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The Bullion Report for January 18, 2012: Gold Trends in t...

When the economic crisis first began to unfold in 2008, it was clear that developed nations would face a bumpy road, and several areas looked like they would get worse before they got better. One of the spots that seem to keep finding fresh trouble is the euro zone. Unique in its make-up, the union of nations faces special challenges to keep certain economies afloat. Their struggles have also likely had an impact on gold investments. [img]http://future spress.com/imgndoc /bullionreport/1-1 8-12%20gc.jpg[/img ] Past performance is not indicative of future results. ***chart courtesy of Gecko Software Gold fundamentals are changing. For many years now the traditional investor has likely gotten cues from actions taken by gold buyers in Europe. Lately though, it’s easy to see where the Euro zone debt problems have been signaling trouble, making investors nervous. Those troubles are likely parts of an apparent change in the shift in demand for gold. How have investments in gold in the Euro zone have changed during the past three years? Is it possible to identify any distinct substantive changes to provide a clue as to what trends are developing and how they may serve to impact gold prices in the years ahead? First, the history: Back in September 2008 under a growing sense of financial troubles the U.S. government took unprecedented action and nationalized the government sponsored enterprises Fannie Mae and Freddie Mac. That action came about because Treasury Secretary at that time, Henry Paulson, wanted to ensure the financial soundness of those two companies at a time when the housing market was under extreme duress. A week later Lehman Brothers filed for protection under Chapter 11 bankruptcy, and the firm was allowed to fail. The Fed then took further action by loaning money to institutions in an effort to create liquidity. Since then attitudes among many investors over global economic health has shifted and fear about an economic contagion has grown. Those developments are now looked upon as watershed moments of change in financial markets the world over. They helped shape the ensuing economic recessions and perhaps set the tone for the resulting debt spiral we are confronted with today. Not long after those events gold prices bottomed, at a shade below $700/oz and began a steep climb that in retrospect has clearly been a monster rally. Three years later in September of 2011 the price of gold reached just over $1,900/oz. A review of the World Gold Council’s (WGC) website can provide a view data to get a clear picture. (1) Even a casual search through their website is helpful in providing a view of key statistics. When searching for a glimpse of the shifting tides regarding demand in European countries I noticed how demand for jewelry fell sharply. For example, according to the WGC, gold jewelry consumption in Italy was down 15 percent in the third quarter of 2008 when compared to the third quarter of 2007. What was especially interesting was that the data showed jewelry demand that year was more than offset by an even larger increase in the investment demand for gold in Italy. The data also showed investment demand picking up among other nations as “French investors became net purchasers of gold for the first time in around 25 years.” There are other examples too, that support the position that gold demand in Europe was shifting during that time. For instance, also in 2008, Germany and Switzerland were seen leading the pack in the rise in demand for European gold investment. Demand got so strong that at one point, according to the WGC, “The Rand Refinery in South Africa was reported to have run out of Kruggerands.” http://commoditytr ading.yuku.com/top ic/720/master/1/#. Txe5iIHC7-Y  (Jan 18, 2012 | post #1)

Day Trading

The Bullion Report For January 11, 2012: China's Gold Bling

The new rules are meant to prevent trading anywhere other than on the official exchanges in Shanghai and comes on the heels of a year where prices moved substantially. While the volatility in gold prices continues, unauthorized trading platforms will no longer be legal forums able to proliferate along with the boom in precious metals. Only a week into the Western New Year the price range in gold has been dramatic, with most of it on the upswing. While the US and other Western nations clean up from their New Year's celebrations, China and other Eastern countries prepare for theirs on January 23 - the Lunar New Year. It is expected that this season will bring increase demand for bullion and jewelry. This is attributed to an increase in disposable income levels, and the belief that gold is a good store of value during difficult times. Summary China has been grappling with inflation issues, which should continue to fuel the demand appetite for gold and other precious metals. This paired with increasing geo-political unrest due to potential military conflict with Iran can only benefit the drive for gold investments. Ongoing concerns over a Euro zone collapse add more fuel to the fire. Lured by global volatility, Chinese purchases of physical gold are on the rise, and will likely show resilience in the new year to come. 1. http://www.chinada ily.com.cn/bizchin a/2011-11/18/conte nt_14117585.htm Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.  (Jan 11, 2012 | post #2)

Day Trading

The Bullion Report For January 11, 2012: China's Gold Bling

Developing nations are frequently the focus when it comes to commodity demand. Amidst the chaos of the Euro zone crisis, and the uncertainty facing other Western powers, it's not unusual that the spotlight should fall on them again. As dealers ramp up their bullion sales ahead of the Lunar New Year, let's take a fresh look at China's gold demand. China’s importance to the world economy is demonstrable. The Chinese economy has fueled a lot of global business with annual growth near the 10% range. The current pace of growth has slowed, with many economists now predicting China's rate of real GDP growth will be closer to 5%. This slowdown is no surprise considering the current global economy. The extent of that impact will be felt in reduced demand for commodity related investments, and a slow down of exports, but not so for gold. Since the onset of the current economic slowdown, the Chinese have displayed an increased appetite for the yellow metal, both for jewelry and as an investment. To appreciate the potential impact of gold demand in China consider the World Gold Council (WGC) reporting that, "demand for gold bars and coins in China expanded by 24 percent from a year earlier." Chinese gold jewelry demand increased by 13 percent to where China has now overtaken India as the world’s largest for gold jewelry. The WGC anticipates, "strong demand in investment and jewelry will drive China's total gold demand to 750 tons this year." Additionally, the Chinese government is thought to be increasing their gold holdings as they grow cautious of the increasing risks in foreign exchange stemming from international liquidity problems as countries turn to more aggressive monetary easing.(1) In response to increased jewelry demand, retail jewelry chains in China have expanded. Stores are opening new locations in smaller cities to take advantage of that increasing demand, which is fueled by rising income levels. According to Dow Jones, even superstar investor George Soros is getting into the act, buying $40 million worth of shares in the IPO of Chow Tai Fook Jewelry Group Ltd. That investment is especially worth noting as Mr. Soros not only is a high profile investor, he has also been attributed with saying gold was the “ultimate asset bubble” nearly two years ago. His investment in Chow Tai Fook shows that Mr. Soros is potentially willing to place a bet on the Chinese demand for gold expanding. Besides jewelry, the other area where gold purchases have shown an increased involvement by the citizens in China is noted by recent increased investment regulation. During the last week of December China made official the decision to regulate all gold trading through official exchanges in Shanghai. The increased regulation isn’t expected to dampen citizen demand for bullion. Instead it was made in an effort to force unauthorized trading platforms to close. The purpose is to obtain a better handle on safeguarding what has become a major market for investor demand as disposable income levels have risen. Chinese citizens, for the most part, purchase gold, but are not active traders. Seldom do typical Chinese investors play the short side of the gold market. In fact, in China the gold buy-back businesses see little traffic. Buyers hold the gold they buy as a long term investment. With China experiencing rising incomes and inflation concerns, investment in gold is becoming more widespread among citizens, and according to Hong Kong analysts gold investments will grow. This increased scrutiny in the gold market is welcomed. The action by the government came about due to requests by Chinese brokerages. They requested tightened oversight of gold exchanges as they grew concerned that gold investors were being exposed to a very volatile gold market and were apt to become caught in dysfunctional markets just as the popularity of precious metals is growing.  (Jan 11, 2012 | post #1)

Day Trading

The Bullion Report For January 4, 2012: New Year, Fresh Star

The real rate of return remains negative, with rates held low, and that should prompt more investment in metals. The present course of action looks for additional rounds of easing and currency devaluation, which should attract investors to precious metals as Gold and silver should tend to counteract any currency devaluation. Thus gold and silver are forecast as solid options against what is apt to come in 2012. Summary What many investors see now is an opportunity to buy. Markets have pullbacks. No market moves straight in any direction. These pullbacks, such as gold and silver experienced in late 2011, were likely started by large institutions needing to cover capital requirements. Those in turn shook out the weak handed and caused others to decide to cash in, yet overall things haven’t changed and the prospect is for another bullish set up for precious metals in 2012. Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.  (Jan 4, 2012 | post #2)

