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Gold -- Sharefin, 23:03:53 08/14/08 Thu

U.S. mint suspends gold coin sales; futures price is a fiction

We just received word, the US Mint has suspended sales of the 1 oz Gold American Eagles until further notice and are not accepting new orders from precious metals dealers. This is in addition to the shortage of 1 oz Silver American Eagles.

This comes at a time when many investors around the nation are scrambling to locate silver bullion and US gold coins while prices are attractively low. These low prices seem to be one of the driving factors in this recent shortage, as investor demand has dramatically increased.

[Edit]

Gold -- Sharefin, 23:02:12 08/14/08 Thu

STOCKPILE ANNOUNCES SALE SUSPENSIONS AND REDUCTIONS OF SELECT COMMODITIES

Ft. Belvoir, VA – The Defense National Stockpile Center announces plans to suspend competitive commercial offerings of six commodities and reduce the sale amounts of seven additional commodities. The actions are being taken as a result of an on-going study to address congressional concerns about Department of Defense needs for strategic and critical materials.

Sales of the following commodities are hereby suspended until further notice: Columbium Metal Ingot, Tantalum Carbide Powder, Platinum, Iridium, Tin and Zinc. Sales offerings under the following solicitations are immediately suspended:

· Columbium Metal Ingot - (BOA) DLA-TANTALUM-001
· Tantalum Carbide Powder – (BOA) DLA-TANTALUM-001
· Platinum – (BOA) DLA-PGM-002
· Iridium – (BOA) DLA-IRIDIUM-003
· Tin – (BOA) DLA-TIN-011
· Zinc –(BOA) DLA-ZINC-004

[Edit]

Gold -- Sharefin, 01:09:30 03/14/08 Fri

Gold reaches record high 1,000 dollars

Gold prices breached 1,000 dollars for the first time on Thursday as the precious metal benefited from a plunging dollar and its safe-haven status amid fears of rising inflation.

Investors are funnelling their cash into commodities like gold as they seek refuge from volatile world stock markets, the collapse of the dollar and growing fears about a US-led economic slowdown, traders said.

[Edit]

Gold -- Sharefin, 01:06:30 03/14/08 Fri

Fake fears over Ethiopia's gold

Ethiopia's national bank has been told to inspect all the gold in its vaults to determine its authenticity.

It follows the discovery that some of the "gold" it had bought for millions of dollars was gold-plated steel.

The first hint that something was wrong reportedly came when the Ethiopian central bank exported a consignment of gold bars to South Africa.

The South Africans sent them back, complaining that they had been sold gilded steel.

An investigation revealed that the bank had bought a consignment of fake gold from a supplier, who is now under arrest.

Other arrests followed, including business associates of the main accused; national bank officials; and chemists from the Geological Survey of Ethiopia, whose job it is to assay the bank's purchases of gold and certify that they are real.

But what has clearly now got the government even more worried is that another different batch of gold in the bank's vaults has also been found to be fake, and this time it was gold which had been there for several years, after being seized from smugglers trying to take it to Djibouti.

-------
Who else has bars like these

First BOE had faulty bars
Now Ethiopia

Next it will be Fort Knox!!!

[Edit]

Gold -- Sharefin, 21:31:20 03/10/08 Mon

Sprott Sees Financial Turmoil Pushing Gold to $2,000 an Ounce

Turmoil in global credit markets may lead to the collapse of a North American bank, pushing bullion prices up to $2,000 an ounce as investors seek a haven in gold, Eric Sprott said.

This year's decline in banking and brokerage stocks will worsen, said Sprott, 63, founder and chairman of Sprott Asset Management, which manages about $7 billion. In response, the company is short selling financial stocks and increasing holdings in bullion and mining companies, Sprott said. He declined to name which bank he thought may collapse.

``We're in a systemic financial meltdown,'' Sprott said in a March 6 interview at the company's Toronto headquarters. ``There are probably 10 companies that are broke that are still trading -- banks and financial institutions.''

[Edit]

Gold -- Sharefin, 21:25:29 03/10/08 Mon

Hong Kong's solid gold toilet, sold for cash?

Hang Fung’s Hall of Gold has now become a key tourist attraction in Hong Kong, but with sky high gold prices, the hall could be melted down and sold for cash.

