NEW YORK (Commodity Online): Silver prices likely to reach $50 an ounce and gold prices to bounce back to $1900 levels, said Stephen Smith, managing member of Smith McKenna, LLC.
According to Smith, the precious metal boom that was cut short in 2011 could be making a strong comeback in late 2012 and over the next few years.
The metal to keep a watchful eye on is silver. Analysts and precious metal experts are in harmony on predictions of silver surpassing $50/oz. and gold edging above $1,900/oz by as early as year end.
Investing in silver ahead of the future outlook for both the global economy and manufacturing sector could prove to be very rewarding. 2011 marked the end to a bullish few years which made a lot of people very wealthy.
While gold is still expensive, silver is the commodity that investors should be paying special attention to. Silver in relation to gold is priced substantially lower; it's undervalued and is expected to respond bullishly over the next few years.
Those who don't currently invest in silver should at least be gathering all the information they can. Current precious metal investors have already shifted their support and focus on the white metal amid global cues and its exceptional properties with continuing limited supply. In short, precious metals should be a part of everyone's investment portfolio; it's all about diversification.
"Most people miss out on precious metal market booms and investing in silver because of uncertainty and lack of information. Potential wealth creation is all about the long term outlook with the right position and knowledge," Stephen Smith added.
Silver has both usage as an industrial metal and value as a precious commodity; making it sensitive to the economic outlook and global manufacturing. Silver has large ties and demand in the pharma industry, solar panel production and electronics.Limited bullion supply, increased demand and global easing could send the price of silver into the clouds.
As a society we're just not as educated on precious metals as an investment source. The banking industry and Wall Street want to remain in the spotlight, but they often have their own hidden agendas. According to Smith, "Silver could perform stronger and be a better investment vehicle than your IRA/401k."
Tuesday's Q2 2012 Euro GDP report showed expected economist predictions with little impact on the silver market.Analysts are still expecting further easing amid high interest rates, debt crises, budget cuts, and limited spending. Money printing and easing could once again send precious silver and gold on a wild ride to new highs.
Silver was seen around $28/oz last week with analysts holding to their notions of silver sitting on the cusp of a strong rebound.There's a reason why investors are currently shifting their focus and doing their homework on precious silver. Its value ratio to gold is heavily skewed and stimulus efforts and economic rebounding could prove to be the recipe that silver has been patiently waiting for.
Silver is a historical form of currency and store of value. Precious metals are a physical asset meaning they are not manufactured but rather limited in supply, making their value exceptionally strong. Owning physical silver is one of the keys to investing in the white metal, staying away from ETFs, Futures and Options.
Source: http://www.commodityonline.com
Monday, August 27, 2012
Thursday, August 2, 2012
Silver Price Psychology
People have a natural tendency to seek and understand value. The currently dominant baby boomer generation has a speculative mindset with regard to investment. The relatively frugal generation that lived through the first great depression is now fading in influence, along with their collective memory of harder times.
Both professional and individual traders tend to chase momentum, with pros often using technical analysis to justify market movements and their positioning in the market. Individual investors also listen to professionals talking their book, rather than to more objective experts.
Silver Prices Spikes
Nevertheless, in the silver market, any significant spike higher tends to feed on itself. This is not only due to speculative buying momentum, but also due to short covering buying as the truly limited supply of physical silver exerts its upward influence on the metal’s price.
While inevitable does not imply imminent, the longer the current price suppression paradigm lasts in the silver market, the tighter the spring becomes coiled, and the higher will be the price’s ultimate release upward.
Understanding Silver’s Value
The main point here is that silver’s intrinsic value is currently understood and accepted by only the few who got into the market early. Those who get into it once the inevitable rally has started will be buying on impulse or out of fear, only rationalizing their investment after the fact.
Some might believe that silver’s price spiking higher will suddenly and magically bring out all of the physical silver ever mined throughout history, including the billions of ounces currently sequestered in technological components, silverware and jewelry.
While some recovery of metallic silver from these recycling sources is likely, the most probable outcome will be an increasing scarcity of physical silver that will fail to meet the growing demand.
Although the masses might be manipulated into seeing spiking silver prices as a selling opportunity before the ‘inevitable’ crash — perhaps because 16 ounces of silver historically could buy one ounce of gold — the likelihood remains that silver’s price will ultimately rise both in U.S. dollar terms and relative to the price of gold.
For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals visit http://www.silver-coin-investor.com
source: silverseek.com
Wednesday, July 18, 2012
Gold Prices To Be Higher Next Year, U.S. Dollar Dramatically
Gold prices should be higher next year, but corn and the U.S. dollar should see dramatic gains, said an influential newsletter editor.
Dennis Gartman, editor of the newsletter, The Gartman Letter, said he’s most bullish on corn and the “English-speaking” currencies, including the U.S. dollar, but also the Canadian, Australian and New Zealand dollar, plus the British pound.
Gartman wouldn’t give a specific forecast for gold, only to say that he expected prices to be higher than they currently are a year from now, but not “demonstratively so.”
