Saturday, May 30, 2009

Silver breaks the psychological level of $15 price

Today move has certainly caught many of you off guard. As I am typing, silver price stands at $15.65. Considered by many as the key resistance and psychological level, $15 price hasn't been seen since last August or so. Just before the current recession really got going. There are two contradictory forces currently driving the price of silver. The first one is the safe heaven buying by those who think silver coins and bars will become real money, and please, you can call them what you want - I affectionately call them silver bugs, but don't discount their numbers and purchasing power. As our government prints dollars which sooner or later will inevitably flood the system, silver is becoming a stable value alternative which will hold its value compared to the lower value of each dollar. To put it simply, it will cost much more dollars to buy an ounce of silver. Consider it a cheaper and more liquid safe haven alternative to gold.

read the entire article :

Friday, May 29, 2009

Gold hit the $980

Gold hit the $980-a-troy ounce level yesterday before easing back to $979.90, up 2.2 per cent on the day and gaining 2.5 per cent this week. It was helped by concerns about rising levels of government debt.

Silver rallied 6.4 per cent to $15.56 this week and was on course for a gain of 26 per cent in May, its best monthly performance for 22 years.

Source FT

Thursday, May 28, 2009

Gold as an investment

David Einhorn, Greenlight Capital president, discusses gold as an investment.

Gold May Test $1,200 in Months

Gold is probably on the verge of a fairly sizable breakout to the upside, says Matt Zeman, trader at Lasalle Futures Group. He tells CNBC's Karen Tso that the precious metal may test $1,200 in the coming months.

Wednesday, May 27, 2009

Pervan Says Silver, Palladium, Platinum `Look Cheap'

Pervan Says Silver, Palladium, Platinum `Look Cheap'

Gold Climbs in New York as Dollar Pares Gains; Silver Advances

May 27 (Bloomberg) -- Gold prices rose in New York, reversing an earlier loss, on increased demand for the metal as a store of value while the dollar pared gains. Silver advanced.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, climbed 1.9 percent to 1,118.76 metric tons as of May 22, the first gain in seven sessions, the company’s Web site shows. Gold assets held by Zuercher Kantonalbank’s exchange-traded fund jumped to a record 4.603 million ounces last week, the bank said today.

“Investors took advantage of intraday weakness by adding to their long positions,” Tom Pawlicki, an analyst at MF Global in Chicago, said by e-mail.

Gold futures for August delivery rose $4.50, or 0.5 percent, to $959.60 at 12:21 p.m. on the New York Mercantile Exchange’s Comex division. The metal fell as much as 0.7 percent earlier today. Futures for June delivery, the most-active contract until today, climbed $4.30, or 0.5 percent, to $957.60 an ounce on the Comex.

Bullion for immediate delivery in London climbed 0.6 percent, to $957.95 an ounce. The metal rose to $949.50 an ounce in London’s morning “fixing,” used by some mining companies to sell their output, from $945 in yesterday’s afternoon fixing.
Read entire article :

Tuesday, May 26, 2009

Perez-Santalla: Gold To Fall $200/Ounce !!!

Mike Norman and Perez-Santalla give another perspective on gold claiming that it will fall by $200 an ounce
Santella says : "
So in the short term, I could see gold in December coming down to around $700, and at that level the jewelry market will pick up again, so it will buoy it and hold it up between 700 and 800. In the longer term, it should come off, or if there’s inflation, maybe it will hold up around there. Those are harder things to see of course, so I’m just guessing.
as to the three industrial precious metals, which are silver, platinum and palladium. Silver consumption has been brisk and remains brisk, and part of that, I believe, is the jewelry sector, which is that people have turned to silver to buy jewelry. So there’s a lot of jewelry sales in silver, so silver remains brisk at these levels … even right now it’s trading above $13. It can remain there for a while, though I think silver will also trade down because it follows gold a lot of times, as there is also a percentage of people that buy for investment purposes.

Platinum and palladium are being held up by investment money at the moment, but their primary demand is industrial. Once people realize they’re not going to get any earnings if the metals stay stagnant in the price level, they will abandon it, and so I think platinum and palladium can still come off a bit." he added

Gold Battle Lines Drawn at $1,000 Again

By James West
Monday, May 25, 2009

Here we go again. The forces of legitimate money versus the incumbent purveyors of the candy floss economy squared off at the $1,000 an ounce line over which yet another battle will be fought. Arrayed against either side are formidable new elements and tried and true old ones. As usual, the first volley has been catapulted over the walls of the hucksters by the defenders of the essential timeless truth of gold’s naturally stored value against the counterfeit paper currencies.

The liabilities of the enemy have increased, and the short positions in the COMEX market are sufficiently stacked that the big bank defenders simply cannot allow gold to win decisively. G7 governments are allied against gold to a man, while emerging economic behemoths China and Russia stand in opposition.

In particular, China’s revelations that it has been in a continuous accumulation mode for the last several years and is now the fifth largest sovereign reserve of gold has created an impetus in the gold camp that has been seen lacking in the past. Institutional and sovereign investment entities now perceive a floor in the gold price based on this information, and one must beg the question as to why China would make such a revelation when it threatens to undermine the value of its $2 trillion in U.S. debt holdings.

China has also been careful to avoid buying gold on the international market, for fear, it says, of creating a stampede into the precious metals that would immediately increase the cost of its stated intention to continue accumulating gold towards the backing of the yuan (renmibi) as a global reserve currency.

Yet that is precisely what has happened. Ostensibly, the justification for tipping their hand exists in the fact that they’ve resigned themselves to the fact that selling poison toys and pet foods to Americans in exchange for a currency that loses value like light into a black hole is an acceptable if imperfect transaction. With $50 billion a year in interest payments from the U.S., they can hedge the risk buy using it to buy gold.

With the perceived floor arguably at $850, downside risk is limited in gold far more so than in U.S. treasuries, which, if mainstream media is to be taken as remotely credible, is the current favorite of safe haven investors.

‘Safe Haven’ is about to get painted with same fragrant brush as ‘AAA-rated’ investments.

Goldbugs are salivating at the prospect of vindication, but seasoned veterans of the war know that the governments and central banks arrayed against gold are not fair fighters. Since the largest players in the futures market occupy both sides of the contract, and never take delivery of the physical gold, they can orchestrate a perpetual negative sentiment towards gold by driving the future price downward by simply amping up the short positions, thus making gold appear poised for a sell-off. This has been standard operating procedure for the last decade, and it is interesting to note that ever-bigger short positions are having less influence over shorter durations before the bulls shrug off the flimsy performance and take gold higher.

Critics and observers of this U.S. Dollar image management program point to the fact that such activity, while shoring up demand for U.S. Dollar debt in the short terms, effectively undermines the entire global economy, and is among the fundamental causes of financial crises such as the housing collapse and the whole current global financial fiasco.

Proponents of this manipulation, who are increasingly legion in number, correctly predict an inevitable bursting of the damn catalyzed by investment demand overwhelming the short positions, forcing them to buy and cover to limit losses, which will, in itself, stimulate the gold price even further.

With the limited oversight and feeble reporting standards of the CFTC, the ploy is facilitated by complicit (or ignorant) regulators who ensure data is obfuscated and disclosure limited. It has been this collective effort on the part of the Dollar Defenders that continuously defeats gold’s advances, repeatedly castrating the bulls and sending them whimpering to lick their wounds and regroup.

But China is now leading the charge, and the bet is that they’re willing to forgo the lost value of their USD holdings to decisively undermine the global reserve currency once and for all and replace it with the Yuan, a move that would effectively mark the beginning in the shift of the global balance of power from west to east.

The United States, overextended militarily across the Middle East and Asia, with new fronts threatening to open in Iran and Pakistan, is perilously close to an international nervous breakdown. China’s opportunity is to ride to the rescue bearing smiles and steamed pork buns while dividing up what is left of the American industrial asset pool.

Our leadership of the last decade (or more accurately, absence thereof), eager to lubricate the workings of multinational financial interests, have inadvertently played into the patient hands of their biggest creditor by prostituting the national currency shamelessly to the point where every nation in the world can see what used up piece of spent jet trash the old USD has become.

While mainstream media dismisses the idea of the Yuan replacing the dollar as the international monetary standard, those of us who have tuned out at the perception management program on CNN recognize the event as halfway accomplished.

The truly explosive moment for gold will occur when the Chinese, at their discretion, decide to spring the trap, and abandon USD completely in favor of gold, suddenly spiking the price of gold straight north in tandem with the complete collapse of the U.S. dollar.

Don’t pay any attention to the second rate hacks trying to claim credit for predicting the fall…its been predicted repeatedly throughout history from Nostradamus to Roubini. Any student of economic history with 20/20 vision could see this coming, and here it is. “I told you so” is a waste of time. Who’s offering a solution?

Whether or not this particular battle at the Great Wall of $1,000 an ounce is the mother of all battles remains to be seen. Desperate times call for desperate measures, and while G7 governments collude to retain power, the unforeseeable is the greatest threat to gold.

That being said, veteran observers are optimistic, to say the least.

According to Bill Murphy, intrepid soldier of gold wars and standard bearer for the Gold Anti-trust Action Committee,

"The Gold Cartel is giving it all they have no, as evidenced by the sharply rising gold open interest on the Comex ... up some 23,000 contracts on Wednesday and Thursday. They are doing all they can to counter new spec buying.

My hunch is the next time we see $1,000, and that could be very soon, gold ought to take off from there, giving us more upside dynamic daily moves. The reasons to own physical gold are off the charts ... HUGE investment demand, shrinking visible central bank supply (unrelated to the cabal), shrinking mine supply, shrinking dollar, concerns over sovereign wealth debt, a horrible US economy, and a US printing press that is going flat out and will have to for some time to come.

In my opinion, all gold has to do is to stay over $1,000 for a few days, and then all kinds of bells and whistles go off."
Read entire article :

Monday, May 25, 2009

Bank Penalties

When Rahim Moosa lost his job last October, he decided to sell the house he'd bought with his wife a year earlier.

His lender, TD Canada Trust, said there would be an $8,000 penalty to break his five-year closed mortgage – an amount he found tolerable.

"By the time we sold in April 2009, TD Bank quoted us a doubled penalty of $18,000. Now, they are stating it will be approximately $25,000 upon closing in June," he says.

Most mortgage contracts and renewal forms specify that clients seeking an early exit will pay either three months' interest or an interest rate differential (IRD), whichever is greater.

The IRD is calculated by taking the outstanding balance, multiplying it by the gap between your existing mortgage rate and the current rate for a term similar to what you have left, and multiplying by the number of months left to the end of your term.

Mortgage rates have fallen steadily since last fall, making the IRD penalties grow bigger and bigger.

Once I got involved in Moosa's case, TD worked hard to cushion the blow. It sent him to a mortgage specialist, who suggested making a 15 per cent lump-sum prepayment using a line of credit that would be paid back at closing.

Since TD hadn't told him about this option last October, Moosa asked for and received the right to make a 30 per cent prepayment to reduce the outstanding balance.

The estimated penalty is now $11,000 to $14,000.

"We won't know for sure what the exact penalty will be until the payments are made using the line of credit next week," Moosa says.

He wonders why TD dragged its feet when told about his financial problems last fall.

"Our branch representative should have advised us that we could pay a 15 per cent lump sum to reduce the penalty.

"TD needs to have a better process in place, particularly when dealing with clients whose largest investment is in their hands."

Moosa's comments will be reviewed, Hechler said. "We could have moved more quickly to help and provided clearer information from the beginning."

Kevin Plautz, also a TD mortgage customer, felt he received misleading information when he asked about breaking the deal to take advantage of lower rates.

His financial adviser initially quoted a penalty of $2,100, based on three months' interest. Other TD staff he spoke to later did not challenge that figure.

Only when he was ready to renegotiate did he learn there would be an IRD penalty of $5,900.

"I wouldn't have bothered doing a renegotiation if I had just been told the correct penalty at the start or one of the many times I asked about it since then," he says

TD agreed to reduce his IRD penalty to $4,000 after I escalated his complaint to the head office.

"We have offered to substantially reduce the amount of Mr. Plautz's IRD penalty as a goodwill gesture in recognition of the confusion he experienced over the amount he was quoted," Hechler told me.

While planning to take the offer, Plautz is leaving TD. He's found another bank that will give him a lower interest rate and cover $225 of his $270 mortgage discharge fee.

"I have a very bad taste in my mouth. I think I still prefer to move my business," he says.

I'd like to hear from readers. Have you tried to renegotiate a mortgage amid falling interest rates? How did the lender respond and what penalty was charged? I'll publish comments in a future column.

Sunday, May 24, 2009

Gold Manipulation by Central Banks

Bill Murphy of and discusses the economy and the gold and silver markets with Mike Maloney

Saturday, May 23, 2009

5-23-09 Weekend Update - Gold and Silver

5-23-09 Weekend Update - Gold and Silver

Gold Poised for Third Weekly Gain as Dollar Slumps Against Euro

Glenys Sim
Friday, May 22, 2009

Gold traded near the highest in two months, set for a third weekly increase, as the dollar fell against the euro, boosting the appeal of the precious metal as an alternative investment.

The Dollar Index, a measure of the greenback against six major currencies, has lost 3.2 percent this week on speculation that the U.S. government’s creditworthiness may be weakening, after Standard & Poor’s yesterday cut its outlook on the U.K.’s AAA credit rating to “negative” from “stable.”

“Investor interest in gold was bolstered by the declines in international equity markets and the soft tone of the U.S. dollar,” David Moore, chief commodity strategist at Commonwealth Bank of Australia, said in an e-mail today.

Immediate-delivery gold was little changed at $952.45 an ounce at 12:27 p.m. in Singapore after touching $956.55 yesterday, the highest since March 23. The metal has climbed about 7.2 percent this month and is about 19 percent higher than this year’s low of $802.59 an ounce. Silver, which dropped 0.2 percent to $14.49 an ounce, is still up 3.5 percent this week.

Bill Gross, co-chief investment officer of Pacific Investment Management Co. in Newport Beach, California, said yesterday that the U.S.’s top AAA credit rating will “eventually” be lost. “The markets are beginning to anticipate the possibility of” a downgrade, Gross said.

Full article here

Thursday, May 21, 2009

Gold May Test $1,200

Gold is beginning to gain investors' interest given all the debt funding we are seeing around the world, notes Frank Holmes, CEO & CIO of U.S. Global Investors. He tells CNBC's Martin Soong & Amanda Drury that gold may test $1,200.

Wednesday, May 20, 2009

Gold Demand Still Strong

Investors are still flocking to gold, according to the World Gold Council's first-quarter Gold Demand Trends Report. Rozanna Wozniak from World Gold Council considers the outlook.

Tuesday, May 19, 2009

Silver more rare than gold, the price will explode

GATA board member Adrian Douglas, publisher of the Market Force Analysis financial letter (, was interviewed for a half hour yesterday by about the gold and silver markets, and you can listen to it here:

Monday, May 18, 2009

Mortgage Payment Plan

New and revolutionary mortgage payment discoveries explain how Consumers in Canada, the United States, the UK, Australia and the Commonwealth, give away huge amounts of money, freely every week or month with each mortgage payment. In fact this is true around the world for almost all Borrowers. We pay our mortgages and loans on terms dictated by the Lender without the expertise of a new wave of professionals who specialize in turning debt and mortgage payments to the financial advantage of the Consumer.

Lenders extend their loan repayment terms over 15, 25 and 30 years for maximum profits on the loan. Consumer Mortgage Repayment Specialists could shrink those profits by thousands of dollars depending on their experience and skill at saving you excessive and unnecessary payments. With some coaching, you too could divert new dollars to pay off the home loan in record time with big savings.

You would create these savings from Mortgage over payment if you could reduce taxes, eliminate excessive interest charges and shrink other payments on the loan. Success with the new way to pay means an early end to payments for an extended number of months. These are payments that in fact, are entirely un-necessary but you think you must make because usually you follow the Lenders' Plan.

Canadians, for example, are allowed tax deductions for retirement savings, as business expenses, and as tax credits for the costs of money used for investment purposes. Unfortunately, many Consumers forgo these allowable tax deductions. These lost tax dollars could be utilized efficiently to reduce excessive mortgage interest payments.

Citizens and Residents of the United States of America too, as Borrowers, have become desensitized to this huge wastage in mortgage costs because of:

• Record low interest rates recently
• Rising house values followed by the sub-prime mortgage fiasco
• The fact that Americans can deduct interest costs on their taxes and
• Aggressive home equity loans by Banks and Mortgage Lenders so that the average North American Home has become a virtual ATM Machine loaded with instant cash available to the Home Owner to spend

As a result, Borrowers and Home Owners continue to add their hard earned dollars to huge Bank Profits, unwittingly. We lack fundamental knowledge about how best to make mortgage payments and home equity loans work in our best interests. New approaches to faster mortgage payments show results very early. Savings of $10,000.00 in one year are not uncommon. About $30,000.00 of savings after three years of payments is almost always achievable.
Any good early, mortgage re-payment program can cause the disappearance of as many as 70 to 120 months of mortgage payments you no longer must make. In order to succeed, the Borrower must follow with discipline, a skilfully designed and specific fast mortgage repayment plan that applies money concepts differently.

This is a complex field. Consumers do not know which story to believe. How do you separate the genuine Mortgage-Payment Wiz-Kid" from the fraudulent, scam Artists and Pushers of get-rich-quick schemes that never work?
The News Media generally favors an easy and sensational story like credit card interest, pay day loans, or the recent surge in foreclosures. Academics, Statisticians and Researchers are not generally practical in their approach to these problems. Professionals in the Mortgage and Loans Industry have been funded largely by the Lending Establishment.

Almost all of them, including the brightest ones work for Lenders. As a result, Consumers have been abandoned, left to the mercy of Bank Profits and Mortgage Loan Officers' fees. What compounds the problem even more is the multitude of self made "Specialists", who in fact know little about the subject. Many of those who comment on fast mortgage payment options may hardly have basic college level math. Some may not ever have had any practical experience in paying a mortgage. You are reading. So here's your mortgage how to tip.

The most important tool for use in designing a good mortgage repayment plan is an amortization schedule that lists all payments from Payment #1 to the Final Payment. To design a good plan, you must compare and contrast different repayment scenarios for that mortgage. The average Canadian mortgage contract is written so that the loan will be repaid in 300 Payments. American mortgages get repaid in 360 Monthly Payments, generally. You must know and include the impact of related financial decisions such as taxes, retirement savings and investments etc. Even additional fees and costs must be considered. Three key components of your plan make a big difference in delivering dollars into your retirement account because of your skill in devising a clever mortgage repayment strategy:

The first of these components is the frequency of compounding and the frequency of payments. For example, Canadian Lenders do not exact a fee for changing from monthly payments to a bi-weekly mortgage repayment schedule. Many American Lenders charge such a fee. In Canada therefore, it is standard knowledge that you would reduce the number of years of payment from 25 to around 22 years by simply changing to a Bi-weekly mortgage payment schedule. A good plan from the new breed of Mortgage Payment Planners would pay off that mortgage in 10 to 12 years.

