Swiss franc suggesting that gold to be flat for years…

Posted September 1, 2011 at 7:40 pm

by Chris Kimble

I understand if you are thinking “NO WAY” after reading the title of this post. Odds do seem very low that this could happen. So why say such a thing?

The chart here covers a 30-year time frame for both the Swiss Franc and Gold.

When the Swiss Franc has hit resistance line (1), gold has traded flat to down for years to come. How interesting that multi-year resistance is coming into play for both of these at the same time that GLD has become the largest ETF in America.

Crowded trade?

[ Source: Advisor Perspectives ]

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Drunk on gold, high on silver.

Posted July 28, 2011 at 3:54 am

by Joshua Brown

Is gold money?

That’s the question Ron Paul famously asked Dr. Bernanke on the Hill last week and the question on many of your minds.  Bernanke’s answer, presumably inspired by a late-night viewing of Fiddler on the Roof, was that gold’s value is basically “tradition”.  That answer was hilarious, btw.

I have a few smartass remarks to make here about gold, and before you guys howl at the moon and come after me, please understand that I’ve had gold as a part of the portfolios I manage for over four years now via ETFs and active managers with big allocations toward the precious metals.

Anyway, gold has, at times, been more like a drug than like money.  The Spaniards in the 16th Century were like meth addicts for gold; their lust driving them across the oceans to slaughter millions of people in an endless quest to melt down as much of it into the shape of a cross that they could.  And like all the best drugs, gold (and the pursuit of more gold) deluded the conquistadors into a sense of invincibility.

You’ve heard of “Beer Muscles”, the phenomenon during which an intoxicated man is convinced that he can fight the entire bar?  Well Gold Muscles enabled Francisco Pizarro, a very ordinary campaigner, to march a starving, bedraggled army from Panama to Peru.  Upon his arrival in 1532, with only 180 men left and a handful of horses, Pizarro’s gold muscles led to his conquest of 30 million Incas in half an hour – they take Emperor Atahualpa hostage and demand that the Incas bring them every shiny object in the kingdom (the entire west coast of South America) that’s not nailed down.

And when that ransom is paid, they kill Atahualpa anyway – drunk on gold, high on silver.

These days, gold has morphed from being a drug into being a religion.  I’m long but not religious about it.  To me it’s a trade.  Gold is an ETF.  So long as the uptrend is intact, I’m happy to be a part of it all, but I’ll lose my religion faster than Michael Stipe should it feel “over-ish”.  Gold is a trade, a “play”, a tool to express a popular theme. 

Not money, but a means of getting more money [continue]…

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Has the fear trade ended?

Posted July 26, 2011 at 10:34 am

by Wade Slome

Ask any average Joe off the street what investment category is at or near record all-time highs, and a good number of them will confidently answer “gold,” as prices recently eclipsed $1,600 per ounce. But of course this makes perfect sense, right?

The Fed is printing money like it’s going out of style, the dollar is collapsing like a drunken sailor, inflation is about to sky-rocket to the moon, and China is on the verge of becoming the world’s new reserve currency. Never mind that Greece, Portugal and Ireland are in shambles with the Euro on its death bed.

Or Japan has achieved a debt to GDP ratio that would even make U.S. vote grubbing politicians blush. A sub-3% 10-Year Treasury Note doesn’t appear to discourage fervent gold-bugs either.

No Respect

While gold has experienced an incredible sextupling in prices over the last decade and hit new-all time highs, believe it or not, there is an unlikely asset class that is reaching new historic highs and has outperformed gold for almost 2.5 years. Can you guess what asset class star I am talking about?

If I said U.S. “stocks,” would you believe me [continue]?

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Sovereign Debt to Drive Gold Prices

Posted July 7, 2011 at 1:36 am

Massive sovereign debt issues will drive gold prices through 2011-12 making gold and gold miners a strong buy Shayne Heffernan said today.

The sovereign debt challenge, now the top priority for many advanced economies to tackle, is broader than in the euro area, said Christine Lagarde, the newly- appointed managing director of the International Monetary Fund ( IMF) on Wednesday.

“The issue is broader than in euro zone,” Lagarde said at her first press conference as the new head of the 187-member international financial institution, citing that the debt crisis in Europe, particular in Greece is “immediate” and “pressing”.

Moody’s warned that Lisbon could not meet the reform requirements of its first 78-billion-euro (112 billion U.S. dollars) IMF-European Union bailout and would need a second rescue package.

Meanwhile, Greek fiscal condition remains in danger. The European Union and the IMF are in intensive talks about the rescue plan.

