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Monday
Nov302009

Gold Bullion ETF in Switzerland: SGOL

Canadian Gold Coin 01 Dec 09.JPG


With the overwhelming popularity of GLD as a physical gold bullion exchange traded fund, another fund has set up which provides a similar function, albeit with one key difference.

Back in September, ETF Securities launched SGOL, a physical gold ETF like GLD except the gold is stored in vaults in Switzerland, unlike GLD where the gold is in the USA.

During the 1930's President Roosevelt issued an executive order banning American's from owning gold and making it illegal to own gold in the USA. Although a repeat of such an order is unlikely to happen again, it still remains a possibility and therefore a threat to anyone with gold holdings in the US.

Therefore it would be prudent to hold gold outside of US borders, such as in Switzerland, just in case such an scenario should arise again.

However despite a “safe” reputation, Switzerland still has a government and any government cannot be fully trusted. Therefore rather than place all your eggs in one basket, a better idea would be to hold a portion of GLD and a portion of SGOL, so to split your risk. Both trade on American exchanges, and although GLD is more liquid and has a much larger market cap, SGOL still has good enough volume for the retail investor.

We are simply putting SGOL up as an alternative, or even more a complement to GLD. Physical gold ETF's still poise risks and would not work as well in an armageddon scenario as bullion under your bed so to speak!


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Sunday
Nov292009

The US Dollar is Approaching a Major Support Level

Five day dollar 29 Nov 09.JPG

This chart shows the dollar over the last five days trying to cling to the '75' level. If this does not hold then '72' is the next major support, which if hit represents a double bottom for the dollar as the 71.34 was the previous low.

Taking a macro view of of the dollar, the chart below is courtesy of Jesse's Café Américain which may not be clear enough for you, if so, then just click here to see a full size version of it. The chart shows the dollars progress since the early 90s which has been a fairly volatile ride for the dollar.

US Dollar chart Long Term 29 Nov 09.JPG

It can be argued that the double bottom will be followed by a bounce by the dollar to higher ground which in turn would would cap any further progress in gold prices. This is not an opinion that we subscribe to as the move to gold is starting to gather momentum and the diversification out of dollars and most other paper currencies is also on the move albeit at a slow pace for now. The next year or two will see the dollar trading at the '40' level before this financial mess runs out of steam.

A default by Dubai is the latest to come and haunt us but not the last of this type of event. If the sub prime debacle has shown us that the banks are not capable of arranging and managing mortgages then why should we expect them to be successful with much larger and more complex projects. Commercial property has yet to raise its ugly head, in any downturn business's go under and the rent stream drys up so we do need to be aware that this could be the next area of the economy requiring a bale out.

Golds chart is telling us that gold is overbought and so it is easy to make the decision to reduce exposure to it. However the hard part is deciding at just what point we would re-enter the market. If you are selling some of your stocks at the moment then we wish you well, however, that call is too difficult for us make at the moment so we will stay put. Should events conspire to change our minds than we will try and trail our intentions prior to making a move.

Enjoy the week and please add any comments that you have as they all add balance to our cavalier stance on this subject.

We apologize if we have not answered your email, but there are only so many hours in a day, so please use the site to get your point across, many thanks indeed.



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Saturday
Nov282009

South Africa’s golden age is coming to an end

Gold mine.JPG

The high cost of mining old mines and the scarcity of reserves as seen the once mighty South African gold mining industry fall from grace in recent years.

South Africa’s remaining gold reserves are less than half existing estimates and the cost of bringing the dwindling resource into production may be far more than its value, a new report has found.

An article in the South African Journal of Science has highlighted the plight of the country’s gold mining industry, which is afflicted by high costs, environmental damage, falling output and illicit mining. A formerly illustrious industry is in its death throes, according to Chris Hartnady, the report’s author, who predicts that the output of the main Witwatersrand goldfields could fall below 100 tonnes a year within a decade.

South African output peaked in 1970, when the country mined 1,000 tonnes of gold and accounted for more than three quarters of world gold production, but production has declined rapidly since. Last year, South Africa produced 233 tonnes — about 10 per cent of world gold supply.


“It must be accepted that the Witwatersrand goldfields are now 95 per cent exhausted ... the glory days of South African mining appear to have arrived finally at an ignominious end,” Mr Hartnady wrote in his report.

This article was found on 'Times on Line' and should you want to read it in full, please click here.

Please fire in your comments.

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Wednesday
Nov252009

Happy Thanksgiving Day to All of Our American Subscribers

Thanksgiving 26 Nov 09.JPG

From the team here have a great day with your family and friends and enjoy that Turkey.

