Posted February 7, 2012 at 1:56 am
by Jeff Macke
Unless you owned defensive stocks, 2012 has been an equal opportunity rally. Tech stocks, financials, cyclical names… just about any asset class that isn’t defensive has seen a sharp move higher this year. Both supporting and belying this observation is the price action in gold, typically a safe-haven asset that’s risen 10% so far in 2012.
“We did have a bubble in gold, the bubble popped and we’re now trying to reflate,” says Richard Suttmeir of valuengine.com”
He says that the recent upward trend isn’t as much a return to gold’s past glories but rather a bounce to be sold. For Suttmeier the end of gold’s rally is neigh. He puts the monthly resistance level at $1,836, a relatively minor 6% above current levels, and says a return to levels over $1,900 are a thing of the past.
Naturally gold bugs would disagree, pointing to seemingly endless dollar printing by our government and troubles in Europe as reasons gold will never go out of style as a safe haven. In addition, despite gold’s extended pause, the barbaric metal long-term uptrend support held beautifully towards the end of last year.
None of which is enough to convince Suttmeier to rethink his position. As he sees it, the dollar is going to continue to move higher, almost despite the best efforts of the Fed as there’s simply no where else for global investors to go.
It’s the “best house in a lousy neighborhood” theory of currency investing. If Suttmeier is right, a strong dollar will buy [continue]…
Filed Under: Market Bytes
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Posted December 16, 2011 at 3:55 am
by Barry Goss
Managing Editor / Publisher, The Wealth Vault
Ya know… ya gotta admit, things you hear that can be possible, but rarely probable, are indeed fascinating.
For instance, full end-to-end double rainbows really are cool (er, WARNING, if you click the link and have people around you, not looking at your screen, but only hearing what’s coming from your speakers, they may think you’re watching porn).
So, just as fascinating as what the guy in the link above found (taking his hilarious reaction out of the equation) is how we humans mostly only let common sense ‘sink in’ if the teaching — the reminders — are delivered in a not-so-common way.
Sure, there are things in life we don’t need to be taught to “get” — like how wine really is made from grapes… or… how the meat in a Taco Bell taco really is cow meat (not anything more or less).
But, when it comes to finances and money, man oh man, sometimes a good storyline — a setting of cryptic and hammy proportions — is all it takes to have sensibility again become popular (and inspiring) for us.
Enter what the sheeple — those who easily latch onto popular culture and memes rather than expend energy to think in deeper ways — have made one of the longest-running and bestselling books of all time:
The Richest Man in Babylon.
George S. Clason didn’t write it to be a book. Rather, he started writing parables in 1926 and they were distributed by banks in pamphlet form. The most famous of these parables were later compiled into the book, The Richest Man in Babylon.
The book takes a couple of simple concepts and beats them to death in a series of mind-numbing stories written in old English style writing.
The narrative follows two poor workers, Bansir and Kobbi, as they attempt to gain wealth. They ask advice of their friend Arkad, who is the titular “richest man in Babylon”. Arkad proceeds to use a series of parables to illustrate the financial, or wealth-building, secrets of the so-called “ancients.”
If you like old English, or enjoy Shakespeare, and need an “imagine yourself rich” motivational story, you may like this book.
But, somehow I think you’re already past basic concepts like [1] save a portion of your income (put away X% of your income every paycheck); [2] control your expenditures (don’t spend more than you need to); [3] increase the amount of money you earn; and [4] protect your wealth against losses, etc.
Then again, the world-at-large has apparently clamored for the Aesopian proverbs (like, “Better a little caution than a great regret”) and the yoga-esque platitudes (like, “Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those who are skilled in its keep”) that come along with it.
On that latter, seemingly godly note… current day wisdom just might say: “I only invest in businesses I understand” (Warren Buffet). Yeah, but reaaaaaally, come on. Who wants something so simple; so cut-to-the-chase drab, when they can get an eth or thee thrown in every other paragraph? 
The entire book basically boils down to: pay your bills, save some money, make it grow.
Yet, for the greenhorns coming into a J-O-B with their first paycheck, or for those just getting started in the world of investing, here’s a bit of elaboration on one key word used judiciously throughout the book:
GOLD!
Gold’s Scary Secrets: It doesn’t mean you won’t be wealthy if you don’t have any. Far from it, as it was used to simply signify money, or capital, in the above book.
And, as you’ll soon see, current day money, even in its paper (fiat and legal tender) form, can (and should) be used to increase income and build wealth.
Gold (in “physical” form) can certainly help store the value of your net worth; i.e., the dollar value of your total assets (bank accounts, stocks, real estate equity, etc.) minus the dollar value of your total liabilities (bank loans, credit card debt, etc.)