Day Trading

The Bullion Report For January 4, 2012: New Year, Fresh Star

The New Year has begun, and with it comes a fresh start for world markets. Many news outlets greeted the first minutes of 2012 by remembering what a tough year 2011 was. As global economies turn to a fresh page, what can investors expect to see from precious metals? Gold prices finished 2011 trading at $1,566.80 which was a 9.3 percent increase for the year. Gold saw its lowest level back in February, but also established a new record high above $1,900 per ounce in September. During the final quarter, gold prices declined with liquidity concerns and an overbought technical view dominating the market. Some took that as a sign that major players were exiting gold positions so as to cover holes in their balance sheets. Contrary to gold, silver prices ended 2011 with a loss settling at $27.92 - a decline of 10.7 percent for the year. While silver prices peaked near $50 in late April, they never reached a new record high price. Some feel the industrial aspect of silver may have helped foster the decline as concerns mounted of a global economic slowdown. At present silver prices seem to have found support at around $26 per ounce. The sharp drop in silver prices has taken the wind out of some bullish sails, but fundamentals remain intact and friendly. Gold rallied in the final session of 2011 and moved higher on the first day of trading in 2012. Indicators are issuing a possible buy-signal, but it would really help to see a little more follow through to the upside in order to coax additional confidence especially the 200 day moving average at $1,626. For now it looks like investors are again friendly to bullish gold and believe that the yellow metal will regain its ability to rally, finding legs. Silver prices have gained well over the past few sessions, up sharply and back over $29.50. That is impressive and sets the tone for a move to $30.00. Silver prices also offer the additional attraction of having been beaten down more so than gold which may entice buyers seeking a rebound. On the fundamental front, it seems apparent that governments will continue to print more money and concerns for economic growth remain. Meanwhile Iran is heating up with perceived threats regarding missiles, concerns over their nuclear capability and general saber rattling as Iran flexes their muscles. All of this helps firm oil prices and in turn adds a bullish flavor. Equities have risen and while the U.S. dollar remains in an uptrend, it has stalled and is fueling strength among precious metals. Long term, however, the situation becomes less clear. The major influences will remain the direction of the dollar, oil prices and the perceptions regarding European and US debt. Should the global economy fail to improve, that may encourage the aspect of metals as a store of value. Fundamentals haven't changed, and remain friendly for higher prices. An area frequently overlooked as to its significance is the psychology of the marketplace. At present given the price drop the past couple of months in precious metal prices there are a growing number of skeptics for another bullish year ahead. There are also fears raised by the MF Global bankruptcy. That action shattered confidence as many traders faced margin calls, and others lost access to their positions. There is still a specter of missing money which further damages trust, yet beyond that interest is the relationship between gold and silver. Since silver prices have been more depressed, specs may be keen on their attraction to silver. Price levels are another element; Gold below $1,500 or above $1,700 could give a push just like silver over $30 or below $25. Right now, the environment for investors still seems positive for precious metals. The sorting through the European Debt Crisis hasn't gone away. Although they still lack a solution the markets seem intent upon calming in an effort to restore at least a semblance of normalcy. Stocks are firm and economic news seems pretty friendly.  (Jan 4, 2012 | post #1)

Day Trading

The Bullion Report For December 21, 2011: After the Fall

It might be just the medicine to create an environment which returns the spontaneous order of the market place. With easy money and inflation again in the headlines, but without a Paul Volcker at the Fed's helm, the BOE analysis and arguments are timely and will hopefully bring new discussions. Monetary policy observers around the world may point to this as the death of the world dollar standard and why not? Haven’t we seen enough of the ill effects of the present system? Certainly the inability of the U.S. to reduce its budget deficit is a case in point as is the Federal Reserve’s easy money policy - they are bullish for gold. Among some students of the economy an argument for returning to the gold standard is brewing. Even more importantly is the argument for choice and competition and the role of government. The presidential election in 2012 will be focused on the economy and the role that government plays. Summary Preserving the ability to choose which currencies to accept, with whom to trade and on what terms, is a hallmark of a free society. Sadly these freedoms are among the many that have been compromised, if not lost completely. Traders have watched as over time gold trades in an inverse relationship to the dollar. Right now, the gold market is likely sensing another round of Fed quantitative easing in the near future, and writing the script of its own recovery off recent lows. Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.  (Dec 21, 2011 | post #2)

Day Trading

The Bullion Report For December 21, 2011: After the Fall

If you didn't notice, the price of gold dropped recently. Is this responsible for renewed discussions regarding a return to a gold standard? Gold prices dropped more than 7% last week, which is the biggest weekly loss since September. The cause has been attributed to liquidity plagued speculators and banks that closed out long positions. Yet, while the price has fallen none of the reasons gold has gone up have changed. They’re still in place. The economic crisis of the past several years, with unchecked government growth and spiraling debt are all still apparent. The problems with the global economy still exist and are apt to grow. And one only need look at what is happening as it serves to illustrate the dangers we face from living beyond our means. Yet, we continue to build upon unsupportable economic foundations. Our current path is unsustainable. We have moved away from the path of sound money and economic stability. So what to expect of gold? Well, bearish sentiment in the gold market is very high, which for some may be indicative of a market bottom. One thing to look at is that bullion buying in much of Asia has risen. Reuters reported that there has been a jump in buying in most Asian countries and that demand for gold in India, still the world's top buyer, rose slightly for the first time in almost a week on Friday. While opinions are divided about the outlook for gold, most analysts of the gold market remain positive about the price outlook for gold in the medium and long term. Some are cautiously suggesting that the worst of the sell-off may be over as gold looks very oversold technically and the fundamentals remain sound. It is worth remembering that with gold selling off this past week physical demand remains robust globally. What did central banks do in the gold market this week? Central banks in nations like China, India, Russia and Thailand keep buying gold reserves. These banks seem to be trimming their dollar exposure and have been buying whatever the International Monetary Fund chooses to sell. What does this mean? Does it mean that there are those who are reforming their thinking that perhaps gold can do a better job as an instrument to help a bank? Possibly; the Bank of England explores that subject in a paper that is to be officially published December 20, 2011, entitled, The Bank of England’s Financial Stability Paper No. 13. In the paper they propose countries reduce the need for accumulating foreign exchange reserves by creating “exchange rate insurance” that individuals, businesses and governments can use to protect themselves against gyrations in their home currency’s value. It certainly is interesting to note that progressive thinking is growing in earnest to reform the current International Monetary and Financial System. In a way it serves to reaffirm how gold has been viewed as a hedge against all currencies. The results of the BOE paper indicate that the real task at hand is to create a reformed international gold standard that would promote trade and prosperity throughout the world. Such a system has historical evidence on its side. What is proposed would provide a stable and secure international monetary system by redefining each of the key currencies, specifically the dollar, euro, pound, yen and Yuan, respectively, as a unit weight of gold. Other major countries, including Brazil, Canada, India and Russia would be invited to join in defining their currencies in terms of gold. Then smaller countries would then be free to fix their exchange rate to any one of the gold backed currencies. The notion that a reformed approach to a gold standard could actually produce better results than powerful central bankers who manipulate interest rates and currency values may be counter-intuitive but the facts speak for themselves. Evidence suggests a gold standard provides better apparent financial stability.  (Dec 21, 2011 | post #1)

Day Trading

The Bullion Report For Dec 14, 2011: Gold does have a Sea...

After the first of the year, the market experiences a similar impact from China. The Chinese New Year typically falls between late January and mid-February on the Western calendar. The Chinese have a deep cultural affinity for gold and gold investments. All of these events add up to very good motivators for seasonal rallies in gold. The bottom line is that there is a demand-driven seasonal in gold that comes from a variety of cultural factors around the globe. It is a cycle that precious metal traders should be aware of. Though seasonal are only a secondary driver, they are reliable and worthy of attention. Of course, it is also important to recognize that any seasonal tendency is merely a proclivity, and as such may be superseded, or over-ridden by other events. While it is a factor, it is always important to pay attention to other factors such news events just as one might with other assets. This year such a situation developed as gold prices approached the time of year when seasonal demand was overridden by an overbought market. While gold’s seasonal tendency is for prices to begin ascending in the fall, instead there were some violent downward moves. It is felt that an overbought situation caused a major correction to occur. This holds true for any market which is overbought or oversold, just as any seasonal tendency can be negated or ignored altogether by a news event. Think of it this way, prevailing winds will always influence a golf ball’s flight even if it is struck true and on course. Serious golfers know this and adjust. Serious traders should too. Even though it makes sense to be aware of gold’s seasonal tendency, remember the prevailing wind of other market influences. When gold’s primary drivers are positioned to support a major move, seasonal winds can assist, or serve to enhance the price move. This may help it make a larger and faster move. Summary Right now we are heading into gold’s strongest time of the year seasonally. In the last decade gold prices have on average moved about 10% higher between late October and late February. I am not suggesting that this is precisely what will be experienced again this year, especially as so much news is influencing markets in general, but it is a tendency that gold prices have shown previously. This kind of seasonal demand, coupled with serious economic issues on a global scale, could make it hard for anyone to call a top in gold. Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.  (Dec 14, 2011 | post #2)

