Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199

 

Search Gold Prices
Gold Price
[Most Recent Quotes from www.kitco.com]
Our RSS Feed

Gold Updates by Mail

Enter your email address:

Follow Us on Twitter
Tuesday
Mar162010

The Federal Reserve: No Change to Rates for an Extended Period

USD Chart 17 March 2010.JPG


The balancing act continues as the Federal Reserve holds interest rates and hints at an "extended period" of the no change policy. As we write the US Dollar has moved lower to trade at 79.64 on the US Dollar Index with gold moving higher to trade at $1128.00/oz at the close on the NYSE.

No joy or encouragement here for savers as the dollar returns next to nothing at the moment. If you look hard enough at the alternatives you can get close to 5% on the Australian or New Zealand dollar, which have been strengthening against the US Dollar over the last year or so.

The dilemma for the Fed is one of balancing a gentle withdrawal of excess cash out the system without taking the patient off life support too early and is summed up very well by this snippet from MarketWatch

WASHINGTON (MarketWatch) -- The Federal Reserve kept its benchmark interest rate at a record low level Tuesday and made no changes to the key "extended period" policy pledge, a signal that it believes the economy still needs support to get to a sustainable path.

Altering the wording would be a clear signal that the Fed is more sanguine about the economic outlook and believes ultra-low rates are no longer necessary -- and financial markets would react accordingly.

The Fed's policy statement, released after a closed-door meeting, said the economic situation is "likely to warrant exceptionally low levels of the federal funds rate for an extended period."

Brian Bethune, economist at HIS Global Insight said the statement was designed to calm markets that any change in interest rate policy was imminent. At the moment, the Fed is walking bit of a tightrope, Bethune said.

One the one hand, the Fed has been winding down its emergency funding programs as the economy has recovered and Fed officials have been talking in great detail about how the central bank will be able to exit from its zero-interest rate policy before inflation pressures emerge.

On the other hand, the central bank doesn't want to tighten prematurely, which could kill the housing market and lead to more woes at the nation's crippled banking sector.

"The Fed...has to avoid being stampeded into a short-term tightening which would be a disaster," Bethune said.

It will be interesting to see just how gold performs as it reaches the $1140/oz level which we see as the next resistance point, gold may back off and try again later, however, if it goes through this level then we would expect a decent rally to ensue, just our humble opinion.



Have a good one.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Sunday
Mar142010

The Federal Reserve: The Greatest Scam in History (revision C) the Yellen Effect

Janet Yellen.JPG



Janet L. Yellen appears to be the favourite to replace Don Kohn, the outgoing vice-chairman at The Federal Reserve Board, an appointment that does not surprise us, however, her resume is a smorgasboard of academia without even a hint of a proper job.

This resume belongs to a person who went to school, then to university as a student and then back to university. This is the resume of an overgrown school kid who has spent a lifetime acquiring many academic certificates from educational institutions along the way and stayed in the academic world pontificating on whatever took her interest.

Now, unless you consider working for the Federal Reserve as a stint in the private sector, this lady has no experience whatsoever in working or running a real business. A mirror image of Ben Bernanke she has never mustered the courage to venture into the private sector and implement her theories for the benefit of an organization battling to survive and grow in the private sector.

Her theories remain unproven outside of the classroom and as they have remained theoretical only, there isn't the hard won experience in the real world to support and give credit to her words. Every corporation and indeed every person in the United States of America will be and are being affected everyday by the actions of The Federal Reserve Board, the governance of which is entrusted to people who have never fixed so much as a wing nut to a Ford motor car.

Helicopter Ben has said that he will run the money printing presses for as long as it takes and now he has the assistance of Janet L. Yellen to shovel the money out of the doors in the belief that more money is the solution to a debt laden nation. The political courage to suck money out of the economy just does not exist as unemployment is high and the economy is fragile and will remain so for sometime to come. Should a double dip recession appear on the horizon then the drunk will be given yet another drink, well it almost worked in Zimbabwe.

Please forgive us for being old cynics as we cannot see anything in this resume to boost our confidence. This is her resume as published by The Federal Reserve Bank of San Francisco, if we have missed a proper job then please correct us.


Janet L. Yellen took office as President and Chief Executive Officer of the Federal Reserve Bank of San Francisco on June 14, 2004. As a member of the Federal Open Market Committee, Dr. Yellen fully participates in the meetings and brings her District's perspective to policy discussions in Washington.

