bloomberg.com 
SEPTEMBER 06, 2011

 

Gold’s rally above $1,900 an ounce shows no signs of a “bubble” as central banks continue to boost  Money Supply  that has helped spur bullion to a record, according to investor  Marc Faber.

“I don’t think that gold is in a bubble,” Faber, publisher of the Gloom, Boom and Doom report, said in a phone interview yesterday from Chiang Mai, Thailand. “When you buy gold, it’s an insurance against systematic failure and problems in the financialmarkets.”

Faber’s comments come amid predictions gold may tumble after surging 35 percent this year and touching a record $1,913.50 an ounce on Aug. 23, as investors sought haven asset amid declining equities and weakening currencies. Speculative demand from investors had pushed the gold market into a “bubble that is poised to burst,” Wells Fargo & Co. analysts led by Dean  Junkans  said in a report last month.

“I’d buy every month a little bit of gold,” Faber said.

Manufacturing slowed in the  U.S.  Europe  and Asia, adding to signs of slowing global growth that may force central banks to step up stimulus measures.

The  Federal Reserve  completed its second round of so-called quantitative easing in June, whereby the central bank purchased $600 billion of Treasuries from November 2010, after injecting $1.25 trillion in the first round. Goldman Sachs Group Inc. and Citigroup Inc. see  theBank  Of England  restarting bond buying as early as this week as the economic recovery weakens and bank- funding costs increase.

Gold Holdings

Holdings in exchange-traded products backed by gold rose to a record 2,217 tons on Aug. 8, and stood at 2,142.4 tons as of yesterday. Bloomberg data show. Trade volume inComex  gold futures and options rose on Aug. 24 to a record 593,405 contracts, according to Jeremy Hughes, Singapore-based spokesman of CME Group Inc.

Spot gold gained 0.6 percent to $1,912.38 an ounce as of 1:33  p.m.  Singapore  time.Prices may slump as much as 30 percent from a record as the dollar “outperforms” its counterparts, damping demand for bullion as an alternative currency, Stanley Crouch, the chief investment officer of Aegis Capital Corp., said Aug. 24.

 

 

Gold rally extends on global economic worries

SINGAPORE (Commodity Online) :  Gold  prices continued their journey towards north on escalating global economic concerns, driven by Europe debt worries.

Gold for immediate delivery was seen trading at $1912.03 an ounce at 1.00 p.m Singapore time after hitting as high as $1912.91 an ounce in early trade.

US gold for December delivery in was at $1,912.40 an ounce at the same time after hitting as high as $1916 in early trade.

Gold prices quickly shrugged off news that the Shanghai Gold Exchange had temporarily raised trade margins for itsGold  and  Silver  forward contracts.

A margin requirement hike on comex gold contracts was instrumental in pulling gold from record highs last week.

Analysts said the precious yellow metal is likely to extend gains during the day as growing concerns over economic uncertainties will prompt investors to protect their wealth.

Floor trading in the U.S. was closed yesterday for the Labor Day holiday.
In India, world’s largest gold consumer, prices continued to climb as 10 gram gold accounted for Rs 28,583 Tuesday

 

 



 

Gold Trades Within 0.2% of Record as Debt Concern Boosts Haven Demand

Gold for immediate delivery gained as much as 0.6 percent to $1,911.07 an ounce, trading within 0.2 percent of the all- time high of $1,913.50 reached Aug. 23. It was at $1,910.27 as of 12:34 p.m. Singapore time. Futures for December delivery in  New Yorkwere at $1,912.40, up 1.9 percent from their close on Sept. 2. Floor trading in the U.S. was closed yesterday for the Labor Day holiday.

“Fear continues to dominate European markets with the debt crisis center of attention,” Lachlan Shaw, an analyst at Commonwealth Bank of  Australia, wrote in an e-mail. “The gold price rose to near record highs as investors embraced safe-haven assets.”

Gold is in the 11th year of a  bull market, the longest winning streak since at least 1920 in  London, as investors seek to diversify away from equities and some currencies. The metal is up 34 percent this year, outperforming global stocks, commodities and Treasuries. It climbed to records priced in euros and British pounds today.

Stocks Decline

Asian equities dropped for a third day as Finnish, German and Dutch finance ministers meet today to discuss a demand by Finland for collateral in Greece’s bailout, threatening rescue measures for the region. U.S. stock futures fell today, indicating the Standard & Poor’s 500 Index may slide for a third day before Italian lawmakers debate an austerity package amid a strike called by the nation’s biggest union.

“I don’t think investors are really convinced that European governments have got what it takes, got the political will to sort out the crisis and also do it sooner rather than later,” said  Darren Heathcote, head of trading at Investec Bank (Australia) Ltd. “So we’re going to continue to see speculation about the impending doom in Europe dominating markets for the time being.”

