Today's Gold Prices and Gold Investing News - Money Morning

Today&#39;s <b>Gold Prices</b> and Gold Investing News - Money Morning

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• Today&#39;s <b>Gold Prices</b> and Gold Investing News - Money Morning
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Today&#39;s <b>Gold Prices</b> and Gold Investing News - Money Morning Posted: 04 Nov 2011 04:32 AM PDT By Diane Alter, Contributing Writer, Money Morning  ·   December 10, 2013  ·   Print  |   Email Why gold is up today: Gold prices on Tuesday morning staged the biggest advance since mid-October. Gold prices ended Tuesday's session sharply higher, hitting a three-week high. February gold gained $28, or 1.5%, at $1,262.20 an ounce. Spot gold added $22.70 to reach $1,263.50 an ounce. To continue reading, please click here... Gold Prices Down This Week, But Big Money Stays Invested By Diane Alter, Contributing Writer, Money Morning  ·   November 22, 2013  ·   Print  |   Email It's been another painful week for the precious metal amid what's been one tough year for gold bulls. Gold futures ticked up Friday, following a two-day dip that left gold prices at levels not seen since early summer. To continue reading, please click here... Gold's Shocking New "Pick and Shovel" Play By Peter Krauth, Resource Specialist, Money Morning  ·   November 19, 2013  ·   Print  |   Email Ever since humans realized the intrinsic value of gold, we've constantly searched for - and perfected - ways to find more. From early methods like panning and trenching, to lode prospectors hunting for rock outcrops and veins, to the invention of drill bits... In modern times, we use increasingly sophisticated tools and techniques, such as seismic sensors, magnetometry, and gravimetrics to help locate potential gold deposits. But, after thousands of years of digging for gold, the low-hanging fruit's already been picked. Most remaining deposits are becoming increasingly difficult to find, and increasingly low grade. Now, a surprising, brand-new gold prospecting tool may be in the offing - one that's far less technologically demanding, and much less invasive. It seems nature itself has found a way to extract gold from the ground. Take a look at this picture... Gold News: China Poised to Overtake India as Biggest Gold Consumer By Diane Alter, Contributing Writer, Money Morning  ·   November 12, 2013  ·   Print  |   Email The latest gold news out of China is yet another bullish development for investing in the yellow metal... Increasing gold demand in China has put the Asian nation on track to become the world's biggest consumer of the precious metal. According to the World Gold Council, China's gold consumption is on pace to increase to a record 1,000 tons this year, up 29% year over year, surpassing India as the leading global user of gold. Imagine what this will do to the price of gold over the next few years... "Democratize" Gold and Give the Government a Black Eye By Peter Krauth, Resource Specialist, Money Morning  ·   November 11, 2013  ·   Print  |   Email We all know that, so long as the Fed keeps the printing presses on, the risk of a worldwide currency crisis gets even higher. Gold, of course, is the timeless hedge here - for all the reasons you and I know. But are we truly prepared for a currency crisis? Much of the gold in the United States is owned by big institutions: the Treasury, the Federal Reserve, and bullion banks. So, if a currency crisis hits, their 8,900-ton hoard won't do us a bit of good. But there is one country whose "democratic" approach to gold ownership will allow its people to survive a currency crisis, literally, in fine style. Not only that, but this country's people are giving their government a whopping black eye for its heavy-handed ways in the process. Here's what's going on there... Why Gold Prices Are Down Right Now By Charles Rice, Associate Editor - November 8, 2013  ·   Print  |   Email Gold prices are the honey badger of precious metals right now. As 2011's very popular YouTube video showed us, the honey badger makes moves that don't make sense - it "don't care." And neither does gold. Like the honey badger, gold prices just don't seem to care that the world has teetered on the brink of destruction all year. They just keep heading lower. Here's what's been dragging gold down... Why Gold Prices Are Up Today By Diane Alter, Contributing Writer, Money Morning  ·   October 22, 2013  ·   Print  |   Email Gold moved sharply higher Tuesday thanks to a weaker-than-expected September jobs report - and our country's employment situation is yet another reason why gold prices are up today and will resume their climb... Perhaps anticipating a weak number, gold prices began moving higher shortly before the jobs report. Gold moved up $5 to $1,320.80 two minutes before the release. Following the report, gold surged. To continue reading, please click here... Higher Gold Prices and Coin Sales Point to Growing Gold Rush By Diane Alter, Contributing Writer, Money Morning  ·   October 18, 2013  ·   Print  |   Email Gold prices in 2013 haven't performed as well as the previous few years - but Washington continues to give us plenty of reasons to buy the yellow metal. This week showed us how sensitive the price of gold can be to news from Washington. On the heels on the down-to-the-wire U.S. government budget and debt ceiling deal, gold prices moved abruptly higher and soared above the key $1,300 level. Here's why the next round of budget battles will be good for gold... Investing in Gold and Silver: Interview with an Industry Insider By Diane Alter, Contributing Writer, Money Morning  ·   October 4, 2013  ·   Print  |   Email It's been a volatile year for those investing in gold and silver. Gold is down some 20% year to date, and silver has lost more than 30%. The yellow metal tumbled more than 30% in the three quarters to June as fears mounted of an early end to the U.S. Federal Reserve's bond-buying program. But the stars are aligning for better times ahead. Following a record 23% drop in Q2, in which gold suffered a two-day carnage (April 15-16) that took prices down some $225 an ounce, gold gained nearly 9% in Q3. The gains ended gold's longest quarterly losing streak since 2001. Silver prices fared even better in the latest quarter, bouncing 10.5%. To continue reading click here... Why Gold Prices Fell Yesterday By Tony Daltorio, Contributing Writer, Money Morning  ·   October 2, 2013  ·   Print  |   Email Gold prices seem to have stabilized today, trading once again above the $1,300 an ounce mark. This follows a tumble yesterday of more than $40 an ounce to as low as $1,284 an ounce. That price was nearly a two-month low and put the precious metal down 23% in 2013. At that level, gold was trading more than $50 below its 50-day moving average. To technical analysts, this confirmed the downtrend in the precious metal, bringing about a wave of selling by those who strictly follow the charts. However, there were factors at play in gold's selloff other than technical selling. To continue reading click here...

