Metals / Gold

• Have Gold Prices Finally Peaked?

  Gold slipped below $1,800 per ounce last week as equities rallied in a burst of risk on investor enthusiasm. Does this spell the end of the bull run? The gold price has seen a lot of volatility of late and questions are being asked — not least by those holding long positions — as to what the future for gold prices holds in store. GFMS, the precious metals consultancy, is understandably still bullish. In their recent quarterly Gold Survey, they are quoted by the Telegraph as saying, “Given strong demand for bullion from the public and private sectors … the…

• Don’t Count on Gold in a Downturn

  The way the price of gold keeps rising, a person might think that no matter what the downturn, gold would prove to be a good investment. I think that if things don’t fall apart too much, gold will be an OK investment. If things really start falling apart, though, it is not clear that gold will work nearly as well, especially if we expect gold to function as a currency itself. If things don’t fall apart too much If we keep teetering on the edge, but our current financial system remains in place, gold seems likely to be a good…

• Can we Expect a Sharp Correction in the Gold Price Before Year end?

  A review of the gold price written by Robin Bew, chief economist at HSBC Bank, proposes that the gold price is in danger of entering bubble territory and predicts a sharp correction by year-end. Determinedly, Robin examines the main drivers behind the price over recent months while acknowledging by use of this graph that the price has been on the rise for much of the last decade:Source: The Economist Courting controversy from a few sides, the bank states there is nothing special about the nature of gold that makes it an ideal safe-haven asset. Were it not for its widely…

• Negative Real Interest Rates Continue to Provide Gold With a Perfect Environment

  Inflation has never been the primary driver of the gold sector on its own. Given that gold, as is well known, does not pay interest, the real interest rates equal the opportunity costs. During the 20 years of the gold bear market in the 1980s and 1990s, real interest rates were about 4%. They were negative in only 6.7% of the months. The situation was completely different in the 1970s. Real interest rates were negative in 54% of the months. Since 2000 real interest rates have been negative in 47% of the months, which constitutes an optimal environment for gold.…

• Excessive Structural Debt Suggests Further Appreciation of Gold

  “Jesting is the third-best disguise. The second-best: sentimentality. But weirdly, the best and safest disguise is still the blatant, naked truth. Nobody will believe that.“ The debt of the USA currently amounts to USD 14.3 trillion . Debt in terms of economic output is 93%, i.e. the highest ratio since the end of the 1940s. The new debt taken out since 2008 alone accounts for more than 40% of the aggregate government debt amassed in the past 240 years. Inclusive of the debt and entitlements of the States, authorities, pension funds etc. the situation is dramatic, painting a picture of…

• Gold Experiencing a Renaissance as an Investment Class

  The (financial) world is at the moment long in questions but short in answers. We believe that gold is one of the right answers in times of chronic uncertainty. It is said that “trust is a delicate flower; once destroyed, it will not return easily”  . We believe that the trust lost in the past years will not be regained any time soon, and that the situation will actually still get worse. The Eurozone is going through a breaking test, and the US dollar is gradually losing its status as the leading global currency. The global expansion of monetary supply…

• Recoverable Gold Resources to Run Out in 20 Years

  It seems we have been so caught up in the decline of oil reserves that another commodity—one that the mining industry has thrived on for centuries—is apparently even in more scarce supply.  Gold reserves are running surprisingly low, and analysts believe that recoverable resources could run out completely within 20 years. A report written by gold mining analysts for Standard Chartered Bank cites U.S. Geological Survey estimates that at the end of 2010, global gold reserves were only 51,000 tonnes.  At the rate of production seen in 2010, this would translate to only 19.2 years of production.  Unfortunately, the report…

• Move Over Fort Knox: China’s Golden Ambition

  If you think the recent, highly-publicized gold-buying mania is merely the result of a handful of panicking investors, urged along by a couple contrarian billionaire types... think again.Today, it's no longer just private individuals buying up the yellow metal. For the first time in decades, gold has become a nearly universal investment strategy... something that literally any class of investor must own to be considered well-hedged.It's so important, in fact, that the world's biggest and fastest growing national economies are in the midst of an historic push to build up their stores of the precious metal. Most of it will…

• A Review of the Gold Fundamentals

  With gold crashing through to $1,500 this morning, I thought that I would once against re-examine the fundamentals for the barbarous relic. That is most easily done by reading the Q1 report from the World Gold Council, the final authority on all matters regarding the yellow metal (click here for their link). Among the many nuggets that I was able to glean was the fact that per capita gold ownership in the US is $1,197 per person. In China, it is $36. Chinese per capita incomes are rising dramatically. What do you think they are going to buy, with a…

• The Worst Trade of All Time

  One of the great asset management blunders of all time has to be the EC’s decision to sell its gold reserves in the wake of the launch of the Euro in 1998. The decision led to the fairly rapid sale of 3,800 tons of the yellow metal at an average price of $280/ounce, reaping about $56 billion, according to the Financial Times. Today with gold at $1,500/ounce, the stash would be $300 billion. On top of this, the Swiss National Bank is poorer by $70 billion, after offloading 1,550 tons of the barbaric relic. The large scale, indiscriminate selling depressed…