By Nicholas Larkin - Feb 25, 2011 8:01 AM GMT+0800 Gold, trading near a record high, may climb as violence in Libya and concern that inflation will accelerate boost demand for an alternative asset, a survey found. Sixteen of 20 traders, investors and analysts surveyed by Bloomberg, or 80 percent, said the metal will rise next week. Four predicted lower prices. Gold for April delivery was up 1.8 percent for this week at $1,414 an ounce at 11 a.m. yesterday on the Comex in New York. Futures reached a record $1,432.50 in December.
“Unrest in Libya and the potential for it spreading to other key Arab areas is fueling the advance,” said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp.
Libya is the latest country in the region to be rocked by protests that toppled presidents in Tunisia and Egypt this year. Opponents of Libyan leader Muammar Qaddafi consolidated control over the oil-rich east while he clamped down on Tripoli, using tanks to block highways and security forces to attack residents, witnesses said. Oil surged to $100 a barrel in New York for the first time in two years.
“The situation in Libya continues to create jitters over oil supplies, which in turn could stoke inflation,” James Moore, an analyst at TheBullionDesk.com in London, said in an e- mail. Some investors buy gold as a hedge against rising prices. The attached chart tracks the results of the Bloomberg survey, with the red bars derived by subtracting bearish forecasts from bullish estimates. Readings below zero signal that most respondents expect a decline. The green line shows the gold price. The data are as of Feb. 18. The weekly gold survey that started more than six years ago has forecast prices accurately in 200 of 351 weeks, or 57 percent of the time. This week’s survey results: Bullish: 16 Bearish: 4 Neutral: 0
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
Source: http://www.bloomberg.com
Friday, February 25, 2011
Quantum Jump For Metals As Gaddafi To Destroy Pipelines To Mediterranean
Gold up $1410.00… Silver over $33.00… Oil over $94.00… and intensifying against another hostile global dilemma! As the world awaited speech from Gaddafi, “vowing to fight the growing rebellion until his “last drop of blood,” today, he ordered security services to start sabotaging oil facilities. They will start by blowing up several oil pipelines, cutting off flow to Mediterranean ports. This sabotage, according to the insider, is meant to serve as a message to Libya’s rebellious tribes: It’s either me or chaos.” Sources tell Time’s Robert Baer: “the already terrible situation in Libya will get much worse. Among other things, “Qaddafi (we say, Gaddafi, you say Qaddafi,) has unequivocally declared his intention to massacre his own people,” said Shadi Hamid, director of research at the Brookings Doha Center in Qatar. And, to cut off, even partially, the US military and naval Persian Gulf forces … or to cut off the flow of nearby pipelines, the world will feel a major economic strap.
In Washington, U.S. Secretary of State Hillary Clinton said the Obama administration is watching events with “grave concern,” and called on Libya to “end the violence.” She said the U.S. will take “appropriate steps,” which she did not describe.
Hardly anyone in Libya could imagine standing up to, let alone overthrowing, Qaddafi just a few weeks ago, but Tunisia’s Zine El Abidine Ben Ali and Egypt’s Hosni Mubarak turned out to be much more vulnerable than anybody expected. The fear that so grips the hearts of the Middle East’s peoples is breaking…this is the quantum rise that will take us for a ride in oil and Gold. However, “While I do believe gold and oil offer both short and long-term investment opportunities,” says Sprott Resource Corporation, I am not depending on the problems in the Middle East alone to move prices higher. Governments continue to print money, which should support gold prices for the foreseeable future, and there seems to be no end of course, in sight for the world’s thirst for oil.” “As long as the central banking system stays intact globally gold and silver will rise indefinitely” says Ron Fricke president of Regal Assets in a recent conference.
“During such times of geopolitical tensions and economic crisis hitting countries around the world,” says noted investment advisor Marc Faber, “it is wise to hold gold and silver.” Faber, who is famous for his prediction of the US stock market crash in 1987, said that commodities, especially gold and silver will be the wisest investment options for people in the wake of rising inflation and troubled economies around the world. Gold and silver would continue to provide safety as increasing demand for oil in emerging Asian economies and recovering US demand could lead to increasing geopolitical tensions in the Middle East.
He also said that the US dollar could rebound in the next few months, but in the long term it would depreciate as the Fed is likely to expand its money-printing measures beyond the $600 billion already announced up to the middle of this year.
