Why I’ve Turned Bullish On Gold

Why I’ve Turned Bullish On Gold

Let me say from the outset that I’m no Perma-Bull when it comes to gold and precious metal stocks. I sold out 100% of my position in the spring of 2011, and in fact shorted gold at $1900, this after having been in it from 2001. As an investor in gold and precious metal stocks since the last bull market of the 70s, I’ve been in and out of precious metal stocks many times. Even though I’ve been bearish for the last two years, I think an opportunity looms.

Gold, silver and most commodities peaked in 2011 and have been falling ever since. At that time we entered a period where a disinflationary/recessionary bias entered the system, not just for the US, but the world at large. Actual deflation showed up in various economies, and recession or at least slowing growth rates became prevalent in most countries. It is no wonder that commodities in general began to fall. I think that is all about to change, but not at first — it will happen at last.

We have probably peaked at 4.1% GDP in the third quarter, and chances are good that the next two quarters will be trending lower. The first quarter should be very challenging. But the year as a whole should be the highest growth year since the recession ended. Conversely, at a .09% inflation rate year-over-year, the odds of a continued fall in inflation are low from here. After all, how much lower can the Fed allow the rate to fall? Bernanke at his news conference said that they are more than a bit concerned with the falling inflation rate and will do whatever is necessary to combat it if it should continue. So the tendency will be to fight any trend toward lower growth and lower inflation.

My view is that the Fed will be confronted with both during the first quarter of the year and that they will be forced to change their tapering policy to a policy of reflation, or at the very least, put their tapering plans on hold. I wouldn’t be surprised to see them eliminate or reduce the interest rate charged to banks on excess reserves to try and fight the drag on the economy in the next several months. A major correction in the stock market could hurry this decision.

But let’s assume I’m wrong and falling growth and anemic inflation is not an issue in the 1st quarter, and that instead, we have a progressively better year in 2014. That case, the bullish case, is actually very persuasive and even more bullish for resource stocks in general and precious metal stocks in particular. It projects continued growth in GDP and a rising inflation rate.

Recently we have seen the development of a new energy boom, perhaps the most important boom in a generation. We are actually on our way to energy independence and making such cartels as OPEC, irrelevant. IHS, an energy group, is estimating by the end of next year, rail capacity could be enough to handle 700,000 barrels of crude per day, compared to 150,000 today. We are about to become net exporters of oil and gas to the world while importing less. This one industry will be instrumental in raising exports and increasing the GDP in 2014 and into the future.

Read The Full Article A Seekalpha

 

Silver coin supplies…

Silver coin supplies buckle on fever-pitch retail buys

By Myra P. Saefong, MarketWatch

U.S. Mint sales of the American Eagle silver bullion coin have climbed to an annual record.

SAN FRANCISCO (MarketWatch) — Silver prices have dropped more than 30% year to date and demand for the physical metal has reached a fever pitch: United States Mint sales of the American Eagle Silver Bullion Coins have already hit a record this year.

But as supplies of the coin tighten, analysts and bullion dealers said there are still many options for those interested in buying silver. Many predicted all along that sales of those coins would reach a record this year — and they expect the metal’s popularity to continue to grow.

“Private investor demand for physical silver in 2013 has been staggering,” said Adrian Ash, head of research at BullionVault, an online physical gold-and-silver exchange headquartered in London.

Read the full article at MarketWatch 

Why the gold surge is just starting: Peter Schiff

Why the gold surge is just starting: Peter Schiff

Gold rallies on news of a short-term budget deal but Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, says that’s just the beginning.

Goldman Sachs got it completely wrong, says Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital. A budget deal doesn’t make gold a “slam dunk sell”, as Goldman’s head of commodities trading Jeffrey Currie said it would on October 7. Instead, says Schiff, gold is a “screaming buy”.

Gold may be up 3% Thursday on a debt deal between Congress and the President. But, Peter Schiff says the yellow metal has more room on the upside to go because of the deal, not in spite of it.

(ReadGold jumps; Budget deal seen delaying stimulus cut)

Deficit spending far outweighs the benefits to the overall economy, according to Schiff in his latest note. “US GDP is measured at roughly $15 trillion per year,” writes Schiff. “Two percent growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth.”

So, what does that mean for gold?