The Hall of Gold is an exhibition hall filled with six tonnes of solid gold artefacts, which include one of the most astounding pieces of extravagance in the world–a solid 24-carat gold toilet.
~~~

And while appetite for gold has dropped in Europe and America, the Chinese market is gobbling it up, with jewellery sales in Mainland China rose by 40%.

[Edit]

Crowds Still Not Rushing Into Gold -- GEORGE (New message for you), 12:15:50 03/01/08 Sat

We are at the recognition stage of the bull market. ' there is no evidence of a spike or a mania in either public interest or in price action'. We have a long way to go.
An interesting read:
http://tinyurl.com/2y6mlj

[Edit]

Gold -- Sharefin, 10:50:26 02/26/08 Tue

Global shortage of metals looming

Our peak oil thesis gained some new respect last week as oil prices hit yet another record, the first close over US$100 per barrel. Demand fluctuates, but it is all about supply, and supply concerns this week showed how tight the market really is.

Peak oil has lots of press, but what about peak copper? Peak zinc? Peak gold? Sounds preposterous, but maybe it's not so far-fetched. Nearly every commodity is experiencing some supply issues, for a host of reasons. Add it all up, and it means potential supply shortages in the future. Demand may slacken this year, but in the next 10 years today's high commodity prices may actually look like a bargain.

Let's take a look at some of the issues facing commodity projects today, and give some examples of companies that have already been impacted by them.

Cost overruns: Inflation, equipment shortages, and labour issues have combined to wreak havoc on so many new commodity projects that long-term supply issues may result.

Simply put, because of inflation, a commodity project that appeared economical two years ago may no longer be viable.

[Edit]

Gold -- Sharefin, 10:48:45 02/26/08 Tue

U.S. Backs Plan for IMF to Sell Some Gold Reserves

The U.S. Treasury, in a policy reversal, backed an International Monetary Fund plan to sell some of the lender's $98 billion in gold reserves to help make up for a decline in revenue.

``We have a very credible plan for cost reduction that's in the process of being implemented'' at the IMF, David McCormick, Treasury's undersecretary for international affairs, told reporters in Washington. ``For that reason, Treasury supports limited gold sales.''

The Bush administration supported sales of as much as 12.9 million ounces recommended by Andrew Crockett, former head of the Bank of International Settlements, to set up an investment fund to cover anticipated losses at the IMF, McCormick said.

The price of gold fell after the announcement that the U.S., the largest IMF shareholder, will go along with plans by IMF Managing Director Dominique Strauss-Kahn. Strauss-Kahn has proposed eliminating 15 percent of its 2,600 staff and saving $100 million of its $922.3 billion budget to offset dwindling revenue from lending.

``There is a leader there that is really building momentum and pushing in all the right directions,'' McCormick said.

The IMF holds 103.4 million ounces of gold, trailing only the U.S. and Germany, according to the World Gold Council.

[Edit]

Gold -- Sharefin, 10:46:56 02/26/08 Tue

China tops global gold mining

China has ended more than a century of South African dominance of the gold mining industry to become the worldâ€™s biggest producer of the ore.

Chinese gold output jumped to a record high of 276 tonnes last year, a 12 per cent increase over 2006, while South Africa produced 272 tonnes, the London-based precious metal consultancy, GFMS, said on Thursday.

China is already the worldâ€™s biggest producer of aluminium, zinc and lead; the second largest of tin; and among the top 10 in copper, nickel and silver.

Its dominance in gold follows a 70 per cent jump in output in the past decade and is the latest sign of Beijingâ€™s efforts to boost its local supply of commodities to rein in surging and costly raw materials imports.

Bullion prices this week hit an all-time high of $914 a troy ounce as investors sought refuge from a weakening US dollar.

But in spite of the soaring prices, global gold production is falling, notably in South Africa, where output has halved in the past decade amid higher production costs, tougher safety regulations and more depleted mines.

Mark Bristow, the South African chief executive of London-listed Randgold Resources, said: â€œChina is not overtaking South Africa, South Africa is shrinking below China.â€ South Africa has been the worldâ€™s largest gold producer since 1905.

[Edit]

Gold -- Sharefin, 00:58:38 02/15/08 Fri

Fading the IMF

Fading the IMF
By Adrian Ash

The gold price now hovers near all-time record highs. Whereas the
International Monetary Fund (IMF) finds itself short of $400 million per
year. Can you guess what comes next? That’s right; the IMF unloads some of
its gold.

Will these sales weigh on the gold market? We think not. In fact, whenever
the IMF or the major central banks in the West start selling gold, individual
investors should be buying it…at least that’s the lesson of history.

“The IMF is rich if it wants to be,” says Stephen Jen at Morgan Stanley,
recommending IMF gold sales just before the idea was agreed by leaders of the
world’s top seven economies on Feb. 9th. IMF gold – the third largest hoard
after the American and German government gold reserves – is now worth around
$92 billion, tripling in value since the start of this decade. And if you
were spending $1 billion a year but only bringing in $600m, as the IMF is
today, wouldn’t you want to sell a little of your 3,217 tonnes of gold
bullion?

“The current gold price means a flow of income can be ensured,” said the head
of the IMF’s steering committee, Italian finance minister Tommaso Padoa-
Schioppa. It’s the simple solution, agreed leaders of the G7 wealthy nations
in Tokyo. But will IMF gold sales happen? And would it matter to the gold
market anyway?

To answer these questions, let’s take a brief tour though history…

Founded at the end of World War II with donations of cash and gold from its
member nations, the IMF works at economic “crisis prevention” worldwide.
Using the $338 billion or so in cash that it holds (but never the gold, which
exists as a ballast of “fundamental strength,” as the IMF explains), the IMF
also lends to countries facing balance-of-payments problems. This is where
the IMF earns its keep, charging interest on these short-terms loans.

The IMF also makes loans to low-income countries implementing poverty-
reduction programs, currently helping 23 countries from Afghanistan to Sierra
Leone. But more famously, the IMF offers advice and technical expertise to
help developing economies emerge from crises by stabilizing their foreign-
exchange rates and re-structuring government finances.

Since the Argentine crisis of 2001, however – blamed partly on the IMF’s
questionable advice – new IMF lending has contracted dramatically. Therefore,
the IMF’s income has also contracted. The world’s developing economies have
simply developed too fast; they don’t need as many hand-outs from the IMF.

Indeed, many former clients are now so busy piling up foreign exchange
reserves, you have to wonder why the IMF doesn’t ask for help instead. Or the
US, for that matter. The world’s largest economy is now running a trade
deficit worth 6.5% of its annual turnover. (Economists get nervous about any
figure above 3%. Too bad U.S. politicians don’t). The US government has run
up $9 trillion in debt, and the US Dollar has dropped one-third of its value
in the last five years to reach all-time record lows against the rest of the
world’s currencies.

Would selling some IMF gold help push the gold price lower – and by
extension, help the US Dollar to recover? It’s been tried before, and with
little success. Between 1976 and 1980, the IMF sold gold in a bid “to reduce
the role of gold in the international monetary system.” The IMF unloaded one-
third of its total gold holdings – 1,600 tonnes in all.

imfrally.gif

Half of that IMF gold was sold back to member nations at just $35 per ounce –
the old “fixed” gold price until 1971. (But remember, these sales took place
during the late 1970s, when the gold price was several times higher than $35
an ounce). The other half of that IMF gold was sold via auction, but the
auctions were so well subscribed that the impact on the gold price was
actually to forced it higher. The auctions were eventually suspended.

Come April 1978, the Second Amendment to the IMF’s Articles of Agreement
finally eliminated gold bullion “as the common denominator of the post-World
War II exchange rate system,” as the IMF explains on its website. “[The
Amendment] also abolished the official price of gold and abrogated the
obligatory use of gold in transactions between the IMF and its members. It
furthermore required that the IMF, when dealing in gold, avoid managing its
price or establishing a fixed price.”

But trying to cut gold out of the world’s monetary system did nothing to stem
the flight of investment cash into gold. To the contrary, during the four
years that the IMF conducted its auctions, the gold price soared by 400%.

Fast forward two decades and we find the IMF returning to its old tricks.
Ever since the dawn of the new millennium, various IMF officials have
proposed gold sales. The last such proposal came in February 2007, when a
panel of notable “worthies” recommended selling 400 tonnes of IMF gold to
cover debt-relief in poorer nations. That panel included an array of
distinguished gold-scorners like former Fed Chairman Alan Greenspan and
former UK Chancellor, Gordon Brown – the man who orchestrated the sale of 400
tonnes of gold from the British Treasury in 1999, just as the gold price was
hitting a two-decade low. The panel’s call for IMF gold sales came to naught
however.

One year later, the price of gold in Dollars, Euros, Pounds Sterling and most
other major currencies has risen more than 30%, thereby lending fresh urgency
and “legitimacy” to the idea of selling gold. All seven leading members of
the IMF – the G7 group of wealthy nations – agree the IMF should be allowed
to decide for itself. But any sales of the IMF’s gold must be approved by 85%
of the organization’s total voting power. The United States, as the largest
single member nation, holds a crucial 17% of that power – giving it an
absolute veto over that 85% requirement. And the US, as the largest single
member of the IMF, also contributed the largest single share of the IMF’s
gold.

Would Congress approve a sale of this “IMF gold” to help shore up IMF
finances? The US blocked a previous attempt to sell IMF gold in 2005. And
with an election now looming, the idea of selling “legacy gold” to cover a
short-term funding gap might not appeal to US politicians.

“Gold played a central role in the international monetary system until the
collapse of the Bretton Woods system of fixed exchange rates in 1973,” as the
International Monetary Fund itself explains. “Since then, the role of gold
has been gradually reduced,” the IMF claims.

Au contraire! The “role of gold” may have been gradually reduced for
governmental agencies like the IMF or the Bank of England of the U.S. Federal
Reserve. But the role of gold has been rapidly increasing among individual
investors. They seem to understand what most central bankers don’t: gold
holds its value better than paper money.

“Every time the IMF has sold gold it has actually triggered more buying
interest,” says Mario Innecco, a broker at MF Global in London, to Bloomberg.
“It will just make it easier for the big sovereign buyers” – the big central
banks outside the G7 who want to build up their gold reserves – “to snap up
cheap gold from the IMF.”

The IMFs sales would also make it easier for individuals to snap up cheap
gold. The last time the IMF unloaded some of its gold, the price of the
precious metal soared 400%. We would not dare to predict a repeat
performance, but neither would we dare to rule it out. Instead, we would ask
one simple question: If the IMF is dumping gold, what do you want to be
doing?

[Edit]

Fiat -- Sharefin, 00:52:55 02/15/08 Fri

Depression risk might force U.S. to buy assets

NEW YORK (Reuters) - Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.

[Edit]

Gold -- Sharefin, 02:56:39 01/30/08 Wed

Gold Could Soon Pass The US$1000 Level

Further on the subject of derivatives, it is worth noting that
the BIS triennial survey on gold derivatives highlighted a near
tripling in the notional valve to over $1 trillion (roughly 50,000
tonnes, or about one-third of all the gold ever minned). In the
past three years. It is somewhat bizarre that this would have
occurred in a period that saw the mining industry de-hedge
aggressively.

In the past, the relatively large amount of gold derivatives
outstanding had been attributed to producer hedging, but
that has proven not to be the case. In my opinion, the
explosion of gold-derivatives has simply been another tool
in the anti-gold cartel's arsenal to manipulate the price.
It will inevitably fail due to an acute shortage of hytsical
gold stemming from exploding investment demand, shrinking
mine supply and diminishing western central-bank reserves.

As a result, somebody is going to take a terrible hosing on
the short side of the market. The anti-dote to the upcoming
financial debacle is to own as much physical gold
as you can procure.

[Edit]

Gold -- Sharefin, 23:47:00 01/23/08 Wed

Chinese gold output surpassed SA in '07

After more than a century on the throne, South Africa has been deposed as the world's biggest producer of gold, with its estimated 2007 output, of 272 t, falling just short of the 276 t of the yellow metal produced by the new number one, China

While Chinese gold production increased by an estimated 12% year-on-year, South African mines produced 8% less gold than in 2006
~~~
South Africa had held the accolade of the biggest gold producer since 1905, but its ouput has been in steady decline since a peak of 1 000 t in 1970,
~~~
According to GFMS estimates, global mine production contracted by about 1% in 2007, to 2 444 t.

Peru recorded the biggest decline, with gold production falling an estimated 17%, to 167 t, while Indonesia and Brazil were the top gainers, with output rising by an estimated 18% and 16% respectively.

At a company level, none of the top five producers increased their production, and AngloGold Ashanti was the only firm to record a steady output, while the other four, Barrick Gold, Newmont Mining, Gold Fields and Harmony Gold all fell short of their 2006 figures.

[Edit]

Fiat -- Sharefin, 20:03:08 01/22/08 Tue

Welcome to the 2008 Meltdown

The recession, which is likely already happening, will only make all of the above worse. It’s
likely to be prolonged and worse than normal, simply because the bubble that sustained the
economy over the past several years turned out to be a pyramid scheme that was worse than
normal. There are meltdowns occurring everywhere: commercial real estate… car loans…
credit cards. It was all a massive Ponzi scheme sustained by overleverage. Because this has
been one of the most egregious bubbles ever, its impact is likely to linger longer than anyone
expects. This is more than just a market failure. It’s a systemic meltdown. As investors, the
only salvation is to get away from the crumbling pyramid scheme that was the financial world
and into real, hard assets.

[Edit]

Fiat -- Sharefin, 21:56:12 01/21/08 Mon

India's Sensitive Index tumbled 11.5%

India's Sensitive Index tumbled 11.5% within the first two minutes of trading on Tuesday, forcing a trade halt for an hour.
The index stumbled 2,029.05 points to 15,576.30, after slumping 7.4% in the previous session.
"It doesn't look good at all. We expected it to fall, but nobody expected this kind of correction,"

[Edit]

Gold -- Sharefin, 06:32:39 01/19/08 Sat

Gold Says - I Told You So

Gold does not typically have any return at all. While its price was fixed to the dollar – it had a rate of return of zero. Which was a good reason not to own the stuff; you’d get a better yield from almost anything. But when the dollar was tied to gold, you didn’t need to own it.

Every dog has his day. And it looks to us that the mangy cur that sits at the number 79 slot on the periodic table is having his day at last. He is worthless at producing a profit, a dividend, or an interest coupon. Most of the time he just lies around, doing nothing...like a rich man’s pet. But there are times when he earns his keep, when he is worth every pound of meat you give him: he can be one mean junkyard pooch when he has to be.

[Edit]

Gold -- Sharefin, 23:02:07 01/11/08 Fri

Saudi 2007 gold demand up 17pc

Saudi Arabia gold sales rose almost 17 percent in volume and 30 percent in value in 2007 from the previous year.
~~~
"Egypt was the best performer in the Middle East last year. The market saw a 20 percent increase in volume and almost 35 percent increase in value," Barakat said.

[Edit]

Gold -- Sharefin, 08:41:41 01/11/08 Fri

Turkish gold imports set a new record

Turkey, the world's fourth-biggest buyer of gold, imported 20 percent more of the precious metal last year as prices rose to their highest since 1980.

Imports climbed to 230.8 metric tons last year, compared with 192.7 tons in 2006, according to figures posted on the Web site of the Istanbul Gold Exchange. The increase was the biggest since the exchange began recording data in 1995, reported Bloomberg. Meanwhile, Turkey's silver imports fell to 93.4 metric tons last year from 107.4 tons in 2006, the Exchange said.
~~~
Turkey's annual gold process capacity volume is worth $10 billion when it comes to gold bullion import, he said, adding that the country, in 2007, exported 148 tons of processed gold, worth $3.7 billion.

The biggest benefit from processed gold is added value, employment and income provided by taxation, said Kamer. â€œAlthough the country imports gold, half of the imported gold is processed in-country and exported again, generating added value and increasing the importance of the sector.â€

For 2008, Turkey aims to process 200 tons of gold for export. The country's imports will probably increase by 50 percent also, said Kamer. The sector has shown serious growth, he said, adding that the sector now employs 330,000 people, up from 100,000 since 1990.

[Edit]

Gold -- Sharefin, 19:09:13 01/09/08 Wed

Gold futures fly high in Shanghai market

The strong debut Wednesday for the Shanghai gold futures market boosted the price of spot bullion to a fresh record high as investors anticipate a wave of Chinese investment in the precious metal.

Gold prices have been on a record-breaking run in recent months, as investors seek refuge from weakness in the dollar and concerns about the health of the global financial system. The price of spot bullion has gone up 40 per cent since January 2007.

Shanghai’s investors paid a large premium of about $100 an ounce over international gold prices, with the June futures contract hitting an intraday high of Rmb230.95a gram, or almost $1,000 an ounce.
~~~~

Eugen Weinberg, commodities analyst at Commerzbank in Frankfurt, said demand would be driven “massively higher” following the start of gold futures trading in Shanghai, as a whole range of gold derivative products could now be introduced into China.

