KMG Gold. Gold prices rallied to a fresh all time high of $1595.10 this morning with
the market buoyed by fears about an escalation in the economic crisis on
both sides of the atlantic.

In the US the Fed Chairman's testimony before the House left the market
convinced that further stimulus measures would be required if growth slows
- and that seems likely. This expansionary policy heightened concerns
about a much weaker US dollar, a possible downgrading of US debt by the
ratings agency (Moody's placed the US economy on "review for a downgrade")
and it raised once again the spectre of inflation. Bernanke's assurance
that debt repayments would be prioritised from tax receipts left market
watchers wondering just how bad can this get. The Fed's view seems to be
that economic weakness is a temporary phenomenon driven by high oil and
food prices and that they expect these to ease in H2 2011 - the question
"why ?" remains to be adequately explained. With Democrats and Republicans
at loggerheads over the debt ceiling a political impasse to an economic
solution is in place and the unthinkable possibility of a US default has
now become a distinct possibility.

Meanwhile across the pond the crisis in the Eurozone continues with policy
makers seemingly trapped like rabbits in the headlights over the debt
crisis. Ireland and Greece both had the ratings downgraded by Fitch and
questions are being asked of Italy in terms of its ability to adequately
cover its debt obligations.

Gold has been a major beneficiary of the economic woes as have safe haven
currencies such as the Swiss Franc and Norwegian Krone and indeed other
hard assets. The relative strength indicator of gold is currently at 70
which suggests it is not presently overbought and there is scope for the
market to move higher. $1600 could prove a temporary psychological barrier
but the market has a head of steam behind it and we don't expect it to
struggle with that level. In January of this we forecast would see a high
of $1850 in 2011 - we hold to that opinion and it may be a little sooner
than we had originally anticipated.

It's down to who and what can you trust. The markets are primed for
capital flight and are seeking reliable destinations. Let's hope for some
cool and calm decisions - the markets are a little too hot at this time
and deeply uncomfortable.

Visit: www.kmggold.com

Tags gold prices  euro  debt crisis  silver price  platinum price 

Posted by Mike Gupton at 8:39 AM 0 Comments

KMG Gold. While there are many reasons that gold and silver are going to keep moving higher as the fiat currencies trend lower, at our recent Casey Research Summit in Boca Raton, faculty member Mike Maloney pointed out a fact that, while obvious in hindsight, I had never heard mentioned previously.

Namely, that during the last major precious metals bull market in the 1970s, only about 10% of the world could own gold—due to either legal restrictions or a lack of liquid capital.

Today, few countries prohibit gold ownership, and a far higher percentage of the world's population has transitioned out of poverty.

China provides the most germane example, having legalized gold and silver ownership for private citizens in 2004, and through the explosive growth in national GDP that has caused Chinese gold purchases to skyrocket.
 

Confirming the point, the following is an excerpt from a recent article from The Wall Street Journal:

Chinese investors are snapping up gold bars and coins, buying more than ever before in the first quarter of 2011 and overtaking Indian buyers as the world's biggest purchasers of the metal.

A growing middle-class in China is raising the appetite for gold there.

China's investment demand for gold more than doubled to 90.9 metric tons in the first three months of the year, outpacing India's modest rise to 85.6 tons, the World Gold Council said in its quarterly report on Thursday. China now accounts for 25% of gold investment demand, compared with India's 23%.

The report underscores the rising appetite for gold among the growing middle-class in China. Fears of the country's soaring inflation, as well as a search for new investments, is luring investors to gold, and marketing of the precious metal has also increased in recent months.

"I think people will be surprised by the strength in the Chinese demand, but we think this is a trend that is set to continue," said Eily Ong, an investment research manager at the gold council.

Notoriously active savers, stashing away on the order of 50% of their income, the Chinese are increasingly opting for gold over the renminbi to stash their wealth.

For those wondering just how big a development this is, consider that in 2007, just before investing in gold became "the thing to do," gold demand in India was 61% of the world's total while China's gold demand was only 9%.

In other words, India is no longer the only elephant in the gold vault. And they are not alone—investors around the world are now able, and willing, to buy gold as a way of protecting their wealth from the inevitable decline of the fading fiat currencies.

I still don't think we are out of the woods on a commodities correction, but there are so many black swans floating overhead that literally anything can happen, at any time; thus buying in tranches on pullbacks over the next four to six months still makes a lot of sense.

But in the longer term, gold has almost nowhere to go but up.
KMG Gold

Tags gold prices 

Posted by Mike Gupton at 6:41 PM 0 Comments

KMG Gold. "We need to adopt a new mindset, a gold mindset."

Numerous commentaries in the media, both on television and in print, would have us believe that gold is a bad investment. Headlines warning investors to avoid the yellow metal are commonplace. Examples such as Five reasons not to own gold”, "Gold is in a bubble", "Gold as an investment—think again," "Gold is a bad hedge," "Gold is a pointless rock," and "Why gold is a bad investment" can be found with a simple Google search on gold and investment.