Dr. Yellen is Professor Emeritus at the University of California at Berkeley where she was the Eugene E. and Catherine M. Trefethen Professor of Business and Professor of Economics and has been a faculty member since 1980.

Dr. Yellen earlier took leave from Berkeley for five years starting August 1994 when she served as a member of the Board of Governors of the Federal Reserve System through February 1997, and then left the Fed to become Chair of the Council of Economic Advisers through August 1999. She also chaired the Economic Policy Committee of the Organization for Economic Cooperation and Development from 1997 to 1999.

Dr. Yellen became a member of The Group of 30 in September 2009. She also serves on the executive committee of the Bay Area Council and is a member of the Council on Foreign Relations and the American Academy of Arts and Sciences. Dr. Yellen is a research associate of the National Bureau of Economic Research and has served as president of the Western Economic Association and vice president of the American Economic Association. She was also a Fellow of the Yale Corporation.

Dr. Yellen graduated summa cum laude from Brown University with a degree in economics in 1967, and received her PhD in Economics from Yale University in 1971. She received the Wilbur Cross Medal from Yale in 1997, an honorary Doctor of Laws degree from Brown in 1998, and an honorary Doctor of Humane Letters from Bard College in 2000.

An Assistant Professor at Harvard University from 1971 to 1976, Dr. Yellen served as an economist with the Federal Reserve’s Board of Governors in 1977 and 1978, and on the faculty of the London School of Economics and Political Science from 1978 to 1980.

Dr. Yellen has written on a wide variety of macroeconomic issues, while specializing in the causes, mechanisms and implications of unemployment.



The Federal Reserve: The Greatest Scam in History (revision B)
posted on the 20th March 2009.

USD Chart 18 March 2009.JPG

We first posted this article on 13th August 2007 when it appeared to us that the US Dollar along with the economy was heading into such dangerous waters that gold would be the beneficiary. At the time gold was trading at around $670/oz and it closed yesterday at $960 for a gain of $290 or 43.2%. Yesterday was the first time that we have seen the ‘C‘ word used as the Federal Reserve announced that it would be buying back $300 billion in longer-term Treasuries in order to assist the economic recovery. This move to buy these Treasuries is regarded by many as a last resort or a sign of panic as the turmoil in the financial markets reaches a crisis point.

Gold was languishing at the $890/oz level just prior to the announcement and then within the hour it rocketed to the $950/oz level as the news of the Feds action spread. Whether it be an article on Market Watch or a mention on the BBC World Service, news travels fast these days to every corner of the planet and investors react accordingly with startling results. A new government and a New Fed, not really, just more of the same but in increasingly larger doses. Todays action will turn out to be a defining moment for the US Dollar and recorded by historians as the beginning of its demise. Unfortunately the worst is yet to come so steel yourself for a force ten storm.

On 4th October 2008 we updated our original essay with the following excerpts;

If we fast forward to time now and read any newspaper the headlines are dominated with the fire fighting actions being implemented by the Federal Reserve with bankers and politicians in tow. From these bailouts we can only conclude that the dilution of paper money will continue with the pace of dilution accelerating, resulting in massive inflation and propelling the precious metals to higher ground. If you have the time, please read this article and then take a look at what’s happening around you and then find the time to question what you are doing and why you are doing it. Being too busy to organise your own affairs is a poor excuse. Just switch the television off for a couple of nights and clear your head, the way forward for you personally will become apparent.

The Federal Reserve: The Greatest Scam In History?

The Fed Res Logo 15 March 2010.JPG

This is the original essay posted on 13th August 2007

The Federal Reserve was created in 1913-1914 in order to bring stability to the economy and yet almost every major crash, including the great depression, can be attributed to the Federal Reserve.

We are going to take a look at the history of the Fed and what prominent historical figures have said about the organisation.

Firstly, from 1837-1862 there was a system of national banks in the USA but then in 1913-1914 a consortium of 12 privately held banks got together and formed the Federal Reserve Bank, an entity that is not part of the US government. These banks then purchased notes from the US Mint for printing costs and lent them out through member banks charging interest.