Appearing in a no-holds-barred interview on Talking Numbers, Schiff makes his case for why he thinks the recent debt ceiling deal should be bullish for bullion.

“When Goldman came out with that bogus call [saying gold will head down after a deal], I criticized it immediately because the crisis for gold was not that they would raise the debt ceiling, but that they would not,” says Schiff to Talking Numbers. “What is bullish for gold is raising the debt ceiling because that means we get more government, we get more debt, [and] we get more inflation. That’s bullish for gold.”

In other words, Schiff is saying that without leaders aggressively taking on the government’s debt, gold is headed higher. “In fact, this is probably the beginning of a much bigger rally,” says Schiff.

Schiff believes the Fed won’t taper its $85 billion per month bond buying program (known as “quantitative easing” or “QE”) which has rallied bonds, lowered yields, and added dollars into the financial system. In fact, Schiff believes that the first thing Janet Yellen will do as Fed Chair is to actually increase the amount of bond-buying.

(Read: Prices up as debt deal draws investors)

The increased dollars in the economy will have a direct impact on the price of gold, according to Schiff – it’s going up, he says. While this flies in the face of recent history – gold prices are down 20% over the last two years as the size of QE has increased – Schiff likens the selloff in gold to the tech bubble in the late 1990s. Eventually, he believes, the markets will flock to gold.

“Gold is going to make new highs – well above $2,000,” says Schiff. “People are going to forget that this correction ever took place and we’re going to keep on going higher because we are in a major, historic gold bull market.”

Schiff isn’t just bullish on gold, either. He thinks other commodities are also set to go up with the increase in the debt.

Watch The Video Here

 

Silver prices: How…

Silver prices: How high could they go?

BY 

September 11, 2013 • Reprints

One of the questions most often asked by those interested in investing in silver pertains to not only how low, but how high silver’s price can go.

The range is anywhere from a paper price of zero, given the role of the bullion banks in the decades long silver market price suppression conspiracy, to infinity in the event of a U.S. dollar hyperinflationary scenario.

Fair warning should be given that any discussion of price assumes that it is expressed in terms of a fiat currency or forced legal tender.

Of course, the ultimate measure of silver’s value is instead its purchasing power, although this value is much murkier and more difficult to compute given that investors are currently living in an age of faith-based fiat currency.

Bullish Scenarios for Silver Prices

A number of bullish scenarios exist that could substantially increase the price of silver if they were to materialize. They include the following:

When Physical Shortages Spike Premiums: Retail scarcity of silver could ignite physical premiums, thereby completely detaching the physical price from whatever paper price is being printed by the CFTC ‘regulated’ markets.

If Price is Determined Outside of the United States: Physical demand would prevail once again and would very likely cause the price of silver to overshoot its inflation adjusted highs.

Continue Reading..

Gold Gains to Three-Week….

Gold Gains to Three-Week High on Signs of Demand as Dollar Drops

By Glenys Sim - Aug 14, 2013 9:25 PM ET

Gold climbed to the highest level in three weeks on signs of increased physical and investment demand as the dollar weakened. Silver gained to a two-month high, while platinum and palladium advanced.

Spot gold rallied as much as 0.8 percent to $1,346.61 an ounce, the highest price since July 24, and traded at $1,342.78 at 9:24 a.m. in Singapore. Today’s advance came even as a U.S. filing showed billionaire John Paulson had reduced his holding in the SPDR Gold Trust by 53 percent in the second quarter. Bullion advanced 1.1 percent yesterday as the Bloomberg U.S. Dollar Index retreated for the first time in three days.

Assets in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, climbed yesterday to 913.23 metric tons after gaining on Aug. 9 for the first time in two months. In China, the second-largest consumer, the volume for Shanghai’s benchmark spot contract increased to 10,739 kilograms yesterday, the most since Aug. 6, according to the Shanghai Gold Exchange. Gold is heading for a second monthly advance after rising 7.4 percent in July, the best gain since January 2012.

“Gold is benefiting from a weaker dollar,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “The SPDR is beginning to show signs of life again but it’s too early to tell if the liquidation that has hurt gold this year is over. Physical demand, especially in Asia, remains supportive.”

Read Full Article Bloomberg News

Goldman And JPMorgan Probed….

