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Gold Nearly Unchanged, Silver Climbs Modestly

CoinNews.net — Mon, 13 Feb 2012 20:17:49 +0000

Gold was nearly unchanged Monday with a loss of less than 0.1% after falling 0.9% last week.

Gold prices dipped 40 cents to $1,724.90 an ounce in the April futures contract on the Comex in New York. The yellow metal traded from $1,717.70 to $1,735.40. [...]
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In The Lead – Curbing Your Enthusiasm

Jon Nadler, Kitco Metals Inc. — Mon, 13 Feb 2012 15:57:11 +0000

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Against a backdrop that included burning buildings and flying stun grenades in the streets of Athens, the Greek Parliament voted to pass a tough new round of austerity measures that might just make for a new definition of ‘Spartan.’ The image and video that accompany this story speak of anything but optimism on the part of the Greek citizenry. [...]
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Gold Down 0.9% on Week as Silver Dips 0.4%, US Bullion Eagles Improve

CoinNews.net — Sat, 11 Feb 2012 15:04:44 +0000

Gold prices declined 0.9% this week, bucking expectations of many analysts who had forecasted higher prices before the week’s start. Gold, silver, other commodities and stocks were driven lower towards the end of the week as the U.S. dollar became the investment choice when drama ensued over Greece bailout negotiations.

[...]
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In The Lead – On Borrowed Time and Money

Jon Nadler, Kitco Metals Inc. — Fri, 10 Feb 2012 15:59:21 +0000

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The agreement on further austerity measures that was reached by Greece’s political leaders not only failed to ignite the orbital launch of many a risk asset, but it actually resulted in what one might call a "launchpad failure."

While it could be argued that speculators had bought the ‘rumor’ of the agreement and then sold the ‘news’ that it has been arrived at, the deeper layers of the market story are certainly also worth considering. This, because, in effect, Greece is now headed for a de facto referendum on whether or not its citizens might wish to remain an integral part of the European Union. In the interim, it is borrowing more time while restless demonstrators continue to circle government buildings…

No sooner had Athens signaled that further belt-tightening had been finally agreed upon that new demands for "show us the goods" were intimated by Europe’s finance ministers and they have now pushed the prospect of Greece finally getting the money it so badly needs in order to avert a messy default into next week, at best. Standard Bank (SA) analysts listed the EU finance ministers "to-do" list as follows in this morning’s market report:

"Three conditions remain before approval will be considered — a further €325m in cuts, Greek parliamentary approval (should be this Sunday) and a pledge from Greek political leaders that they will maintain the reforms after the country’s general elections (this April). While indications are that the Greek parliament will approve these measures, there is enough uncertainty to keep markets on edge as we enter the weekend."

As a result, Friday is shaping up as a decidedly "risk-off" day and the aforementioned launch into orbit of assets other than the dollar was "rescheduled" for a later date. Houston, we have a ‘problem’ and it’s (still) called: Greece.

Spot precious metals dealings opened on the weak side with all four principal metals that we track losing more than 1.2 and up to 2.1 percent this morning. Spot gold was down by nearly $25 at $1,704 per ounce while silver was bid at near $33.25 with a loss of more than 60 cents. A first-in-two-years decline in Chinese exports and imports also added to the selling pressure in precious and base metals this morning. Standard Bank’s analysts opine that, should gold slip further, then the $1,700-$1,720 zone could be a good one within which to establish fresh short positions. While folks in India may or may not be buying or shorting gold at the moment, they sure are borrowing heavily against it.

So heavily, in fact, that the Reserve Bank of India is considering much more stringent regulations as regards loan-to-value ratios being offered by gold-based lending firms. Borrowers pledging gold as collateral are frequently paying as much as 18-25 percent in interest to do so. The phenomenon brings to mind the word "margin call" in the event of a serious price slide in the yellow metal — many such extensions of credit are being made at rates of 75% loan-to-value and perhaps higher, prompting observers to believe that people who have pledged their bullion might be living on (literally) borrowed time. In our H.O., gold is the one thing one ought not buy with borrowed money, or hypothecate for the borrowing of (paper) money.

Speaking of positions, value, and such, small retail investors who are still trying to figure out "why gold?" and "how much gold?" were faced with a string of news and statements of the head-scratching variety this week and are probably more confused that they have been in a while in their wake. To wit: economist Dennis Gartman said he is ‘wild-eyed bullish’ on stocks and that he is now returning to gold as well (which he sees higher in euro and yen terms). Stop us if you’ve heard this one before, but, given long-term market history, equities and gold are supposed to be doing anything but moving in the same direction, at the same time. In fact, gold is normally added to a portfolio in order to mitigate against potential declines in stocks.