“I really don’t like to put numbers on things. If you say gold is going to $2,100 and it goes to $2,085, I’m telling you, you taken to the rack because you missed it. The best that you can do in this business is to get the direction right…. If you get the direction right 45% of the time you’re going to beat everybody else,” he said.
Gartman spoke to Kitco News Thursday on the sidelines of the Executives’ Club of Chicago’s Annual Economic Outlook.
He said gold is still in a bull market, but right now he is holding a neutral stance. “There are only three positions you can take in a bull market: really long, long and neutral. Right now I think neutral is the place to be,” he said.
Gartman is famous for trading gold in currencies other than the dollar, which gold is denominated in. He frequently trades gold in euro and yen terms. To do so he has said that buys gold and simultaneously sells the other currency, trying best to match equal dollar sums on both sides of the trade.
“Too many people have thought of gold as being an anti-dollar trade. If it is, by buying it in euro terms, I’ve effectively hedged out the dollar risk. Quite honestly under most circumstances – not all – but on days that gold would get whacked, then the euro would get whacked. That has allowed me to breathe on down days in gold,” he said.
He told the audience at the Executive’s Club outlook panel that other markets he’s bullish on are corn, coal – both thermal and metallurgical – and dollars, whether U.S., Canadian, Australian and New Zealand, but did not elaborate.
He added that the U.S. dollar will be “dramatically higher” by next year and said it will remain as the world’s reserve currency, saying it’s “idiocy” not to think so. He said the U.S. military superiority guarantees that dominance. “No one else comes close to the U.S. defense capability,” he said.
He’s also very bullish stock markets, both U.S. and other stock markets, saying that the amount of fiscal stimulus via quantitative easing by the Federal Reserve and ultra-low interest rates in many other countries will benefit equities. When the moderator of the panel asked what his forecast for the Dow Jones Industrial Average would be in a year’s time, he said 16,500. It is now around 12,350.
He also told the Executive’s Club audience that he has no love for “gold bugs,” saying that they remind him of Ted Kaczynski, a recluse survivalist who was known as the “Unabomber” for his letter bombs than spanned 20 years. Gold bugs, he said, have their gold holdings, “dried food, water and live up in caves.”
Gold is “nothing more than another currency. It’s the second reserve currency,” he told the audience.
He’s bearish on the euro overall, but given the rise Friday in the single currency, he said in his newsletter Friday he is standing aside for now.
In the Kitco News interview he said with West Texas Intermediate crude oil at $105 a barrel, the type of oil traded at the New York Mercantile Exchange, that it brings an “awful lot” of new drilling, but he is not “overtly bullish” on energy.
Gartman wouldn’t say if he was shorting any particular trade or market, but he said he would avoid European stocks on the balance, and would prefer to own U.S., Canadian or Australian equities.
CONSIDERS HIMSELF A TECHNICAL TRADER
Regarding his trading technique, he told Kitco News that he considers himself to be 55% a technical trader and 45% a fundamentalist. “The first thing I do is look at a chart. I want to buy things that are going up. I spend weekends leafing through charts to find things that are interesting,” he said. “Do I approach things from a fundamental view first? No, not really. I find that to be a great waste of time. I’ll find out the fundamentals later. If I find a chart that looks bullish, I’ll go find out the fundamentals of whatever it is and if I can understand the bullish fundamentals, if they make sense to me, then I’ll trade.”
He said he trades “a lot” of stocks, but he doesn’t talk about it because of regulatory limitations.
He recommended to those who are new to the market to understand technical analysis before they get started. “I don’t think you can be a ‘trader/investor’ without having some cursory knowledge of technical matters. I do find that people who get esoteric about … chats … I find those people really don’t really very well. Keep it simple,” he said.
He said his job is to be the “liberal arts major of the capital markets,” saying that he knows a little bit about the different markets.
“Grain guys don’t know anything about foreign exchange. Foreign exchange guys don’t know anything about oil. Oil guys don’t know anything about grains. My job is to, one, trade them all and two, be the liberal arts major of the capital markets. Do I know more about the grains than a grain guy does? Oh, God, no. But I know more than a bond guy does,” he said.
Source:http://www.forbes.com
Dennis Gartman, editor of the newsletter, The Gartman Letter, said he’s most bullish on corn and the “English-speaking” currencies, including the U.S. dollar, but also the Canadian, Australian and New Zealand dollar, plus the British pound.
Gartman wouldn’t give a specific forecast for gold, only to say that he expected prices to be higher than they currently are a year from now, but not “demonstratively so.”
“I really don’t like to put numbers on things. If you say gold is going to $2,100 and it goes to $2,085, I’m telling you, you taken to the rack because you missed it. The best that you can do in this business is to get the direction right…. If you get the direction right 45% of the time you’re going to beat everybody else,” he said.
Gartman spoke to Kitco News Thursday on the sidelines of the Executives’ Club of Chicago’s Annual Economic Outlook.
He said gold is still in a bull market, but right now he is holding a neutral stance. “There are only three positions you can take in a bull market: really long, long and neutral. Right now I think neutral is the place to be,” he said.
