Why Gold May Hit $2000 by Christmas

Gold Rises to 29-Week High on Stimulus by Central Banks
By Debarati Roy and Nicholas Larkin - Sep 19, 2012 10:59 PM GMT+0400



Gold futures rose to 29-week high on speculation that steps by central banks to bolster economic growth will spur demand for the metal as a store of value.

The Bank of Japan (8301) said today that it will add 10 trillion yen ($127 billion) to a fund that buys assets. On Sept. 13, the Federal Reserve announced a third round of U.S. monetary stimulus. This month, European Central Bank President Mario Draghi gave details on a plan to buy debt of member states, while China approved infrastructure spending.

“Gold likes the announcement out of Japan,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “People are concerned that this wave of global easing will stoke inflation.”

On the Comex in New York, gold futures for December delivery climbed 50 cents to settle at $1,771.70 an ounce at 1:45 p.m. Earlier, the price reached $1,781.80, the highest for a most-active contract since Feb. 29. The metal has gained 13 percent this year.

Silver futures for December delivery fell 0.4 percent to $34.588 an ounce.

On the New York Mercantile Exchange, platinum futures for October delivery increased 0.3 percent to $1,640.40 an ounce.

Police used tear gas and stun grenades to disperse a crowd near mines in South Africa owned by Anglo American Platinum Ltd. (AMS), the world’s largest producer.

Yesterday, some workers at Lonmin Plc (LMI)’s Marikana mine ended a six-week strike that left at least 45 people dead. Platinum prices jumped 22 percent from Aug. 10, the start of the strike, to Sept. 14.

Palladium futures for December delivery rose 0.9 percent to $673.05 an ounce on the Nymex.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

http://www.bloomberg.com/news/2012-09-19/gold-declines-as-rally-spurs-sales-platinum-extends-drop.html

Gold CEOs Predict New Highs Within One Year on Economy

By Liezel Hill - Sep 13, 2012 11:28 PM GMT+0400


Gold prices are poised to reach new highs in the next year amid global economic uncertainty and a lack of new supply, the biggest producers said.

Gold may exceed $2,000 an ounce within 12 months, Barrick Gold Corp. (ABX) Chief Executive Officer Jamie Sokalsky and Chuck Jeannes, CEO of Goldcorp Inc. (G), said this week in interviews in Denver, where they were attending the Denver Gold Forum. A gold price of $2,000 is “not unreasonable,” Newmont Mining Corp. (NEM) CEO Richard O’Brien said in a presentation at the conference.

“The fundamentals that are backstopping a higher gold price are there,” Sokalsky, who heads the world’s largest producer, said Sept. 10. “I’m optimistic that, with the uncertainty throughout the world and the macroeconomic environment and some of the fundamental supply and demand aspects of gold, that we could see new highs on the gold price.”

Gold has risen for 11 straight years, reaching a record $1,923.70 an ounce on Sept. 6, 2011 in New York, as investors bought the metal as a store of value and hedge against inflation.

Gold futures for December delivery climbed 2.2 percent to settle at $1,772.10 today on the Comex, the first time above $1,770 since February, after the Federal Reserve announced a third round of quantitative easing to boost the U.S. economy and reduce unemployment.

‘Debasement of Currencies’

“The demand side is all about worldwide debasement of currencies and gold being seen as an alternative,” Jeannes, head of the second-largest producer by market value, said Sept. 10. “We see it with central banks buying gold and we see it with investors buying gold to protect themselves from the exposure to currencies that they don’t have confidence in.”

Central banks will increase gold purchases by 7.9 percent to 493 metric tons this year as they keep expanding reserves to diversify from the dollar and guard against a potential gain in inflation, Thomson Reuters GFMS, a London-based researcher, said in a Sept. 4 report.

Gold prices have risen as investors buy the metal because of economic uncertainty and in anticipation of more stimulus from the U.S. Federal Reserve, as well as in Europe, said AngloGold Ashanti Ltd. (ANG)’s Mark Cutifani , CEO of the world’s third-largest gold producer.

‘Pretty Strong’

“Investment demand has been pretty strong,” he said in a Sept. 11 interview in Denver. “I could easily see it going through $1,800 by Christmas.”

It’s becoming more accepted that gold “has a role to play,” Agnico-Eagle Mines Ltd. (AEM) CEO Sean Boyd said in a Sept. 11 interview.

“Not the gold standard, but as equivalent collateral to a treasury bond, as possibly collateral on maybe sovereign debt issuances, is starting to be discussed,” Boyd said. “That wouldn’t have happened five years ago.”

