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Friday
Apr162010

The Tax Window of Opportunity

TAX.jpg




By Vedran Vuk, Casey Research

The biggest danger to your wealth isn’t a bubble in China or Europe – it’s the IRS. Since 1987, top earners have been taxed between 28 percent and 39.6 percent, a relatively low range compared to the 50-percent-and-above rates for most of the century. However, with enormous annual deficits and Social Security lurking around the corner like a mugger, the future promises a return to old tax norms.

Historical income tax rates reveal grim days ahead for U.S. taxpayers. The federal income tax began innocently enough, in 1913, by imposing a 7 percent levy on the top bracket. But immediately with the start of WWI, rates exploded to 77 percent and continued at 73 percent even three years after the conflict. Then, taxes began slowly easing from 56 percent in 1922 to 24 percent just before the 1929 market crash.

The lower rates didn’t last long, though. By 1932, three years into the Great Depression, rates rose to 63 percent, peaking at 94 percent in 1945. Even now, more than 80 years later, the income tax has never returned to the 1929 level.

Capital gains taxes aren’t historically immune either. During the 1970s, the maximum rate on long-term gains reached almost 40 percent, according to the Tax Foundation. For the past 50 years, rates have hovered between 20 and 30 percent.

In the early years of the Great Depression, the U.S. government spent extravagantly without anyone paying the bill – just like today. Naturally, this situation could not last forever then, and it will not last forever now. Someone will have to pay the piper, and it won’t be the bottom 50 percent of the population.

With the Bush tax cuts expiring this year, income taxes will rise from 35 to 39.6 percent for the top bracket. Though less likely, the expiration also threatens to raise capital gains taxes to 20 percent, with increased dividend taxes following suit. Next there are the new health care bill taxes, which will require an additional 16,000 IRS agents to enforce. Further, cap-and-trade won’t make life any easier.

On the horizon, the outlook is even darker with the proposition of value-added taxes (VAT). VAT works like a backdoor sales tax. Essentially, every time a producer of goods purchases raw materials, he must pay a percentage tax. When the producer sells his goods to a wholesaler, the wholesaler pays another percentage.

It sounds bad already, but here’s the worst part. Each company down the supply chain gets a tax discount based on the next company’s tax payment. Through this method, every firm in the chain has an incentive to make sure that the next one pays the full amount. If they don’t, then your company is left holding the bag.

In other words, the VAT makes every businessman an agent of the IRS. In the end, the higher cost of goods is passed down to consumers. However, unlike sales taxes, consumers will never see the bill directly on their receipts. This makes VAT far more politically efficient and insidious.
At this point, high taxes are the only way out of the long-term debt crisis – unless the Federal Reserve wants to see double-digit inflation. Mild Clinton-era taxes expected by most won’t solve the problem. A 4 percent income tax hike is not going to repay trillions of dollars in debt. Betting on the bull market isn’t a good plan either. America would need decades of unprecedented growth to escape unharmed. The U.S. needs more than a bull market – it needs a miracle.

If taxes are hiked to the stratosphere, a market recovery will do little for the wealthy. The fruits of a bull market will be difficult to enjoy with exorbitant taxes. For what does it profit a man to gain the whole world and be taxed on 80 percent of it? Even if market conditions become more favorable, the tax environment will drastically change soon.

In a sense, there is more opportunity in the middle of a low-tax recession than in a boom with cutthroat rates. Waiting for a stock market recovery is a losing decision tax-wise. The best way to grow your wealth is to earn it sooner rather than later.

Now is the moment to utilize excess funds wisely and invest to fill the gap for future shortfalls. While taxes are still low, a window of opportunity is open. There’s no better time to find top-notch investments and make a profit while the going is good.

There’s no doubt taxes are rising – whether it’s through straightforward increases or stealthily through a VAT. The Casey Report keeps investors up to date on the big economic and market trends, so you can keep more of your hard-earned money. Try it now risk-free – with our deeply discounted Tax Day Deduction Deal and 3 full months to decide if it’s for you. Plus, as a bonus gift, get two of our most popular precious metals and energy advisories… FREE for 1 year! Click here to learn more.