The new market traded contracts for about 350,000 ounces of gold on its first day, a level that traders considered extremely positive given the fact that the well-established Comex, the New York-based metals exch-ange, usually trades about 800,000-1m ounces a day.

John Read, precious metals strategist at UBS in London, considered the launch of the Shanghai gold futures the most important development in the bullion market since the introduction of exchange-traded funds in 2003.

The eight largest gold ETFs now hold about 840 tonnes of gold – more than the official bullion reserves of the European Central Bank.

In the absence of a China-based gold ETF, Suki Cooper at Barclays Capital said there would be strong investor support for the new futures market.

[Edit]

Gold -- Sharefin, 03:31:43 01/06/08 Sun

The Week That Was

Richard Russell (Dow Theory Letters): A mighty interesting move coming up for gold
â€œNow that gold is at all-time highs, is there any way to tell where gold might be going? Iâ€™m going to repeat the words of W.D. Gann. Mr. Gann is considered by many professionals to have been one of the greatest commodity and stock traders (and thinkers) of all time. Here are Gannâ€™s words (courtesy of my old New York friend, Ron Rosen).

â€œâ€˜When a stock or a commodity advances into new territory or to prices which it has not reached for months or years, it shows that the force or driving power is working in that direction. It is the same principle as any other force which has been restrained and breaks out. Water may be held back by a dam, but if it breaks through the dam, you would know that it would continue downward until it reaches another dam, or some obstruction or resistance which would stop it.

â€œâ€˜Therefore, it is very important to watch old levels of stocks and commodities. The longer the time that elapses between the breaking into new territory, the greater the move you can expect, because the accumulative energy over a long period naturally will produce larger movements than if it only accumulated during a short period of time.â€™

â€œIt took 28 years for gold to break out above itâ€™s 1980 high of 850. In view of what Gann says, this should be a mighty interesting move coming up for gold.â€

[Edit]

Gold -- Sharefin, 09:29:40 12/30/07 Sun

How High Will Gold Go?

by Dr. Krassimir Petrov

I have seen gold price forecasts of $1,000, $10,000, and even $100,000. There is one true fundamental problem with all calls for the price of gold -- they ignore the future inflation environment.

For example, if a genuine deflation grips the U.S. economy -- like the deflation of the 1930s -- then $1,500 for the top of the gold bull market might be too high. On the other hand, if a long 1970s-style stagflation is in the cards, $5,000 is too low. The point is that a call for the price of gold without clear economic assumptions is a wild guess.
Curiously, once gold shot up to $850, gold analysts did not waste time to update their long-term projections for the price of gold. My feeling, based on a dozen authors, is that their new range for the top is in the $2,000-3,000. I beg to disagree. Their math is simple, but poor. Let me explain.
They say that gold peaked at $850 in 1980; I agree. They say that CPI is up about three times and money supply is up about four times since then; I also agree. It follows that gold has the potential to peak in the $2,000-3,000 range; now I disagree. Here is one simple reason. We might say that this range is fair if this were the price of gold today. However, it might take four-five years to get there. The trick is that in these four or five years, price inflation and money supply may rise by another 50-100%, so by then, the target moves higher, say to the $4,000-5,000 range. Then you need another two-four years to reach the target. The problem is that the target is moving; it moves approximately with the rate of inflation.

The advantage of this approach is its simplicity and intuitiveness. However, it has many disadvantages. First, the target is a moving variable with unknown speed. Second, it ignores the macroeconomic environment. Clearly, deflation, stagflation, or strong inflation in coming years will make a world of difference for the target price of gold. Finally, it ignores basic market sentiment indicators like fear and greed.

Actually, a radically different approach provides a much better and much simpler answer. It also avoids the pitfalls of the previous approach. Most importantly, it tells us when the bull market is over. Thus, it tells us when to sell. It is based on the simple premise that in the long run, there must be a balance between the relative prices of financial assets and real assets. Roughly speaking, stocks and bonds are financial assets, while commodities and real estate are real assets.

Over the course of decades, the relative prices of real and financial assets swing wildly away from their well-established century-old averages. They inevitably revert to historical averages, and then swing to the opposite extreme. A well-established proxy for the price of financial assets is the Dow Jones industrial index. The single best proxy for commodities is gold. Their price ratio, the Dow/gold ratio, tells us how many ounces of gold buy one unit of Dow Jones. If today the Dow is 13,600 and gold is $800, the Dow/gold ratio is 17. Today, it takes 17 ounces of gold to buy one unit of the Dow index.

History tells us is that secular bull markets for stocks can push this ratio up into the range of 20–50. Look at the chart below. During the last century, there were three such secular (long-term) peaks, in 1932, 1966, and 2000. You can see the three peaks in the 20–50 range.

On the other hand, secular stock bear markets usually coincide with secular gold bull markets. At the secular peak for gold, the Dow/gold ratio falls to 1-2. As you can see on the chart, 1900 recorded a low of 1.7; 1929 recorded a low of 2; 1980 recorded a low of about 1. This means that when the gold bull market peaks, the price of gold will roughly equal the Dow Jones index. Thus, we should expect gold to substantially outperform the Dow in the coming 10–15 years. This would push the Dow/Gold ratio down to the range of 1–2.

200 yrs DOW/Gold ratio chart

So how high will gold go? The correct answer is simple: as high as the Dow Jones. It is important to understand that this method does not tell us when. It could be five, 10, or 15 years. It also does not tell us how high. It could be $2,000, $10,000, or $50,000.

Which scenario is most likely depends on how the Federal Reserve approaches inflation. Based on the Fed's reaction, there are three possible future scenarios:
(1) deflation,
(2) stagflation, and
(3) strong inflation.

Let us consider each in turn.

The first scenario, deflation, implies a major contraction in the supply of money and credit, similar to the one during the Great Depression. Consumer and commodity prices would fall rapidly; the stock market and real estate market would collapse. Back then, stock prices and real estate fell roughly 90% and gold increased just a little. Under this scenario, a reasonable forecast for the Dow will be about 1,000-1,500, while the gold price will be likely in the range of $800-1,500. This scenario is highly unlikely, since the Fed will fight tooth and nail to prevent a deflation from taking hold. As Chairman Bernanke reminds us, the Fed has many inflationary tools at its disposal and is not afraid to use them.

The second scenario, stagflation, is most likely. It should look similar to the 1970s. The Dow peaked in 1966. It made little progress for about 15 years. By 1980, it was just about where it was in 1966, roughly around 1,000. Gold, on the other hand, soared by 25-fold -- from $35 to $850. This means that strong inflation during the period kept the Dow from falling, so it did not fall as it did during the Great Depression. In this scenario, we should expect the Dow to remain bound in the 10,000-15,000 range. Then, a gold forecast of $10,000 is perfectly realistic.

The third scenario, very strong inflation, is definitely possible, although less likely than stagflation. A strong inflation could push the Dow up to 30,000-50,000 in the coming decade. However, this would also push gold prices up to $20,000-50,000. It is possible, but, in my opinion, not very realistic.

To summarize, I believe that both deflation and very strong inflation are not very likely. The likely outcome will be stagflation. A $10,000 gold price is consistent with this view. This is my price target for 2015-2020. My advice is simple -- stick with gold and you will profit handsomely over the long run.

[Edit]

Fiat -- Sharefin, 03:58:18 12/19/07 Wed

Staring into the Abyss - The Collapse Of The Modern Day Banking System

One of Britain’s leading economists, Peter Spencer, issued a warning on Saturday:

“The Government must suspend a set of key banking regulations at the heart of the current financial crisis or risk seeing the economy spiral towards a future that could make 1929 look like a walk in the park”.

Spencer said:

“The Bank is staring into the abyss. The Financial Services Authority must go round and check that all banks are solvent, and then it should cut the Basel capital requirement level from 8pc to about 6pc.” (“Call to Relax Basel Banking Rules, UK Telegraph)

Spencer confirms what we already knew; the banks are seriously under-capitalized and will come under growing pressure as hundreds of billions of dollars of mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) continue to lose value and have to be propped up with additional capital. The banks simply don’t have the resources and there’s going to be a day of reckoning.

Pimco’s Bill Gross put it like this:

“What we are witnessing is essentially the breakdown of our modern day banking system.” Gross is right, but he only covers a small portion of the problem.