Platinum for immediate delivery was little changed at $1,888.40 an ounce, trading below gold for a second day. Cash silver rose 0.5 percent to $43.1312 an ounce and palladium gained 0.5 percent to $768 an ounce.

To contact the reporter on this story: Glenys Sim in Singapore at  gsim4@bloomberg.net

 

 

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

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.

The investment manager said that as no " safe" currencies remain, cautious investors had no choice but to opt for precious metals.

“The ultimate currency, which has stood the test of time, which has no political support behind it, is gold. Nobody can print gold out of a machine or a PC.

  “What the Swiss National Bank did two-and-a-half weeks ago, increasing the supply of the Swiss franc, means the safe currencies are all gone. That is why gold will have a revival,” he said.

Gmuer said the precious metal had entered a “super-cycle,” which he likened to the 1998-to-2000 boom in technology media and telecommunications.

He added, “This bull trend will end all the other major bull markets,” and singled out debt capital as an asset class for which demand and prices would decline.

However, Gmuer denied that high and rising gold prices could be indicative of a bubble. “If everybody is saying a particular asset is a bubble, that reflects the fact that most people have disposed of it,” he said.

Other calculations indicate that gold prices could peak at $3,500 or $4,000 per ounce. This is based on historical data regarding the long-term ratio of gold prices to the global money supply.

On Sept. 2,  gold  [GCCV1    1911.20        34.30    (+1.83%)    ]  peaked at $1884.60.

Silver Set for 14-Fold Price Rise?

In addition, Gmuer said silver is set for an even greater upward run than gold, with the market due to correct a distortion in its pricing of silver in relation to gold.

Gold and silver currently price at a ratio of around 45:1. However, Gmuer said declining silver output over the last 60 years—as a result of inventory depletion and mine closures—meant silver supplies currently outnumber gold by a ratio of less than 10:1, thus indicating a market correction is due.

Once this occurs, Gmuer said silver prices would settle at 6.7 percent to 10 percent of gold prices. This implies that if gold reaches $6,200 per ounce, silver could peak at $620 per ounce.

On Sept. 2,  silver  [SICV1    43.19        0.121    (+0.28%)    ]  peaked at $43.24.

  Gmuer added that markets for all precious metals were benefiting from the surge in demand for commodities, food, and energy from developing countries.

“Since World War II, the world population has almost quadrupled. However, most of the increase was in countries that had closed political systems, such as the Soviet Union, China and India," he said. “When these countries started to open up in the 1990s, these people saw they could increase their level of well-being. It is pent-up demand.”

© 2011 CNBC.com 

Gold to Rise on Safe-Haven Demand, Fed Stimulus Expectations

Gold is positioned to rise in the week ahead as jittery financial markets continue to fret about the pace of economic growth, driving safe haven demand for the yellow metal, while building expectations of another round of Federal Reserve stimulus compound upward pressure as investors look for alternative stores of value. A generous dose of top-tier economic data is likely to reinforce this trajectory.

Friday’s disappointing US Employment report left the outlook for overall risk appetite broadly uncertain. Traders’ initial reaction was to sell growth-geared assets across the spectrum. However, there is a good chance that panic will turn into growing confidence in the likelihood of a Fed action to bolster growth after the news has had time to digest over the weekend. The decision will be made against the backdrop of an economic calendar that is peppered with high-profile news releases that could prove critical on their own in shaping risk appetite.

Revised second-quarter GDP readings from Japan and the Euro Zone are expected to add to the pile of evidence pointing to increasingly anemic performance across the world’s leading growth engines. Meanwhile, a packed docket of monetary policy announcements (five in total) is likely to spur a re-pricing of interest rate expectations toward a dovish outlook for the developed economies at large, a trend already underway as the recovery shows increasingly apparent signs of exhaustion. China’s inflation report will also be closely watched for a reading on the pace of future policy-induced slowdown in the world’s number-two economy.

While this leaves a sense of ambiguity about the direction sentiment trends, gold seems positioned to benefit regardless. Indeed, if a continuation of Friday’s price action unleashes risk aversion, gold stands to benefit as safe haven, mirroring the trading patterns noted at least since the beginning of August. However, if confidence rebounds amid hopes that Ben Bernanke and company will once again ride to the rescue of financial markets, concerns about further dilution of the money supply will reinvigorate demand for gold as a tangible alternative store of value.

  Fundamental Forecast for Gold:  Bullish



 

 

China’s SGE to raise gold, silver margin requirements from Sep 9

In a statement,SGC said it will temporarily raise trade margins and daily trading limits for both its gold and silver forward contracts ahead of a long weekend to allow traders more latitude to adjust to overseas price movements.

Chinese exchanges are closed Sept 10-12 for the Mid-Autumn Festival.

