Is silver back in the bull market?

It is silver's time to shine after the precious metal climbed for seven straight sessions to notch gains not seen in nearly five years, and analysts say its winning streak is far from over.

Silver prices rallied to almost $23 a troy ounce on Thursday, after logging collective gains of 17 percent in over the past seven sessions, as a surge in gold prices and a more positive outlook for global industrial production boosted sentiment.

"It's something that you can't really ignore at the moment...There is plenty of talk about silver being in a bull market now, after the recent gains, it does look like it is in really good stead," said Stan Shamu, market strategist at trading firm IG.

Silver prices, which are closely correlated to gold, have followed steep falls in the yellow metal this year. Silver plunged 40 percent from the highs of at the start of the year to lows of $18.19 in June 28, while gold dropped 29 percent over the same period.

Demand for the precious metals, which are viewed as safe havens, waned as investors grew more confident over a more stable global economy. However, prices have recovered in recent weeks as Fed dialogue suggested tapering plans could be delayed and a flare up of violence in Egypt renewed appetite for the safe haven assets. Read more >>

Citi: Are Gold And Silver Finding A Bottom?

"Gold advice from a bankrupt bailed out institution. Priceless."

Gold and Silver appear to be in the process of finding a bottom; however, the price action could continue to be choppy in the coming weeks. Ultimately Citi's FX Technicals group, as the following charts suggest, expect both precious metals to move much higher in the long term with the potential for Silver to be the outperformer, as was the case from 2008 to 2011.

Gold and Silver appear to be in the process of finding a bottom; however, the price action could continue to be choppy in the coming weeks. Ultimately we expect both precious metals to move much higher in the long term with the potential for Silver to be the outperformer, as was the case from 2008 to 2011.

Our original target for this Gold correction was $1,260, which was the target of the double top. This would also have resulted in the same high to low move on a percentage basis as seen in March – October 2008.

Gold has overshot that target, though only slightly (the 2008 high to low correction was 34% while this one has been 36%). The bottoming process in 2008 can still serve as a template for what might still come for Gold:

After rallying through September-October 2008, Gold made one final push down to a low 7.4% lower than the previous one

After rallying through April, Gold has made a push lower and similar move to the last one in 2008 would suggest a bottom would be put in at $1,224. The low so far has been $1,221 and consolidation seems to be taking place. Read more >>

Soros Joins Gold-Stake Cuts Before Bear Market Drop

Billionaire investor George Soros joined Northern Trust Corp. and BlackRock Inc. in cutting holdings of exchange-traded products backed by gold before a bear market in prices last month, while John Paulson maintained a stake that lost about $165 million in the first quarter.

Soros Fund Management LLC lowered its investment in the SPDR Gold Trust, the biggest such fund, by 12 percent to 530,900 shares as of March 31, compared with three months earlier, a Securities and Exchange Commission filing showed yesterday. Funds run by Northern Trust and BlackRock showed reductions of more than half, according to earlier filings. Paulson & Co., the largest investor in SPDR, held 21.8 million shares, while Schroder Investment Management Group bought 2.1 million.

Gold prices that reached a record in 2011 tumbled into a bear market last month, erasing $42 billion from the value of ETP assets this year, according to data compiled by Bloomberg. Some investors lost faith in the metal as a store of value, favoring riskier assets, as equities soared to all-time highs and unprecedented stimulus measures by the world’s central banks failed to spur inflation. After the longest rally in nine decades, gold is headed for its first annual decline since 2000. Read more >>

All Alterantive Currencies Must Be Crushed

Gold prices just entered a bear market. Down 21% from their mid-2011 highs. Today's drop is the largest since 2/29/12 - LTRO2 and takes the price of the barbarous relic back to July 2011 lows. Silver is also seeing its biggest down-day since LTRO2 as it tests 2012 lows. Must. Destroy. All alternative currencies. Read more >>

Gold and Dow Flash the Same Warning Signal

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On Friday, both gold and the Dow flashed the same warning signal—the economy is in deep trouble.  The Dow plunged nearly 275 points on the news of a weak jobs report, and gold rocketed higher by $66 on speculation global bankers are going to print money to resuscitate a dying financial system.  You do not get this kind of tandem move in opposite directions by coincident.  Last week, both the stock and gold markets appeared to stop pretending and acknowledged the vortex of debt and insolvency that could suck us all into a black hole.

Renowned gold expert Jim Sinclair of JSMineset.com said Friday, “Those popular gold writers calling for much lower gold prices are simply out of their mind and disconnected from reality.”  Sinclair has been calling for “QE to infinity” (money printing) for years now, and he’s been right.  Of course, money printing masked the recession/depression since 2008; and now, it looks like more of the same bad medicine is on the way—only a much higher dose.  My only question is when does the money printing stop working and turn the currency into confetti?  It appears we will find out sooner than later. Read more >>

Many have little to no savings as retirement looms

After a vicious decade of no growth for the stock market, including two 401(k)-eating bear markets and persistently sky-high unemployment, more Americans are finding themselves in their 50s and 60s with practically no money saved for retirement.

"We were in our 30s, blinked, and now we're our parents' age," says Alan Tipps, a corporate jet pilot who typically earns more than $100,000 a year when he's working. But Tipps, 52, has been laid off three times during the past four years, and says that has forced him to burn through what was in his 401(k) just to "keep the lights on" in his home in Portales, N.M.

Investors of all ages have suffered. But for those close to retirement, it's been especially tough, because they're faced with taking distributions from investment portfolios that in some cases are a fraction of their peak value. Forced early retirements and the near extinction of pensions are making things worse, creating a generation of aging investors in which some have little or no plans for how they're going to pay for retirement. More...

Gold May Top $6,000, Silver $600: Asset Manager

Image via WikipediaGold prices may reach $6,200 per ounce in a bull run which will “end all major bull markets,” Urs Gmuer, asset manager at Dolefin, a Swiss investment advice firm, told CNBC.

Gmuer’s prediction is based on analysis of the last major gold boom of the 1970s, during which gold prices rose from $35 per ounce to $850 per ounce. Gmuer said that in the current bull run, prices would be pushed upwards by a protracted period of global economic difficulty—potentially lasting years—during which investors would continue to search for so-called safe havens.

“Gold prices have risen over the last few years, as the macroeconomic picture has become worse. The deterioration of the fundamental situation has now gone even further.

“Purchases by investors of gold will be based on fears of systemic risk or banking crashes,” Gmuer said. More...

China's 2010 Gold Rush

Adrian Ash, Editor, Bullion Vault

Owning gold is more often an end-in-itself than as an investment vehicle...the aim of accumulation, not the means...

THE COLLAPSE in India's gold demand during 2007-09 might seem good reason to question the fundamental strength of gold buying worldwide.

After all, if the world's No.1 gold buyers can't keep up with record-high gold prices, who can...?

But the plain fact, as BullionVault first forecast in spring 2009, is that China has overtaken India as the number one private gold buyer this year. The typical Chinese New Year gold rush has already begun (thanks in part to 3% discounts at major retailers), and robust demand looks likely to continue through 2010 if not beyond.

Full-year 2009 private demand in mainland China could outstrip India, the former No.1 buyer, by one quarter if not one third. Short of a (very unlikely) collapse in Q4 demand, full-year private gold buying – including jewelry and retail investment – is set to have grown 10% from 2008's record in volume terms, rising 26% by value to equal $13.5 billion or more.

On recent trends, that would equate to more than 2.0% of China's famously massive household savings (up from 1.0% ten years ago) and account for almost one ounce in every eight sold worldwide.




Basis the GFMS consultancy's data (published by the World Gold Council), physical gold purchases by mainland Chinese households in 2009 was already running 19% ahead of India's private demand for Q1-Q3.