Economist Ludwig von Mises is more succinct in his analysis:

“There is no means of avoiding the final collapse of a boom brought on by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

~~~
What’s so destructive about structured finance is that it allows the banks to create credit “out of thin air”, stripping the Fed of its role as controller of the money supply. Author David Roache explains how this works in an excerpt from his book “New Monetarism” which appeared in the Wall Street Journal:

“The reason for the exponential growth in credit, but not in broad money, WAS SIMPLY THAT BANKS DIDN’T KEEP THEIR LOANS ON THEIR BOOKS ANY MORE—AND ONLY LOANS ON BANK BALANCE SHEETS GET COUNTED AS MONEY. Now, as soon as banks made a loan, they “securitized” it and moved it off their balance sheet.

There were two ways of doing this. One was to sell the securitized loan as a bond. The other was “synthetic” securitization: for example, using derivatives to get rid of the default risk (with credit default swaps) and lock in the interest rate due on the loan (with interest-rate swaps). Both forms of securitization meant that the lending bank was free to make new loans without using up any of its lending capacity once its existing loans had been “securitized.”

So, to redefine liquidity under what I call New Monetarism, one must add, to the traditional definition of broad money, all the credit being created and moved off banks’ balance sheets and onto the balance sheets of nonbank financial intermediaries. This new form of liquidity changed the very nature of the credit beast. What now determined credit growth was risk appetite: the readiness of companies and individuals to run their businesses with higher levels of debt.” (Wall Street Journal)

This is truly mind-boggling.

The banks have been creating trillions of dollars of credit (by originating mortgage-backed securities, collateralized debt obligations and asset-backed commercial paper) without maintaining the proportional capital reserves to back them up. That explains why the banks were so eager to provide mortgages to millions of loan applicants who had no documentation, no income, no collateral and a bad credit history. They believed their was no risk, because they were making enormous profits without tying up any of their capital. It was, quite literally, money for nothing.

Now, unfortunately, the mechanism for generating new loans (and fees) has broken down. The main sources of bank revenue have either been seriously curtailed or dried up entirely. (Mortgage-backed) Commercial paper (ABCP) one such source of revenue, has decreased by a full-third (or $400 billion) in just 17 weeks. Also, the securitization of mortgage-backed securities is DOA. The market for MBSs and CDOs and other complex bonds has followed the Pterodactyl into the history books. The same is true of structured investment vehicles (SIVs) and other “off balance-sheet” swindles which have either gone under entirely or are presently withering with every savage downgrade in mortgage-backed bonds. The mighty gear that was grinding out the hefty profits (“structured investments”) has suddenly reversed and—like a millstone that breaks free from its support-axle–is crushing everything in its path.

The banks don’t have the reserves to cover their downgraded assets and the Federal Reserve cannot simply “monetize” their bad bets. There’s no way out. There are bound to be bankruptcies and bank runs. “Structured finance” has usurped the Fed’s authority to create new credit and handed it over to the banks. Now everyone will pay the price.

Wary investors have lost their appetite for risk and are steering-clear of anything connected to real estate or mortgage-backed bonds. That means that an estimated $3 trillion of securitized debt (CDOs, MBSs and ASCP) will come crashing to earth delivering a withering blow to the economy.

And it’s not just the banks that will take a beating either. As Professor Nouriel Roubini points out, the broker dealers, the investment banks, money market funds, hedge funds and mortgage lenders are in the crosshairs as well.

Nouriel Roubini:

“Non-bank institutions do not have direct access to the Fed and other central banks liquidity support and they ARE NOW AT RISK OF A LIQUIDITY RUN as their liabilities are short term while many of their assets are longer term and illiquid; so the risk of something equivalent to a bank run for non-bank financial institutions is now rising. And there is no chance that depository institutions will re-lend to these to these non-banks the funds borrowed by central banks as these banks have severe liquidity problems themselves and they do not trust their non-bank counterparties. SO NOW MONETARY POLICY IS TOTALLY IMPOTENT IN DEALING WITH THE LIQUIDITY PROBLEMS AND THE RISKS OF RUNS ON LIQUID LIABILITIES OF A LARGE FRACTION OF THE FINANCIAL SYSTEM.” (Nouriel Roubini’s Global EconoMonitor)

As the downgrades on CDOs and MBSs continue to accelerate, there’ll likely be a frantic “flight to cash” by investors, just like the recent surge into US Treasuries. This will be followed by a series of spectacular bank and non-bank defaults. The trillions of dollars of “virtual capital” that was miraculously created through securitzation when the market was buoyed-along by optimism; will vanish in a flash when the market is driven by fear. In fact, the equity bubble has already been punctured and the process is well underway.

[Edit]

Gold -- Sharefin, 02:35:04 12/17/07 Mon

Demand for gold investment is rising

Analysts expect gold investment to be strong in 2008 for many of the same reasons it was robust during latter 2007 — a soft dollar, fears of inflation and a flight to safety amid credit-market worries.
~~~
JPMorgan strategist Michael Jansen added that buying of gold to insulate portfolios from dollar weakness and as a hedge against potential inflation will strengthen investment.

"Gold historically has been a place to hold value, and that will continue to appeal to investors," Jansen said.

Bart Melek, global commodity strategist with BMO Capital Markets, said total gold demand in the second half of 2007 is expected rise around 11 percent, including fabrication, bar holdings and implied net investment.
~~~
Holmes said so much money entered exchange-traded funds that streetTRACKS bumped China from No. 10 on a list of the world's top gold holders.

[Edit]

Gold -- Sharefin, 10:29:19 12/16/07 Sun

India's gold rush

But in recent years, all previous sales records have been smashed. Rapid economic growth has given rise to what amounts to a gold rush.

According to the World Gold Council, demand for jewellery is up 38% in the last 12 months, even with the gold price at $789.50 an ounce. India is now the largest consumer of the precious metal in the world.

“Gold is at a 28-year high, but we have never seen it so busy,” said Mohit Gupta, a fifth-generation member of the family that owns Shri Ram Hari Ram.

[Edit]

Gold -- Sharefin, 03:40:17 12/11/07 Tue

Chinese now primed for Gold

Monday, December 10, 2007 6:19:52 AM
Author: John Reade, Robin Bhar
UBS Metals Daily

China's wealthiest investors set for gold spree

China's wealthiest investors are on the brink of ploughing as much as $68 billion into gold markets as they take profits from roaring share prices and steer clear of property, a top fund manager and bullion bull says. Wang Weilie, a pale, bespectacled 40-something who manages over 1 billion yuan ($135 million) on the Shanghai Gold Exchange on behalf of himself and clients, says the so-called "Zhejiang clique" are ready to pounce after Beijing opens up spot market bullion trading and a futures contract launches early next year. After amassing an estimated 3 trillion yuan ($400 billion) from investing in red-hot real estate and stock markets which have risen five-fold in the past two years, the wealthy group from eastern China is looking for the next sure bet. Wang says that's gold, and expects the amount of Chinese capital invested in the bullion market to soar 100-fold to some 500 billion yuan ($67.5 billion) in the next two years -- a sum that could catapult China ahead of India as the world's top buyer. "We all agreed that upside room on stocks was limited, as was upside on property prices. But the gold price has only increased minimally, even after 20 years of China's reform and market opening," Wang told Reuters during a lunch with three business partners in Lujiazui, Shanghai's financial hub. Coupled with inflation and global economic uncertainty, the redirection of Chinese capital towards domestic gold contracts will help spot prices more than double, says Wang, who says he once cornered two-thirds of the Chinese gold forward contract. "Spot gold prices will hit $2,000 in coming years," he said. Spot gold touched a 28-year high of $845.40 per ounce in early November, nearly doubling over three years amid a flood of investment in the commodities complex -- much of it driven by China's growing demand for raw materials to fuel its economy. Wang expects more than 15 percent of the capital currently invested in China's stock market to move to gold trading. China's total market capitalization peaked at about 35 trillion yuan in October, exceeding the country's gross domestic product. The main stock index tumbled nearly 20 percent last month while Beijing has continued tightening controls over the property sector to limit price gains (Reuters).

[Edit]

Gold -- Sharefin, 20:59:50 11/15/07 Thu

A perfect storm for gold as mines left empty

The era of 'peak gold' has arrived.

Try as they might, miners cannot find enough ore at viable costs to replace their fast-depleting reserves, even if they dig miles into the centre of the earth.

"There's not much gold out there," said Gregory Wilkins, chief executive of top producer Barrick Gold.

"Global mine supply is going to decrease at a much faster rate than people generally believe. Many of the new mines that people are anticipating will never come into production," he told the RBC Capital Markets gold conference in London.
~~~
Mr McArthur said global output was on a relentless slide. "We'll see four digit gold. It will have to reach $2,500 an ounce to equal the 1980 record in today's terms, so we have a long way to go," he said

Gold reached a 27-year high of $846 an ounce in early November following rate cuts by the US Federal Reserve, though it has fallen back on profit taking.

Investors seem to be betting on a "Bernanke reflation", suspecting that the Fed will turn the liquidity tap back on to cushion the US property slump.

Tony Fell, chairman of RBC Capital Markets, said the world money supply has been growing by 5pc-10pc while the stock of mined gold has been rising at 1.6pc, creating a mismatch that must be covered.

Mr Fell says the total debt burden in the US has exploded to 340pc of GDP, in stark contrast to the steady levels of around 150pc of the post-War era.

It almost insures further dollar debasement. "We're in the very early phases of a prolonged bull market," he said.

RBC argues that the global dollar system known as Bretton Woods II is "coming apart at the seams" as Asian, Mid-East, and Latin American states start to break their dollar links to avoid importing US inflation.

The result is to resurrect gold, which is fast regaining its role as the world's benchmark currency.

[Edit]

Gold -- Sharefin, 21:12:08 10/08/07 Mon

Golden years for Harry Schultz

On the other hand, Schultz' slowness doesn't seem to have hurt his performance over the past several years.

And Shultz's focus on gold is right on the news. He writes: "With an election coming, the Fed went for bandaging a slipping economy which affects votes and sacrificing the dollar, which is harder for the public to measure. Big rate cuts, like this 50 points, are always an act of desperation. Such cuts have usually been followed by recessions. More cuts will follow. It set the future in cement for the U.S. dollar. Cement overshoes. Currency debasement never produces wealth. Fed knows this, but took a political decision. Nothing new about that. Much higher inflation now guaranteed ... My tentative targets (by end of 2008): 14% (inflation), $1,600 (gold) and $45 (silver)."

Elsewhere, Schultz writes: "Gold is starting into the most exciting part of its long-term bull market, the so-called second (and monetary) phase. Herein we normally see the biggest percentage gains, matched by biggest corrections as we saw in the '70s gold rush: in 1974, gold corrected 25% in 4 months (most gold shares fell 50-70%); in 1975-76 gold fell 50% (most shares fell 70-90%) and took 2 1/2 years to get back to old high before then rocketing to new highs. But that makes for great trading opportunities. This is the phase where the BIG money is made, by those who go with the tides. In and out, in and out ..."

[Edit]

Gold -- Sharefin, 20:54:36 09/30/07 Sun

Dollar crunch puts gold centre stage

HE dominoes are toppling. What began as a credit crunch has turned into a dollar crunch. We are witnessing a run on the world's paramount reserve currency, an event that occurs twice a century or so, and never with a benign outcome. The US dollar has fallen through parity against the Canadian dollar and plummeted to all-time lows against a basket of currencies. This is dangerous. None of the mature economic blocs seems able to take the strain, let alone step in to restore order.

Ultimately, Europe and Japan are in worse shape than the US. A mood of sauve qui peut is taking hold.