Gartman is famous for trading gold in currencies other than the dollar, which gold is denominated in. He frequently trades gold in euro and yen terms. To do so he has said that buys gold and simultaneously sells the other currency, trying best to match equal dollar sums on both sides of the trade.
“Too many people have thought of gold as being an anti-dollar trade. If it is, by buying it in euro terms, I’ve effectively hedged out the dollar risk. Quite honestly under most circumstances – not all – but on days that gold would get whacked, then the euro would get whacked. That has allowed me to breathe on down days in gold,” he said.
He told the audience at the Executive’s Club outlook panel that other markets he’s bullish on are corn, coal – both thermal and metallurgical – and dollars, whether U.S., Canadian, Australian and New Zealand, but did not elaborate.
He added that the U.S. dollar will be “dramatically higher” by next year and said it will remain as the world’s reserve currency, saying it’s “idiocy” not to think so. He said the U.S. military superiority guarantees that dominance. “No one else comes close to the U.S. defense capability,” he said.
He’s also very bullish stock markets, both U.S. and other stock markets, saying that the amount of fiscal stimulus via quantitative easing by the Federal Reserve and ultra-low interest rates in many other countries will benefit equities. When the moderator of the panel asked what his forecast for the Dow Jones Industrial Average would be in a year’s time, he said 16,500. It is now around 12,350.
He also told the Executive’s Club audience that he has no love for “gold bugs,” saying that they remind him of Ted Kaczynski, a recluse survivalist who was known as the “Unabomber” for his letter bombs than spanned 20 years. Gold bugs, he said, have their gold holdings, “dried food, water and live up in caves.”
Gold is “nothing more than another currency. It’s the second reserve currency,” he told the audience.
He’s bearish on the euro overall, but given the rise Friday in the single currency, he said in his newsletter Friday he is standing aside for now.
In the Kitco News interview he said with West Texas Intermediate crude oil at $105 a barrel, the type of oil traded at the New York Mercantile Exchange, that it brings an “awful lot” of new drilling, but he is not “overtly bullish” on energy.
Gartman wouldn’t say if he was shorting any particular trade or market, but he said he would avoid European stocks on the balance, and would prefer to own U.S., Canadian or Australian equities.
CONSIDERS HIMSELF A TECHNICAL TRADER
Regarding his trading technique, he told Kitco News that he considers himself to be 55% a technical trader and 45% a fundamentalist. “The first thing I do is look at a chart. I want to buy things that are going up. I spend weekends leafing through charts to find things that are interesting,” he said. “Do I approach things from a fundamental view first? No, not really. I find that to be a great waste of time. I’ll find out the fundamentals later. If I find a chart that looks bullish, I’ll go find out the fundamentals of whatever it is and if I can understand the bullish fundamentals, if they make sense to me, then I’ll trade.”
He said he trades “a lot” of stocks, but he doesn’t talk about it because of regulatory limitations.
He recommended to those who are new to the market to understand technical analysis before they get started. “I don’t think you can be a ‘trader/investor’ without having some cursory knowledge of technical matters. I do find that people who get esoteric about … chats … I find those people really don’t really very well. Keep it simple,” he said.
He said his job is to be the “liberal arts major of the capital markets,” saying that he knows a little bit about the different markets.
“Grain guys don’t know anything about foreign exchange. Foreign exchange guys don’t know anything about oil. Oil guys don’t know anything about grains. My job is to, one, trade them all and two, be the liberal arts major of the capital markets. Do I know more about the grains than a grain guy does? Oh, God, no. But I know more than a bond guy does,” he said.
Source:http://www.forbes.com
Wednesday, June 13, 2012
Sudan nets $603m in gold exports to April 1
KHARTOUM (REUTERS) - Sudan has exported about 13.2 tonnes of gold in the year to April 1, netting it about $603 million in a push to build up the minerals industry to make up for lost oil revenues, the mining ministry said on Monday.
Sudan has been struggling with a severe economic crisis since South Sudan seceded a year ago, taking with it about three quarters of the country's oil production, previously Khartoum's main source of exports and state revenues.
Officials have said bolstering agricultural and mining exports can help Sudan compensate for a resulting shortfall of foreign currency, which has fuelled soaring inflation over the past year.
Sudan exported about 33.7 tonnes of gold for about $1.5 billion in 2011, and 30.3 tonnes for about $1 billion in 2010, the ministry said in a presentation delivered to parliament.
While many experts say Sudan has great mining potential, many also say it is hard to verify overall production figures because unofficial or "artisanal" gold seekers so far account for a large part of Sudan's gold industry.
The government was working to control smuggling and "illegitimate" exports to help develop the industry, the ministry presentation said.
Sudan was supposed to continue receiving some oil revenues via fees paid by the landlocked South to export its oil through pipelines running through the north, but the two have failed to agree on fees.
In January, South Sudan shut down its entire output of about 350,000 barrels per day to stop Khartoum from taking some crude to make up for what it said were unpaid fees.
The dispute has helped create a $2.4 billion gap in Sudan's public finances and caused exports to plunge 83 percent, the finance minister said in May.
Source : http://www.mineweb.com
Sudan has been struggling with a severe economic crisis since South Sudan seceded a year ago, taking with it about three quarters of the country's oil production, previously Khartoum's main source of exports and state revenues.