Ireland, the other euro zone country to have received a bailout, said on Tuesday it may have to make additional spending cuts next year to meet deficit reduction targets in its 85 billion euro bailout plan due to economic slowdown.

These European countries’ fiscal deterioration could come to test the IMF’s commitment to eurozone stability.

“Those issues can not wait,” said Largarde. “A lot should be done by economy players.”

In the most recent International Monetary Fund projections, Italy’s headline debt will reach 120 per cent of national output this year, and then decline only slightly to 118 per cent by the end of 2016.

Italian bonds last week yielded about 4.9 per cent, with the spread over German bonds widening to about two full percentage points (in contrast, the Greek-German spread is now about 13 percentage points). Further increases in interest rates could push the forecasts for Italy’s debt toward Greek levels.

Italy, though, has close to 2 trillion euros in debt outstanding. It’s inconceivable that Germany or the IMF could provide a rescue to protect its creditors. Such a package would have to involve loans and guarantees of at least 500 billion, and possibly 1 trillion, euros to impress the markets. This would be a significant fraction of Germany’s gross domestic product of about 2.5 trillion euros. With a debt-to-GDP ratio of about 80 per cent, Germany’s ability to take on new debt is limited.

She noted that debt issue is a wide challenge for many other advanced economies, including the United States, which is also at the risk of default if the country could not lift its borrowing limit in time.

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

 

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Gold is NOT an Investment, Part 2

Posted July 5, 2011 at 2:50 am

Another Wealth Wire post that takes some level-headed and sensible air out of “gold bug” land is here.

Now, onto Peter Brandt:

Owning bullion is a fool’s game, unless society as we know it morphs into absolute economic and social chaos — at which point I would rather own orange juice, canned soup and toilet paper than bullion!

I know all the story lines given by bullion bulls. Just some of them include:

  • We have reached “peak” Gold.
  • Inflation is inevitable, given the monetization of government debt.
  • Only real assets are real assets.
  • The U.S. Dollar and all paper currencies are not worth the paper they are printed on — fiat currencies will prove worthless.
  • And on and on it goes…frankly, folks, the same song has been sung for decades. Same song, 70th verse!

Let’s assume for a moment you are a Gold…Silver…Platinum bull. Let’s assume that all the bullet points above prove to be spot on. Let’s assume that being a bullion bull is the smartest thing going.

If… when… the day of judgement comes, is a person better off owning bullion or the companies that produce that bullion?

Putting aside for a minute the argument that the world will return to a barter system of commerce (in which case we would all have bigger problems than where to hide our bullion), let’s allow history to guide us on whether buying bullion or buying the stock of bullion producers is the better speculation or investment.

Full article…

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“Gold is not an investment. It is money,” says James Turk

Posted June 23, 2011 at 1:14 am

James Turk of the GoldMoney Foundation speaks about currency devaluation and the rising gold price. He also explains why gold should be considered money and not an investment.

“When you’re looking at gold, it goes into the bottom part of your portfolio, the liquidity part of your portfolio. And when you’re evaluating whether you want to own gold, you evaluate it against other currencies of the world, other monies of the world,” he said.

Watch the 14-minute presentation here…

 

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With a rising dollar, do gold bugs need to seek cover?

Posted June 15, 2011 at 3:55 am

by Alexander Schachtel

The US dollar continues to sway in trading this week, down big against the Euro today after posting substantial comparative gains through most of last week.

Gold (NYSE:GLD) and Silver (NYSE:SLV) prices, which are generally thought to move inversely with the dollar, have shed some value in trading in that span of time.

Combine indicators signaling a possible slow-down in the Chinese Economy and an increasingly likely Greek -default scenario in Europe and you may see the dollar continue to rise against two of the world’s leading currencies.

So if the dollar finally starts to gain significant momentum, do the gold-bugs have reason to seek cover and latch on to other commodities? George Soros, the investment tycoon and philanthropist, recently sold the large majority of his funds’ holdings in Gold, having opined that the gold market is officially in a bubble.

As QE2 nears its end expect more inflationary pressure on the dollar to be lifted leading to further appreciation in the value of the greenback. It is starting to look like Soros is on the money once again.

All told, the future market prices for Gold (NYSE:GLD) and Silver (NYSE:SLV) may hinge more on the success of the current economic recovery than anything else.

Dollar prices will be more swayed by…

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Gartman Feels Party is Over For Gold

Posted June 12, 2011 at 7:45 pm

by Nicholas Larkin
via June 3rd Bloomberg Article

Dennis Gartman, the economist and editor of the Gartman Letter who correctly forecast 2008’s commodities slump, cut his gold position by half today and said yesterday’s drop makes him “nervous” that it may keep falling.