Is this what gold is sniffing as it breaks out against all currencies, smashing through €500 an ounce against the euro, and vaulting to a 28-year high of $743 against the dollar?
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"Central banks have been forced to choose between global recession or sacrificing control of gold, and have chosen the perceived lesser of two evils," said Citigroup in a fresh report.

"We believe that the policy resolution to the credit crunch will take the form of a massive, extended 'Reflationary Rescue', in a new cycle of global credit creation and competititive currency devaluations. This could take gold to $1,000 an ounce, or higher."

The report's authors, John Hill and Graham Wark, say the avalanche of central bank bullion sales earlier this year was "clearly timed to cap the gold price".

They do not explain this explosive allegation, long promoted by the gold group GATA. But it would not surprise me if the European Central Bank's motive for selling 37 tonnes in April and May was to hold the euro price of gold below €500.

Citigroup said the game was up once the Federal Reserve slashed rates a half point and opened the liquidity floodgates.

[Edit]

Gold -- Sharefin, 23:02:37 09/25/07 Tue

Gold prices hit three-week high

Gold output in South Africa, the world’s biggest producer, fell 7.5 percent in the second quarter from a year ago, while Russia produced 76.9 tonnes of gold in the first seven months of 2007, 1.9 percent lower from last year.

Traders said brisk seasonal demand from India, the world’s largest consumer, boosted physical trading in Asia and helped offset scrap sales. Gold imports to Turkey, jumped 40 percent to 178 tonnes in the first eight months of the year.

[Edit]

Gold -- Sharefin, 23:01:14 09/25/07 Tue

India Jan-Aug gold imports up 87%: WGC

Mumbai, September 22: India imported around 664 tonnes of gold in January-August, up 86.5 percent from a year ago, a World Gold Council official said on Saturday.

[Edit]

Gold -- Sharefin, 10:22:03 09/25/07 Tue

Chief strategist at CLSA predicts record gold run

The precious metal, long a safe haven for investors, yesterday was predicted by a leading analyst to quadruple within three years as buyers seek shelter from prolonged turmoil in mainstream financial markets.

According to Christopher Wood, chief strategist at the broker CLSA, market ructions and a collapse of the dollar could send gold prices to more than $3,400 an ounce within the next three years. Gold futures last night hit a 28-year high at $733 an ounce, but are more than $100 short of the record. Mr Wood said that the sub-prime conflagration would be the catalyst for a wider breakdown in markets.

[Edit]

Gold -- Sharefin, 20:52:00 09/17/07 Mon

Spanish gold move boost for bullion

he Bank of Spain, the largest seller of gold this year under the central banks’ gold agreement, plans no more significant sales of the precious metal in a move that is likely to fuel further the recent surge in prices.

People familiar with the pact said Spain’s central bank had already achieved the bulk of its planned bullion disposals.

Analysts said the end of Spanish sales could reduce next year’s central bank gold sales and improve sentiment in the bullion market just as the gold price is approaching a 26-year high.

The gold price rose on Monday to a fresh 16-month high of $719.65 a troy ounce, underpinned by the weakness of the dollar ahead of Tuesday’s Federal Reserve rate-setting meeting.

~~~~
Spain has been the largest seller of gold under the current year of the central bank pact which runs to the end of September, according to data from the World Gold Council.

Spain sold about 149 tonnes, or 37 per cent of the total 399 tonnes sold by central banks in industrialised countries. The French central bank was the second largest seller with 99.2 tonnes.

[Edit]

Gold -- Sharefin, 22:13:52 09/06/07 Thu

India's 07 gold demand seen jumping by 50 pct - WGC

MUMBAI (Reuters) - India's demand for gold in 2007 is likely to jump by 50 percent, from 2006, to record levels as lower prices lift buying interest, a senior official of the World Gold Council said on Thursday.

If realised, Indian gold demand would exceed 1,000 tonnes for the first time.
~~~~
Latest figures from the WGC show India's gold demand in the first half of 2007 was 528.2 tonnes including jewellery and net retail investment demand.

[Edit]

Fiat -- Sharefin, 11:18:12 08/11/07 Sat

Central banks act to head off global credit crisis

WASHINGTON/FRANKFURT (Reuters) - Central banks around the globe pumped billions of dollars into banking systems on Friday in a concerted effort to beat back a widening credit crisis, and they pledged to do more if needed.

In all, central banks in Europe, Asia and North America have pumped out more than $300 billion (148 billion pounds) over 48 hours in an effort to keep money flowing through the arteries of the global financial system, hoping to prevent a credit market seizure that could imperil economies.

In a rare statement of reassurance that underlined the seriousness with which it views the current bout of market stress, the U.S. Federal Reserve said it would provide cash as needed to ensure markets functioned smoothly. The statement was the first of its kind since September 11, 2001, when terror attacks brought the U.S. financial system to a virtual halt.

"Ben Bernanke must feel like the captain of the Titanic," said Sherry Cooper, chief economist at BMO Capital Markets in Toronto, referring to the Fed chairman. "He knows the ship has hit an iceberg but, through the dark and fog, can't see how bad the damage is."

[Edit]

Gold -- Sharefin, 23:39:05 06/09/07 Sat

SOLBES SAYS GOLD IS NO LONGER PROFITABLE

Bank of Spain once again sells important amounts of gold in May

The Bank of Spain's gold reserves continue to dwindle. Not only did it manage to sell 20 percent of its reserves in only two months (March and April), it continued fast-paced sales in May: 28 tons.

Economy Minister Pedro Solbes claims the sales are for making the reserves profitable, but analysts foresee further rises in gold, the price of which could reach $2,000. (It currently trades at $661.50).

The Bank of Spain sold 28 tons of gold in May, as revealed by the latest Reserve Assets Report, in addition to the 80 tons sold in the months of March and April. Thus, in three months the Bank of Spain has parted with 25 percent of its gold assets.

Last Wednesday, Partido Popular Sen. Javier SÃ¡nchez SimÃ³n queried Economy Minister Pedro Solbes regarding the regulatory body's reasons for the March and April gold sales. Solbes' response was that "the intention with selling gold, an unprofitable asset, is to convert it to fixed-income bonds, which are profitable." Solbes added, "Based on this legal framework, the Bank of Spain has carried out a strengthening process of its equity situation, attempting to improve the profitability of its assets."

"Gold is no longer profitable," Solbes categorically stated.

[Edit]

Gold -- Sharefin, 17:28:04 06/08/07 Fri

Gold May Touch $1000

Gold may rise to more than $1,000 an ounce as demand from India, China and exchange traded funds increases and production of precious metal falls, according to JP Morgan Chase & Co., the third-largest US bank.

Gold, which has risen 5.2 per cent this year, may reach $850 an ounce in the “medium term,’’ on the way to $1,000, analysts from JP Morgan led by John Bridges said in the report dated June 6. They didn’t specify what the medium term was.

Gold-mining companies reduced output to a 10-year low of 2,471 metric tons in 2006, according to London-based researcher GFMS Ltd. Demand for gold from India, the world’s largest buyer, rose 50 percent in the first quarter of 2007 while demand in China gained 31 percent, according to the World Gold Council.

“We would continue accumulating gold and silver positions looking to higher prices by year-end,’’ the analysts said. “A four-figure gold price looks quite feasible to us given the tight supply demand situation in the gold market.’’

[Edit]

Gold -- Sharefin, 07:12:22 05/30/07 Wed

Blanchard Notes

Australia and South Africa officially updated mining production totals this past weekend for the first quarter of 2007.

Australian production was down nearly 2% at just over 60 tonnes of production compared to last year.

South African production was down 7.8% compared to 1st quarter last year. Perhaps even more importantly is the nearly 20% increase in costs the mining companies have seen in this year over year period. Margins aren't expanding with increased prices and the bruising labor talks are sitting right on the horizon. Union and company discussion on wages are set to begin in mid June.

These are figures for the long term investor. Prices have nearly tripled in the last five years and production is still slumping in the #1 & 2 producing countries in the world.

Only one country, China, in the top 10 producing countries has shown an increase in production over the past five years. This is why we've had a 7% drop in mine production from 2001 to 2006. There is no reason, with reports like these from Australia and South Africa and with mining company CEOs stating lower production should be expected, to believe the production profile will somehow miraculously be saved by the increased production in one country.

[Edit]

Gold -- Sharefin, 20:54:09 05/18/07 Fri

"Pig Year" Prompts Jump in Gold Demand

Demand for gold increased 4% from the same quarter last year, even as the spot price of gold has increased 17% during the same time, a report by the World Gold Council shows.

Identifiable gold demand jumped to 831.7 tonnes of gold worth $17.3 billion compared to the first quarter of 2006, in which buyers sought 797.8 tonnes of gold worth $14.2 billion.

!!!!!!!!!!!!!!!!!!!!!!
Demand has been perpetuated by traditionally gold-strong areas such as India and China, where consumer demand has increased by 50% and 31%, respectively, compared to a year earlier, Milling-Stanley said.

[Edit]

Gold -- Sharefin, 22:18:15 05/16/07 Wed

Gold glows on back of clean-air movement

Gold is coming of age as an industrial metal in a host of uses from car catalysts to air conditioning and health care, adding 451 tonnes to global demand last year - roughly offsetting sales by central banks.

The World Gold Council is counting on a future surge in demand for use in diesel catalysts following the invention of a new technology by the US firm Nanostellar that is more efficient and cheaper than platinum.

Gold costs $663 an ounce, while platinum has soared to $1,320 as car companies scramble to meet stricter clean-air rules.

James Burton, the WGC's chief executive, said the design could cut noxious emissions by 40pc more than existing platinum catalysts. "With the diesel automobile market continuing to grow strongly across the globe, this is very exciting," he said.

For now, however, investment demand remains the key hope for gold bugs waiting to see the metal break out of its lacklustre trading range.

Rob McEwen, chief executive of US Gold Corp, predicted that gold would soon smash through its 25-year peak of $730 in May 2006. "I expect it to test $850 by the end of 2008, and by the end of 2010, north of $2,000, possibly $5,000," he said, insisting that dollar troubles would eventually prompt a flight to the safety of bullion.
~~~
The WGC said consumer demand in India and China was the key impetus for growth of the gold market in the first quarter of 2007. India's thriving middle class drove up sales by 50pc year-on-year, snapping up jewellery in advance of the Akshaya Thritiya festival.

In China, the Year of the Golden Pig has boosted Chinese demand by 31pc, with affluent city buyers opting for 24-carat bars of pure gold.
~~~
One of the properties of gold is that it can serve as a catalyst at low temperatures. Japanese toilets now use gold filters to break down smelly nitrogen compounds, purifying the air. Gold particles can clear smoke in air conditioning systems in buildings, or in gas mask respirators to prevent CO2 poisoning down mine shafts or in airplanes.