Officials have said bolstering agricultural and mining exports can help Sudan compensate for a resulting shortfall of foreign currency, which has fuelled soaring inflation over the past year.
Sudan exported about 33.7 tonnes of gold for about $1.5 billion in 2011, and 30.3 tonnes for about $1 billion in 2010, the ministry said in a presentation delivered to parliament.
While many experts say Sudan has great mining potential, many also say it is hard to verify overall production figures because unofficial or "artisanal" gold seekers so far account for a large part of Sudan's gold industry.
The government was working to control smuggling and "illegitimate" exports to help develop the industry, the ministry presentation said.
Sudan was supposed to continue receiving some oil revenues via fees paid by the landlocked South to export its oil through pipelines running through the north, but the two have failed to agree on fees.
In January, South Sudan shut down its entire output of about 350,000 barrels per day to stop Khartoum from taking some crude to make up for what it said were unpaid fees.
The dispute has helped create a $2.4 billion gap in Sudan's public finances and caused exports to plunge 83 percent, the finance minister said in May.
Source : http://www.mineweb.com
Monday, June 11, 2012
Is the Table Set for a Mania in Gold and Silver?
By: Jeff Clark
It may feel like I'm out of touch with the precious metals markets to broach the subject of a mania today, but I think the table is being set now for a huge move into gold and silver.
There are, however, very valid reasons to reasonably expect a mania in our sector. For one thing, manias have occurred many times before, but the main issue is that a mania in gold and gold stocks is the likely result of the absolute balloon in government debt, deficit spending, and money printing. Saying all that profligacy will go away without inflationary consequences seems naive or foolish. Inflation may not attract investors to gold and silver as much as force them to it.
Now, one could make the argument that any rush into gold and silver will be muted if no one has any savings, especially given that demographers say a quarter of the developed world will soon be retired. But even if individuals are wiped out, the world's money supply isn't getting any smaller, and all that cash has to go somewhere.
I wanted to look at cash levels among various investor groups to get a feel for what's out there, as well as how money supply compares to our industry. Data from some institutional investors are hard to come by, but below is a sliver of information about available cash levels. I compared the cash and short-term investments of S&P 500 corporations, along with M1, to gold and silver ETFs, coins, and equities. While the picture might be what you'd expect, the contrast is still rather striking.
Naturally, not all this money or even a big chunk of it will be used to buy GLD, Barrick, or American Eagles, but it's clear that if any significant fraction of the cash sloshing around the economy were to be used to buy gold, it would have a major impact on the price of gold - which would trigger the mania I fully expect. Let's take a quick look at what kind of impact our sector could experience if just a small amount of available funds were devoted to various forms of gold and silver.
The entire worldwide value of all gold exchange-traded products (ETPs) currently represents just 2.1% of the cash and short-term investments held by S&P 500 corporations. If 20% of these companies decided to put a mere 5% of their available holdings into these precious metals vehicles, their value would more than double.
If just 1% of the physical currency (M1) floating around the system were used to buy gold Eagles, it would be 13 times more than the entire value of all coins purchased last year.
If corporations chose to invest 1% of their cash in silver ETFs, it would surpass the total current value of all such ETFs.
If corporations moved 5% of their "short-term investments" evenly into gold stocks, the market cap of every gold company would increase by 20%.
If they chose silver stocks, they'd each grow by a factor of six.
Five percent of M1 would increase the market cap of gold producers by 14%. The same fraction would be 3.4 times bigger than the entire current value of all primary silver producers.
This is just S&P 500 corporations - there are many more corporations in the world, as well as pension funds, hedge funds, sovereign wealth funds, mutual funds, private equity funds, private wealth funds, insurance companies, and other ETFs.
It's striking, when you really stop to think about just how big the impact could be if some significant fraction of the larger financial world started chasing the small niche market that is gold. Such cash inflows will send our industry to the moon.
In the meantime, keeping our eye on the big-picture forces that have yet to play out is the plan to follow. Sooner or later, though, I'm convinced the catalysts will kick in that will pull/push/drag/compel/force the mainstream into our sector. I suggest beating them to it.
And when the mania arrives, we'll all wonder why anyone doubted it in the first place.
Source : http://www.marketoracle.co.uk
It may feel like I'm out of touch with the precious metals markets to broach the subject of a mania today, but I think the table is being set now for a huge move into gold and silver.
There are, however, very valid reasons to reasonably expect a mania in our sector. For one thing, manias have occurred many times before, but the main issue is that a mania in gold and gold stocks is the likely result of the absolute balloon in government debt, deficit spending, and money printing. Saying all that profligacy will go away without inflationary consequences seems naive or foolish. Inflation may not attract investors to gold and silver as much as force them to it.
Now, one could make the argument that any rush into gold and silver will be muted if no one has any savings, especially given that demographers say a quarter of the developed world will soon be retired. But even if individuals are wiped out, the world's money supply isn't getting any smaller, and all that cash has to go somewhere.