The Federal Reserve came into being after its supporters paid for the Presidential campaign of US President Woodrow Wilson. Wilson signed the bill that transferred the US currency to twelve regional private banks Wilson regretted his decision later saying:

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”

In 1933 President Roosevelt confiscated citizens gold and handed it to the Federal Reserve. At the very moment when Americans have needed to protect their wealth the most, the best store of wealth ever created, gold, was confiscated from American citizens and given to a un-elected conglomerate of private banks.

When the bill for the Federal Reserve was being considered, some brave politicians spoke out against its creation calling it “the strangest, most dangerous advantage ever placed in the hands of a special privilege class by any Government that ever existed” and Congressman Victor Murdock said, “I do not blind myself to the fact that this measure will not be effectual as a remedy for a great national evil – the concentrated control of credit.”

It even appears that one of the most important and most respected figures in American history disagrees with the Federal Reserve saying, “If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”

Jefferson also said, “I sincerely believe the banking institutions having the issuing power of money are more dangerous to liberty than standing armies”

“Paper is poverty… it is only the ghost of money, and not money itself.”

The Federal Reserve make no secret about the scam they are running as the Boston section of the Federal Reserve Bank said:

“When you or I write a check there must be sufficient funds in our account to cover the cheque, but when the Federal Reserve writes a check there is no bank deposit on which that cheque is drawn. When the Federal Reserve writes a cheque, it is creating money.”

Perhaps the Fed can create money, but we strongly believe that wealth cannot be created. Wealth is simply transferred, it is not created and we challenge anyone to prove otherwise. The only time wealth was created was when the world was created, with all its resources, true wealth. So why hasn’t the Federal Reserve been disbanded?

Well as the Rothschild Brothers of London said in 1863; “The few who understand the system, will either be so interested from it’s profits or so dependant on it’s favours, that there will be no opposition from that class.”

The great Henry Ford once said “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

The problem is, very few people understand the system at all. It is not taught in schools and even some of the most prominent financial analysts and fund managers really have no idea how the system works. They tend to define inflation as rising prices when in fact inflation occurs because of the expansion of the money supply. Or even link inflation with the economy doing well, saying, “we should raise interest rates as the economy did extremely well this month and we don’t want inflation getting out of hand”, or words to that effect.

What all people, not just investors, need to understand is that paper money is worthless. Gold and precious metals are the real money, the real wealth that cannot be created like its paper ghost.

Gold has been telling us for sometime that all is not well so listen up and put at least a small part of your wealth into precious metals or their associated stocks.

Discipline is about to return to a screen near you.

The Fed Building 15 March 2010.JPG

All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.

If you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Saturday
Mar132010

The Big Dead-Cat Bounce

Dead Cat Bounce 13 March 2010.JPG



By Doug Hornig, Senior Editor, Casey Research

It’s now been a year since the dark days of early March 2009, when, although no one knew it at the time, the stock market hit rock bottom. From there, all of the indexes went on a tear through the rest of the year, moving almost uninterruptedly higher before easing slightly in the first two months of 2010. At this writing (March 5), the Dow is still up 60%, the S&P 500 68%, and the NASDAQ 83%.

Virtually no one was calling for this kind of rally a year ago. But it happened. So investors are either seeing the “green shoots” supposedly sprouting from the moribund economy or believe that they’re about to break ground any day now. That sentiment is continually reinforced by government officials and media talking heads who almost universally proclaim that “the worst is past,” “we’re back from the brink,” or other words to that effect.

It’s often said that stock market action is a leading indicator, reflecting what investors think the economy will be like six or nine months down the road.

Are they right? Will good times soon be here again? Or is this just a big dead-cat bounce?

Jobs: Now here, we’ve clearly turned the corner. Everyone says so. For evidence, all we need do is look at the declining rate of job loss in the country. Uh-huh.

Perhaps it’s rude of us to point this out, but a declining rate of job loss is still a job loss. It is not the same as job creation.

The hard reality behind February’s “encouraging” numbers is that 14.9 million people remained out of work. 8.4 million jobs now have been lost since the start of the recession. In addition, there is a net need for 100,000 new jobs a month, just to keep up with first-time entrants to the workforce.

Even if the economy were suddenly to start churning out new jobs at the robust rate of a half-million a month – and the chances of that range from zero to none – it would still take nearly two years to return just to pre-recession employment levels.

(Near-term employment figures may blip up, as the government hires one and a half million people – who knew we needed so many? – to help take the census. That could lead to a classic false dawn.)

