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Thursday
Jun032010

A Question and Answer from Jim Sinclair

Jim Sinclair.jpg


A missive just received from Jim Sinclair in a question and answer form.


Dear Jim,

Gold traded inversely to the dollar last week (directionally, but not tick for tick). Now the weak euro is a drag on the gold price.
 
Why are we now seeing this type of behavior and when can we expect gold to resume its appreciation?
 
Thanks,
CIGA Brian S.
 
Dear Brian,
 
Your question reflects, I am sure, what people are worrying about.
 
The cold hard fact is that the hedgies, driven by momentum algorithms, have reduced their position, continue to sell or have gone short gold. This week the hedgies made a pass at gold shares, from major to junior, increasing or re-establishing their short position.
 
The community still follows those that call tops. So far each top call has failed to do anything but take people out of their position.
 
There are three factors to think about right now:
 
The euro is seeking it lows again from which intervention has come, and from which intervention must continue to come right here and now.
 
The cash price of gold, which had fallen away from the delivery month future, is now moving back. This indicates the physical market is firming.
 
The Libor rate continues to rise which indicates that the euro zone rescue package has no shock and awe in it at all.
 
The hedgies, the new masters of the universe, feel certain that they can run any market, anywhere at any time. That assumption could come to a screeching halt now because a crisis anywhere is a crisis everywhere.
 
The hedgies are running the gold price based on algorithms and the community is having conniptions based on seasonality.
 
Gold will trade at $1650 and better. These reactions are normal to markets and we have seen them together a thousand times or more.
 
Your degree of concern is unfounded. The risk in this trade is to the hedgies, not to us.
 
The expectation of a sell off going into June is challenged by the fact that a crisis anywhere in a global market economy is a now crisis everywhere. This concept is backed by the firming cash physical to cash contract price of gold and the action of Libor. Let's not forget four failed interventions now in the euro and the absolute necessity that right now, this minute, the euro intervention must occur again.



So, according to Jim we are still on course for $1650/oz for gold prices.


Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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
Jun032010

Who Will Profit from the Oil Spill

Crude Oil 04 June 2010.jpg


By Charles S. Brant, Energy Correspondent, Casey’s Energy Opportunities




The disaster in the Gulf of Mexico may be the best thing that’s ever happened to green energy producers in the U.S – but the one that benefits the most will probably surprise you.     

As the damaged Deepwater Horizon well continues to pump out 5,000 barrels of oil per day into the Gulf, all the major stakeholders are scrambling to find a way to contain the damage. Investors in BP, Anadarko, Transocean, and Halliburton have had a rough few weeks and should be nervous about the future. The growing political firestorm that’s accompanied this ecological disaster is drastically reshaping the energy landscape in the U.S. There’s huge money to be made from the biggest structural change to the energy markets in the past 50 years, if you know where to look.    

The political and economic fallout from this accident is starting to take shape, with the executives from BP, Transocean, and Halliburton being paraded in front of Congress for a public chastising. Predictably, politicians are making stern promises of tighter regulations in the future. 

At this point, it’s a guessing game as to what the new permanent regulations will be. So far, a temporary moratorium has been put in place on the issuance of new offshore oil and gas drilling permits. In addition, the Department of the Interior plans to restructure the federal Minerals Management Service (MMS) to eliminate the conflict of interest inherent in its role of monitoring safety, managing offshore leasing, and collecting royalty income.

The Department of the Interior has plans to make offshore drilling rig inspections much stricter. Interior Secretary Ken Salazar has also promised tighter environmental restrictions for onshore as well as offshore exploration and production. Lastly, in a knee-jerk reaction to the oil spill, the Senate Climate Bill gives states the right to veto offshore projects within 75 miles of shore.    

Although these regulatory changes aren’t set in stone yet, it’s a foregone conclusion that any company involved in offshore drilling will feel some pain. Any exploration and production company that continues to operate offshore will face reduced margins from a higher-cost structure from increased taxes, regulation, and insurance. 