I wanted to look at cash levels among various investor groups to get a feel for what's out there, as well as how money supply compares to our industry. Data from some institutional investors are hard to come by, but below is a sliver of information about available cash levels. I compared the cash and short-term investments of S&P 500 corporations, along with M1, to gold and silver ETFs, coins, and equities. While the picture might be what you'd expect, the contrast is still rather striking.
Naturally, not all this money or even a big chunk of it will be used to buy GLD, Barrick, or American Eagles, but it's clear that if any significant fraction of the cash sloshing around the economy were to be used to buy gold, it would have a major impact on the price of gold - which would trigger the mania I fully expect. Let's take a quick look at what kind of impact our sector could experience if just a small amount of available funds were devoted to various forms of gold and silver.
The entire worldwide value of all gold exchange-traded products (ETPs) currently represents just 2.1% of the cash and short-term investments held by S&P 500 corporations. If 20% of these companies decided to put a mere 5% of their available holdings into these precious metals vehicles, their value would more than double.
If just 1% of the physical currency (M1) floating around the system were used to buy gold Eagles, it would be 13 times more than the entire value of all coins purchased last year.
If corporations chose to invest 1% of their cash in silver ETFs, it would surpass the total current value of all such ETFs.
If corporations moved 5% of their "short-term investments" evenly into gold stocks, the market cap of every gold company would increase by 20%.
If they chose silver stocks, they'd each grow by a factor of six.
Five percent of M1 would increase the market cap of gold producers by 14%. The same fraction would be 3.4 times bigger than the entire current value of all primary silver producers.
This is just S&P 500 corporations - there are many more corporations in the world, as well as pension funds, hedge funds, sovereign wealth funds, mutual funds, private equity funds, private wealth funds, insurance companies, and other ETFs.
It's striking, when you really stop to think about just how big the impact could be if some significant fraction of the larger financial world started chasing the small niche market that is gold. Such cash inflows will send our industry to the moon.
In the meantime, keeping our eye on the big-picture forces that have yet to play out is the plan to follow. Sooner or later, though, I'm convinced the catalysts will kick in that will pull/push/drag/compel/force the mainstream into our sector. I suggest beating them to it.
And when the mania arrives, we'll all wonder why anyone doubted it in the first place.
Source : http://www.marketoracle.co.uk
Wednesday, May 16, 2012
Gold, Silver Prices Continue To Decline On US Dollar Strength
European markets traded lower today as European Commission stated that European economy will shrink in the current year with negative outlook after countries from Spain to Italy faced recession. According to the commission, GDP will increase by 1 percent in 2013 after declining by 0.3 percent in 2012. Additionally, escalating political turmoil in Europe also led to rise in risk aversion in the global markets.
India’s industrial output unexpectedly declined by 3.5 percent (y-o-y) in March as against an annual rise of 4.1 percent in February. Manufacturing output declined by 4.4 percent (y-o-y) in March from a rise of 4 percent a month ago.
Strength in the US Dollar Index (DXM2) coupled with a rise in risk aversion in the global markets due to worsening tensions in the eurozone exerted downside pressure on the gold and silver prices today. Silver, being an industrial metal also took cues from downside in base metals pack today.
The base metals complex traded on a negative note today on the back of rising worries over Europe’s debt crisis, coupled with strength in the US Dollar IIndex. Additionally, weak sentiments in the markets also acted as a negative factor for metal prices.
However, depreciation in the Indian rupee cushioned further losses on the domestic bourses. Copper is the worst performer amongst the base metals complex today, as the metal declined by 1.6 percent on the LME and by 0.8 percent on the MCX till 4.30 pm IST. The red metal touched an intra-day low of $7981/ton and was hovering around $7985/ton until 4.30 pm IST.
Nymex crude oil prices declined more than 1 percent today on account of worsening European debt crisis coupled with rise in crude oil production from the Organization of Petroleum Exporting Countries (OPEC). Additionally, a stronger Dollar Index exerted further downside pressure on prices. Crude oil touched an intra-day low of $ 95.74/bbl and hovered at $96.04/bbl today till 4:30pm IST.
Re-emergence of the uncertainty over eurozone debt crisis coupled with weak sentiments in the global markets will exert downside pressure on precious metals and base metal prices in the evening session. Additionally, strength in the US Dollar Index will also act as a negative factor for prices.
Markets will also take cues from US economic data to be released later in the evening and if the data come on a negative note then this will further lead to further downside in commodity prices. Crude oil prices are expected to trade lower in the evening session on the back of rise in OPEC’s oil production, increasing worries over eurozone debt crisis and strength in the US Dollar Index.
India’s industrial output unexpectedly declined by 3.5 percent (y-o-y) in March as against an annual rise of 4.1 percent in February. Manufacturing output declined by 4.4 percent (y-o-y) in March from a rise of 4 percent a month ago.
Strength in the US Dollar Index (DXM2) coupled with a rise in risk aversion in the global markets due to worsening tensions in the eurozone exerted downside pressure on the gold and silver prices today. Silver, being an industrial metal also took cues from downside in base metals pack today.