Anyone looking to the housing market to lead the recovery, as it often does, had better find a magnifying glass. January marked the third consecutive monthly drop in new home sales, and it was a whopping 11.2% tumble. Mortgage applications fell to the lowest level in 13 years. There was even a decline of 6.1% from January of 2009, itself a very dark month. Congress’s extension of home buyers’ tax credits is proving to be of increasingly little consequence.

New home sales are very important, since they cause a cascade effect down through the entire supply chain, from architects to building contractors, to sawmills, to sheetrock manufacturers, to carpenters, plumbers, and electricians. But sales of existing homes are also relevant, and there, too, the figures are grim. After piggybacking on federal subsidies through the fall, sales absorbed the worst pummeling on record in December, down 16.2%. January was a little better, only off 7.2%.

One number that is unfortunately growing is this: distressed sales, such as foreclosures, accounted for 38% of sales in January, up from about 32% in December. People are losing their homes at an increasing rate, with few buyers stepping up to the plate.

But hey, maybe there is a huge pent-up housing demand out there. We doubt it, but if there is, it doesn’t matter. Because lenders are ignoring it. In 2009, U.S. banks posted their sharpest decline in lending since 1942. One reason is that many are too cash-strapped themselves to deal with borrowers. According to the FDIC, at year’s end its “problem” list of U.S. banks at risk of failing hit a 16-year high at 702 (or nearly one in eleven), rocketing up from 552 at the end of September and 416 at the end of June. And little wonder. More than 5% of all outstanding loans are now at least three months past due, the highest level recorded in the 26 years the data have been collected.

Then there’s those that can’t lend because they’re no longer with us. 140 banks went belly-up in 2009, and 2010’s total will be worse than that if January’s 15 failures prove representative. The FDIC is bankrupt after reporting a $20.9 billion loss in the fourth quarter of 2009 in its Deposit Insurance Fund.

However, never let it be said that the government won’t try to squeeze some lemonade out of its bag of lemons. To wit, the FDIC’s own financial woes haven’t prevented it from opening a huge new satellite office in the Chicago area. The facility will be dedicated to managing receiverships and liquidating assets from failed Midwest banks, and will occupy seven floors of an 11-story building. The office space being leased is well over 100,000 square feet and will employ approximately 500 temporary employees and contractors. 

Does the FDIC know something we don’t? We can’t say for sure, but the fact is that the agency has already opened similar offices in Irvine, California, and Jacksonville, Florida.  Each time, the number of bank failures in those states spiked dramatically after the FDIC set up shop.

Elsewhere, consumer confidence is flagging and, since the economy is 75% consumer-driven, that doesn’t bode well. The Conference Board’s index took a swan dive in February, to its lowest point since last April. The index plunged to 46 from January’s reading of 56.5, stifling the previous three months’ uptrend. As a measure of how bleak the public mood is, the economy is considered stable only when the consumer confidence reading exceeds 90. We’re barely halfway there.

And finally, we don’t want to lose sight of the 800-pound gorilla in the room, the federal debt. How bad is it? Well, the Bank for International Settlements recently released a very frightening figure. In order just stabilize debt at pre-crisis levels, the BIS says the U.S. government must run a budget surplus of 4.3% of GDP. Every year. For ten years.

For an in-depth look, try Harvard economist Kenneth Rogoff’s new book, This Time is Different: Eight Centuries of Financial Folly (co-authored with Carmen Reinhart of the University of Maryland), the first comprehensive survey of past financial crises around the world.

Dr. Rogoff, who may be the country’s leading expert on the historical record, concludes that a banking crisis often leads a country into default, because government’s response is usually to try to prop up the financial system with yet more debt.

If that sounds familiar and disconcerting, it should. Even more so because Rogoff has identified a clear tipping point, beyond which there is little hope of recovery. When a government’s debt grows to equal annual GDP, the game is essentially over.

Where we are now: We have $12.5 trillion in gross debt, growing at $2 trillion per year, on a GDP of $14.3 trillion. Next year, it will be $12.5T + $2T = $14.5 trillion on a projected $14.5T of GDP. Or 100%. A level we cannot survive for long.

That means it’s likely, in the not-too-distant-future, that the government will be confronted with a very stark choice between defaulting on the debt or trying to inflate its way out. The former would kill off economic growth and likely launch a worldwide depression of epic proportions.