A lack of new supply will also support prices, Goldcorp’s Jeannes said. Producers including Barrick and Toronto-based Kinross Gold Corp. (K) have said they will be more disciplined in spending on projects and will target higher returns rather than production growth.

Gold mine supply will probably be “flat and eventually declining,” Jeannes said. Companies that were trying to build large, low-return projects as a play on future gold price increases are not getting support from investors, he said.

“The market is not letting them do that, they are not giving them the money to do it,” Jeannes said. “So we are limited to high quality, high return projects that don’t require a higher gold price to succeed, and that’s limiting supply.

The Philadelphia Stock Exchange Gold & Silver Index (XAU), which is made up of 30 gold producers, has declined 15 percent in the past year.

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net   http://www.bloomberg.com/news/2012-09-13/gold-ceos-predict-new-highs-within-one-year-on-economy.html

Gold up on QE3 hope in the US, sets new record in India

While Bernanke did not explicitly say anything on further easing at Jackson Hole, the bullion market is expecting some more measures in the US Federal meeting on September 12-13

Dilip Kumar Jha / Mumbai Sep 02, 2012, 00:41 IST   Gold moved up by 1.74 per cent to set the new record on Saturday in Mumbai’s Zaveri Bazaar following global sentiment where a bullish trend restored after Federal Reserve Chairman Ben Bernanke’s speech in Jackson Hole raised hope for fresh aid to the US economy.

While Bernanke did not explicitly said anything on further easing, the bullion market is expecting some more measures in the US Federal meeting on September 12-13, which will be a crucial meeting ahead of US Presidential election in November.

http://www.business-standard.com/india/news/gold-upqe3-hope-inus-sets-new-record-in-india/485088/

Precious metals leaving industrial metals behind

BY ANTHONY LAZZARA

AUGUST 21, 2012 • REPRINTS

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We are seeing precious metals increase in price this morning likely due to European Central Bank head Mario Draghi's so-called assurances that the ECB will do whatever it takes to keep the Euro stabilized. This is a common sense result of more fiat money liquidity into the system. Precious metals become more attractive to investors and traders as more fiat money is pumped into the global system in attempts to avoid an intense crisis or sovereign default.

Copper and Silver are the two biggest risers this morning in the metals complex, with Dec. ‘12 Gold also breaking out above its recent technical resistance level at $1630. It is very important that gold has held key technical support at $1,550 for over two months now. The next major resistance level is at $1,800. Expect the market to remain bullish gold as long as it holds $1,550. Furthermore, gold has broken an important downtrend line providing another reason for buyers to come into the market (see chart). Granted, much of today's move is based on Draghi's comments about the ECB. 

 

However, there is a very interesting 'discrepancy' we notice in the metals markets. While precious metals are all having positive days, the industrial metals group (tin, lead, nickel, aluminum and steel) are actually still near three-year lows. There has been a bear market in tin to the point of Indonesia idling 70% of its tin-smelting capacity due to extremely low profit margins on such low prices of tin. We are hearing concerns regarding China’s consumption are a main cause of an industrial metals sell-off of this year. We notice that tin is currently beneath a major chart support point at 19000 and is near the low part of a down-trend channel forming since 2011 (see chart).

 

Thus while global equities, food commodities, and precious metals are rallying, we look to the industrial metals as the "counterpoint" to the global monetary expansion euphoria. 

ABOUT THE AUTHOR

Anthony Lazzara

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firmLido Isle Advisors , spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange.

http://www.futuresmag.com/2012/08/21/precious-metals-leaving-industrial-metals-behind?t=commodities

The case for a new gold rush

MARTIN MITTELSTAEDT

The Globe and Mail

Published Monday, Jul. 16 2012, 8:02 PM EDT

Last updated Monday, Jul. 16 2012, 8:10 PM EDT

When it comes to gold, Warren Buffett doesn’t know what he’s talking about, according to one of the metal’s most ardent European fans.

Gold is likely to hit a record high of $2,000 (U.S.) an ounce over the next year, driven by fears over government deficits and worries that central banks will be forced into more money printing, according to Erste Group, an Austrian bank.

The bank believes the precious metal will eventually rise even further, reaching at least $2,300 an ounce, which would match its high from the early 1980s if inflation is taken into account. In a recent report to clients the institution says that given the instability in the global financial system, its price forecast “could be on the conservative side.”