Gold Correction Isn&#39;t Over, But <b>Gold Price</b> Heading to $20,000 :: The <b>...</b> Posted: 10 Dec 2013 12:39 PM PST Gold Correction Isn't Over, But Gold Price Heading to $20,000 Commodities / Gold and Silver 2014 Dec 10, 2013 - 09:39 PM GMT By: Casey_Research By Louis James, Chief Metals & Mining Investment Strategist In April of 2008, Casey International Speculator published an article called "Gold—Relative Performance to Oil" by Professor Krassimir Petrov, then at the American University in Bulgaria, now a visiting professor at Prince of Songkla University in Thailand. He told us he thought the Mania Phase of the gold market was many years off, which was not a popular thing to say at the time: "In about 8-10 years from now, we should expect the commodity bull market to reach a mania of historic proportions. "It is important to emphasize that the above projection is entirely mine. I base it on my own studies of historical episodes of manias, bubbles, and more generally of cyclical analysis. In fact, it contradicts many world-renowned scholars in the field. For example, the highly regarded Frank Veneroso and Robert Prechter widely publicized their beliefs that during 2007 there was a commodity bubble; both of them called the collapse in commodity prices in mid-March of 2008 to be the bursting of the bubble. I strongly disagree with them. "I also disagree with many highly sophisticated gold investors and with our own Doug Casey that the Mania stage, if there is one, will be in 2-3 years, and possibly even sooner... Although I disagree that we will see a mania in a couple years, I expect healthy returns for gold." It turned out that Dr. Petrov was right. Five and a half years later, here's his current take on gold and the metal's ongoing correction… Louis James: So Krassimir, it's been a long and interesting five years since we last spoke… Gold bugs didn't like your answer then, but so far it seems that you were right. So what's your take on gold today? Krassimir Petrov: Well, most gold bugs won't like my answer again, because I think we are still between six to ten years away from the peak of the gold bull. We are exactly in the middle of this secular bull market, and a secular bull market is usually punctuated or separated by a major cyclical bear market. I think that the ongoing 24-month correction is that typical big major cyclical correction—a cyclical bear market within the context of the secular bull market. Thinking in terms of behavioral analysis, most investors are very, very bearish on gold. People who are not gold bugs overall still dismiss gold as a good or even as a legitimate investment. That, too, is typical of a mid-cycle. So as far as I'm concerned, we are somewhere in the middle of the cycle, which may easily go for another 10 years. I expect that this secular bull market for gold will last a total of 20 to 25 years, dating back to its beginning in 2000. Some people like to date the beginning of this secular bull market at the cyclical bottom in 1999, while others date it at the cyclical bottom in 2001. I prefer to date it at 2000, so that the secular bottom for gold coincides with the secular top of the stock market in 2000. L: That's interesting. But I'm not sure gold bugs would find this to be bad news. The thing they're afraid to hear is that the market has peaked already—that the $1,900 nominal price peak in 2011 was the top, and that it's downhill for the next two decades. To hear you say that there is a basis in more than one type of analysis for arguing that we're still in the middle of the bull cycle—and that it should go upwards over the next 10 years—that's actually quite welcome. Petrov: Yes, it's great news. But we're still not going to get to the Mania Phase for at least another two, but more likely four to six years from now. Now, we should clarify what we mean by the Mania Phase. Last time, it was the 1979 to early 1980 period. It's the last phase of the cycle when the price goes parabolic. Past cycles show that the Mania Phase is typically 10% or 15% of the total cycle. So it's important to pick the proper dates for defining a gold bull market. I prefer to date the previous one from 1966 as the beginning of the market, to January of 1980 as the top of the cycle. That means that the previous bull market lasted 14 years, and it's fair to say that the Mania Phase lasted about 18 months, or just under 15% of the cycle. So I expect the Mania Phase for the current bull cycle to last about two to three years, and it's many years yet until we reach it. In terms of market psychology, we still have many people who believe in real estate; we still have many people buying and believing in the safety of bonds; we still have many people who believe in stocks. All of these people still outright dismiss gold as a legitimate investment. So, to get to the Mania Phase, we need all of these people to convert to gold bull market thinking, and that's going to be six to eight years from now. No sooner. L: Hm. Your analysis is a combination of what we might call the fundamentals and the technicals. Looking at the market today— Petrov: Let's clarify. When I say fundamental analysis, I mean strictly relevant valuation ratios. For example, according to the valuation of gold relative to the stock market, i.e., the Dow/gold ratio, gold is extremely undervalued, easily by about 10 times, relative to the stock market. Fundamental analysis can also mean the relative price of gold to real estate—the number of ounces necessary to buy a house. Looked at this way, gold is still roughly about 10 times undervalued. Thus, fundamental analysis refers to the valuation of gold relative to the other asset classes (stocks, bonds, real estate, and currencies), and each of these analyses suggests that gold is undervalued about 10 times. In terms of portfolio analysis, gold today is probably about one percent of an average investor's portfolio. L: Right; it's underrepresented. But before we go there, while we are defining things, can you define how you look at these time periods? Most people would say that the last great bull market of the 1970s began in 1971, when Richard Nixon closed the gold window, not back in 1966, when the price of gold was fixed. Can you explain that to us, please? Petrov: Well, first of all, we had the London Gold Pool, established in 1961 to maintain the price of gold stable at $35. But just because the price was fixed legally and maintained by the pool at $35 doesn't mean that there was no underlying bull market. The mere fact that the London Gold Pool was manipulating gold in the late 1960s, before the pool collapsed in 1968, should tell