Wednesday, March 01, 2006


Gold 'Continues To Defy Bears, Skeptics'

The days trading wrapup. "Gold futures climbed Wednesday to close at the highest level in three weeks as traders touted the metal's investment advantages against a backdrop of economic and political uncertainty worldwide. 'Gold's ability to move above and hold the $560 level gives a positive lift to the metals short-term outlook and suggests a test towards the $568-$572 resistance band is on the cards as investors and speculators continue to be drawn towards gold's safe-haven qualities,' James Moore."

"The April gold contract climbed to a high of $569 an ounce on the New York Mercantile Exchange, its highest level since Feb. 7, before closing up $1.90 at $565.80."

"'Gold continues to defy the bears, skeptics and even ardent bulls all of whom continue to pay little or no attention to one of the most powerful factors driving the secular bull market,' said Peter Grandich. He thinks those 'powerful factors' include 'past gold manipulation that has come home to roost those who are now getting squeezed.' In addition, 'the U.S. dollar appears to have made a major top thanks to European and Japanese interest rates set to rise,' he said. A weaker dollar boosts demand for gold."

"Elsewhere in the metals sector, May silver fell 1.5 cents to close at $9.79 an ounce after an earlier climb to $9.88. The June palladium contract added $6.15 an ounce to close at $299.95, but April platinum fell $2.90 to end at $1,051.80 an ounce after climbing almost $20 on Tuesday."

"In related news Wednesday, Merrill Lynch raised its base metals-price forecasts, citing strong pricing year to date as well as the 'outlook for continued healthy pricing for the remainder of 2006.'"

This from China. "The Bank of China will slash the trading spread on gold trading by up to 20% for 13 weeks beginning next Monday and running until May 27, according to reports carried in the Shanghai Daily Wednesday. The move is part of two reforms designed to make the buying and selling of gold easier and less expensive, the paper said, citing unnamed officials at the bank."

"Starting later this year, the Bank of China will run a trial program allowing holders of U.S. dollar accounts to trade gold. China already allows investors to buy and sell gold through Chinese currency accounts, denominated in yuan, though the sales are based on the dollar value of the metal on international markets.'"

"Expanding trades to U.S. dollar accounts will help ward off foreign exchange risk, authorities were reported as saying by the paper. The development comes as China faces growing pressure to allow the yuan to appreciate against the U.S. dollar."

I've been fascinated with gold ever since I was 8 when my Dad first brought home a fresh batch of Krugerands. I started buying them myself when I was 20 and the price of gold was $300 oz. Moved on to ETF's once I came into some real money to invest.I'm a gold bug and I believe in the fundementals.

I came to a fork in the road today. I decided to liquidate my entire position, EFT's and all but 10 Krugs , on the slim chance we do see all currencies melt-down.

The reason why is 2 fold:

1) All this hype around gold reminds me so much of the talk surrounding every investment that was hot. RE, Nasdaq, etc..etc.. - In each case all the experts laid out an eloquent and fundementaly sound reason why said investment was going to double AGAIN. I guess the contrarian in me has to call BS. It's always worked for me before. When my housekeeper and the cab driver is tallking about said investment, it is time for me to sell.

2) I beleive a big reason for the run-up in gold is the same reason EVERYTHING else has gone up. Simply, too much money being printed worldwide. Take away the money, prices come down. What's happening now is you're seeing money leaving certain sectors and moving on to the next hottest. Currently it is commodities.

I'm sure gold will probably be a $600 an ounce by year end. That's a 7% increase from where we are at now. I can get a guaranteed 5% in CD with no risk.

In the meantime I'll still be checking in on Bens blog on a daily basis, and if we see the haircut like I think we are, I'll buy back in again. This was a VERY difficult decision.

Good luck all!

Say it isn't so!!!

1) All this hype around gold reminds me so much of the talk surrounding every investment that was hot. RE, Nasdaq, etc..etc..

Hype? What hype?!? Is Cramer pushing mining stocks? Have the airwaves suddenly filled with bullion ads? Are Eagles the common subject of Starbucks chatter?

Sure, bears & goldbugs are talking up the PMs, but the rest of the world is almost totally ignorant. We're just now entering phase II, where savvy investors start to notice. Face it -- if you didn't already know about gold you wouldn't even think about it now.

2) I beleive a big reason for the run-up in gold is the same reason EVERYTHING else has gone up. Simply, too much money being printed worldwide. Take away the money, prices come down.

Wait a minute... didn't Ben "helicopter" Bernanke just assume the helm of the Fed? Isn't M3 publication being terminated? The pumps are primed for more printing, not less.

Yes, interest rates are going up, and that will crimp the carry trade worldwide. And yes, some "hot money" has chased commodities. However, the PM market is way too small for hedge funds. Actually, the hedge guys like low priced gold because it gives them access to cheap money; they lease it from the CBs for next to nothing and sell for cash to leverage elsewhere.

Think about it. What truly liquid vehicle for trading PMs is there outside the two gold ETFs? Both ETFs have done nothing but accumulate; never a down month, always gains. GLD is currently the 13th largest owner of gold bullion and climbing quickly.

Yes, the move up in PMs are due to easy money, but from creating it -- inflation! -- not spending it.
Dude, the man on the street can't even spell gold. It is totally off peoples radar screens. Don't let visiting blogs like this give you myopia. I wouldn't even know about this but for hearing a late night radio show last year. I don't discuss it with people because they would look at me as though I have two heads.
Russell on Gold.... As Always, good points!
When was the last US gold sales?

When some Fed guy (I forget who) says gold may come down before May, I have to ask myself, is there a US gold sale comming up?

Does it "have" to be announced?

The phrase "pump N dump" comes to mind for some reason.

I made an unacademic flowchart of the money from the Fed and gold as they crept around the world. Then input a raise the US intrest rates and as things played out, all the gold wound up in the China central bank. I thought it was a stupid chart, until I read this weeks blog.

thejdog, tyvm for posting, things seem a little better when Im not the only one in this, cash-out-hope-to-buy-back-in, boat.
I just checked Kitco and...

I think there are two camps here.
One camp (thejdog, rowyerboat) with intermediate buy/sell perspective and 2nd camp with long term perspective.
Other than that we all agree: it is not over yet.
But, I rather think that public has no clue.
When the public will be riped, the conversations at Starbucks wont be just about precious metals. They will be more around the lines:
which golden coin has better purity? Canadian Maple Leaf or Chinese Panda.
So, the argument that too much public talk sanctioning sell is way off line.
Having said that, I feel that we are in the short term top situation.
Just my opinion. I could be wrong.
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