Disastrous as that would be, if the alternative is chosen and Washington’s printing presses beget hyperinflation, that would probably be worse. In a serious deflation, those who have saved for a rainy day can make it through okay. In hyperinflation, which unconstrained further spending could easily bring on, everyone loses.

The truly prudent prepare, as best they can, for either eventuality.

How to prepare for the worsening crisis… how best to diversify your portfolio and protect your assets… which investments and specific stocks to pick… learn all that and more at the Casey Research Crisis & Opportunity Summit in Las Vegas, April 30 – May 2. Listen (and talk!) to top-notch speakers like Doug Casey, Agora Financial Chairman Bill Bonner, real estate pro Andy Miller, Sprott Chief Investment Strategist John Embry, and many more. Early-bird discounts still available for those who sign up today. Click here to find out more…


All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.


Friday
Mar122010

Doug Casey on Surviving Financial Apocalypse Now

White House Money 12 March 2010.JPG


(Conversations with Casey: Interviewed by Louis James, Editor, International Speculator)


L: Doug, last time we spoke, you said quite a bit about debt, in the context of your expectation that the euro is on its way out. At the end of that conversation, you mentioned, of course, that the problem is not limited to Greece, nor the eurozone. America as a country has become a world-class debtor, and many Americans seem to think a maxed-out credit card is a reason to get a higher credit limit, not to economize. It’s like a global epidemic. Let’s talk about debt.

Doug: Sure. This is a story that’s going to end very badly for a lot of people. I’ve said this before, in many different ways, but I think it’s worth saying again, because most people just don’t grok it

L: Grok. From the Martian word for “drink” and “understand.” In Heinlein’s novels, water was a critical element of Martian culture – makes sense, for a desert planet. When you grok knowledge, as when you drink water, you don’t just hold it in your mouth and spit it out. You take it into yourself, it goes into your blood, and eventually into every cell in your body; it becomes part of you. This is heavy-duty understanding… Sorry for jumping in with the spontaneous lecture. I just suspect many readers will not know the term.

Doug: Or put another way, in the negative case, most people just don’t get what money really is – and what it isn’t. They take it as a given, as part of the cosmic firmament. But it’s not. A prime example of this is the mistaking of debt for money, a phenomenon David Galland pointed out in a Casey’s Daily Dispatch a few weeks ago. This is why the entire world’s monetary system today is headed for a disastrous failure. And this is absolutely inevitable. There’s no way around it.

L: Why?

Doug: Because you can’t use debt as money. As I’ve pointed out before, Aristotle, in the fourth century BC, was the first person to define what money is. And what is it? It’s a store of value and a medium of exchange.

The paper we use today is a medium of exchange – it got that way because governments made it illegal not to accept it – but it’s not a good store of value. And it’s rapidly and radically becoming less of a store of value. What we use as money today is actually not money; it’s currency. Technically, that’s simply a word that indicates a government substitute for money.

What does make for good money? Again, Aristotle gives us the answer. It’s something that has five characteristics: it’s durable and divisible, consistent and convenient, and has value in itself.

L: Some of our readers who’ve studied Austrian economics challenged us on that last bit, last time we talked about gold, because, as the Austrians pointed out, value is subjective. But you don’t mean some sort of value that’s independent of people making value judgments. You mean that people value something that makes for good money, because of its innate qualities – not something “valued” because of government threats of force.

Doug: Right. And for these reasons, gold is almost certainly the best thing to use for money. Not because I say so, nor because Aristotle said so, but because, over time, people have found it to be the most durable, divisible, consistent, convenient, and inherently valuable thing to use. Silver is also good, but it’s less durable because it corrodes. And less convenient, in that it takes about 60 times more of it – at the moment – to offer the same value as gold. Copper is the next traditional step down the ladder.

L: That, plus one reason that’s pertinent today but was not a problem in Aristotle’s world: gold can’t just be printed up on the arbitrary whims of those in power.

Doug: That’s the big one. Using metals as money takes the whole matter out of the hands of the government and its bureaucrats.

L: But we don’t use gold today…

Doug: No, as per David’s example, it’s as though a bunch of friends without any real money started exchanging IOUs for money, and then after a while forgot that the IOUs were supposed to represent, and be redeemed in, real money.

The problem with this is that, in the case of the IOUs between friends, paper is based solely on hope and trust. One can move away, or die, or turn dishonest, or become insolvent – many other things could happen. A guy stuck with a dead man’s IOU has nothing.