The second major planning component is the application of tax rules to benefit the Borrower. Our generous Uncle Sam allows US Taxpayers to deduct the interest on the mortgage loans on their homes to a maximum loan size of one million dollars. Canadian Mortgage Payment Planners, however, must distinguish themselves by devising various schemes to make the Canadian Mortgage Interest Tax deductible. Clever yet perfectly legitimate tax planning schemes could make a difference in your mortgage costs to the tune of tens if not hundreds of thousands of dollars.

Thirdly, a clever investment program that is closely integrated with the mortgage repayment plan could free you, the Borrower from loan payments much sooner and leave an Investment Account at the end.

Consumers have been diverted successfully to focus their attention on the low interest rate game. They are also enticed with other gimmicks such as interest-only payments, 100 percent financing, cash back from the mortgage at closing. These offers sedate and distract us from the real meaningful issues such as the time it would take to repay the entire loan. How much does the mortgage really cost? Such costs must be counted in before tax dollars and in after tax dollars. What are the penalties, fees and costs for early repayment?

A fast mortgage payment plan that ignores any of those three key components above is an Amateur’s Plan. Unfortunately, most mortgage pay off plans do not include such considerations. At the time of approvals and funding, Consumers become overwhelmed with the mortgage process. Even professionals, like dentists and doctors, teachers, nurses and police, even accountants and financial planners can be so intimidated with the experience that they accept the Lenders' Payment Plan without question. That payment plan usually has a built-in, profit pool to be counted in the hundreds of thousands of dollars over the life of the mortgage. The new breed of Mortgage Payment Specialists knows how to design a Consumer friendly, Mortgage Payment Plan that integrates tax issues, compounding frequency and investments. All three components, when skilfully integrated into a mortgage payment plan, deliver savings counted in the hundreds of thousands of dollars over the life of the mortgage.

Already you can see that the overwhelming majority of Borrowers do not usually create their own specific, mortgage payment plan. Those who do would not have the tools to integrate tax planning, payment and compounding frequency, in addition to investments into their plan. So you must consult an expert who has those skills. Since space does not permit, we will end here. Later on, we will explore the real benefits of a Fast Mortgage Payment Plan. In another article, we will explain the magnitude of those savings in numbers the size of which once again are too often misunderstood.

Swiss Asia's Kiener Expects `Huge Shortage' of Gold: Video

Swiss Asia's Kiener Expects `Huge Shortage' of Gold: Video
May 18 (Bloomberg) -- Juerg Kiener, chief investment officer of Swiss Asia Capital Ltd., talks with Bloomberg's Paul Gordon about the outlook for the gold market.

Kiener, speaking from Singapore, also discusses factors driving gold prices, the metal's use as a currency and his investment strategy for gold stocks. (Source: Bloomberg)
Watch the vide by clicking bellow :VIDEO

How to Buy Gold

How and where and when to buy Gold as a long term investment and inflation umbrella :

Saturday, May 16, 2009

China is stock piling GOLD

Tetsuya Yoshii, VP for derivative products at Mizuho Corporate Bank is bullish on gold given China's demand for the precious metal as it diversifies out of U.S. paper and dollar-based assets. He makes his case to Linda Yueh of Oxford University & CNBC's Martin Soong.

Gold Climbs in N.Y. as Equity Rally May Stall; Silver Declines

By Halia Pavliva

May 15 (Bloomberg) -- Gold prices rose, extending a rally to two weeks, as investment demand increased on rising consumer prices and signs that a rally in U.S. equities may be ending. Silver futures fell.

The Standard & Poor’s 500 Index headed for a decline this week amid speculation that the rally has outpaced prospects for corporate profits and economic growth. Some investors buy gold as an alternative to shares. U.S. consumer prices excluding food and fuel climbed 0.3 percent, the Labor Department said today.

“For gold and silver, we are going into a win-win situation,” Ashraf Laidi, the chief market strategist at CMC Markets in London, said in a Bloomberg Television interview. “When we will have a retreat in the financials and the rest of the stocks, we will have some rotation into metals.”

Gold futures for June delivery advanced $2.90, or 0.3 percent, to $931.30 an ounce on the Comex division of the New York Mercantile Exchange. The price gained 1.8 percent this week, following a 3 percent increase last week.

“Gold prices have turned higher as the market’s focus turns to the unexpected jump in the core consumer-price index,” said Ralph Preston, a Heritage West Futures Inc. commodity analyst in San Diego. “A close above $930 could be explosive.”

Silver futures for July delivery slipped 3 cents, or 0.2 percent, to $14.01 an ounce. The metal still gained 0.4 percent this week.

Equities, Dollar

The S&P 500 is down 5.1 percent this week. The gauge rallied eight times in the past nine weeks as some economic reports suggested that the worst of the recession may be past.

The dollar has dropped 1.8 percent this month against a basket of six major currencies, enhancing the appeal of gold as an alternative investment.

“Gold has been the object of affection for hedge funds and also has paid increasing attention to the dollar lately,” said Tom Pawlicki, an analyst at MF Global in Chicago. “That helps explain why gold has rallied both when stocks have risen and fallen.”

Silver has climbed 24 percent this year, and gold is up 5.3 percent.

Source Bloomberg

Friday, May 15, 2009


by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
May 11, 2009

Will the wealth destroying policies of the Obama Regime make the People’s Bank of China full-fledged Gold Bugs? Chinese officials announce their purchases of Gold, and continue to raise concerns about U.S. economic policy and the associated implications for the value of the U.S. dollar. One might think they have indeed become Gold Bugs. If that be the case, no real surprise should be registered. A casual observation of government economic policies around the world, and in particular in the U.S., since the invention of the central banking and fiat money would convert any rational individual into a Gold Bug. Given the wealth destroying policies of the Obama Regime, a large number of people might wake up to be Gold Bugs.

Text Box:

In the above chart is plotted a dollar index built on the median movement of the dollar versus a basket of major currencies. In today’s world, capital flows dominate all other considerations in determining the relative values of currencies. The widely used trade-weighted index is a fairly obsolete concept, built on early 20th century concepts of trade, but remains commonly used. The median is used as a measure of central tendency to avoid the distortions that often develop when using common averages.

In that chart is an ominous picture. The U.S. dollar is breaking what little support might have existed. The U.S. dollar is about to go into free fall. Just as traders were quick to ride the dollar higher, on false pretenses, traders will be as quick to sell the dollar. Already, some currencies have rallied strongly against the dollar. No one observing a chart of the U.S. dollar is going to be willing to grab this “the falling knife.”

Part of the impetus for the dollar’s rally of the past year was the repatriation of funds made necessary by the joyful collapse of the hedge fund sector. Fundamentals, of any kind, did not exist to support the dollar’s rally. What is now happening is the correction of non-equilibrium values in the foreign exchange market. And just as the dollar overshot on the upside, it will overshoot on the downside.
We can now reasonably expect that the dollar will make a new low, as measured by the index in that chart. That development would have some strongly positive implications for the price of US$Gold. A new low in that dollar index translates into a U.S. dollar price of Gold of more than US$1,100. Gold Bugs may indeed have a joyous holiday season this year, brought to you by the Obama Regime’s destruction of the dollar.

A natural question that then follows is when that price might be achieved. In large part the speed of the assent will be dictated by the level of institutional participation in the Gold market. Based on the experience of the past year we can make some time estimates, though frail they are. If the institutions are active in the market as the dollar crumbles, US$Gold could achieve that level in a September - December framework. Without that participation, December - March would be more likely.

That $Gold is under valued in an intermediate time frame is only part of the equation. Two remaining questions must be answered.

If I do not live in U.S. dollars, should I buy Gold?

Finally, should we be buying Gold today, at these prices?

Flip side of the price of Gold in your currency is the Gold price of your currency. Gold price of your currency is how many ounces of Gold are necessary to buy one unit of that currency. The calculation is simply 1 divided by the price of Gold in your currency. If the price of Gold declines when denominated in your currency, which happens when your currency strengthens, the Gold price of your currency is rising.

Text Box:

To simply things, let us consider the chart above. What has been done is to plot the rank of the major currencies by the strength of the Gold price of that currency. In other words, the Gold price of the South African rand has been the strongest of the twelve currencies listed. The South African rand has been too strong relative to Gold. The currency is likely over valued relative to Gold. Or from the other direction, the Gold price of the currency is probably too high. The higher your currency ranks in this chart, the more under valued Gold is likely to be in terms of your currency.

Thus far, we have set an intermediate term target for $Gold of US$1,100. Second, we have identified in which currencies Gold is probably the most under valued. Final question deals with whether or not we should be buying today.

Text Box:

To help answer the final question, let us consider the chart above. $Gold has broken the down trend line which had served as resistance. However, it is now short-term over bought. That condition comes from the rapid decent of the U.S. dollar in recent weeks. Additionally, institutional recognition of the role of Gold in portfolios has become more widespread this year.

Given that $Gold is probably short-term over bought and some possibility of Summer doldrums developing, investors should probably simply use weakness to do their buying. $Gold prices below US$900 should encourage all buyers. Price weakness in the AM on New York City time should be used in particular. Those investors living in currencies at the top of the second chart should be aggressive buyers during such periods.

Summer of 2009 may be the last great buying opportunity for Gold. What we mean is that the prices that develop in the next few months, or weeks, may not be revisited. In the next leg of the structural Gold bull market, US$1,000 is more likely to be a floor than a ceiling. Waiting to buy Gold till the next announcement of purchases by the People’s Bank of China may be too late. China’s most recent comments on the dangerous economic policies of the Obama Regime remind this author of an old joke. When the wife complained to the farmer for shooting the mule, he turned to her and said, “That’s once.”


© 2009 Ned W. Schmidt

Gold Needs to Shine

May 14 2009

Gold needs to break through the $930 level first in order for investors to snap it up, suggests Jonathan Barratt, managing director of Commodity Broking Services. He speaks to CNBC's Oriel Morrison.

Thursday, May 14, 2009

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Wednesday, May 13, 2009

Gold May Extend Gain as Resistance Breached: Technical Analysis

May 14 (Bloomberg) -- Gold may extend its two-week advance after breaching the so-called resistance level that defined the precious metal’s bear trend since this year’s peak in February, Standard Bank Group Ltd. said, citing trading patterns.

This indicates the “corrective phase has ended,” Darran Grabham, the bank’s technical analyst, wrote in a note yesterday. “This is a positive development, but we are not currently forecasting a move to a new high.” A resistance level is where sell orders may be clustered.

“A break above $932 is forecast in the weeks ahead, yielding a move into the $960 to $966.70 area, from where a reaction is envisaged,” Grabham wrote.

Gold for immediate delivery traded little changed at $925.47 an ounce at 10:01 a.m. Singapore time and has gained 1 percent this week. The precious metal is down 8 percent from this year’s intra-day high of $1,006.29 on Feb. 20.

The advance may stall at $932, with the $900 to $890 area providing support to ensuing retracements, Grabham wrote. If the anticipated sell-off does not materialize around $960, the rally may extend to $980.

“Gold weakness back below $890 turns the outlook neutral, while continued selling through $880 again exposes the market to the pivotal $869 to $865.80 support base,” he wrote. “A sell signal will be initiated below $865.80, initially yielding a decline to $840.”

Source Bloomberg

Gold Gains to Six-Week High on Dollar’s Drop

By Glenys Sim

May 13 (Bloomberg) -- Gold climbed to the highest level in six weeks as a drop in the dollar boosted demand for the precious metal as a store of value.

Bullion has gained 1.2 percent this week as the Dollar Index, which tracks the greenback against six major world currencies, slid 0.6 percent in the same period to a four-month low today. Gold was also boosted by crude oil’s rally to a six- month high, increasing demand for the metal as a hedge against accelerating consumer prices.

There may be “a spike in inflation” following U.S. government measures to revive the economy, Raymond Goldie, an analyst at Salman Partners Inc., said in a report. The measures may generate “an excess of U.S. dollars in foreign markets, ultimately creating weakness in the U.S. dollar,” he wrote.

Gold for immediate delivery gained as much as 0.5 percent to $928.17 an ounce, the highest since April 2, and traded at $927.63 at 2 p.m. Singapore time. Bullion, denominated in dollars, tends to move in the opposite direction to the currency.

Gold for June delivery in New York added as much as 0.6 percent to $929 an ounce before trading at $928.70.

The dollar fell for a second day to a seven-week low versus the euro after Chinese reports added to signs the worst of the global economic slump is over, sapping demand for the currency as a refuge.

“Given the inverse relationship between the U.S dollar and the price of gold and silver, this should provide a positive catalyst for the price of the precious metals,” said Goldie.

Among other precious metals for immediate delivery, platinum was up 0.9 percent at $1,145 an ounce and palladium traded little changed at $234.50 an ounce. Silver gained as much as 1 percent to $14.38 an ounce, the highest since Feb. 24, before trading at $14.32.

Gold Basics

In The picture A Roman gold bar from the 4th century is shown at the Bank of England museum in London. Gold, a scarce metal that has incited wars, expeditions and conquests throughout history,

Nothing buffs gold better than a thick coat of fear. Gold futures soared to record levels last March and investors have shown renewed interest in investing in the commodity that has typically been used as a bulwark against inflation and other currency risks.

"Gold is a very effective hedge against uncertainty because even as investors are watching the value of their equity investments plummet, gold still has value. In that way, gold can help diversify away some of the risks in an investor's portfolio," said Tom Pawlicki, a precious metals and energy analyst at MF Global.

Gold, a scarce metal that has incited wars, expeditions and conquests throughout history, has retained its value and investment appeal largely because of the gold standard, which dictated that all paper money would be backed by gold reserves. Even though U.S. President Richard Nixon quashed the U.S. dollar's direct convertibility to gold in 1971, the precious metal only gained popularity as a safe-haven investment since the double-digit level of inflation that plagued the economy during the period undermined the value of the U.S. dollar. In January 1980, gold hit US$850 -- its long-standing record until the current financial crisis led investors to run the price up to US$1033.90.

Inflationary threats have been supporting strong gold prices as investors become increasingly wary of the Fed's plans of pouring money into the financial system in hopes of rebuilding asset values and evading deflation.

The risk, of course, is that anti-deflationary actions will go too far, resulting in high levels of inflation or even hyperinflation.

The U.S. Federal Reserve has been buying assets including government bonds to lower interest rates and ease the de-leveraging process. In order to mitigate remaining debt that's clogging balance sheets, the Fed has the ability to increase the money supply until eventually enough inflation is created to absorb outstanding debt.