Goldman And JPMorgan Probed Over Metals Warehouse Manipulations

Published: Sunday, 21 Jul 2013 | 4:33 PM ET
By: Josephine Mason

NEW YORK, July 21 (Reuters) – The U.S. commodities market regulator has put Wall Street banks and other big traders on notice for a possible investigation of their metals warehousing businesses following years of complaints about inflated prices.

The U.S. Commodity Futures Trading Commission (CFTC) last week sent a letter to firms ordering them to preserve emails, documents and instant messages from the past three years, two sources who received the letters told Reuters.

The notice amounted to a “warning shot” ahead of what is probably a formal CFTC probe, one of the sources said.

If there is an investigation, it would be the first such probe by any regulator into the lucrative and controversial industry, which since 2010 has become dominated by banks including Goldman Sachs Group Inc and JPMorgan Chase & Co and global merchant traders like Glencore Xstrata Plc and Trafigura AG.

The letter from the CFTC’s enforcement division did not refer to an investigation, but the do-not-destroy order touched on some of the most sensitive issues in a controversy that has plagued the London Metal Exchange for years.

The CFTC explicitly said that the firms should retain communication related to incentives or premiums given to metal producers in exchange for storing metal; daily loading rates; high load-out requests; delivery policies and procedures and complaints about load out requests.

At least two companies involved in warehousing received the letter, but sources said they believe such notices were sent to all the major players.

While the recipients of the letter say they now expect a wide-ranging probe, it is not clear how or when that could take place. The CFTC opens dozens of investigations a year, yet only a handful ever result in action and some are never made public. It almost never discusses open inquiries.

In the past three years, a mountain of aluminum and other metals has accumulated in the global warehouses that are part of the LME network, clogging the trading system and causing lengthy queues – up to a year – as consumers and dealers of the metal seek to get their hands on it.

The queues have caused the price premium on some metals to surge, prompting accusations that banks and traders are artificially inflating prices and distorting supplies.

After years of complaints from end-users such as Novelis , the world’s biggest maker of flat-rolled aluminum, and customers like Coca-Cola Co, which use the metal for aluminum cans, regulators are now taking a deeper look into the industry as political pressure to rein in Wall Street’s powers intensify.

In an email to Reuters on Saturday, Bart Chilton, a Democrat on the five-person commission and frequent critic of lax regulation, urged a “full and comprehensive review” of warehouse ownership, but did not comment on the letter itself.

“These markets are too important to allow behind-the-scenes machinations to distort commodity prices,” he said.

A possible probe comes amid intensifying scrutiny of Wall Street’s role in raw material markets from owning oil tankers, power plants and metals warehousing.

The Federal Reserve is weighing whether to allow banks to continue owning physical assets.

“The CFTC has a role to play in protecting American manufacturers and consumers from having the price of their gas, canned food and beverages, or electricity driven up by Wall Street speculators,” said Senator Sherrod Brown, a Democrat from Ohio.

“The CFTC should use the full force of its power to address this abuse.”

The U.S. Senate banking committee will hold its first hearing on the matter on Tuesday, asking whether “Too Big to Fail” banks should be allowed to operate freely in loosely regulated physical commodity markets and own physical commodity assets from power plants to oil tankers.

CFTC spokesman Steven Adamske declined to comment.

Goldman Sachs, JPMorgan and Glencore declined to comment. Trafigura declined to make and any immediate comment.

Goldman has consistently said Metro International Trade Services, its warehousing unit, has not broken any laws or rules. (Reuters in-depth report on warehouses:

http://r.reuters.com/cur86s)

SEEKING AN EXIT

Well before the CFTC’s involvement, there has been growing evidence that the period of record high premiums, long queues and rich rewards for owners of the warehouses is drawing to a close.

Earlier this month, the LME’s new owner – Hong Kong Exchanges and Clearing Ltd – proposed sweeping reform of its warehousing policy in its third attempt to tackle the wait times and soothe irate industrial clients.

And Goldman Sachs began exploring the possible sale of its warehousing business Metro International earlier this year, Reuters reported in April. JPMorgan has more recently started to look for potential buyers for its Henry Bath unit, people familiar with the process said this month.

The sales efforts precede the change in LME rules, but emerged just ahead of deadlines for the U.S. Federal Reserve to decide whether Wall Street should be allowed to own commodity trading assets. The issue is coming to a head five years after the financial crisis brought Goldman under the Fed’s purview.

While it had long been assumed that the banks would likely be allowed to retain many of their investments, even if holding them at arm’s length, growing public and political pressure appears to be forcing the Fed to take a deeper look.

Late on Friday, the Fed issued a surprise statement saying that it was rethinking a decade-old decision that allowed banks to trade in physical commodities.

CFTC GETS TOUGH

The letter is the latest effort from a newly emboldened CFTC, which has also led the charge on the Libor interest rate manipulation probe and more recently began reviewing millions of energy swap trades for possible violations of new rules.

The enquiry could also raise pressure on the UK watchdog, the Financial Conduct Authority (FCA), which has regulatory oversight of the LME, to delve into the industry, sources said.

Novelis has complained to the European Commission, the FCA and the CFTC, but has been frustrated by the apparent lack of activity.

“Warehousing has been believed to be outside the scope of the FCA and CFTC because it’s not a derivatives market,” Novelis vice president and chief procurement officer Nick Madden told Reuters in an interview earlier this month.

“It’s an area that’s very vulnerable to these players using leverage for their own interest,” he said.

The CFTC does not regulate the LME, nor does it have authority over physical commodity trading, but it may still be able to claim some jurisdiction through a no-action letter it granted allowing the LME to operate in the United States or through metal futures traded on CME Group exchanges.

The letter, dated July 19, makes reference to both LME and CME registered warehouses, although the same problems have not afflicted the U.S. exchange’s markets.

A PREMIUM METAL

Warehouse firms in the LME system were traditionally independently owned, but since 2010 four of the six largest players have been bought by investment banks or traders.

Over the same period, storage volumes have surged. Metro now holds 1.4 million tonnes of aluminum at its 29 Detroit warehouses, up from 800,000 tonnes at the end of 2009. That is almost a quarter of the aluminum in registered LME warehouses around the world and almost 1 million tonnes of it is waiting to be delivered out.

The warehouse firms collect rent on the metal, and are only required to deliver it out at a limited rate set by the LME.

Warehouses with 900,000 tonnes or more are required to load out metal at a minimum rate of 3,000 tonnes per day, regardless of how much metal was delivered into the warehouse.

The firms pay big incentives to traders to use their warehouses. End-users then fork out high rates in order to get their hands on metal.

Aluminum premiums in the United States <AL-PREM> are at record highs even though the market is in chronic surplus.

The LME’s vast global storage network is currently holding over 5 million tonnes of aluminum, with analysts estimating another 5 million tonnes stored outside of the exchange.

That combined 10 million tonnes is about 10 percent of annual global demand.

Read Full Article AT CNBC

Why silver might be….

Why silver might be a good buy at $20 an ounce

By Myra P. Saefong, MarketWatch

SAN FRANCISCO (MarketWatch) — Silver didn’t quite turn out to be a bargain at around $30 an ounce early this year. At $20, however, it could be a steal, if you’re careful.

“Most indications are that silver is at or very near a bottom,” said Paul Mladjenovic, author of Precious Metals Investing for Dummies. The massive selling of silver futures contracts during the first half of this year “is very over-done and created some extraordinary bullish conditions.”

Silver futures SIU3 -2.33%  closed Thursday at $20.15 an ounce, down almost 34% year to date. About a month ago on June 27, prices settled at $18.53, their lowest since late August 2010, according to FactSet data, tracking the most-active contracts.

Brendan Conway explains why gold ETFs are rising even as individual investors are selling. Plus: Hidden dangers of ETFs and ETNs.

Silver’s declines have well outpaced that of gold’s GCQ3 -0.83% steep drop of 21% year to date. Copper’s HGU3 -2.76%  down roughly 13%, platinum’s PLV3 -1.89% lost almost 7% and palladium PAU3 -2.67%has gained 5% this year.

“Silver is a more emotional market than gold, meaning it often has extreme upside and downside moves [more] than other metals,” said Alan Knuckman, chief market strategist at Trading Advantage, a market education and trading training firm. Silver prices were cut nearly in half from the highs around $35 in September to the recent low near $18.