With government IOUs, or currencies, it’s worse, because they can increase the number of IOUs in circulation without telling anyone – that’s what inflation is. Since the government creates the IOUs, it gets the benefit of spending them before the inflation they create raises prices, which is basically stealing from the people. And, of course, sometimes governments do “die,” leaving the holders stuck with nothing, just as with the IOUs between friends. In fact, it’s arguably far more likely that such problems will arise from trusting a government to print IOUs than from trusting a friend.

[To read the full 8-page interview with Doug Casey and what he thinks will happen to the American middle class, sign up here.]



All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Thursday
Mar112010

Competition for the IMF’s Gold?

FED Monetary Base 11 March 2010.JPG

By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

On February 24, Reuters reported that the Reserve Bank of India was “set to be a buyer” of the 191.3 tonnes (6.74 million ounces) of gold the IMF is selling. Although the bank wouldn’t comment directly on the possibility, they did say, “We are closely looking at the gold market... gold is a safe bet.”

The article then quoted an unidentified official from the China Gold Association as saying, "It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility.”

But the next day, Finmarket news agency in Russia reported that China “confirmed its intention” to buy the IMF gold. "Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market.”

While they’ve been silent since, both India and China have publicly hinted they want this latest batch of yellow bars from the IMF. There’s no way to know if a competitive bid would spring up between these two countries, but...can you imagine the ramifications if one did?

When India bought 200 tonnes of IMF gold last November 3, it set off a buying spree that saw gold rise 14.2% in 4 weeks. What if this time around, a couple central banks both want the gold for sale? What if China says to India, “Not so fast, guys. We’d like to bid on that, too...” and word of that clash leaked out?

Pure speculation, of course, but competing for gold purchases isn’t a far-fetched idea. This sale is not pre-arranged; it’s an open market sale. Also, there’s only so much to go around. These two countries have only a tiny amount of their reserves in gold. Throw in the fact that central banks worldwide are already net buyers.

A pretty delicious thought, wouldn’t you say?

The gold price dropped a tad on the IMF announcement, but is up 1.1% since then. It’s pretty hard to make a case that IMF sales will hurt the gold price. As I said a few weeks ago in my dirty jokes column, IMF sales tend to mark bottoms in the price and not tops. The World Gold Council reported that floor traders now consider $1,054 as a floor in the market. Why? That was the average price India paid for the 200-tonnes they bought from the IMF last fall.

Meanwhile, what is our government doing?

See the chart above:

You’ll recall that that big spike in the U.S. monetary base in late 2008 was never before seen in history. The Federal Reserve basically doubled it overnight. Our economist Terry Coxon described it as “beyond unprecedented.”

So, they stopped that insane activity, right? Since December 2008, the monetary base has swelled from 1.69 trillion to 2.18 trillion, a 29% increase and another new record.

Printing paper money vs. buying physical gold. I don’t know about you, but I think I’ll follow China and India’s lead here, even if I have to compete for the price I pay for my gold.

Is $1054 really the bottom in the gold price? Check out our 4 clues in the current issue of Casey’s Gold & Resource Report here risk free.


All the best.
Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.


Thursday
Mar112010

Randgold CEO sees range bound gold price in 2010

Reuters Logo 11 March 2010.JPG

Randgold Resources Limited (GOLD) Chief Executive Mark Bristow sees gold as being pretty flat over the coming year or so as per this snippet from an interview at The Prospectors and Developers Association of Canada (PDAC)

TORONTO, March 10 (Reuters) - The price of gold is likely to remain range-bound through the course of 2010, the head of Randgold Resources (RRS.L) said on Wednesday.

"This year is going to be a relatively flat year for gold with the price ranging between $1,000 to $1,200," said Chief Executive Mark Bristow, speaking on the sidelines of the Prospectors and Developers Association of Canada (PDAC) mining convention in Toronto.

Bristow believes the price of gold will begin to climb again in 2011 as the world begins to face inflationary pressures caused by huge levels of government stimulus spending designed to counter the economic downturn.

However, Bristow thinks the U.S. dollar will remain relatively strong as major currencies like the euro, the yen and the Canadian dollar are not in a position to rally against the greenback.
"Lots of people are very bearish on the dollar, but compared to what? You will see on a relative basis the dollar being a lot stronger than some people think," he said.