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 buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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
Apr152010

Sell Now, Buy Later – the ABCs of Short Selling

By Jake Weber, Editor, The Casey Report

The catch phrases “Buy low, sell high” and “The market fluctuates” are probably the two most frequently used clichés of the investment world. The latter statement is hardly astute, and the former far easier said than done. What both of these simplistic ideas overlook is a third concept largely ignored by the investing public, “Sell now, buy later.”

The idea of selling something that you don’t yet own is a foreign concept to many. However, in a powerful bear market, it’s an important strategy to understand and utilize, though for reasons I’ll discuss below, only as a relatively small and closely watched speculative portion of your portfolio. The concept I’m referring to, of course, is short selling.

The basic mechanics of selling short a stock are not complicated, but, as with any investment, there are risks involved, and it requires discipline to execute these trades successfully.
What Is Short Selling?

If, after carefully scrutinizing a security, you conclude that there is nowhere for the stock to go but down and want to put your money where your brain is, there are a couple of different alternatives. One way to go is the options route, selling calls or buying puts on the stock. This is certainly a viable route with plenty of opportunity to profit; however, with options, not only do you have to be right about the direction, you also have to be correct about the timing and strike price.

The other alternative is to open up a margin account and sell the stock short. That requires posting a margin – cash or securities – in your account. With that condition met, your broker will undertake to borrow the stock from someone that owns it. Once your broker has acquired it, either from another client or another brokerage firm, he or she will sell the stock and deposit the proceeds into your account. What you own now is a liability to purchase back, or “cover,” those same shares at some point in the future, hopefully at a lower price. Because there’s a loan involved with this transaction, you’ll be charged an interest rate on the amount borrowed, likely in the area of about 4.5% annualized these days.

With a short sale, your maximum gain is capped at 100%, which you would only collect if the stock goes to zero – but your loss is technically unlimited because stocks have no cap on the upside. Of course, there are ways to limit your losses, which we’ll discuss in a moment, but first let’s look at what could happen to your account should the stock fall, as you hope it will… or rise, as you hope it won’t.

For the purpose of this example, let’s say you came to the conclusion that XYZ stock is overvalued at $25 a share and so you sell short 100 shares. Here are the implications of two different scenarios subsequently unfolding:

XYZ Falls to $10.00

XYZ Rises to $40.jpg


Your maximum profit of the XYZ short sale is $2,500, but the sky is the limit for your losses and will be magnified, should you use margin. This potential for open-ended loss is enough to deter most investors from shorting, and is the reason we recommend you do so only with the speculative corner of your portfolio.

Minimizing Risk

Short selling is an aggressive strategy to pursue. There are, however, measures you can take to help mitigate risk.

Limit Your Margin

One of the ways to avoid large losses is by limiting the amount of margin used to borrow the shares. To sell short in the U.S., regulations require that the stock be “marginable,” and an initial deposit is required – 50% for stocks above $5 per share and 100% margin for stocks below $5 per share. After you borrow the shares, the rules require you maintain equity in the account worth at least 25% of the total market value of the security.

These are the regulatory minimums; individual brokerages may have additional rules and limitations for margin accounts, so be sure to carefully review your margin agreement. Even so, to avoid being “chased out” of a trade, you may want to deposit more cash than required by your broker in order to further cushion your position.

Keep in mind that the interest paid on the borrowed money will eat into your returns, reducing your potential upside, the longer you hold open a position. Also, any dividends issued while you are borrowing the stocks will be transferred from your account to the original buyer. We highly recommend that you actively monitor your account to avoid any margin calls and minimize your risk by reducing the use of margin.

Use Stop-Loss Orders

If you aren’t able to actively manage your investment accounts, then stop-loss orders can help soften the blow if the trade quickly turns against you. When the general market or sector gains upward momentum, even the fundamentally weakest stocks can catch a free ride. In order to limit your loss, consider placing orders to “buy to cover” at a price above your initial short sale price and remember to review your stop-loss orders periodically to assure you are covered.