Erste Group has been producing annual forecasts of gold prices since 2007, and has been bullish over the period – an accurate call, given gold’s surging fortunes over the past five years.

This year’s 120-page report includes such quirky measures as how many litres of beer can be purchased at Munich’s Oktoberfest each year with an ounce of gold. It also features a lengthy discussion on Mr. Buffett’s well-known antipathy toward gold, which the bank views as an irrational form of “aurophobia.”

The bank says that Mr. Buffett doesn’t understand that bullion is a form of money and therefore shouldn’t be compared to stocks as an investment. It maintains that the proper comparison is between gold and competing types of money.

Mr. Buffett “criticizes the low industrial use, the lack of intrinsic value, and questions the general reasonableness of buying gold. We believe that Buffett has made a fundamental error, having missed the connection between gold and money and is thus comparing apples and oranges.”

The bank says that Mr. Buffett’s negative view on gold would apply equally well to the U.S. dollar, which “has no intrinsic value, no industrial use, and does not pay any interest at this point in time either.”

To be sure, Erste Group’s Oktoberfest beer comparison indicates that gold is a little pricey now, at least compared to the long-term average of the yellow beverage in terms of the yellow metal.

Since 1950, an ounce of gold bought an average of 87 litres of beer at Munich’s outdoor gardens. Currently, it’s 136 litres.

However, the record high for this beer-based measure of a liquid asset was 227 litres back in 1980, a level the bank says could again be attained.

“We think it is indeed possible that we will see these values again. Beer drinkers with gold in their portfolio should therefore look out for sparkling times,” it noted.

The bank says one of the big questions facing investors is whether the global economy will be hit with higher inflation or a bout of deflation.

Either scenario will be bullish for gold, in its opinion. “In times of inflation tangible goods are the preferred asset class, whereas in deflation it is cash. Gold is liquid, divisible, indestructible, and easily transportable. It also has a worldwide market and there is no default risk. It is thus cash of the highest quality.”

Turning to gold stocks, the bank says mining equities are at “extremely attractive” valuations.

Stocks in the Gold Bugs index, a basket of large producers that don’t hedge their production against price fluctuations, have a projected price-to-earnings ratio this year of 13.9 times, less than half the average level of 28 times over the period from 2000 to 2012.

Investors are as pessimistic toward gold mining stocks as they were four years ago during the financial panic, but gold miners are far healthier than they were back then, the bank says. Their balance sheets are stronger, their free cash flows are higher, while their debts are low and their dividends are rising – all factors that will eventually drive share prices higher.

The bank says gold investors should restrict themselves to jurisdictions that are unlikely to experience “resource nationalism,” the term for countries that try to extract more value from their wealth in the ground at the expense of mining companies.

Among its favoured jurisdictions is Canada.

“We believe that solid mining shares in politically stable regions currently represent a high-leverage bet on the gold price with an attractive risk/return profile,” the bank says.

http://www.theglobeandmail.com/globe-investor/investment-ideas/the-case-for-a-new-gold-rush/article4421481/

What Are the Best Trades Ahead of Fed's QE3?

Published: Friday, 8 Jun 2012 | 1:26 AM ET

By: Vittoria Pirone
Associate Producer, CNBC

• 
  

Oil and gold will make the best trades ahead of a potential fresh round of quantitative easing by the Federal Reserve, Joe Clark, Founder and CIO of Financial Enhancement Group, told CNBC.

Diamond Sky Images | Photodisc | Getty Images

NYMEX crude oil [CLCV1  82.70    -2.12  (-2.5%)   ] has lost almost 20 percent in the past three months and Clark said that oil has been particularly oversold and represents a good trading opportunity should the Fed decide to print more money to help the economy.

“You have to look at oil and say: ‘All right, we’ve got an issue here,’” Clark told CNBC. “The probability of more QE  , I wouldn’t say it’s 100 percent, but it’s extremely high. If you believe that, you have to look at oil and say: 'OK, that’s probably got to rebound,'" Clark told "Worldwide Exchange".

He also expects a rebound for gold [XAU=  1578.10    -11.05  (-0.7%)   ], which has lost about 7 percent since March.

“I’m not a big fan of gold, I can’t eat it, I can’t sleep with it, it’s not one of those things I want to keep around forever, but if QE comes out you’re going to see those commodity prices rise,” he said. “Gold and oil are the two places that people can trickle into a little bit.”

Clark believes the positive momentum in the markets will continue, but he warns that the impact of fresh stimulus will be short-lived compared to the last round of QE.

