failure of Ireland to renegotiate its ‘bailout' terms] would indicate that Irish debt would have no market and threaten the stability of the Eurozone.   This would prompt precious metal buying to escape the damaging impact on the euro and on the future of the global monetary system.

China selling U.S. Treasuries on a persistent ongoing basis would do the same as this would directly indicate the slow demise of the U.S. dollar as a credible global reserve currency.

As to day to day news, much as it may make an appealing story, most supposed drivers of day to day gold and silver prices do not drive people to buy gold or silver.

In the Far East the emerging [India, China, etc] more than the developed nations[Japan ] look at gold and silver as financial security, some way above government or bank investments or equity investments.   There, the ongoing realization that gold and silver are real money, drive gold and silver markets more than any sudden event.  

However, there are times when an investor may rely on the emotional appeal of a piece of news rush into the gold market only to find the market did not react subsequently.   The media are there to ‘sell' stories, but investors have to discern the impact if they are to maximize profits.   Here's to successful investing!

Source: http://www.mineweb.com

PRECIOUS METALS: Gold Up On Japan, Middle East Worries

NEW YORK (Dow Jones)--Gold prices edged higher on stronger demand for safe-haven assets Monday, while platinum and palladium tumbled as Japanese car makers shut production in the wake of a massive natural disaster.

The most actively traded gold contract, for April delivery, settled up 0.2%, or $3.10, at $1,424.90 per troy ounce on the Comex division of the New York Mercantile Exchange.

The thinly traded March delivery contract ended up 0.2%, or $3.10, at $1,424.60 per troy ounce.

Investors flocked to gold, shedding riskier assets, as they scrambled to asses the likely impact of Japan's earthquake and tsunami on the global economy.

"It's one event after another that benefit gold. We constantly see this emphasis on a flight to safety and quality - attributes that boost gold," said Bill O'Neill, a principal with LOGIC Advisors.

Meanwhile, platinum and palladium both settled at a two-month lows after Japanese car makers suspended production due to rolling power balckouts, damaged facilities and logistics disruptions following the natural disaster.

The noble metals are widely used in car exhaust filters, known as catalytic converters, leaving their prices sensitive to disruptions in the automotive sector.

Japan is a major consumer of both metals, accounting for 15% of global platinum demand and 16% of global palladium consumption according to Barclays Capital.

Platinum for April delivery, the most actively traded contract, ended down 1.7%, or $ 29.40, at $1,752.30 per troy ounce on the New York Mercantile Exchange.

Palladium for June delivery, the most actively traded contract, settled down 2.3%, or $17.30, at $748.20 per troy ounce on the NYMEX.

Japan now faces the largest reconstruction effort since World War II. Much of the basic infrastructure like houses, office buildings and roads, was damaged by the earthquake and subsequent tsunami, and clean up and insurance costs alone are estimated in the tens of billions.

The Bank Of Japan added a record Y15 trillion into money markets Monday to soothe liquidity concerns in the wake of the natural disaster. While it will take months to calculate the exact cost of the damage, Boston-based AIR Worldwide estimated insured property losses to run between $15 billion to $35 billion.

"If anything, down the road this will add to inflation pressures as Japan has to rebuild," said Ira Epstein, director of the Ira Epstein division of the Linn Group.

The move to rebuild is likely to benefit gold prices, as higher-than-expected demand for raw materials from Japan will likely boost global commodity prices and ramp up global inflation rates. Gold is considered a hedge against inflation, and tends to grow in value as inflation rates rise.

Japan's troubles overshadowed civil unrest in the Middle East, which continues to lend support to gold prices. In Libya, forces loyal to Col. Moammar Gadhafi launched a fresh assault into rebel strongholds in the country's east.

Meanwhile, Saudi Arabia and other Gulf Cooperation Council states sent troops to Bahrain to help suppress violent antigovernment protests in the Kingdom.

"This is the first full business day after the Japanese disaster, Libya will take a back seat... The attention has shifted for a while, but it will shift back," said Epstein.
Source: http://online.wsj.com

Japan and precious metals: a snapshot

It feels callous writing about such an awful tragedy in terms metals markets, but sadly there is perhaps a call for a quick review of Japan's typical position in terms of normal demand levels.  This piece is not designed to take a view on the prospects for longer-term increased demand in terms of reconstruction, not to try and quantify how demand may contract in the short-term as some of Japan's industries have to struggle to contain their losses or temporary shut-downs; it is aimed more at giving a snapshot of Japan's market share in different sectors.

The PGMs

The platinum group metals are the logical place to start, especially given Japan's long history of platinum jewellery demand.  This is based partly, but not only on the concept of purity.  Platinum jewellery needs to be a minimum of 85% and there is no "caratage" concept as such; this partly informs the fact that for many decades Japan was the world's largest consumer of platinum in jewellery as Japanese people have high standards and have always valued high purity (this though has been changing in the gold market through economic force of circumstances).  The other reason goes back some centuries to the Shogun era, when the Emperor desired his merchants to wear while metal rather than yellow, in an effort to minimise ostentation - this was more important than the generally accepted concept of white metal looking better on the Japanese complexion than yellow metal. 

 Back in 1991, purchases of platinum for jewellery manufacture in Japan were 1.26 million ounces or 39 tonnnes (Johnson Matthey figures). This was some 31% of world demand for platinum in all forms and 85% of the world jewellery sector, which was 4.1M ounces or 252t.

Preliminary JM figures for 2010 put world purchases of platinum for jewellery at 2.4M ounces or 149t.  This of course is now dominated by China; the Japanese figure for 2010 is just 330,000 ounces, a fall of 74% from 20 years previously.  GFMS is currently estimating actual Japanese fabrication demand in the sector at a lower figure and has noted recently, but before the earthquake, that while the bridal sector remained relatively steady, falls in adornment demand were likely to continue.  This is ascribed both to slow economic growth and demographic shifts in spending patterns as well as other endemic changes in the local sector.

JM figures suggest that Japanese demand for platinum in the auto sector accounted for just over half a million ounces in 2010 or 18% of the world total, but the Japanese auto market is a palladium story rather than platinum.

Johnson Matthey's estimate (which, as noted above, reflects purchases of metal for the sector as opposed to actual fabrication demand) for the overall Japanese share in the platinum market in 2010 is 1.2M ounces, or 15% of the world total.  Autocatalyst and jewellery, as the two largest demand sectors, took up 75% of local purchases, with glass in third place.

Japan's position in the palladium market is slightly larger than that of platinum, reflecting its greater use in the auto and electronics sectors.  JM estimates that Japan's overall demand for palladium in 2010 was 1.5M ounces or 16% of the world total.

More than 50% of this was accounted for by the auto sector, at 765,000 ounces.  Japan's share of palladium demand in the world auto sector was therefore 15%. 

Globally, the second largest use of palladium is the electrical and electronics sector, notably the latter.  This sector took up 1.4M ounces in 2010, or 16% of world demand.  In Japan the offtake was 295,000 ounces, giving it a 21% share, well ahead of Europe and the United States and second only to China.

Meanwhile Japan‘s demand for palladium in the dental sector is the world's largest at almost 47% of the total.

Silver

A fully up-to-date breakdown of silver demand by country is not yet available (GFMS will be publishing its World Silver Survey for the Silver Institute in early April).  Broadly speaking, however, Japanese demand for silver is something over 2,000 tonnes, or 9% of world total.  The largest end-use by far is the broad "industrial" category, which includes the auto sector, construction, medical uses and solar cells, which latter are garnering an increasing amount of popular comment.  The photographic sector has been falling as heavily in Japan as it has elsewhere in the face of the onward march of digital technology; the fall in Japanese demand between 2000 and 2009 was 63%, while world usage fell by 62%.  Jewellery and silverware is a minimal end-use in Japan.

Gold

In the gold market, meanwhile, Japan's share of world gold fabrication (i.e. exclusive of investment demand) is approximately 6% of the world total, with the majority of this concentrated in the electronics industry in which it has consistently been the world leader.  The tonnage involved in Japan is close to 100t for a world total in the region of 250t.  Jewellery demand is low, both on a gross and an outright basis, and scrap recycling has been relatively heavy in recent years, meaning that net demand has typically been well below 50% of gross demand - and more recently has been more like 20% of total.  Caratage in new pieces has been falling as economic conditions have been constricting expenditure.

Gold investment bars, meanwhile, have been flowing back into the market.  World Gold Council publication "Gold Demand Trends" (figures compiled by GFMS) show that with the exception of the fourth quarter of 2008, Japanese investors have been net sellers of gold bars on a quarterly basis right back to the start of 2006, since when the net release of small bars has been over 220 tonnes.  This negates the net purchases of gold bars going back to the second quarter of 2002.  Between the start of 1999 and Q2 21002, net purchases were almost 300t - so we may yet find that these sorry circumstances lead to more such sales.

Source: http://www.mineweb.com

Gold Strikes Record At $1,440 On Libya Chaos

LONDON : Gold glistened last week, striking a record peak as investors hunted for a safe haven amid violent unrest in Libya that has sparked fears about spreading instability in the Middle East and North Africa.
New York crude crossed $104 per barrel to reach the highest level for 30 months as the African nation was forced to slash exports.
"Unrest in the region continues apace, with Libya effectively remaining out of the oil market; while the replacement of the lost Libyan barrels is eating into spare capacity, rampant demand growth is adding further pressure," said Barclays Capital analyst Sudakshina Unnikrishnan.
Commodities won further support on Friday as the euro bounced above $1.40 for the first time in nearly four months, after a surprise drop in the US unemployment rate and accelerated job creation. A weaker greenback makes dollar-priced commodities cheaper for buyers holding other currencies and tends to stimulate demand.
Precious metals: Gold peaked at $1,440.32 per ounce on Wednesday, while silver struck a 30-year high of $35.36 on Friday. On the London Bullion Market, gold closed the week at $1,427, up from $1,402.50 a week earlier. Silver closed at $34.43, up from $32.54. On the London Platinum and Palladium Market, platinum climbed to $1,828 an ounce from $1,791 and palladium rose to $811 from $785.
Oil: New York crude surged to $104.32 on Friday, a level last seen on Sept 29, 2008, as violence escalated in Libya.
"It seems likely that soon there will be no oil exports at all from Libya, a loss of 1.4 million barrels per day to the global markets, and a particular concern to refiners in Italy and elsewhere in Europe," said said Deutsche Bank analyst Adam Sieminski.
The head of Libya's National Oil Corporation, Shukri Ghanem, said on Thursday that production had been halved.
Brent crude has been trading higher than WTI partly because of high US energy inventory levels.
"It's taken a while for the WTI contract to wake up to the potential stresses in the oil market," said GFT analyst David Morrison.
Brent crude for April delivery rallied in London on Friday to $115.77, compared with $111.57 a week earlier. On the New York Mercantile Exchange, Texas light sweet crude for April traded at $103.45, compared with $97.24 a week earlier.Base metals: Prices mainly rose as traders took direction from the faltering dollar. On the London Metal Exchange (LME), copper for delivery in three months rose to $9,935 a tonne from $9,711 a week earlier. Three-month aluminium increased to $2,612 from $2,558, lead to $2,638 from $2,495, tin eased to $31,750 from $31,788, zinc to $2,491.25 from $2,493, while nickel rallied to $28,900 from $27,710.
Cocoa: The market continued to trade at 30-year highs amid worsening unrest in top producer Ivory Coast.
On the London International Financial Futures and Options Exchange (LIFFE), cocoa for May rallied to 2,414 a tonne from 2,371 a week earlier.On the New York Board of Trade (NYBOT), cocoa for May increased to $3,766 a tonne from $3,637 a week earlier.
Sugar: Prices gained ground on the NYBOT, with unrefined sugar for delivery in May rising to 30.62 US cents a pound from 27.64 cents a week earlier. On the LIFFE, a tonne of white sugar for May increased to 759.30 from 699.50 a week earlier.
 
Coffee: Prices hit a 34-year high in New York as traders fretted over inventories that are at their lowest levels since the International Coffee Organisation started tracking them in the 1960s. On the NYBOT, Arabica for delivery in May rose to 277.30 US cents a pound from 266.55 cents a week earlier. On the LIFFE, Robusta for May rose to $2,403 a tonne from $2,328 a week earlier. AFP

Source: http://www.bangkokpost.com

Metals-Energy Update: Silver Soars To $35, Gold Rebounds, Oil Spikes

Published on: March 06, 2011 at 17:25 
By Devi Gopalakrishnan, Commodity Online Info Service
Gold prices boosted by safe haven appeal rebounded to $1428 levels but still short of the record 1440 set on March 2 while silver prices soared to $35 an ounce on mounting unrest in Libya. Middle East and North African tensions continue to impact commodities especially crude oil which has seen a surge of 6.7% in New York this week.

U.S. Commodity Futures Trading Commission (CFTC) informs that net long positions in U.S. gold futures contracts held by speculators rose nearly 10% last week as bullion prices rose by 2.5 percent.

Precious Metals
US Gold futures reorded 1.4% growth thanks to tension in Libya that gave a boost to safe haven appeal of gold. Bullion hit a record high of $1,440.10 an ounce on March 2, recording its fifth consecutive weekly gain on fears that Libya's rising unrest may spread across the Arab world.

Gold may gain in New York as turmoil in Libya and concern inflation will accelerate boost demand for an alternative investment.
Gold futures for April delivery rose $12.20, or 0.9 percent, to settle at $1,428.60 an ounce on the Comex in New York. The metal rose 1.4 percent this week.

Silver futures for May delivery jumped $1, or 2.9 percent, to $35.327. Earlier, the price reached $35.405, the highest since March 1980. In that year, the metal reached a record $50.35. This week, silver gained 7.3 percent, the sixth straight increase.

Palladium futures for June delivery fell $5, or 0.6 percent, to $809.80 an ounce on the New York Mercantile Exchange. The price, up 2.8 percent this week. Platinum futures for April delivery rose $4.90, or 0.3 percent, to $1,837.90 an ounce. The metal up 1.9 percent this week.

In Indian market, MCX April Gold Futures opened the week at 20971 and rose 0.60% to 21098 after hitting a high of 21190 while June contract rose 0.29% to 21398 per 10 gms after hitting a high of 21470. MCX Silver March opened this week at Rs.50423 and ended higher by 0.98% to Rs 50740 after hitting a high of 52925.

Crude Oil
Crude oil surged this week on concern unrest in Libya will spread to other North African and Middle East energy exporters, curbing shipments. Oil prices may rise further next week as civil unrest in the region fuels concerns of prolonged supply disruption.

Crude oil for April delivery increased $2.51 to $104.42 a barrel on the New York Mercantile Exchange. The contract rose 6.7 percent this week.
Brent crude for April settlement rose $1.18, or 1 percent, to end the session at $115.97 a barrel on the London-based ICE Futures Europe exchange. The contract gained 3.4 percent this week, the sixth straight weekly increase.

Brent may advance past $119 a barrel as prices continually surge above ranges and moving averages, according to technical analysis by Glen Ward, head of retail derivatives at London Capital Group Holdings Plc. (LCG).

At MCX, Crude oil March contract rose from Rs.4485 to Rs.4731, up by 5.36% after hitting a high of 4739 whereas the April contract gained 4.84 per cent to Rs.4806 after hitting a high of 4813.

Base Metals
Copper prices at London Metal Exchange gained 1.5% this week as tensions mounted in Libya and Middle East causing fears that rising crude oil prices will stoke inflation and curb growth. At LME, three-month copper fell to $9,895 on Friday after a recent record high fo $10,190 per tonne.

Copper is well supported by global economic recovery signals and estimates of growing Chinese demand. Copper demand in China may grow by 7 percent this year on strong economic growth, according to Jiangxi Copper Co. Demand for copper is surging as the nation plans to build more homes, autos and appliances and upgrade power-grid networks. Copper touched a record $10,190 a ton last month after surging 30 percent in 2010 as the global economy recovered from the worst recession since World War II.

Futures on the Comex in New York gained as much as 0.5 percent to $4.5120 a pound, before trading at $4.5105. May- delivery copper on the Shanghai Futures Exchange rose 0.8 percent to end at 74,720 yuan ($11,378) a ton.

Lead in London gained 0.5 percent to $2,629.75 a ton, nickel rose 0.4 percent to $28,975 a ton and tin added 0.3 percent to $31,755 a ton. Aluminum was little changed at $2,615 a ton, and zinc was little changed at $2,511.25 a ton.75 levels, June contract prices rose marginally from Rs.452.50 per Kg to Rs.453.10 after hitting a high of 458.75.

Natural Gas
Natural gas for next-day delivery in New York declined to the lowest price in three months as scheduled gas shipment to the region’s residential users tumbled 17 percent.

Prices at the Transco-Z6 hub, which delivers gas to the New York City region, dropped 13 percent as gas delivery to households in New York state fell to 3.01 million dekatherms (about 2.93 billion cubic feet), down from yesterday’s 3.62, according to Bloomberg data.

Transco-Z6 prices declined to $4.3999 per million British thermal units on the Intercontinental Exchange, the lowest levels since Nov. 24. Gas at the Tetco-M3 hub, which also transports gas to the New York area, slid 3.2 percent to $3.9806.

Scheduled gas shipments for residential use in the U.S. declined 11 percent to 32.6 million dekatherms, the lowest level since Nov. 16, according to the Bloomberg data. Temperatures will be above normal in the U.S. East and Midwest through March 8, according to Commodity Weather Group LLC in Bethesda, Maryland.

In India at MCX, Natural gas March contract closed lower by 4.13 % to Rs.171.50, April contract prices declined from Rs.187.90 per Kg to Rs.177.50, down by 5.80 per cent.

Major Headlines
Commexes turnover has crossed Rs 100 trillion mark till Feb 15: FMC
The Forward Markets Commission (FMC) on Wednesday said the turnover at the commodity futures market crossed Rs 100 trillion-mark till February 15 of the current fiscal, buoyed by futures trading in bullion and energy items. The turnover stood at Rs 66.24 lakh crore in the same period last year.

Gold gains 1 percent, silver jumps on oil rally, Libya
Gold rose above $1,430 an ounce on Friday, while silver surged 3 percent to 31-year highs, as soaring oil prices fueled by widening clashes in Libya prompted investors to pile into safe havens.

Rapid growth of BRIC strengthened trade ties with low-income nations: IMF
The rapid economic growth of the BRIC — Brazil, Russia, India and China — has helped create the global commodity boom and strengthened its trade ties with low-income countries, the International Monetary Fund said.

Source: http://www.commodityonline.com

Stock Collection Notice - March 2011

Announcement!!!

With effect from 21st Feb 2011, customer MUST proceed with full payment upon booking and the 10% of booking payment is not allowed with immediate effect. The collection period of stock will be fixed at 3-5 days from the purchase order date. Customer are encouraged to collect the stock based on the date that stated on the Stock Collection Notice. 

Stock Collection Notice (Mar 2011)

Customers are advised to call our branches for stock reservation and collection based on the schedule below:

Gold Product (999.9 Gold Bar & Coins)

Purchase Order Dated	Stock Collection Period
1st – 31st Mar 2011	5 days from the Purchase Order Date

Gold Product (916 Gold Dinar Coins)

Purchase Order Dated	Stock Collection Period
1st – 31st Mar 2011	3 days from the Purchase Order Date

Silver Product

Purchase Order Dated	Stock Collection Period
1st – 31st Mar 2011	3 days from the Purchase Order Date

Note :

i) Customers MUST call our branch for stock reservation before any collection.

ii) Due to the security reason, Stock Collection only allowed during office hours, all collection after 7pm will not be entertained.

iii) Customer MUST made full payment before stock collection, no deposit of 10% will allowed after 21st Feb 2011.

iv) Original bank-in slip MUST be provided upon stock collection.

v) New Dealers are advised to get familiar with the stock collection method and don't hesitate to seek for the assistance from their Master Dealer if they have any doubt.

Stock Collection Notice (Feb 2011)

Customers are advised to call our branches for stock reservation and collection based on the schedule below:

Gold Product

Purchase Order Dated	Stock Collection Period
1st Feb – 6th Feb 2011	10th Feb – 12th Feb 2011
7th Feb – 13th Feb 2011	21st Feb – 26th Feb 2011
14th Feb – 20th Feb 2011	7 days from the Purchase Order Date
21st Feb – 28th Feb 2011	7 days from the Purchase Order Date

Silver Product

Purchase Order Dated	Stock Collection Period
1st Feb – 6th Feb 2011	10th Feb – 12th Feb 2011
7th Feb – 13th Feb 2011	21st Feb – 26th Feb 2011
14th Feb – 20th Feb 2011	7 days from the Purchase Order Date
21st Feb – 28th Feb 2011	7 days from the Purchase Order Date

Note :

i) Customers MUST call our branch for stock reservation before any collection.

ii) Due to the security reason, Stock Collection only allowed during office hours, all collection after 7pm will not be entertained.

iii) Customer MUST made full payment before stock collection, no deposit of 10% will allowed after 21st Feb 2011.

iv) Original bank-in slip MUST be provided upon stock collection.

v) New Dealers are advised to get familiar with the stock collection method and don’t hesitate to seek for the assistance from their Master Dealer if they have any doubt.

Stock Collection Notice (Jan 2011)

Customers are advised to call our branches for stock reservation and collection based on the schedule below:

Gold Product

Purchase Order Dated	Stock Collection Period
16th Jan – 25th Jan 2011	7th Feb – 12th Feb 2011
26th Jan – 31st Jan 2011	13th Feb – 19th Feb 2011

Silver Product

Purchase Order Dated	Stock Collection Period
16th Jan – 25th Jan 2011	7th Feb – 12th Feb 2011
26th Jan – 31st Jan 2011	13th Feb – 19th Feb 2011

Note :

i) Customers MUST call our branch for stock reservation before any collection.

ii) Due to the security reason, Stock Collection only allowed during office hours, all collection after 7pm will not be entertained.

iii) To make the process faster and smoother, customers are encouraged to make full payment through bank before stock collection.

iv) Original bank-in slip MUST be provided upon stock collection.

v) New Dealers are advised to get familiar with the stock collection method and don’t hesitate to seek for the assistance from their Master Dealer if they have any doubt.

MASSIVE gold demand continues to break records in China

In amongst all the comment and analysis regarding the effects of the various Middle Eastern and North African power struggles on the gold price, the latest news on Chinese domestic gold demand has almost passed by unnoticed.  According to Peer Hickson, the global commodities strategist for gold-focused Swiss Bank, UBS, in a report by Bloomberg, Chinese gold demand hit no less than 200 tonnes in the first two months of the current year.  If that is extrapolated over a fill year - and the gold purchasing momentum caused by inflation-nervous purchasers suggests that there is even a possibility that demand could rise - this would mean that the Chinese consumer could be in line to buy close on 50% of global mined gold (and this does not include what the country's Central Bank may be salting away as well.)