For football fans we are shouting for Oakland to win at Dallas by six points, Go Oakland Go!

Wednesday
Nov252009

How and Why China Will Flood the Gold Market

In this mornings mail bag we have this 'take' on China By Jeff Clark, Editor, Casey’s Gold & Resource Report

As you read this, the Chinese government is doing an extraordinary thing... something nearly unheard of in the modern world.

It is encouraging citizens to put at least 5% of their savings into precious metals.
The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year's meltdown in the stock market, people believe it. After all, Chinese citizens don't receive government retirement money... and they don't have company pension plans like people in many other countries do.

This is why folks in China are lining up outside of banks, post offices, and the new official mint stores to buy gold and silver (they especially like silver because it's cheaper per ounce).

The Chinese attitude toward gold and silver is a striking contrast to the American attitude right now. I don't recall a TV or radio ad from my congressman or President Obama encouraging me to buy gold or silver. Does your bank sell silver bars? Are gold mints popping up in your neighborhood? Are any of your friends, family, or coworkers scrambling to buy precious metals?

In spite of a few ads on television and satellite radio, buying gold and silver in the U.S. is still largely seen as a fringe-group activity. That's not the case in China. And in the big picture, there are three distinct trends occurring in China today that many in the Occidental world are not paying attention to.

First, look where China stands as a gold-producing nation.

China worlds largest gold producer Casey.JPG


In 2008, China produced 9,070,000 ounces of gold, exceeding all other countries. Further, its production continues to rise, while many of the top-producing countries are in decline.

Second, China had the lowest per-capita gold consumption of any country over the past half-century. This year, it is widely expected that Chinese demand for gold will surpass that of India. In other words, they'll also become the world's No. 1 retail buyer.

Third, the Chinese government has been using its foreign exchange reserves to buy gold – a lot of it – and doing so on the sly. This past April, Chinese officials made a surprise announcement that they had been secretly buying gold since 2003, increasing their gold reserves by 76% to 33,886,000 ounces. The Chinese government now owns 30 times the gold it held in 1990. And China is believed to be a leading candidate to buy some or all of the 12.9 million ounces the International Monetary Fund says it will sell.

But all this production and all this buying isn't enough...

Even though China is the world's seventh-largest holder of gold, gold comprises but a tiny fraction of its reserves, as shown in the table below.

World Gold Holdings.JPG


What would happen to the gold price if China increased its gold reserves to just 5%? What about 10%? To overtake the U.S. as king of the gold hill, it would have to buy all the gold held by the governments of France, Italy, and Germany combined. Can China really do any of that?

At $1,000 gold, to push China's gold holdings to 5% of reserves would take $55.3 billion; to 10% would cost $144.4 billion; to be the world's top gold dog would run $227.6 billion.


Chinese reserves are approaching $2.3 trillion, of which almost 70%, or $1.6 trillion, are denominated in U.S. dollars. The cost to become the world's biggest holder of gold would be a pittance compared to the amount of money China has available. In other words, money is not a problem.

Combining the country's massive holdings of dollars and the very real likelihood those dollars are going to lose much of their value, the motivation to buy tangible assets is urgent.

Further, keep this in mind: China's reserves continue to grow. Therefore, the country must continue buying gold (or consuming its own production) just to maintain the small gold-to-reserves ratio it has, let alone increase it.

In addition to the government buying precious metals, Chinese citizens will continue gobbling them up, too. Demographics alone tell us why.

Government statistics show the average urban household in China has about US$1,300 in disposable income. Multiply that by the number of urban households in China and you come up with roughly $36 billion in available capital.

According to precious metals consultancy CPM Group, about 9.5 million ounces of gold will be turned into coins this year (including "rounds" and medallions). At $1,000 gold, that's $9.5 billion, or only about one-third of the capital available in China.

The number is more striking for silver: Total coin production this year is expected to hit 35 million ounces, equaling $615 million or just 1.7% of the available capital in China. Of course, a lot of Chinese people want cars and refrigerators, etc., but it won't take much of a shift of this capital into gold and silver to have a major impact on the global retail precious metals market. It may already be under way.
And long-term projections show the demographic trend won't slow down: The middle class in China is expected to increase by 70% by 2020. So over these next 10 years, more Chinese and more money will be coming into the precious-metals markets, all at a time when inflation is almost certain to be high, adding to gold and silver's appeal. Couple this with China's long-standing cultural affinity for gold and you have the makings for a potentially life-changing gold rush.

If I were a crime detective, I'd say China has the motive, means, and opportunity to push gold and gold stocks much higher.

