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Tuesday
Mar022010

Paul Ryan — the Man Who Could Save America

Wisconsin Congressman Paul Ryan.JPG

By Doug Hornig, Casey Research

Since the stunning result of the Massachusetts senatorial race, President Obama has softened his tone quite a bit, essentially saying to Republicans that if they have any good ideas, “Bring ’em on.”

Whether he’s sincere or not remains to be seen, but the implication is that he’s unworried, because in his opinion the opposition party only knows how to criticize and doesn’t have anything constructive to say.

He needs to call Wisconsin Congressman Paul Ryan, ranking member of the Committee on the Budget, and have him over for tea.

Ryan is a representative who appears to take his job – overseeing the federal budget –  seriously. In 2008, he introduced legislation called “A Roadmap for America’s Future.” It died, so he’s reintroducing it this year. It won’t pass, unless the Democrats somehow manage to lose control of the House. It’s just too simple.

It’s also breathtakingly visionary. In one fell swoop, Ryan takes on taxes, health care, Social Security, and the federal deficit, and fixes them all. He puts the government back on the road to solvency, something no other plan comes close to achieving. Most important, he wants to shift our mindset, so we finally recognize that the cure for debt problems is not to pile up more debt.

Income and Other Taxes
Ryan has a nicely targeted sense of humor. For those who can’t bear to part with today’s elephantine tax code, he leaves it in place, and anyone who loves it can still use it. For the rest of us: Single filers would pay 10% on income up to $50,000 ($100,000 for joint filers) and 25% thereafter, with a generous standard deduction and personal exemption ($39,000 for a family of four). That’s it. No loopholes, deductions, credits or exclusions. Fill out the postcard and mail it in.

Additionally, the plan promotes saving by eliminating a whole bunch of other taxes -- on interest, dividends and capital gains. It scraps the alternative minimum tax and abolishes the death tax. It replaces the corporate income tax – currently the second highest in the industrialized world – with a business consumption tax of 8.5%, about half the world average, putting American companies and workers in a stronger position to compete in the global economy. And it allows for immediate expensing of new business investment.

Health Care
A refundable tax credit – $2,300 for individuals and $5,700 for families – to purchase coverage (from another state if they so choose) and keep it with them if they move or change jobs. State-based high-risk pools. Supplemental payments to low-income recipients, who can choose their care rather than be consigned to Medicaid.

Medicare
Large-scale, common-sense reforms involving vouchers and medical savings accounts, along with a very gradual rise in eligibility age, designed to preserve the best parts of Medicare while securing its solvency for generations to come.

Social Security
Maintains benefits for current recipients, while making the program permanently solvent by combining a modest adjustment in the growth of initial Social Security benefits for higher income individuals with a gradual, modest increase in the retirement age. Includes a property right, so that your vested Social Security interest does not die with you. Those who own these accounts can pass on assets to their heirs.

Making all this work would require some adjustments, though. Nondefense discretionary spending, for example, would be frozen for ten years at 2009 levels in nominal terms and allowed to grow thereafter by an amount linked to CPI.

There has been immediate criticism from Democrats, mainly centered around cuts to Medicare. And some of the objections could be valid; maybe the plan could be tweaked a little to bring more of the opposition on board. Or maybe they’ll just continue to complain because reducing the size of government doesn’t sit well with them.

But the thing is, even the critics have been forced to admit that the plan would probably work. How do we know? Ryan had the confidence to submit it to the Congressional Budget Office for analysis. As you probably know, the CBO has stated frankly that continuing along the current path leads to unsustainable deficit levels and bankruptcy for the country.

According to CBO projections, debt will spike sharply upward in 2015, rising – relentlessly and unstoppably – to over 700% of GDP in 2080. Of course, the economy will be destroyed and government forced to default long before then.

If Ryan’s Roadmap were adopted, however, the CBO estimates that debt/GDP would peak at 100% in 2043 and “decline thereafter, reaching zero by 2080,” then move into surplus. (For the complete CBO report, go here.)