The pharmaceutical company CytImmune has developed a new cancer treatment using gold nanoparticles to target tumours, a treatment that appears to reduce toxic side effects.

[Edit]

Gold -- Sharefin, 06:36:41 05/14/07 Mon

How to spoil a good party

NEW YORK - On a sultry spring day in Manhattan, the contrarians -- bears and goldbugs -- are in on the prowl.

The 100 or so bankers, money managers and investors gathered at the Union League Club in New York City last week to hear how today's highly leveraged, derivatives-entangled global financial system is about to come crashing down about their ears.
~~~
To give an idea of how indebted the United States is, Mr. Liu outlines what the U.S. Treasury would require if the dollar was still backed by gold.

The U.S. treasury now owns 261 million ounces of gold. At its peak in in December, 1941, it owned 650 million ounces.

As of March 12, 2007, the price of gold required to pay back the national debt was US$33,864 per ounce. The rise in the price of gold needed to keep up with the rise in U.S. national debt would be US$8.15 per ounce per day.

To back the U.S. monetary base with gold, which was about US$800-billion in February, the price of gold would have to be US$3,763 per ounce.

[Edit]

Fiat -- Sharefin, 10:10:38 05/11/07 Fri

Credit Collapse

On May 10th 1837, the banks of New York suspended gold and silver payments for their notes. Fear ignited bank runs throughout the United States. The young country fell into a 7 year depression. How could two decades of prosperity end so suddenly? According to America: A Narrative History: "monetary inflation had fueled an era of speculation in real estate, canals, and railroad stocks." Cracks in the dam were visible much earlier, as the stock market peaked in inflation-adjusted value three years prior. According to Rolf Nef, debt levels in the private sector rose to 150% of GDP. In late 1836, the Bank of England concerned with inflation raised interest rates. As rates rose in England, credit tightened, and U.S. asset prices began to fall. On May 10th, investors panicked and scrambled for cash. "By the fall of 1837 one third of the work force was jobless, and those still fortunate to have jobs saw their wages fall 30-50% within 2 years. At the same time, prices for food and clothing soared." Murray Rothbard in A History of Money and Banking in the United States described the impact on financial institutions: "unsound banks were finally eliminated; unsound investments generated in the boom were liquidated. The number of banks fell during these years by 23 percent."

[Edit]

Gold -- Sharefin, 10:06:26 05/11/07 Fri

Blanchard News

The Bank of Spain announced yesterday on their website that they have sold 2.6 million ounces of gold into the market over the past two months, giving no update on if those sales were expected to continue or not. This figure means that Spain has sold off 20%(!) of their total gold holdings.
~~~~
Goldcorp reported earnings this morning, the final senior producer to do so. Their numbers were quite impressive across the board (a sharp change from other numbers presented by senior mining companies this quarter), but more important for the physical side of the market is that their expected production for the year has been revised lower by 100,000 ounces.

Freeport McMoRan's gold production is going to fall considerably in the second half of the year as the company is expected to producer less gold in the final three quarters of the year than they did in the first quarter; Newmont and Barrick are expected to have lower production figures moving into the second half of the year from the first half.

Following up more on the supply side of the market from miners are the comments below from Gold Fields CEO, Ian Cockerill. Cockerill expects South African gold production, which represents 12% of annual mine supply to continue tapering off or being flat in the best case scenario with output currently at 85 year lows. Peruvian, South African and Canadian gold production has fallen nearly 30% in the last five years. These three countries represent 25% of annual mine supply. Again, these are not one off, isolated scenarios. These are the flagship mining countries showing irreversible production declines that began a decade ago. (Editor's note: Blanchard uses GFMS research which confirms the above trends).
~~~
NEWLY mined gold from South Africa would continue to decline or level off at best, said Ian Cockerill, CEO of Gold Fields which derives about 2.52 million oz/year from the country, equal to 60% of production.

South Africa, which comprised about 66% of world production in the 1970s, produced 275 tonnes in 2006, a 7.5% year-on-year reduction, and the lowest output since the General Strike in 1922.

[Edit]

Silver -- Sharefin, 05:53:51 05/09/07 Wed

Stockholders' Questions Answered at Berkshire's Annual Meeting this past weekend

Their silver trade
"I bought it too early, I sold it too early. Other than that, it was a perfect trade."

"That shows you how much we know about silver."

"I'm flattered you asked because no one asks us our opinion on silver anymore."

"Commodity prices are determined by supply and demand, not conspiracy theories."

[Edit]

Gold -- Sharefin, 11:00:55 05/07/07 Mon

To better appreciate just how much of stock gains can be attributed to inflation, consider that the record high for the Dow in 1929 of approximately 380 also equated to 19 ounces of gold. So despite all of the hoopla and a thirty-fold increase in stock prices, the Dow has actually gained no real value during the past eighty years. The entire rise from 360 to 13,000 has been an illusion made possible by the magic of inflation. So much for the concept of stocks being a "can't lose" long term investment -- unless you feel that eighty years is not quite a long enough time horizon! Peter Schiff

[Edit]

Gold -- Sharefin, 07:19:27 05/03/07 Thu

From the Elliott wave Theorist.

If there is anything I would have done differently, it would have been to short the stock market in terms of real money, which would have entailed selling stocks and buying gold simultaneously. Robert Prechter

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Gold -- Sharefin, 00:40:11 04/25/07 Wed

Massive European bank gold sales continue to fail

ECB gold sales have been updated for the past week and again we've seen another week of massive sale increases. Two ECB banks sold 17 tonnes of gold into the market over the past week. In the last five weeks, ECB banks have dumped over 76 tonnes of gold into the market, a drastic change from sales levels over the previous six months. There is only one time in the last two years there has been this high a level of gold sales into the market in such a short period of time. The last time the gold market saw these levels of sales was May of '06 when prices peeled off of $730 and fell back to $550 over the length of the sales. Gold has increased $50 per ounce in the face of this supply increase. We will continue to harp on this issue because it is the clearest indicator of the robust physical demand currently in the marketplace.

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Gold -- Sharefin, 10:08:42 04/06/07 Fri

Peru Gold Production Falls to 4-Year Low on Yanacocha Decline

April 3 (Bloomberg) -- Peru's gold production fell to a four-year low in February because of declining output at Newmont Gold Corp.'s Yanacocha mine.
Production fell for an eighth straight month, dropping 25 percent from a year earlier to 12,522 kilograms (27,606 pounds), the Energy and Mines Ministry said an e-mailed statement. Yanacocha, the world's second-largest gold mine, expects output to drop 39 percent this year to 1.6 million ounces on falling ore grades.

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Gold -- Sharefin, 10:04:52 04/06/07 Fri

Global gold output fell to 10-yr low in 2006

Global gold production had fallen to a ten-year low last year, when output registered a “substantial” 3% decline of 79 t, a survey released on Wednesday showed.

Precious metals consultancy firm GFMS, which launched Gold Survey 2007 in Johannesburg, senior supply-side analyst Bruce Alway explained that Asia, North America and Africa were the main contributors to the decline in production.

In Asia, production fell by 46 t, while North America and Africa’s output declined by 26 t and 17 t, respectively.

“In Africa, Mali and Ghana did much, but not quite enough to undo the more than 20 t of lost output reported in South Africa,” the consultancy said.

South Africa’s gold production dropped to an 84-year low in 2006, registering a 7,5% year-on-year decline.

Oceania's production fell by 21 t last year.

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Gold -- Sharefin, 04:45:41 03/29/07 Thu

Dow Jones notes IMF plan to clarify gold loans and swaps

LONDON -- The International Monetary Fund has proposed to increase transparency in the gold market by publishing statistics that reveal the amount of gold loaned and swapped into the market by central banks, analysts said
Friday.
~~~
According to the IMF draft, gold bullion can be a financial asset, otherwise called monetary gold, or a good, otherwise known as nonmonetary gold, depending on the holder and the motive for holding.

"Monetary gold is gold to which the monetary authorities have title and is held as reserve assets," the IMF said, and comprises gold bullion and unallocated gold accounts.

Meanwhile, an allocated gold account provides a record of title to specified gold, typically offering the purchasing and selling of investment grade bars and coins to order, the draft said. "In contrast, unallocated accounts represent a claim against the account operator to deliver gold," the draft continued.

Both of these accounts are to be distinguished from accounts that are linked to gold -- accounts indexed to gold -- which are considered deposits, the draft said.

If the IMF chooses to adopt these details, it will help to "get rid of confusion, disseminate more information, and increase transparency of the marketplace," said Neil Ryan of Blanchard and Co. in New Orleans.

Ryan said that as the IMF begins implementing changes to gold-reserve accounting regulations, the gold market will become "more accessible and transparent for all market participants."

The IMF draft also proposes further clarification with regard to the treatment of loans involved in repos and gold swaps -- in other words, helping to clarify where gold should be allocated on the books.

This contrasts sharply with the IMF's previous decision to report gold held in monetary reserves, both swaps and loans, all in one line item, analysts said.

A gold swap is a repurchase agreement for currency.

With regard to gold swaps between a monetary authority and a resident, "it is reported under repo loans in other foreign currency liabilities," according to the draft.

And "any loan liability to a nonresident is recorded within 'other investment,' with the foreign exchange received recorded as an increase in currency and deposits within reserve assets," the draft continued.

As for gold loan regulations, the IMF draft said that "to qualify as reserve assets, gold accounts must be available upon demand to the monetary authorities."

In effect, this means that when gold is deposited with a bullion bank, the ownership effectively remains with the monetary authority and the gold is returned to the authority on maturity, said analysts.

The draft continues to elaborate on loans, saying, "If the monetary authority deposits gold bullion in an unallocated gold account, the gold bullion is demonetized and this is recorded in the other changes in assets account of the monetary authority."

And "if the account is with a non-resident and is available on demand, a transaction in an unallocated gold account is recorded in reserve assets," the draft continues.

