Tuesday, January 22, 2008

Gold Steady as She Goes – Oops!

Gold ended up at 858.75 at the last count for the day.

Talk about slipping on a wet floor. The bear markets have yanked golds chain and gold dropped to the below the level it was on January the 7th., but the good news is it started to perk up almost immediately.

As the word markets 'tumble for ya', gold will be seen as the investors haven and there is an opportunity for a sharp eyed gold investor to grab what he can before it starts its stratospheric climb again.

When to buy gold!
Remember when someone sells it means someone has bought, and visa versa. The trick is to be the one buying at the bottom.

But in reality anytime is a good time to buy gold. One isn't buying gold, one is preserving ones assets. The value of gold throughout the ages has always maintained its stability come what may. Nations may come and nations may go but gold rules forever!

Saturday, January 19, 2008

Chinese Love Affair With Gold

An alternative investment is increasing in China, the appeal of gold as its price hits new highs and analysts forecast the gold price to keep rising in the mid to long term.

The recent strong upward trend has attracted many individual Chinese investors such as Yao Yun, for example.. The chief financial officer of a Shanghai-based foreign company bought 50,000 yuan ($6,849) in gold bars and the price has risen by 12 yuan per gram in just half a month.

"I believe the price will keep rising," he said. "The stock market is too volatile, and the real estate sector is subjected to macro-control. Investing in gold is a good choice at this time."

In the Caishikou Department Store, a popular physical gold dealer in Beijing, over 100 people lined up to purchase bullion for the Lunar Year of the Mouse on November 22, last year. the first trading day of the products. More than 200 kilograms of the gold bars were sold within 1.5 hours. The total subscription amounted to two tons of gold.
Li Xiang, a manager of the department store, said, at the time, sales of gold products surged more than 50 percent to 2.38 billion yuan in 2007.

A leading gold products manufacturer in the country, Zhongjin Gold Cooperation Limited, stated that its bullion sales had kept a steady growth of 50 percent month-on-month since July last year.

And the China Gold Association has just release statistics revealing gold investors nationwide have exceeded 1 million.

That number doesn't include speculators of gold futures, however, which made a strong debut in Shanghai on January 9th when China gold futures contracts surged to the daily 10 percent limit minutes after trading started at 9 a.m. on the Shanghai Futures Exchange. More than 6,000 clients traded on the market.

Many experts believe the China gold futures market will grow into a leading global market as it was launched at a time when international gold prices have repeatedly been hitting new highs. Global prices jumped more than 30 percent throughout last year, representing the biggest increase since 1979.

China is truly having a love affair with gold!

Friday, January 18, 2008

Gold, Steady as She Goes!

Gold bounced up this week with opportunists looking for a good bargain after a fall of just over 4% from the high of 915 an ounce last week.

"Gold is consolidating after touching recent highs," said Christoph Eibl, head of trading at Tiberius Asset Management, noting that there had been some investor selling of gold held in exchange-traded funds (ETFs).

"ETF investors ... are holders rather than traders, therefore the recent drop has some strength." he added.

Gold's investment appeal remains intact however, unlike the mortgage and currency markets still suffering turmoil in the US and with no end in sight.

Barclays Capital said in a report,"External factors such as higher inflation expectations, broader economic concerns, geopolitical tensions and Fed rate easing are likely to drive prices higher."

"On a fundamental basis mine supply remains constrained and physical and investment demand should emerge upon price dips providing a price floor," it continued.

It seems likely that gold will maintain a steady increase but will be more than a week before the 900 is reached again. It seems probable it will stay within the 870-890 range before peaking at around 887 per ounce.

So there is still some time for bargain hunting before gold starts its big climb again!

Gold EFT investors take a Profit

StreetTracks Gold Shares, one of the biggest Gold EFTs around, saw redemptions of 21.51 tone of gold worth over 600 million dollars last Wednesday. Current holdings of StreetTracks totals 631 tones or twice that of the Bank of London.