Yes, all predictions are bound to be flawed. Yes, we must remain skeptical of anything that comes from a politician. And yes, it’d be better for government to shrink more than this proposal envisions. But, especially concerning taxes, it’s a big step in the right direction.

The president is wrong. There is another idea out there, and according to the government’s own budgetary watchdogs, it’s a good one. It “just” necessitates adopting a 75-year time line.

Of course, the odds of Congress looking that far ahead are slim to none, and you know where Slim is. But who knows, if enough Americans beat the drum for Paul Ryan, this country may actually have a future.

Doug Casey and his team keep saying that in this day and age, politics is inseparable from the economy and the markets. In The Casey Report, we closely follow the actions of Washington’s movers and shakers, which help us, stake out the best action plan for our portfolio. Learn how to make the best of any crisis – and profit while others lose their shirts. Click here for more.


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Tuesday
Mar022010

Dear Comrades In Golden Arms, 03 March 2010

Jim Sinclair.JPG



Jim Sinclair very kindly sent us this missive this morning:
 
When Greece falls "CDS OTC Instruments of Western World Financial Destruction" will tear apart every currency, including the dollar, one state at a time.
 
Merkel will kill herself and Germany if she persists in political grandstanding.
 
When Greece is bailed out it is "QE to Infinity." 
 
Either way this is a catastrophe because the OTC CDS market now cannot be stopped as it will issue out of Uzbekistan or a satellite country if necessary.
 
It is too late. The monster that will eat the Western World has been set loose in Wall Street.
 
My observation is the financial leaders are acting too stupid to be stupid, so what is the agenda?
 
The agenda for gold is $1650 to $5000. Take your choice.
 
Gold mines will be mining money even though that concept has never entered the minds of the major producers. If it had they would not sell every ounce they mine or hedge anything ever.
 
Regards,
Jim

Not looking too good is it!

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Tuesday
Mar022010

Randgold Resources Limited Call Options Up 30%

Randgold Chart 03 March 2010.JPG

This is a quick update on the Call Options we purchased on the 9th February 2010 on Randgold Resources Limited (GOLD) the June 2010 series with a strike price of $75.00 (GUD Jun 19 ‘10 $75 Call) for which we paid $5.50 per contract for them. The session on NYSE has about 1.5 hours to go with the bid standing at $7.10 and the ask at $7.30 registering a gain of around 30%, as we write.

On the 5th February 2010 we wrote the following:

Randgold Resources Limited (GOLD) has been taking a battering lately along with most other gold producers which is interesting to us as we like this stock a lot but do not own any of it at the moment. The current correction could present us with the buying opportunity of the year so its now time to watch it carefully and be prepared to pounce.

As we can see from the above chart this correction could well bring Randgold back into the frame as a Buy having fallen 5.91% today alone and to close at $67.29. This is a fair way down from its recent high of almost $90.00 per share, a price that left us thinking that we might never own it again. Still never say never in this business, its so volatile and can change on a dime as we have said many times before.


As we write Randgold is trading at $76.09 having gained around 2.6% in todays trading.

We purchased the Call Options on 9th February when the stock was trading at $67.50, it is now above the strike price of $75.00 and in the money, so every dollar gained by Randgold should increase the value of the options contracts by the same amount. Four consecutive good days in a row might attract profit takers, however the RSI can still go higher, so we will stick with it for now.

Gold is currently up to around $1134.90/oz which is a terrific gain for the day especially to see it push up and break through the $1130/oz level which many regard as positive for the worlds only real money.

Randgold has been kind to us in the past and we have waited patiently for this opportunity to present itself, so lets hope that this progress continues and we can bank a few bucks.





Randgold Resources Limited has a market capitalization of $6.68 billion, a 52 week trading range of $40.41 to $90.30, a P/E ratio of 91.83 with an average volume of 1.0 million shares traded.

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



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Sunday
Feb282010

High River Gold Update 01 March 2010

HRG Logo 31 July 2009.JPG


Chris Charlwood has very kindly sent us this missive updating us on the current state of play over at High River Gold Mines Limited (HRG) which we hope that you find interesting and informative.