But, you have to get this distinction: it WAS once used as money. Just like cowry shells, shekels (a weight of barley), and other commodity-driven forms of money were. Yet, they eventually become obsolete due to technology (in my coming DETAILED gold report, I will get into the hype around the gold bugs holding onto the “how every paper-based money has failed, or will fail,” canard).
As a “monetary asset” (yup, regardless of Ron Paul faithfuls’ claim, Bernake was 100% correct with that label; while you can’t pay for dinner with it, you can use it as collateral), bullion (physical gold) is the best hopeful insurance against economic and political disaster (i.e., bureaucrats causing COMPLETE loss of confidence in the worldwide fiat monetary system, as represented through multiple currencies (think: Yen, Dollar, Franc, Euro, etc).
I didn’t add in the word “social” above, as in a breakdown of society, Mad Max style, gold isn’t going to be anything other than a shiny rock to look at. In this far-fetched scenario, the commodities I want on hand are:
Hundreds of 5-gallon Poland Spring Water containers, gasoline stored to run a generator for months, firewood, blood pressure medicine, storable food, Swiss Army knife, Bowie knife, batteries, shortwave radio receiver, and a Remington pump-action 10-gauge shotgun, with sufficient ammo.
Do I spend a waking minute worrying, or even thinking, that the above scenario can (or will) happen? Ah, I think you already know the answer. But, I’ll say it like this:
NO!
Instead, I get enthralled with ideas! Combine those with prosperity-minded people, experience, and technological resources and you can’t help but be part of creating a better world through VALUE and INNOVATION (more on that shortly).
So, here’s the problem with just tossing around the word “gold” without any context, or any understanding of anything about it, except its latest 10-year pricing boom.
Like the flock of believers who get sucked into the exploits of the next traveling faith healer, you also might take a leap of faith to the shiny metal… all because, well, everybody seems to be.
In the August 29 issue of Barron’s, Gene Epstein wrote that “In addition to being a commodity, gold is also a cause.”
Yet that cause has gotten skewed. Again, it should ONLY be used to mitigate risk, purchasing power loss, in true investments. But, like some religions who think that those who unquestionably believe (yeah, just believe) will be rewarded handsomely in the afterlife, extreme gold bugs will tell you if you don’t buy all you can now you’re being led astray by the forces of evil.
Just like Christianity is divided into so many sects, so too is gold: You’ve got the hard bullion people, the people who speculate in the miners, the ETFs, and even spinoff precious metals, like silver.
You also have the really far-out-there, cult-like folks who think they’re actually making long-term, value-based “investments” in the relic metal.
[ Uhmm, let's investigate that some after this managed forex find from Brad... ]
NOTE: The above commentary is the preface to our October 31st member update. To read it’s continuation and the rest of the update, as well as obtain full access to our coveted money-growing Vault, click here… After you join us a full-fledged paid-up member, go to the October 31st member update to finish reading the above commentary.
Or… if you just prefer more no-charge gold bug commentary…
Filed Under: Premium Research - Previews
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Posted December 15, 2011 at 1:22 am
by Mark Hulbert
Gold bugs over the last two weeks have become even more discouraged than they were at the end of November.
And that’s saying something, since they were already quite dejected.
As a result, contrarians detect a very strong wall of worry forming in the gold market, one which could very well be the springboard for bullion rallying into new all-time high territory.
Consider the average recommended gold market exposure among a subset of the shortest-term gold market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI).
Two weeks ago, when I last wrote in this space about a contrarian analysis of gold sentiment, this average stood at 13.7%.
Today it stands at 0.3%, which means that the average gold timer is essentially keeping all of his gold-oriented portfolio out of the market.
To be sure, I reported two weeks ago that, on the basis of the HGNSI being as low as 13.7%, contrarian analysis was already bullish on gold’s prospects. And yet, far from rallying, the yellow metal since then has fallen by more than $100 per ounce. Read Nov. 30 column.
What assurances do we have that contrarian analysis will be any more successful this time around? We don’t, of course.
But it’s worth stressing that contrarian analysis is [continue]…
Filed Under: The Wealth Wire
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Posted December 13, 2011 at 3:42 am
by Francesca Freeman and Rhiannon Hoyle
Gold has taken another dramatic tumble, sliding below the key $1,700 a troy ounce level amid a toxic mix of technical selling, risk aversion and a weaker euro. Indeed, commodities overall have taken a battering.
At gold’s lowest point, the yellow metal was languishing at $1,676.56/oz, its lowest level in two-and-a-half weeks. It was down 4% on the start of the previous week and 2% lower on the day.