Offshore production supplies a large amount of oil and gas to the U.S. The U.S. Energy Information Agency estimates that U.S. offshore reserves account for 17% of total U.S. proved reserves for crude oil, condensate, and natural gas liquids, as the illustration below shows.
 


Of the total known U.S. offshore reserves, the Gulf of Mexico accounts for 90%, with the rest found in California and Alaska. In 2009, BP produced nearly a quarter of all the Gulf’s oil and gas located in federal water. Shell and Chevron produced 12% and 11%, respectively. 

The sheer size of offshore reserves guarantees exploration and production will never be completely abandoned in the U.S., but don’t expect any growth. In fact, the Gulf of Mexico disaster probably destroyed any hope of any future drilling in environmentally sensitive areas, like the Arctic National Wildlife Reserve.   

The market has reacted strongly to the spill, punishing the stocks of every company involved in offshore drilling. Now many are suggesting it might be an overreaction that could benefit your investment portfolio if you dare buy in now. However, there are better ways to work this news to your benefit.

The oil spill will be a very expensive setback for all the players involved in offshore production; we’ve already seen that reflected in their stock prices. In the near term, offshore exploration and production companies and the oil services companies will show margin erosion as they digest higher costs. In the medium term, some companies will pull up stakes and move completely into non-U.S. offshore projects, as they’ll realize the cost of doing business in the U.S. outweighs any potential gains. 

The market might be overreacting, but we’re not convinced these depressed stocks represent good value. While it’s possible there are some good bargains, it’s still too early to consider speculating in any offshore-related companies. Specifically, the threat of increased regulation, massive tax increases, and rising insurance costs will create a hostile environment for these companies going forward.        

Instead of risking your capital on so many unknowns, a prudent alternative is to look at energy producers in the renewable energy sector. The oil spill has only strengthened the current administration’s resolve to make greener energies supply a larger chunk of America’s energy needs in lieu of traditional fossil fuels. Congress is doing its part by giving huge subsidies to companies in this field.

There are a lot of renewable options that will benefit from the subsidies and political wrangling, but our current favorite by a long shot is geothermal power. 

Of all the renewables, we think geothermal has the best upside potential. Based on economics and efficiency alone – unlike wind and solar energy, geothermal is reliable for round-the-clock generation and is already price competitive with fossil fuels without any subsidies – geothermal outperforms competing renewable technologies.

Add the government subsidies on top of the existing good economics and the pot gets even sweeter in the short term. Once the spill is finally contained, attention will shift to previously low-key renewables, like geothermal, and soon after the market will recognize geothermal as the clear winner.  

We’ve researched companies up and down the geothermal supply chain and we’re seeing value in a number of quality companies that we think are poised to outperform. With the coming flood of money and attention that will be focused on green energy, you’ll want to move quickly before these bargains go away.
----
Want to know which geothermal stocks are set to explode to the upside? Try Casey’s Energy Opportunities risk-free for 3 months today and gain access to one of the best energy analysts of our day, Marin Katusa. Marin and his energy team know all the inside details and have prepared a shortlist of the best companies to own. For only $39 per year, they will keep you in the loop on nuclear, geothermal and other renewable energies.





Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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
Jun022010

Give unto Caesar - What to Pay When You’re Selling

Caesar.jpg



By: Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
Proper planning with your finances is incomplete until you consider the endgame consequences of your investment decisions today. So, what are the tax consequences of selling gold, gold ETFs, and gold stocks?






There’s lots of conflicting and inaccurate tax information on the Internet about this. We know of one site that claims the sale of silver Eagles is exempt from capital gains tax due to some obscure law (not true). So, let’s nail down the current tax rules for selling gold in the U.S.

[The following information pertains to U.S. taxpayers only and is not intended as nor should be considered personal tax advice. Always consult a financial planner and/or tax professional before investing.]