To Minority Shareholders of High River Gold,
 
Please see the Reuters article below regarding Severstal’s attempt on acquiring Crew Gold as well as its thoughts on High River Gold. The article has been translated from Russian, so it is a bit convoluted. The interesting part for us is that for the first time Severstal has publicly stated it will not try and buy out minority shareholders of HRG. The statement was made in response to a recent letter that was sent by the institutional shareholders of HRG announcing that if an offer were made, they will not sell for less than $1.50 (more than twice the current price).  I see this Severstal statement as a milestone and very good news for us as we have made strong efforts to dissuade them from trying to buy us out since last May. The threat of another low ball offer prior to the Q4 and year end results has now been removed. This should make new investors feel comfortable coming into HRG at these low prices.
 
It is speculated in the article that Severstal Gold could do an IPO with vending in only their  51% of HRG. Although a Severstal representative states that the paper work for an IPO has not been prepared, I would suggest that if it were to go ahead later in the year, then it will be very good for HRG shareholders as it will be easy for  investors to track the values between Severstal Gold’s shares and HRG’s shares (based on gold ounces produced). Such a scenario could attract arbitrage traders thereby reducing the gap between values. The question is will Severstal stick to their statement longer term.  An IPO  will place a lot of pressure on them  to consolidate as much revenue and cash flow as possible. Of course, post IPO, minority would likely be open to being bought out with Severstal Gold shares as long as the respective share prices are trading at comparatively fair values. Another point to consider is that since HRG currently makes up 50-60% of Severstal's gold production, HRG's share price could likely move up to the pro-rata values being justified by the investment banks that would take Severstal Gold public.
 
HRG management has stated that Q4 and year end results will be reported at the end of March. We are expecting up to $45M in cash flow for Q4 and up to $130M in cash flow for 2009. If the Q4 cash flow does in fact hit $45M, then  all looks good for at least $180M in cash flow for 2010. Also, we are expecting the year end numbers to show that HRG has enough liquid assets (once Royal Gold collateral released) to cover off all debts with up to a $45M surplus. At $.70, the stock is currently trading at 3.1 times Q4 cash flow whereas the peers are trading at an average of 18.1 times Q3 cash flow. The peers are Randgold Resources, Northgate Minerals, Centerra Gold, Golden Star Resources, Red Back Mining, Eldorado Gold, Semafo Inc., Gammon Gold, New Gold Inc., Alamos Gold, Aurizon Mines, Jaguar Mining.
 
Chris Charlwood
Retail Investor
604-718-2668 office
604-718-2638 fax
 
*********************************************************** 

Severstal will make a proposal for Crew Gold
Thursday, February 25, 2010 17:22 MSK
 
Polina Devitt
MOSCOW (Reuters) - One of the largest steel company Severstal of Russia intends to make a takeover bid of British Crew Gold Corporation, but does not plan to completely buy out the Canadian High River Gold, despite the interest of minority shareholders.

High River minority shareholders believe that Severstal will seek to buy the remaining shares of the Canadian company, if decides to IPO of its gold assets. Severstal, controlled by its General Director Alexei Mordashov, already owns a controlling stake in High River, its shares for the year increased fourfold.

"We are currently very busy with projects related to business development and improvement of production. We are not going to make an offer to buy back all outstanding shares of High River", - said director general of Severstal Gold Nikolai Zelensky, in comments sent to Reuters via email.

Comment Zelensky was a response to last week circulated a letter minority High River - which included Sprott Asset Management, Prosperity Capital Management, Specialized Asset Management and Firebird Management - which said that the minority shareholders would not accept an offer to sell its shares until it price would not be fair.

Such is the price, in their opinion, could be the level of 1.5 Canadian dollars per share, more than twice the current market price (0.66 Canadian dollars).

Capitalization of High River for the year increased fourfold to $ 477 million. The assets of the company contributed about half produced in 2009, Severstal gold. Last Severstal make an offer to buy back shares of High River in the summer of 2009. Price then was offered at 0.30 Canadian dollars, after that there was no new offers.

