Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Gold Back With A Vengeance As Bitcoin Bubble Bursts - 26th Jun 17
Crude Oil Trade & Nasdaq QQQ Update - 26th Jun 17
Gold and Silver Ongoing Consolidation May End Soon - 25th Jun 17
Dollar May Become “Local Currency of the U.S.” Only - 25th Jun 17
Sheffield Great Flood of 2007, 10 Years On - Unique Timeline of What Happened - 24th Jun 17
US Stock Market Correction Could be Underway - 24th Jun 17
Proof That This Economic Recovery Narrative is False - 24th Jun 17
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

Gold Bugs Christmas Cheer

Commodities / Gold and Silver 2012 Dec 22, 2012 - 05:24 AM GMT

By: Jeff_Clark

Commodities

While the price of gold has languished in a trading range much of the year, leaving some investors scratching their heads, many have been buying – and in some cases, really loading up.

It's a tad puzzling that gold hasn't broken into new highs, despite enough catalysts to move a herd of stubborn mules. But that's the hand we're dealt right now. We can't get up from the table until the game reaches its conclusion. Besides, I think the stall in prices is giving us one last window to buy before prices break permanently into higher levels for this cycle.


At least that's how a number of prominent investors and institutions are viewing the price action right now. Here's a sampling of this year's "gold bugs" and what they've been doing about precious metals recently.

Jim Rogers, billionaire and cofounder of the Soros Quantum Fund, publicly stated last month that he plans to "sell federal debt and purchase more gold and silver."

George Soros increased his investment in GLD by a whopping 49% last quarter, to 1.32 million shares. His stake is now worth over $221 million. Many investors don't realize that he also placed call options on GDX worth $9 million. The most logical explanation is that he thinks gold equities are undervalued and that there's big money to be made in them within a year.

Marc Faber mocks those claiming gold is in a bubble. "It's nowhere close to that stage," he says. And even though he's already sitting on a huge gain, he won't take any profits. Why? "I keep a picture of Mr. Bernanke in my toilet, and every time I think about selling my gold, I look at it and I know better!"

Brent Johnson, a San Francisco hedge-fund manager, believed in gold so much that he started his own gold fund, Santiago Capital, earlier this year. His latest video points out that there have been "278 global easing moves in the last 14 months." How does someone not own gold in that kind of environment?

Don Coxe, a highly respected global commodities strategist, stated at the Denver Gold Forum that "now is the best climate I have ever seen for an increase in gold prices." He told fund managers, mining analysts, and mining executives to prepare for significantly higher gold prices and thus higher gold-mining-stock valuations. "The opportunities ahead are the best I've seen." He thinks a new gold rush is ahead for gold stocks, and that a "lustrous" rally will occur within a year.

Jeffrey Gundlach, cofounder of DoubleLine Capital, predicts that deeply indebted countries and companies will default sometime after 2013. Central banks may forestall these defaults by pumping even more money into the economy – but at the risk of higher inflation in coming years. He recommends buying hard assets including gold, and also "gold-mining firms because we consider them to be bargains."

Rob McEwen, CEO of McEwen Mining and founder of Goldcorp, is buying precious metals because he believes gold will someday hit $5,000 and silver $200.

Savneet Singh, a former investment analyst at Morgan Stanley, was frustrated with the options available to acquire physical gold in an allocated, whole-bar format outside the banking system. He started Gold Bullion International, the platform service used by the Hard Assets Alliance, a service that virtually does away with the need to buy GLD.

This is only a handful of individual investors who have made recent news with their bullion buying. But institutions, governments, and others are participating, too…

Central Banks

  • The South Korean central bank added 14 tonnes (approximately 450,000 troy ounces) of gold in November, and now holds six times more than back in June of 2011. "Gold is a physical, safe asset, and allows us to deal with changes in the international financial environment more effectively," bank officials said.
  • Brazil bought 18.9 tonnes (607,650 ounces) in September and October alone. It will likely buy more, since gold still accounts for only 0.8% of its reserves.
  • Paraguay bought 7.5 tonnes (241,130 ounces) in July.
  • Turkey imported 4.2 tonnes (135,000 ounces) of gold in November. It has bought 117.2 tonnes (3.7 million ounces) so far this year, almost double last year's purchases.
  • Central banks around the world bought a total of 351.8 tonnes of gold (11.3 million ounces) in the first nine months of 2012, up 2% from a year ago.
  • Even Argentina added 7 tonnes last year (225,000 ounces), and Colombia 2.3 tonnes (almost 74,000 ounces).
  • And of course there's China. While nothing official has been announced by its central bank, its imports and buying habits are mind-boggling.