This would account for the drop in gold as greedy investors decided to cash in and walk home with the dosh.

In fact gold futures dropped 3 percent at one point and caused some order imbalances on the electronic exchanges according to some traders.

The selling came immediately after gold topped the 900 dollars mark in New York.
ETFs have come along way since the first gold EFT opened on the Australian Stock in 2004.

Shortly after that time, analysts, such as Michael Porter for Lipper USA, voiced the expectation. "I expect this to be a blockbuster, because a lot of institutional investors who might not have been mandated to own gold other than mining stocks will finally be able to get directly involved in the gold market," Lipper told reporters.

Never has this prophetic statement been so true as recently demonstrated by the StreetTracks investors taking a profit.

Some analysts are expecting those investors to start buying in again now the price has dropped.

Wednesday, January 16, 2008

Aussie Gold Rush Strikes Again!

The soaring gold price on the international market has sparked a gold fever in Australia.

As they watched the price of gold climbing up ordinary Australian Mums and Dads have started to snap up gold bars and coins, ingot, even medallions and shares on gold bullion companies.

Australians remember well the "recession we had to have" as announced by the then Australian Treasurer Paul Keating in the early 1990s. This time they are determined not to be caught out and gold is fast being seen as a safe haven from a possible impending recession as a result of the US economic turmoil.

"Traditionally when markets are a bit shaky, investors turn to gold as a safe haven," said one commodities dealer.

Business has also been brisk at the Perth Mint shop, which sells actual gold bullion bars, ingots and coins worth anywhere from $500 to several million and total sales have jumped by almost 50 per cent in the past six months.

Perth Mint treasurer Nigel Moffatt said mum and dad investors, especially those running self-managed superannuation funds, were shelling out an average $150,000, but some buyers were pouring millions into the glittery metal. "There are a lot of people in Australia with a lot of money to invest who are quite nervous about the stock market and see gold as a solid investment that has been around for 5000 years."
Manager Cathy Anza commented that 75 per cent of sales in the past month have been to first-time investors.

"People have been watching the price moving upwards and are hoping it will keep going," she said.

"When times are tough, people take a lot of comfort in gold because they like to have a physical asset they can hold."

Ms Anza said buyers often stored their gold bullion, delivered by armored vehicle, in bank safety deposit boxes.

An Aussie gold rush is on again!

Gold Going Down or Gold Correction?

Since hitting the all time high of 914 dollars an ounce gold has been dropping and is now in the 870 to 890 range. A big fat drop it would seem.

But the economy has not changed. Yes, the dollar has strengthened slightly (whatever does that mean? You can't tear it in half anymore?) and oil is lower. But that would not account for such an "interesting" drop. The demand for gold has not changed. The value of gold has not changed. Only the value in dollar terms. So what has changed?

The higher the value set on a commodity the bigger will seem the drop. Instead of saying, "Wow, gold dropped 20 dollars today!" Perhaps one should be looking at the percentage of the drop. "Oh gold only dropped 2 percent today." That give a better perspective.

The drop is slight. Part of the day to day ups and downs, the parry and thrust.

So what has changed?

Profit taking. That's what has changed. Many people bought into gold when it was in the 600 to 800 range. Now maybe because they emotionally believe it is too high, or maybe seeing a good profit to be made, some are selling out and raking in the profits. This is what has bought the price down.

"There has been a reversal of recent trends and the dollar has strengthened and oil and commodities have sold off from overbought conditions," said Mark O'Byrne, analyst at Gold and Silver Investments Ltd. "Corrections in most markets were expected as recent movements had been sharp."

Now that the profit takers are sitting home at the kitchen table counting their money, gold is likely to return to its busy trend. UPWARD.

There is still a long way to go for gold to reach its true value against the dollar That one thousand dollar gold price can be seen in the distance now.

And it is getting closer.

Why Gold?

Why gold indeed. It is often said that money talks. Well, if money talks then gold screams.