"In the beginning, the shares of High River reached 95 (Canadian) cents, so 1.5 (Canadian dollar) is the real price", - told Reuters the representative of one of the funds involved in the preparation of letters of minority shareholders.

In response to the question why Severstal, in his opinion, should make such an offer, he said: "Companies (Severstal), it would logically prior to placing a consolidation of assets removed from the stock exchanges have zalistingovannye.

Severstal began to acquire assets in the field of precious metals in 2007, saying that the IPO could be one of the options for the development of these assets. Rumors of imminent Listing intensified earlier this year, when analysts Uralsib Bank reported that in their opinion, Severstal this year may sell up to 50 percent of the shares of gold assets in the IPO. However, representatives of Severstal said that preparations for listing are not maintained.

EBITDA for the gold mining business Severstal for 9 months of 2009 amounted to $ 140 - $ 150 million, believes Uralsib evaluating the entire business in the $ 2-3 billion.

"If the acquisition of Crew Gold will be successful, then I think it will be included in the IPO", - said on Thursday Uralsib analyst Dmitry Smolin.


"I understand that Severstal wants to buy back shares from minority shareholders of High River at an affordable price. She did not want to pay a significant premium, it could be the listing of" gold "of assets from 51 per cent stake in High River, which it already has," - added Smolin.
In 2009, Severstal produced 533,967 ounces of gold. For the nine months of 2009 net loss the company made $ 878 million, net debt - $ 4.71 billion.

ABSORPTION CREW GOLD

Severstal reported on Thursday that increased its share in Crew Gold by 6,8 percentage points to 26.59 per cent and now intends to make an offer to purchase the remaining shares.
"We owe this proposal to Canadian law, as well as abroad have exceeded 20 per cent", - explained Zelensky.

Russia company bought shares in Crew Gold at a price 1.10 Norwegian kroner per share, which corresponds to the current market price. For the same price Severstal intends to make an offer to repurchase the remaining shares of the company, noting that the price of its offer twice quotes Crew Gold at the beginning of the year. On Thursday, after the publication of reports of Severstal shares Crew, capitalization currently stands at $ 392 million, grew by 5.8 percent.

Details of its offer to purchase the remaining shares Crew Severstal intends to announce within two weeks.

Crew Gold, gold mining at the deposit LEFA in Guinea, in 2009 produced about 179,000 troy ounces of precious metal, and, thus, can add 33 percent to the production of Severstal.
In December 2009, Crew Gold held a restructuring, under which about $ 300 million of its debt were converted into new shares, which constitute about 95 percent of the total capital of the company and traded on the Oslo Stock Exchange.

($ 1 = 5.983 Norwegian Crown)

(With the participation of Olga Popova and Alfred Kuppersa. Editor Tatiana Mosolov)
The picture continues to improve so all we can do is hang on in there.


 High River Gold trades on the Toronto Stock Exchange as HRG.

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Sunday
Feb282010

Kinross appointed to Russian government advisory council on foreign investment

Kinross logo 01 March 2010.JPG



A feather in the cap for Kinross Gold Corporation (KGC) as there latest news release proudly announces that they have been appointed to the Foreign Investment Advisory Council (FIAC):

The Ministry of Economic Development of the Russian Federation has announced the appointment of Kinross to Russia’s Foreign Investment Advisory Council (FIAC).

FIAC was established in 1994 to assist Russia in forging and promoting a favourable investment climate based on global expertise and the experience of international companies operating in Russia. FIAC functions on the basis of direct dialogue between the chief executives of investor companies and the Russian government, with a focus on the crucial aspects of fostering a healthy investment climate.

The council is chaired by Russian Prime Minister Vladimir Putin and includes CEOs from 42 companies. Kinross is the only Canadian company to be named to the council. “Kinross is honoured to be inducted into FIAC, which we view as an endorsement by the Russian government of our status as a valued investor,” said Mr. Burt. “By working directly with the Russian government at a high level, the Council reinforces the government’s ongoing efforts to improve Russia’s investment environment. We look forward to playing an active role in advancing this shared goal.”