The $64,000 question is, since oil has been spiking on fears of a Libyan disruption, and today, the country declared force majeur, effectively canceling oil contracts, will it affect gold? Contrarians are betting that it will take the yellow metal into high territory. The HGNSI currently stands at 45.3%, just half of its all-time high of 89.6%. In other words, despite gold being only a few dollars shy of its all-time high, the average gold bug is still allocating more than half of his gold portfolio to cash. That doesn’t guarantee that gold will go up, of course. But it does mean that there is a lot of sideline cash ready at a moment’s notice to be shifted into the gold market to propel gold higher.
This week, the World Gold Council (WGC) said, Gold will be interesting to watch as a barometer of good and bad government policies pop its face. In countries such as China, where the embrace of free market principles has ushered in economic growth, gold demand levels should remain strong. This is what makes today’s gold market different from the 1970s. Back then, today’s emerging market powerhouses, such as China and India, had no global economic impact. Now, these countries aren’t just at the forefront of the gold market, they are global leaders in economic growth. As a note, it is by no coincidence that 30 years after Deng Xiaoping took office in China and began instilling the concepts of free markets; the country has grown to become the world’s second-largest economy behind the U.S.
In reality, gold is standing the test of time once again! In terms of its purchasing power during other known human history, war, political unrest, and financial dilemmas, it has caused people to turn to Gold as value store. And, while the global economy runs on oil, and much of that oil gets shipped through seven narrow straits, when there’s even a rumor of a choke point getting blocked, people will turn to gold…And there have been many rumors in Egypt.
Source: http://goldcoinblogger.com
In Washington, U.S. Secretary of State Hillary Clinton said the Obama administration is watching events with “grave concern,” and called on Libya to “end the violence.” She said the U.S. will take “appropriate steps,” which she did not describe.
Hardly anyone in Libya could imagine standing up to, let alone overthrowing, Qaddafi just a few weeks ago, but Tunisia’s Zine El Abidine Ben Ali and Egypt’s Hosni Mubarak turned out to be much more vulnerable than anybody expected. The fear that so grips the hearts of the Middle East’s peoples is breaking…this is the quantum rise that will take us for a ride in oil and Gold. However, “While I do believe gold and oil offer both short and long-term investment opportunities,” says Sprott Resource Corporation, I am not depending on the problems in the Middle East alone to move prices higher. Governments continue to print money, which should support gold prices for the foreseeable future, and there seems to be no end of course, in sight for the world’s thirst for oil.” “As long as the central banking system stays intact globally gold and silver will rise indefinitely” says Ron Fricke president of Regal Assets in a recent conference.
“During such times of geopolitical tensions and economic crisis hitting countries around the world,” says noted investment advisor Marc Faber, “it is wise to hold gold and silver.” Faber, who is famous for his prediction of the US stock market crash in 1987, said that commodities, especially gold and silver will be the wisest investment options for people in the wake of rising inflation and troubled economies around the world. Gold and silver would continue to provide safety as increasing demand for oil in emerging Asian economies and recovering US demand could lead to increasing geopolitical tensions in the Middle East.
He also said that the US dollar could rebound in the next few months, but in the long term it would depreciate as the Fed is likely to expand its money-printing measures beyond the $600 billion already announced up to the middle of this year.
The $64,000 question is, since oil has been spiking on fears of a Libyan disruption, and today, the country declared force majeur, effectively canceling oil contracts, will it affect gold? Contrarians are betting that it will take the yellow metal into high territory. The HGNSI currently stands at 45.3%, just half of its all-time high of 89.6%. In other words, despite gold being only a few dollars shy of its all-time high, the average gold bug is still allocating more than half of his gold portfolio to cash. That doesn’t guarantee that gold will go up, of course. But it does mean that there is a lot of sideline cash ready at a moment’s notice to be shifted into the gold market to propel gold higher.
This week, the World Gold Council (WGC) said, Gold will be interesting to watch as a barometer of good and bad government policies pop its face. In countries such as China, where the embrace of free market principles has ushered in economic growth, gold demand levels should remain strong. This is what makes today’s gold market different from the 1970s. Back then, today’s emerging market powerhouses, such as China and India, had no global economic impact. Now, these countries aren’t just at the forefront of the gold market, they are global leaders in economic growth. As a note, it is by no coincidence that 30 years after Deng Xiaoping took office in China and began instilling the concepts of free markets; the country has grown to become the world’s second-largest economy behind the U.S.