These data suggest in and of themselves that dips in the gold price are likely being bought – and will continue to be bought – by central banks. They're not exactly short-term traders. Remember, central banks were net sellers as recently as 2009, so this reversal will likely play out for years.

India. I tire of the reports that proclaim something like, "Indian buying dropped this month!" Let's be clear about India and gold: Imports have more than doubled in three years (through 2011), and investment demand has climbed almost fivefold. And all this occurred while prices were rising and from a nation that already has a strong cultural predisposition towards the metal. Further, silver demand is taking off: sales have jumped 24% this year over last.

There is some government interference, but no slump in demand in India. This trend will continue and may even strengthen when inflation begins making front-page headlines.

Germany. A precious-metals group recently reported that Germans are increasingly buying gold because of fears about economic uncertainty, and that a third of citizens are now considering gold as part of their investments. "There has been a significant increase in demand in recent months because of worry about actions taken by the European Central Bank and US Federal Reserve, as the two central banks seek to counter the euro zone crisis and slow US economic growth."

Commercial Banks

  • Morgan Stanley's preferred metal exposure for 2013 is gold, though the company expects silver to outperform it. The bank stated that it believes "nothing has changed with gold's fundamental thesis: QE 3 (and 4...) and similar commitments from the ECB and BoJ; low nominal and negative real interest rates; ongoing geopolitical risk in the Middle East; and mine supply issues."
  • ScotiaMocatta stated that it will "not be surprised to see prices reach $2,200/oz." Why? "One of the main reasons we are still bullish is because of the mess the Western world is in. Europe has a debt problem that is proving all but impossible to solve, and all efforts to date have revolved around throwing more money at the problem to avoid the monetary system from breaking down… that should be reason enough to be bullish."
  • Deutsche Bank released a new report essentially declaring that gold is money. "We see gold as an officially recognized form of money for one primary reason: it is widely held by most of the world's larger central banks as a component of reserves. We would go further, however, and argue that gold could be characterized as 'good' money, as opposed to 'bad' money which would be represented by many of today's fiat currencies."
  • Bank of America Merrill Lynch says gold will hit at least $2,000 by the end of 2013.
  • JP Morgan now accepts physical gold as collateral.
  • Another source of demand from banks could be the change in Basel III regulations. If you haven't read about it, gold could get promoted to Tier 1 status, meaning it would be considered a "zero-percent risk weighted item."

    Eric Sprott recently wrote, "If the Basel Committee decides to grant gold a favourable liquidity profile under its proposed Basel III framework, it will open the door for gold to compete with cash and government bonds on bank balance sheets – and provide banks with an asset that actually has the chance to appreciate. Given that US Treasury bonds pay little to no yield today, if offered the choice between the 'liquidity trifecta' of cash, government bonds or gold to meet Basel III liquidity requirements, why wouldn't a bank choose gold?"

    We'll be watching the news on this topic.

None of these parties think the gold bull market is over, nor the price too high. They recognize the implications of a world floating on fiat currencies, and that government "solutions" to debt and deficit spending will significantly – perhaps catastrophically – dilute the value of currencies, the fallout of which has yet to materialize. As for me, I think that the longer the malaise continues, the more likely the breakout is to be both sudden and dramatic.

We can all speculate about when the next leg up for gold will kick in, but the point for now is to take advantage of the weakness, like many of these gold bugs. When the price breaks out of its trading range, are you sure you won't wish you'd bought a little more?

I say give you and your loved ones a lasting Christmas gift and call your favorite bullion dealer.

Now is a great time to give yourself another gift... one that will make next year's holiday season even brighter. There's currently an anomaly in the metals market that can bring astute investors life-changing gains. Learn more about it and get started today.

© 2012 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife