www.kmggold.com The U.S. Comex gold futures dropped 1.49 percent in the past two days while the S&P 500 index jumped 1.54 percent and the Euro Stoxx 50 Index rose 1.26 percent. At 2.185 percent, the U.S. 10-year government bond yield is trading only 5 basis points below its recent high of 2.23 percent.

Year-to-date, the gold futures have corrected 18.43 percent to $1,367 while the CRB Commodities Index dropped 2.91 percent and the Dollar Index rose 1.06 percent.

Data before the Fed Meeting
The U.S. CPI rose 0.1 percent in May compared to the expected 0.2 percent. Year-on-year, the CPI rose 1.4 percent compared to 1.1 percent in April. The core inflation rate rose 0.2 percent as expected. An inflation rate of lower than two percent gives the Fed more room to continue with the monetary stimulus.

The May U.S. housing starts also rose less than forecasted at a yearly rate of 914,000.

Investors Positioning
After jumping 17.48 percent in the previous week, the net non-commercial combined positions in gold declined 7.13 percent during the week of 11 June to 60,227 contracts. In the past twelve months, the level has declined 56 percent as the developed market equities have risen 22 percent. According to Barclays, the net redemptions from gold-backed ETFs have slowed, with an outflow of 15 tonnes in the first half of June compared to 48 tonnes in the first half of May.

The cash-negative gold positions have also fallen to fewer than 70 tonnes. On the contrary, investors in China continue to see gold as a store of value, boding well for the launch of the first two yuan-denominated gold ETFs to be listed on the Shanghai Stock Exchange.

Reading the Fed
According to a Bloomberg survey on 7 June, the Fed will likely trim the QE by $20 billion to $65 billion as soon as the October meeting.

For the Fed's meeting, the investors will watch out for the conditions under which the bond purchases will be reduced, the Fed's outlook for the interest rates as well as the Fed's projections of the inflation and the unemployment rate. www.kmggold.com

Tags gold standard  gold stock  gold investment  physical gold  gold bars 

Posted by Mike Gupton at 11:10 AM 0 Comments

www.kmggold.com The U.S. Comex gold futures jumped 1.09 percent on Tuesday, but tumbled back down the next day, ending at $1,377.80 on Thursday. During Asia's Friday morning, the gold futures traded higher at around $1,385.

The Dollar Index has fallen 1.12 percent week-to-Thursday as the Japanese Yen has surged 2.30 percent and the Euro has risen about 1 percent versus the dollar.

The Euro Stoxx 50 index dropped for four consecutive days by 2.29 percent. The S&P 500 index rebounded 1.48 percent on Thursday although it has fallen 0.43 percent this week. Since the peak in early May, the U.S. high yield bond prices have fallen about 3 percent while the emerging market bond prices have dropped even more by 6 percent.

Slowing Growth Outside of the U.S.
The growth in the U.S. is holding up better than that in the rest of the world, and its stock market is outperforming this month. The latest U.S. weekly jobless claims dropped 12,000 to 334,000 while the May advance retail sales rose 0.6 percent compared to the expected 0.4 percent.

The World Bank lowered this year's world GDP growth forecast from 2.4 percent in January to 2.2 percent. In particular, it reduced its growth expectations in China and Brazil, expected the Euro economies to contract 0.6 percent, and revised up the growth in the U.S. and Japan.

As the market increasingly expects the Fed to reduce its bond purchases, bond yields, especially in the emerging countries, have backed up, sending investors' money out of global bonds.

Investors Feeling Bearish Again
Based on the Bloomberg survey, the number of bearish gold traders has increased the most since a month ago. The gold-backed ETP holdings fell to a two-year low of 2,117.96 metric tons on Thursday.

The Chinese may lend support to the physical gold market after their three-day holiday. Import demand in India has dropped significantly in June after the government raised the import duty from 6 to 8 percent on 5 June and imposed further shipments restrictions.

Gold prices will be under further pressure if investors continue to flee from the gold-backed ETPs without a big enough offset by the physical demand.

What to Watch
Next week, the important events to watch will include the U.S. May CPI and housing starts on 18 June, the U.S. FOMC rate decision and the Fed's press conference on 19 June, the Eurogroup meeting on 20 June as well as the June "flash" PMI index for China, the E17 and the U.S. on the same day.
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Posted by Mike Gupton at 10:03 AM 0 Comments

www.kmggold.com The U.S. Comex gold futures rebounded 1.33 percent in the past two days to $1,415.80 on Thursday while the Dollar Index plunged 1.49 percent to finish at 81.537 on Thursday. The Japanese Yen rallied about 3 percent against the U.S. Dollar just in the past two days. The stock markets remain volatile with the S&P 500 index dropping 0.5 percent and the Euro Stoxx 50 index falling 3.37 percent this week.

The VIX, or the fear index, has risen from 12.5 percent in mid-May to a recent high of 17.5 percent on 5 June.

ECB Actions and the U.S. Dollar
On Thursday, the ECB decided to leave the interest rates unchanged at 0.5 percent and would not take any immediate actions such as negative deposit rates or cash lending to institutions to further boost the economy. The U.S. stock investors were initially disappointed that no further stimulus measures are taken despite big promises from the ECB governor and an expected 0.6 percent contraction in the Euro Area this year.

The Outright Monetary Transactions program is yet to start. In the U.S., the May ADP employment increased 135,000 versus an expected 165,000. The Dollar weakened further against the Euro. For Friday's employment report, Bloomberg shows an expected change in non-farm payrolls of 163,000 and a projected unemployment rate of 7.5 percent.

Gold Fund Flows
As stock prices wobble and the U.S. Dollar falls, the number of gold traders who are expecting a jump in the gold price next week rises to the highest since mid-March according to Bloomberg. Nevertheless, the investors in paper gold continue to sell. Year-to-date, investors have sold 495 metric tons of gold-backed ETPs. EurekaHedge reported that 20 gold hedge funds have closed doors so far this year.

However in China, the gold price premiums to international prices jumped from an average of $7 in the year ending mid-April to an average of $31 after April when the gold prices plunged.

What to Watch
Apart from watching the U.S. nonfarm payrolls report on Friday, we will also monitor China's May industrial production and inflation data on 9 June, Japan's BOJ Target Rate on 11 June, The April E-17 industrial production on 12 June, the May U.S. retail sales on 13 June and the May U.S. industrial production on 14 June. www.kmggold.com

Tags gold price  gold investment  equities  commodities 

Posted by Mike Gupton at 8:22 AM 0 Comments

www.kmggold.com After rising for two consecutive weeks, the U.S. Comex gold futures fell 1 percent week-to-Tuesday to $1,448.80 although prices touched $1,458 on Wednesday Asian morning. The story of the week is still rising equities, with the S&P 500 index climbing 0.71 percent after rising 2.03 percent last week and the Euro Stoxx 50 index rising 0.2 percent after surging 2.99 percent last week.

So far in May, the S&P 500 index, the Euro Stoxx 50 index and the MSCI World index have jumped 1.78 percent, 2.10 percent and 1.08 percent respectively. The gold futures have slipped 1.58 percent this month while the Dollar Index has risen 0.62 percent.

Better Data from the U.S., Europe and China
Last Friday, the U.S. reported a higher-than-expected rise in nonfarm payrolls of 165,000 in April. The unemployment rate also inched down 0.1 percent to 7.5 percent in April. In Europe, the ECB governor stands ready to cut interest rates again, paying close attention to all the economic data in the next few weeks. The ECB predicts the EU-17 economies will shrink 0.4 percent in 2013.

However, Germany's March factory orders surprisingly jumped 2.2 percent against a predicted drop of 0.5 percent, indicating a recovery is taking place. China reported a larger than expected jump in exports of 14.7 percent in April although several economists already pointed out that some capital flows may have been disguised as trade flows leading to the inflated exports numbers.