In reality, gold is standing the test of time once again! In terms of its purchasing power during other known human history, war, political unrest, and financial dilemmas, it has caused people to turn to Gold as value store. And, while the global economy runs on oil, and much of that oil gets shipped through seven narrow straits, when there’s even a rumor of a choke point getting blocked, people will turn to gold…And there have been many rumors in Egypt.
Source: http://goldcoinblogger.com
Tuesday, February 22, 2011
Gold at $1400 again, silver at 31 year high. Where next?
After the early January sharp setbacks, which had many observers yet again shouting ‘the bubble is bursting', gold and silver have made strong recoveries with the gold price again touching $1400 (at the time of writing) and silver breaching a new 31-year high. Other precious metals have been benefitting too with palladium hitting a new 10-year high and platinum trading up also.
The gold price advance will have been helped by the unrest in Arab states in the Middle East and North Africa which is creating huge uncertainty in the region, as well as creating global nervousness. Certainly gold purchases have been on the increase in the Middle Eastern souks, but it is probably continuing high Asian demand, particularly in India and China which is the true driver of the market at the moment. This is particularly relevant given there has been substantial disinvestment from the world's biggest gold ETF, SPDR Gold Trust (GLD), where gold holdings have fallen to a nine-month low, although still very substantial at 1,223 tonnes. Investment in silver ETFs per contra seem to be rising. However the SPDR Gold Trust sell-off seems to be stabilising and as steadier heads prevail may start to pick up again once the implications of current global developments really begin to sink in.
Much of the SPDR Gold Trust disinvestment appears to be because investors in the West feel the general stock market will continue to offer better returns, although the Arab situation should be beginning to engender a note of caution here. If the flow of Middle Eastern oil is interrupted, or oil prices rise substantially, this could have a devastating effect on markets, despite their being buoyed up by governmental/central bank, Quantitative Easing programmes. Remember the OPEC oil crisis of 1973/74 and the corresponding market crash! The possible change to more hostile-to-the-West governments among the major oil producers in the region should ring a few warning bells.
Meanwhile buying of gold and silver bullion in the East currently seems to be soaking up any metal which may be being sold off by investors in the West, which is underpinning the precious metals markets at the moment. Silver in particular seems to be in a short squeeze with backwardation (when futures prices are lower than current ones) still in evidence. Indeed some observers caution on silver reckoning it may be overbought, but if the squeeze continues there could yet be further gains to be seen.
The gold silver ratio at the time of writing is 41.95, down from over 60 only a few months ago. This gives a little more credence to those predicting a $50 silver price, although for this observer this would seem unlikely without a further substantial rise in gold (which could be on the cards if momentum picks up further). $1400 gold is a bit of a tester here - if gold can move through this level and stay above it, then a new high in the mid-$1400s may not be too far away.
Source: http://www.mineweb.com
Why Are Gold & Silver Breaking Out?
Reflections on what could happen
We are living in a world of consequences, all of them unforeseen, yet caused by the faulty structure of the financial world laid down decades ago. The 'credit crunch' that rippled into the banking crisis then sovereign debt crisis was a reflection of greed and the 'live now, pay later' way of life in the developed world. Each of the consequences of each stage of these crises was unforeseen. Yet each was a consequence of the sanctioning of debt leverage in all walks of financial life.
Energy prices are much higher than pre-credit crunch levels and set to go higher. At that time, so much was written about ensuring that oil supplies needed to accommodate both the developed world and the rapidly emerging Asian world, which accounted for half the world's population. Have oil supplies been expanded to accommodate such Asian growth? No they haven't! So there is an oil crisis in the pipeline. The governments of the oil producing Middle East have long been secured by the main developed world powers to protect the vital interest of oil supplies. The fact that they were corrupt and kept their own people in poverty was ignored. It was a matter of time before that crisis erupted. Food and energy inflation provided the trigger. Will the new governments in these countries continue to support the dollar pricing policies on oil or will they accept all currencies and review their priorities concerning which customers to favor. Will we see prices like $145 if Libya falls [they supply 2% of global oil supplies]? If Bahrain falls, will it bring down the eastern area of Saudi Arabia? If so, the shape of the oil world will have to be re-sculptured. In turn the economic future of the developed and emerging world will change and cause pressures between the different trading blocs that have not even been contemplated. [In our series on "Financial Earthquakes' featured in our Gold Forecaster and Silver Forecaster newsletters we looked at several areas of potential, global, economic, structural crises we might see in 2011] 2011 is already the most dramatic year of this century and still has ten months to go.