Each of the above points are addressed and debunked in the BMG Special Report, 'Six Biggest Myths About Gold' which readers of this article are strongly encouraged to read and which can be downloaded for free at www.goldmyths.com.

These articles miss the point, because they treat gold as an investment. To fully understand gold's role in an investment portfolio, we need to adopt a new mindset, a gold mindset.

Simply put, gold is not a bad investment, and gold is not a good investment. Gold is not an investment at all—gold is money.

While many people believe gold is an archaic relic that has no role in today's sophisticated, computerized, paper-based monetary system, three facts contradict this popular misconception:

1. Gold, silver and platinum are traded on the currency desks of the major banks and brokerage houses, not the commodity desks. Traders understand gold is money to be traded against paper currencies.


2. The world's central banks hold about 30,000 tons of gold in reserves. While there has been a lot of media attention given to central bank sales in the past, gold holdings have only declined by about 2,000 tons since 1980. Central banks have become net buyers since 2009 and have been adding gold to their currency reserves. Central bankers understand gold is money.


3. The turnover rate between members of the London Bullion Market Association is over US$20 billion per day, with volume estimated at five to seven times that amount. Clearly, this has nothing to do with jewelry sales and everything to do with the exchange of money.

The definition of "investment" is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income or appreciation of the value of the investment. Through this transfer of capital, in the expectation of a profit, an investor gives up their capital and puts it at risk. The investor receives a return in dividends or interest as compensation because their capital is at risk; they may get back less than they invested, or they may get back nothing at all.

However, physical gold bullion or physical paper currencies locked in a vault are not invested; they are simply being stored. Since neither is invested, they don't earn interest or dividends, but they don't have any counterparty risk. The major difference between gold and currencies kept in a vault, however, is that gold's purchasing power increases while paper currencies lose purchasing power year after year.

Both gold and currencies can be taken out of the vault with ease, and the proceeds invested by giving them to someone else in return for dividends or interest. An interesting perspective can be gained by calculating whether the proposed investment is likely to return more gold ounces than were originally invested. For example, the 44 ounces of gold required to purchase the Dow in 2000 has now dwindled to fewer than nine ounces. Might as well have left the gold in the vault. Since gold maintains and even increases in purchasing power, there is no need to put it at risk in order to earn a minimal amount of interest or dividends.

Figure 1 illustrates how gold has not only preserved but also increased its purchasing power from 1971, when the gold standard was abandoned, to 2011.

Figure 2 illustrates how all of the major currencies have declined over the last decade when measured by gold ounces.

It is crucial to recognize that physical gold bullion, held directly or on an allocated and insured basis in a vault, is not an investment because it is not someone else's promise of performance or someone else's liability, and as a result has no counterparty risk. All other forms of gold ownership are, in fact, investments. Paper gold certificates, unallocated bullion accounts, ETFs, shares in gold mining companies and futures contracts all have counterparty risk, and are either someone else's promise of performance or liability. They may have their place in a portfolio, but they are all investments. We hold physical gold in a vault, we hold physical currencies in a bank, but we invest in financial assets.

Visit: www.kmggold.com 877.468.2220

Tags gold prices 

Posted by Mike Gupton at 6:53 PM 0 Comments

Both metals settle at multiweek highs
SAN FRANCISCO (MarketWatch) — Gold futures traded higher on Wednesday, shaking off early weakness as the dollar came off its highs, and silver futures rallied more than 4%.

Gold for June delivery GCM11 -0.08%  added $3.40, or 0.2%, to $1,526.70 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s best settlement since May 3.

August gold GCQ11 -0.09% , the contract with the most open interest but less volume, added $3.50 to settle at $1,527.80 an ounce.

Gold benefitted from ongoing concerns about Greece’s debt and its implications for the euro zone.

“Gold continues to have a safety bid,” said Frank Lesh, a broker and futures analyst with FuturePath Trading in Chicago.

Silver futures rallied 4.2%, with the July contract   SIN11 +0.54%  settling at $37.64 an ounce, the highest for the metal since May 10.

Silver was more of a speculator market, Lesh said. It was getting a push from smaller investors priced out of gold above $1,500 an ounce, particularly after its recent selloff, he added.

“Silver continues to function as the poor man’s gold,” Lesh said.

Investors on Wednesday grappled with news U.S. durable-good orders were sharply lower in April, rekindling worries of an economic slowdown and providing another leg of support for gold.

“We think that gold will remain well supported in the short term amid small-scale safe haven buying, and still in the absence of a substantial pick-up in physical demand,” analysts at VTB Capital in London said in a note to clients.

