Monday, November 29, 2010

$2,000 Gold – Why and When?



why and when?
Macquarie Equities Research, in a note to clients earlier this morning, commented:
“Gold as an alternative currency has been an important theme driving prices higher over the past several years.  As we have discussed previously, none of the world’s three leading currencies (U.S. dollar, euro, and yen) enjoy strong fundamentals, which underscores the long-term case for owning gold…Actions in Europe over the past few days highlight the long, long road that Europe faces to return to financial respectability and the high probability of further setbacks along the way.”
“As long as US real short rates remain negative, the opportunity cost of owning gold is negligible. In a highly uncertain world, gold is effective insurance at a compelling price.”
“We remain cautious about the outlook for gold in the very near term given the strengthening dollar and weakening sentiment. However, we look to add to positions in gold and gold stocks in the coming weeks as the medium-to-long term outlook remains very positive. We continue to see gold reaching $2,000/oz over the next 18–24 months.”
Short URL: http://www.goldalert.com/?p=7419

Thursday, November 25, 2010

Major Economic Decisions affecting FX and Gold.


Spiralling euro crisis could cost us billions more: Now there are fears for Spain, Portugal and Belgium

By HUGO DUNCAN
Last updated at 3:44 AM on 26th November 2010
British taxpayers could be asked to stump up billions more pounds to stop the European debt crisis spiralling out of control.
George Osborne has already pledged around £7billion to the mammoth bailout of Ireland - at a cost of nearly £300 to every household.
But, as the euro continues to tumble, the rescue package has failed to calm fears that other debt-ridden countries will need help to survive.
Worsening situation: As the euro continues to tumble, British taxpayers could be asked to stump up billions more pounds to stop the European debt crisis spiralling out of control
Worsening situation: As the euro continues to tumble, British taxpayers could be asked to stump up billions more pounds to stop the European debt crisis spiralling out of control
Portugal is seen as the next in line but Spain, Italy and even Belgium are on the danger list.
Fears are mounting that the £635billion rescue fund set up by the European Union and International Monetary Fund may not be big enough to cope.


    Axel Weber, head of Germany’s Bundesbank and a powerful figure at the European Central Bank, said that if it is not enough, ‘it will have to be increased’. 
    German chancellor Angela Merkel repeated calls for a permanent crisis fund.
    ‘We now have a mechanism of collective solidarity for the euro,’ she said. ‘And we all are ready, including Germany, to say that we now need a permanent crisis mechanism to protect the euro.’
    Painful cuts: Irish Prime Minister Brian Cowen (right) and Finance Minister Brian Lenihan announce the National Recovery Plan in Dublin on Wednesday
    Painful cuts: Irish Prime Minister Brian Cowen (right) and Finance Minister Brian Lenihan announce the National Recovery Plan in Dublin on Wednesday

    WHY ORDINARY GERMANS ARE SICK OF BAILING OUT THE EURO 

    German Chancellor Angela Merkel stands in front of a 30-year-old and seven metre high Christmas tree
    German Chancellor Angela Merkel is involved in the fight of her life (writes Allan Hall in Berlin).
    Not against terrorists, the Left, or the French - but in trying to persuade her own people that the euro is worth fighting for.
    Increasingly, as Germany bailed out Greece and will now have to dig deep to save Ireland, ordinary Germans are sick of it.
    Long sceptical of swapping the mighty D-Mark for the common currency - a survey this year found more than 51 per cent wanted to ditch the euro before the full impact of Greece and now Ireland was known - there is an ugly mood abroad.
    Burdened by high taxes, a harsh austerity programme and dwindling opportunities, they are in no mood for new lectures on why it is important to save the euro.
    Chancellor Angela Merkel has yet to make an official statement on Ireland's request for help but the noises from the chancellery are that fear will play a large part in the PR campaign to convince Germans that the currency is good for them.
    The word is she will sell up to £30billion worth of aid for Ireland claiming that social cohesion and peace itself in Germany will be threatened if the country doesn‘t cough up for Dublin.
    But while she stokes up popular fears, she has plenty of her own. The climate is ripe in Germany now for a rightist party to grab up to 20 per cent of the voter from her conservative CDU on an anti-EU platform.
    The recently formed Freedom Party is currently underway trying to do just that.
    One caller into Radio Bavaria in Munich this morning said; 'If our cars and fridges and heavy machinery and chemicals and ships are good enough to be bought around the world priced in euros then they will be good enough to be bought in marks and to hell with the rest of Europe'.


    A bigger permanent fund could put George Osborne on collision course with Tory MPs on one side and fellow European leaders on the other.
    The single currency fell again yesterday, hitting fresh two-month lows against the pound and the dollar. The cost of government borrowing in weak European countries such as Greece, Ireland, Portugal and Spain also rose as nervous investors demanded higher rates of return.
    Leading eurosceptic Tory MP Douglas Carswell said: ‘We are being sucked slowly but surely into the black hole.
    ‘We need to stop throwing good money after bad and we need to allow the break-up of the euro.
    ‘The politicians are telling us that break up is not an option but economic reality is closing in.’
    Former Tory minister John Redwood said: ‘It should be for euro members to make the money available to those in difficulty.’
    It is likely that countries in the euro would be asked to foot much of the bill by pumping more cash into their £373billion rescue fund.
    But Brussels may also try to increase the size of a £50billion EU-wide bailout fund - putting British taxpayers back in the firing line.
    It would be a major headache for the Chancellor who is furious that his predecessor Alistair Darling signed Britain up to the EU scheme after the general election.
    Treasury sources said Mr Osborne would oppose any attempts to increase the size of the scheme, having this week pledged to block a move spearheaded by Germany to make it permanent beyond 2013. 
    But although that would appease eurosceptic Tory MPs, it would put the Chancellor at loggerheads with fellow European leaders desperate to save the euro from collapse.
    Kathleen Brooks, research director at currency agency Forex.com in London, said: ‘Another day, more weakness in the euro. The single currency seems to be on a slow grind lower.
    ‘Fears seem to be settling on a potential Spanish bailout exceeding the size of the current stabilisation fund, throwing a possible rescue of the Iberian nation into chaos. The more likely a Spanish bailout becomes, the more investors are going to sell the single currency.’
    Mr Weber said he was convinced EU leaders would do whatever it takes to repel what he called an ‘opportunistic attack’ on the euro bloc.
    Tory MP Bill Cash said: ‘This prospect is the nightmare that we have been warning about. We should never have agreed to the stabilisation mechanism in the first place.’


    Dominoes: The collapse of Greece and Ireland's economies could have a knock-on effect on other nations
    Dominoes: The collapse of Greece and Ireland's economies could have a knock-on effect on other nations. Britain's public sector net debt is £845.8 billion, the equivalent to 57.1 per cent of gross domestic product



    Read more: http://www.dailymail.co.uk/news/article-1333204/Spiralling-euro-crisis-cost-billions-Now-fears-Spain-Portugal-Belgium.html#ixzz11rK7UP1N


    Monday, November 22, 2010

    Soros Gold Bubble Expanding as ETFs Hold Nine Years of U.S. Mine Supplies

    Soros Gold Bubble Expanding as ETFs Hold Nine Years of U.S. Mine Supplies
    By Nicholas Larkin and Pham-Duy Nguyen - Nov 22, 2010 8:26 PM GMT+0400


    Gold’s 23 percent surge this year to a record is proving no deterrent to George Soros, John Paulson and Paul Touradji, whose investments signal more gains for the longest winning streak in at least nine decades.


    Securities and Exchange Commission filings this month by Soros Fund Management LLC, Paulson & Co. and Touradji Capital Management LP listed investments in gold as their biggest holdings. Exchange-traded products own 2,088 metric tons, equal to nine years of U.S. mine supply, data compiled by Bloomberg show. Precious metals will produce the best commodity returns in the next year, Goldman Sachs Group Inc. said in a Nov. 9 report.

    Continue.....

    Thursday, November 18, 2010

    Top 5 Reasons Gold Prices Move

    Stock quotes in this article:GLD 

    NEW YORK (TheStreet ) -- Gold prices have risen 20% in 2010, closing Wednesday at $1,336.90 an ounce. Another round of quantitative easing from the Federal Reserve, global currency wars led by the "race to debase," and a weakening eurozone have triggered gold's recent surge, but those issues don't tell the whole story.
    Gold prices broke to a new record high last week of $1,424 an ounce as investors bought gold as protection against the Fed's loose monetary policy, and as Robert Zoellick, president of the World Bank, floated the idea of a gold standard to solve exchange rate wars rocking currency markets.
    Gold's rally was fierce and short-lived. New highs failed to attract new money and momentum traders. No new money coupled with worries that China would raise key interest rates to fight inflation slaughtered prices and dragged them down 6%.
    Most analysts believe the stage is set for more volatility in gold prices. Global uncertainty after the Group of 20 failed to come to an agreement on how to halt currency manipulation, of which China and the U.S. are both accused, establishes a choppy trading environment. 
    Gold is also at the mercy of stocks. When equities plummet, investors are often forced to sell gold for cash, but any significant dip can trigger a wave of buying as investors purchase gold at "discount" prices resulting in a strong tug of war for prices.
    Prices must also contend with speculation. Some investors buy gold as protection for their portfolios and are unlikely to participate in the day-to-day market action. Traders, however, use gold as a trade, a quick way to make money, which has been aggravated recently as they must decide whether to let their December future contracts expire or pony up the cash to roll over the contract to February 2011.
    Aside from recent market jitters and technical trading, there are five other fundamental factors that contribute to gold's strong price moves.
    5. Price Manipulation
    Price manipulation is the most controversial theory that has circulated among gold bugs for 20 years. Some argue that gold prices have been illegally suppressed over the last two decades by central banks and governments. The Gold Anti-Trust Action Committee, or GATA, is the biggest complainant.
    According to statistics from the World Gold Council, central banks reportedly have 32,000 tons of gold, with the International Monetary Fund accounting for 2,966.8 tons. Under the Washington Agreement on Gold, its members can sell a maximum of 400 tons a year, thereby restricting the amount of gold in the open marketplace.
    GATA argues that central banks actually have less than 15,000 tons of gold, and that the missing gold has been secretly sold or leased into the market to prevent gold prices from rising to their actual value, which should be between $3,000 to $5,000 an ounce.

    Wednesday, November 17, 2010

    Chart Update

    REUTERS Global gold demand rises as India, China buy: WGC

    Link
    LONDON: Gold demand is being lifted this year by a recovery in jewellery buying in the key Indian market, and robust growth in Chinese gold consumption, the World Gold Council said on Wednesday. 

    Releasing its third-quarter Gold Demand Trends report, which showed a 12 per cent year-on-year rise in gold demand in the third quarter, the WGC said jewellery consumption in particular looked set to improve on last year's level. 

    "The main drivers for this year are the impact of the Indian and Chinese markets," said the WGC's research manager Eily Ong. "In 2010 in total, jewellery demand could actually exceed that of 2009." 

    Concerns over the global economic outlook and currency market stability have supported investment in gold this year, helping it to a record $1,424.10 an ounce last week. But identifiable investment levels are below 2009's stellar levels. 

    Investment demand almost halved in the third quarter from the previous three months, during which concerns over euro zone sovereign debt levels fuelled a surge in investment in bullion. 

    But Ong said jitters remain in the wider financial markets, caused by measures such as the United States' quantitative easing policy announced earlier this month, could still lead to another jump in investment. 

    "If there is continuing uncertainty over the impact of QE2 and uncertainty over what is happening with the Asian market -- whether they will continue to tighten policy, or whether whatever they are doing now will succeed in curbing inflation -- we could probably see what we saw in Q2 again," said Ong. 

    "There could be more investors allocating their assets into gold as a store of value, and for capital preservation." 

    Demand for investment products such as gold exchange-traded funds softened in the third quarter. ETF demand was down 7 per cent year-on-year to 38.7 tonnes, less than a seventh of the "exceptional" flows seen in the second quarter. 

    But other forms of demand rose. Jewellery buying climbed 8 per cent to 529.8 tonnes in the last quarter, accounting for 57 per cent of total demand. In the second quarter jewellery buying accounted for just 40 per cent of overall consumption. 

    India bought nearly 50 tonnes, or 36 per cent, more gold jewellery in the third quarter than in the same period of the previous year, while Greater China lifted its gold consumption by 16 per cent. 

    "What we see is that in the largest part of gold demand, which is jewellery, a sector that is always sensitive to high gold prices, we continue to see strong appetite," said Ong. 

    "That is a very good, confident signal to investors that the trend in gold prices is not a bubble." 

    Dental and industrial demand, for applications such as electronics devices, also rose 13 per cent to 110.2 tonnes. Ong said the sector had now returned to pre-financial crisis levels.