Changes are a' coming…
It is in our nature to want our national, political, financial and economic environments not to change, leaving us to get on with our lives in a somewhat myopic way. Change when it does come is surprising every time. It shouldn't be but we tend to be so focused it always is. As with the credit and subsequent crunches we tend to feel everything will come right eventually, it's just a case of waiting. Well it hasn't and here we are suffering the next set of structural crisis consequences.
So what should we do?
- We, at Gold Forecaster, have always followed a policy of extrapolation, taking the events and structures of today and taking them forward to the future. Hope is not part of this exercise, only realities that are present and real now.
- We do not wait until statistics from the past confirm our viewpoint. We need to be able to take the factors unwinding now, knowing that statistics will confirm our conclusions later. This takes us to the front from the back of the queue. For instance we were confirming central banks had turned sellers of gold nearly two years ago. It is now being confirmed by statistics delivered now.
- We need the correct perspective in order to weigh the different market influencing factors in a balanced way. For instance we don't see gold in a 'bull' market, but paper currencies in a 'bear' market after their 'bull' market last century from 1971.
- We need to accept that the gold and silver markets are now global markets. Asian markets are the most vigorous in this regard so they are now in the center of the market. They are investors who do not buy for profit. In the developed world investors buy for profit, but are having a diminishing effect on the gold price itself. Yet western investors continue to believe they are the main influence on the gold price. They will sincerely believe that the level of U.S. interest rates will dictate the future of gold prices. The average Asian buyer doesn't even know what these are. Yet, it is the Asian buyer that is having and will have the greatest impact on the gold price.
- Our last two articles on Technical analysis highlighted the dwindling influence of Technical factors on the gold price too. The fundamentals are the main influence with technical factors clarifying short-term moves.
- We must accept that the world financial climate has darkened and that the storms of consequences are fundamentally destructive. Like adjusting to winter from summer our expectation have to be tempered by this reality. This allows us to protect ourselves from the coming storms. Where we are optimistic, we have weighed the pertinent realities before reaching that conclusion. We then act on that. We may well find that the realities of crises have given us tremendous opportunities both for profit and to protect those profits.
How will all this affect the gold and silver markets?
The fulcrum of the gold and silver markets at the moment remains rapidly growing Asian demand. Following this is the inability of the supplies of gold and silver to accommodate this growing demand. A factor that will grow in the days to come will be the change in the developed world to holding gold rather than selling it when prices indicate a correction. The corrections we have seen in the last few years have shortened and become shallower than the previous one. Just as central banks in the developed world have stopped selling, [but not yet turned to buying] so private investors are holding far longer than has been the case in the past. Asian demand is totally different in that investors there buy to hold as financial security, just as we used to buy houses. We expect to see this trend start to grow in the west as the developed world declines economically and the East rises.
Source: http://www.financialsense.com
Saturday, February 19, 2011
How Much More Demand Can Silver Handle
The numbers for silver demand are starting to make some market-watchers nervous. The U.S. Mint sold over 6.4 million silver Eagles in January, more than any other month since the coin’s introduction in 1986. China’s net imports of silver quadrupled in 2010, to 122.6 million ounces, roughly 13.7% of global production. Meanwhile, mine production can’t meet worldwide demand; the only way demand gets fulfilled is from scrap supply.
That is some very hungry demand. Which raises the question, how long can this pace continue?
This is important for various reasons, starting with how demand contributes to price. If demand falls off, our investments could, too.
While I’ve discussed the concern regarding the lack of supply before, which has its own implications for the silver market, let’s focus on investment demand. Frankly, is there room for it to continue to grow? After all, how long can investors continue to set records?
There are a number of ways to measure this – the amount of money available to invest, its percent of total financial assets, its contrast to demand in the last bull market, etc. – but I think the bottom line to answering the question is to compare the biggest silver investments to some popular equities. If they rival that of the stocks we always see on the news and analysts constantly talk about and every fund manager wants to own, then it might be reasonable to assume demand could be nearing its pinnacle.