Given China's continued economic growth (certain to hit Beijing's 8% target according to the Chinese Academy of Social Sciences) – let alone the surge in money-supply and credit growth over and above GDP (put at 23 and 27 percentage points respectively by Deutsche Bank) – private gold consumption in Q4 most likely remained very robust. Whereas India's private gold off-take during Oct-Dec. continued to shrink in the face of record-high prices. Indian bank and wholesale dealers have reported below-market bids from their clients throughout the autumn. Comments from the Bombay Bullion Association put Q4 imports 54% lower from 2008's already disastrous finish.

Fourth-quarter Chinese consumption should be in the range of 116 tonnes (if it adds 37% to Q1-Q3 volume, as per the 5-year average) to 128 tonnes or more (if Q4 tops Q3 by volume, as it has each year since 2004). Running total to end-Sept. was 315 tonnes. Likely to finish full-year at 431-443 tonnes.

India's private demand, in contrast, ran 45% below 2008 levels during the first 9 months of the year, most notably depressed during Q1 (down 83% from Q1 08, with Indian investors becoming physical dis-hoarders on GFMS's data; overall, India was a net exporter of gold for the first time since the Depression according to market historian Timothy Green). Applying the 5-year average ratio of Q4 demand to Q1-Q3 figures (27% added to 264 tonnes), full-year private off-take would come in at 336 tonnes, the lowest total since at least 1991 on GFMS's data.

India's full-year imports (it has virtually no domestic mining output) are forecast at 370-380 tonnes says the Bombay Bullion Association. They have not been below 400 tonnes per year since at least 1997 according to the Indian Bullion Market Association.

It is impossible to predict the outlook for gold-buying in mainland China next year, but this decade's drivers for Western gold investment – credit excess and miserable returns to cash – also apply in China, with bells on.

The People's Bank cut its benchmark rate from 7.5% to 5.3% in Dec. 2008, and has left it there since. Inflation in the cost of living was officially reported at minus 1.1% across the first 3 quarters, but real rates were negative in H2 2004 and again in at the turn of 2007-8. Some analysts are forecasting 4.0% inflation for 2010, and either way, commercial rates have been so attractive this year that new credit growth was CNY295 billion in Nov., equal to $43 billion. That was down from 2009's monthly average of $130bn, but took full-year credit growth to the equivalent of $1.35 trillion, equal to 27% of GDP.

Pitched against this rampant credit excess, gold's quasi-religious and auspicious appeal in Chinese culture – as a solid, tangible, intrinsically valuable store of wealth – will only have grown. Most significantly, and in sharp contrast to Indian demand, private Chinese buying has grown as the price has risen (gold has than tripled against the Yuan since retail price controls were lifted in 2001).

That might suggest gold is just another bull-market asset for China's increasingly wealthy and capital-rich middle classes. But owning the metal is most often viewed more as an end-in-itself than as an investment vehicle; it's the aim of accumulation, not the means.

Given this last decade's average 15% annual gains for US-Dollar investors – plus the outlook for sub-zero real interest rates, struggling equity dividends, and the danger of sharply higher bond yields (i.e. falling bond prices) as the Treasury attempts to finance a new record deficit – might the Chinese approach to gold investment start to take hold in the West...?

Parabolic Gold Price Rise Imminent

John Embry
As the gold price is set to appreciate for the ninth consecutive year, investors that have accumulated investments tied to the gold price such as gold-backed ETFs and gold stocks have been amply rewarded. The gold sector has been one of the best performing asset classes over the past decade as investors have pushed gold to record highs above $1,200 per ounce in an effort to diversify out of the U.S. dollar and other global fiat currencies - which have been debased by both politicians and central banks through persistent deficits and rising debt levels. One of the oldest and foremost bulls on the gold price and gold mining stock sector has been Sprott Asset Management, the Canadian-based hedge fund controlled by Eric Sprott. In the latest edition of Investor’s Digest of Canada, John Embry, Sprott’s Chief Investment Strategist, wrote a piece titled, “Gold bull has many years, thousands of dollars to go.”