Analysts maintain, however, that this is only a draft proposal and the market will have to wait and see if it is adopted in October.

But the outlook is good if such clarifications are adopted. "We'll have to work to find out how much is loaned and swapped into markets, but for the first time ever, the market will be able to actually get this information with some work," said Ryan.

[Edit]

Gold -- Sharefin, 09:15:55 03/12/07 Mon

New gold mines fail to deliver

A STRING of failed gold projects, including the troubled revival of Victoria's Bendigo and Ballarat fields, has seen Australia lose its ranking as the world's second-largest gold producer.

Australian mines produced 249 tonnes of gold in 2006, slipping behind the United States which produced 252 tonnes.
Australia put in its worst performance in 13 years, with production 5 per cent lower than in 2005, according to a report compiled by Melbourne consultants Surbiton Associates.
~~~
Australia had been expected to maintain and even increase its position in the world gold rankings as the soaring gold price encouraged the development of new mines.

Large developments including Newcrest's Telfer mine and the $2 billion Boddington redevelopment mean Australia could soon challenge South Africa for the number one position.

But the failure of a number of smaller projects to live up to expectations last year saw gold production slip.

Setbacks have included the troubled revival of the Ballarat and Bendigo gold fields, with Ballarat Goldfields and Bendigo Mining announcing the deferment of production in favour of further exploration.

BMA Gold, which owns the Twin Hills mine in Queensland, has
appointed administrators and Tanami Gold had had design problems with the treatment plant, delaying production.

Australia was not the only country to produce less gold in 2006, with South Africa and the US also reporting lower output.

Australia became the world's second-largest producer in 2004 when it overtook the US, and Dr Close predicted more movement in the rankings in the next few years.

She said Peru and Russia were substantial producers, but singled China out as an emerging force in gold.

"It looks like the crouching tiger is getting ready to pounce," Dr Close said. "According to Chinese government sources, China's gold production jumped 7 per cent in 2006 to 240 tonnes . . . and output in 2007 is estimated to rise another 20 tonnes to 260 tonnes," she said.

[Edit]

Gold -- Sharefin, 09:12:26 03/12/07 Mon

Global Gold Production on the Decline

Yesterday, South Africa’s Chamber of Mines reported that gold output fell last year to 275 tonnes, down 8% from 2005. Some sources say South Africa’s decline in gold production is now becoming a global affair, as seen in leading gold producing countries.

According to stats from GoldSheets.com, U.S. gold output for last year declined from 262 tonnes to 260 tonnes. Australian production fell to 251 tonnes from 263 tonnes. Gold produced in Peru declined to 203 tonnes from 207 tonnes. Russian gold output dropped 4 tonnes in 2006 to152 tonnes, while Canada fell from 118 tonnes to 104 tonnes.

“Production in Australia, South Africa, Canada and Peru is expected to continue slumping in the next few years, probably stabilizing in 2010, but never reaching their peak levels from years past,” said Neal R. Ryan, Vice President and Director of Economic Research for Blanchard and Company, Inc.

Ryan said global production for gold peaked in 2001 at 2,604 tonnes or 83.7 million ounces. With 2006 production expected to come in at 2,467 tonnes, annual gold mining supply will have fallen 4.4 million ounces in five years. Since 2001, prices have almost tripled from $260/oz to $650/oz.

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Gold -- Sharefin, 00:48:07 03/04/07 Sun

True State Of The Economy Not Grasped By The Public

John Hathaway, a gold-fund manager at Toqueville Asset Management in New York and the author of a series of brilliant essays on gold, perhaps summed it up best in a recent letter to shareholders. He stated that, "we are still in the early stages of a bull market in gold. When it has completed its course, we believe the duration and magnitude will exceed any historical precedent."

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Gold -- Sharefin, 17:30:41 02/24/07 Sat

The relevance and importance of Gold in the World Monetary System

If man-made money returns to being stable, it is likely that the man-made money price of Gold will also be stable.
This may make Gold unattractive in terms of immediate return on investment, although insurance via Gold preserves
investors' capital during times of monetary instability. If, however, the current Monetary inflation gives way to
deflation because of the Debt burden, it is as certain as anything can be in the world of investment that Gold would
then enjoy a secular "bull market" either in "nominal price" terms (inflation) and/or in "real price terms" (deflation).
Gold, which is the only widely accepted means of exchange that cannot be destabilised by man, will adjust in price
to reflect disorder in man-made money. When the Fifth monetary Phase occurs, the recent bull market in Gold will
prove to be only the beginning. In these circumstances, investors in Gold would stand to profit handsomely.

[Edit]

Gold -- Sharefin, 17:26:39 02/24/07 Sat

China plans to produce 260 tons of gold in 2007

BEIJING - China plans to produce 260 tons of gold in 2007, nearly 20 tons more than last year, according to the National Development and Reform Commission (NDRC).
The NDRC said that China's gold output hit a record 240.08 tons last year, up 7.15 percent year-on-year.

[Edit]

Gold -- Sharefin, 17:20:14 02/24/07 Sat

Barrick Gold looks beyond yellow metal

Nickel, copper, zinc. Silver, platinum, palladium. Even energy.

They aren't words you expect to hear at all – especially not in a positive light – from the world's biggest gold miner in a three-hour presentation to the international investment community.

Yet, Barrick Gold Corp.'s chief executive Greg Wilkins stood before analysts yesterday and talked about some of the company's future plans in base metals and other precious metals as a reality of an industry, given the lack of major new discoveries on the global bullion front.
~~~
So, in the face of rapidly depleting resources, flat production, rising costs and longer approval times to open new mines, Wilkins touted other developments besides gold, including a big nickel project in Tanzania, platinum-palladium projects in Russia and South Africa, along with a copper and gold property in Pakistan.

Already 20 per cent of Barrick's overall sales are from its copper operations in Chile. Its Pascua Lama project on the border of Chile and Argentina also hosts a world-class silver deposit.

And the Pueblo Viejo property in the Dominican Republic will crank out silver, copper and zinc once it gets approved.

"We're going to harness these non-gold assets," said Barrick's vice-president of exploration, Alex Davidson.

"Our business is gold. ... But reserves are an issue. Can we sustain them, can we grow from here," Wilkins said.

[Edit]

Gold -- Sharefin, 22:35:35 02/21/07 Wed

The relevance and importance of Gold in the World Monetary System

If man-made money returns to being stable, it is likely that the man-made money price of Gold will also be stable.
This may make Gold unattractive in terms of immediate return on investment, although insurance via Gold preserves
investors' capital during times of monetary instability. If, however, the current Monetary inflation gives way to
deflation because of the Debt burden, it is as certain as anything can be in the world of investment that Gold would
then enjoy a secular "bull market" either in "nominal price" terms (inflation) and/or in "real price terms" (deflation).
Gold, which is the only widely accepted means of exchange that cannot be destabilised by man, will adjust in price
to reflect disorder in man-made money. When the Fifth monetary Phase occurs, the recent bull market in Gold will
prove to be only the beginning. In these circumstances, investors in Gold would stand to profit handsomely.

[Edit]

Gold -- Sharefin, 22:16:04 02/17/07 Sat

Gold sales rose to a record level of $65.3 billion in 2006

*

2006 demand for gold hits record of US$65bn, despite fall in tonnage and reduced supply
*

Industrial demand highest ever at 458 tonnes
*

Jewellery sales at all time record in US$ terms at $44bn
*

Investment demand 7% higher than 2005 in tonnage terms and 45% higher in dollar terms
*