If you're interested in taking a stake in China's booming silver market, make sure to read the latest edition of Casey's Gold & Resource Report. Jeff has turned up a small company poised to become one of the dominant mining companies in China. This company is sitting on an incredibly rich silver property... it's heavily owned by its blue-chip management. It's the one stock to own if China goes "silver crazy." You can learn about this and all other stocks recommended in Casey’s Gold & Resource Report for just $39 per year. Try it risk-free for 3 months here.

*************************************************************************************
Hold on tight it is still going to be a white knuckle ride so please don't go too crazy on any one particular stock or vehicle, make sure that you can live to fight another day.

Finally, please, please, please, comment on our articles, they are really useful for us and our readership, thanks!

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 new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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Wednesday
Nov252009

Gold: A Quick Update

Gold Chart 25 Nov 09.JPG
The chart is courtesy of Kitco.com

After the close in New York gold continued to head north and although at a slow pace it is good to see it making steady progress as the above chart shows. If you have held stocks for some time you should be seeing some improvement to your portfolio as the precious metals continue to sparkle.

The Gold Rush on CNBC is worth a watch, the guests see gold going higher, however, they throw in enough caveats to cover themselves just in case and their recommendations on how to invest $1000 was way beyond our comprehension. However, its good to listen to alternative views in order to appreciate both sides of the debate, just click here to see it.



To feel a little better you might want to listen Jim Sinclair, an interesting take on the 'staircase' rise in gold-prices, just click here.



For those of you who just cant stomach our all out approach to precious metals and their associated mining stocks you might want to consider buying some well 'out of the money' long dated Put Options. Should gold and silver drop then the Puts would appreciate and cushion some of your loses. This way you can still hang onto your core position and sleep a little better knowing that you have some insurance against a fall.

Are we buying Puts, Nop! we are still looking for gold and silver to run higher and close a lot higher come News Years Eve, a position that we have not changed and constantly have reiterated of late.

Hold on tight it is still going to be a white knuckle ride so please don't go too crazy on any one particular stock or vehicle, make sure that you can live to fight another day.

Finally, please, please, please, comment on our articles, they are really useful for us and our readership, thanks!


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 new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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.





Monday
Nov232009

Gold Rally Stumped in NYC

Gold Chart 24 Nov 09.JPG


As we mentioned yesterday gold got off to a good start which carried through to New York where it traded above $1170/oz before the session turned sour and the shine was taken off gold as trading came to a close.

Not to worry, the week started with a gain and most of it remains in place.

But, the above chart for gold shows that the technical indicators are banging their heads on the ceiling, in particular the RSI is sitting at 79.29 today which is a cause for concern as we usually regard '70' as sell signal. However, gold fever is building and the dollar is hanging onto the '75' foothold, but only just.

Our strategy remains the same in that we are holding onto our core positions in the belief that both gold and silver will go higher. On the other hand our Call Options on Agnico-Eagle (AEM), Randgold (GOLD) and Silver Standard (SSRI) will need to be watched carefully as time erosion can be devastating if the metals go sideways or down. We have placed sell orders on both Agnico-Eagle and Randgold at twice the price we paid for them in the event that we get a spike in prices, but have not placed an order on Silver Standard as yet, still stewing on it.
Thanks Giving Day in the USA comes up on Thursday so we may see that trading turnover could well be thin over this period. For the rest of the world it will be business as usual and we could see the dollar dip below '75' with '72' being the next support level. It could all happen fairly quickly so stay awake.

Enjoy the week and please add any comments that you have as they all add balance to our cavalier stance on this subject.

We apologize if we have not answered your email, but there are only so many hours in a day, so please use the site to get your point across.

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 new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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.









Sunday
Nov222009

Gold Off to a Good Start

gold chart 23 nov 09.JPG


As the Kitco chart shows gold has got off to a good start this morning in the southern hemisphere and is currently trading at $1160.50/oz, up $9.00/oz. Silver is also joining in the fun with a gain of $0.14 to trade at $18.65. With all the chat about a dollar recovery etc, a number of investors may have shorted the precious metals and are now having to run for cover and close their short positions forcing gold prices higher.

If you go to Kitco's home page you can see a breakdown of golds movement, as we write it shows the following:

Gold Price Change due to Weakening of US Dollar $2.10
Gold Price Change due to Predominant Buying $7.70

This is a neat addition to kitco's site as it saves us the bother of looking up the dollars movement and doing a quick bit of mental arithmetic in order to allocate just what is behind golds price rise.

If gold can get some traction here and carry it through to Hong Kong and then on to London we could be in for a very good day, however the action is usually on the New York Stock Exchange with the other Stock Exchanges playing second fiddle as they tend follow rather than lead the gold market.