Gold has been steadily climbing since the turn of the millennium and if that is not a scream I don't know what is.

It has been said that "the price is being driven by growing investment interest, safe-haven demand and strong market fundamentals." Actually it is more driven by the decreasing value of paper currency. In addition to that we have a stronger than ever Asian interest in gold unparalleled even in the 1980s. China, is buying gold as if there was no tomorrow and the stocks of gold increase by only 2 percent per year meaning that soon it is going to be in very short supply.

Apart from some expected profit taking, gold is now in the 900 dollars an ounce range and analysts are expecting that magic 1000 dollars an ounce to be reached early this year.

Then it will be time to break out the champagne.

But what does this mean to the fellow in the street? It means everything in short. Gold is the barometer of finance. It is the handkerchief fluttering in the wind. The canary in the gold mine. The wind up the Khyber Pass. In short gold tells you what the state of the economy is.

Inflation could be said to be an increase in prices or a decrease in the value of the currency mostly cause by too much money in circulation. How can that be, some might ask. "I don't have too much money," I hear someone say!

Inflation is not caused by ET or strikes or greedy company CEOs. It is caused by printing more paper money to pay for more debt created by banks using the fractional system.

Meyer Rothchild once said, "Give me control of a country's money and I care not who makes the laws".

The apparency of inflation is that prices, like oil for example, are going up. But the actually value of products and services is not going up. The dollar is going down in value and so it takes more of them to buy the same product or service. This is not the case with gold. In 1900 one ounce of gold would buy you a very nice men's suit in London. Gold was about 20 dollars an ounce then. Today you can buy a very nice men's suit in London for one ounce of gold. I bet you know how much gold is per ounce today.

The difference, of course, is the drop in the value of the dollar. Hence higher oil prices, Higher property prices. Higher food prices. Higher everything prices.

So when you read about greedy oil companies, or high property prices know that it is not true. The value of commodities are not rising. The dollar is falling.

So Why Gold
"The central banks are flooding the market with paper. Does anybody now take the dollar, the euro or the pound seriously? People are turning to gold because it is the only hard store of value."
- Peter Hambro of Peter Hambro Mining

There is 641.81 tonnes of gold held in the vaults of StreetTracks gold ETF (exchange traded fund) for private investors. They are the 7th largest holder of gold in the world. Impressive when you consider that most of the gold holdings are owned by banks. This is a private company, not a bank. This fund only began in 2004 so is only 3 years old.

Evidently private investors, in the face of ineffectual economies, are turning to gold as a safe haven and a protection from the Begger-thy-neighbour practice*

Bond guru at Morgan Stanley, Joachim Fels has stated that the central banks will tolerate an upward creep in the underlying level of inflation because the pain required to kick the habit at this late stage is deemed too high. "I strongly doubt that they will tighten the screws. I expect 2008 to mark the beginning of another global liquidity cycle."

So there is to be no relief anytime soon it seem as far as the economy, inflation and value of the dollar is concerned.

So it is no surprise that gold is valued so highly.

Objections to Buying Gold
A gold analyst recently gave the following responses to objections to buying gold.

You can't eat gold
Response: So? You can't eat paper money either. Gold isn't in competition with food. It is in competition with paper money.

You can't put gold into your car's gas tank
Response: You can't put gasoline in your pocket either. See previous response.

Gold is only worth what someone is willing to trade for it
Response: That is true. It is also true of paper money. The difference is that to get gold you have to find it, dig it up, smelt it, and coin it. The stock of gold usually only grows at about 2 percent a year. Paper money, on the other hand, can grow by infinite amounts because all you have to do to create it is punch some keys on a keyboard. This is why gold retains its value and paper money always becomes worthless in the end. For example, in 1899 London an ounce of gold would buy you a nice men's suit. In today's London an ounce of gold would buy you a nice men's suit.

Now compare that to the purchasing power of a U.S. dollar.

Gold isn't money
Response: Then why do Central Banks around the world have 13,000 tons of it in their vaults? Why would a bank put something into their money vault if it isn't money? "But they are selling it," you say. Well, they are buying it to.

There's not enough gold around to be a currency today
Response: Not at today's gold prices there isn't. But then there is no reason for gold to remain at today's prices.

When currencies collapse you want a gun, not gold
Response: First of all, when whole societies collapse only precious metals are money. Nothing else is (for example, Roman coins were used as money for centuries in Europe after Rome had fallen). Precious metals became money without government coercion, and when the government becomes powerless, precious metals will return as common currency. Because unlike paper, precious metals aren't built on debt.

Secondly, every idiot in the country (USA) has a gun. Your gun isn't going to impress them.

Thirdly, society rarely collapses when its currency does. A good example is Weimar Germany. History is filled with examples of paper money becoming worthless, impoverishing whole sectors of a nation, and then the nation moves on and learns from the mess for a couple generations before they make the same mistakes all over again.

Gold is a bad investment based of its track record since 1980
Response: The argument sounds good on face value, but not if you look closely.

First of all, gold spent all of two trading days above $800 in 1980. So extremely few people bought gold at the top of the 1980 mania, thus very few people lost the kind of money that gold-haters like to portray.

Secondly, the same people who criticize gold as an investment probably won't tell you to never buy tech stocks, despite the fact that a lot more people bought NASDAQ stocks near 5,000 (and lost quite a bit more) than ever bought gold near $800. The lesson here is: don't buy into a mania.

Finally, and most importantly, people didn't start buying gold in 1980. People have been buying and selling gold for 5,000 years. It has a track record that almost no other investment class can beat. It neither gains value or loses it. It just sits there...retaining value.

Gold is a risky investment
Response: Gold is probably the safest investment you can make. Looking at the chart above, there is really only one instance in history that caused gold to make a dramatic fall - Spain dumping stolen Incan and Aztec gold onto the market. Barring a half-mile wide asteroid made of solid gold hitting the Earth, that is unlikely to ever happen again. The huge gold strikes in California and South Africa barely even made a dent in the price of gold.

So there is the answer to the question, why gold. Gold keeps its value even while the dollar doesn't. Besides, you never know when your going to need a new suit.

*An international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners. http://financial-dictionary.thefreedictionary.com/Beggar-thy-neighbor

Wednesday, January 9, 2008

Chinese Gold Futures

Chinese gold futures made a strong debut on the Shanghai Futures Exchange (SFE) on Wednesday amid a world wide bull market for gold.

In a time of potential impending recession in the US, rising oil prices and property not seen as quite the favorite anymore, gold is being seen as a safe haven for investors world wide not the least by the astute Chinese business market.

The June delivery contract made a strong start surging 9.98 percent to 230.95 yuan (around 31.54 USD) per gram. Other daily limit contracts rose for July through to December delivery.

Contract size was set at 1000 grams. This is over three times the original envisaged but was out in place to discourage individual investors.

Analysts said they believed most futures brokers will ask for a 12 percent cash deposit for each contract and investors would need around 24,000 yuan to secure a futures contract.

The most active June contract closed the first trading day at 223.3 yuan per gram, up 6.34 percent, with a turnover of 23.2 billion yuan, according to the SFE website. The total turnover of the seven contracts was registered at more than 27 billion yuan for the day.

After peaking at 230.99 yuan all futures dipped slightly to end up at between 223 yuan and 228 yuan at the close of the day.

China gold futures trading was launched as international gold prices have repeatedly hit new highs. Global prices jumped more than 30 percent last year, the biggest increase since 1979 and look set to jump even higher in the first part of this year.

China now looks set to be a big player in the gold futures market

Tuesday, January 8, 2008

Gold Coin Goes from 20 Dollars to Half a Million

Buy a gold coin for 20 dollars and sell it for half a million dollars. That's what Douglas Winter, a Portland USA coin broker did. He bought a 1856-O Double Eagle, the rarest gold coin struck at the New Orleans mint in November last year and sold it in Dec the 17th for a hearty 542,000 US dollars.