us for sure that we already had an incipient, ongoing secular bull market. The other argument is that while the London Gold Pool price was fixed at $35, there were freely traded markets in gold outside the participating countries, and the market price at that moment was steadily rising. So, around 1968 we had a two-tiered gold market: the fixed government price at $35 and the free-market price—and these two prices were diverging, with the free price moving steadily higher and higher. L: Do you have data on that? I never thought about it, but surely the gold souks and other markets must have been going nuts before Nixon took the dollar completely off the gold standard. Petrov: Yes. There have been and still are many gold markets in the Arab world, and there have been many gold markets in Europe, including Switzerland. Free-market prices were ranging significantly higher than the fixed price: up to 10, 20, or 30% premiums. There's also a completely different way to think about it: in order to time gold secular bull and bear markets properly, it would make the most sense that they would be the inverse of stock market secular bull and bear markets. Thus, a secular bottom for gold should coincide with the secular top for stocks. And based on the work of many stock market analysts, it is generally accepted that the secular bear market in stocks began in 1966 and ended in 1980 to 1982. This again suggests to me that it would make a lot of sense to use 1966 for dating the beginning of the gold bull market. L: Understood. On this subject of dating markets, what is it that makes you think this one's going to be a 25-year cycle? That's substantially longer than the last one. We have a different world today, sure, but can you explain why you think this cycle will be that long? Petrov: Well, based on all the types of analyses I use—cyclical analysis, behavioral analysis, portfolio analysis, fundamental analysis, and technical analysis—this bull market is developing a lot slower, so it will take a lot longer. The correction from 1973 to 1975 was the major cyclical correction of the last gold bull cycle, from roughly $200 down to roughly $100. Back then, it took from 1966 to 1973—about six to seven  years—for the correction to begin. This time, it took roughly 11 years to begin, so I think the length of this cycle could be anywhere between 50 and 60% longer than the last one. Let's clarify this, because it's very important for gold bulls who are suffering through the pain of correction now. If we are facing a 50-60% extended time frame of this cycle and the major correction in the previous bull market was roughly two years, we could easily have the ongoing correction last 30 to 35 months. Given the starting point in 2011, the correction could last another six, eight, or ten more months before we hit rock bottom. L: Another six to ten months before this correction hits bottom is definitely not what gold investors want to hear. Petrov: I'm not saying that I expect it, but another six to ten months should not surprise us at all. A lot of people jumped on the gold bull market in 2008, 2009, 2010, 2011, and these people haven't given up yet. Behaviorally, we expect that these latecomers—maybe 80-90% of them—should and would give up on gold and sell before the new cyclical bull resumes. L: Whoa—now that would be a bloodbath. Can we go back to your version of fundamental analysis for a moment and compare gold to other metrics? You mentioned that gold is still relatively undervalued in terms of houses and stocks and some things, but I've heard from other analysts that it's relatively high compared to other things—loaves of bread, oil, and more. Petrov: Let's take oil, for example. We have a very stable long-term ratio between oil and silver, and that ratio is roughly one to one. For a long time, silver was about $1.20, and oil was roughly $1.20. At the peak in 1980, silver was about $45, and oil was about $45. Right now, silver is four to five times undervalued compared to oil, so in terms of oil, I would disagree for silver. The long-term ratio of gold to oil is about 15 to 20, depending on the time frame, so gold may not be cheap, but it's not overvalued relative to oil either. But suppose gold were overvalued relative to other commodities—which I doubt, but even if we suppose that it's correct, it simply doesn't mean that gold is generally overvalued. The other commodities could be even more—meaning 10, 15, 20 times—undervalued relative to the stock market, or real estate, or bonds. There is no contradiction. In fundamental analysis, it is illegitimate to compare gold, which is largely viewed as a commodity, to other commodities. We should compare it as one asset class against other asset classes. For example, we could compare gold relative to real estate. By this measure, it is easily five to ten times undervalued. Separately, we could evaluate it relative to stocks. When you compare gold to stocks in terms of the Dow/gold ratio, it's easily five to ten times undervalued. Separately again, we could evaluate it relative to bonds, but the valuation is much more complicated, because we need to impute a proper inflation-adjusted long-term yield, so it's better not to get into this now. And finally, we could evaluate it separately against currencies. More on that later. Now, I believe that when this cycle is over, we are going to reach a Dow/gold ratio far lower than in previous cycles, which have ended with a Dow/gold ratio of about 2:1 (two ounces of gold for one unit of Dow). This time, we are going to end up with a ratio of 1:2—one ounce of gold is going to buy two units of Dow. So, if the ratio right now is about 8:1, I think gold could go up 16 times relative to the stock market today. L: That's quite a statement. Government intervention today is so extreme and stocks in general seem so overvalued, I can believe the Dow/gold ratio could reach a new extreme—but I have to follow up on such an aggressive statement. What do you base that on? Why do you think it will go to 1:2 instead of 2:1? Petrov: If I remember correctly, we had a 2:1 ratio during the first bottom in 1932; the Dow Jones bottomed out at $42 and gold was roughly about $20 before Roosevelt devalued the dollar. That was also the beginning of the so-called "paper world," when we embarked on the current paper cycle. The next cycle bottomed in 1980; gold was roughly 850 and the stock market was roughly 850, yielding a ratio of 1:1. Now, if we look at it in terms of the "paper" supercycle, beginning in the early 20th century and extending to the early 21st century, you can draw a technical line of support levels for the Dow/gold ratio. If you do this, you end up with Dow/gold bottoming at 2:1 (in 1932), then at 1:1 (in 1980), and you can project the next one to bottom at 1:2. Another way to think about it is that we are currently in a so-called supercycle—whether it's a gold supercycle or a commodity supercycle—and this supercycle should last 50 to 70% longer than the previous one. It will overcorrect for the whole period of paper money over the last 80 years. From a behavioral perspective, I could easily see people overreacting; we could easily see that at the peak we're going to have a major panic with overshooting. I expect the overshooting to be roughly proportional to the length of the whole corrective process. In other words, if this cycle is extended in time frame, we would expect the overshooting of the Mania Phase to be significantly larger. It should be no surprise, then, if we get a ratio of 1:1.5 or 1:2, with gold valued more than the Dow. L: That's a scary world you're describing, but the argument makes sense. How many cycles do you have to base your cyclical analysis on, to be able to say that the average Mania Phase is 15% of the cycle? Petrov: Well, gold is the most complicated investment asset. It is half commodity, and it behaves as a commodity, but it's also half currency. It's the only asset that belongs in two asset classes, properly considered to be a financial asset (money) and at the same time a real asset (commodity). So, even though gold prices were fixed in the 20th century, you can get proper cycles for commodities over the time period and include gold in them. If you look into commodity cycles historically, there are four to five longer (AKA Kondratieff) commodity cycles you can use to infer what the behavior for gold as a commodity might be. L: So would it be fair, then, to characterize your projections as saying, "As long as gold is treated by investors as a commodity, then these are the time frames and the projections we can make"? Petrov: Right. L: But if at some point the world really goes off the deep end and the money aspect of gold comes to the forefront—if people completely lose confidence in the US dollar, for example—at that point, the fact that gold is a commodity would not be the main driver. The monetary aspect of gold would take over? Petrov: No, not exactly, because you will still have a commodity cycle. You will still have oil moving up. Rice will still be moving up, as will wheat, all the other commodities pushing higher and higher, and they will pull gold. Yet another important tangent here is that in commodity bull markets, gold is usually lagging in the early stages. In the late stages of a commodity bull market, as gold becomes perceived to be an inflation hedge, it begins to accelerate relative to other commodities. This is yet another very good indicator that tells me that we are still in the middle of a secular bull market in gold. In other words, because gold is not yet rapidly outstripping other commodities like wheat, or copper, or crude oil, we're not yet in the late stages of the gold bull market. L: That's very interesting. But if I remember the gold chart over the last great bull market correctly, just before the 1973-1976 correction, there was quite an acceleration, such as you're describing—and we had one like it in 2011. Gold shot up $300 in the weeks before the $1,900 peak. Petrov: Absolutely correct. This acceleration before the correction is exactly what tells me that the correction we're in now is a major cyclical correction, just like in the mid-1970s. The faster the preceding acceleration, the longer the ensuing correction. This relationship is what tells me that this correction will be very long and painful. Yet another indicator. Everything fits in perfectly. All of these indicators confirm each other. L: Could you imagine something from the political world changing or accelerating this cycle? If the politicians in Washington are stupid enough to profoundly shake the faith in the US dollar that foreigners have, could that not change the cycle? Petrov: Yes, that's a possibility. This is exactly what a gray swan is; a gray swan is an event that is not very likely, that is difficult to predict, but is nonetheless possible to predict and expect. One example of a gray swan would be a nuclear war. It's possible. Another could be a major currency war, à la Jim Rickards. There are a number of gray swans that could come at any time, any place, accelerating the cycle. It's perfectly possible, but not likely. Now, going back to your question about monetizing or remonetizing gold—the monetary aspect of gold taking over that you mentioned. The remonetization of gold wouldn't short-circuit the commodity cycle; the commodity cycle would continue. Actually, you'd expect the remonetization of gold to go hand in hand with a commodity bull market. You also need to understand that the remonetization of gold would not be a single event, not a point in time. Remonetization of gold is a process that could easily last five to ten years. No one is going to declare gold to be the monetary currency of the world tomorrow. What will happen is that countries like China will accumulate gold over time. Over time, gold will be revalued significantly higher, and there will be global arrangements. The yuan will become a global currency, used in international transactions. Many institutional arrangements need to be in place around the world, including storage, payments, settlements, and some rebalancing between central banks, as some central banks have way too little monetary gold at the moment. L: I agree, and see some of those things happening already. But I don't expect any government to lead the way to a new gold standard. I simply expect more and more people to start using gold as money, until what governments are left bow to the reality. I believe the market will choose whatever works best for money. Petrov: Indeed, and that's a process that will take many years. Getting back to gold in a portfolio context, relative to currencies, gold is extremely cheap. Historically, gold will constitute about 10-15% of the global investment portfolio relative to the sum of real estate, stocks, bonds, and currencies. Estimates suggest that right now gold is valued at roughly about one percent of the global investment portfolio. L: That implies… an enormous price for gold if it reverts to the mean. Mine production is such a tiny amount of supply; the only way for what you say to come true is for gold to go to something on the order of $20,000 an ounce. Petrov: Correct. $15,000 to $20,000. That's exactly what I'm saying. In a portfolio context, gold is undervalued easily 10 to 15 times. On a fundamental basis, gold is undervalued relative to stocks 10 to 15 times, and relative to real estate about 10 times. When we use the different types of analyses, each one of them separately and independently tells us that we still have a lot longer to go: about six to 10 more years; maybe even 12 years. And we still have a lot higher to rise; maybe 10-15 times. Not relative to oil, nor wheat, but gold can easily rise 10 to 15 times in fiat-dollar terms. It can rise 10 times in, let's say, stock market terms. And yes, it can go 10 to 15 times relative to long-term bonds. (We have to differentiate short-term bonds and long-term bonds, as bond yields rise to 10 or 15 percent.) So, portfolio analysis and fundamental analysis tell me that we still have a long way to go, and cyclical analysis tells me we are roughly mid-cycle. It tells me that from the beginning of the cycle (2000) to the correction (2011) we were up almost eight times, from the bottom of the current correction (2013-2014) to the peak in another six to ten years, we are still going to rise another 10 times. Whether it's eight years or 12, it's impossible to predict; whether it's eight times or 12, again, impossible to predict; but the order of magnitude will be around 10 times current levels. L: You've touched on technical analysis: do you rely on it much? Petrov: Well, yes, but in this particular case, technical subsumes or incorporates a great deal of cyclical analysis. It's very difficult to use technical analysis for secular cycles. We usually use technical analysis for daily (short-term) cycles, or weekly (intermediate) cycles, or monthly (long-term) cycles. We use them as described in the classic book Technical Analysis of Stock Market Trends by Edwards, Magee, and Bassetti. If we apply technical analysis to our current correction, it doesn't appear to be quite over yet. It could still run another three to six months, possibly nine months. But when we talk about the secular cycle, we need to switch from technical to long-term cyclical analysis. L: Okay. Let's change topic to the flip side of this. Can you summarize your view of the global economy now? Do you believe that the efforts of the governments of the world to reflate the economy are succeeding? Or how does the big picture look to you? Petrov: The big picture is an austere picture. Reflation will always succeed until it eventually fails. The way I see it, the US is going down, down, and down from here—the US is a very easy forecast. The UK is also going down, down, and down from here—another easy forecast. The European Union is going to be going mostly down. However, most of Asia is in bubble mode. Australia is in a major bubble that's in the process of bursting or is about to do so; it's going to go through a major depression. China is a huge bubble, so China will get its own Great Depression, which could last five to ten years. This five- to ten-year China bust would fit within my overall 10-year forecast for the remainder of the secular bull market in gold. I see a lot of very inflated and overheating Asian economies. I was in Hong Kong in January, and the Hong Kong economy is booming to the point of overheating. It's crazy. I was in Singapore just three months ago, and the Singapore economy is clearly overheating. Last year I was teaching in Macao for a few months, and the economy is overheating there as well—real estate is crazy; rents are obscene; five-star hotels are full and casinos crowded. Right now I'm teaching in Thailand. It's easy here to see that people are still crazy about real estate—everyone's talking about real estate; we still have a peaking real estate bubble here. Consumption is going crazy in the whole society, and most things are bought on installment credit. Another easy forecast is Japan; it too will be going down, down, and down from here. Japan has nowhere to go but down. It's been reflating and reflating, and it hasn't done them any good. Add all this up and what I actually see is a repeat of the 1997 Asian Crisis, involving most Asian countries. L: So your overall view is that reflation works until it doesn't, and you believe that on the global scale we're at the point where it won't work anymore? Petrov: Not exactly. We're at the point where reflation doesn't work anymore for the US, no matter how hard it tries. It doesn't work for the UK; not for most of Europe; not for Japan—no matter how hard they try. But reflation is still working in China. Reflation is still working for most of Asia and Australia. As I see it, Asia is overheating significantly, based on that global reflation. Even the Philippines was overheating when I was there two years ago. Malaysia is overheating big time—consumerism at its finest—and I'm hearing stories about Indonesia overheating until recently as well. Maybe we have the first sounds of that bubble bursting in countries like India, Malaysia, and Indonesia. The Indian currency is weakening significantly; so is the Malaysian currency. If I remember correctly, the Indonesian currency is weakening significantly, and I know well that their money market rates are skyrocketing in the last few months. So we may have now the beginning of the next Asian Financial Crisis. Asia is still going to be able to reflate a little longer, another year or two, maybe three. It's very hard to say how long a bubble will last as it is inflating. The same thing for Australia; it will continue to reflate for a few more years. So for Asia and Australia, we are not yet at the point when reflation will no longer work. Very difficult to say when that will change, but we're there for the US, UK, Europe, and Japan. L: Why won't reflation work for the US and its pals? Petrov: Reflation doesn't work because of the enormous accumulated economic distortions of the real sector and the labor market. All the dislocations, all the malinvestments have accumulated to the point where reflation has diminishing returns. Like everything else, inflation and reflation have diminishing returns. The US now needs maybe three, four, or five trillion annually to reflate, in order to work. With each round, the need rises exponentially. The US is on the steep end of this exponential curve, so the amount needed to reflate the economy is probably way more than the tolerance of anyone around the world—confidence in the US dollar won't take it. The US is at the point where it is just not going to work. L: I understand; if they're running trillion-dollar deficits now and the economy is still sluggish, what would they have to do to get it hopping again, and is that even possible? Petrov: Correct. The Fed has tripled its balance sheet in a matter of three to four years—and it still doesn't work. So what can they do? Increase it 10 times? Or 20 times? Maybe if they increased it 10 or 20 times, they could breathe another one or two or three years of extra life into the economy. But increasing the Fed's balance sheet 10 or 20 times would be an extraordinarily risky enterprise. I don't think that they will dare accelerate that much that fast! L: If they did, it would trash the dollar and boost gold and other commodities. Petrov: Yes, that's clear—the bond and the currency markets would surely revolt. That's a straight shot there. The detailed ramifications for commodities, if they decide to go exponential from here, are a huge subject for another day. For now, we can say that they have been going exponential over the last three to four years, and it hasn't worked. Also, we know well from the hyperinflation of the Weimar Republic that they went exponential early on, and it stopped working in 1921. For two more years, they went insanely exponential, and it still didn't work. I think the US is at or near the equivalent of 1921 for Weimar. L: An alarming thought. So what happens when Europeans can no longer afford to pay the Russians for gas to heat their homes? Large chunks of Europe might soon need to learn Russian. Petrov: Not necessarily, but Europe is going to become Russia's best friend and geopolitical ally. The six countries in the Shanghai Co-op are already close allies of Russia. So is Iran. So Russia has seven or eight very strong, close allies. European countries will, one by one, be joining Russia. Think about it from the point of view of Germany: why should Germans be geopolitical allies of the US or the UK? Historically, it doesn't make any sense. It makes a lot more sense for them to join the Russians and the Chinese and to let the Americans and British collapse. So that's what I expect, and Russia will use all its energy to dictate geopolitics to them. L: Food for thought. Anything else on your mind that you think investors should be thinking about? Petrov: Well, it's fairly straightforward. First, I do expect that the stock market is going to lose significant value over the next five to ten years. Second, I believe that real estate is still grossly overvalued; as interest rates eventually rise, real estate will fall hard—overall, it will not hold value well. Third, I also believe that bonds are extremely overvalued and that yields are extremely low. I expect interest rates to begin to rise and bond prices to fall, so I strongly discourage investors from staying in bonds. Finally, I expect that governments will continue to inflate, even though it doesn't work, and that currencies will devalue. I strongly encourage investors to stay out of all four of these asset classes. Investors should be staying well diversified in commodities. They shouldn't ignore food—agriculture. They shouldn't ignore energy. But their portfolios should be dominated by precious metals. L: That's what Doug Casey says, and that the reason to own gold is for prudence. To speculate for profit, we want the leverage only the mining stocks can give us. Thank you very much, Krassimir; it's been a very interesting conversation. We shouldn't let this go another seven years before we talk again. Petrov: [Laughs] Okay. Hopefully a lot sooner. Hopefully you'll be prepared when the gold bull market reaches the Mania Phase… and hopefully you are taking advantage of the low gold price to stack up on your "hard money" safety net. Find out the best ways to invest in gold, when to buy, and what to watch for—in Casey's 2014 Gold Investor's Guide. Click here to get your free special report now. © 2013 Copyright Casey Research - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors. © 2005-2013 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication. Only logged in users are allowed to post comments. Register/ Log in

SHORT SQUEEZE: <b>Gold price</b> spikes $40 | MINING.com Posted: 04 Dec 2013 11:07 AM PST Gold shorts may be losing the courage of their convictions ahead of D-day on Friday. The gold price briefly touched a fresh 5-month low in brisk, volatile trade on Wednesday before turning sharply higher after the release of strong US jobs numbers. On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at $1,251.50 an ounce during early afternoon dealing, up $40 from the $1,210.80 low struck shortly after the opening. Silver tracked gold's trading pattern, jumping more than 4% to a day high of $19.89. The precious metal has been under pressure as markets believe a recovering economy – and specifically an improved labour market – could prompt the US Federal Reserve to slow the pace of its $85 billion in monthly bond purchases as soon as December. The market got its first taste of the state of US employment today, with the November ADP non-farm payroll number coming in at 215,000 jobs added, easily beating the 172,000 forecast and the 184,000 reading in October, which was also revised upwards from 130,000. A strong number usually leads to a sell-off in gold as it strengthens the hands of Fed members who are eager to start unwinding the near $4 trillion the central bank has taken onto its balance sheet since QE1. The Fed first embarked on its quantitative easing program in December 2008 when gold was trading around $830 an ounce. The reaction of gold traders to the news was typical, but the rapid reversal after the initial slump shows just how finely poised the gold market is at the moment and how much uncertainty there is about future prices. Friday's official jobs numbers would be the best indicator of the Fed's direction when it meets December 17–18 and large gold investors have been positioning themselves in anticipation of the closely watched data. Standard Bank in its daily research note points out that shorts – bets that the price is going lower – are building in the gold and silver futures market with Comex gold shorts jumping to a 4 month high ahead of Friday's US employment data: We believe one can interpret the way the market is trading in one of two ways: Either the gold price behavior is a signal that the market knows best and the employment number will most likely be a good print; Or, Friday's employment number may not necessarily beat expectations, but this is irrelevant to participants as the majority looks through the noise towards the end goal, i.e. tapering and a slow normalisation of US monetary policy which is coming closer by the day. Judging by Tuesday's rapid price reversal, gold shorts may be losing the courage of their convictions ahead of D-day on Friday.