A Few Key Terms:

Short Interest: This is the aggregate number of short sale positions on each security. This information is published monthly by the exchanges and also offered through many other websites such as Barron’s and Yahoo Finance. It’s important to monitor how many shares have been borrowed because they will eventually have to be bought back (see Short Squeeze, below). Generally, the lower the short interest, the better.

Days to Cover: This is another important data point to track, because it’s an estimate for how many days it will take to unwind all the outstanding short positions. It’s calculated by dividing the current short interest by the average daily trading volume of the stock. The fewer days to cover, the better.

Short Squeeze: Should a stock appreciate by a substantial amount, it is entirely to be expected that some number of short-sellers will decide to cover their short or be forced to it by margin calls. Of course, that requires closing their positions by buying the stock back, which gives the stock further upward momentum. This may in turn force other short-sellers to cover, thus creating a rush to cover known as a short squeeze. Using stop-loss orders will help prevent getting caught on the wrong end of a short squeeze.

Called Away: This refers to being forced to cover your short position because the lender requires delivery of the stocks. While this technically could happen at any time, it is exceedingly rare and would typically occur only if a clearing house couldn’t find shares to borrow for exchange-traded funds. This is something certainly to be aware of, but it’s not a cause for great concern, in our opinion.

Proceed with Caution…

If short selling fits within your scope of risk tolerance, it can be very profitable. Even so, it’s important you avoid being overleveraged in any position and never, ever “bet the farm” with a short position. Rather, only invest with money that you can afford to lose and consider using stop-losses.

As Jake says, short-selling can be very lucrative – if you correctly assess the broad market trends. That’s what The Casey Report does: analyzing budding trends and finding the best opportunities to profit from them. And as a special Tax Day offer – for 2 days only – you can now get The Casey Report for $150 less… PLUS one free year of our two most popular precious metals and energy advisories. Click here to learn more.



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 buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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
Apr142010

Gold in Perspective

Gold, Inflation Adjusted.jpg


By David Galland, Managing Director, Casey Research

As the price of gold rises and the inevitable quacking begins again about the “barbaric” metal being overvalued, I thought a quick check-in with the historical perspective might prove useful.

The first of two charts that follow shows the long-term picture of gold from 1970 to the present, correctly adjusted for inflation.

In the second chart, we overlay the inflation-adjusted price of gold from the last secular gold bull market in the 1970s, with the secular bull market we’re now in.


Gold Still Looks Cheap When Adjusted for Inflation.jpg

As you can see, if the current bull ends with the sort of grand finale we saw at the end of the last big blow-off, then prices have a long way to go from here. That said, a credible case can be made that this time around, the price could go much higher.


Percentage of the Population Unemployed 27 Weeks and Over.jpg

For starters, in the 1970s, though not good by any means, the economy was in much better shape than it is today. The chart here uses long-term unemployment as a proxy for that contention.

As you can see, at the end of the 1970s, the employment picture was quite healthy. 
Today, in addition to wildly out-of-control debt on both the private and public levels, we have a massive problem with unemployment and the consequences of a burst housing bubble. Thus, Paul Volcker’s somewhat simplistic solution to inflation – and the trigger for the end of the last gold bull market – seriously ratcheting up interest rates, is off the table. (Since we’re trying to gain perspective, I’ll remind you that at the beginning of the 1980s, mortgage rates topped 18%.)

But wait, I heard someone in the back shout, “There is no inflation today!” Wrong, there is unprecedented inflation – properly defined as an increase in the monetary base. What’s missing, so far, is the inevitable consequence of the inflation – steadily rising prices.


That will come, and when it does, the government will find it is going into a gunfight with a (dull) knife – because raising interest rates in the Kingdom of Debt will lead to a predictable outcome.  

Unfortunately, thanks to the inflation, interest rates are going up no matter what the government would prefer to happen, a contention of ours that is now gaining traction in the mainstream.

And, yes, up to a point, history shows gold and interest rates moving upwards in concert.

Don’t go crazy about buying gold, but by all means, if you don’t own some, begin a monthly program of purchases.

While it would be perfectly natural to see the gold stocks give back some of the big gains they have offered since last year’s correction, any further corrections should be viewed as opportunities. But again, don’t go overboard. If you have an investment portfolio with 20% to 30% in a combination of precious metals bullion, large-cap and small-cap stocks, you’ll be well positioned – and protected – for what’s coming. 