Trading margins for the gold forward contract, Au(T+D) , will be raised starting Sept 9 to 13 percent from 12 percent, while the daily circuit breaker would be lifted to 10 percent from 9 percent.

The  Silver  Gold  forward contract, Ag(T+D) , will also see its trading margin raised by one percentage point to 16 percent, while daily movement will be raised to 12 percent, from 10 percent.

The SGE said the collateral and daily price limits for both contracts would revert back to their pre-holiday levels on Sept. 14 if those limits were not breached on the first day of market re-opening on Sept 13.

 

What you might lose when buying the SPDR GLD ETF? Gold itself !!

-Many people might not know this, but  you will not be allowed to see the vault that stores the gold. No matter how many shares you own. Period!

-When you own a GLD share theoretically you can redeem it but practically you cannot. Confused? If you want to redeem gold in physical form, you have to be approved to do so (generally meaning, you're either a broker or a market maker), and then  you have to redeem a minimum of 100,000 shares!

-Now, let’s assume you meet the qualifications to redeem physical gold. But then there is another clause - a provision stating that the company has the option of redeeming such shares in cash equivalent rather than bullion. Meaning, suddenly if there is a huge demand for the metal,  GLD is not obligated to give you  Gold  in physical form!

So, the next time you invest in a GLD share, just think the purpose of your investment. If your aim is to take stock of the metal in physical form, maybe traditional methods would be more suitable for you since if you invest in GLD, you may lose out on your ultimate objective-to own gold physically.

 

 

Gold rises on worries over U.S. growth, euro zone debt

* Stock  markets, euro under pressure after U.S. payrolls data

* European debt crisis retakes centre-stage

* Gold regains premium over platinum

By Jan Harvey

LONDON, Sept 5 (Reuters) - Gold prices rose back above $1,900 an ounce on Monday as expectations grew that the United States could implement a further round of monetary easing after Friday's weak payrolls data, while concerns over the  euro zone  debt crisis resurfaced.

Stock markets weakened, with European bank shares sliding to a 29-month low, while the euro slipped versus the dollar and oil prices fell as investors sold out of assets seen as higher risk in favour of havens like gold and Bunds.

Spot gold was up 0.2 percent at $1,887.89 an ounce at 0916 GMT, having earlier touched a high of $1,902.70. It is one of this year's best-performing  commodities, up by around a third in 2011 to date.

European shares fell on fresh sub-prime mortgage woes, fears of recession and yet more evidence of political disunity that could hamper efforts to solve the region's debt crisis. German Bund  futures  hit record highs.

Standard Bank analyst Walter de Wet said a court ruling due Wednesday that may reduce the freedom of the German government to finance rescues of crisis-hit countries like  Greece  was supporting interest in safe-haven gold, while a European Central Bank meeting on Thursday will be closely watched.

" There is a growing expectation in the market that we will have to get some policy response from the ECB at some stage," he said. " Whatever that will be, it is more likely to be positive for gold than not. Either they will have to cut rates, or they will have to be more accommodating."

" That just adds to what we're seeing happening in the United States," he said. " It seems that people are more convinced that gold will not come off. Whenever gold retreats $20, $30, we see decent buying coming through."

Gold had a choppy month in August, peaking at a record $1,911.46 an ounce and trading within its biggest range in absolute terms since January 1980, when it hit a record $835 an ounce, or above $2,000 in inflation-adjusted terms.

It is being lifted by expectations that the failure of the U.S. economic recovery to gain traction will force the Federal Reserve to embark on a third round of quantitative easing.

" The positive for gold (after Friday's payrolls U.S. data) lies in the possible policy response to the lack of employment growth," said HSBC in a note.

" Market discussions quickly centered on the possibility of a third round of quantitative easing. The two previous bouts of QE saw significant gold price appreciation."

COIN SALES CLIMB

Managed money in gold futures and options reduced their net length for a fourth straight week to August 30, the latest data from the U.S. Commodity Futures Trading Commission showed late on Friday.

" Current positioning is in line with the year-to-date weekly average, and considering the uptick in both U.S. and European risks this week, we certainly don't consider current spec positioning as been excessive," UBS said in a note.

Sales of gold and silver American Eagle coins were at their highest since January in August, meanwhile, data from the U.S. Mint showed. The Mint sold 112,000 ounces of gold coins and 3.68 million ounces of silver coins last month.

Gold prices quickly shrugged off news that the Shanghai Gold Exchange had temporarily raised trade margins -- which cover the risk of default -- for its gold and silver forward contracts.

A margin requirement hike on COMEX gold contracts was instrumental in pulling gold from record highs last week.

" It's not going to have a major effect," said Standard Bank's de Wet. " A lot of demand we see out of Asia is physical rather than speculative."