Day Trading

The Bullion Report For Dec 14, 2011: Gold does have a Sea...

Some people might look forward to singing "Silver Bells" at this time of year, but did you know that gold prices also have a song to sing? Believe it or not, there is a tendency for gold prices to gain strength approaching the holiday season. Therefore, it is a topic worth considering as gold’s previous seasonality is meaningful for speculators and investors. It just might offer some welcome insight, brighten the holiday spirit and help those interested in fine tuning the timing of precious metal trades. Let's get one important thing out in the open first. Seasonal and weather trends might already be priced into the market, and any past movements in price are not a promise of future results, so keep that in mind. Seasonality is not something that is often associated with the price of gold. Typically seasonality or weather related patterns are often thought of as something that applies to crops, or even certain stocks like Toys R Us. It is in cases where a commodity is planted, grown and later harvested during certain times of the year that triggers a thought towards seasonal patterns. Seasonality is even logical with some stocks. Who would think that there is a similar tendency for the yellow metal since gold is extracted or mined, in all types of weather and at all times of the year? The supply side is only one side of the story. Demand also plays an important role. Demand is the sometimes overlooked part of the equation, as there may be regular seasonal forces at work. Think of how demand for toys picks up as Christmas approaches or the seasonality of certain clothing like bathing suits. This can also be the case with gold, where purchases and interest are driven by a seasonality of demand. Holiday bonuses may be a simple factor, but it’s likely more than that. Investors and speculators increase their holdings when they see opportunities for demand, and prices, to increase. Those times may be when the political or economic climate is perceived as changing. While those events can occur at anytime during the calendar year, gold still shows a historical tendency to rise during the holiday season. It is simply because there tends to be more demand for gold at this time of year. One global factor that helps drive this demand and signal the start of gold’s seasonal price rise comes from post-harvest Asian buying. India is a particularly good example of this. India is famous for its harvest festival season and India has long been the world’s largest gold consumer, although China is likely to overtake that role sometime in the near future. The core of Indian festivities following the harvest is their famous wedding season. Wedding traditions in India are elaborate and fascinating. They help drive what is usually the world’s biggest gold-demand period of the entire year. Marriages in India are so very important that even today most are arranged by families. For many, the timing of these weddings is critical. There is an increase in weddings during festival season. It is thought to enhance a marriage’s success, longevity, happiness, and good luck. Families of Indian brides pay handsomely to outfit them with extensive gold dowries, much of which is in the form of gold jewelry. No expense is spared in buying these gold dowries, which is why Indian gold demand soars in autumn. It is not unusual for between a third and a half of India’s entire annual gold demand to occur during this time. Although it tapers off in late November to early December, gold’s strong seasonal period continues into the Western holiday season. This is when the overwhelming portion of discretionary spending takes place. There is a pronounced surge in gold jewelry demand as holiday dollars flow into gifts for wives, girlfriends, daughters, and mothers. In fact most jewelers do well over half of their entire year’s sales between Thanksgiving and Christmas.  (Dec 14, 2011 | post #1)

Day Trading

The Bullion Report For Dec 7, 2011: Will November's Golde...

Additional liquidity cannot help but eventually lead to higher inflation rates. At some point, investors will have to be on the lookout for the impact to appear in commodity values, many of which are also experiencing lower than normal inventories. While there are legitimate concerns that Chinese economic growth is slowing, the fact that more money will be available to chase around goods is apt to heighten demand and pick up the pace for hoarding certain commodities. Chief among them could be gold as it lends itself to the favored choice for a store of value during inflationary times. This may very well set the tone for Chinese-based purchases of gold to help fuel another gold rally. Lastly, there appears to be a growing consensus in both Europe and in the United States, one that feels we must choose a different path. The Tea Party, Occupy Wall Street, the protests in Greece, and the increasing tensions abroad are all signs that people no longer believe in the system we’ve got and want a different one. There is evidence that economic troubles are reaching a crisis level, and although this theme is often played up in the media, it appears increasingly relevant as more and more people in the streets get involved. Now, no one is suggesting that things have reached a point of no return, but they sure seem to have gotten broader attention and frustrated the masses. Summary The world is by no means on the verge of complete ruin, but without a doubt the latest action is seen by an increasing number of economists that we are acting with urgency to avert economic slow downs. “Risk on” has become a new buzz phrase and it these fears of aversion to risk and that will likely continue providing a safe haven demand for gold. Despite November being an extremely volatile month, one which saw sharp losses in many bond markets and all major equity indices internationally, gold was higher in all major currencies in November. The very limited supply and rarity of gold means that the increase in allocations to gold from minuscule levels is sustainable and will likely continue for many years as investors seek safe harbor given the radically changed nature of the global financial and economic landscape. Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.  (Dec 7, 2011 | post #2)

Day Trading

The Bullion Report For Dec 7, 2011: Will November's Golde...

With all of the economic turmoil that took place last month, investors who owned gold as a safe haven appeared to benefit. During the month of November gold ended with a 1.9% gain in US dollar terms. This is now the seventh month this year which saw the dollar falling against gold. Will gold maintain this haven status heading into the close of the year or will the market see an exodus as investors clear their books in the final quarter? The international issues have so far supported fresh forays into precious metals. Gold's gains were evident against other currencies, not just the US dollar. The euro dropped 5% against gold in November. The British pound fell nearly 4% against gold. The Aussie dollar fell nearly 6.5% and the South African rand by 5%. Thus, gold again protected investors around the world during the past month where heightened concerns abound from the global financial crisis. Gold is now more than 20% higher in dollars and 18% higher in Euros and pounds during 2011. And gold is only 9% below the record nominal high of $1,920/oz reached in September. If investors maintain the current skepticism regarding currency stability it seems likely that gold will flirt with those September highs sometime in early 2012. Demand for gold has increased in recent months and years, however, there is plenty of room for additional investment to take place. HSBC estimated in December 2010 that gold remains less than 0.14% of global investable assets. That figure certainly seems to allow room for growth. Many analysts involved in the gold markets believe that precious metals are seeing a sustainable trend and investment, and monetary demand is set to remain very robust in the coming years. That the gold price has improved and proved resilient is perhaps due to a reawakening of inflationary concerns and continued skepticism regarding economic and currency policy. Last week China's central bank cut the reserve requirement ratio for its banks for the first time in nearly three years to ease credit strains and shore up borrowing concerns. While many felt that move was due to housing concerns in China, it no doubt will have an impact of fanning the flames of inflation internally in China. And since China is the most significant player in raw material purchases, any excess inflation could lead to an even faster spike in global inflation the next time markets get a fresh round of quantitative easing. Don't forget the surprise move by a group of central banks, where they reduced the dollar swap rates. That action had the immediate impact of rallying equity markets as it was orchestrated to do. Broader markets have responded with substantial price increases. Reducing the swap rates seems akin to printing money as dollar swap lines give foreign central banks the ability to borrow dollars against their currency, use them for whatever they want - like to shore up bets made by European banks that went wrong, and at a later date, return them. Markets previously experienced a similar “temporary dollar liquidity swap arrangement” with 14 foreign central banks back in December of 2007 (several months before the Bear Stearns collapse and nine months before the Lehman Brothers’ bankruptcy) which allowed easier access to Fed's subsidies. The joint action by some of the world's major central banks to boost dollar liquidity and provide cheap dollar funding to European banks seems very much like the world economy is facing another “Lehman moment”. Bottom line is this, the central banks worked in concert to provide liquidity for other currencies. That coordinated central bank action will result in a further increase in the global money supply and the consequent debasement of fiat and electronic currencies and inevitable devaluation of the dollar and of all major currencies.  (Dec 7, 2011 | post #1)

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The Bullion Report For Nov 30, 2011: Is Gold Bubbling or ...