To learn where to buy physical gold and where to store it… and which major gold stocks, mutual funds, and ETFs are the safest while giving you handsome upside… read Casey’s Gold & Resource Report. At $39 per year, it’s a steal for the value you get out of it. Click here for more.




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 buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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
Apr132010

Strong Auction Demand in Greece, Euro Steadies, Dollar Weakens

USD Chart


Greece's auction of treasury bills drew stronger demand than at a previous sale, signaling renewed investor appetite at the government's first offering of debt since winning an aid package from the European Union.

BNN speaks with Jessica Hoversen, fixed income and foreign exchanges futures analyst, MF Global.

In a nutshell Jessica points to the on-going problems of both liquidity and solvency, along with an economy which is expected to continue to decline so Greece may have to go to the IMF eventually. Ireland, Italy and Spain have committed funds to the thirty billion support package, should Greece need to call on it.

It begs the question of just where do these other countries get the funds, they have a surplus of their own financial problems as it stands, the mind boggles.

Please click here to catch her opinions.



The following update is by Sophie Laubie (AFP) who reported the following:

The finance chief for the 16 euro countries, Luxembourg premier Jean-Claude Juncker, said on Tuesday he was "reassured" by market reaction to a 30-billion-euro backstop Greek bailout.

"We took the right decision on Sunday ... I am reassured by the reactions of markets since,"

Juncker told AFP in his Luxembourg offices.

He was referring to a firming of the euro against the dollar on Monday and a fall well below 7.0 percent for the interest rates that debt-stricken Greece must pay to borrow on bond markets.

Juncker, the formal head of the euro finance ministers grouping, will hear from his peers in Spain on Friday as they assess political progress on activating the plan, aimed at calming market fears of Greek default and preventing the euro currency from entering freefall against the dollar.

Dismissing fresh doubts surfacing among analysts over the scheme's readiness and scale, he said he was pleased that a Greek government auction of short-term loan notes on Tuesday had been "oversubscribed at acceptable rates."

Dangling a return of over more than 4.0 percent, Athens raised 1.56 billion euros (2.12 billion dollars) from short-term treasury bills compared to an initial target of 1.2 billion euros.

The loan drive resulted in a rate of 4.55 percent on the six-month bill, still more than three times that paid in January.

Juncker said Europe would have to "wait several days" to reach a "definitive" judgment on how the rescue plan, which would involve another 15 billion euros in loans this year from the International Monetary Fund subject to ongoing negotiations, had been received "in its entirety."

As we can see from the above chart the US Dollar has come off its highs since the development of the bail out strategy for Greece. Still to be finalized the perceived solidarity has helped the euro to stabilize against the dollar, but for how long. We'll be keeping an eye on the situation as it unfolds as a slight weakening in the dollar could be the trigger to send gold prices higher and ultimately challenge its old high.




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 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.








Tuesday
Apr132010

OPTIONTRADER: 20% in 46 days, Risk and Leverage

SLV Calls sk options trading

In the latest closed trade from OPTIONTRADER, we made 20.44% in 46 days on $16 Jan-11 SLV calls. As the chart shows, we clearly would have made a greater profit by holding the calls until now, since they have traded as high as $3.00, whereas we were stopped out and sold at $2.18.


However our strategy is not to aim for the maximum reward, but the maximum reward relative to risk. Many people tend to focus too much on the rewards of a trade, without properly assessing, managing and limiting their risk. This is essential in all areas of trading an investment, but particularly to options trading where there is the added risk of time premium decay each day.

The tactics used in this trade aimed to minimize our risk and maximise our reward, therefore as the trade moved into profit, we place a stop order in behind the price to ensure that our profits were locked in as the call increased in value. Our stop order at $2.18 was triggered as silver dropped slightly and the call fell close to $2.00.

Of course there is a part of us that thinks perhaps we should have held out, and would now be sitting on the calls at $2.95 rather than having sold at $2.18. However we look back with no regrets. We have a successful trading strategy and we stick to it. We managed our risk effectively and made a significant profit given the relatively small time period.

One issue that is brought up again and again by investors and traders is leverage, and how to gain the greatest leverage (again with respect to risk) on a given trade. To illustrate the leverage on our SLV trade detailed above, we have graphed the performance of 3 other silver investment vehicles, silver itself, as many choose in be in the physical metal or the ETF, and two of our best performing silver stocks, Pan American Silver (PASS) and Silver Wheaton Corp (SLW).

SLW SLV PAAS sk options trading chart

As you can see our SLV trade was clearly the better place to be over that time period, so our money was right to be invested in those calls than in SLW or PAAS stock or silver itself. Many will quickly point out that options carry a lot more risk than the stocks or metal, but let’s just take a look at the risk picture in more detail.

We purchased the call option at $1.81 with a $16 strike price, expiring in January 2011. When we bought, SLV was around $15.50-$15.00, so our call was out of the money since it gave us the right to buy at $16, a price higher than spot. Therefore if SLV simply stayed below $16 until January, our options would expire worthless. That is clearly a risk, however SLV was $17.81 on the day of expiration we would break even, and anything higher than that would be pure profit, eg if SLV was at $19.00 at expiration our option would be worth $3.00. So the question we asked ourselves was, do we think silver will trade higher than $17.81 by January 2011?

Our answer was a firm yes. So we did not view the risk of the option expiring worthless as very large, and we prepared to hold the calls until expiration if necessary, even if things got volatile. We actually expected silver to make gains a lot sooner than that, therefore once the trade moved into profit, we moved our stops up as detailed above.

Now let us take a looking at the risks of holding a silver mining stock, which many perceive as less risky than holding an option.
-There could be geopolitical instability in the region that the company is mining
-There could be technical troubles with the mine itself
-The deposit may be smaller than expected (or even the same size but the lack of expansion and good new releases causes the stock to drift south)
-Costs of mining could increase harming the company’s profits
-Tax changes in country of operation could harm the company’s bottom line
-Good management could leave, causing investors to lose confidence in the stock
-Exchange rate fluctuations for companies operating in more than one country

These are just some of the potential risks to holding a mining stock, but it is enough for us to say that the call option offers the better return/risk ratio. There are of course some great companies out there who are making a lot of money, and all credit to them. However we would say that the call option is the better way to play a rise in silver, simply since it is more directly linked to the price of silver than stocks which can be affected by a myriad of external factors.

Another thing many investors tend to misunderstand is the variety of options available, and how much risk differs from one to another. It is far crude to brand all options as “too speculative” or “too risky” when there are options that are possibly less risky than stocks in our opinion.

Therefore by making the right selection of options, one can tailor the risk/reward ratio to suit one’s personal preferences, investment objectives, aversion to risk etc. At SK Options Trading we specialise in this, and our premium options trading service OPTIONTRADER offers real time trading signals and updates, delivered directly to you by email in simple readable formats which make them quick and easy to interpret, understand, act on and ultimately, profit from.



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Sunday
Apr112010

Gold Prices Move Higher As the European Union Dithers

Gold Chart 11 April 2010.jpg


We'll kick off with a snippet from The Economist in an article they published entitled: 'The Wax Melts' dated 8thApril 2010:

GEORGE PAPANDREOU may have spoken too soon. On April 6th, just three days after the Greek prime minister claimed “the worst is over,” the yield on Greek ten-year government bonds leapt from 6.5% to above 7%. Yields remain at alarming levels, rising above 7.5% at one point on April 8th.

The president of the European Central Bank, Jean-Claude Trichet, told a press conference that “default is not an issue for Greece.” But the D-word is increasingly on the lips of analysts. The cost of insuring Greece’s bonds surpassed that of Iceland’s this week; Greek banks have asked to tap a government liquidity scheme. Far from coming to an end, the Greek debt crisis seems scarcely to have begun.

On the face of it, this week’s renewed bond-market jitters were caused by growing doubts that an emergency-aid package patched together by European Union leaders last month offers Greece much help. Under the terms of the EU deal, any short-term support would have to be approved by all of the 16 countries in the euro zone. German anger at Greece’s profligacy could easily delay the cash it would need should bond markets close.

Sword of Damocles.jpg

The Sword of Damocles


On the Business Hour yesterday, a radio programme down here in New Zealand, they were discussing the plight of the four top banks in Greece where it is rumored that as much as 5% of the cash has been withdrawn over the last week and is believed to have left the country. The worry for the Greeks is that Greece defaults on its debt and leaves the euro, with all the euros in Greece being converted back to their traditional currency, the Drachma. The end result being a dramatic loss in terms of spending power for those still holding the baby when the music stops.

We just cant see this being allowed to happen but they are sailing rather close to the abyss for our comfort. The lack of action creates uncertainty which hangs like the Sword of Damocles over the euro. So worried investors look for safety and as we have witnessed this week the beneficiaries have been the the US dollar and gold prices.

As we can see from the above chart gold prices have made steady progress as the financial plight of Greece has unfolded. We must also note at this point that the US dollar is holding up well and trading at 80.94 on the USD Index. The RSI suggests that gold prices may be getting a head of itself and take a breather after this $80/oz increase in price, however, we would not bet on it at the moment.

What this issue is doing is catching and focusing the attention of investors on the precarious state of a number of the currencies. Apart from the usual suspects of of Spain, Italy, Ireland, Iceland, Portugal, etc, the United Kingdom is not far behind and the United States Dollar is holding up well, for now.

However, the Greeks are facing the music here and now as they cannot print more money to get themselves out of this mess, but the United States can and is printing as though tomorrow will never come. Sooner or later the euro will resolve these issues of a fashion and when it does the focus will once again land firmly on the buck sending it lower. Gold prices will then challenge and surpass its previous highs as it cannot be printed or electronically produced out of thin air.

All gold bugs need now is patience and the guts to keep increasing their exposure to the precious metals sector via the vehicle that best suits their needs, be it gold and silver and their associated mining stocks or the leveraged possibilities offered by an Options Trade.

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
Apr102010

Gold Prices at Record Levels in UK and Eurozone

Gold Prices at Record Levels in UK and Eurozone


In dollar terms the gold price is about 5pc below its record, but the weakness of the pound and the euro against the American currency means that for investors in Britain and the eurozone the precious metal has never been so valuable.

The price of an ounce of gold has reached record levels of £754 and €865 in recent trading, and the dollar price has reached a three-month high of $1,157.

In August last year the gold price in sterling terms was £562, so British gold investors have made a profit of 34pc, compared with a rise in the dollar price of 23pc over the same period.

Gold is seen as a safe haven investment but, because it is priced in dollars, investors in countries other than America are exposed to currency risk.

For example, British gold investors saw the value of their holdings fall by 10pc in the six months to August 2009 as the pound recovered strongly against the dollar – even though gold in dollar terms appreciated by 2.2pc over the period.

Nicholas Brooks of ETF Securities, which runs a gold exchange-traded fund, said: "The strong performance of gold, despite the strength of the US dollar, indicates that investors are increasingly viewing it as an alternative store of value, not just to the US dollar but to fiat [paper] currencies more broadly, as sovereign risks continues to rise.

The above snippet comes courtesy of the Telegraph.co.uk


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
Apr092010

BOMBSHELL RELEASE - Harvey & Lenny Organ & Adrian Douglas:

Gold in Vaults

Harvey & Lenny Organ & Adrian Douglas: Drop Another Bombshell In What Could End Up Being The Largest Fraud In History - King World News was contacted again by Adrian Douglas, Board of Director for Gata with stunning new information involving the man he testified with at the CFTC meeting Harvey Organ.

Harvey, who was invited by the CFTC to testify and his son Lenny describe another piece of the puzzle in what could turn out to be the largest fraud in history.
 
This time a large international bank with almost 15 million customers in 50 countries around the world becomes part of this unfolding saga.

Click here to listen to this interview on King World News.

So there we have it and its not a pretty picture. Nothing beats holding both gold and silver in your very own hands, in our humble opinion. This story will run and run as it pulls no punches. We don't want to be alarmists but we do ask you to find the time and listen to whole interview and form your own opinion.