Next up, we have Warren Buffet who now feels that "stocks, or investments in any “productive” asset, will “prove to be the runaway winner” over bonds or gold “over any extended period of time” … and “more important, it will be by far the safest.”

Mr. Buffett is no stranger to the world of precious metals; he once (not that long ago) bought roughly 138 million ounces of silver (about as much a one year’s worth of retail demand) for himself and then sold it all at a handsome profit.

However, his B-H shareholder newsletter notes that "what motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth — for a while."

Money Box’s Matthew Yglesias encapsulates the phenomenon as one wherein:

"you’re betting that in the future more people will want to bet that future people will want to bet on gold."

Mr. Buffet, for his part, still prefers productive assets such as farmland and businesses.

Finally, if you thought that gold rising in the wake of a Bernanke speech is as reliable a knee-jerk reaction as you would expect following a hit by your physician’s rubber mallet, well, think again. Marketwatch contributor Mark Hulbert has found no evidence of there being a reliable correlation between what Mr. B says and gold taking off for the stratosphere. This, despite urgings of the type we see in newsletters that declare that the Fed Chairman has ‘green-lighted’ gold’s next ‘orbital sortie.’ You might think of availing yourself of a different gold trading theory and strategy at this point. Perhaps the length of skirts on the runway, or the Giants winning the Super Bowl.

If you wish to have some light shed on some of the above, you might consider signing up for our free webinar on gold and how and why an allocation of same in your portfolio without regard for price ‘performance’ is a prudent long-term strategy. So much for the ‘shameless self-promotion’ bit for today. See you on the 15th on this ‘station’ and hopefully the ‘why gold?’ and ‘how much gold?’ questions you have will at least be partially answered.

Gold conspiracy theories that have cast the CME as the ‘uber-villain’ that prevents freedom in trading by small investors were also dealt a bit of a ‘setback’ overnight as the exchange lowered margin requirements for trading gold, silver, and platinum. So much for the alleged ‘never lowering of margins and only raising them to frustrate everyone.’ At any rate, the shrinkage in margins now required evidently failed to ignite speculative enthusiasm in the complex.

Platinum fell by $24 of its own to trade at $1,633 while palladium slipped $14 to be indicated at $695 the ounce in New York. Rhodium was the standout gainer this morning, adding $25 to the bid-side and reaching the $1,500 mark once again. January’s Chinese car sales were dealt quite a setback by…the calendar this year. The earlier than normal Lunar New Year resulted in many dealers closing shop for a full week or longer and this resulted in the lowest monthly auto sales level in that country in seven years.

Still, nearly 1.4 million vehicles rolled out of Chinese showrooms last month and analysts expect this year’s sales to show a growth rate of probably 8% (almost four times better than 2011). The euro was struggling near $1.318 while the US dollar advanced 0.60% to the 79.10 level on the trade-weighted index. Overseas, equity prices suffered in Europe and US stocks fell 125 points in the initial half-hour of trading today as risk appetite was ‘shelved’ for another session ahead of the weekend. Copper fell 2.4% and crude oil slipped 1.9% lower this morning.

Have a pleasant weekend,

Jon Nadler
Senior Metals Analyst — Kitco Metals

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

www.kitco.com and www.kitco.cn
Blog: http://www.kitco.com/ind/index.html#nadler

Gold and Silver Prices Advance 0.6%

CoinNews.net — Thu, 09 Feb 2012 22:10:31 +0000

Gold prices rose Thursday as the U.S. dollar weakened and the euro strengthened in the wake of news that Greece leaders agreed to austerity measures to secure a financial bailout. [...]
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Gold, Silver Prices Fall while US Bullion Coins Maintain Momentum

CoinNews.net — Thu, 09 Feb 2012 00:11:23 +0000

Gold declined Wednesday, taking away a sizeable portion of the sharp gains from the previous day. Profit taking was among the major reasons cited for losses. [...]
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In The Lead – PGMs = Potentially Great Movers

Jon Nadler, Kitco Metals Inc. — Wed, 08 Feb 2012 16:03:57 +0000

http://www.kitco.com/

Amid further, but by now routine, delays and more negotiations among its political leaders, the situation in Greece showed no concrete signs of coming to a conclusion just yet, despite the optimism manifest in certain currency, equity and commodity markets on Tuesday. To wit, the euro traded near $1.329 (a two-month high) while European stocks posted gains despite some unsettling economic metrics coming out of Germany.