Supply fell 13% in tonnage terms including a sharp reduction in net selling by central banks

~~~
The popularity of gold exchange traded funds meant that ETFs have become the main driver of investment demand growth. The launch of several new gold exchange traded funds spurred inflows into ETFs and at the end of last year, total gold stocks held by ETFs and other similar funds amounted to 652.5 tonnes, worth around $13.3bn.

[Edit]

Gold -- Sharefin, 20:47:00 02/07/07 Wed

Central Banks Becoming Buyers

According to recently updated IMF reserves statistics, some central banks have begun purchasing significant quantities of gold over the past few months, in stark contrast to the most recent figures available to the market, says Donald W. Doyle, Chairman and CEO of Blanchard and Co. Inc.

The central banks of Russia, Kazakhstan, Greece, and the Philippines all have added to gold held in reserve, according to figures updated February 5, 2007.

"The general trend of central bank activity regarding gold reserves has changed a great deal in the past year," Doyle says. "For the first time in the seven years of the program, banks affiliated with the Central Bank Gold Agreement failed to reach sales quotas in 2006, and now, with updated IMF reserve data just published, it is apparent that gold sales have slowed. In addition, the much-anticipated and speculated-upon gold buying is finally emerging in the market."

According to IMF statistics, Russia has added 7.45 tonnes to reserves, Kazakhstan has added 7.38 tonnes, Greece has added 3.56 tonnes, and the Philippines added 1.4 tonnes. While Russia stated publicly in 2006 that it would increase its gold reserves substantially over the coming years, the moves by other central banks were unexpected in the market, clearly a bullish signal, Doyle remarked.

[Edit]

Gold -- Sharefin, 19:13:39 01/21/07 Sun

Leading Canadian banker recommends gold, denounces fiat system

Chairman RBC Capital Markets
Vancouver Client Appreciation Dinner
Four Seasons Hotel, Vancouver
Thursday, January 18, 2007

.... I would not want to close off the evening without tabling one opportunity for all of us to make money, safeguard our wealth, and protect ourselves from the ravages of inflation over the next many years -- and that is gold bullion.

Gold bullion is a secretive, opaque market with little transparency. Gold can be volatile, is almost impossible to forecast on a short-term basis, and requires great patience, and, accordingly, it's not for short-term traders but rather for serious long-term investors.

Is gold a currency, a commodity, or a store of value?

The answer is all three, but gold bullion is primarily a currency and a store of value and is a hedge against fiat paper money and inflation.

As an economic consultant in 1966 Alan Greenspan wrote: "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. Gold stands in the way of this insidious process."

At Royal Bank we trade gold bullion off our foreign exchange desks rather than our commodity desks because that's what it's is -- a global currency.

As J.P. Morgan said in 1913: "Gold is money and nothing more."

It was Alan Greenspan again who said in a 1999 testimony before the U.S. House Banking Committee that "gold represents the ultimate form of payment in the world."

Gold bullion is the only currency worldwide which is freely tradable and which is unencumbered by vast quantities of sovereign debt and prior obligations.

Gold bullion is the one investment and long-term store of value which cannot be adversely impacted by corrupt corporate management or incompetent politicians -- each of which are in ample supply on a
global basis.

As a currency and a store of value gold has stood the test of many centuries.

At the current level of about $625 per ounce, gold has risen about 250 percent over the last five years.

Nevertheless, I believe gold bullion is now in the very early stages of a long-term secular bull market which will carry it to much higher levels over the coming decade.

I don't think there's any point in speculating how high the price of gold might go in the course of this cycle because no one can be that precise.

Suffice to say I anticipate a material increase.

History doesn't repeat but it's well to remember that from 1970 to 1980 gold rose 2,300 percent so it shows what can happen.

Reflecting on the long-term outlook for gold, it is important to fully appreciate that we now live in a world of fiat paper money.

Just as a reminder, fiat paper money, according to the Oxford Dictionary, is inconvertible paper money made legal tender by government decree.

The real question over the long term is: How much confidence do you have in politicians and central bankers to maintain the purchasing power of their currencies?

Since the U.S. moved to fiat paper money in 1971, the dollar has lost 80 percent of its purchasing power.

Since the Federal Reserve was established 93 years ago, the dollar has lost 98 percent of its purchasing power.

The new fiat U.S. dollar system has been in place for only 35 years -- not long when you consider the sad and sorry record of fiat paper money around the globe throughout the past century or two.

I would say the jury is very much out on this new system.

What will the record of the U.S. dollar be in another 20 or 30 years?

Recent history does not augur well and it could be much worse.

The U.S. annual trade deficit, now running at a rate of more than three-quarters of a trillion annually, or 6.3 percent of GDP, is a huge concern.

It's not prudent for the U.S. to depend on foreign bond buyers to finance domestic consumption.

Asian countries produce low-cost goods which are shipped to the United States, the U.S. ships dollars back to Asia, and then the Asians purchase U.S. treasuries.

One could say this is a giant international Ponzi scheme. I don't think this model is viable or sustainable. Asian central banks will not want to accumulate U.S. dollars at the current rate forever.

There is no free lunch. Virtuous circles like this, where everyone appears a winner, always come to an unhappy ending.

We have never before experienced imbalances in global trade and foreign exchange of the current magnitude -- not even close.

Major currency realignment is coming, and the longer it is delayed, the more the risk of the crisis. You can't hold back the tide.

The ingredients are here for major trouble in global financial and foreign exchange markets.

For all these reasons, I believe the stature and reputation of the U.S. dollar as a store of value have been greatly diminished and undermined over the past decade.

In light of all this, I believe gold bullion will gradually re-emerge as an accepted alternative asset and investment.

Over the past few years the price of gold has been in a clear uptrend against the U.S. dollar, the euro, the yen, the Indian rupee, and the renminbi.

I think this trend will continue and accelerate as events unfold.

Another factor is that I believe over the past decade there has been a substantial increase in systemic risk in the global financial system, which has benefited greatly from an extended period of incredibly low interest rates, easy credit, and what can only be described as massive liquidity.

History shows that such an environment can, and usually does, foster a degree of complacency.

In the financial and investment business memories are short and every generation has to learn the hard way.

Leverage in virtually every area of the financial markets has increased.

Financial products are now infinitely more complex.

There is, at present, an unwarranted optimism that the business cycle is a thing of the past, that central banks with infinite wisdom are in firm control and will be able to thread the needle between inflation and deflation, and that we will never again have a major foreign-exchange or financial crisis.

Well, I don't believe it, and the record shows that gold bullion represents a solid store of value in times of economic and financial distress.

Over the coming decade, global gold production will be static to declining while governments around the world continue to increase the money supply at a rapid rate.

If there is an "event" and a crisis develops, they will print money even faster.

The arithmetic is compelling.

Total gold production since the beginning of time is estimated at 5 billion ounces valued at about $3.2 trillion at current prices now scattered around the world in jewellery, artifacts. and gold bars in safety deposit boxes.

Annual gold production is now running at about 76 million ounces, which means that the above-ground stock of gold is increasing at about 1.5 percent per year.

In contrast, central banks around the world are probably printing money and creating credit at the annual rate of 5 to 10 percent per annum.

Recently in China the money supply has been increasing at a rate of 18 percent.

These numbers dictate that gold prices are destined to go much higher.

In short, the global supply of fiat paper money is increasing perhaps four times faster than the physical supply of gold bullion, and sooner or later this will be reflected in the market.

It's like a coiled spring.

Major gold companies are not replacing reserves and major discoveries are incredibly rare.

Investors forget that at most gold mines you have to move 35 to 40 tons of dirt and rock just to get one ounce.

On the other hand, fiat paper money can be printed by pressing a button on a computer.

It's quite interesting if you've noticed what's happening to paper money.

Not so many years ago millions of dollars seemed like a lot of money. Then we started talking about hundreds of millions and then we were thinking in terms of billions.

Then a billion became petty change and we started to talk in terms of hundreds of billions and now you hear the word "trillion" more and more.

The next stage will be hundreds of trillions.

Recently an "old master" painting was auctioned in New York for $94 million.

Just based on common sense, we have to ask ourselves: Is that painting really worth $94 million, or has the U.S. dollar become just like so much confetti?

I think we know the answer.

When Mr. Nardelli was recently fired as CEO of Home Depot he received a settlement of $210 million. The CEO of Pfizer received a settlement of $240 million when he was let go.

A condo in New York trades for $80 million.

What does all this say about the value of money?

Finally, there is a great deal of skepticism about the future of gold, which is a very positive factor.

Investors forget that bear markets start when the skies are blue and bull markets start when despair and apathy are in the air.

At present most major investors now regard gold and gold shares with apathy and even distain and are vastly underweight the sector.

The vast majority of investors are so short-term oriented they just don't see the big picture unfolding.

When the price of crude oil bottomed out at $10.70 a barrel on Christmas Day in 1998 and the front cover of the Economist magazine was forecasting a glut of oil and a price of $5 a barrel, you couldn't give oil or gas stocks away.

Now just seven years later, even after the recent decline, the price of oil is up five times.

What a difference a few years can make.

Similarly, with the price of uranium at $7 a pound at the end of December 2000 you couldn't give away either uranium or uranium stocks. Now that uranium has increased by 1,000 percent to $70 a pound, investors are driving uranium stocks to all-time highs.

The market just didn't see it coming -- it happens all the time.

So it is my view that, after a 20-year bear market from 1980 to 2000, the past few years represent a major positive turning point in the fundamental long-term outlook for gold bullion.

Gold is a hedge against inflation and, as a result of the excesses of the past 15 years, I believe there is more inflation in the pipeline than is generally anticipated -- perhaps quite a bit more -- just like the 1970s.

I believe any surprises on the inflation front will be on the upside.

To some extent, I regret to say, all paper currencies are becoming somewhat suspect, and accordingly it is my view that gold bullion, rather than being the barbarous relic described by John Maynard Keynes, may well become the asset of choice for many investors over the coming decade.

I have always been told to buy quality assets that are vastly undervalued and that have been ignored by the marketplace for a prolonged period.

Notwithstanding the modest rise in gold prices over the past few years, that is where gold bullion is today, and it represents a great opportunity.

[Edit]

Gold -- Sharefin, 21:25:45 12/13/06 Wed

Gold's rise points to inflation

The real annual inflation rate is closer to 8% than the 2% or 3% governments claim, a prominent U.S. economist said yesterday.

David Ranson, president of Boston-based H. C. Wainwright & Co. Economics Inc., defines inflation as a decline in the purchasing power of a national currency. He prefers that definition to flawed ones like the rising cost of living or increasing labour costs.

Official government-massaged measures such as the consumer price index (CPI) do not detect the onset of inflation as quickly as financial markets, he says. The latter indicate "current inflation is much higher than policymakers realize and is still accelerating."

A year ago, Ranson released a study that concluded the price of gold is a better predictor of inflation than oil. He reiterated that view at a briefing in Toronto yesterday hosted by Bullion Management Services Inc.

Ranson charted inflation and gold in the U.S. and six European countries between 1948 and 1999. He found rising gold prices predicted rising consumer price indexes in all those nations.

These views seems to jibe with those of the average man in the street, who feels prices are rising higher than the benign rate governments portray.
~~~~
Since gold has risen 200% in the last five years, it is giving an ominous early warning on inflation. However, it takes time before the CPI fully reflects the trend signaled by gold. Ranson found it takes six years for the CPI to reflect even half the trend signaled by gold.

"This is a serious matter," Ranson said. "It's a very big deal if what I'm saying is correct."
~~~~
While Ranson made no predictions as to the future direction of inflation, gold prices or the stock market, he suggested advisors could use the rising price of precious metals as a "reliable guide" to asset allocation.

Investors holding only bonds would need an 18% gold position to completely "immunize" a portfolio against serious inflation. "18% is the upper end in practice, unless you know for sure that inflation is here and continuous, in which case why hold bonds at all? But we're all in ignorance so hedge our bets."

For a typical asset mix of 60% stocks to 40% bonds, as much as 30% might be needed in precious metals, Ranson told advisors.

[Edit]

Gold -- Sharefin, 03:02:50 12/11/06 Mon

Gold Is Cheap, Yamada, Banks Assert as Sales Pared

"Gold is the purest play against the dollar," said Louise Yamada, managing director of Yamada Technical Research Advisors LLC in New York, who sees gold surpassing $730 next year on its way to $3,000 within a decade. Yamada, the former head of technical research at Citigroup Inc., proclaimed gold cheap in 2001 when it fetched $279.

She now has lots of company among the world's biggest financial institutions. Deutsche Bank AG's chief metals economist, Peter Richardson, made gold his favorite pick for 2007. JPMorgan Chase & Co. analysts John Normand and Jon Bergtheil on Dec. 7 said only corn could rival gold as the best bet while Merrill Lynch & Co. analyst Michael Jalonen elevated gold's value through 2010.

``If you can only make one commodity investment,'' gold is the ``choice for 2007,'' said Richardson from his office in Melbourne.

That's partly because five of the past six bear markets for the dollar led to an increase in gold.
~~~~~
``Gold is probably the most