Kinross has been active in Russia since 1995. The company currently operates the Kupol gold-silver mine in the Chukotka region of Russia through the Chukotka Mining and Geological Company (CMGC), which is owned 75 per cent by Kinross and 25 per cent by the Chukotka government. Kinross is the largest Canadian investor in the Russian Federation.

Well done Team Kinross, this move will no doubt reap the benefits going forward.

To read the news release in full please click here.

Kinross Gold Corporation trades on the Toronto stock Exchange under the symbol of ‘K’ and on the New York Exchange under the symbol of ‘KGC’


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Saturday
Feb272010

Are Stocks the way to play this bull?

Silver Gold and the HUI Chart 27 Feb 2010.JPG

We have long held the opinion that holding silver and gold mining stocks would give us a leveraged return to silver and gold prices and thus generate better returns from this bull market in the precious metals arena. Taking a quick look at the above chart we can see this it has not been the case for the last few years, which requires us to give our strategy a bit of a shake.

Its true that if we go further back in time and draw the chart again then we can see that the stocks have outperformed the precious metals. However our patience wears thin when the stocks have lagged behind the metals for so long and one begins to wonder if this is now the new trend and it could be entrenched this way for some time to come.

In our humble opinion there is no substitute for owning the physical metal as we have continuously recommended, with the associated mining stocks offering leverage to the metals in return for the risks that they carry with them. However the metals space has changed and we now have funds holding massive amounts of both gold and silver and they are acting as a proxy or a paper version of gold and silver ownership. Whether the funds have the amount of gold and silver that they purport to have is a discussion for another day, however, as a vehicle for traders to ply their trade, it fits the bill. So far these funds have more or less replicated the performance of the precious metals. Yes there are risks but the inherent dangers of mining are removed, geo-political tensions disappear, start-up is not an issue, mega doses of financing are not required, good people with the right experience are not required, etc.

Now, if an investor is looking for leverage to gold and silver prices why not substitute mining stocks for an options play on one of these funds. The need to know a mining company from top to bottom and keep up with their ever changing characteristics is time consuming to say the least. Is it worth the effort? The above chart suggests that we can research and analyze these companies until the cows come home, we are simply not getting a leveraged return on the effort and risks involved.

Taking it a step further, if the quality producing stocks that make up the gold bugs index cant keep up with the metal then what chance have the juniors got? The mantra of juniors, juniors have been trumpeted for some time but will they soar this time around? Historically the juniors have soared later on in the cycle but history does not always repeat itself. This is not 1980, believe it or not, and the circumstances, the investment environment, politics, economics, social aspirations, the transfer of wealth from west to east, the dissemination of knowledge, the speed of change, etc, have all changed since the last bull market.

As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.

Our premium options trading service, SK Options Trading, has closed the last 7 trades, with an average gain of 51.17% in an average of 37 days per trade, why not drop by and take a peak.



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Friday
Feb262010

Snow-cialism

Socialism 27 February 2010.JPG


By Vedran Vuk, Casey Research

There is a silver lining to every snowstorm – getting to know your neighbors both good and bad. With forty inches on my block this week, I’ve learned a lot about my neighbors and, strangely enough, socialism.

My corner of Baltimore seems like a good place to ride out a storm. After all, innumerable cars are plastered with Obama bumper stickers, and windows display signs like “Universal Healthcare Now.” In essence, it’s a very liberal neighborhood in an extremely liberal state. What better neighborhood to be in times of need, right?

The architecture ranges from early 19th to early 20th century row homes, which as a result demands parallel parking. This isn’t a great inconvenience most of the time, but with the snow, it’s an absolute nightmare. First the clouds drop forty inches. Then the city snow plow piles another mountain from the street onto your car.

Successfully liberating the vehicle from its icy prison can take hours. After leaving the spot, anyone can take the laboriously freed space. Restoring regular parking conditions quickly requires everyone chipping in for the common good.