Gold rose $7.90 on Tuesday on worries surrounding Europe’s sovereign-debt situation. Read story on Tuesday's gold moves.

Meanwhile, the Bombay Bullion Association said it expects India’s gold imports to reach a record level of 1,000 metric tons this year if the monsoon season is good, analysts at Commerzbank wrote in a note to clients.

“Strong monsoon rainfall increases the income of the rural population, who are major buyers of gold jewelry in the world’s largest gold consumer country,” they said. Gold imports are likely to be 40-50 tons in May, but that’s 30% lower than the previous month, the analysts added.

The dollar index DXY +0.07%  , which measures the greenback against a basket of six currencies, traded at 75.930 from 75.915 in late North American trading on Tuesday, as the euro pared losses against the U.S. currency. Read more on currencies

July copper  HGN11 -0.06%  rose 9 cents, or 2.3%, to $4.11 a pound, ending in the black for the second day.

Platinum and palladium also settled higher, with July platinum PLN11 +0.29%  rising $17.30, or 1%, to $1,779.80 an ounce.

Palladium for June delivery PAM11 +0.18%  rose $12.10, or 1.7%, to $747.35 an ounce.

Tags gold prices  copper price  euro  debt crisis  silver price  platinum price 

Posted by Mike Gupton at 5:22 PM 0 Comments

Copper loses 3.2% on worries about slowing global economy
SAN FRANCISCO (MarketWatch) — Gold futures gained Monday as concerns about the euro zone tempered earlier losses on the back of a stronger dollar.

Gold for June delivery  GCM11 +0.63%  added $6.50, or 0.4%, to $1,515.40 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s highest settlement since May 10, and the second in a row above $1,500 an ounce.

Silver for July delivery SIN11 +4.80% , which had wavered between small gains and losses, finished 18 cents lower, down 0.5%, at $34.90 an ounce. That was silver’s lowest settlement since Tuesday.

Fears of a European sovereign-debt debacle “were overriding strength in the dollar,” said James Cordier, a portfolio manager at Optionsellers.com in Florida. “Investors are going to safe havens.”

Traders also fretted about more signs global growth is cooling, pulling down metals more closely related to industrial activities, such as copper.

“The global economy bull run of 2009-10, it really appears to be slowing down,” Cordier said.

Gold last week gained 1%, and silver added 3%, recovering some of the steep losses earlier in the month.

The dollar index DXY -0.27% , which tracks the U.S. unit against a basket of six rival currencies, traded at 76.125, up from 75.444 in North American trading late Friday.

The U.S. dollar strengthened against the euro as European sovereign-debt concerns resurfaced. Read more about currencies.

There was plenty of reason to worry about the euro zone, and the euro EURUSD +0.4414%  at one point traded at its lowest against the dollar since March. The single currency recently traded at $1.4055, from $1.4194 in North American trading late Friday.

Debt-ratings company Standard & Poor’s lowered Italy’s credit-rating outlook from stable to negative on Friday.

European Central Bank Governing Council member Christian Noyer, meanwhile, said the Greece situation is worse than those of Ireland and Portugal.

Spain’s ruling Socialist Party suffered significant losses in the local weekend elections, renewing fears that new regional governments could unearth more debt problems in an economy that is bigger than those of Greece, Ireland and Portugal combined.

As the euro weakened and the dollar strengthened, weakening macro data from around the globe also pressured other commodities and U.S. stocks, which traded lower.

The latest data from China added to mounting evidence that the global recovery could be beginning to slow.

HSBC’s preliminary purchasing managers’ index cooled to 51.1 from 51.8 in April. Data released Monday is compiled from a smaller base than the regular PMI and is designed to give investors a glimpse of what the broader survey will show next week.

Copper, heavily imported by China and used in construction, led losses for the broader complex on Monday.

The July contract HGN11 +0.74%  fell 13 cents, or 3.2%, to $3.99 a pound.

That was the lowest settlement for a most-active copper contract in a week.

Platinum for July delivery PLN11 +0.70%   dropped $13.50, or 0.8%, to $1,755.90 an ounce.

June palladium PAM11 +1.08%  declined $3.70, or 0.5%, to $731.80 an ounce.

While the greenback strengthened, analysts at the National Australia Bank cited recent U.S. dollar weakness as having supported the run-up in gold prices over the few past months.

The analysts forecast gold will fall back to $1,460 in June, and $1,450 by September.

“After remaining around $1,450 per ounce in quarterly average terms until the end of the September quarter ... we expect gold prices to gradually ease as investor jitters abate,” the analysts said in a research report.

NAB said escalation of conflicts in the Middle East and North Africa or sovereign-debt concerns would drive gold prices higher.

The analysts said gold holdings among exchange-traded funds have eased since 2010, and have been broadly flat since early February.

“A downside risk to our price forecasts is that a decline in investor appetite results in a substantial increase in gold supply entering the market from highly liquid exchange-traded funds’ holdings,” the analysts said.