So how do the world’s largest silver ETF and one of the biggest silver producers compare to the more fashionable equities?
The largest silver ETF, iShares Silver Trust, has net assets of $9.6 billion (as of February 4). This pales in comparison to the more popular stocks trading in the U.S. In fact, SLV has roughly 3% the market cap of Apple. It would have to grow over 43 times to match Exxon Mobil.
Pan American Silver, the largest pure silver producer trading on a major U.S. exchange, has a market cap of $3.72 billion. This is 4.7% the size of McDonald’s. The market cap would have to increase more than 53 times to match Walmart. It is over 62 times smaller than Microsoft.
This isn’t to suggest SLV and PAAS will match the market cap of these other companies, but clearly the masses are still demanding much more of them than the biggest of silver’s investment vehicles.
So how much more demand can silver handle? As much as it takes to make it the household name I’m convinced it will be before this is all over. When SLV is a favorite of fund managers. When Silver Wheaton is a market darling of the masses. When Pan American is Wall Street’s top pick for the year.
Imagine what those bars on the right will look like when most everyone you know is talking about poor man’s gold. The rise could be breathtaking.
Remember that silver rose over 3,646% from trough to peak in the last precious metals bull market; it’s up about 630% in our current run. A return matching the 1970s advance would push the price to $152. This price level is further supported by the fact that this is about where it would be when inflation-adjusted for its 1980 peak.
When you look at the potential growth in market cap of the world’s biggest silver investments, it becomes easy to view any downdraft in price as nothing but a buying opportunity. I know I do.
Source: http://news.silverseek.com
Wednesday, February 16, 2011
Inflation In Both China And India To Bolster Gold Prices
No Pedal to the Metal! Gold to gain steam! Inflation in India and in neighboring China, estimated to be at a 30-month high, will help gold to jump ahead once again! Traders insist that the stage is set for a conducive environment that will push bullion prices higher. Some analysts forecast that gold will be subject to a tug-of-war between profit-minded sellers and bargain-hunters who will buy the metal on dips, a combination that promises to trigger volatility.“The bullishness that has been shown by China in buying and hoarding gold will have a big effect on the global gold market,” said Dhaneshwar Jadhav, a bullion retailer in Mumbai. He went on to add that inflation in China in November 2010 had jumped to a two-year high of 5.1%, dragging year-on-year growth up to 9.6%.
“There is news that China’s wheat crop is under threat from below average rainfall,” said Chandrasekhar Bhatt, bullion analyst at a broking firm here.
“Wheat flour prices are ruling 16% higher than a year ago, driven by fears of drought. Though the Chinese government has announced a $1.96 billion relief package, food prices are bound to touch record levels. And that will set the stage for an upward revision in the price of gold,” he added.
For some time now gold prices have been on a roller coaster, buoyed by the turmoil in Egypt. According to some experts, the high – 18.5% – rate of inflation in Egypt has been termed a major factor in the uprising that dislodged Hosni Mubarak. Moreover, if China reports a high inflation number as is expected, the spike in gold will follow, insist traders.
Trying to combat inflation in the best way possible, China raised its lending and deposit rates by 25 basis points each around the Chinese New Year. This is a second increase in just over a month. The move was meant to tame inflation.
Most analysts are expecting at least one more rate hike, closer to the second quarter of the year. The move has raised concerns in the market that a slowdown in China’s economy could have a ripple effect. Soon enough and a heartbeat after the rate hike was announced in China, oil prices slumped. Analysts say it is a pointer and could cool China’s economy.
Inflation in India
With India too battling with high levels of inflation, many traders have forecast that all of this has profound implications on the price of gold. Gold will soon gain steam in the international markets, as a higher-than-expected inflation readings expected from China will prompt a rush into the metal,” said a bullion analyst at an international broking house here.
In a note to his clients, Paulo Gracias of Reliable Gold Securities said that fears of inflation had driven demand for gold as a retail investment in China, with the country reportedly importing over 200 tonne over the last three months.
As inflation continues to increase, the buying of physical gold by the Chinese will send the price of gold skyrocketing, he said, advising customers to stay invested. Moreover, with India looking to raise key interest rates after its December inflation reading jumped to 8.43% versus a year ago, traders insist gold is being used as a store of value by consumers in India to protect against rising inflation. Official data showed that food prices surged 18.3% in the week ended December 25, the highest rate since July, as onion prices soared 80%.
“Strong industrial growth in urban India and expansion in the rural market is literally putting cash into farmers’ hands. Though better harvests will ease inflation in the coming months, there is concern that tightening by the central bank in India, the Reserve Bank of India is a signal that India will join China in moves to dampen growth rates. Both the economies are worried about overheating,” said a precious metals analyst at DBS Bank.
Traders also point to record imports of gold, which they maintain is another case in point. India is said to have imported around 800 metric tonnes from 557 tonnes in 2009, and exceeded the previous all-time high of 769 tonnes in 2007, according to Ajay Mitra of the World Gold Council. He reportedly said that price was no longer a factor – “Our assessment is that demand will continue to be strong”, for investment demand for gold in India grew faster than the 62% gain in jewelry demand in the same period.
Mitra noted that it has been demand driven with investment in mind. “Though a lot of consumers in India buy gold in the form of jewellery, the core proposition really is security for the future, which is the investment angle for buying into gold,” Mitra added.
Moreover, with the country going in for its annual budget at the end of February, the government has already set the ball rolling. On Friday, the government liberalized norms for the import of precious metals – gold, silver, platinum and palladium – by select nominated agencies.
Inflation is coming our way, make no mistake about it
Inflation has soaked up the dollar’s purchasing power, forcing millions of Americans to slash discretionary spending. Furthermore, the U.S. Federal Reserve, through its lax monetary policy, has been exporting inflation to the rest of world. The resultant price increases in commodities have hit the wallets – not to mention the bellies – of many consumers, including those in the United States. A particular note about the U.S.–related factors: they will become more influential as the year progresses. The U.S. faces an extensive political debate about debt reduction this year that begins in earnest with President’s Obama’s rollout of his fiscal year 2012 budget request to Congress this week. All agree that government spending must be trimmed, but negotiating real reductions will be challenging. If the U.S. can’t meaningfully cut the federal budget, the failure will become more apparent in the third quarter, as politicians scramble to make a deal before the federal government’s fiscal year begins on October 1, just when the Indian wedding season demand for gold is ramping up. In regards to the 2012 budget Ron Fricke president of Regal Assets stated “The US administration submitted their budget for 2011 and with $3.7 trillion in mind it is up $1.54 trillion from 2010 clearly showing the flailing economy and no sign for recovery”
Unless the U.S. experiences a recovery so strong that increased government tax revenue will ease deficit concerns or U.S. political leaders make a genuine deficit-reduction breakthrough, there is a logical thesis for gold and gold-related assets to appreciate in the second half of 2011 that is compounded by seasonal Indian factors.
Source: http://goldcoinblogger.com
“There is news that China’s wheat crop is under threat from below average rainfall,” said Chandrasekhar Bhatt, bullion analyst at a broking firm here.
“Wheat flour prices are ruling 16% higher than a year ago, driven by fears of drought. Though the Chinese government has announced a $1.96 billion relief package, food prices are bound to touch record levels. And that will set the stage for an upward revision in the price of gold,” he added.
For some time now gold prices have been on a roller coaster, buoyed by the turmoil in Egypt. According to some experts, the high – 18.5% – rate of inflation in Egypt has been termed a major factor in the uprising that dislodged Hosni Mubarak. Moreover, if China reports a high inflation number as is expected, the spike in gold will follow, insist traders.
Trying to combat inflation in the best way possible, China raised its lending and deposit rates by 25 basis points each around the Chinese New Year. This is a second increase in just over a month. The move was meant to tame inflation.
Most analysts are expecting at least one more rate hike, closer to the second quarter of the year. The move has raised concerns in the market that a slowdown in China’s economy could have a ripple effect. Soon enough and a heartbeat after the rate hike was announced in China, oil prices slumped. Analysts say it is a pointer and could cool China’s economy.
Inflation in India
With India too battling with high levels of inflation, many traders have forecast that all of this has profound implications on the price of gold. Gold will soon gain steam in the international markets, as a higher-than-expected inflation readings expected from China will prompt a rush into the metal,” said a bullion analyst at an international broking house here.