During this street clearing process, my neighbors sorted themselves into four groups:
1.The Saint (1% of the neighborhood) – Every couple of blocks resides a truly amazing human being living to serve others. He’s shoveling out his neighbors’ cars, dumping bags of rock salt down the whole street, and passing out shovels like he owns a hardware store.

2.The Good Citizen (15% of the neighborhood) – A caring person doesn’t just shovel enough snow to drive away. He carves out the front and back. After leaving his spot, someone else can parallel park without digging. If everyone did this, normal parking would resume in a day – if not less.

3.The Self-Interested Person (70% of the neighborhood) – This guy doesn’t really care about helping anyone. He carves just enough in the front to get out. The next person must dig before parking.

4.The Malicious Creep (14% of the neighborhood) – Instead of shoveling snow to the curb, the creep stacks snow onto his neighbor’s car. This saves the creep approximately fifteen minutes while adding an hour to his neighbor’s work.

While my neighbors love Obama and universal healthcare, they obviously aren’t such good socialists on their own block. This is no surprise; everyone on earth is an armchair Mother Theresa. We all have noble thoughts at the coffee shop or over beers. But when the snow shovel has to come out, so does the truth.

So let’s face it. Universal healthcare supporters are much like the folks on my street. There are a couple of saints, a few good people, and a large chunk who are either self-interested or just plain selfish. Most support it either because they will benefit directly, or they think the tax burden will not be placed on them.

Just look at this Gallup poll: only 34 percent believe that healthcare reform will personally increase their costs. Gallup also points out that most don’t think healthcare reform will benefit them personally – hence they are supposedly altruistic. But it’s not altruism when only 34 percent believe that they will do the shoveling.

You don’t think this is true? Just look at the Republican Party’s anti-universal healthcare campaign. The GOP hasn’t appealed to morality or fairness, but instead to selfish elements among universal healthcare supporters. The message is that the plan will cost more for everyone and your healthcare will get worse. So far the campaign has worked.

One can speak sweet nothings while pleasantly sitting around a warm fireplace. But in the end, a snowy day and a shovel will always reveal the selfish nature of a socialist underneath.
If you want to stay in the loop on what the Obama administration is planning and how to protect yourself – even profit from – the ramifications, give The Casey Report a risk-free try. Never get hoodwinked again because you will see the big trends coming long before they get here. Click here to find out more.



All the best and dont forget to vote on where you think that gold prices are going next.

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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Friday
Feb262010

China To Purchase Half of IMF’s Gold

Pravda Logo27 Feb 2010.JPG

Yesterday we reported that India would buy the IMF gold and that was according to an article carried by the Emirates Business, today, Pravda reports that the buyer is China, as follows:







China has confirmed the intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said.

World central banks started to increase their gold reserves after prices on gold began to climb in 2001. The IMF sells gold within the scope of a program to diversify sources of income and achieve an increase in lending.

The IMF announced an intention to sell 403.3 tons of gold in accordance with the adequate decision made by the board of directors of the fund in September of 2009. India, Mauritius and Sri Lanka purchased about 212 tons of the amount at the end of 2009. India purchased most – 200 tons.

China’s interest in international trade is connected with the development of the nation’s economy, as well as with the growing consumer demand in the country.

“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. China is interested in the development of the domestic consumer market,” the agency reports.

Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said.

The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poor countries.

We will see just what tomorrow brings!


All the best and dont forget to vote on where you think that gold prices are going next.

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.

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Thursday
Feb252010

Gold, the IMF, and Dirty Jokes

IMF logo Dark.JPG


By Jeff Clark, Casey’s Gold & Resource Report

How many IMF officials does it take to change a light bulb?

As you probably read, the International Monetary Fund announced they would proceed with selling the remaining 191.3 tonnes of gold from the 403.3 tonnes planned. The money is to be used for lending to poor countries. Lending implies the money will be repaid, which, in the case of the IMF, is a joke that isn’t funny. But that’s a topic for another day.