The 200 tonnes in two months figure is MASSIVE.  We recall that only a couple of months ago we were reporting that Chinese gold imports in the first 10 months of 2010 totalled 209 tonnes, itself a 500% increase on the previous year.  It now seems that demand by individuals is reaching almost frightening levels.  Not only is jewellery demand seen as being up by 70% year on year, but investment demand (coins and bars as opposed to jewellery, which has been the main outlet for gold purchases in the past) is also coming on strongly from virtually nothing a couple of years ago to a WGC estimate of close on 180 tonnes in 2010.  If the pace of growth continues investment demand alone could reach as much as 300 tonnes in 2011!

If the Chinese Central Bank is absorbing domestic production, as many believe then total Chinese demand this year could soar past India's.  The potential is almost beyond belief.  Indeed Chinese offtake is more than matching any disposals from gold ETFs, and with the continuing justified worries about inflation in China the momentum is likely to continue regardless of the gold price elsewhere.

This area of demand is something which has only really come to life in the past two years, and it seems that many observers and analysts are just not feeding this information into their predictions.  As we've noted here beforehand this kind of demand level - particularly as it is not from a population which trades in and out on price, but holds its bullion and jewellery as insurance against really hard times - does tend to limit downside risk in the gold market.

But what of the Chinese Central Bank?  There is evidence that China is positioning itself to make the yuan at least a part of any new reserve currency package which might replace the still-declining U.S. dollar in global trade.  There is the strong suggestion that it needs to build its gold reserves as backing for this at least to levels approaching those of the biggest European Central Banks, which suggests a doubling of Chinese gold reserves at the very least in a relatively short space of time.  We know that China has been buying on gold price dips as various officials have confirmed this in the past, although we have no idea of the volumes involved.  Maybe the country will announce another revaluation of its reserves in the near future, even though it tends to be cagey about such announcements as it knows any significant increase will affect the global gold price and while it may be soaking up excess gold it still wants to buy it at what it may see as bargain prices!

Source: http://www.mineweb.com

Gold and silver: The states' new currency?

Why are so many state legislators beginning to call for issuance of a form of gold money?  The Constitution prohibits states from coining money but allows them to make “gold and silver Coin a Tender in Payment of Debts.” By prohibiting everything except “gold and silver Coin” the Constitution clearly considers gold and silver coinage to be legitimate, no matter who issues it.  States haven’t issued currency in any form for more than a hundred years. So why now? Disgust is probably the answer. Various state legislators are disgusted by the federal government’s promiscuous dollar-printing. Accordingly, legislators in a dozen states are contemplating legislation to issue gold or silver-based currencies, including Utah, South Carolina, Virginia and New Hampshire.  The transcript of the debates in the original Constitutional Convention shows that the attitude of the Founders toward paper money was one of contempt. One delegate, Roger Sherman, called for the insertion of an absolute prohibition against states issuing their own paper money.  Sherman’s argument prevailed, as the Founder’s decided that the states would not possess the power to “emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts” making these prohibitions absolute…  As for the federal government, the earliest drafts of the Constitution included language permitting the federal government to issue unbacked paper money. But this language would not survive the final draft.  Many of the Founders objected strongly to this power. The objections were summed up by delegate Oliver Ellsworth, who sought to “shut and bar the door against paper money.”  “Paper money can in no case be necessary,” Ellsworth argued, “The power [to issue it] may do harm, never good.”  Since most of the Founders agreed, the federal government was also denied the power to issue non-convertible paper money. The federal government mostly operated within these constraints – the main exception being the Civil War, when saving the Union took precedence over all other considerations.  But for most of American history, dollars have been convertible into gold or silver. It is a 20th century innovation to have non-convertible currency. In 1932, FDR denied US citizens the right to convert their dollars into gold by US citizens. Then, in 1971, Richard Nixon denied foreign central banks the right to convert their dollars into gold.  On August 15, 1971, Nixon declared:  I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold… Now, what is this action – which is very technical – what does it mean for you?  Let me lay to rest the bugaboo of what is called “devaluation.”