The financial contagion in Europe is pushing already fragile global economies towards recessions, and increasing the risk of the world slipping into global recession is rising significantly. Indeed, as analysts have warned for many months, there is a real risk of a global Depression given the scale of the debt levels in most western countries and the massive imbalances globally. Although most of the focus has been on Europe in recent weeks, markets should cast an eye on the not-so-inconsequen tial matter of the appalling US fiscal position which could deliver further market volatility and see the US dollar come under pressure again. Washington's latest “Super committee” effort to come to grips with the mounting debt seems to have ended in failure when negotiators announced they could not reach a deal. This failure with cutting the US government's crushing $15 trillion debt looks set to support gold. Summary Gold and silver prices reflect market forces and what investors are experiencing right now are uncertain and unprecedented times. Precious metal prices have gone up substantially and the violent correction to prices is a result of that move. The longer term likely bodes well for another round of higher prices, but it will takes time for markets settle down and get accustomed to their new phase. It is easy for some talking heads to banter in the way they have always done - a really active market with fresh price highs is just a bubble waiting to burst or a story to take an alarmist view on. These sound bites might be good for the quick pace of daily news, but precious metals are unlikely to fade as fast as runway fashions or starlets. Remember to keep the macro view in mind - there is still a long road ahead for the global economy. Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.  (Nov 30, 2011 | post #2)

Day Trading

The Bullion Report For Nov 30, 2011: Is Gold Bubbling or ...

Precious metal prices appear to have entered a new stage. With increasing frequency, and regularity, the price of gold and silver has been swinging in volatile fashion. These volatile price swings have likely caused many individual investors to become reluctant, even fearful, of taking on fresh positions. After substantial runs to fresh highs, prices over the last week have whipped back and forth in a violent manner, making trouble for trend followers. How long might it be before these troubling times are over and a clear trend is re-established? Or better still, how far and in which direction must gold prices move before the market settles down and volatility softens? Precious metals have always been considered to be welcome stores of value during uncertain times. That investors are facing uncertain times is demonstrable; just look at the price moves of almost any investment. Few are steady in the current environment. The customary pre and post Thanksgiving rally in stocks did not materialize, but the day after it sure did! America continues to react to happenings in Europe, and while the US dollar has recently strengthened in a flight to quality versus other currencies, it looks to be correcting amid an uptrend. What's next? The national debt is now over 15 trillion dollars while the annual Gross Domestic Product is only $14 trillion. In other words the value of all the goods and services that generate income in America is now exceeded by the nation’s debts. While the US dollar strengthens, it is because for now it is deemed the lesser of two evils. A stronger dollar weighs on commodity prices, especially gold. Market participants might be surprised by gold’s continuing weakness and some are likely questioning gold’s safe haven status. However, the fundamentals of broad-based global physical demand remain very sound as evidenced by recent central bank gold buying data. Russia bought 19.5 metric tons of gold in October bringing their total gold reserves to 871.1 tons according to IMF data. Belarus increased its holdings by 1 ton; Colombia by 1.2 tons; Kazakhstan by 3.2 tons; and Mexico by 0.9 ton. Data also shows that Germany reduced reserves by 4.7 tons and Tajikistan cut reserves by 0.4 ton. If central banks are buying, what message does that convey? Additionally SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported a rise of 3.631 tons to 1,293.088 tons in its holdings. Commerzbank said recently that they expect to see gold trading at $1,800/oz by the end of the year. Barclays says it is sticking with a fairly bullish call for gold and says it sees the price at $1,875/oz in Q4, and according to Reuters. Deutsche Bank says they expect periods of risk aversion to remain through 2012 and their strongest conviction trade remains long precious metals and specifically gold. Gold prices have corrected from record highs yet there is evidence of inflation clouds gathering. Food prices are up a full 13 percent this year. Inflation statistics however do not seem to verify this in CPI as a whole. It feels as though the foundations of future inflation have already been laid. There is still a piper to be paid for all of the money that was created as part of the stimulus efforts since 2008. As for what is happening in Europe, two main potential outcomes exist: Either the euro zone splits apart or it binds closer together. The euro may change its make up or face the emergence of a deeper political union in which a federal Europe takes control of national budgets — something that would lead to serious political, legal and financial consequences. With financial panic now threatening to move beyond Italy and Spain and into Belgium, France and Germany, the euro zone’s paymaster, the pressure to arrive at a solution is at a new level of intensity.  (Nov 30, 2011 | post #1)

