Monday, February 20, 2006

 

Gold Pushes Higher On Heavy Speculation

Reuters has the latest on metals. "Gold prices moved to 10-day highs on Monday supported by a rise in crude oil and a drop in the dollar, and dealers said the metal was expected to extend gains. Other precious metals followed gold higher after tumbling in the previous week, with platinum rising nearly two percent and silver climbing to its highest in more than a week."

"Gold rose as high as $556.60 an ounce before easing to $554.50 at the afternoon fixing, compared with $551.70/552.60 in New York on Friday. Traders said physical demand was slow, while there was also little investment interest, as the New York futures market is closed on Monday due to the Presidents Day holiday."

"'Obviously, the New York holiday is leaving market conditions quite thin and the trade is looking at the background noise such as the dollar and oil prices,' said James Moore."

"Spot silver was quoted at $9.49/9.52, compared with $9.42/9.45 in New York on Friday. Palladium was up at $288/292 from $285/289."

And Bloomberg had this. "Investors have tripled their holdings in five gold-backed exchange-traded funds, including the U.S. traded StreetTracks Gold Trust, to 429 metric tons since November, according to London-based ETF Securities Ltd."

"Speculators almost doubled their holdings in gold futures since August, reports from the U.S. Commodity Futures Trading Commission show. Hedge funds and other large speculators held net-long positions, or bets prices will rise, totaling 118,914 Comex gold contracts as of Feb. 14, up from 65,569 on Aug. 2, data from the commission showed on Feb. 17. Speculators amassed 177,410 contracts on Oct. 11, the most since at least February 1983."

Comments:
Looks to me that the PM's are headed up this week along with oil, which I believe will be back in the 65-68 dollar range soon! Our energy and mining stocks should get a boost this week also. At least that's the way I see it!
 
War 2006?

http://www.gold-eagle.com/editorials_05/silberman021806.html
 
war? with what troops?
 
In the gold-eagle article previously posted, the autor is predicting war in Oct 2006. Could of sworn I read an article last year where the same guy predicted war in March 2006.

That's the pattern with some of these doom and gloomers. They keep pushing back their predictions.

Folks, there will be no war with Iran in the near future, for the simple reason, like somebody else said, WITH WHAT TROOPS?

More importantly, it's an election year and our representatives care far more about getting re-elected then saving the USD. Besides, Israel has more than it can handle right now with the newly elected Hamas PLO.
 
Fleckenstein:

In the meantime, I anticipate a bullish chain of events for the metals: When the "right" data emerge to support the fact that the economy is weaker than it appears, I believe the Fed will make clear that it's closer to pausing than people think. (Bernanke himself told Congress last Wednesday that whatever the Fed does will be "dependent on the data.") If that turns out to be the case, I think there will an explosion in the precious metals and currencies, an outcome that I intend to capture.
 
thejdog and john_law_the_ii, you are both right. There is no way there will be a ground war with Iran. We absolutely don't have the troops. Not to mention that any hostile action against Iran could make our occupation of Iraq even more unpleasant (if that is possible). But I wouldn't discount the possibility of selective strikes vs. its emerging nuclear cabability, though it would be a serious misstep on our part. I would profit on my GLD but fallout from provoking Iran into a military confrontation would likely make the world a much worse place for all of us.

I can only imagine what would happen to gold if a general Middle East war broke out. Guess I fall into the category of investors holding some gold as a hedge against armageddon ;)

Between OSB's claims of another impending strike vs. US interests, Chavez not playing nice with us, and chaos in Nigeria, '06 is looking rough. The heights of the S&P boggle my small bearish mind. Oh, and throw in another year of brutal hurricanes. I bet that '05 isn't an anomaly, but instead a yearly trend that will disrupt our offshore rig and refining capacity.

Well, aren't I positive this evening?

What gets me with gold is its highly speculative nature. Yeah, I know, its a store of value, and so on. But ultimately, I have no use for the stuff. Nor do most of the other speculative buyers. But if there's a "credit crunch" in the next couple years, after these years of easy money, I really wonder how much speculative cash will be floating around to support gold prices, or any other commodity for that matter.

BTW, my savings are 75% in foreign-denominated holdings, and about 10% GLD. Thinking of buying some gold coins, to trade for food and ammo ;-)

I've never been much of a believer in PMs as a good asset class, but all the other asset classes just look so bad right now. Equities (aside from specific sectors like PM /mining) look way overpriced, and US bonds look bad w/ rising short term rates. And I'm definitely a US dollar bear (in spite of a good '05) with our fiscal mess.
 
creamofthecr*p:

What gets me with gold is its highly speculative nature.

The problem isn't gold, it's your perspective. Gold has been a recognized store of value for thousands of years. OTOH, you admit that 100% of your holdings are in paper, which instrinsically is worth absolutely nothing. Who's really speculating??
 
When oil was forced to be traded with only petrodollars, the dollar was backed, in a sense, with oil (the black gold). As that changes, USD will not have the strength that it once did. It should take more USD to buy an ounce of gold if/when that weakness comes.
 
Hi all,

If you are interested in gold
I would like to invite you to visit my web log

The web log contains daily commentary, news and charts regarding the global gold and silver market.

Gold global perspective
 
Take a look at this chart... PDF


http://www.faerdersecurities.no/Rapporter/210206Gold.pdf
 
Approaching Hubbert's Peak Of Silver?

http://www.resourceinvestor.com/pebble.asp?relid=17222
 
"Peak Silver"? Sounds familiar... ;-)
 
tj & the bear wrote: The problem isn't gold, it's your perspective. Gold has been a recognized store of value for thousands of years. OTOH, you admit that 100% of your holdings are in paper, which instrinsically is worth absolutely nothing. Who's really speculating??

Agreed on gold's intrinsic value. The value of the physical metal will never drop to zero, even if our financial system collapses. But, ultimately, what one categorizes as speculation depends on one's perception of risk. If you consider the complete collapse of fiat currencies to be likely, then holding a large amount of physical gold makes sense. If, on the other hand, you consider it very likely that our financial systems will remain intact, even if highly troubled, then diversifying across a number of conservative "paper holdings" makes more sense. For example, foreign gov't bonds of countries w/ prudent central banks. Plus of course some PM exposure. IMHO PMs are not extremely overvalued as I've heard some people claim. If you look at gold, adjusted for inflation over the past 30 years, it doesn't look especially overpriced right now. More people would be holding PM if they only knew the true financial mess our gov't is in. Further, on the topic of speculation, I consider it highly speculative to be holding 100% USD denominated assets. Adjust the S&P 500 for the loss in value of the USD in the past few years ('05 notwithstanding) and it doesn't look so good anymore.

I am curious to know what percentage of physical gold folks out there are comfortable with... as opposed to GLD or mining equities.

Ben, great blog. Wow, the volume of posts on the housing bubble blog is astounding. Hope this blog will see similar traffic soon. People are slowly having their eyes opened to the credit bubble, and I hope this leads them to think about fiat currency risks. In my mind, buying PM is a vote of "no confidence" in the reckless fed.
 
Creamofthe...
You said:
"The value of the physical metal will never drop to zero, even if our financial system collapses."
I say after TJ:
"The problem ...is your perspective".

This is exactly the situation, when value of the PM will skyrocket.
 
creamofthecr*p:

If, on the other hand, you consider it very likely that our financial systems will remain intact...

Ah, there's the rub. Pick up "Empire of Debt". It's a very entertaining read that'll scare the hell out of you. Otherwise, nice post!

Stick around. HB2 was just like this in the early days. The crowd over there just hasn't realized that this is the new frontier, blog-wise!
 
TJ- thanks, I will check out Empire of Debt. I've seen a number of references to it on financialsense.com. While our financial system has been relatively stable and resilient since the great depression, that's no guarantee that it will perform similarly in the future. Though I am still not convinced that its collapse is imminent, I suspect that we're in for a prolonged period of economic stagnation and a crisis in confidence w.r.t. the dollar, and serious dangers with derivative markets that nobody really understands (Warren Buffett, no less, has made statements to this effect).

Imagine what would happen if just 25% percent of the masses decided to diversify their savings out of the USD, whether into foreign currencies or PMs. I bet that currency controls would be introduced in short order.
 
Cream of the crap said:"I am curious to know what percentage of physical gold folks out there are comfortable with... as opposed to GLD or mining equities".

I hold about 15% silver eagle coins and the rest of my gold portfolio is invested in gold and silver mining stocks. I know alot of posters here hold physical gold, which is good for emergencies in case things get really bad, but I like the convenience of selling gold stocks without having to find a dealer to pay me the best price when its time to sell. I am not as sophisticated as most here for sure, but I do feel the economy is going to take a turn for the worse, none to the likes of what we have experienced before. At least in the 1970's, people had savings, but not this time around. Dont know what to expect really, but gold did well then when interest rates were skyhigh and hyperinflation quadrupled house prices. Also, my other thoughts about the future of this ecomony is wondering which banks will be left standing after everything shakes out. I checked the FDIC website, and there is no mention of when monies will be paid back in the case of bank closures. This scares me, and it seems that all banks are giving crazy loans to anyone that is breathing. Is it best to keep cash in ones house, or in a small bank?

Not to change the subject, but now that the HB2 blog format has changed, I cant post my comments anymore. Can someone please tell me how to post on this new format? I have tried, and cant get anywhere. Thanks for the assistance in advance.
 
LV,
I saw one of your posts just now on the HBB
 
FDIC pays 99% of claims within 30 days.
 
