Reuters) - Gold rose 1 percent to a four-month high above $1,670 an ounce on Thursday, bolstered by hopes for a new round of U.S. monetary stimulus and news that Spain is negotiating conditions for a possible aid package.
Silver surged 2 percent and platinum group metals also climbed on supply concerns due to labor unrest in South Africa.
Precious metals received a boost after sources told Reuters Spain is in talks with the euro zone over conditions for international aid, even though the country has made no final decision to request a bailout.
Bullion consolidated its breakout above a four-month trading range and technical resistance at the 150-day and 200-day moving averages. However, gold's relative strength index suggests the market might be slightly overbought following its seventh consecutive day of gains. (r.reuters.com/xub32t)
The move higher came amid already-bullish market sentiment, with Wednesday's minutes from the U.S. Federal Reserve's August meeting showing policymakers were ready to deliver more stimulus "fairly soon" unless the economy improves considerably.
"This is the first insight we've gotten in the marketplace to think that the Fed is committed to this new stimulus program, and that's the catalyst you need to break out of the range," said Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital LP, which has over $40 billion in assets under management.
Spot gold gained 0.9 percent to $1,668.70 an ounce by 2:25 p.m. EDT (1825 GMT), having risen 3.5 percent so far this week.
That put gold on track to post its largest monthly rise since January's 11 percent increase.
U.S. gold futures for December delivery settled up $32.30 at $1,672.80 an ounce. Trading volume looked set to challenge its highest in almost a month, preliminary Reuters data showed.
Silver rose 2.2 percent to $30.49 an ounce.
Bullion broke ranks with U.S. equities, which fell after the number of Americans filing new claims for jobless benefits unexpectedly increased, and after St. Louis Federal Reserve President James Bullard played down the odds of imminent easing.
WEAKNESS SEEN IF FED DISAPPOINTS
Bullion is now up nearly 7 percent year to date, still below the 15 percent in January when the Fed signaled it might use more stimulus and would keep interest rates near zero until at least 2014.
"Market expectations on monetary easing might be too high and that could lead to pullbacks," said Nicolas Berge, a trader at Geneva-based hedge fund Absolute Capital Group which invests in commodities futures and currencies.
Gold's breakout above its downward trend confirms the potential start of a longer-term bull market, Berge said.
Bullion held in top exchange-traded funds monitored by Reuters hit a record by Wednesday's close, having risen by more than 600,000 ounces this week so far, marking the largest weekly rise since early February.
Gold investors also monitored news that Citi Private Bank deciding it will withdraw up to $500 million from long-time gold bull and prominent hedge fund manager John Paulson's flagship Advantage funds, which held some gold investments.
In platinum group metals (PGM), ETF Securities said that its U.S. PGM exchange-traded products added nearly $50 million in new assets in the last week due to supply worries following deadly violence and work stoppage in South African mines.
Platinum rose 0.4 percent to $1,536.75 an ounce and palladium was up 3.5 percent at $650.75 an ounce.
Source: http://www.reuters.com
Monday, September 3, 2012
Monday, August 27, 2012
Silver to hit $50 by end of 2012
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
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
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
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