Among other precious metals, silver was down 1.3 percent at $42.61 an ounce. Holdings of the world's largest silver-backed exchange-traded fund, the iShares Silver Trust , rose 35 tonnes on Friday, the trust said.

Spot platinum was down 0.3 percent at $1,871.49 an ounce, while palladium was down 2.7 percent at $764.50 an ounce. Gold regained its premium over platinum, with the autocatalyst metal struggling for traction as demand fears grew. (Editing by  James Jukwey)

 

 

 

Economy is going to get much worse

Sept Fed policy: Will there be $2000 gold & $45 silver?

By Renisha Chainani, Edelweiss
The first week of August, 2011 saw the world financial markets tumbling like a house of cards, the trigger being the US debt downgrade by credit ratings agency Standard & Poor's. Financial markets continued to demonstrate large volatility with equities, risky assets and commodities (except for gold) tumbling and bonds rallying.

For many markets, August’s savage sell-off has been the worst since the October following Lehman Brothers’ implosion and investors diversified into havens such as high credit government bonds and gold.

The fact that the US and European economies are down in the dumps is obvious enough. But almost three years after the collapse of Lehman Brothers and a massive dosage of stimulus packages, debate still prevails as to whether the global economy is on its path to recovery or is likely to sink into another recession having said that, more than one indicators point to the latter scenario.

Six recession indicators
Take  shipping  to begin with, which is a critical indicator of global financial health because so many of the world's goods travel by sea. The latest data about dry bulk commodities-shipping costs, as tracked by the Baltic Dry Index, reveals that rates have fallen by a third so far this year. Further, the industry has not been able to impose normal surcharge which is typically a feature of peak demand periods.

Other indicators are the revision of various estimates as far as  GDP growth  and  oil demand  are concerned. Most global organisations have cut down GDP forecasts taking into account the failure of the developed nations to recover. But these downgrades are not just applicable to developed nations but to emerging countries as well. The latter especially are expected to witness a slowdown in growth as inflation and interest rates rise.

On the oil front, OPEC expects demand to drop. China, which is one of the biggest guzzlers of oil, is likely to consume less oil as its economy slows and demand slackens.  Government spending  has also come under severe strain in the developed world due to massive debt thereby restricting any headroom to spend on activities that will contribute to GDP growth.

It doesn't end here.  Unemployment  has become a cause for worry in the developed world as it has remained persistently high in the region for quite some time now. Indeed even in China, although the CIA Fact Book has recorded the unemployment there at 4%, it comes with a caveat this figure takes into account the urban areas only.

On considering migrants, the rate may very well jump to 9%.  Poverty  is another indicator. The number of people who live below the poverty line and have poor access to food has risen sharply this year hurt further by drought, flood and higher food prices.

Not to mention the telling effect that all these factors have had on the global financial markets, which have once again seen a sell-off in recent times. Indeed, even if the staunchest optimists are not ready to believe that the global economy is heading into a new recession, they will have to concede that recovery is certainly not expected to happen for some time to come.

The 18-month long Euro sovereign debt crisis has been characterized by a series of market shocks.

However, in recent months, the downgrade of the US' sovereign ratings has taken precedence for economists and markets to follow. But the stage seems all set for the Euro crisis to take centre stage yet again. The silence of political leadership in the Euro nations during the summer months is expected to break shortly.

What it means is that the debt restructuring debate for economies like Greece and Portugal and Ireland will heat up. The money poured into the Euro debt crisis by the likes of Germany and France has already caused sufficient financial tress to the stronger economies in the EU. Whether the policymakers will allow that to continue remains to be seen.

September crucial
Important event in month of September would be The Federal Open Market Committee (FOMC) meeting on 20-21 Sep, where US policymakers will “allow a fuller discussion” of the economy and the Fed’s possible response.

Bernanke said in the speech at a Fed conference at Jackson Hole in last week of August that the central bank still has stimulus tools, while not providing details or committing to deploying them. Despite evidence that its previous actions have done little to revive the U.S. economy, the U.S. Federal Reserve is likely to take more action before the end of the year barring a swift turnaround in such indicators as unemployment, consumer spending, and housing.

FOMC minutes from its Aug. 9 meeting, released on Tuesday, indicated that several members already favor more Fed intervention. On Aug. 9, the Federal Open Market Committee said it expected to keep interest rates exceptionally low until the middle of 2013.

The FOMC discussed virtually every policy tool available to it, including a third round of bond-buying known as quantitative easing (QE3), an " Operation Twist" that involves selling shorter-term notes and using the proceeds to buy longer-term notes, and setting numerical targets for unemployment and inflation.

The debate will be continued over two days next month. If economic indicators continue to deteriorate, chances are policy makers will choose to implement one of those policies.
If some monetary policy is announced in September meeting, then we could certainly see  Gold  touch $2000 and  Silver  touching $45.

 

 

/