In a note to his clients, Paulo Gracias of Reliable Gold Securities said that fears of inflation had driven demand for gold as a retail investment in China, with the country reportedly importing over 200 tonne over the last three months.
As inflation continues to increase, the buying of physical gold by the Chinese will send the price of gold skyrocketing, he said, advising customers to stay invested. Moreover, with India looking to raise key interest rates after its December inflation reading jumped to 8.43% versus a year ago, traders insist gold is being used as a store of value by consumers in India to protect against rising inflation. Official data showed that food prices surged 18.3% in the week ended December 25, the highest rate since July, as onion prices soared 80%.
“Strong industrial growth in urban India and expansion in the rural market is literally putting cash into farmers’ hands. Though better harvests will ease inflation in the coming months, there is concern that tightening by the central bank in India, the Reserve Bank of India is a signal that India will join China in moves to dampen growth rates. Both the economies are worried about overheating,” said a precious metals analyst at DBS Bank.
Traders also point to record imports of gold, which they maintain is another case in point. India is said to have imported around 800 metric tonnes from 557 tonnes in 2009, and exceeded the previous all-time high of 769 tonnes in 2007, according to Ajay Mitra of the World Gold Council. He reportedly said that price was no longer a factor – “Our assessment is that demand will continue to be strong”, for investment demand for gold in India grew faster than the 62% gain in jewelry demand in the same period.
Mitra noted that it has been demand driven with investment in mind. “Though a lot of consumers in India buy gold in the form of jewellery, the core proposition really is security for the future, which is the investment angle for buying into gold,” Mitra added.
Moreover, with the country going in for its annual budget at the end of February, the government has already set the ball rolling. On Friday, the government liberalized norms for the import of precious metals – gold, silver, platinum and palladium – by select nominated agencies.
Inflation is coming our way, make no mistake about it
Inflation has soaked up the dollar’s purchasing power, forcing millions of Americans to slash discretionary spending. Furthermore, the U.S. Federal Reserve, through its lax monetary policy, has been exporting inflation to the rest of world. The resultant price increases in commodities have hit the wallets – not to mention the bellies – of many consumers, including those in the United States. A particular note about the U.S.–related factors: they will become more influential as the year progresses. The U.S. faces an extensive political debate about debt reduction this year that begins in earnest with President’s Obama’s rollout of his fiscal year 2012 budget request to Congress this week. All agree that government spending must be trimmed, but negotiating real reductions will be challenging. If the U.S. can’t meaningfully cut the federal budget, the failure will become more apparent in the third quarter, as politicians scramble to make a deal before the federal government’s fiscal year begins on October 1, just when the Indian wedding season demand for gold is ramping up. In regards to the 2012 budget Ron Fricke president of Regal Assets stated “The US administration submitted their budget for 2011 and with $3.7 trillion in mind it is up $1.54 trillion from 2010 clearly showing the flailing economy and no sign for recovery”
Unless the U.S. experiences a recovery so strong that increased government tax revenue will ease deficit concerns or U.S. political leaders make a genuine deficit-reduction breakthrough, there is a logical thesis for gold and gold-related assets to appreciate in the second half of 2011 that is compounded by seasonal Indian factors.
Source: http://goldcoinblogger.com
Tuesday, February 15, 2011
Silver Long Term Update
I have been a bull all my life and I will continue to remain a silver bull all my life. But silver has the tendency to fall much faster than any other metal in the event of a bear run. It is this tendency which scares low risk investors away. However silver’s performance in 2010 has a lit a fire in the mind of retail investors that he needs to invest in silver. I am now being asked by a huge amount of people whether they can invest at current prices. A few years ago I used to tell the same people to invest in silver but they ignored my advice.
- There have been three major corrections in silver since 2000. I am very sure that the fourth one will happen over the next two years.
- It will not be one way traffic for silver. There will be wild swings and consolidation phases.
- Silver can rise to $5498 and $8203 as long as it trades over $1774.20 on weekly closing basis.
- There is just one silver exchange traded fund. If more silver exchange traded funds come up then silver prices will zoom twenty percent in the short term and forty percent in the medium term to long term.
- The risk to my bullish view in silver is that of a reduction in global liquidity and global economic fundamentals.
- In the event of a crash in silver I do not foresee silver falling below $1400 in the long term.
- As far as long term investment in silver at prices is concerned, I will prefer to wait and invest around $2800 till $2100.
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