US Fed Decisions To Bust <b>Gold</b>, Silver <b>Price</b> Forecasts For 2014 <b>...</b> Posted: 06 Dec 2013 10:01 AM PST By Taras Berezowsky Looks like the biggest drop in gold prices in several months permeated the precious and PGM markets - nearly every single price point in gold, silver, platinum and palladium markets tracked by the MetalMiner IndX℠ fell last month, as the monthly Global Precious Metals MMI® dropped 5.3 percent to a value of 90 in December. 2013 has seen our gold, silver, platinum and palladium price index fall - and stay - below the baseline of 100. Because a broader recovery in the US economy (with a revised GDP up 3.6 percent) pushed investors to reallocate money from gold to equities, and many expected an eventual quantitative easing pullback from the Fed, gold was the big story for the mainstream media. The yellow metal experienced its biggest monthly drop since June (and its worst November since 1978!), losing around 6 percent for November and down a quarter of its value so far this year; it's on track to post its first annual loss in 13 years, according to Reuters. However, there are competing viewpoints on the gold price forecast. "We think current strong negative sentiment towards the gold price is overdone," according to Nick Brooks, head of research and investment strategy at ETF Securities. "The gold price should rally if US growth disappoints and thus it provides a good risk hedge if optimistic consensus growth forecasts prove to be wrong." UBS Investment Research (UBS) is on the other side of the gold coin, having downgraded its 2014 forecast for average prices, from $1,325/oz to $1,200/oz. "The…forecast reflects the view that the gold market will fluctuate widely as it faces the crosscurrents of an improving macro backdrop, the changing landscape of physical demand and, ultimately, the implications on mine production," according to the bank. (Key: if the US dollar stays strong and real interest rates rise, expect more downside for gold.) So the obvious question is: where will the global economy go? Brooks thinks that the revised China growth figures moving forward - more 7-8 percent, less 10-12 percent - have been already figured into most price expectations. But according to Eurostat's recent growth figures, the EU economy is losing steam. Watch physical demand from India and China closely, which by all accounts remains strong. Silver Prices and Forecast: The Bigger Story? Silver prices in the US, Japan and India showed the biggest singular drops on MetalMiner's monthly precious metals index. UBS "lowered its average price expectations for silver from $25 previously to $20.50/oz for 2014 and from $24 to $21 in 2015," according to the most recent Precious Metals Note. For silver and gold, much will depend on the US Federal Reserve's moves in the coming weeks. The Fed's "Beige Book" showed an improved US manufacturing economy (as we've seen from record PMI figures, etc.) over the past 1.5 months, among other sectors, and based on that, the bank will decide at a Dec. 17-18 policy meeting whether to begin pulling back its $85 billion-a-month bond-buying program. Higher PGM Price Rises: Best Bet? Nothing has dissuaded us from the view that platinum and palladium will continue their longer-term luster. Principally on the macroeconomic side, the results of Beijing's Third Plenum bode well for continued industrial demand there. US auto sales have been comparatively awesome, good for end-use PGM consumption. And on the supply side, platinum and palladium are still running supply deficits (the biggest in 14 years for platinum). Key Price Drivers of Precious Metals Index: US silver prices dropped by 10.2 percent this month. The price of Japanese silver closed after dropping 12.7 percent. Following a 6.6 percent decline in price, US platinum bar finished the month down as well. US gold bullion prices fell 6.4 percent, while a 5.6 percent decline hit Chinese gold bullion. Chinese platinum bar was down 5.3 percent for the month. The price of Japanese gold bullion fell 3.2 percent. After rising the previous month, US palladium bar prices dropped 2.7 percent. Japanese platinum bar prices fell 2.7 percent after rising the previous month. Chinese palladium bar prices dropped 2.5 percent.

China, <b>gold prices</b> & US default threats — RT Op-Edge - RT.com Posted: 21 Oct 2013 03:50 AM PDT William Engdahl is an award-winning geopolitical analyst and strategic risk consultant whose internationally best-selling books have been translated into thirteen foreign languages. Published time: October 21, 2013 10:50 In the very days when a deep split in the US Congress threatened a US government debt default, the gold price should normally jump through the roof, yet the opposite was the case. It is worth a closer look why. Since August 1971, when US President Richard Nixon unilaterally tore up the Bretton Woods Treaty of 1944 and told the world that the Federal Reserve 'gold window' was permanently closed, Wall Street banks and US and City of London financial powers have done everything imaginable to prevent gold from again becoming the basis of trust in a currency.  On Friday, October 11, when there was no sign of any deal between US Congress members and the Obama White House that would end the government shutdown, the Chicago CME Group, which operates Comex - the Chicago Commodity Exchange, where contracts in gold derivatives are traded - announced that at 8:42am Eastern time the trading was halted for 10 seconds after a safety mechanism was triggered because a 2-million-ounce (56.7 million grams) gold futures sell order was executed. Something rotten in gold market  The result of that huge paper gold sale was that at just the time when a possible US government debt default would send investors in a panic rush to the safety of buying gold, instead, the price plunged $30 an ounce to a three-month low of $1,259.60 an ounce. Market insiders believe the reason was direct market manipulation. David Govett, head of precious metals at bullion broker Marex Spectron, calls the sudden huge futures sale suspicious.  "These moves are becoming more and more prevalent and to my mind have to either be the work of someone attempting to manipulate the market or someone who really shouldn't be trusted with the sums of money they are throwing around. There are ways of entering and exiting a market so that minimum damage is caused and whoever is entering these orders has no intention of doing that," Govett said. UBS gold trader Art Cashin echoed the suspicion.  "…if that happens once it could be an accident of technology, or it could be a simple error. But when it happens five times over a period of months, it does raise questions. Is it being done purposefully? Is somebody trying to influence the market?"  That 'someone' market sources believe is the Obama White House, in league with the Federal Reserve and key Wall Street banks that would be ruined were gold to really rise. In March 1988, five months after the worst one-day stock market plunge in history, President Ronald Reagan signed Executive Order 12631. Order 12631 created the Working Group on Financial Markets, known on Wall Street as the 'Plunge Protection Team' because its job was to prevent any future unexpected financial market panic selloff or 'plunge'. The group is headed by the US Treasury Secretary and includes the chairman of the Federal Reserve, the head of the Securities & Exchange Commission, and the head of the Commodity Futures Trading Commission (CFTC) which is responsible for monitoring derivatives trading on exchanges.  Numerous times since 1988, reports have surfaced of secret interventions by the Plunge Protection Team to prevent a market panic selloff that could threaten the role of the US dollar. Former Clinton White House staff chief George Stephanopoulos admitted in 2006 that it was used to support the markets in the 1998 Russia/LTCM crisis under Bill Clinton, and again after the 9/11 terrorist attacks in 2001.  He said, "They have an informal agreement among major banks to come in and start to buy stock if there appears to be a problem."  Clearly stocks are not the only thing the government manipulates. Gold these days is a prime focus. The price of gold in recent years—since the eruption of the US dot.com IT stock bubble in 2000—has exploded from around $300 an ounce to a recent record high above $1,900 in August, 2011. Gold rose an impressive 70 percent from December 2008 to June 2011, after the Lehman Brothers collapse and the start of the Greek crisis in the eurozone. Since then, with no clear reason, gold has reversed and lost more than 31 percent, despite the fact that talk of a unilateral Israeli military strike on Iran and the US financial debacle combined with a euro crisis, and now, threat of US government default, created overall huge demand for investment in gold.  This past April 10, the heads of the five largest US banks, the Wall Street 'Gods of Money' — JPMorgan Chase, Goldman Sachs, Bank of America and Citigroup — requested a closed door meeting with Obama at the White House. Fifteen days later, on April 25, the largest one-day fall in history in gold took place. Later investigation of trading records at Comex revealed that one bank, JP Morgan Securities, was behind the huge selloff of gold derivatives. Derivatives are pieces of paper or bets on future gold or other commodity prices. To buy gold futures is very inexpensive compared with gold but influence the real physical gold price, largely because the US Congress, under lobby influence from Wall Street, since 2000 and the Commodity Trading Modernization Act, has left gold derivatives unregulated. The President's Plunge Protection Team was at work now as well, clearly. China smiles & buys In effect a war, a financial war, is underway between the Wall Street giant banks and their close allies, including the major City of London banks and banks like Deutsche Bank on the one side, using paper gold derivatives trading in the unregulated COMEX, with covert support of the US Treasury and Fed. On the other side are real investors and Central Banks who believe that the world financial system, especially the dollar system, is teetering on the brink of disaster and that physical gold is the historical best safe haven in such a crisis.  Here, the recent buying of gold reserves by several central banks including Russia, Turkey and especially China, are notable. The short-term derivative gold price manipulations by JP Morgan and Goldman Sachs are creating smiles at the Peoples' Bank of China and the Russian Central Bank among other buyers of physical gold. Since 2006 Russia's central bank has increased its gold reserves by 300 percent.  Now, the Chinese central bank has just revealed data showing that China imported 131 gross tons of gold in the month of August, a 146 percent increase compared to a year prior. August was the second highest gold importing month in its history. More impressively, China has imported more than 2,000 tons of gold in the past two years. According to a 2011 cable made public by WikiLeaks, the Peoples' Bank of China is quietly seeking to make the renminbi (the yuan) the new gold-backed reserve currency.  Hmmmm. According to unofficial calculations, the Peoples' Bank of China today holds about 3,500 tons of monetary gold, surpassing Germany, to make it number two in the world after the Federal Reserve. And there are grave doubts whether the Federal Reserve actually holds the 8,044 tons of gold it claims it does. The former International Monetary Fund director, France's Dominique Straus-Kahn, demanded an independent audit of the Federal Reserve gold after the US refused to deliver to the IMF 191 tons of gold agreed to under the IMF Articles of Agreement signed by the Executive Board in April 1978 to back Special Drawing Rights issuance. Immediately before he could rush back to Paris, he was hit by a bizarre hotel sex scandal and abruptly forced to resign. Straus-Kahn had been shown a secret Russian intelligence report prepared for President Vladimir Putin in which 'rogue' CIA agents revealed that the US Federal Reserve had no gold reserves and only lied that it did.  The stakes for Washington and Wall Street in depressing the gold price are staggering. Were gold to soar to $10,000 or more, where many believe current demand-supply pressures would find it, there would be a panic selloff of the dollar and of US Treasury bonds. China now holds a record $3.7 trillion of foreign currency reserves and the US Treasury bonds and bills are about half that.  That selloff would send US interest rates sky-high, forcing a chain-reaction of corporate and personal bankruptcies that have been avoided since the financial crisis broke in 2007 only owing to record near-zero Federal Reserve interest rates. That selloff, in turn, would be the end of the US as the world's sole superpower. Little wonder the Obama Administration is manipulating gold. It cannot last very long at this pace, however. The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

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