If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today. (Emphasis supplied.)  President Nixon called the suspension “temporary,” but it has been anything but temporary…and the dollar has suffered as a result.  The dollar today is worth less than a quarter was worth in 1971. And yet, Washington has been curiously unresponsive to the suffering brought by Nixon’s failed promise. Why? Because Washington, itself, has been a primary beneficiary of monetary depreciation.  The federal government spent $15 billion from 1789-1900. Not $15 billion a year. $15 billion cumulatively. Uncle Sam will spend $10 billion per day in 2011. The federal government spends more every two days than it did altogether for more than America’s first century. Although these sums are not adjusted for inflation, they give a correct impression of the magnitude of the change from what our Founders set forth and our early statesmen delivered.  How does Washington get its hands on so much money? Three ways. Taxation, borrowing and printing dollars. The third mechanism is usually the easiest road…at least for a while. Almost no one complains about printing dollars because almost no one feels the resulting consequences directly or immediately.  The power to print money at whim is wrong. It is toxic to our personal and national wellbeing. And it is unconstitutional.  No wonder that legislators in twelve states are considering issuing their own gold-based currencies. By doing so, these states are challenging the federal abuse of an unconstitutional power – challenging the issuance of unhinged paper money.

Federal officials should take these state initiatives as a cue. Federal officials have sworn to preserve, protect and defend the Constitution of the United States. Let them take their oath seriously and restore the convertibility of dollars to gold.

Source: http://www.csmonitor.com

New Floor For Metal Prices To Be Established

February was a short month, and it’s been a wild ride. And it’s almost certainly going to be another wild month on the Libya front (not to mention Egypt, Tunisia, Iraq, Yemen, etc.). While we saw chaos erupt in virtually every Mideast country, the return of stock market volatility, oil spike, and several other things to get the pulse racing, February for gold was just a trailer.After a lull of almost two decade, when Gold started its recent bull run towards the tail end of the last decade when it was trading below $300 per ounce, since then, it has gone up five folds to over $1400 per ounce. And now, once again, we will witness the big show in March. While the price of gold is already appearing as if it is set up for another bull run, it is not from any sophisticated technical analysis. It is merely examining the spot gold price and observing the similarity of patterns that seems to be matching the gold price’s rise from the consolidations of last summer. While we have witnessed gold’s price gyrate up and down … just now, gold is headed for new highs.

If we look at the nature of the European Financial Stability Fund at stake, in the US, a major disappointment on jobs and an epic fight over the debt ceiling, its all going to make the budget stuff look like child’s play. And, the likelihood that the Mideast stuff will continue to spiral, and you’ve got the makings of what’s going to be an epic, it will be paramount for Gold and Silver. Note that the price is just now making a fourth attempt in as many months to penetrate the new high price set in as many months. Last summer saw a similar situation, where the price made about five attempts before finally setting a new high on or about September 1. This consolidation also lasted about four months. Then, when the price set a new high in September’s 2009, the “Gold Bull Run” was off and running for the fall. “The new floor for gold and silver is about to be established in the coming months” states Ron Fricke president of Regal Assets “September 2009 we saw gold break through the resistant level of $1000 an ounce and since this high it has not pulled back below $1000 an ounce, expect the same to happen shortly with both gold and silver prices”

Are there any other factors that may help an investor allay fears of a pending crash in the price of gold, rather than starting a new bull run? Just take a look at inflation of Paper Currencies. The markets interpret the Federal Open Market Commitees previous pronouncements as inflationary for paper currencies, is expected to continue until there are some indications of inflation being reined in. This currency inflation is a fundamental driver for the precious metals. Plus, there is a rising middle class as the world’s emerging markets continue to grow and gain parity with the world’s developed markets. The size of the world’s middle class growth is the largest in the Asian economies and of a scale that the world has never before seen. Asians have a particular affinity for the precious metals due to their history and culture of precious metals being a store of wealth. This buying by emerging middle classes provides a strong base of support for precious metals prices. And lastly, the peak Gold is coming due to higher costs and lower grades. Barrick Gold’s chief executive Aaron Regent already declared a state of “peak gold” in 2009. The thesis is that gold mining is difficult, and the challenges of increasing costs, lower gold grades, and difficult operating environments all coalesce to decrease gold production supply. This “peak gold” dynamic is ensuring that the new production supply of precious metals will be constrained in the future.

While some of the market’s reactions to the fundamental drivers affecting gold prices are currency inflation as the prime driver, buying from Asia will support the price during corrections. Future gold supply is constrained by peak gold. With all these factors affecting gold prices, is it any wonder that a significant rise is in store?

Finally, with massive withdrawals from savings banks already occurring in different areas of the world and being investing it in gold, just over the past week in Korea, a total of 490 billion won was withdrawn from 98 savings banks Monday, despite the financial regulator’s assurance that there will be no more shutdowns of such institutions. The withdrawals came after the FSC confirmed that it will avoid suspending operations of additional savings banks unless in an emergency, such as a bank run.