►The IRS considers gold a “collectible” and will tax your capital gains at a 28% rate. This designation includes all forms of gold (other than jewelry), such as...

• All denominations of gold bullion coins and numismatic/rare coins, gold bars, and gold wafers
• ETFs like GLD, SLV, etc. (closed-end funds have different rules; see below)
• Any electronic form of gold like GoldMoney and Bullion Vault
• Any “paper” or certificate forms of gold, such as Perth Mint Certificates and EverBank accounts
• All forms of pool gold, rounds, and commemorative coins

And the same designation and rules apply to silver, platinum, and palladium.

►“Reporting” requirements can be confusing. It is true that precious metals dealers aren’t required to report certain small sales to the IRS – but that doesn’t relieve you of the obligation. If you sold one gold or silver coin to your local dealer, he is not obligated under current regulation to report the sale. But selling at a profit requires you to report it and pay 28% tax on your gain.

Keep in mind that the Patriot Act obligates a dealer to report any “suspicious customer activity.” Therefore, don’t expect a wink from your dealer if you proclaim you won’t be reporting your sale or ask him to “book” only half the coins you sell him. There are people sitting in prison who’ve tried this.

►Gold stocks are not designated as a collectible and are therefore subject to the standard capital gains tax rates like all other stocks.

►Gold jewelry sales are not reportable. This makes the Heirloom Collection an attractive consideration and an excellent diversification maneuver (for both financial and romantic reasons!).

►We wouldn’t advise making your investment decisions based solely on tax considerations. You should own both gold and gold stocks for different reasons – gold for wealth protection and gold stocks for profit potential.

►There’s a lobbying arm for our industry, the Industry Council for Tangible Assets. Their efforts are mostly for dealers, but their website contains valuable information on this topic.

PFICs: Blessing or Curse?

For U.S. investors, there’s one more tax consideration if you own, or plan to own, a closed-end fund (whether it’s precious metals or otherwise).

For example, the Central Fund of Canada (which holds gold and silver bullion) is considered a Passive Foreign Investment Corporation (PFIC) for U.S. investors. This is a complex topic, but what I learned could save you some dinero now and some hassle later if you own a foreign closed-end fund like this one.
 
Keeping it simple, if you own CEF, you can qualify for the standard capital gains tax rates, instead of the 28% collectibles rate, if you file a timely and valid Qualified Electing Form, or QEF. There are several options you can take with a PFIC, but this is the most common election.

Even if you don’t sell the fund in any given year, you must file this form every year. If you don’t complete an annual QEF or make one of the other elections, you could get hosed when you eventually do sell because your gain will be considered ordinary income, forcing you to pay interest and penalties on top of the regular tax.

You can hold a PFIC stock for years without paying tax, but if you haven’t made a QEF or other election, you get the bad result we’re describing when you sell. Further, if the PFIC company reports income in a given year, this income is reportable and taxable as regular income that year, even if no stock was sold and even if the stock ended down on the year.

The point here is obvious: don’t blindly buy into a PFIC.

The QEF benefit is clear: you can cut your tax liability up to 46%, the difference between the 15% long-term capital gains rate and the 28% collectibles rate. Yes, capital gains rates are scheduled to rise next year, but this option still reduces your tax liability.

A successful investor is an informed investor, and you should read the prospectus of any closed-end fund before buying. And if you don’t want to mess with the tax hassle, use an ETF instead.
----

What ETFs and closed-end funds do we recommend? If you like this kind of fact-based research, you might also appreciate our recent analysis of the best gold and silver ETFs, along with our just-released 2010 Silver Buying Guide. For only $39, you can access all our research and recommendations for one year, risk-free. To learn how the right stocks and funds can give you considerable leverage to gold itself.









Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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.


Monday
May312010

Worried about Inflation

Inflation OECD 01 June 2010.jpg


The inflation/deflation debate continues at a merry pace with both sets of supporters banging the drum equally as loud as the other. So we decided to pop over to the UK for this 'take' on the current situation by Stephanie Flanders of the BBC.