Gold and crude oil enjoyed a very good trading session on Tuesday as speculators threw money at both markets with an amount of generosity that was clearly lacking on, say, last Friday. This morning, however, the going got a bit tougher after the euro exhibited a bit of "fade" in the wake of a reluctant-to-dole-out-money kind of statement coming from the ECB.

A package intended to untie the complicated knots that Greece is tangled in has been on the working tables in Athens since July but the past five days have really been cliff-hanger ones when it comes to the country securing its second round of bailout funds and/or its prospects of remaining in the eurozone altogether. Whether Greece secures the money or heads into bankruptcy does not alter the fact that its denizens face inevitable hardships ahead, complete with wage and pension cuts as well as even more joblessness.

Greek labor unions staged another walkout yesterday and indicated that their members are not keen on more austerity measures being imposed upon them and that the bailout is being rammed down their throats by foreign creditors. Greek Finance Minister Venizelos calls the unfolding saga a "dramatic and acute dilemma." However, it is clear that despite dramatic statements being made by politicians who are up of election/reelection come April, the real power in the situation resides in the hands of the so-called "troika" of the IMF, the ECB, and the European Commission at this juncture.

Gold prices meandered on either side of the ‘unchanged’ marker this morning and orbited around the $1,745 area as the US dollar did not appear to pierce the 78.50 level on the trade-weighted index following yesterday’s euro-centric optimism-induced sell-off it was subjected to. At least one school of thought sees a potential sell signal in the recent advances made by the yellow metal, while another such school envisions more volatility as the defining feature of bullion in coming months. Crude oil, on the other hand, made further progress to the upside, gaining another $1.25% this morning. Developments in Iran and Nigeria continue to bolster black gold and the lower dollar did not hurt it either.

Speaking of the greenback, the "Arab Street" has been turning towards it in droves following the spreading malaise that has ensued in the wake of the "Arab Spring." Folks in Egypt, Libya, Tunisia, Iraq, and Syria have been seeking shelter in the American currency have watched their own colorful banknotes taking a hit in value and they have thus sought out the relative safety of the buck in unprecedented numbers.

Bloomberg News reports that, for example, "In Syria, where an uprising against President Bashar al- Assad’s rule is still raging, demand for dollars is so high that Mudher Salih, the deputy central bank governor of neighboring Iraq, said Jan. 10 that traders were buying dollars in his country to sell them illegally next door."

Silver climbed by 19 cents to the $34.34 mark on the bid-side but appeared confined in the $34 to $34.50 channel for the time being. Platinum gained $3 to rise to the $1,650 level and palladium moved up by $1 to the $709 per ounce figure. The former has now halved its previous near-$200 discount to gold in a matter of not too many trading sessions. There are a couple of fresh news items on the subject of the noble metals that merit our attention: they come from Norilsk, Lonmin, and South Africa. Read on:

The world’s top palladium producer, Norilsk Nickel said on Tuesday that "PGMs have investment potential comparable or even greater than gold."

Platinum has moved 16% higher thus far this year, while palladium has advanced by 24% from its October lows. Existing platinum above-ground supplies might last no more than 7 months if production of the metal were to be halted. A Norilsk official puts the price of palladium at $2,100 in five years’ time, while he also sees a 50% gain (to $2,500) as possible in platinum. Gold would have to touch $5,100 to mirror the kind of performance that Norilsk envisions in palladium.

Another PGM producer, Lonmin, told attendees at the Africa Mining Conference in Cape Town that the risk of platinum supply disruptions is growing. The firm’s CEO, Ian Farmer pointed to "government safety stoppages, labour management difficulties, skills shortages, transformation and equity ownership challenges, rising community expectations, resource nationalism and high electricity prices" — all of which are making operating in South Africa increasingly difficult.

Also down in South Africa, labor strife continues to cast a fairly dark shadow on the output in the PGM space. As recently reported here, Impala Platinum (the planet’s second largest platinum producer) fired more than 17,000 workers during what the firm has called an "illegal strike." And then, there remains the subject of the possible nationalization of that country’s mines; a thorny- and as yet unresolved- issue and one that will not come to be addressed without contentiousness.