Day Trading

The Bullion Report For Nov 23, 2011: Holiday Volatility

Governments keep printing more money. They do this as it may just get them through the current issues, but in the long-term higher debt could push the world into a global depression. The yield on the 3 month T-bill in Spain has doubled to over 5% from last month. The current levels are close to both Greece and Portugal. Summary Precious metals may be experiencing large price swings and volatility remains high, causing investors to back away. That leaves the markets vulnerable, but that vulnerability is in both directions. While investors may have seen metals receive pressure on prices, they can just as easily surge upward again. Or as Kyle Bass, recently put it, “Buying gold is just like buying a put against the idiocy of the political cycle, it’s that simple.” Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.  (Nov 23, 2011 | post #2)

Day Trading

The Bullion Report For Nov 23, 2011: Holiday Volatility

There is no candy-coating the economic woes facing the U.S. and Europe. Stalled growth, high unemployment, and an unprecedented economic climate have investment markets nervous. Add to that mix the continuing saga of the back and forth regarding European debt. Not a day goes by without another announcement that drives markets up or down, keeping volatility abnormally high. Stir in the MF Global bankruptcy and missing money and what does it suggest about the state of the financial industry, the health of the economy and the impotence of government regulatory agencies? And more to the point, what does it mean for precious metals prices? As more and more defaults and bankruptcies occur, increasingly more investors become timid and fearful, along with becoming less aggressive. Typically, during such times investors seek to find a safe haven investment. Throughout recorded history gold has been often considered and used as such an investment. Then why are we not seeing precious metal prices respond in such fashion? What forces are at work? Don't forget - this is also a holiday-shortened week, which should also be taken into consideration. Recent inflation statistics have been lower than expected in October and a steady dollar has appeared to slow demand for the precious metal as a group. U.S. Labor Department data this past Wednesday showed the cost of living in the U.S. declined in October. This slow down of economic activity and relative stability of the dollar may have dampened gold as a currency alternative. Gold is priced in dollars and appears more expensive to buyers who use other currencies when the dollar rises. With a daily trading range of around $40-50, or 2%, now common in the gold market in recent weeks (even larger for silver) cautious investors are staying away. The markets are thin and therefore every price reaction gets exaggerated. It is the thin conditions that may give rise to understanding why precious metal prices haven’t reacted by moving to new highs. When you think about it, though, they really aren’t so distant from those highs either. As Bill O'Neill, a principal with Logic Advisors puts it, “the increased volatility makes gold more dangerous to trade from a safety standpoint.” Investors sense this and as a result many stay away. There has also been a recent need to cover margin commitments and cover losses in other sectors and that along with fund liquidations have contributed to keeping gold under some pressure in the short-term. The gold market broke below the 100 day and the 50 day moving averages ($1710.60 and 1711.50) yesterday with gold back below $1,700.00. More than likely this has the chance to see some consolidation and minor price adjustments heading into the remainder of the holiday shortened week. The bright spot of news it that there is reason on a technical level to expect to see the $1,680.00 area be supportive. Listening to the talking heads perform you’d think gold was falling off a cliff. They always need a “breaking news” story and any substantial movement in the gold price is always worthy. Yes, to some it may seem odd that prices have dropped given the shuddery economic environment. It may seem out of character, but remember markets are extremely thin right now. Markets are confronting the holiday week, essentially a four day holiday for many, combined with reluctance on the part of many traders to be aggressive. Another confidence-buster that is not going away is the brewing MF Global situation. Many MFG customers are missing money and cannot trade. This takes away further liquidity. Prices of key “outside markets” have been bearish for gold, as the U.S. dollar index firms and crude oil prices move lower. Near-term technical damage has been inflicted in precious metals charts and bears now have the slight near-term technical advantage. Yet, markets act funny near tops and bottoms.  (Nov 23, 2011 | post #1)