“I believe you’ll see people pull out of the market before QE3 unwinds,” he told CNBC. “So you will see the positive response, kind of like 'buy the news,' but it will be sold sooner than what we saw in the last round of easing.”

http://www.cnbc.com/id/47721831

Could Gold Hit $7000 Before End of Bull Run? (Audio)

PETER BRIMELOW

April 2, 2012, 12:02 a.m. EDT

Gold bugs think Q2 will bring new rebound

Commentary: Indian buying seems likely to resume

Peter Brimelow, MarketWatch

HARRISONBURG, Va. (MarketWatch) — March was very cruel to gold bugs. But they think the metal will now rebound.

Gold measured by the CME active contract floor-close was down 6.5% or $116.20, measured from Feb. 28. The NYSE Arca Gold Bugs Index XX:HUI +1.09%  was down 13.8%. (Measuring from Feb. 28 represents March better. Leap Year Day, Feb. 29, saw a brutal sell off, smashing a promising rally and establishing the new month’s character.)

The last month of a quarter seems to be a dangerous time to own gold instruments. Last December was gruesome too, giving gold bugs a notably unmerry Christmas ( See Jan. 2 column.   )

But in January, gold rebounded. Could another new-quarter reversal be possible?

The latest of gold’s two decent attempts to rally in March peaked last Monday. Although gold then fell back, over the whole week gold gained 0.6%, and further comfort to the bulls was offered by gold’s starting to rise mid-morning in New York on Thursday and adding $17 on Friday — when the HUI closed up 1.09%.

Chinese demand driving commodities strategy

Minmetals Resources' majority stakeholder is the Chinese government, and the company is bullish that demand from China will continue to fuel the market for copper and zinc, according to its CEO Andrew Michelmore.

And there’s possibly bullish news out of India, by far the largest importer of gold. (China is a rival to India in consumption, but it mines the bulk of the gold it needs: India mines almost none).

The Indian government doubled import duties on the yellow metal on March 17. The huge Indian gold fabricating and retailing trade responded by going on strike! Reports from bullion dealers confirm that Indian imports subsequently have been very light, despite the low gold price.

But on Friday evening, HSBC gold analyst James Steel came up with something of a scoop: He reported that the strike is over. Subsequent newswire stories appear to confirm this.

There are differing opinions as to how much the increase in the gold duty — to just over 4% — will impact longer-term Indian demand. But in the short run, a substantial increase in imports after the drought of the last two weeks seems likely.

Gold bugs see reason for optimism from another angle too. CME gold open interest (the number of gold contracts outstanding, reflecting total public participation) plunged far more than gold in this period — down 15.2% to Thursday’s close (Friday’s will not be published until Monday morning).

Not only is this more than double gold’s 6.5% decline, but it also takes open interest down to the level of early September 2009, when gold was in the upper $900s.

The Golden Truth website points out that after the September 2009 decline, “gold began the move to its 2011 cyclical peak just below $1,900. During that run, open interest expanded to over 660,000 contracts.”

Big declines in open interest on falls in the gold price normally mean liquidation by CME contract longs. A posting over at the LeMetropoleCafe website suggests the March problem was the “liquidation of some major spec involvement”.

If so, the new quarter could well see a directional change.

More evidence: an interesting chart supplied on Tuesday by Standard Bank, an active bullion dealer. This was its Gold Physical Flow Index, derived from the actual metal demand it is experiencing.

Gold offtake was the highest since June last year, just before the $400 rise into August. The bank acknowledged recently weak Indian demand but reported strong interest elsewhere in Asia.

Gold bugs hope that, without continued selling, this means gold has to rise — particularly if India indeed comes back on line. By Peter Brimelow, MarketWatch

HARRISONBURG, Va. (MarketWatch) — March was very cruel to gold bugs. But they think the metal will now rebound.

Gold measured by the CME active contract floor-close was down 6.5% or $116.20, measured from Feb. 28. The NYSE Arca Gold Bugs Index XX:HUI +1.09%  was down 13.8%. (Measuring from Feb. 28 represents March better. Leap Year Day, Feb. 29, saw a brutal sell off, smashing a promising rally and establishing the new month’s character.)

The last month of a quarter seems to be a dangerous time to own gold instruments. Last December was gruesome too, giving gold bugs a notably unmerry Christmas ( See Jan. 2 column.   )

But in January, gold rebounded. Could another new-quarter reversal be possible?