While investors market-wide cast a skeptical eye over the fruits of last week’s European Union summit, gold received an extra shove to the downside by technical-selling around $1,700/oz, as a blanket of automated selling-orders were triggered around the key support level, according to traders.
The yellow metal now sits precariously above another band of support at $1,680/oz to $1,660/oz, making it vulnerable to another wave of selling, should this level be broken.
“Gold could be in for a grilling,” said a London-based trader. “The market is going to look as bearish down here as it was bullish on its way up through $1,650/oz.”
Liquidity is also quickly thinning ahead of [continue]…
Filed Under: Market Bytes
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Posted November 16, 2011 at 3:17 am
by Barry Goss
The tools of those that toot gold’s golden horn seem limitless… the pitch for the shiny metal almost unabated.
I’m not going to get into any detailed counterpoints here, as I have covered those with our paid-up members, throughout October, inside the vault.
So, here, I’ll just share the reply I gave to a worn-out, surface-level meme about gold [ this one on a private facebook fan page I frequent ]
Commenter:
“Gold and silver are bound to carry on rising in value because the banking system can’t print them.”
My Reply:
Be sure not to entangle price and value.
In regards to “physical” gold (bullion), wars have been fought over it, weddings sanctified by it, and paper currency (legal tender) pegged to it in the past.
Its price increases due to supply and demand (yes, it’s still that simple) and the demand for such an inert commodity increases when there’s fear, uncertainty and perception of scarcity in the marketplace (yes, it’s still that simple).
Gold, sitting there by itself, does NOT have commercial or business value. It doesn’t spit out interest, dividends, or income. It’s a cashflow-less commodity that has little demand outside it’s historical “psychological” demand as a currency of last resort.
An ounce of it bought at $300 has the same principles, qualities, and intrinsic value of the same ounce bought at $1300 [ Stocks, not so much, as the value changes based on an increase or decrease of productivity, profits, and people capital within a company ]
A gun (outside of one used as a collectible) or something intangible like… say… hurricane insurance — just like a bar of gold — is inert; passive. You have to do something with them to accrue value from them.
In the case of a bar of gold, it’s value can only be relative to those who feel they can use it for something else. Heh, trying going to Wal-Mart with some gold coins tomorrow.
My view:
Should paper currencies (all of whose value can be derived, at any given moment, through exchange rate measurement) collapse you’ll be better served putting value on that gun (and some food), in lieu of gold.
[[ I'll go on record to bet that paper currencies don't collapse in my, my son's, and his future offspring's lifetime as technology and human progress will have a lot to say about that ]]
Gold bandwagon riders continue to jump on the printing-press / devaluation-of-the-dollar spiel, without much research and understanding of how inflation in the first place is not driven by the stock of money [too long to go into here].
Always remember: an investment is not measured by its ability to “hold value” but to increase in value. That part happens by the investment doing or offering something that is usable NOW — i.e., cash-flow, shelter, transportation, etc.
Yes, gold can help collateralize the value of your net worth — i.e. the dollar value of your total assets (bank accounts, stocks, real estate equity, etc.) minus the dollar value of your total liabilities (bank loans, credit card debt, etc.)
Yet, current day money (yes, even it its paper / fiat and legal tender form), can (and should) be used to increase income and build wealth.
If you feel otherwise, transfer the digital dollars in your bank account(s) my way and I’ll then grow those digits and then sell / trade some for a few ‘hands-off’ income-producing assets
The anti-flame war qualifier: to prevent any ODD sudden reactions to the title of this blog post, keep one thing in mind: I promise you that I won’t go to money purgatory for being okay with desiring dollars.
But, if you’re the type who thinks everybody who does is evil and only if they believe as extremely as you do about the “other way” (gold), will they survive.. you need help.
So, I’ll cut right to the chase:
Whether you should be buying, holding or selling physical gold today will depend on your personal circumstances, which include your net worth and how much of it is or isn’t already backed by value-increasing and/or inflation-protecting assets; your level of suspicion against our fiat monetary system and whether it can or will be sustainable during your and your children’s life; and your level of fear for a financial doomsday scenario.
Filed Under: High Jinks
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Posted November 1, 2011 at 1:55 am
from MoneyEnergy
Over the past 24 hours, the price of gold has plunged as much as $104/ounce, or 10%, ahead of what looks to be an imminent Greek debt default.
In fact, the past three days have seen the largest consecutive drop in gold prices in 28 years!
The question is why, you might ask. Debt problems in the Eurozone would usually encourage investors to flock to the golden “safe haven,” would they not?
In the face of the debasement of currencies worldwide (prompted by the massive quantitative easing led by the Federal Reserve – a process known as exporting inflation), the past year has seen gold climb astronomically, particularly in the summer of 2011.
So what’s changing now?