“The rewards are sometimes greater in silver when you are [on] the right side,” said Knuckman.

Mladjenovic, meanwhile, referred to silver’s current prices as “artificially low” and said they’ll “push marginally productive silver mines to close and this will shrink supply” as demand for the metal continues to grow.

Even after the metal’s huge losses, however, not all analysts are quick to call a bottom for the white metal.

And they have good reason: Forecasts for an end to the silver selloff back in Februaryturned out to be wrong, and prices instead leveled off before falling even more.

Blame that on silver’s usually high volatility and its split personality as an industrial and precious metal.

Read The Full Article At Marketwatch

Silver shorts play a dangerous..

June 3, 2013, 12:02 a.m. EDT

Silver shorts play a dangerous game

Commentary: The shorts could get caught here

LOS ANGELES (MarketWatch) — One of Wall Street’s many witty quips recommends you buy when there’s blood in the streets. Well, these days, the blood in the streets isn’t red — it’s silver.

 

From late November through late May, the spot price of silver has bled nearly 35%. This sharp and protracted six-month plunge in the value of the metal has many causes, but the primary factor contributing to the silver selloff is the rotation away from precious metals and into stocks of all varieties.

The heavy bout of selling in the space has created an extremely ugly technical picture for silver. In February, the spot price of silver, represented by the chart here of the iShares Silver Trust SLV +0.18% , plunged below both the short-term, 50-day moving average as well as the long-term, 200-day moving average. The drop below these two key technical resistance levels was followed by a near-capitulation selloff in April. Since that April meltdown, silver has fallen even further, and as of Friday, May 24, silver closed at $21.60.

For contrarian traders, or for those who like to sift through the detritus of beaten-down sectors in search of value, the severe drop in silver prices should trigger your blood-in-the-streets instincts. But why would anyone want to own silver here? Just because the price has come down so far, so fast, certainly doesn’t mean you should be a buyer. Here you have to ask yourself what would cause a rebound in silver prices.

The way we see it, silver prices rally for two basic reasons. First, silver rises in sympathy with gold as an inflation hedge. Second, silver prices rise in response to growing industrial demand, which is largely a function of enhanced global economic growth.

Unfortunately for silver bulls, there hasn’t yet been any significant inflation (at least by official government metrics) that would drive the value of the U.S. dollar lower and the price of hard assets such as commodities higher. Although the camp critical of the Federal Reserve’s easy monetary policies (a camp we include ourselves in) has argued persuasively for the inevitable onset of inflation prompted by a debasement of the currency, this outcome has yet to be realized.

As for global economic growth and higher industrial silver demand, that, too, is an outcome yet to be realized. Yes, there are signs of modest improvement the economy and the labor markets, but that’s yet to translate into increased demand for industrial metals in general and for silver in particular. If, however, you suspect that we could see either a significant increase in inflation, or a considerable spike in industrial demand, then buying silver here at these current levels means you are buying a fantastic value.

Now, from a pure trader’s perspective, there’s an interesting phenomenon taking place in silver. We’ve noticed recently that the Commitment of Traders report, or COT, in silver continues to signal that there is no real risk of an impending washout in the price of the metal going forward.

As of May 14, the “net long” position of speculators in silver was just 3,785 contracts. That’s extremely low by historical measures, although not nearly as low as the -2,497 net longs we saw prior to that April plunge. The current net longs are about 10 times below the net long high of nearly 36,500 set in November.

On the short side, the COT reveals that the last time the number of “contracts sold short” was at current levels for more than just a week or two was in July 2012 (see chart above). Yes, there was a spike in short positions during that April decline, but now the shorts are back to their July levels.

The high number of short contracts, and the corresponding levels of net longs, we witnessed in July 2012 pretty much marked the low in silver for 2012. Interestingly, within eight weeks of the high mark in the shorts, silver prices rose some 30%.

Read Complete Article At MarketWatch.com

Latest News

Metal Spot Prices
Metal Bid Ask +/-
Gold $1,576.40 $1,576.70 -22.46
Silver $27.26 $27.30 -0.75
Platinum $1,567.00 $1,577.00 -22.00
Palladium $762.00 $768.26 -16.37
Updated: 4/2/2013 4:54:52 PM ET
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