In many ways this is another example how global banking crisis will be affecting gold, since we are currently in the midst of, born out of faulty loans made in a global housing crisis. Another prime example of financial contagion, something we are seeing more and more of in our global economy—an economy that is deeply interconnected at this point; no event occurs in isolation, and a crisis in one part can spread to a crisis in other parts.

While fear might have been the catalyst to the gold record high last year, with weekly chaotic crisis hitting the global economy, gold will continue to be on the rise! In fact, it just hit a new five-week high. Demand for silver is becoming the second most precious commodity, moving up as fast as oil–oil is marching up again, now over a $100 a barrel. Agricultural commodities have gone ballistic in price over the past year and in some areas of the world, “gold fever” is absolutely exploding, says Peter Schiff, who has always been spot on, adds, buy silver now don’t wait for hyperinflation! Silver is going to explode to at least $100. Ultimately, if global political unrest is in the cards – and if new forms of government will emerge, perhaps in the form of new regional governments like the Eurozone, or non-state networks like Hezbollah and cyber-networks like Facebook, it would again strengthen the case for precious metals—as currencies introduced by non-state networks will eventually be tied to precious metals.

Source: http://goldcoinblogger.com

Is gold poised for breakout?

After a month or so in the doldrums after hitting a record high in December, the Middle East/North Africa (MENA) unrest has launched the gold price towards yet new highs, and at the time of writing the yellow metal was trading just above $1,430 an ounce in Europe.

In OTC trading in the U.S. yesterday a new all-time high had been breached temporarily.

Some observers, notably Julian Phillips of Gold Forecaster who is a regular writer on Mineweb, sees the latest move in the gold price as being a long-awaited breakout and now expects to see a move to new highs between $1,500 and $2,000 this year with higher prices thereafter. 

Other pro-gold commentators will be even more bullish, but there will also be plenty of naysayers out there They just cannot recognise that the movement in the gold price defies what is nowadays deemed as normal investment logic because gold is hard-wired into the psyche of a large part of the world's population as the perennial wealth store and a hedge against bad times.  When this coincides with external events like the MENA ‘uprisings' the pressure pushing the gold price up can be extremely strong.

Gold demand is currently being skewed by burgeoning offtake in the East - notably in China and India and other South and Far Eastern nations - where a sea change has been taking place in the wealth and investment potential of the population.  This has been  brought on by enormous advances in GDP and a corresponding growth in the numbers of people entering the potential gold-buying market, and in their disposable incomes.

Probably nowhere is this being seen to more effect than China.  Anecdotal reports indicated a tremendous surge in gold buying ahead of the Chinese New Year in early February - and by all accounts this is continuing after the New Year as the population is becoming increasingly nervous about inflation, which Chinese economists, seriously worried about the ‘export' effects on prices of the U.S. Quantitative Easing programs, view as Bernanke-inspired.  There are reports of long lines developing again at shopping outlets selling gold and gold jewellery with demand running hugely ahead of the same time last year - a year in which Chinese demand reached record levels.

While China seems thus to be underpinning the gold price with ever growing frantic demand there is evidence, though, that other Asian markets are a little more cautious on the higher prices - perhaps in part because for the most part they are more established gold markets while China is much more of a new player.  Even so, Asian gold buyers do have a penchant for hanging on to their gold and only selling in real necessity - it is not primarily a profit-taking trading market as seen in much of the West.

So at the moment we have perhaps a higher proportion of Western investors trading in and out of gold, hence its volatility and the limitations which tend to mitigate highs as profit taking comes in - although it does seem that the really big investors, like Soros and Paulson, are largely hanging on to their precious metals and not liquidating even a part of their holdings on the current high prices.  Thus we have seen holdings in the SPDR Gold Trust ETF continuing to fall, although there is evidence in the past few days that the rate of decline has been easing and maybe we'll see a reversal in the next week or so dependent on global events.  

The advances and retreats in precious metals prices in recent months have largely been on the perceptions of how well the U.S. and European economies are recovering from recession.  As things are seen to improve the safe-haven appeal falls away and prices dip, and also better investment opportunities are seen elsewhere, although recent stock market weaknesses may mean this is a false perception.  

But when adverse economic figures appear the reverse happens and interest returns to precious metals.  Now, the current MENA troubles are putting serious pressure on the oil price and high oil prices are seen as potentially depressing the Western economies, hence the gold price surge.  Should things quieten down in the MENA countries then gold and silver could retreat again.  If the unrest spreads - notably to Saudi Arabia - then all bets are off and the sky could be the limit.
Source: http://www.mineweb.com