The fact is that institutions are clamoring to sell gold in order to take cash and keep cash positions. This could be for a variety of reasons. One, gold is seen as having [continue]…
Filed Under: Market Bytes
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Posted October 19, 2011 at 11:02 pm
by Michael Babad
The gold market is suffering “very real damage,” warns economist Dennis Gartman, who fears that the rally from September’s lows is “now under assault.”
The rally was always disconcertingly tepid; that is, after a vicious decline such as that seen in late August until late September, the bounce, if the market is truly healthy, should have been even more vigorous. It was not, and indeed if anything it was tepid, quiet and placid,” the publisher of the Gartman letter said today.
“Tepid placidity all too often gives way to vigorous selling sooner rather than later.”
Mr. Gartman cited several possible reasons – margin call selling, for example, or central bank sales – and said that “caution and some liquidation are in order before others beat us to the punch.”
Gold is well down from its peak of more than $1,900 (U.S.) and ounce before September’s dip, and several factors are playing into global markets overall, whether they be the troubles of the euro zone, worries over the U.S. economy, or fears of China’s economic growth slowing down.
“The problem with all this is it’s getting tricky to work out what gold’s reaction will be if there was a rescue plan [for Europe] or there isn’t a rescue plan or there is a downgrade and so on,” Mitsubishi analyst Matthew Turner told Reuters.
“The only rational conclusion I can draw is internal factors in the gold market are moving around and establishing a new [continue]…
Filed Under: Market Bytes
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Posted October 5, 2011 at 3:05 am
Market indicators point to gold nearing a major bottom.
by Przemyslaw Radomski
Recently, investors suffered an average market decline of 6.5% in the equity portion of their investments, the largest fall since the dark days of October 2008, with $1 trillion of paper wealth evaporating in the process.
Speaking of October 2008, it was then that gold prices tumbled 18% as turmoil in global financial markets led to losses in global equity and commodity markets. The precious metal rallied 23% in the next two months.
So why did precious metals take such a fall? As my firm’s correlation matrix showed, over the past few weeks gold had decoupled from stock markets and every time stock markets sold off, gold would rise as investors would seek it out as a safe haven.
However, the Chicago Mercantile Exchange, or CME, began raising the amount of margin it required to buy a gold future with three raises since July.
In total, margins have risen by $5,400. (You had to put more money down to invest.) If you recall, the same thing happened with silver when it went parabolic in the spring.
The CME raised margin requirements four times, amounting to an 84% hike. At that time silver also sold off. Then again, historically, margin hikes are known to be much more important for silver than they are for gold, so it seems there must have been more to the bearish case than just margin hikes.
Another factor influencing the drop was [continue]…
Filed Under: Market Bytes
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Posted September 22, 2011 at 11:42 pm
by Charles Sizemore
World stock markets are down this morning on renewed worries of a Greek default. Adding fuel to the fire, President Obama’s proposal to levy a new tax on millionaires—dubbed the “Buffett Rule” after being suggested by billionaire superinvestor Warren Buffett—has drawn a sharp rebuke from Congressional Republicans and threatens to unleash more political instability on a crisis-weary public.
And U.S. homebuilders, citing the effects of never-ending foreclosures, are even more despondent than feared according to the National Association of Home Builders survey released this morning.
With the finance world appearing to teeter on the edge of disaster, one might expect that standby crisis hedge—gold—to rise.
Yet a funny thing happened this morning. The price of gold actually fell sharply.
The spot price of gold has continued to drift lower after surging to new all-time highs above $1,900. As this article is being written, the price has fallen to $1,783 and appears to have lost all momentum.
Gold’s recent weakness comes even as competing crisis hedges have lost their luster. The Swiss National Bank took a sledgehammer to the Swiss franc two weeks ago, pledging to lower its value against the euro. The tactic worked, sending the franc down nearly 10%. U.S. Treasuries—considered by many to be the ultimate safe haven for their liquidity—now yield far too little to be attractive for most investors. The 10-Year note yields a miniscule 1.95%.
Gold’s recent action should be deeply disturbing to gold bugs or to [continue]…
Filed Under: Market Bytes
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Posted September 15, 2011 at 2:24 pm
by John Spence
The pullback in gold prices to under $1,800 an ounce is testing the conviction of investors who chased the rally with exchange traded funds.
SPDR Gold Shares (NYSEArca: GLD), the largest precious metals ETF with about $71 billion in assets, was up about 28% year to date through Wednesday’s close as investors have sought shelter from Europe’s debt woes and economic uncertainty.
However, gold and silver ETFs have traded lower this week and broken support trend lines from the summer.
Gold exchange traded product holdings rose to [continue]…
Filed Under: Market Bytes
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