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
Apr082010

Centerra Gold Hit by Political Unrest.

Centerra Chart 09 April 2010.JPG

Centerra Gold's stock (CG) extended its plunge to a second day Thursday on worries that political unrest in the Central Asian country of Kyrgyzstan could disrupt operations at the company's Kumtor gold mine.

A day after Kyrgyz opposition forces said they had seized power after a deadly uprising, the company said in statement the turmoil had no impact on the huge mine.

The statement repeated what a Centerra spokesman told Reuters on Wednesday.

Even so, at least two analysts downgraded the Canadian company's shares, while one voiced concerns about the stability of an agreement with the government that sets the terms of Centerra's ownership of the mine.

Shares of Toronto-based Centerra, which is one-third owned by the country, were down 9.8 percent at $10.82 on the Toronto Stock Exchange at mid-morning.

The stock dropped 11.4 percent Wednesday following reports that protesters had toppled the country's government in a violent uprising that has so far killed dozens.

The mine is expected to produce up to 560,000 ounces of gold this year and accounts for nearly 10 percent of the central Asian country's economy.

Concerns about the mine's possible nationalization have dogged Centerra in the past. But the issue appeared to be resolved last year after Cameco Corp., Centerra's former parent company, struck a deal that doubled the Kyrgyz government's stake in the company.

Steven Butler, an analyst at Canaccord Adams, said in a note that the shaky political environment raises the risks for the ownership agreement.

"The increased political uncertainty in Kyrgyzstan will likely be an overhang on the stock price in the near to medium term, along with the risk associated with continuity of the ownership and fiscal terms applicable to Kumtor that were negotiated only one year ago," he said.

To read this article in full please click this link.



The geo-political risk involved in mining has hit Centerra Gold pretty hard and brings into the question once again, whether its better to invest in the mining sector or the metal itself and is the leverage to gold prices worth the risk. Its something that we continue to wrestle with and at the moment we hold gold, silver and their associated stocks.

For disclosure purposes we do not own any of Centerra Gold stock and we publish every trade that we make and access to our portfolio is free.

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Wednesday
Apr072010

Fronteer Developments Group: A Gold Prices/Uranium Play

FRG Chart 07 April 2010.JPG


We purchased Fronteer Developments Group (FRG) on the 15 July 2006 at around the $4.70 level, as it offered exposure to both a uranium and gold play as FRG owned the lion’s share of Aurora Energy Resources. On the 24th September 2007 we sold 50% of this stock for an average price of $10.44, banking a profit of 122%. Fronteer is currently trading at US$6.10 so we are now in positive territory with this portion of the purchase.

Some good news and media exposure as led to an increase in the volume of stock traded which has helped FRGs stock price spike higher. The RSI is firmly in the overbought zone and is standing at 79.55 and we can see that the last time the RSI popped up above the '70' level FRG was promptly sold off. Thats not to say that history will repeat itself but it certainly looks ripe for some profit taking at the moment.

Todays hot news is that Fronteer has struck a joint venture deal with a subsidiary of Teck Resources to drill its copper-gold deposit in Turkey. You can can hear what Mark O'Dea, president and CEO, Fronteer Development Group had to say about this deal on BNN, just click here.

Mark O’Dea 07 April 2010.JPG
Mark O’Dea


Despite this good news item and the fact that we are rate this company highly we are of the opinion that it is currently running a little ahead of itself and so we decided to try and sell our holdings tomorrow.

Our intention is to put this cash to one side and re-purchase the stock if and when it drops to lower levels, something we will have to examine in more detail when we get closer to the time. This does not mean that this stock cannot make new 52 week highs, it most certainly can, but we think it will run out of steam and so we will bank the profit and retire to the sidelines for now.

Having made 122% profit on the first 50% and hopefully a small profit tomorrow on the remainder, we are reasonanly satisfied with this little venture with Fronteer . The chart also suggests that a possible options play on this stock could return a decent profit, but we'll leave that to the Options Team for now.

Fronteer Development Group Incorporated trades on the AMEX under the symbol of FRG and also in Toronto as FRG.



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


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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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