Nevertheless, imports rose 16.8% year-on-year, reflecting a pretty robust domestic demand picture. In fact, Hong Kong has just reported that China's gold imports from Hong Kong reached a record high of 223.52 metric tons in March before the large sell-off in gold in April. The China Gold Association stated that China is currently short of gold jewellery inventory after gold purchases surged in April.

Fund Holdings
Bloomberg reported that for the week ending 30 April, speculators in gold increased their net-long positions in options and futures by 19 percent while they decreased their net-short positions by 9.2 percent. However, the net-short positions are still more than three times the average since the data started in 2006. The gold-backed ETP holdings dropped further on Monday to 2,254.68 metric tons, after a record fall in April and a peak in December 2012.

Given the reduction of tail-risk in Europe, the rising labour market in the U.S. and the low inflation rate, investors prefer equities to gold in the near-term. Nevertheless, as the World Gold Council pointed out, gold still has a place in investors' portfolios as a hedge against the consequences of the on-going global quantitative easing. www.kmggold.com

Tags gold price  gold investment  equities  commodities 

Posted by Mike Gupton at 1:18 PM 0 Comments

www.kmggold.com The U.S. Comex gold futures fell 1.76 percent on Wednesday and rebounded 1.48 percent on Thursday to end at $1,467.60, a decline of 12.4 percent year-to-date. The Dollar Index surged 0.91 percent on Thursday to 82.224 after falling 1.23 percent in the beginning of the week. The Euro/Dollar dropped 0.87 percent on Thursday after the ECB cut rates. The S&P 500 index ended up unchanged in the past two days while the Euro Stoxx 50 index rose 0.25 percent.

Chinese Housewives Taking On Wall Street Short-Sellers?
According to a local Hong Kong newspaper, the largest fall in gold prices in 30 years prompted the Mainland Chinese tourists to buy about 60 tonnes of gold in Hong Kong during the three-day Labour Day holiday. After this surge of buying, physical demand will inevitably slow down although it is clear that gold is highly regarded as precious gifts for the younger generations and a store of value in Asia, providing support to gold prices and prompting the short-sellers to cover.

On the other hand, the CFTC reported that speculators have reduced their net-long gold positions by 25 percent in the latest reporting week while they maintained the second-largest short positions in gold since the beginning of the data in 2006.

Central Bank Actions - Different Gold Reactions
The U.S. Fed recently maintained the pace of bond purchases at $85 billion per month. However, the Fed would be ready to increase or decrease the pace of bond purchases depending on the economic data, changing the market expectation that the Fed can only reduce its pace of bond purchases going forward. The slowdown in the March payroll data, a weaker inflation, the tightening of fiscal policy as well as a lower U.S. ISM manufacturing data have prompted the policy maker to remain flexible in its monetary policy.

The gold futures nevertheless fell 1.76 percent on Wednesday as the market still expects the U.S. to grow faster in the next four quarters, leading investors to buy more equities than gold. The gold-backed ETP holdings fell again by 0.9 percent this week as of Wednesday and dropped 369.3 tons this year. On Thursday, gold demand and prices increased after the ECB cut the refinancing rate by 25bp and raised the possibilities of a negative deposit rate for the banks and further stimulus down the road.

What to Watch
The market will zero in on this Friday's April non-farm payroll data and the unemployment rate in the U.S. Next week, we will watch for the Chinese April trade numbers and Germany's March industrial production data on 7 May, the Bank of England's monetary policy announcement and the Chinese April inflation number on 9 May as well as the Fed's speech on 10 May.
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Posted by Mike Gupton at 10:48 AM 0 Comments

www.kmggold.com The U.S. Comex gold futures fell $122.70 and 7.69 percent in April, representing the largest sell-off in gold since December 2011 when the gold futures fell over $200 intra-month. The gold futures dropped 12.16 percent year-to-date after a bull-run for twelve consecutive years as the prices surged from $279 at the end of 2001 to $1,675.80 at the end of 2012.

Year-to-date, the Dollar Index rose 2.48 percent, the S&P 500 index surged 12.02 percent, the Euro Stoxx 50 index rose 2.89 percent while the CRB Commodity index dropped 2.33 percent.

Mixed Global Economic Data
Global economic news has been mixed at best. In the U.S., the April consumer confidence index jumped unexpectedly to 68.1 while the S&P/Case-Shiller housing index rose 9.3 percent year-on-year in February.

Despite the housing improvement, the manufacturing remains an area of concern as seen in the recent lower-than-expected April Chicago purchasing manager index. In April, China's manufacturing PMI expanded at 50.6 compared to 50.9 in March, indicating that the expansion is slowing down.

While the April jobless rate in Germany was unchanged at 5.4 percent, the Euro-area unemployment rate inched up to 12.1 percent and the youth unemployment rate reached 24 percent. The 11 percent rebound in the gold futures from the 15 April's trough probably reflects the expectations that the U.S. Fed will maintain its bond purchase program while the ECB will cut rates further given the worsening economic data.

Continued ETP Outflows
Gold investors are keenly watching the direction of the gold-backed ETP holdings, which fell 174 metric tons or 7.1 percent in April to 2,275.84 metric tons according to Bloomberg. The SPDR gold holdings fell to a 43-month low to 1,078.54 tons at the end of April. Deutsche Bank estimated that institutions, which hold close to 50 percent of SPDR, may further sell down 5 million ounces of gold in Q2.

The commodity funds also saw a large net outflow of $7 billion in Q1 according to Barclays. While such outflow may seem to reflect global economic weakness, gold was the single asset dragging down the aggregate with $9.2 billion of net gold funds outflow in Q1. This Wednesday's FOMC meeting and this Thursday's ECB announcements will give further clues to gold investors which way they should go.
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Tags gold standard  gold stock  gold investment  physical gold  gold bars 

Posted by Mike Gupton at 8:31 AM 0 Comments

www.kmggold.com  What is up—the Dow Jones Industrial Average and Standard & Poor's 500—will come down and what is down—gold equities—will go up fast, predicts the ultimate contrarian investor, Bob Moriarty. In this interview with The Gold Report, the president of 321 Gold proclaims that while all gold stocks are cheap right now, he has some favorites that he expects to jump when the junior market turns. Those who turn their back on the market over the summer just might lose their best chance to get in at historic lows.
- JT Long of The Gold Report
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Tags gold standard  gold stock  gold investment  physical gold  gold bars 

Posted by Mike Gupton at 4:40 PM 0 Comments

www.kmggold.com The U.S. Comex gold futures surged 4.76 percent to $1,462.0 on Thursday, about 6.6 percent below the closing level of 11 April before the rout occurred. During Asian Friday morning, the gold futures reached as high as 1,484.80.

Gold prices have recovered roughly half of what they lost. The Dollar Index barely budged this week and ended at 82.744 on Thursday. The S&P 500 index, the Euro Stoxx 50 index and the CRB Commodity Index rebounded 1.92 percent, 5.02 percent and 1.39 percent respectively this week.

Lining up to Buy Gold
After gold has fallen into a bear market on 12 April, physical demand has soared. According to Bloomberg, the U.S. Mint sold 196,500 ounces of gold coins this month through 24 April, more than three times the volume in March. Demand for gold is un-abating at both the U.S. Mint and the U.K.'s Royal Mint. The physical gold sold to India exceeded its highest record by 20 percent, reported by Standard Chartered.

The gold premiums in Hong Kong and Singapore reached $3 an ounce, an eighteenth-month high. The World Gold Council in the Far East remarked that the Asian's hunger for the cheaper gold has exceeded the expectation of global investors. In the past ten days in the Shanghai Gold Exchange, the daily volume of the benchmark contract was more than four times of the 2012's daily average. Before the latest rout in gold, Russia's central bank boosted gold by 4.7 metric tons in March while Kazakhstan bought 1.2 tons.

The emerging countries' central banks will likely take advantage of the gold price plunge to continue to add to gold, which is seen as an alternative currency and an inflation hedge. Bloomberg reported that hedge fund managers turned into buyers and net added gold for two consecutive weeks. As the global economic data have turned softer recently, central banks such as the ECB are likely to continue to ease rather than terminate the ease prematurely.

What to Monitor Next Week
Lots of events to watch next week including the April Germany unemployment change on 29 April, the U.S. April consumer confidence index on 30 April, the U.S. FOMC meeting decision and the April U.S. ISM manufacturing index on 1 May, the ECB interest rate decision on 2 May and the U.S. April non-farm payrolls on 2 May.
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Posted by Mike Gupton at 8:57 AM 0 Comments

www.kmggold.com The U.S. Comex gold futures rose on Thursday by 0.71 percent to $1,392.50. Week-to-Thursday, the gold futures are down 7.25 percent while year-to-date, the prices are down 16.91 percent. Gold has returned 17 percent per year in the previous ten years. However, the gold futures entered into a bear market on 12 April as the big sell-off began. The S&P 500 index fell 2.09 percent in the past two days while the Euro Stoxx 50 index also dropped 2.06 percent. The Dollar Index rose 0.30 percent this week with the Euro/Dollar dropping 0.47 percent and the Yen rising 0.20 percent against the Dollar. The CRB Commodity index suffered a loss of 1.50 percent this week.

Stocks Declined as Gold Rebounded
Market's concerns have shifted to equities after the gold's downturn. Bloomberg highlighted that the U.S. stocks peaked in April in the past three years and declined for the next two to six months. The sentiment towards stocks and commodities has been weak as economic data from the U.S. and China were weaker than expected while some earnings results were disappointing. The U.S. leading indicators index, a gauge for the economy in the next three to six months, dropped 0.1 percent in March compared to an expected increase of 0.1 percent. The expansion at both the Philadelphia and the New York regions cooled in April with inventories plunging.

Debates on Gold
After the gold price plunge, the Chinese, Indian and Thai retail buyers rushed to buy gold. The April U.S. Mint sales more than doubled from March to April while the Australia's Perth Mint saw its sales doubled in one week. Central banks are watching closely the price level to re-enter even though some bank analysts are calling for gold prices to go towards $1,000. The gold-backed ETP holdings declined by 2.41 percent this week to 2,348 metric tons and dropped 10.8 percent this year. A stronger dollar remains a danger for gold.

What to Watch
The important events and data to watch next week will include the April "Flash" manufacturing PMI from China, the E17 and the U.S. on 23 April, the April Germany IFO business climate index and the March U.S. durable goods orders on 24 April, and the Bank of Japan policy rate meeting on 26 April.
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Posted by Mike Gupton at 8:28 AM 0 Comments

www.kmggold.com. The number of news articles on gold has more than doubled in the past two days as the U.S. Comex gold futures plunged 4.06 percent last Friday and fell even more spectacularly on Monday by 9.34 percent. The Monday's percentage fall was the largest since 1983. The gold futures traded at a record high of 751,058 contracts at the CME. On Tuesday in New York, the gold futures rebounded 1.93 percent to end at $1,387.40 although they reached $1,404.20 at one point. The CRB Commodities index dropped 2.19 percent on Monday, the largest percentage drop since 14 December, 2011.

The S&P 500 index rebounded 1.43 percent on Tuesday after selling off 2.30 percent on Monday while the Euro Stoxx 50 index fell in the past three consecutive days by 2.43 percent. The Dollar Index went up slightly by 0.13 percent on Monday, but dropped 0.81 percent on Tuesday as the Euro/Dollar surged 1.08 percent.

What Has Happened?
Market analysts have offered the following reasons for the "unexpected" plunge in the gold prices. The equity markets and the broader commodities have reacted negatively to China's 7.7% yoy Q1 GDP figure compared to the median Bloomberg forecast of 8 percent. Last week, the news that Cyprus might sell 10.4 tonnes of its gold holdings has triggered the fear that the other European sovereigns would sell a higher amount to raise funds.

The market also believes that the chance of a "tail-risk" event has been significantly reduced with the ECB, the Fed and now the BOJ taking some actions to boost economic recovery and prevent the worse-case economic scenarios. This has prompted some shifting of money from the defensive assets such as gold back into equities although the recent weakness in the U.S. data has prompted some movements back into the U.S. Treasuries, a traditional safe haven.

Global gold-backed ETF holdings have declined about 9.5 percent this year. The important support level at $1,540 has also been broken. When gold price breached $1,430, the selling became indiscriminate. Given that the longer-term supportive fundamentals for gold have not changed in just three days, a stronger argument for the vicious sell-off is the short-selling by funds and dealers. Our CEO Ross Norman pointed out that the selling of 400 tonnes was timed to get the maximum impact especially with the sentiment towards gold already being weak.

What Can We Expect from Here?
The CME has subsequently raised the margin for gold by 19 percent which will likely dampen the speculators' interests to short more. However, some funds may look to sell further to reduce risks. The Chinese and Japanese retail investors have been seen to scoop up the cheaper gold. The central banks including Sri Lanka and Korea still look to add gold on a longer-term basis.

The North-American gold miners may need to cut back on spending and exploration if their all-in-cost level of $1,300 is breached. While a trading range will take time to be re-established and the physical buyers will re-assess carefully before buying, the gold market will likely find a level where the longer-run fundamentals will re-assert themselves in the next few months.
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Posted by Mike Gupton at 8:30 AM 0 Comments

www.kmggold.com After gold slipped gently below the important technical level of $1540 this afternoon, it appeared that short sellers and heavy long liquidations had done their worst - but more was to come. $1540 was the market low in 2012, a level it tested and held in October
2011 and May 2012.

Gold investors have been noticeably absent and are perhaps now fully desensitized to bad news as the lacklustre price action in the wake of Cyprus, North Korea and weakening US data proved.

Shorting gold will remain a popular sport while there is money in it and there has been a noticeable absence of bounce in the price after each sell-off, prompting repeat attacks to the short side. Next support levels seen at $1470 then $1340.

For those seeking a haven in equities that have been trading at all time highs, we suggest you refrain from schadenfreude - and be careful what you wish for.

Underpinning gold are attractive fundamentals with the price floor in the form of mine costs rising sharply (gold prices rose 6% last year and costs 12%). More of this and a little below the current price and the gold-shorters will be butting up against production cut-backs - this wheeze will run its course.

Meanwhile the total US national debt rises in 2013 from 16.8 to 17.8 trillion dollars - before number blindness creeps in a translation is perhaps in order - that is equivalent to more than 330,000 tonnes of gold, or over twice all of the gold ever produced in history or total gold mine production for the next 120 years - fat chance that is going to be paid down through the fruits of economic labour.

Gold will remain on the ropes until it engenders higher levels of investment demand - for that it will require more sales channels, more product innovation and more education. It is a tiny lifeboat in a sea of economic trouble - this boat ain't sunk yet !
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Posted by Mike Gupton at 10:49 AM 0 Comments

KMG Gold.com
One of the hallmarks of the decline in gold prices from an all time high of $1920 in Sept 2011 (as the market collapsed by 26%) was the significant long liquidation of speculative positions by gold futures traders on the CME in New York.

Since then gold has steadily rallied - firstly breaching the important 200 day moving average which was then at $1644 and subsequently technical and psychological resistance around the $1700 level. And it has done this without any significant re-building of net long positions of the CME futures traders (see Reuters chart below).

By last Friday the Commitments of Traders reports suggests that futures traders are now at a net long of 126,937 contracts (a little under 400 tonnes). That is a gain of nearly 9% on the previous weeks position but still less than half the levels seen mid last year.

With the US Federal Reserve committing to keep interest rates at low levels at least until "late 2014" this would suggest the gold market still has legs to run and it is surely only a question of time before the floor traders join the party and rebuild their long positions in earnest.

With gold starting 2012 at a cracking pace, gaining 10% in the first month (equaling the gains of the whole of 2011) - gold may be poised to set fresh highs this year - but much earlier than many - ourselves included - would have expected.
KMG Gold.com

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Posted by Mike Gupton at 11:15 AM 0 Comments

KMG Gold: There was a time when politicians kissed babies to show they had the common touch and a real connection with ordinary folk. With the outcome of the US elections finely poised, gold and a return to a gold standard is seen as a potential vote-winner - today they are embracing gold, not babies.

In South Carolina 33% of voters are gold standard supporters, with 18% warm to the idea while only 11% are against and 6% cool on the proposal. Gold is a clear 3-1 vote winner.

To be fair, Republican presidential candidates Newt Gingrich and Ron Paul have both consistently been strong supporters of 'hard money' but their advocating a "gold commission" to consider a return to a gold standard is interesting at two levels - firstly in what tells us about the mood in the USA - and secondly by its potential impact on the gold market itself.

President Nixon moved the US out of the gold standard in 1971 and brought to an end the Bretton Woods system of monetary management introduced in 1946 where currencies were pegged to each other and the dollar was pegged to gold at a price of $35/ounce. The proposal is to back US dollars with gold (and possibly silver).

The main benefit of the gold standard was that, by linking a countries currency to a fixed asset like gold. it prevented policy makers from over-expanding the economy - it was a forced discipline or straight-jacket which effectively has a self-regulating and stabilizing effect on the economy. As such, the government can only print money depending upon the levels of gold reserves it has. This discourages inflation, budget deficits and debt. Furthermore, the more productive nations benefit - as they should - because the more they export, the more gold they can purchase and therefore money they can print to grow their economy further.

In the current political climate there is a strong desire to achieve economic stability through fiscal discipline, a balancing of the budget and by reducing government interference in the economy. Many would be prepared to forgo potential economic growth that a fixed money supply would engender and even tightness in credit markets that would stifle company growth through lack of funding. Such is the anger of the mis-management of the economy and the short-comings of the fractional reserve banking system.

But can gold fulfill its extended role ? Certainly gold prices have behaved in an exemplary manner during the crisis as a wealth preserver and its role in maintaining purchasing power parity in the long run has been well proven. Prescient gold investors have been well rewarded with over 20% compound growth year-on-year - for over a decade.

But with a large and highly globalised economy, can gold sensibly underpin the world's senior reserve currency in a complex financial world ?

Representing as it does less than 1% of global financial assets, gold is very clearly limited without a massive upward revision in its price from $1650/ounce to about $45,000/ounce. There are also fundamental problems in fixing exchange rates between currencies that we had under Bretton Woods - it is not unlike the artificial and flawed arrangement that underpins the Eurozone. The short answer as to whether or not gold can fulfill this role is in the detail and what sort of system you want.

Economists broadly do not favour a return to a gold standard. The University of Chicago conducted a poll of 40 leading economists none of whom supported the move. But it is also clear that something needs to change. So long as policy makers make over-extended promises on the one hand (to ensure re-election) and the printing presses in the other then we will continue to see inflation and currency declines as those shown below. Since 1971 the US dollar has lost over 85% of its value by official (CPI) measures. Truly the thief in the night and that's just not right. To use the words of President Hoover in 1933 - "We have gold because we cannot trust governments".
KMG Gold

Tags gold standard  gold stock  gold investment 

Posted by Mike Gupton at 8:43 AM 0 Comments

Gold Can't Be Held Down For Long

This has been a summer of more downs than ups in the investment markets but it could finally be coming to an end. We always maintained the opinion that a strong fall is upon us and we are still sticking to that prediction.

Instead of the normal, boring summer doldrums where many small-cap stocks lose 5-10% of their value due to a lack of liquidity, we had a very real, harsh summer correction across all major exchanges. $8 trillion was erased from the global equity markets in August. Even gold, the bright spot of the summer, reminded us this week that every dog has its day. The correction in gold was healthy and necessary for its continued run.

We watched gold's pullback this week as positive, only adding to our belief that gold is far from a bubble. Now, before you write us off as just another group of maniac gold-bugs, keep reading.

If you take the time to really analyze global asset allocation in 2011 compared to what it was a few decades ago, you’ll find that the gold sector is underinvested in and that less than 1% of global assets are situated in gold. How can anyone say that gold is a bubble about to burst given that statistic alone?
To add even more depth on this topic, I found one of the best explanations of why gold is not in a bubble. If you are invested in gold bullion, producing gold companies, or juniors with proven or soon to be proven gold resources - this is a must read!

The below excerpt is taken from the article, "Debunking the Gold Bubble Myth," and was authored by Eric Sprott and Andrew Morris in March of 2011.

"In their Gold Yearbook 2010, CPM Group noted that in 1968, gold held by individuals for investment purposes represented approximately 5% of global financial assets. By 1980 that amount had fallen to roughly 3%. By 1990 it had dropped significantly to 0.6%, and by the year 2000 represented a mere 0.2% of global assets. By the end of 2009, nine years into the gold bull market that began in 2000, they estimate that gold had increased to represent a mere 0.6% of global financial assets - hardly much of an increase. Gold ownership didn't change much last year either, as we estimate that this percentage increased to 0.7% of global financial assets in 2010. So despite gold reaching record nominal highs, the world holds about the same portion of its wealth in gold as it did over two decades ago. While this probably says more about the proliferation of financial assets over the past decade than it does about gold investment, it is surprising to note how trivial gold ownership is when compared to the size of global financial assets.

The increase in gold ownership from 0.2% in 2000 to 0.7% in 2010 is also misleading. If you consider the approximate $227 billion that was invested in gold bullion in 2000, that level of investment would have grown to $1.18 trillion, or 0.6% of financial assets, by the end of 2010 - based purely on gold appreciation alone.

In other words, the actual amount of new investment into gold since 2000 represents only 0.1% of current global financial assets, or about $250 billion. Although this number may seem large, consider that roughly $98 trillion of new capital flowed into global financial assets over the same period, so gold's approximate 0.3% share of global investment flows is essentially trivial.

The 0.7% ownership data point also has interesting implications for global gold ownership going forward. Consider that to return to a meaningful level of gold investment, say to the 5% level of 1968, it would require over $9 trillion of gold investment today, or about 6.5 billion ounces of gold at the current gold price. This would represent well over 1.3 times the amount of gold ever produced throughout history and four times the amount of known gold reserves. So not only is the public relatively underinvested in gold, but at current prices it isn't even possible to increase our gold holdings back to a meaningful level."

Tags KMG Gold  gold investing  purchasing gold  selling gold  gold  precious metals  gold demand  gold investment 

Posted by Mike Gupton at 9:52 AM 0 Comments

Gold Prices Stall as Stocks Bounce

Gold prices were cautious Wednesday as hopes for further government intervention to boost the economy pushed investors into stocks and fears of a double-dip recession faded.

Gold for December delivery was adding 80 cents at $1,830.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,839.80 and as low as $1,822.30 while the spot gold price was down $7.90, according to Kitco's gold index.

Tags KMG Gold  gold investing  purchasing gold  selling gold  gold  precious metals  gold demand  gold investment 

Posted by Mike Gupton at 9:51 AM 0 Comments

Investments: Why Buy Gold?

It impacts on the population’s budget significantly as most Georgian citizen's deposits are kept either in USD or EUR accounts in Georgia.

The Euro and U.S dollar rates have been continuously varying since 2010. Therefore, the people with Georgian accounts are in a precarious situation. They cannot confidently decide which currency is reliable, which currency is beneficial for saving money and which currency will not reduce its value.

In such a situation economic experts' advice is to invest in shares of gold. “The price of gold is increasing in relation to the dollar, the Euro and Gel. Therefore, investing in gold is the only way to ensure the safety of your money and to potentially increase it,” said Paata Sheshelidze, the economic expert. “Gold is a natural metal and its availability is limited and the production of certain currencies depends on political decisions. Therefore, gold is much more stable and reliable than the US dollar, Euro or Gel,” he added.

Tags KMG Gold  gold investing  purchasing gold  selling gold  gold  precious metals  gold demand  gold investment 

Posted by Mike Gupton at 9:20 AM 0 Comments