The metal fell as much 1.3 percent yesterday after earlier this week trading within 1.8 percent of the all-time high a month ago. Gartman cut his gold holdings in all currencies. Gold in euros and British pounds rose to records since last week.

“For the first time in a very, very long while, we are a good deal more nervous than we have been about the trend,” Gartman said in his Suffolk, Virginia-based Gartman Letter. “We fear that yesterday’s sharp break that took gold down to $1,520 in the veritable twinkling of an eye was the harbinger of even more severe weakness that might soon develop.”

Gold may fall “swiftly” to about $1,480 an ounce as early as the next few days, he wrote. Gold for immediate delivery dropped $6.27, or 0.4 percent, to $1,527.30 an ounce by 1:07 p.m. in London.

Gold has gained 7.4 percent this year and touched a record $1,577.57 an ounce on May 2 as faster inflation, Europe’s debt crisis, a weakening dollar and unrest in the Middle East and north Africa boosted demand for a protection of wealth. European Union and International Monetary Fund officials today complete a review of Greece’s plan for 78 billion euros ($113 billion) in asset sales and austerity measures as they prepare the nation’s second bailout in little more than a year.

Full article…

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Gold is a defensive asset – bar none!

Posted June 9, 2011 at 11:10 pm

Here is a key excerpt from one of the most elaborative, smart, and level-headed (non-ideological) articles available online about gold — its price movement, it’ purpose in an investment portfolio, its history, and why if you should even care.

With respect to the price prospects for gold itself, it needs to be said up front that nobody knows where it will sell next month, next year or ever. Gold is a commodity; a very special one, but a commodity nonetheless.

As such, its price tends to be volatile. If stocks and bonds generally were trading at more attractive prices relative to estimated future cash flows, we might have little or no interest in owning gold as an investment.

But those two traditional asset classes are, in our opinion, somewhere between expensive and very expensive. We invest in stocks very selectively when we find well-run businesses at attractive valuations.

Our core belief as capitalists is that the two most effective ways for citizens of free countries to cope with the risks of currency manipulation by the monetary establishment are:

  • To support the election of candidates most likely to pursue sober and transparent fiscal and monetary policies.
  • To invest their savings in global, prudently managed, legal businesses. Business, we think, is in the best position to contend with weak currencies and other threats to prosperity.

We have a saying: “Businesses can adapt, bonds cannot”.  So, our philosophical bias is toward equities. We regard gold as a defensive holding that is sometimes necessary… now is one of those times.

As to the specific challenge of valuing gold bullion, James Grant, one of the truly elite money mavens, (www.grantspub.com) puts it well, we think:

You can’t value a non-earning asset, even though you can pretend to. Gold’s valuation takes the form of a fraction: 1/n, where ‘n’ is the world’s confidence in paper currencies and the mandarins who manipulate them.” He goes on to say that, “Regrettably, ‘n’ is not quantifiable.”

In a way, that is the essential mystery of gold, isn’t it. There is no dependable metric for gold’s valuation comparable to a P/E ratio for a company’s stock or the “real” yield on a sovereign bond.

The total value of investment gold is, as we have seen above [see link to entire article below], tiny compared with traditional asset classes, and gold’s physical supply tends not to respond very much to price changes the way other commodities do.

So, what we have is an asset whose price can change rather dramatically in response to shifts in “currency confidence” which is impossible to quantify.

[ Details / Source: Above is our hand-picked KEY excerpt(s) from this full article: "GOLD—Relic or Real Money?" ]

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When to Sell Gold or Gold Shares

Posted June 7, 2011 at 1:17 am

by Emily Knapp

This year, market-guru George Soros dumped around $800 million of Gold (NYSE:GLD). Now people are wondering if it might be time to jump ship. If Soros is getting out now, what does that say for the future of the gold market?

While it’s true gold (NYSE:GLD) has been bullish for a 12-year run now, and that one should expect the floor to fall out at some point, that’s unlikely to happen before it hits its blow-out phase, when share prices will go through the roof. Until that happens, there is still more money to be made.

In July 1999, gold (NYSE:GLD) hit a 20-year low at $252.80 an ounce, but since then it has steadily recovered, reaching a record high of $1,575.79 an ounce — that’s a 623.23% increase in value over 12 years.

If you bought in in 1999, maybe you’re ready to sell as you kick back on your yacht in the south of France and fan yourself with crisp hundreds. Selling too soon at least avoids the risk of selling too late.

For gold (NYSE:GLD) to move into bubble territory, we’ll have to see a…

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