While we are on contentious subjects, we might as well tackle a couple of fairly old but frequent ones. The heated debates on whether or not gold is an effective inflation hedge and on whether the Fed is or is not doing its job continue to rage on, and they continue to show sharply divided camps. This morning, we bring you a couple of stories from the less…"conventional" side of these issues. For the sake of balance (and a bit of myth-busting), you know…

A just-published by Credit Suisse study by Messrs. Marsh, Dimson, and Staunton of the London Business School argues that owing to its price volatility, gold has not been able to play an effective role in protection against inflation. The study is not referring to the past nine months of volatility in bullion prices; it covers 112 years of market history. Since 1900, the real return on gold has been 1.1% (in sterling) as compared to the 5.4% annualized return offered by global equities.

Do note that the LBS study does point out that "Gold is the only asset that does not have its real value reduced by inflation" and that "it has a potential role in the portfolio of a risk-averse investor concerned about inflation." However, one would be well-advised not to look at the precious metal for "return" in the sense that "this asset does not provide an income flow and has generated low real returns over the long term. Gold can fail to provide a positive real return over extended periods.”

Gold is many things to many people, but ignoring such math as shown above can prove unwise. Perhaps the individual investor’s focus should remain on the fact that when gold is added to a portfolio of conventional assets (and in a not too over-weighted percentage) the overall performance of that basket of assets is slightly enhanced, whilst its overall risk profile is slightly decreased. Gold is a good diversifier, and a good tail-risk mitigator. As for being a ‘panacea’ for what ails the world, or certain other miraculous things, well, surely studies such as the above will keep coming.

As for the Fed, while certain would-be US Presidents currently in the heat of the election campaign would like to incarcerate Ben Bernanke and slap him with a charge of "treason" (punishable by execution), the numbers that Mr. Bernanke’s Fed has been able to recently draw on the US economic chalk board (again, those pesky numbers and math) are proving them "dead" wrong.

Inflation supposedly now demolishing America and your wallet? The imminent death of fiat currencies and the entire political system?

Perhaps you’ve been parsing too many shadowy statistics: "More than a year after Republicans from House Speaker John Boehner of Ohio to presidential candidate Ron Paul of Texas warned that the Fed’s second round of asset purchases risked a sharp acceleration in prices, the surge has failed to materialize. The personal-consumption-expenditures price index rose 2.4 percent for the 12 months ending in December, near the central bank’s 2 percent target."

US unemployment at 10 or 20 percent by now, and the US economy shrinking into oblivion? Perhaps you have been the recipient of the wrong news (-letters, that is): "The unemployment rate fell to 8.3 percent in January, the lowest since February 2009, according to a Labor Department report last week. Payrolls rose by 243,000, exceeding the most optimistic forecast in a Bloomberg News survey. The U.S. economy is forecast to grow at a 2.3 percent rate this year, up from 1.7 percent in 2011, according to a Bloomberg News survey of 70 economists last month."

Not exactly the "rap sheet" for which one is sent "up the river." Certainly not when, even in the wake of such figures, the Fed Chairman remains of the opinion (spoken just yesterday) that the US job market, while progressing along, is relatively far from being given a clean bill of health.

Until tomorrow,

Jon Nadler
Senior Metals Analyst — Kitco Metals

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America

www.kitco.com and www.kitco.cn
Blog: http://www.kitco.com/ind/index.html#nadler

Gold Rebounds as Silver Jumps 1.3%, US 1 Oz Bullion Coins Gain

CoinNews.net — Tue, 07 Feb 2012 23:58:47 +0000

Following two consecutive daily losses, gold rebounded Tuesday when the U.S. dollar fell and bargain hunting ensued. Pressuring the greenback were comments from Fed Chairman Ben Bernanke about weakness in the U.S. economy and optimism over reports of progress in a Greece debt deal. [...]
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Gold Declines as Silver Gains Penny, Major US Mint Eagle Coins Rise

CoinNews.net — Tue, 07 Feb 2012 03:27:40 +0000

Gold declined Monday for a second straight session as a stronger U.S. dollar and a "risk-off" mentality pressured the yellow metal.

"People are in a risk-off mode today as investors are finding it very difficult to stomach the roller coaster ride in Greece," Rick Trotman, a senior research analyst at MLV & Co. in New York, said in a telephone interview that was relayed on Businessweek.

[...]
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In The Lead – It’s All Greek To Us All

Jon Nadler, Kitco Metals Inc. — Mon, 06 Feb 2012 16:05:34 +0000

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Gold’s worst loss in over one month showed signs of continuing to deepen as markets opened for trading in New York this morning. Albeit during the overnight hours gold prices managed to bump some $10 higher in a recovery attempt, the uncertainty manifest in the European news flows on Monday kept the selling pressure on in the precious metals and commodities’ complex and speculators opted to take temporary shelter under the "green" umbrella of the US dollar (up 0.52% on the index). [...]
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