The base metals complex traded on a negative note today on the back of rising worries over Europe’s debt crisis, coupled with strength in the US Dollar IIndex. Additionally, weak sentiments in the markets also acted as a negative factor for metal prices.
However, depreciation in the Indian rupee cushioned further losses on the domestic bourses. Copper is the worst performer amongst the base metals complex today, as the metal declined by 1.6 percent on the LME and by 0.8 percent on the MCX till 4.30 pm IST. The red metal touched an intra-day low of $7981/ton and was hovering around $7985/ton until 4.30 pm IST.
Nymex crude oil prices declined more than 1 percent today on account of worsening European debt crisis coupled with rise in crude oil production from the Organization of Petroleum Exporting Countries (OPEC). Additionally, a stronger Dollar Index exerted further downside pressure on prices. Crude oil touched an intra-day low of $ 95.74/bbl and hovered at $96.04/bbl today till 4:30pm IST.
Re-emergence of the uncertainty over eurozone debt crisis coupled with weak sentiments in the global markets will exert downside pressure on precious metals and base metal prices in the evening session. Additionally, strength in the US Dollar Index will also act as a negative factor for prices.
Markets will also take cues from US economic data to be released later in the evening and if the data come on a negative note then this will further lead to further downside in commodity prices. Crude oil prices are expected to trade lower in the evening session on the back of rise in OPEC’s oil production, increasing worries over eurozone debt crisis and strength in the US Dollar Index.
Source: http://www.forexpros.com
Monday, April 23, 2012
Gold Investment in 2012: The Bullish and Bearish Signals
1. Gold investment demand is expected to set a new record in 2012
GFMS expects gold investment demand to be the main driver of gold price this year, as it was in 2011. Furthermore, the consultancy expects investment demand for gold to set a fresh all-time high of close to 2000 tonnes in gold bullion terms.
A key driver of Gold Investment, says GFMS, is likely to be ongoing loose monetary policies adopted by the world's central banks.
"A corollary of all this monetary largesse," says GFMS's global head of metals analytics Philip Klapwijk, "is fears about resurgent inflation, and that becomes all the more likely if oil prices motor higher should tensions get any worse between Iran and the US."
2. Physical Gold Investment demand continued to be strong last year
Investment demand for physical gold saw "an excellent performance" last year, Klapwijk told the audience at the London launch of 'Gold Survey 2012'.
Europe, China, Thailand and the Indian subcontinent all saw growth in physical gold bar investment (investors in North America, as Klapwijk pointed out, tend to prefer Gold Coins to Gold Bars).
On a global level, combined demand for coins and bars was 1543 tonnes – a 30% gain on 2010, and a new all-time record. Indeed, the majority of Gold Investment in 2011 took the form of physical investment, GFMS says.
The significance of this is that investments in physical gold tend to represents "stickier" investments than other forms of getting exposure to the metal (for example buying Gold Futures) – meaning it would probably take more for such investors to exit the positions they've built.
That said, there is obviously a limit to most investors' stickiness. A lot will depend on whether, as GFMS expects, the economic environment will continue to be supportive of Gold Investment, with negative real interest rates and fears of inflation prevailing in most parts of the world.
3. Scrap supply appears to be flat
On a global level, scrap supply fell by around 50 tonnes 2011 – equivalent to almost two thirds of the year's Gold Mining production growth. This was the second consecutive year-on-year fall for scrap supply.
Only Europe saw significant growth in scrap Gold Bullion supply last year (old jewelry, gold watches etc.), most likely the result of distressed selling prompted by the Eurozone crisis.
North America and Latin America meantime posted modest scrap supply growth. East Asia and the Indian subcontinent meantime saw scrap supply fall, as did the Middle East, where it dropped by over 100 tonnes.
Although GFMS says it expects scrap supply to rise this year, another traditional source of supply – central banks – is expected to be absent (see below). GFMS points out there was a "secular increase" in supply from scrap, producer hedging and official central bank sales between 1987 and 1999 – a factor which it reckons contributed to the lackluster Gold Price during that period.
By contrast, supply from these sources has been flat since 2000, despite a sharp jump in scrap supplies at the onset of the financial crisis. This period in flat supply has broadly coincided with gold's bull market.
4. Central banks are expected to keep Buying Gold
GFMS expects central banks to remain net gold buyers this year, although there may be a slight dip on last year's figure, with net official sector buying having risen 491% year-on-year in 2011.
The swing to net buying by central banks is a key factor behind the flat supply picture of recent years that was noted above. Signatories to the Central Bank Gold Agreement have made what GFMS calls "trivial sales" in recent years, while emerging market central banks have been Buying Gold in significant quantities.
Bearish Signals
1. Gold Mining supply is expected to continue growing this year
Worldwide gold mine production rose for the third year running in 2011. Last year saw an annual gain of 2.8%, or 78 tonnes.
New Gold Mining operations contributed 47 tonnes of supply, while Africa was the region that saw the strongest growth, increasing production by 51 tonnes (despite its largest player, South Africa, seeing a five tonne drop).
Gold mine production has entered a "new era", Klapwijk told the London launch, with GFMS expecting a further 3% growth this year.