Moreover, China cannot allow the yuan to strengthen against the U.S. dollar, said Bristow.

"The problem with the Chinese is that if they move in any way to devalue the dollar, or find alternatives, they will destroy their balance sheet, because they are the biggest holders of U.S. dollars," said Bristow, who heads the African-focused gold producer.

So there we have it.



All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.


Wednesday
Mar102010

Randgold Resources Limited Stopped Out on Options Play with a Small Profit

Randgold logo.JPG


Team, a quick note to let you know that we have been stopped out on the Call Options we purchased on the 9th February 2010 on Randgold Resources Limited (GOLD) they were the Jun 19 ‘10 $75 Calls with a strike price of $75.00 for which we paid $5.50 per contract for them.

We placed a stop at $6.50 to protect our position from any sudden fall in value and it has been triggered so we are out with a small profit which has been achieved in just one month.

It looks like the low amount of liquidity meant that there were few bids on the day and once the bids dropped our stop was triggered. However it does raise the question that maybe we should be using the bigger vehicles like GLD as the larger volume in liquidity may have helped us on this occasion, an area that we need to study more closely.

Back to the drawing board.

Randgold Resources Limited trades on the NASDAQ under the symbol of GOLD and on the London Stock Exchange under the symbol of RRS.


If you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.

All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Tuesday
Mar092010

$2000/oz Gold by Year End, Rob McEwen

Rob McEwan.JPG


This is a prediction made by Rob McEwen appearing at The Prospectors and Developers Association of Canada (PDAC) that gold will hit $2000/oz by the year end and $5000/oz before this gold bull run is over. Thats a 78% increase in gold prices from todays price of around $1118.90/oz.

In response to a statement by the interviewer, that the government would mop up the money supply Rob replied along the lines of 'printing money is like a junkie with a high you just have to keep giving more and more dollars to keep the economy running.'

The story in general remains the same, governments around the world are trying to print their way out of trouble and as we have said many times its like trying to put out a fire with gasoline as per our article back on September 9th, 2007, when gold was trading at $709/oz, please click here to read that article in full.


Thanks to BNN who spoke to Rob McEwen, chairman and CEO, U.S. Gold and Lexam Explorations and founder and former chairman and CEO of Goldcorp Incorporated.

In another interview later on BNN talked with Peter Grandich who was more conservative then Rob and his predication for the year was a slow but steady increase in gold prices to around the $1300 to $1500/oz level this year and $2000/oz before this bull run is over.

As for the team here we are very bullish but we guess that you would expect that sort of stance from us and yes we are looking for gold to trade closer to the $2000/oz as confidence in most currencies is now not what it once was and people are slowly looking for a more secure vehicle to store their wealth. It is also possible to move from one asset class to another with great speed these days, all done at the press of a button which adds to the volatility for both the currencies and gold prices. We are aiming to position ourselves to take advantage of this volatility through the use of options trading which will add leverage to the movement in these assets. Its risky and you must be prepared to be wiped out in any one trade so find some discipline and risk only what you can afford to lose. As Peter Grandich says investment is a word we invented so that we don't have to use the word gambling, but it is all gambling, make no mistake about it.



However, if this is the sort of trade that might be of interest to you and you would like to get a bit more bang out of your buck, then check out our Options Trading Service to see how we are progressing, please click here.

All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Sunday
Mar072010

Agnico-Eagle Mines Limited Call Options in Positive Territory

AEM Chart 08 March 2010.JPG



Just a quick note to update the team on the purchase of the MAY 2010 series Call Options at a strike price of $60.00 on Agnico-Eagle Mines Limited, for which we paid a price of $4.64 per contract. These contracts closed last week at $4.90, for a rise of about 5%, having traded as high as $5.40 on Friday as gold prices held their ground.

We made the purchase on the 11th February 2010 when Agnico-Eagle was trading at around $58.00 area. The stock has rallied a little and then fell back and rallied again to close at $60.80 so these contracts are now 'in the money'.

We would now like to see gold prices open in London on a positive note with a reasonable follow through on the NYSE. Make no mistake about it, the NYSE is the dominant partner in this matter and any gains made in the UK can soon dissipate if the mood in New York is negative towards gold prices.

A quick look at the chart above and we can see that AEM has room to move higher and should improve providing we see gold move to higher ground.