LauraVella - I too am concerned about the solvency of our banks, given the low/nonexistent lending standards. As I understand it, mortgages are "bundled up" and securitized, then sold on the open market... and have the implicit backing of the US govt through FMAC/FNMA. I am not sure what would happen to banks if people started defaulting en masse on their mortgages. Presumably either a government bailout or the securities holders (be they foreign governments, banks, pension holders, or whoever) would be left holding the bag. I have no financial background, anyone correct/clarify this if I've got it wrong. In any case, I would be very interested to know which banks are "safer" in terms of their exposure to mass defaults on mortgage (and other) debt.

I keep a significant amount of cash on hand, just in case things go bad very fast for some reason. It's not like I've stuffed my mattress w/ bills, but enough to get by for a few weeks or months if stretched. One can imagine a number of scenarios (natural disaster, bird flu outbreak, terror attack & mass panic) where the ATM machines might stop working, in addition to bank closures. On the morning of 9/11 I had just landed in a major European city with no hard cash on hand, just credit/debit cards. Wondering what I would do if they had stopped working served as a wake-up call.

Of course, FDIC insures up to $100K but I doubt that the funds would be available immediately if there's a meltdown of the severity that some people expect. I suspect that over the next couple of years, it will be far worse than the average person expects (in their current blissful ignorance) but perhaps not absolute carnage, necessitating survivalist techniques. But I bet that Joe Average's faith in the system will be severely shaken. When The Economist publishes an article titled "Danger Time for America", one can't write off predictors of financial meltdown as cranks. It's becoming mainstream that we're about to have to take our medicine, the likes of which I've never seen in my lifetime (b. 1971)

About your posts not showing up on http://thehousingbubbleblog.com/ .... have you asked Ben about it? He's been very helpful in working through a number of bugs that people have reported. Let him know the browser you're using, and what specifically is happening (any error when posting, post just not showing up, etc).
 
Hi Ben! You are right, I just now looked and it posted. Thanks for checking. I guess it just takes a little while.
 
The JDog said:"FDIC pays 99% of claims within 30 days".

Thats a relief! Thanks JDog!
 
Cream of the crap - Agree. One never knows how to really prepare ones self for a banking crisis, but at least it seems that most of us here on this blog knows there's a train wreak starting to unfold before our eyes, to prepare as best we can.

The econimist article is very good by the way, with accurate information on what is in store for us.
 
Pardon my cynicism, but I doubt the FDIC's record will be so good when 80% of it's member institutions are in crisis.

Despite all the press given lender's offloading of mortgages via MBS, most banks are highly at risk. Reserve requirements are the lowest they've been in decades, sub-prime credit exposure is way up, and real estate financing makes up a majority of bank's loan portfolio. In fact, the nationwide average exceeds that of Texas' bank's exposure to the oil industry before the '80s bust; all those banks went under.
 
TJ- I would have to agree with you, most banks would be affected. Even the most conserative banks are giving crazy loans. I did find world saving has a good rate for CD's - 4.85, but thats no consolation if I can't get my money when a crisis hits.

If all/most banks will be at risk, maybe it's best to research the FDIC insurance policy. Can past history has answers to our questions about bank safety?

Personally, I don't know anyone who lost any money from any bank during the banking crisis in the 80's or 90's. I do remember some S&L's in the bayarea did close and the rest changed their names to Savings Banks.

Is there any posters here who actually did loose money throught a banking bust? Might be an interesting topic for discussion.
 
LauraVella!
I think what you need, is to check out this website: www.weissratings.com
I got this from someone from HB2.
It suppose to rate banks by safety.
I am still not concern about it that much. Possibly in the future.
Inform us about your findings on this website.
I hope it will help.
 
It's not a matter of researching the FDIC, it's a matter of researching the banks themselves.

There are services that rank bank's risk and make recommendations. Believe it or not, there are banks that still operative very conservatively; just don't expect online banking or ATMs everywhere. I'll try to find the book(s) I have that listed them.
 
Mike from Chicagi said:"I think what you need, is to check out this website: www.weissratings.com
I got this from someone from HB2.
It suppose to rate banks by safety.
I am still not concern about it that much. Possibly in the future.
Inform us about your findings on this website.
I hope it will help."

Mike- I Checked this site out and it has rating information on banks, stocks, mutual funds,including insurance companies - for a price. There is a free sample of bank ratings-what's interesting is there are only small local banks on the list, not a one of the large institutions appears on the list, which leads to believe it's not very safe (to me). Makes one wonder...anyway, something to definitely research more for the future.
 
TJ said-"There are services that rank bank's risk and make recommendations. Believe it or not, there are banks that still operative very conservatively; just don't expect online banking or ATMs everywhere. I'll try to find the book(s) I have that listed them."

TJ-If you can find it that would be great, meanwhile, I will see what I can find on the net and post it to a new thread on this blog.
 
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