The New Orleans Mint struck only 2,250 of these coins and only 20 to 30 are known about today, according to Douglas Winter, who does business from a Pearl District loft as Douglas Winter Numismatics and wrote "Gold Coins of the New Orleans Mint, 1839-1909."

Owning one of these coins, he stated, is like an art collector landing a Raphael painting.

"It is a true classic rarity," agreed Gary Adkins, a coin dealer in Minnesota and president of the selective Professional Numismatists Guild, of which Winter is a member. "If you were a collector, this would be a crown jewel of your collection."
Winter bought the 1856-O -- slightly larger than a half dollar but nearly three times its weight -- for $525,000 from a St. Paul, Minn., dealer. He sold it to a New England collector he declined to identify to honor his privacy.

The coin is well known for its almost perfect appearance. A full strike of the die in all areas of the liberty head and eagle figures, and the satiny luster and shadowing around each star, according to CoinFacts.com. The New Orleans mint started making gold coins in 1839, closed during the Civil War and reopened from 1879 through 1909. The double eagles were the largest denomination of gold coins. The smallest was a gold dollar piece.

The sale underscores interest in these little vessels of American history. Winter and Adkins also said interest in gold coins, especially, is expanding as investors look to diversify in the face of fading real estate and stock markets.

But Winter said his typical customer is a baby boomer guy -- like him -- who grew up collecting Lincoln pennies, could never afford the prized 1909-S Vdb penny, and now has the money to indulge his interest.

Winter, 48, moved from Dallas, Texas, to Portland two years ago for the lifestyle. And while he has, on occasion, obtained and sold coins for more than this double eagle, he said handling this one was a thrill.

"That gave me some goose bumps, to be able to buy and sell a coin that was so rare and at that price level," he said. "It was really one of the highlights of my year."

Thursday, January 3, 2008

Gold Futures up Again for the Second Day

Gold futures were up again for the second day running pushed by a weakened dollar and ever increasing oil prices. Oil is over that magical 100 dollars a barrel and gold is now well over the 850 dollars an ounce. Gold is evidently being seen far and wide as a safe haven investment.

In the futures, gold for February delivery rose $8.60 to $868.60 an ounce on the New York Mercantile exchange. Also February silver added 17 cents to $15.40 an ounce, while February copper gained 7.85 cents to $3.1380 an ounce.

The confidence in gold as a short and long term investment is clearly demonstrated by the gold futures now maintaining a steady climb to what some analysis see as a new plateau for gold. 1000 US dollars an ounce is now not out of the question and this could be reached in the first quarter of the year some analysis predict.

On Wednesday, gold prices around the world hit a trading high of $864.50, marking an almost historic 30-year record in what's known as front-month trading of gold contracts; the previous high was $850. Gold prices have increased over 3o percent in 2007. A great investment by anybodies standard.

"The euro continues to tick a little higher, and that's supporting the gold market," said James Steel, a precious metals analyst at HSBC. "If you combine that with the uptick in the oil price, you have a cocktail that is positive for bullion."

According to Jon Nadler, an analyst with Kitco Bullion Dealers, a gold buying spree by investment funds also propped up gold Thursday, the second trading day of the new year.

"The funds' Godzilla-sized footprint is really evident today. They have a lot of money to play around with, and it's helping gold," Nadler said.

The surge in the price of oil - which hit $100 a barrel for the first time ever Wednesday and did so again Thursday - also contributed to boost the price of gold while investors shifted more resources to the precious metal, often seen as a hedge against inflation and political uncertainty.

We can probably expect a little profit taking today or tomorrow resulting in a slight drop, giving some advantage for latecomers to buy in, but it looks certain that the gold price is going to continue its climb over the coming months.