The IMF stated that sales will be conducted in the open market, which is interesting because until now, gold has only been made available to central banks. While the IMF remains open to central banks buying some of the gold, sales will be conducted “in a phased manner over time” to avoid disruptions to the open market.

So, will IMF sales depress the gold price? Well, remember the price rose with the first sale, when it was announced India was buying 200 tonnes of the 212 for sale. But that was an offtake deal, not an open market sale, so the question is legitimate.

One way to look at it is this: global mine production was 80.9 million ounces in 2009, so the IMF’s 6.7 million ounces could be a market-jolting 8.2% addition if dumped all at once. And an 8.2% load would indeed upset a market if we were talking about strawberries or anything else that people buy only for the purpose of consuming.

But most gold isn’t bought for the purpose of using it up. It’s bought for the purpose of holding it. So the relevant comparison for the IMF’s 6.7 million ounces isn’t annual mine production. Instead, we should compare it to the world’s existing stockpile of gold, which is roughly 2 billion ounces. The IMF sale would add just 0.3% to global inventory – hardly a market trasher.
Further, we’ve been down this road before with the IMF. When they sold gold in the 1970s, the price dropped upon the announcement of the sale, but then rose when actual sales took place.

And the dirty joke is this: when the IMF sold gold in the 1970s, it marked a bottom in the price. The late Jerome Smith advised always betting against the government: “When they’re unloading an asset, it’s time to buy.”

The IMF provides some very cushy jobs for the right people, along with a perpetual series of exquisitely catered conferences for the politically connected and politically correct. These people are not exactly known for being the brightest economic decision-makers. However noble their cause, the fact that they’re selling at all in the current environment, given the enormity of the monetary crisis that will only worsen as time goes on, tells me I want to be doing the opposite.

And that’s why the answers to my light bulb joke are as follows:

How many IMF officials does it take to change a light bulb?
None. Doesn’t gold glow in the dark?
One, but only if the ladder is padded.
Two. One to screw it in and one to screw it up.
Three, but nobody can find them.
Four, to form a panel to discuss which way to turn the bulb.
Five. One to change the bulb and four to buy the wine to celebrate.
Nine, to provide a quorum to vote on incandescent vs. fluorescent.
Eleven. One to hold the bulb, and ten to turn the house.
All of them. But only after dinner at L’Arpège (the most expensive restaurant in Paris).

While we’re convinced gold is headed much higher, is the recent correction over, signaling its time to jump in? Get our answer in the new issue of Casey’s Gold & Resource Report, which you can try risk-free here...




All the best.

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Wednesday
Feb242010

India to Buy IMF Gold

Reserve Bank of India.JPG

Well thats according to an article carried by the Emirates Business today, the rational being that unlike China who can boost gold reserves internally, India needs to import gold in order to boost supplies.


Gold prices are expected to stabilise with the imminent purchase of gold by India from the International Monetary Fund (IMF).

India's central bank, which has increased its gold holdings to diversify its reserves, looks set to be a buyer again when the IMF begins selling 191.3 tonnes of the precious metal amid volatility in major currencies. Gold prices climbed steadily late last year to touch an all-time high of $1,226.10 an ounce on December 3 after the RBI announced in November it had purchased 200 tonnes of IMF gold.

Prices have steadied just above $1,000 recently, edging up to $1,107.30 an ounce yesterday, after falling one per cent the previous day.

The uncertain outlook for two of the world's major reserve currencies – the dollar and euro – provides a spur for central banks, including India's, to buy gold.

India's gold holdings lag those of major economies despite a big purchase in October.

"India is no stranger to gold. The government is gearing up for growth and wants to recalibrate its reserves," said Mark Pervan, senior commodities analyst at ANZ.

"They can't lift their gold holdings from domestic output, unlike China. And they have shown an appetite to buy in the past."

We guess its now a question of watch this space to see just who steps up to the plate.

Footnote: Please don't forget to vote on whether you think gold is going to $1000/oz or $1200/oz first as per the Peter Grandich challenge.


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.