Inflation is well above target - and well above where the Bank of England and others expected it to be not very long ago. That much we know. The big question is: should we worry?

Two different events this week seemed to suggest we should. The Organisation for Economic Co-operation and Development said in its latest economic outlook that the UK authorities, almost alone among the OECD, needed to be wary of losing their credibility on inflation. It even gave the Bank of England some free advice - to raise the bank rate to 3.5% by the end of 2011, starting "no later than" the last three months of this year.

The remarks were interesting because (a) the OECD doesn't usually give such specific advice to anyone, let alone to central banks; and (b) the text of OECD reports is always circulated well in advance to the countries concerned. This means someone at the Treasury was happy to see all this appear in print.

The other event was the release of the third estimate for UK economic growth in the first quarter of 2010. As expected, this was revised up slightly, to 0.3%. But the stand-out statistic on GDP wasn't the real figure - it was the nominal. These figures showed nominal GDP - the cash value of all transactions across the economy - growing by 2.1% during the quarter, or an annual rate of more than 8%.

The implication is that the GDP deflator - a measure of economy-wide inflation - rose by more than 1.7% in that period. That is partly due to the rise in VAT in January - but not entirely. Excluding taxes, prices across the economy rose 1.2% on the quarter, up from 1% in the fourth quarter of 2009 and 0.8% in the quarter before that.

The simplest explanation of these figures is also the most favourable to the Bank of England: quantitative easing worked. Just as the Monetary Policy Committee intended, pumping all that liquidity into the economy seems to have helped maintain nominal spending across the economy in the second half of 2009, even while the economy and the supply of bank credit were continuing to shrink.

But the Bank of England can't make the path out of this crisis an easy one. And it can't reimburse us for all that we have lost. Quite the opposite: it has to make sure that all of us - collectively - take a hit.



To read the article in full please click here.



Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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

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

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


Sunday
May302010

SPDR Gold Trust (ETF) Call Options Competition has been won

GLD Chart Last Qoute 29 May 2010.jpg


On the 18th May 2010 we commenced this competition to see who could predict the price of the SPDR Gold Trust (GLD) Call Options for the June 2010 series with a strike price of $120.00 and as the chart above shows the last trade was for $1.68. We have examined the entries and not one of you got it exactly and the range of entries varied from $0.01 to $12.40.

So we have decided to give the prize to the contestant whose entry was the closest, which is as follows:

I think we are having a pullback in gld these call options will be $1.70
Comment by nigel harrison —


Nigel, we will be in touch with you shortly to set up things regarding your prize.
The prize is a free subscription to OPTIONTRADER, from SK Options Trading, which costs $99.00 and is yours for free, well done and we hope that you find it both enjoyable and profitable.

The above table is a snap shot of the prices paid for the various call options that are currently available on the SPDR Gold Trust (GLD) for the June 2010 series. The number outlined in the box, $1.68, is the last price paid for the June 2010 series with a strike price of $120.00 and the last bid stands at $1.67 and the last ask stands at $1.72, as of 29th May 2010.

Many thanks indeed and commiserations to all the other contestants who came joint second..... we hope that you enjoyed it. As we can see from the chart below our last 16 trades have all been winners with not one losing trade, so this service is going very well indeed. Now, if you have something better please write as let us know about it, if not, then take a look at what we are doing and ask yourself if you could spend $99.00 better than on OPTIONTRADER. Its very simple to use, you will receive an email on what to buy and then another email when the time comes to sell. The amount of contracts that you buy depends entirely on your budget, you can participate as though you were buying a few penny stocks to get a feel for it.


Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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
May282010

Preparing for What’s Next





By David Galland, Managing Editor, The Casey Report

Oh, what a tangled web we live in.

On one side of the Atlantic, there is a fundamentally broke European Union. On the other, the world’s largest debtor nation, these United States.