"However, it is not clear, with a failed banking system incapable of transmitting the Fed's 'high-powered money' into new loans, how well or quickly such a 'reflation' policy would work," said UBS analyst Daniel Brebner. In such an instance, Brebner expects gold to track inflation since it isn't tied to currencies.

Dr. John Mathis, a professor of global banking and finance at Thunderbird School of Global Management acknowledged that hyperinflation is a threat given the massive dollar value of bailout actions. He said the challenge for central banks will be determining the right rate at removing excess liquidity from the system.

Hyperinflation concerns are shared by Axel Merk, president and founder of Merk Investments. He remains very concerned that recent policy actions will spur high inflation that the government won't be able to tame.

"The amount of the stimulus is going to be much more than people predict. I don't think the government has an exit strategy and there's been way too little effort to look ahead. They're trying everything just to prop up a broken system," Merk said, adding that in the hard currency fund he manages, they have a 14.4% allocation to gold, which is higher than usual.

With gold acting as an effective hedge against uncertainty, deflation, and inflation, why bother investing in anything else?

A big downfall to investing in gold is that the precious metal doesn't offer the same return potential that equities do --particularly in a recovery environment as the current market is eagerly awaiting.

"When the economy begins growing and if the Fed shows that it's on top of the inflation curve, then there's no reason to invest in gold because equity markets will offer much better returns," said Pawlicki. The Fed has been selling government-backed bonds to help swallow excess liquidity. If economic stimulus measures successfully return confidence to the market and banks loosen their grip on lending, the stock market is likely to heat up, leaving gold in the cold.

Current gold prices seem to suggest that government actions are having their intended effect.

"As fiscal and monetary stimuli kick in, the slowdown in the global economy is easing," said Francisco Blanch, a commodity strategist at Banc of America Securities-Merrill Lynch Research, in a recent note. "Risk perceptions are clearly on decline with the VIX having fallen 33.0% from levels above 50.0% just a couple of months ago. Equities have risen for six successive weeks, with the S&P 500 up more than 28.0% from its low in March." Blanch also noted that as a result, gold prices are showing less volatility.

According to Pawlicki's estimates, gold prices will hold in the mid-US$950 to US$1000 range in the near-term. Once the economy begins showing signs of recovery and investors' risk appetite improves, however, he sees prices dipping to between US$750 and US$800.

Monday, May 11, 2009

Vancouver Housing Starts Drop

Metro Vancouver housing starts showed another substantial drop in April leaving new-home construction at about one-third the level it was a year ago, according to figures from Canada Mortgage and Housing Corp.

Builders started work on 483 new homes across Metro Vancouver in April, almost 70 per cent fewer than April, 2008.

To the end of April they'd started 2,302 new housing units, some 66 per cent fewer than the first four months of last year.

Starts were down in every municipality except Delta, which has seen construction start on 93 new homes up to the end of April, a 75-per-cent increase from a year ago.

"New home construction is facing competition from a well-supplied resale market and a growing inventory of unsold new homes," Robyn Adamache, a Canada Mortgage and Housing Corp. analyst said in a news release.

"Builders will remain on the sidelines until some of the existing new and resale supply is absorbed."

Construction across B.C.'s urban areas remained depressed in April with builders starting only 842 new homes during the month, down 73 per cent from the 3,092 started in the same month a year ago.

Once booming Kelowna saw the steepest decline with only 29 new starts in April, down 88 per cent from the 249 started in the same month a year ago.

In Victoria, starts were down 87 per cent at 54 units, and in Chilliwack starts were down 87 per cent at 21 new units.

Vernon was the only urban area to see an increase in starts with 64 new units reprsenting a 16 per cent increase from a year ago.

Overall, however, builders started work on just 3,363 new homes to the end of April compared with 11,385 in the first four months of last year.

Monday, May 4, 2009

Condos as attractive investment

More people are seeing condominiums as an attractive investment opportunity than was the case a year ago, according to a survey released Monday.

TD Canada Trust said 44% of respondents in a survey of urban Canadians said conditions had improved over the last year with regard to the prospects of buying a condo for investment purposes. That was up from 21% in a similar survey done last year.

The bank said lower prices and Canada mortgage rates are the main reason people are being drawn to condos as a way to make money over the longer term.

"This is a good time to explore a condo purchase given that mortgage rates are very attractive right now and many condos have dropped significantly in price," Joan Dal Bianco, the bank's vice-president of real estate secured lending, said in a statement

In fact, 43% of the respondents said if they couldn't afford a condominium right now, they'd consider partnering with a friend or relative to buy one for investment purposes.

But there were other reasons than investing people had for wanting to buy a condo. The most popular one, cited by 39 per cent of survey takers, was that condos require less maintenance than house do. The second most cited reason for buying a condo, a 21 per cent, was that they're more affordable than houses.

The survey, done by Angus Reid Strategies, involved 200 respondents in the cities or surrounding areas of Vancouver, Calgary, Toronto, Montreal and Halifax between March 30 and April 7.