To see Kitco's site please click here
To see the USD's progress please click here.

Regular readers will know these sites or have their own sources of data collection but some of our newer subscribers are still finding their feet in the precious metals space so please be patient with us if you are already a sophisticated and seasoned investor, thanks.


Have a good one and stay calm.

Got a comment – then fire it in.

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 new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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Saturday
Nov212009

Agnico-Eagle Mines Limited: Slow to Recover

AEM Chart 22 Nov 09.JPG

On the 4th November 2009 we were of the opinion that that Agnico-Eagle Mines Limited (AEM) had been oversold and wrote the following:

In conclusion we think that the punishment does not fit the crime and that the selling has been overdone. So we see it as a buying opportunity. This week we will seriously consider making another purchase of the Agnico’s stock and may also buy a few of the longer dated Call Options.

We then proceeded to purchase some Call Options which we still hold however Agnico's recovery is slower than we had hoped for and the trading volume has reduced of late. The stock price has moved from $52.00 to $60.00 so we are heading in the right direction so it may be just a question of being patient for now. We are of the opinion that Agnico should be trading much higher as it is a quality stock with a bright future, however the investment community may not be as confident as we are which would explain the slower than expected rise in the stock price.

Agnico-Eagle Mines Limited trades on the NYSE under the ticker symbol of AEM and on the Toronto Stock Exchange under the symbol of AEM.TO.

Have a good one and stay calm.

Got a comment – then fire it in.

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.

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Friday
Nov202009

A Tax Free Way To Play Gold

There are many different investment vehicles out there that one can use to play this gold market, each with their own advantages and disadvantages, however there is one vehicle that appears to be slipping under most investor's radar.

When one looks at the various choices of gold investment, top of the list is the physical bullion itself. This is very popular with many of the old school gold bugs and those who foresee some sort of economic armageddon as at the end of the day one will always have the physical metal should worst come to worst. For those who also wish to simply have exposure to the gold price, GLD, the physical bullion ETF has been extremely popular with investors able to buy and sell shares as if it were bullion itself, except with a great deal more fluency. Next up are the ETF/ETNs that offer leverage to the gold price on a daily basis by holding a combination of derivatives, popular for trader-investors looking for a bit more bang for their buck without the addition of due diligence required for gold mining stocks.

Gold stocks however have also got alot of air time, despite their performance not always living up to expectations. Whilst we would not recommend speculative junior resource stocks as a way to play this gold market, many of the larger producers tend to move in tandem with the gold price, although usually with more volatility. Then of course there are gold futures and options, plus options available on most of the instruments mentioned above for rather more speculative strategies.

However the vehicle that we believe many investors are not considering is financial spread betting. For those unfamiliar with the concept, it involves betting a certain amount per point on various financial instruments. So for example, one could go long and bet $10 per point on gold, and so for every dollar that gold goes up, the bettor's position increases in value by $10. The bettor also can set a stop and limits, at which their bet will be automatically closed.

Many would view financial spread betting as simply a trading vehicle, but it doesn't have to be limited to just that. What if you placed the stop at gold being $0.01 and placed enough capital in your account to cover that bet? One would effectively be getting a 1:1 ratio with gold, similar to returns offered by GLD and other 1:1 ETFs/ETNs.

Some may argue that in order to get that amount of coverage from the broker, a huge amount capital would have to be deposited to cover the potential loss. But this is not the case, the minimum bets at some brokers are as low as £1.00 per point. So with gold at around $1080, one would only need to deposit £1080 to cover the bet, and one is getting a 1:1 return on gold, for every $1 gold goes up, one gains £1, and the position will only be closed if gold falls to 1 cent.

The large tax advantage here is that spread betting is free from capital gains tax (18%) in the UK, so there is another great advantage for those available to take advantage of this situation. Obviously this may not apply to every individual situation so please check with your financial adviser or tax professional beforehand. However if one can take advantage of this, the benefits are huge. Considering investing $100,000 in gold and gold doubled. You would have made $100,000 but would have to pay $18,000 in capital gains tax leaving you with just $82,000 profit. With financial spread betting, there would be no tax and you would pocket the full $100,000, increasing your profits by 22%!

We know this may not apply to all investors, but for those who it does this opportunity is definitely worth looking into, and appears to be a much better option than holding an ETF simply for the above tax reasons. If you have any questions, feel free to post a comment on our website and we will do our best to answer them.

We also plan to cover spread betting in more depth in a future article, so stayed tuned to find out about more great opportunities that may have slipped under the mainstream radar.

You can find out more about spread betting at IGIndex.co.uk or igmarkets.com - or try one of the many other spread betting dealers.


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.

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