2. A lot of Gold Investment is required just to maintain current prices
Rising mine supply contributes to what GFMS terms the gold market "surplus" – the difference between combined mining and scrap supply and fabrication demand (jewelry plus industrial uses).
GFMS estimates that this leaves a "surplus" of gold supply equivalent to around 110 tonnes. Gold Investment therefore needs to take up that slack.
At current prices "purchasers of bullion need to take gold to the tune of $130 billion out of the market for it to clear," said Klapwijk this week. One attendee at the launch asked whether there might be a case for saying many western investors are now overinvested in gold.
Klapwijk agreed such a case could be argued, and that many wealth investors interested in gold have probably already built their positions. He also pointed out that institutions such as pension funds and sovereign wealth funds – where Gold Investment remains relatively rare – could still offer some scope for growth.
3. Hedging activity by miners can now only be a source of supply
For much of the 1980s and 1990s, gold miners would hedge their price risk by selling future production forward to lock in the current price, adding to current supply and putting downwards pressure on the Gold price.
This process went into reverse as the bull market got underway. With Gold Prices rising, producers began to de-hedge, buying back positions and thus contributing to gold demand.
Measured as the total outstanding forwards and loans, plus gold options positions weighted according to their sensitivity to movements in Gold Futures (i.e. an option's delta), producers' overall hedging position last year was equivalent to 157 tonnes of Gold Bullion. Last year was the first year in over a decade that net hedging was positive, the producers in aggregate adding six tonnes to their combined position.
By contrast, hedging positions were equivalent to around 3000 tonnes in 1999 and 2000. Most of the de-hedging – which contributed to the demand side – appears to have been done.
"[Producer hedging] cannot be a source of demand in future," said Klapwijk.
"It can only be a source of supply. The question is: how much supply?"
Klapwijk noted, however, the most of the hedging seen last year appeared to be related to specific mining projects, adding that there seemed little appetite for strategic hedging against a fall in Gold Prices.
4. Gold jewelry demand is expected to fall again
Gold jewelry fabrication demand fell 2.2% in 2011 – though given the rise in Gold Prices, the fact that the fall wasn't larger led GFMS to describe this source of demand as "resilient".
The bulk of fabrication demand was again accounted for by developing countries, where gold jewelry is often bought for investment as much as adornment purposes.
Although most of the world's regions saw a fall in gold jewelry fabrication in tonnage terms, there was a slight gain in Russia and more significant growth of around 40 tonnes in East Asia, which "boils down to China" said Klapwijk.
Despite this eastwards demand pull, though, GFMS expects gold jewelry consumption to fall again this year, citing high Gold Prices and a slowdown in global growth. Jewelry consumption however "is still expected to remain above 2009's historically depressed level" says GFMS.
The Outlook for Gold Prices
Weighing up the above factors, and many more besides, GFMS forecasts an average Gold Price in 2012 of $1731 per ounce, with a range of $1530 to $1920.
Klapwijk adds that "a push towards $2000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of the year".
Of course, short-term gains are not the primary reason most people make a Gold Investment, especially not those Buying Gold in physical bullion form. From developing nations in the East to the quantitatively eased economies of the West, people are turning to gold as a vehicle for defending the value of their wealth and an insurance hedge against tail risks.
The dynamics behind most Gold Investment will continue to play out well beyond the end of this year.
Source: http://www.bullionvault.com/
GFMS expects gold investment demand to be the main driver of gold price this year, as it was in 2011. Furthermore, the consultancy expects investment demand for gold to set a fresh all-time high of close to 2000 tonnes in gold bullion terms.
A key driver of Gold Investment, says GFMS, is likely to be ongoing loose monetary policies adopted by the world's central banks.
"A corollary of all this monetary largesse," says GFMS's global head of metals analytics Philip Klapwijk, "is fears about resurgent inflation, and that becomes all the more likely if oil prices motor higher should tensions get any worse between Iran and the US."
2. Physical Gold Investment demand continued to be strong last year
Investment demand for physical gold saw "an excellent performance" last year, Klapwijk told the audience at the London launch of 'Gold Survey 2012'.
Europe, China, Thailand and the Indian subcontinent all saw growth in physical gold bar investment (investors in North America, as Klapwijk pointed out, tend to prefer Gold Coins to Gold Bars).
On a global level, combined demand for coins and bars was 1543 tonnes – a 30% gain on 2010, and a new all-time record. Indeed, the majority of Gold Investment in 2011 took the form of physical investment, GFMS says.
The significance of this is that investments in physical gold tend to represents "stickier" investments than other forms of getting exposure to the metal (for example buying Gold Futures) – meaning it would probably take more for such investors to exit the positions they've built.
That said, there is obviously a limit to most investors' stickiness. A lot will depend on whether, as GFMS expects, the economic environment will continue to be supportive of Gold Investment, with negative real interest rates and fears of inflation prevailing in most parts of the world.
3. Scrap supply appears to be flat
On a global level, scrap supply fell by around 50 tonnes 2011 – equivalent to almost two thirds of the year's Gold Mining production growth. This was the second consecutive year-on-year fall for scrap supply.