Rotate the globe and you discover China, the world’s most populous nation: a nation whose economy is desperately dependent on export revenues, without which its government may find it hard to meet the population’s soaring aspirations. And who is China’s largest trading partner? The European Union, that’s who.

The web also encompasses the role that the U.S. dollar plays in the relationship between the European Union and the Chinese. Or, more specifically, the role the peg plays that China maintains with the U.S. dollar. As long as the U.S. dollar is weak, the Chinese yuan is weak and therefore competitive in European markets.

The problem now is that, with the euro falling, in order to remain competitive, Chinese companies must reduce their margins. Therein lies the rub, because the razor-thin margins of the Chinese companies – estimated to be on the order of just 2% -- face the very real danger of thinning to the vanishing point. After which the best a Chinese company will be able to hope for is to make up its losses on volume.

That was a joke.

It gets more tangled. Because as the euro falls, the competitiveness of eurozone companies on world markets rises, adding further pressures on the trade that China so desperately needs (and that the U.S. would like more of as well). In this race to the bottom that the editors of The Casey Report have been warning of, the latest leg goes to the Europeans, though no conceivable improvement in their exports will offset the crushing debt burden that is now laying the continent low.

While this chapter in the unfolding saga may not end with the phrase, “And so it was that the eurozone collapsed and its common currency passed into the annals of history,” as this chapter is still being worked on, it could end that way.

Likewise, with China’s #1 market on the thin edge of becoming uneconomic, so, too, the current chapter might end with the myth of the Chinese miracle being shattered. And the U.S.?

To get to a rational assumption about the U.S., we need to ponder the fate of the dollar, as this plays a mighty role in the global economy.

We begin our pondering by recognizing that, given the massive sovereign – and private – debt load, there’s no way that the central banks of Europe or the U.S. are going to voluntarily raise interest rates anytime soon. To do so would be akin to Count Dracula voluntarily stepping into the sunlight.

Regardless of the wishes of the sovereign debtors, whether rates rise – especially when it comes to medium and long-term paper – is almost entirely driven by market forces. And what market forces might cause rates to rise?
• One is that the supply of new credit greatly outstrips demand. We already know that the U.S. is blowing out Treasuries in a manner not dissimilar to the way that the Deepwater Horizon well is blowing out crude.

• However, dominating the news just now is the massive bailout organized by the European Union in an attempt to beat back the troubles besetting eurozone banks with balance sheets buried in the unpayable sovereign debt of the PIIGS – an amount that could exceed a trillion dollars. This bailout will require, á la the U.S., a serious ramping up of the supply of eurozone sovereign debt.
 
With one important difference – while the situation in the U.S. is untenable, as it is not front page news, it is not urgent.

Therefore, at this point in the crisis, while LIBOR is on the rise, the U.S. Treasury is again enjoying a wonderful uptick in demand for its trash and that, in turn, is driving U.S. rates down and helping to prop the dollar up.

Still with me?

Getting circular here, we return to the fact that China’s link to the dollar means that its currency is likely to keep rising in relation to the common currency of its largest trading partner – the eurozone. And per above, that risks shoving a stick into the spokes of the Chinese economy.

On that point, an excellent recent commentary by Eclectica fund manager Hugh Hendry included a quote by China’s Vice Commerce Minister Zhong Shan in the Wall Street Journal: “Water doesn’t boil if it is heated to 99 degrees Celsius. But it will boil if it is heated by one more degree.” And, “A further rise in the yuan by a very small magnitude might cause fundamental changes.”

A serious downturn in China will have big consequences. For instance, as Hendry also points out, while China represents just 7% of the world’s GDP, it currently consumes upwards of 30% of the world’s aluminum, 47% of the steel, and 40% of the copper.

So what are we to make of all of this? How are we to invest?

Until there is some semblance of clarity in just how badly banged up the balance sheets of the European banks are, and whether the governments of that region will be able to pull the oars in sync, the euro is in for a lot of trouble. Counter-trend reversals aside, parity with the U.S. dollar is not out of the question.

That increases the potential for China to hit a wall, at which point the world will find itself facing a whole new set of problems. Per many past comments on the topic, for us the myth of China has long sounded eerily like that of Japan in its now past glory days. All of which is to say that, in the current chapter of the crisis, the U.S. dollar is likely to regain its aura of being the fair-haired lad of the global financial community, albeit a deeply dysfunctional fair-haired lad.

For commodity investors, that gives rise to the clear potential that the base metals and energy sectors are going to come under considerable pressure.

As will gold, if for no other reason than that when the trading herd sees the dollar rising against the euro, it reflexively hears “sell gold.”

Of course, with the “safe harbor” trade back in vogue, the U.S. government will redouble its efforts to paper over the nation’s systematic problems – a papering over that will only accelerate as it becomes apparent that the economy is headed for the next leg in the crisis.

While the timing is impossible to predict, I suspect that in a relatively short period of time (three months? Six months?) it will become clear to absolutely everyone that the U.S. has no intention of changing its spendthrift ways, making it no safe harbor, at which point the show for tangible assets – gold, above all – will really get moving.

The way to play the situation is to follow our constant advice to have a heavier-than-normal concentration of cash in your portfolio and look to use corrections to steadily build positions in gold and the high-quality gold stocks. And, as energy is also under pressure – pressure that would intensify if China stumbles – you need to be researching the sector now, with an eye toward building a solid portfolio in that sector as well. Not quite yet, but soon.

Now, having shared those prognostications, a caveat is in order.

Namely that no one can tell the future. The best we can do is to examine the data and try to make rational assumptions. Those are my assumptions, but I may have overlooked many a critical factor in this immensely complex and interconnected world.

And, of course, more than just about any time in living memory, there is a heightened probability that a black swan might land and turn everything on its head.

Even so, a portfolio whose core is heavy with cash against near-term deflation and that gives you the flexibility to buy tangible assets when they get cheap… bolstered by a solid position in gold to ward off the effects of an all-but-certain future inflation, and a winner in crisis as well… and which focuses on a slow build of shares in high-quality precious metals and energy companies… should pretty much get you through any conceivable scenario that may come to pass.
----

David Galland is managing editor of The Casey Report. He and his colleagues – among them investing legend Doug Casey and Chief Economist Bud Conrad– constantly analyze economic data, recent and historical market moves, as well as the news, to predict big-picture trends and find the best opportunities to profit from them. Read about their favorite investment for 2010 – a play that’s an absolute no-brainer for all in-the-know.








Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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
May272010

An American Concept: Crushing Debt

Debt Levels Casey 28 May 2010.jpg


By David Galland, Managing Director, Casey Research

Commenting on the European crisis – because this has gone well past being one that can be termed “Greek” – the New York Times cited a senior U.S. official on the significant role the U.S., including Obama himself, played in getting Europe’s leadership to agree to a bailout approaching one trillion. One particularly telling quote…

The U.S. officials began talking to their counterparts about an American concept: overwhelming force. “It’s all about psychology,” said the senior official.
 
Funny how these things work, isn’t it? In response to its own debt crisis, the U.S. mirrors the failed Japanese experiment in quantitative easing, except that we look to “fix” the flaw in that experiment with the overwhelming force of trillions upon trillions of unsupported spending, in the process making the idea of unleashing a money flood an “American concept.” Europe, desperate and without the advantage of the time needed to witness the ultimate consequences of the latest American concept, agreed to a money flood of its own… with the result that it, too, plans on taking on nearly a trillion dollars in new debt.

Now, the funny thing is that the way this latest bailout is structured calls for the European Central Bank to try and sell over $500 billion in new bonds offered by what is being termed a special purpose entity, whose bonds will be backed by the European member states – Greece, Portugal, Spain, and all the other PIIGS included. The rest of the money will be delivered by the IMF (17% of whose funding comes as a transfer out of U.S. taxpayers’ pockets).

Will the new special purpose bonds prove popular with investors? Or will they prove unpopular, requiring higher and higher interest rates? What happens then?

And who is going to buy all these bonds, given the energetic selling going on by the U.S. Treasury?

When you strip away all the psychology that senior officialdom seems to think is what really counts, you have a bunch of sovereign deadbeats attempting to impress by moving into a really nice new mansion – maybe even in Brooklyn Heights -- hoping to cover the mortgage with a “no (real) money down” liar loan.

Do you want to own a piece of that loan? Because soon, thanks to the American concept and the new special purpose entity being cobbled together in Europe for the sole purpose of spitting out yet more debt, you’ll be able to buy up all of the stuff you want. Meanwhile, the above chart is what you’re actually buying…


Note, as bad as those numbers are, and they are bad, they don’t take into account unfunded liabilities – you know, little things like Social Security and Medicare. Throw those into the mix, and the picture gets a lot darker.

And what does Mr. Market really think about these numbers? As you can see from the table below, gold is starting to trade up against all the fiat currencies… just as we have been expecting it would.

Gold Up in all Currencies Casey 28 May 2010.jpg

Commenting on the situation, Casey Research CEO Olivier Garret had this to say…
Another thing that can't last is interest rates going down as debt goes up significantly. We are in for a fun ride, better buckle up. By the way, Greece is not that much worse than most developed countries when it comes to debt-to-GDP ratio; no wonder that Obama and the European leaders try to do something before the market got spooked too much.
 
I sometimes feel like a broken record (for our younger readers, that is a reference to solid vinyl discs with grooves in them that, when run over with a needle, would create sound… when scratched or “broken,” the record would repeat the same notes over and over) in my dire prognostications about just how wrong-headed it is what now passes for fiscal and monetary policy.

You can’t cure debt with more debt. And if you can produce the stuff in unlimited quantities, then it’s not money – that is, not if your definition of money is something you can use to efficiently hold and transfer wealth.

No wonder the big money traders are beginning to recall gold’s historical role as money. ---

Europeans are starting to get the picture – many precious metals sellers in Europe are now finding themselves out of stock – but most Americans are still woefully clueless when it comes to the safe-haven value of gold. And timing can be most important. Read our FREE report How Do I Know When to Buy? Click here to get it now.




Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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
May262010

Gold, Silver and Mining Companies Shaping Up

Gold Chart 26 May 2010

We will kick off with a review of the charts for gold, silver and the gold bugs index, the HUI, in an attempt to see where we are now and just where we might go from here. However, to put the charts into context we need to take into consideration the surrounding political, economic and investment landscape. These are volatile times with the financial markets in turmoil as what were perceived to be sound and secure governments now toil under the strain of their own excesses. The borrow and spend philosophies are coming back like a bad penny, to haunt not just those who caused this mess, but also for the rest of us, who are expected to clear it up. The follies vary from mis-management to corruption, resulting in people taking to the street to protest the latest craze of austerity and belt tightening. Society, in general, has high expectations in terms of their standard of living and the mere thought of it heading lower is not acceptable to them. Take state pensions, for example, millions of people are expecting it to be there for them when they retire, however, the pensions cupboard is empty and therefore the concept of sitting back as the cheques roll in is well and truly dead in the water. We need to start protecting ourselves now, don't wait, make it the number one priority to put your independence at the top of your 'To Do' list.




Taking a quick look at the above gold chart we can see that the sell off in gold prices of $60.00/oz has now steadied and gold appears to be set to continue its rally. Note both the 50 day and the 200 day moving averages are climbing gently in support. The RSI has turned north and the STO has just made a crossover, which is usually a positive sign.


