"Aggressive Investors" Target $1400 Gold and $25 Silver as Global Currency Crisis "Is Upon Us"

"Aggressive Investors" Target $1400 Gold and $25 Silver as Global Currency Crisis "Is Upon Us"London Gold Market Report

THE WHOLESALE PRICE of gold and silver bullion retreated from fresh record highs against the Dollar early Thursday afternoon in London, slipping back from overnight jumps of 1.3% and 4.5% respectively as the US currency's latest plunge paused.

European stock markets reversed early gains, but Asian stocks ended the day more than 1.5% higher on the MSCI index, as the Japanese Yen squashed the Dollar to a new 15-year low beneath ¥81 and the Euro leapt above $1.41.

"It is no wonder the rally of precious metals has been relentless," said a Hong Kong dealer of Thursday's Asian trade. "Silver led the pack higher...Then gold took over.

"[Platinum and palladium] have been relatively tame...failing to hurdle last week's highs."

With crude oil rising back above $83.50 per barrel today, the Canadian Dollar broke above parity to the US currency – only the second time since 1977.

But gold rose faster still, setting new record highs vs. the Loonie at C$1385 per ounce. Priced in US Dollars, gold and silver bullion hit $1387 and $24.90 at Thursday morning's peak.

There are "large [numbers of] December option strikes at $1400 and $25," notes one London dealer.

"Aggressive investor buying is pushing gold towards the next major resistance level of $1400," agrees Walter de Wet at Standard Bank.

"Expectations of further quantitative easing by the Fed, continues to dominate precious metals markets. [But] the physical market remains weak, with gold scrap availability remaining high."

Wednesday's slump in the Dollar – and concomitant rise in gold and silver – came after European Central Bank policy-maker Axel Weber told a conference that the ECB should halt its government-bond buying program, and start raising interest rates "before the phasing out" of the exceptional banking support offered since 2007.

"This statement had more effect on the market than the [US Federal Reserve] minutes," notes MKS Finance, a division of the Swiss refinery group.

"The cracks are getting wider, the crisis is upon us," says Marc Ostwald, strategist at Monument Securities in London.

Warning clients to pay attention to "the rifts that are opening up within Asia" over the US Dollar's six-month tumble, Ostwald points to unilateral controls on foreign-investment flows and exchange rates by Russia, Singapore and Taiwan.

Bank of Korea chief Kim Choong-Soo today rebuffed comments from a "certain country" – Japan's finance minister Yoshihiko Noda – questioning Seoul's ability to lead next month's G20 summit of advanced and emerging economies because of its repeated interventions in the currency market.

Tokyo meantime confirmed that it spent ¥2.1 trillion ($25bn) last month buying US Dollars to try and halt the Yen's rise.

"We believe many hedge funds may have enjoyed [in Sept.] their highest earnings for the past year," says a report from Japanese bank Nomura, quoted by the Financial Times' Alpha blog, pointing to the slumping-Dollar-led surge in bonds, equities and commodity prices.

"Accordingly, we now expect those hedge funds to lock in those profits ahead of their year-end book closing in November."

Noting that Fed chairman Ben Bernanke is due to speak on monetary policy Friday, "The main risk [to silver and Gold Prices] is that he might...reign in expectations of quantitative easing," says Standard Bank's Walter de Wet.

"This could prompt a pull back in precious metals, possibly amplified by profit taking ahead of the weekend...[But] we anticipate some seasonal jewelry demand to prompt some buying into dips."

Currently moving towards the peak of its post-harvest buying season, Indian gold demand will see the Hindu festival of Diwali end on 5th Nov

Adrian Ash

Head of Research

Bullionvault.com

You can also Receive your first gram of Gold free by opening an account with Bullion Vault : Click here.

City correspondent for The Daily Reckoning in London, Adrian Ash is head of research at BullionVault.com – giving you direct access to investment gold, vaulted in Zurich, on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed herein are those of the author and are subject to change without notice. The information herein may become outdated and there is no obligation to update any such information. The author, 24hGold, entities in which they have an interest, family and associates may from time to time have positions in the securities or commodities discussed. No part of this publication can be reproduced without the written consent of the author. Disclaimer

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Investors are officially giddy about stocks again

From The Big Picture:

Individual investors are now officially giddy for stocks.

As measured by the AAII survey, individual investor bullishness rose to 51.2 from 49.6 last week, to the highest since May 2008 while Bears fell to 21.6 from 25.2, the lowest since Jan 2006.

Luckily, we have to wait less than a week now to see what’s been priced in and what hasn’t been. The 10-year Irish bond yield has broken out to...

Read full article...

More on sentiment:

Everyone hates the dollar right now

Investors are becoming dangerously complacent again

Top manager Hussman: Investors are bearish... but unafraid

View the original article here

Gold & Silver Slip But Investors Still "Buying the Dips"…

gold and silver bullion failed to hold a rally in London trade on Wednesday, easing back from a bounce on "decent" Asian demand after a rise in China's benchmark interest rates yesterday sparked what one analyst calls "a knee-jerk sell-off across the commodities."

US crude oil contracts had earlier crept back above $80 per barrel, while broad commodity markets added more than 1%.

Losing 2.5¢ to the Dollar on Tuesday, the Euro rose back above $1.3850 this morning, pushing the gold price for French, German and Italian buyers down towards an 8-session low beneath €31,100 per kilo.

"Nervousness abounds," says UBS metals strategist Edel Tully.

But "Investors are still buying dips in the gold price," counters Walter de Wet at Standard Bank. "We expect this to continue for the next two weeks", until the US Federal Reserve announces its widely-expected round of quantitative easing.

"Very easy Chinese monetary conditions have been one of the primary drivers for global asset demand, including commodities," says a note from the currency analysts at RBC Capital Markets today.

The first rise in China's benchmark rates since late 2007, "This start to the rate-hiking cycle will tighten monetary conditions [and] be accompanied by ongoing gains in the Chinese Yuan."

Washington has long asked China to allow the Yuan to appreciate, because "The international monetary system today has become distorted," as Bank of England governor Mervyn King told an audience in the English Black Country last night.

"The major [trade] surplus and [trade] deficit countries are pursuing economic strategies that are in direct conflict."

"The end game...was always going to be monetary debasement, competitive devaluation and a trade war," writes SocGen's ever-bearish analyst Albert Edwards in a new report.

"As US unemployment begins to rise, do not be surprised when across-the-board tariffs are implemented if China does not revalue."

Beijing's move yesterday raised bank-deposit rates faster than borrowing rates, but it still leaves real returns sharply negative for China's cash savers.

CPI inflation was reported at 3.5% on the official measure in August. Local analysts expect to a reading of 3.6% annually for Sept.

One-year deposit rates were raised by 0.25% on Tuesday to 2.50%. Chinese savers have to tie-up their money for five years to get more than 4% interest.

Back in the precious metals market, meantime, silver prices today recovered half of their US Dollar losses by lunchtime in London, briefly trading above $23.90 per ounce after losing more than $1 on Tuesday – silver's fifth "dollar day" of the last 3 weeks.

"The price action is bearish," says a note from bullion bank Scotia Mocatta, but "due to the very strong price action last week, we do not see major selling [in silver bullion] until $22.94."

Looking ahead, "The timing of [China's] rate hike is somewhat suspicious," says a short from Japanese metal conglomerate Mitsui's London dealers, pointing to a slew of Chinese economic data – including GDP and last month's Consumer Price inflation – due out later today.

"We could see these numbers exceed expectations."

Here in London, meantime, UK government bonds rose sharply – bucking the trend in German and US debt – as Chancellor George Osborne told Parliament he would eliminate the structural deficit in Britain's state finances by 2015.

Some 490,000 public-sector jobs will be cut, with departmental budgets slashed by 19% on average over the next four years.

The Pound held below $1.4750, however, holding the gold price in Sterling just shy of £850 an ounce.

In Spain's Valencia region today, the treasurer of Villajoyosa announced "the impossibility" of paying the town council's €11.2 million in unpaid bills, since the municipality now holds funds of only €286,000.

Payments to all vendors are suspended, but council staff wages – as well as bank interest – will continue to be paid.

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Will the CFTC Actually Act to Protect Silver Investors?

The silver market has seen a lot of surprises this year, and the statement today made by CFTC Commissioner Bart Chilton is probably the most unexpected yet. After more than two years of "investigation" into the silver market with no acknowledgment of structural issues, Chilten gave a public meeting in which he was quoted as saying "There have been fraudulent efforts to persuade and deviously control that price... the public deserves some answers to their concerns that silver markets are being, and have been, manipulated." He went on to state that the CFTC would be introducing new regulations to curb manipulation in the precious metals markets. Silver rose nearly 80 cents from its intraday low on the news.

Silver analyst Ted Butler has been writing letters and warning the CFTC of the consequences of manipulation in the silver market for more than 20 years. Not many people would bother to warn of these issues when ignored and ridiculed, however Butler persisted with his call for action to remove manipulators from the market. Up until recently, these warnings have been completely ignored.

As Butler and others have documented, a concentrated group of four to eight traders have been responsible for nearly 70 percent of all short positions in silver on the COMEX. These traders have consistently traded in unison to move prices while collecting large profits along the way. It is suspected that JP Morgan holds the majority of these short positions; however the CTFC has refused to acknowledge this and trading positions are not publicly disclosed.

Why Now? What does the CFTC and the short commercial banks know that we don't?

It doesn't take 20 years, or 2 years for that matter, to realize that there are obvious structural problems with the silver market - especially when the issues are spoon fed by letters from thousands of individuals. Given the reactive nature of the CFTC, it is unlikely that Chilten is acting preemptively to protect the small investor. It is more likely that the CFTC position is changing due to the structural change in the silver market. In 2008 weak long speculators were categorically replaced with blood thirsty hedge funds, wealthy investors, and developing nations who buy in cash.

As previously documented on Tradeplacer.com, the commercial banks began to cover their short positions in a rising market about four weeks ago which is highly unusual. While silver has oscillated between $23 and $25 over the last month, the banks have continued to quietly cover. Perhaps Chilten means what he says and the banks began to cover in anticipation of further regulation by the CFTC.

Is it too late?

As of October 19th, the commercial traders were still net short 58,150 contracts - roughly 290 million ounces of silver. There are currently only 52 million registered ounces and 59 million eligible ounces held in COMEX warehouses. It would not be possible to remove the short commercials from the silver market in an orderly fashion. The majority of contracts would have to be settled in paper at much higher prices. As pointed out by Butler, the worst case scenario - and increasingly likely - would be a closure of the paper precious metals markets. If that occurs physical silver would likely trade in multiples of its previous paper price and would be unavailable to most buyers. The apparent choice by the CFTC to act is most likely no choice at all. It is a desperate move to maintain the status quo and a reaction to an eminent emergence of either physical shortages or dollar devaluation instigated by a wave of quantitative easing.

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Mom and pop investors are fleeing the stock market in droves

From Zero Hedge:

The latest confirmation that there is nobody left in stocks save for hedge funds, HFTs (who do so at a comped exchange loss via liquidity rebates), and primary dealers, comes courtesy of UBS Client Flow research, which reports that, "long-only funds increased their net selling to levels last seen in October 2008."

Putting a number to this: the week outflows by long-only funds was $783 million in the week ended October 1. This is in addition to observations that retail flows are now a one way street away from stocks, and merely reinforces the threat that the hedge fund playground which is what the stock market is now exclusively, could plunge the moment there is coordinated selling and profit taking.

To use more graphic terms the entire theater is just full of hedge fund millionaires, where everyone owns the same stock (mostly Apple), there is only one open door, and the Fed keeps on pouring gasoline all over the place...

Read full article...

More on stocks:

This chart says the bear market could last for 6 more years

Wall Street's "smart money" is making a huge downside bet on stocks

This 70-year chart shows stocks are approaching a hugely important area

View the original article here

Women and Money - Top 5 Reasons Women Make Better Gold and Silver Investors

I have been in and around sales for over 24 years. I have done business all over the United States and as far as India. During that entire time I was heavily involved in the equities and precious metals markets. I have even sold gold as a broker as recently as one year ago. Over all that time, I know one thing for sure...when it comes to women and money - generally speaking - women make better buyers of gold and other precious metals. Although they venture there far less than men, when they do, they often do a better job.

I am fairly certain most guys will not agree with that at first blush. 'Women are too emotional' is a response I can hear from some men reading this article. This may or may not be true. Facts are, women are probably as "too emotional" as men are "too un-emotional." It doesn't matter. It has been my experience that when women get involved in something like buying gold or silver, they tend to be more cautious. I think often they know what they don't know and make decisions only after they feel comfortable they have addressed that deficit. Men often act like they should know this stuff; and once they believe they should be doing something, are more prone to make the best decision they can with what they have at that time. Much of the time in business, this serves them well. In the gold and silver markets - usually this leaves them with not enough of the right kind of information.

As a gold broker - my experience revealed that women were better precious metals investors. This doesn't necessarily suggest that as sellers, we liked this. Generally speaking, most of the characteristics mentioned below do make for better buyers, but they also result in being more difficult to sell; especially at first. Certainly more difficult than most in the gold industry would prefer if you could get them to admit any of this in the first place. Here are a few of the reasons women were better gold buyers from my personal experience:

1. Women knew what they didn't know. As I said, they wanted to learn what they did not know before moving ahead. I think it safe to say that investing in general and commodities like precious metals specifically have been mostly a man's world. Still is. There are very few women who excel in it. There are a few....and they do extremely well.

2. Women had more patience in the gold buying process. I think patience combined with the rest of these bullet points is key to their success. My experience is that the women I had dealt with as a gold broker had a comfort zone they were looking for. Once they got there, they were willing to move forward. Until then, they were uncomfortable and not ready to buy. Try to push them too hard before they got there, and you run afoul of bullet points 3 & 5, and the relationship is lost.

3. Women wanted a relationship in their gold business dealings. They were less interested in a sterile transaction. Men tend to be more comfortable around short term anything. We will just leave that there. Women want to get enough face time to determine if you are trustworthy. As a salesperson, rush this, and they will quietly move to someone willing to take their time with them.

4. Women seem to operate more with their egos in check - I know this is going to really turn up the heat but so what. From a salesman's point of view, I found ladies less likely to be motivated to actions typically associated with the ego. Attempts to motivate them to invest in gold or silver by selling around issues like keeping up with others, it's us against them, or other ego focused ideas carried little weight.

5. Women had better instincts when they learn to trust them in these scenarios. This point really has two important pieces. I do believe many men will admit that women as a group have better instincts than men. DNA and societal factors certainly play a part in this. I believe that men who have to rely on relationships for a career, take sales for example, learn to develop great instincts too or they do poorly.

But if there was an issue with women in my experience - it would be that they need to trust this asset even in the precious metals world...especially in the precious metals markets! Trust and leverage your instincts ladies...it can make a lot of difference when considering investing in gold or silver or other precious metals. A word of caution - you will have a hard time finding brokers that will work with you the way you want. They do exist.

Suggestions for Women Investors

A good alternative to interacting with brokers before you are ready is to build those relationships with credible, knowledgeable and neutral sources before you buy. This way, before you enter the buying process, you are further down the road and less dependent on the need for more time incumbent in leveraging all the points being discussed here. The precious metals industry; gold brokers on straight commission; and men in general, work against your desire to build a relationship in this business before doing any business. I wouldn't even worry about that. Instead, get the same or better information from insiders who do not sell precious metals...whose only interest is in credible education for you as the client.

Men tend to want the information from the people who 'do the deal.' All too often, this gives those who 'do the deal' an upper hand. Men are also more likely to pull the trigger more on impulse than women before they have all the facts. From a salesperson's perspective - men are better buyers...because it is easier for brokers to be better sellers.

What Does This Tell Us?

Women break the gold buying decisions into smaller pieces spread farther apart. This is exactly what most gold brokers are trained to try and prevent. It is part of the reason why I was never a huge success as a gold broker. I was much more comfortable having many conversations over considerable time and share the 24 years of experience with quality people willing to make an investment in doing the right thing. My worldview and selling style is that it's a marathon not a sprint. Unfortunately, the gold selling business does not reward that selling style. It can't really. Unless one has the financial wherewithal to pay their bills while the relationships build and eventually turn into sales.

Big business can do this. Most gold dealers are small. Often 3 - 20 people. The brokers are paid on commission. Sell or starve. Turnover is often high as is it very difficult to survive in the gold business as a broker.

Conclusion: From a buyer's point of view, women give us a good example of how to approach buying gold, silver or other precious metals. If you are a new or uncertain gold, silver or other precious metals buyer, this is especially true for you. Be careful - do your homework up front. Acquire and study information from credible and neutral sources. As you learn more, contact a few gold brokers until you find a few you get comfortable with. Or better yet, if you are lucky enough to know people who have trusted relationships within the industry, leverage those as you can.

Educating one gold buyer at a time!

S. Peters brings over 24 years of business, financial markets, gold trading and gold broker experience to help new or unsure gold buyers avoid the mistakes so many make. Go here to read more: http://www.goldsafetysecrets.com

More gold training articles can be found here: Expert Gold Training

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Gold and Silver - The Crucial Reason Why Investors Should Own Precious Metals

Gold and silver have been a store of value and a medium of exchange for literally thousands of years. As assets, these two precious metals have certainly had their ups and downs in recent decades. But why consider them today? Are they better or worse than other asset classes (such as stocks or bonds) in today's uncertain economy?

There are always advantages and disadvantages to acquiring any given asset or security when the goal is wealth-building (or wealth preservation). We know that when times are good, and the economy is roaring along, stocks tend to do very well. When times are bad and the economy seems to be hitting a rough patch, conventional wisdom has been to keep more money in safer venues such as government bonds or bank certificates of deposit (CDs).

Every asset has strengths and weaknesses and it is up to the investor (and/or there advisor) to figure out which asset is preferable at a given. For 2010, and beyond, there is a solid reason why gold and silver are strong considerations for investors concerned about today's economy and financial markets.

Although the typical reasons given for investors to consider owning gold and silver are that they are traditionally good hedges against inflation and market turmoil, there is another reason that often missed...even by financial planners and experienced investment pros. In today's market environment, this may very well be the most important reason of all to consider precious metals.

Counter-party risk. It sounds odd but it is probably the most important reason why investors should add gold and silver to their portfolios. Specifically I am referring to gold and silver physical BULLION. In other words, gold and silver physical coins and bars purchased from reputable dealers. Why?

One of the most desirable benefits of owning gold and silver physical coins and/or bars is that these two metals do not have "counter-party risk". Counter-party risk is the risk that the counter-party in a particular security will be not able to live up to its' promise or performance. Virtually all paper assets (stocks, bonds, mutual funds and even bank investments and currencies) have counter-party risk. If you are still a little unsure of the concept, let me give you some examples.

? When you own a stock, there is counter-party risk. The stock is only as valuable (or desirable) as how well the company involved is performing. If the company is doing well, the stock will continue to have value. However, if the company is in trouble (financial or otherwise), or it is in danger or bankruptcy, then the stock will lose value. Ultimately, if the company goes bankrupt, the stock becomes worthless. Example: Enron or Bear Stearns.

? When you own a bond, it has counter-party risk. What happens if the bond issuer goes out of business or refuses to pay back the principal and/or interest? Then the bond loses value and it could become worthless should the bond issuer not make good on the promise to pay the bond (and interest) in full. Example: Bonds created from sub-prime mortgage securities.

? When you have money in a mutual fund, or hedge fund or some third-party manager, there is counter-party-risk. What if that fund goes out of business? What if their portfolio is loaded with bad Securities? What about fraud? Example: Bernard Madoff.

I think that you are getting the picture. "Paper assets" have counter-party risk. That risk is not limited to just stocks, bonds or funds. In recent years we have learned that sometimes your money is not safe in a bank. In addition, even cash itself can have counter-party risk because of inflation. When governments crank up the printing press to unleash hyper-inflation (as in Yugoslavia in 1989-94 or Zimbabwe 2006-09), the currency becomes worthless literally overnight.

Gold and silver do not have counter-party risk. They have their own intrinsic value and that value is not dependent on another party's promise or performance. Remember...physical bullion since owning stock in gold and silver mining companies has many of the same counter-party risks that any other stocks would have.

Part of the reason that precious metals have this unique quality is that gold and silver can not be created out of thin air by any government. Both are finite in supply and it is not easy to extract them from the earth. Annual mining only adds about two percent to the world's above-ground supplies.

Next time you hear the word "diversification", think "outside the... uh... paper box". Don't just diversify among paper assets since the portfolio would still be exposed to counter-party risk. Add non-paper assets like gold and silver for more assured diversification.

Paul Mladjenovic is a CFP, author and national seminar leader. He is the author of The Unofficial Guide to Picking Stocks and Zero-Cost Marketing. Since 2000, he has been one of the most successful financial forecasters in the nation by accurately forecasting many economic events including the housing bubble, commodities bull market and the recessions of 2001 and 2008 among others. Paul is the editor of the Prosperity Alert newsletter and his website is http://www.SuperMoneyLinks.com and his blog is http://www.Mladjenovic.blogspot.com.

Are U.S. Investors Driving The <b>Gold Price</b>? - GoldSeek.com

-- Posted Monday, 11 October 2010 | Digg This Article | | Source: GoldSeek.com

The Nature of U.S. Investors

The U.S. is a world of well educated, highly sophisticated investors who use an extraordinary well developed set of markets through which to invest into every item that has a market and usually at prices that attract the world of buyers to the oil market, currencies equities bonds and the rest.

In the U.S. gold markets investors can buy the shares of gold mining companies, get options to buy these shares, buy the Indices that track these shares, buy gold coins, gold bullion, buy the shares of gold Exchange Traded Funds, buy gold futures through COMEX and more still.   Indeed the variety of different types of investment channels and their markets leads you to believe that the U.S. must be the heart of the world of gold.   In terms of volumes of money that surely must be the case.   This would be true if they all affected the gold price directly.   Do they?  

Where are the main Gold Markets and which ones affect the Gold Price?

Cutting to the chase, the only markets that do affect the gold price are those where gold bullion is bought and sold.   These are physical gold markets.   They can be as far apart as Shanghai, Mumbai, Dubai, London, Zurich, New York, etc.   Jewelry markets use physical gold and these are world wide.   Industrial markets are smaller and spread across the globe.

Central banks hold physical gold alongside individual investors, all over the world.   All these markets follow the same route to physical gold as each other.   All of them go to a local wholesaler, where small amounts are involved.   These wholesalers may be banks or maybe just wholesalers or large jewelers that supply smaller ones, having the advantage of bulk buying.   These larger buyers go, in turn, to their main local importers.   Local importers go to gold dealers or if large enough direct to the bullion banks.   The largest buyers go direct to the London Bullion banks.  

Refiners may receive their gold from scrap sales of from the gold mines direct, refining it to the highest Standards of the LBMA [The London Bullion Market Association].   It is then eligible for sale though the London Fixing.  

All the above markets directly affect the gold price.

It may come as a surprise to you that the U.S. is not the place where the heart of the gold market lies.   This happens in its traditional center in London.  

The Gold Fixing

The two Gold Fixings are the most important [ www.goldfixing.com ]events in the daily world of gold.   At the Fix, five Bullion banks buy and sell gold at two points in the day, at 10.30am and at 3.30 pm.   At these ?Fixing? sessions, the five banks representatives face each other in small neat room.   There, they are linked to their own banks by phone.   In turn, these banks are linked into their customers by phone and often their customers are linked by phone to their own customers.   Offers and bids are put forward at different prices, then adjusted and readjusted by all involved until a consensus is reached on price and volumes.   This price is then ?Fixed? and all transactions involved are established at that price.  This takes care of over 80% of gold deals in physical bullion, often as much as 90%.  

It is from here that coins are made and find separate markets.  

Gold Exchange Traded Funds.

A major link between the physical gold world and the paper gold world is via the recently developed gold Exchange Traded Funds.  Initiated by the World Gold Council but largely handled by HSBC, [one of the five London gold bullion members of the Gold Fixing] shares are bought in these funds.   These funds take the proceeds and invest in actual gold bullion, usually bought through the Fix in London.   Of course when one buys ?loco London? delivery can be made in another part of the world.    Unlike buying shares in gold mining companies, buying these shares precipitates the buying of gold.   So effective is this translation of paper gold into physical gold that over 1,400 tonnes of gold has been bought through these funds.   This places their holdings larger than China?s or Switzerland.

The largest of these gold Exchange Traded Funds is in the U.S. called the SPDR Gold Trust.   This holds nearly 1,300 tonnes of gold.  Investors in these shares come mainly from the U.S.   The force that these investors gave to the gold price was substantial and their buying at that time was the main  gold price driver as the holdings rose.   But this amount has hardly grown this year as asset managers [according to HSBC gold dealers] are fearful of the confiscation of gold by the U.S. government.   It appears that these buyers now hold their gold outside the U.S. in the hope that this will avoid any confiscation [more on this in future issues of the Gold Forecaster].   So any force that the investors from the U.S. have on the gold price does not appear to be present now nor has it been for the last few months.   In the present run up to $1,360 these investors have been overall sellers of gold.   This has taken away the driving force of U.S. investors in the gold market.

Paper Gold Markets which do not affect the gold price

COMEX

We confirmed with officials on COMEX [the Commodity Exchange in New York] where it appears huge volumes of gold changes hands that between 1% and 5% of all transactions there involve physical gold.   To emphasize the point, this means that between 95% and 99% of all Futures, and Options trading on COMEX do not involve gold itself.   This is a financial market.   Its key function is to allow those in the gold market to cover their exposure to physical positions in gold with a financial ?insurance? against price fluctuations.  

There are very large positions in futures and options [the net speculative long position on COMEX is over 1,000 tonnes] but these are unwound before a delivery has to take place.   For those positions where the buyer wants to take delivery, he has to notify the seller well in advance.   So of this 1,000 tonne position only between 10 and 50 tonnes will involve the delivery of physical gold.   This is a tiny amount relative to the London Bullion Market.  

Gold Mining Company Shares

These are simply equities the same as any other traded worldwide in equity markets.   They carry the same corporate risks as any company shares.   Where they are different is that their income over the quarter, half or full year is linked to the average gold price over that time.   Hopefully shareholders will benefit from both capital appreciation and a dividend flow as the gold price rises.   The income from the sale of gold by these miners will rise with the average gold price and from the point that costs are covered company profits will rise at a higher rate than the gold price rises.  

Additionally it is hoped that even when the gold price were to remain static, increasing proven gold reserves adds to the amount of gold the company can produce for the benefit of the shareholders.   This, again, can make the right gold shares outperform the gold price.   One has to have done ones? homework carefully on each gold mining company before you can be sure that this will happen in any particular share.

What is irrefutable is that when you buy the shares of these gold mining companies, your investment will not affect the gold price whatsoever.   The huge volumes of investors money does no more than ensure that gold will be mined.   With the supply of gold now relatively price inelastic, we see such investments as unlikely to affect the gold price directly any time in the future.

Who then is driving the gold price?

With U.S. investors in the SPDR Gold Trust currently holding the gold they have and not investing at the moment, the force that U.S. investors have had on the gold price through the physical buying of gold is absent from the gold market.  

If U.S. investors are buyers at the moment, they have taken their money overseas to buy gold and hold it there. 

We can conclude that U.S. investors are not the driving force behind the gold price breaking new records.   But the gold price has been hitting new record highs in the last couple of weeks, so who or what is the driving force behind the rise in the gold price now?

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This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.  Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

-- Posted Monday, 11 October 2010 | Digg This Article | Source: GoldSeek.com

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Previous Articles by Julian D. W. Phillips, The Gold Forecaster - Global Watch

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Gold and Silver Ratio Increases Profits For Coin Collectors and Investors

What is the gold and silver ratio?

How can the silver to gold ratio help you invest in rare coins and bullion?

It is the ratio of how many ounces of silver it takes to buy an ounce of gold.

In the very early days, 3500 BC in Egypt the ratio was at, 2.5:1........This means it took 2.5 oz silver to buy 1 oz gold.

In the 1980's the ratio was around 45 to 50:1.

In the 1990's the ratio fluctuated between a high of 110:1 and a low of around 78:1.

Many coin and bullion dealers use this ratio to decide when silver is cheap or overpriced.

Today, 2008 January we can see the silver to gold ratio is around 55:1.

How to use this ratio to purchase gold, silver and rare coins.

By calculating the ratio, divide the price of gold by the price of silver, $610, 16.50=36.96 ratio 1/28/2008

In 1972 the mint coinage act set the price at a ratio of 15:1.

I doubt if we will ever see this ratio again as it is not in relation to the low value of the US dollar.

The average ratio over the last 20 years has been around 50 to 60 to 1.

A good time to be a buyer of silver bullion and silver rare coins is when the ratio is high.

Any time it is over 35 to 110 is a good time to be a buyer of rare coins and silver bullion.

The higher the ratio the better value silver is...Be a buyer.

What to do now that precious metals are higher.

Continue to collect silver coins as you have done and also get the key coins you need for your sets.

As more collectors and investors build their collections it will become harder to find the silver and gold coins you need.

TV, EBAY and other Auction sales are removing the supply from dealers and making it harder to find the coins you want.

Prices continue to rise with these sales and the higher price becomes the norm.

What is the most collected coin?

The penny. Don't be fooled by this. It is the easiest coin to save as no one misses a penny. But......

Copper as an industrial metal, along with silver have risen to some of the highest levels seen since the 1980 boom.

Why?

China, India and other countries want to build their countries up to American standards.

This means commodities are in demand and will be for the next 10 to 20 years.

Continue to collect silver coins as you have done and also get the key coins you need for your sets.

As more people collect they will be harder to find.

Copyright 2008 Richard Irby

Have you enjoyed this article or to learn more about collecting coins and silver and gold visit my web site and sign up for the monthly news and tips letter.

Richard Irby has been collecting, buying, selling and trading silver and gold coins and sports cards for 25 plus years. To contact Mr. Irby use the contact page at: http://www.Rarecoins4u.com

Copyright 2008 Richard Irby

A huge catalyst for gold and silver stocks that most investors ignore

From Resource Investor:

If you’ve followed our work, you know how useful intermarket analysis can be when deciphering future movements and trends in the precious metals complex. Years ago, when I would analyze gold, I would only follow gold. Now I am aware of a wealth of markets that can be analyzed, which can help provide an outlook for precious metals.

Today, I am looking at the Canadian dollar. Most gold and silver companies are Canadian companies. They earn and spend in Canadian dollars. Thus, the U.S. dollar gold price has much less of an impact than you’d think. It is the Canadian gold price…

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