The latest of gold’s two decent attempts to rally in March peaked last Monday. Although gold then fell back, over the whole week gold gained 0.6%, and further comfort to the bulls was offered by gold’s starting to rise mid-morning in New York on Thursday and adding $17 on Friday — when the HUI closed up 1.09%.

Chinese demand driving commodities strategy

Minmetals Resources' majority stakeholder is the Chinese government, and the company is bullish that demand from China will continue to fuel the market for copper and zinc, according to its CEO Andrew Michelmore.

And there’s possibly bullish news out of India, by far the largest importer of gold. (China is a rival to India in consumption, but it mines the bulk of the gold it needs: India mines almost none).

The Indian government doubled import duties on the yellow metal on March 17. The huge Indian gold fabricating and retailing trade responded by going on strike! Reports from bullion dealers confirm that Indian imports subsequently have been very light, despite the low gold price.

But on Friday evening, HSBC gold analyst James Steel came up with something of a scoop: He reported that the strike is over. Subsequent newswire stories appear to confirm this.

There are differing opinions as to how much the increase in the gold duty — to just over 4% — will impact longer-term Indian demand. But in the short run, a substantial increase in imports after the drought of the last two weeks seems likely.

Gold bugs see reason for optimism from another angle too. CME gold open interest (the number of gold contracts outstanding, reflecting total public participation) plunged far more than gold in this period — down 15.2% to Thursday’s close (Friday’s will not be published until Monday morning).

Not only is this more than double gold’s 6.5% decline, but it also takes open interest down to the level of early September 2009, when gold was in the upper $900s.

The Golden Truth website points out that after the September 2009 decline, “gold began the move to its 2011 cyclical peak just below $1,900. During that run, open interest expanded to over 660,000 contracts.”

Big declines in open interest on falls in the gold price normally mean liquidation by CME contract longs. A posting over at the LeMetropoleCafe website suggests the March problem was the “liquidation of some major spec involvement”.

If so, the new quarter could well see a directional change.

More evidence: an interesting chart supplied on Tuesday by Standard Bank, an active bullion dealer. This was its Gold Physical Flow Index, derived from the actual metal demand it is experiencing.

Gold offtake was the highest since June last year, just before the $400 rise into August. The bank acknowledged recently weak Indian demand but reported strong interest elsewhere in Asia.

Gold bugs hope that, without continued selling, this means gold has to rise — particularly if India indeed comes back on line. 

http://www.marketwatch.com/story/gold-bugs-think-q2-will-bring-new-rebound-2012-04-02

Sorrentino Sees Gold Rising Over $2,000 Early This Year (Bloomberg)

Gold price set to go up to US$2,000 by mid-year (the Star)

By DAVID TAN
davidtan@thestar.com.my

GEORGE TOWN: The Gold Bullion Entrepreneurs Association of Malaysia (GBEAM) expects gold price to hit US$2,000 per ounce by mid-year from the current US$1,733 per ounce as the weakening global economy would drive more funds to safe-haven investments such as gold.

GBEAM secretary-general Datuk Joseph Kow said in an interview that from now till March, the price of gold should increase between 5% to 8%.

“We expect gold trading to pick up in the second quarter 2012,” he said.

Due to the Chinese New Year holidays and shorter working days, gold trading is expected to be slower in the first quarter,” Kow added.

Kow added that GBEAM would announce the recommended selling price of gold twice daily to its 4,000 members soon.

“Because gold prices fluctuate every minute, it is necessary to make the announcement a twice-daily routine.

“This will also give our members a clearer picture of the international gold trading market,” he said.

The recommended selling price of gold usually hovers between 22% to 25% of the market price, which would cover labour and operational costs and currency adjustment factors,” he said.

At present, GBEAM announces the recommended selling price of gold via SMS once daily.

Kow said GBEAM's objective was to promote gold bullion trading to the Malaysians and emphasise the importance of gold investment as a hedge against inflation.

“Gold is generally perceived as money that is universally accepted like a currency,” he added.

An OCBC Bank report last month forecast that gold prices would target around US$1,800 per ounce by end-2012.

The upward trend of gold prices would continue into 2012, largely driven by the negative real-interest-rate environment as central banks were expected to cut interest rates or keep them at historical lows to support growth, it said.

“In 2011, gold purchases made by central banks were seven times higher than 2010, and this sets a bullish tone for gold as the bullion is increasingly being viewed as a store of value by both investors and global authorities, “the report said.

“As such, we believe gold prices to target US$1,800 per ounce by end-2012,” it added.

http://biz.thestar.com.my/news/story.asp?file=/2012/2/16/business/10717078&sec=business