Next we have the HUI which is making steady progress despite the volatility and is now perched just above the 200dma. Looking at the technical indicators we can see the RSI has turned north just above the '30' level and that the STO has also turned up having dipped below '20', again all positive for the gold and silver mining producers.

HUI Chart 26 May 2010.jpg

Turning to silver we can see that the pull back looks to have run its course so we are looking for silver prices to head to higher ground. The technical indicators are now out of the overbought zone thus reducing the selling pressure on silver and allowing it the space to resume its advance.

Silver chart 26 May 2010

In conclusion we are of the opinion that the precious metals should once again be bought, gold, silver and their associated stocks. As a word of warning though, its still not clear to us whether or not the stocks will go down in the face of a broader market sell off should it occur. So go gently and make your acquisitions on a 'layered' basis. Finally, we are considering the purchase of a number of options trades which should be profitable during the next move up, which we believe to be imminent.


Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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
May252010

Gold-Prices.Biz Tops 10,000 Subscribers

gold prices hits 10,000 subscribers 26 May 2010.jpg

A huge thank you from all the team here to the 10,021 subscribers who have now enrolled for our newsletter, up 1000 since 24th September, 2009. This newsletter is now being read in all corners of the globe from Calgary to London and from Moscow to Bombay. We are flattered not only by the volume but also by the number of Stock Brokers, Fund Managers, Financial Institutions, Mining Companies, CEOs, VPs, Financial Letter Writers and Banks who are also recipients.

You may have noticed the counter on the home page which says 10,021 readers by Feedburner, which is slightly misleading as it refers to the number of people who have become subscribers. The number of casual visitors to the site is around 30,000 per day on a busy day. The figures do vary form time to time as subscribers change jobs etc, however, the overall trend is up, smashing!

Total Views 26 May 2010.jpg

The thing that pleases us most though is the quality of the comments that we received on the site and via our mail bag. These comments help to police us and add a semblance of balance and normality to what is a small market sector which is still on fire and has a lot further to go!

Please feel free to join in if you have not already done so, we want to hear your voice whether you agree with us or not, your comments are really appreciated by the team here.

Once again many thanks indeed for your co-operation, patience and support.

Gold Price Total Change 26 May 2010.jpg

Gold prices have moved higher today as the chart shows to add to our upbeat mood.

Gold Prices 26 May 2010.jpg

Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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.
Monday
May242010

Gold Shares to Outperform Gold by 5:1

In a missive that we received today from Jim Sinclair there is the above statement about gold shares outperforming gold itself. The shares have lost a little of their leverage in recent years when compared to silver and gold prices, so this is an interesting stance to take. The question, of course is just when will this happen and as we dont know then maybe the strategy of keeping a core position regardless of the markets volatility and oscillations is the way to go.

Jim Sinclair.jpg
Jim Sinclair


The power of the derivative manufacturers is clearly stronger than the combined power of world central banks.
 
The mockery made of the $1 trillion Shock and Awe of the euro rescue package is telling. The public relations that Monday had to be approved by the architects of what is now a joke.
 
The real story is that the credit default swaps derivative dealers are stronger than all central banks put together. Soon markets will see this and rush to the side of the stronger which are the currency shorts of the Western world.
 
Gold will be purchased for a very long time to come as currencies will offer no storehouse of value. The central banks have publicly lost the battle and no cover will serve to keep this realization away from international money.
 
The euro pulled back almost, but not quite, to the base line of the flat bottom triangle and is now looking at $1.10 support. The size of the fortunes which are being made by the attacking forces boggles the imagination.
 
Those that will make the largest profit in gold are just the same forces now attacking Western world currencies.
 
You must stop being driven crazy by watching the day to day action of gold which is destined only to become increasingly volatile.
 
Good gold shares in any category of production will at one point outperform gold 5 to 1.
 
The end of confidence in the fiat money system is behind us. From here on it is structure after structure that is going to fall.
 
The power of the derivative manufacturers is clearly stronger than the combined power of world central banks.
 
Respectfully,
Jim








Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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.