Only Europe saw significant growth in scrap Gold Bullion supply last year (old jewelry, gold watches etc.), most likely the result of distressed selling prompted by the Eurozone crisis.
North America and Latin America meantime posted modest scrap supply growth. East Asia and the Indian subcontinent meantime saw scrap supply fall, as did the Middle East, where it dropped by over 100 tonnes.
Although GFMS says it expects scrap supply to rise this year, another traditional source of supply – central banks – is expected to be absent (see below). GFMS points out there was a "secular increase" in supply from scrap, producer hedging and official central bank sales between 1987 and 1999 – a factor which it reckons contributed to the lackluster Gold Price during that period.
By contrast, supply from these sources has been flat since 2000, despite a sharp jump in scrap supplies at the onset of the financial crisis. This period in flat supply has broadly coincided with gold's bull market.
4. Central banks are expected to keep Buying Gold
GFMS expects central banks to remain net gold buyers this year, although there may be a slight dip on last year's figure, with net official sector buying having risen 491% year-on-year in 2011.
The swing to net buying by central banks is a key factor behind the flat supply picture of recent years that was noted above. Signatories to the Central Bank Gold Agreement have made what GFMS calls "trivial sales" in recent years, while emerging market central banks have been Buying Gold in significant quantities.
Bearish Signals
1. Gold Mining supply is expected to continue growing this year
Worldwide gold mine production rose for the third year running in 2011. Last year saw an annual gain of 2.8%, or 78 tonnes.
New Gold Mining operations contributed 47 tonnes of supply, while Africa was the region that saw the strongest growth, increasing production by 51 tonnes (despite its largest player, South Africa, seeing a five tonne drop).
Gold mine production has entered a "new era", Klapwijk told the London launch, with GFMS expecting a further 3% growth this year.
2. A lot of Gold Investment is required just to maintain current prices
Rising mine supply contributes to what GFMS terms the gold market "surplus" – the difference between combined mining and scrap supply and fabrication demand (jewelry plus industrial uses).
GFMS estimates that this leaves a "surplus" of gold supply equivalent to around 110 tonnes. Gold Investment therefore needs to take up that slack.
At current prices "purchasers of bullion need to take gold to the tune of $130 billion out of the market for it to clear," said Klapwijk this week. One attendee at the launch asked whether there might be a case for saying many western investors are now overinvested in gold.
Klapwijk agreed such a case could be argued, and that many wealth investors interested in gold have probably already built their positions. He also pointed out that institutions such as pension funds and sovereign wealth funds – where Gold Investment remains relatively rare – could still offer some scope for growth.
3. Hedging activity by miners can now only be a source of supply
For much of the 1980s and 1990s, gold miners would hedge their price risk by selling future production forward to lock in the current price, adding to current supply and putting downwards pressure on the Gold price.
This process went into reverse as the bull market got underway. With Gold Prices rising, producers began to de-hedge, buying back positions and thus contributing to gold demand.
Measured as the total outstanding forwards and loans, plus gold options positions weighted according to their sensitivity to movements in Gold Futures (i.e. an option's delta), producers' overall hedging position last year was equivalent to 157 tonnes of Gold Bullion. Last year was the first year in over a decade that net hedging was positive, the producers in aggregate adding six tonnes to their combined position.
By contrast, hedging positions were equivalent to around 3000 tonnes in 1999 and 2000. Most of the de-hedging – which contributed to the demand side – appears to have been done.
"[Producer hedging] cannot be a source of demand in future," said Klapwijk.
"It can only be a source of supply. The question is: how much supply?"
Klapwijk noted, however, the most of the hedging seen last year appeared to be related to specific mining projects, adding that there seemed little appetite for strategic hedging against a fall in Gold Prices.
4. Gold jewelry demand is expected to fall again
Gold jewelry fabrication demand fell 2.2% in 2011 – though given the rise in Gold Prices, the fact that the fall wasn't larger led GFMS to describe this source of demand as "resilient".
The bulk of fabrication demand was again accounted for by developing countries, where gold jewelry is often bought for investment as much as adornment purposes.
Although most of the world's regions saw a fall in gold jewelry fabrication in tonnage terms, there was a slight gain in Russia and more significant growth of around 40 tonnes in East Asia, which "boils down to China" said Klapwijk.
Despite this eastwards demand pull, though, GFMS expects gold jewelry consumption to fall again this year, citing high Gold Prices and a slowdown in global growth. Jewelry consumption however "is still expected to remain above 2009's historically depressed level" says GFMS.
The Outlook for Gold Prices
Weighing up the above factors, and many more besides, GFMS forecasts an average Gold Price in 2012 of $1731 per ounce, with a range of $1530 to $1920.
Klapwijk adds that "a push towards $2000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of the year".
Of course, short-term gains are not the primary reason most people make a Gold Investment, especially not those Buying Gold in physical bullion form. From developing nations in the East to the quantitatively eased economies of the West, people are turning to gold as a vehicle for defending the value of their wealth and an insurance hedge against tail risks.
The dynamics behind most Gold Investment will continue to play out well beyond the end of this year.
Source: http://www.bullionvault.com/
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