Mr. Embry begins by providing a history lesson on the volatile relationship between the gold price and central banking. He argues that for the past 15 years, central banks such as the U.S. Federal Reserve have been flooding the market with very large quantities of the yellow metal in order to suppress the price of gold - thereby allowing the U.S. dollar to maintain its preeminence as the world’s reserve currency while easy monetary policies are pursued. While this strategy worked exceptionally well in the 1990s as the gold price held below $400 per ounce, it has been particularly ineffective over the past decade, as a huge amount of fund flows has pushed the price of gold from below $300 per ounce to an all-time nominal high of $1,226.50 per ounce in early December.

Embry goes on to reiterate his disdain for the actions of the central banks, stating that history has demonstrated that in the long run government intervention in the free market does not work. As evidence of this, he cites the successful efforts of central banks to depress the gold price during the 1960’s - which was followed by a subsequent 2,300% rise during the 1970s. Accordingly, “markets that have been artificially capped tend to catapult upwards when the suppression ultimately fails. In my opinion, the last experience in the 60s and 70s was a mere bagatelle in comparison to what is happening today,” argues Embry. To support this claim, he suggests that as much as 15,000 tonnes of gold have hit the market in the past 15 years, relative to just 3,000 tonnes in the 60s and 70s.

For those who claim that gold is in a bubble phase, Embry strongly disagrees and argues that gold has received very little attention from the general investing public and not anywhere near the level of coverage from the financial media that would exist if gold was a bubble. Furthermore, according to Mr. Embry, in a true gold bubble gold mining companies and gold producers would be generating extraordinary earnings - a situation that is not occurring, despite the strong rise in the gold price over the past decade.

Going forward, Embry believes another chief factor for the ongoing gold bull market will be the lack of gold mine supply. He cites an absence of quality projects ready for gold mining, further environmental and geopolitical issues, continuing capital constraints, and a “chronic shortage of skilled miners and competent mine builders.” The decline in gold mine supply will continue “for some time, irrespective of what the gold price does.”

Embry highlights recent commentary from Aaron Regent, the CEO of Barrick Gold (ABX), the world’s largest gold mining company, who stated that global gold production was in terminal decline and went so far as to use the term “peak gold.” In addition, Embry provides comments from the research and technical director of a Cape Town, South Africa-based consultancy, who stated that the famous Witwatersrand goldfields - the largest goldfield ever discovered and one that constitutes roughly 10% of the world’s gold supply - are approximately 95% exhausted. Add to this backdrop the declining supply of central bank gold and heightened investment demand for gold, and the Sprott team opines that the necessary ingredients for a significant rise in the price of gold are in place.

Embry concludes his piece by boldly stating that “I now firmly believe that the chances of gold ever trading below $1,000 per ounce are becoming increasingly remote.” He does add one caveat however - if the global economy suffered a “catastrophic deflationary collapse, gold could briefly be swept under but would then emerge with even greater relative strength as the only true safe haven.” Nevertheless, Embry believes the chances of such a deflationary collapse are very small given the pure fiat currency environment that exists.

He believes that gold is “going to stage a parabolic rise from current levels shortly” and that gold “remains one of the best supply-demand imbalance stories I have ever encountered in my career.” Such a bold claim by an experienced, successful money manager indicates just how much upside potential could remain in gold’s bull market.

World gold supply runs out - we're at "Peak Gold"

Barrick shuts hedge book as world gold supply runs out

Global gold production is in terminal decline despite record prices and Herculean efforts by mining companies to discover fresh sources of ore in remote spots, according to the world's top producer Barrick Gold.

Ambrose Evans-Pritchard
Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.

"There is a strong case to be made that we are already at 'peak gold'," he told The Daily Telegraph at the RBC's annual gold conference in London.

"Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore," he said.

Ore grades have fallen from around 12 grams per tonne in 1950 to nearer 3 grams in the US, Canada, and Australia. South Africa's output has halved since peaking in 1970.

The supply crunch has helped push gold to an all-time high, reaching $1,118 an ounce at one stage yesterday. The key driver over recent days has been the move by India's central bank to soak up half of the gold being sold by the International Monetary Fund. It is the latest sign that the rising powers of Asia and the commodity bloc are growing wary of Western paper money and debt.

China has quietly doubled holdings to 1,054 tonnes and is thought to be adding gradually on price dips, creating a market floor. Gold remains a tiny fraction of its $2.3 trillion in foreign reserves.

Gold exchange-traded funds (ETFs) – dubbed the "People's Central Bank" – have accumulated 1,778 tonnes, making them the fifth biggest holder after the US, Germany, France, and Italy.

Ross Norman, director of theBullionDesk.com, said exploration budgets had tripled since the start of the decade with stubbornly disappointing results so far.

Output fell a further 14pc in South Africa last year as companies were forced to dig ever deeper - at greater cost - to replace depleted reserves, not helped by "social uplift" rules and power cuts. Harmony Gold said yesterday that it may close two more mines over coming months due to poor ore grades.

Mr Norman said the "false mine of central banks" had been the only new source of gold supply this decade as they auction off reserves, but they are switching sides to become net buyers.

Barrick is moving fast to wind down the remaining 3m ounces of its infamous hedge book over the next twelve months, an implicit bet on rising gold prices over time.

Mr Regent said the company had waited too long to ditch the policy, which has made the company enemy number one among 'gold bug' enthusiasts. The hedges oblige Barrick to deliver part of its gold into futures contracts set long ago at levels far below today's spot prices.

The strategy worked well in the falling market of the 1990s, but has cost the company dear in lost profits this decade. "Hindsight is always 20/20," said Mr Regent, who was appointed from the outside earlier this year.

Barrick bit the bullet in the third quarter, taking a $5.7bn charge against earnings on hedge contracts. Liberation is at last in sight. In 2001 the hedge book topped 20m ounces.

Mr Regent said the hedge policy has weighed badly on the share price and irked investors, becoming a bone of contention at every meeting. The financial crisis brought matters to a head as markets fretted about counterparty risk. "It was clear to me that there were a significant number of institutions who wouldn't invest in Barrick because of the hedge book," he said.

Barrick produced 1.9m ounces of gold last quarter, down from 1.95m a year earlier. Costs have been "trending down" to $456 an ounce, though rising energy prices pose a fresh threat. Total reserves are 139m ounces, far ahead of rival Newmont Mining at 86m.

The hedge book venture has not been a happy one, but those who predicted that Barrick would eventually "blow up" on its contracts may owe the company an apology.

Gold Fever Is Heating Up

Money Week

Not surprisingly, given the dollar's weakness, commodity action has been very positive. Two weeks ago we said that, on the CRB exceeding 271, commodities would become a buy opportunity. As you can see from the latest chart, that occurred. This is a signal of considerable importance and suggests that a long term commodity bull market is now secure. If that turns out to be true, it may be implying an even steeper collapse of the dollar.

The crude oil chart also featured in the previous issue. Here we said that a break above $74 would signal a buy - it has happened. We have, accordingly, invested 7.5% in the Investec Global Energy Fund. This fund, which is positioned in high quality energy equities, should benefit considerably from a higher oil price. It is thought that globally the oil majors are valued based upon oil at $55 pb, in our view a long term outlook which is too conservative.

We also noted the buy signal for the CRB index, and acquired a 7.5% position in a grain ETF, which is invested approximately 29% in corn, 44% in soybean and 26% in wheat. We still hold the natural gas ETF which was purchased on 11 September; it is now ahead by 11.25%. We expect prices to be volatile but there should be a sharp recovery next year driven by considerable cuts in drilling activity.

Our longstanding gold positions are set to deliver very significantly over the next year or so. A weak dollar will add considerable impetus to the gold price, as will the policy of money creation and devaluation pursued by many of the major economies of the world. The investment case for gold as the ultimate currency is very comprehensible:

• Deflation and inflation both bullish for gold.
• Gold is the only currency whose production is going down not up.
• Negative real rates are bullish for gold.
• Potential increased investor and central bank buying as a store of value in order to diversify US dollar exposure.

Since gold exceeded $1,000/oz the price has been extremely resilient with no meaningful pullback. Although there has been some large profit taking, there is plenty of demand on any weakness. In September, the Russian Central Bank added 400,000 ounces to their gold reserves; they now total 19 million ounces. This year to date they have bought a huge 2.3 million ounces.

Cheng Siwei said that China is incrementally diversifying out of dollars and gold is one of their choices. China is the world's largest producer of gold, but holds only 1,054 tonnes of gold reserves, amounting to less than 2% of total foreign reserves. Extraordinarily, the Chinese government has also been advertising gold on Chinese television, encouraging citizens to acquire it.

Good old "gold fever" is heating up. There is a huge market in scrap gold with advertisements everywhere and Harrods is now selling it.

Over the next few months we would expect the commodity sector to deliver significant returns, led by gold bullion.

Gold on the verge of breaking out big time!

Image via Wikipedia

What about you? Sold your gold lately? Sold your gold due to an inevitable correction coming due? Sold your gold because of a tremendous short position build up with the bullion banks? Sold your gold because the bullion banks are so smart and always right? Sold your gold because of an imminent deflationary collapse which would bring down gold prices to absurd lows of $300 or less?

Well, the list of bearish arguments goes on and on but the reality is that nothing fundamentally has ever changed. In other words, those very same fundamentals which took gold up from $250 in 2001 to almost $1000 today are still in place.

With the end of the US dollar as world’s sole reserve currency in sight gold is poised for a monster rally towards $5000 or more. Yes, ultra bearish reports for gold are surfacing almost on daily basis now and yes, 12 reasons to short gold seems to be the tune of the day these days and yes, conspiracy theories to suppress the gold price are being ridiculed by western media as never before so yes, for newcomers to the gold market it’s difficult what and who to believe. Should they believe GATA which maintains the view that gold has been suppressed for more than a decade in order to maintain the illusion of a strong dollar? Or should they believe the mainstream gold organizations like GFMS who refer to the GATA crowd as a bunch nuts or even worse terrorists?

The simple truth is that GATA has done such tremendous research and has come up with so much evidence that even some major banks like Credit Agricole and CITI Group have published bullish reports on gold projecting $2000+ gold based on GATA’s findings. As John Embry of Sprott Asset Management once said, everyone with a IQ higher than a grapefruit should admit GATA has a point. Obviously GFMS Chairman Philip Klapwijk fails to meet Embry’s IQ criteria since he refuses to debate GATA on grounds you shouldn’t deal with terrorists.

To the newcomers in the gold market I would say please read the fictitious conversation between a staunch gold bull and GATA supporter (GB) and a mainstream investor (MI) who isn’t so sure what to believe these days. The conversation features discussions on traditional bearish arguments for gold, gold’s monetary role, the gold suppression scheme, GATA’s birth, the blatant lies from US government regarding its gold policies, Brown/Blair’s blatant lies after announcing the sale of half of Brittain’s gold in 1999, future for the US dollar, new world reserve currency, Chinese gold hoarding, etc.

I hope you agree with John Embry after reading this piece that GATA has a point indeed. It’s important to know what GATA knows since once you understand what western central banks have done to gold last decade you’ll understand why gold is heading to $5000 or more. Read More...

Gold Screaming On The 1-3-6 Rule

John Galt says,

Years ago a trader explained to me that if the 1 month, 3 month and 6 month Treasury yields dove towards zero and out of their “normal” range during a bull or bear market that there was a fear of a huge risk to the markets or other financial event occurring and that meant the big money as it is called, wanted to be in the safest of short term instruments that could be cashed out at maturity or sold on short notice to raise cash or return to the markets should it prove to be a non-event. Well, let us look at the history of this over the last three years and since the crisis began in February of 2007 when the first of the mid-sized mortgage finance companies started to collapse and a lot of us went “oh crap” and knew what was coming with this credit market implosion and eventual financial system collapse. Here is a 3 year chart of the 1 month Treasury continuous yield with notations.