If this is the sort of trade that might be of interest to you and you would like to get a bit more bang out of your your buck, then check out our Options Trading Service please click here.

All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Friday
Mar052010

What’s More Important: Price Per Ounce or Ounces Owned?

Mining  06 March 2010.JPG


By Jeff Clark, Casey’s Gold & Resource Report

In a recent conversation with a fellow gold analyst, he was emphatic that the price one pays for physical gold should be ignored. “What’s far more important,” he insisted, “is how many ounces I own in relation to the total value of my assets.”

Building a core position in gold bullion is a smart goal, to be sure, and a strategy Casey Research has been advising for years. However, ignoring the price you pay for gold could be seen as foolhardy; sure, it’s insurance, but isn’t price part of the consideration when you shop for insurance?

So, who’s right?

The World Gold Council just released their 2009 annual report on gold trends. From the densely populated pages of interesting data, there’s one compelling tidbit I gleaned that may shed some light on the buying behavior of gold investors.

Overall investment in gold was 7% higher in 2009 than 2008. This is significant when you consider that demand in the fourth quarter of 2008 – during one of the worst financial meltdowns in history – was so great that shortages of physical metal abounded everywhere. And yet investors bought more gold in 2009 when investor fear about global financial uncertainty was subdued.

Further, 2009 total funds invested in all forms of gold exceeded 2008 by 20%, and the average price was 11.6% higher. In other words, investors were buying gold even though the price wasn’t necessarily “low.” To be sure, that’s a broad statement. But the fact remains that year-on-year, more gold was purchased at higher prices when the markets were less scary, than when the price was lower and Hank Paulson was on CNBC every 15 minutes pontificating on how to save America’s financial system.

This isn’t to suggest one shouldn’t pay attention to price. And the data doesn’t identify how many of those who purchased gold last year were first-time buyers, as certainly there were newcomers to the sector that contributed to higher demand. But it begs the question, who would continue to buy gold when the price is higher?

Whoever doesn’t own enough, that’s who. The gold I bought last month was certainly higher priced than what I paid in 2008. But I’m trying to position my assets for protection from eventual dollar debasement and rising inflation. So perhaps focusing more on acquiring sufficient ounces to withstand a storm rather than stubbornly buying none, waiting for “cheaper” prices, however you define that, is a better mindset. Not owning enough gold is equivalent to holding a million-dollar mortgage and having a $10,000 life insurance policy. It won’t help much when you really need it.

Of course we should pay attention to price. But the trick is not letting that distract you from buying what you need. You’re not buying gold bullion as a speculation (although we expect to make a bundle on our holdings), but as a sound form of cash in an environment where government has no respect for a balance sheet and sees inflation as the only way out of its black hole of debt. During periods of inflation, the government does fine; it’s the citizens that suffer from the lost purchasing power of their savings. It’s clear our currency is being debased. What’s your plan of defense?

For those diligently accumulating gold, how do you know when you have enough? Check your anxiety quotient. If Ben continues printing money or Obama promises more goodies than he has the money to pay for, and you remain calm, then you likely have adequate gold. These are the investors who can afford to be stubborn about price as they build their holdings. In my opinion, this is where we all want to be.

What form of gold should you buy? It depends on why you’re buying it. If you understand gold’s role in history, owning a physical form will come naturally to you. If you see the threat of inflation on the horizon, or you worry about what is being done to the dollar, you’ll own both coins and an ETF. If you’re worried about possible exchange controls someday, you’ll consider a Perth Mint Certificate. And the more gloomy your outlook about the global economy, the greater the percentage of all forms of gold you’ll buy.

That said, we maintain a bias toward physical ownership. GLD and other gold ETFs are fine and do offer protection. But the custodian isn’t going to airmail gold to you when you cash in your shares; having the “hard money” in your hand gives you the freedom an ETF cannot. In our book, owning physical gold, in the form of one-ounce coins, is where your first dollar should go.
I remember when my wife and I decided it was time to get life insurance. We just had our kids, and it was time to play grown-up. Given what 5,000 years of history has taught us about the value of gold, and given what’s happening at this moment in history to our currency, are you playing grown-up with your investments?

Is the current price of gold a good time to buy? Check out our four “clues” in the new issue of Casey’s Gold & Resource Report, risk-free here...

All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.

For those interested in getting a bit more bang for your buck and adding a touch more excitement to your portfolio, then check out our Options Trading Service please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.