Tags gold prices  copper price  euro  debt crisis 

Posted by Mike Gupton at 3:33 PM 0 Comments

Commentary: Some of yellow metal’s investors see stampede ahead

NEW YORK (MarketWatch) — Gold’s gyrations on Friday were dramatic, probably exhausting to both sides — and possibly important. Some gold bugs think a new attempt on the highs of last month may have started.

Gold was firm in Europe, but plunged on serious selling during the New York morning — then dramatically reversed on heavy volume to close up $16.50 at $1,508.40 in the CME June contract. This meant gold was up over 1% on the week. More importantly, gold appears to have broken the downtrend which had been in place all month.

Gold stocks, as measured by the Arca Gold Bugs  HUI +2.44%  , also seem to have reversed their May downtrend — particularly important to the many observers who think gold shares lead the metal’s movement. The HUI was up 2.75% on the week.

This action must have been a relief to the respected, institutionally oriented Gartman Letter, which overcame its earlier worries and very early on Friday morning added two “units” of gold to its model portfolio (one of which was hedged into yen). This makes the portfolio 7/11ths gold.

During the morning, Gartman must have been wondering if its actions (and those of its hedge-fund clients) were being targeted by hostile forces — a suspicion sometimes heard in the past. As it is, Gartman appears to have judged gold momentum well.

Gold’s recovery on Friday closely followed the announcement that the Fitch ratings service had cut its ranking on sovereign Greek debt. This sparked fears that a wave of anxiety about euro-zone defaults might sweep the market. (Standard & Poor’s subsequently made matters worse by warning of a possible downgrade for Italy.)

One of the correspondents on the LeMetropleCafe webzine pointed out that the rally in gold, as Europe was closing and on a Friday, nevertheless involved heavy estimated volumes, and asked: Did Fitch bring in Western Elephants?

That is, have the powerful speculative forces which have previously run gold up on euro fears appeared again?

All of this will certainly exercise Australia’s attentive and sophisticated gold observer, The Privateer. It has contended for some time that bouts of negative publicity by the ratings agencies are orchestrated to distract the markets from America’s problems.

As it acidly observed over the weekend: “… it is clearly the ‘policy’ that the U.S. and its debt problems will NOT be the focus of the global public in general and the U.S. paper markets in particular. … The U.S. was last faced with the necessity to raise their Treasury’s debt limit in late 2009 - early 2010. That was when the European sovereign-debt crisis first hit the headlines — duly conjured up by the U.S. ratings agencies. …”

“Now, we are in the same situation again, the only difference being that the U.S. Treasury is now officially $2.2 TRILLION deeper in debt than it was at the end of 2009, less than a year and a half ago.”

“The problem is that the European sovereign-debt crisis is becoming increasingly ‘old’ news. Something BIG had to be done to resuscitate it. It was.”

The Privateer continues to be bullish on gold.

Tags gold prices 

Posted by Mike Gupton at 3:25 PM 0 Comments

LAS VEGAS, N.V. (MarketWatch) -- They are in denial no longer.

The “they” are the gold timers I monitor. The last time I wrote about them, just one week ago, I wrote that they were in denial, having for the most part stubbornly held on to their bullishness despite a breathtaking drop that caused an ounce of bullion to lose nearly one hundred dollars.

That they have finally rushed for the exits increases the likelihood that some sort of trading bottom has been formed in the gold market.

How enduring that bottom turns out to be, however, is still in doubt, since it will be determined in no small measure by how those erstwhile bulls react in coming days.

Consider the average recommended gold market exposure among a subset of the gold market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). Just a week ago this average stood t 73.7%, one of the highest readings for this index in several years.

Today, in contrast, it stands at just 7.0%.

This sixty-seven percentage-point reduction in a week’s time is impressive, and most definitely enough to get the attention of contrarian analysts.

The rally occasioned by this big drop appears to be already underway, with bullion rising $23 over the first two days of this week. Here are the sentiment signs to be on the lookout for in coming days for clues whether this rally has good odds of propelling gold above its previous all-time high — set less than two weeks ago.

On the one hand, it would be a good sign if the gold timers were to only reluctantly jump back on the bullish bandwagon. That would suggest that the recent rout in the gold market had built up a strong wall of worry that the rally could climb.

On the other hand, it would be a bad sign if that wall of worry disintegrates as quickly as it was built. That would suggest that the gold timers haven’t really thrown in the towel on bullion’s bull market — and would increase the odds that a more serious correction is needed to create the sentiment foundation for a more sustainable rally.

It’s too early to know for sure.

But an encouraging straw in the wind is that the HGNSI has declined slightly over the last two days, despite gold’s increase.

Tags gold prices 

Posted by Mike Gupton at 5:07 PM 0 Comments