Gold: Is a deep correction due?

Gold: Is a deep correction due?
If judged by the criteria of six years ago, Julian Phillips argues, then one could argue that it should be time to sell but, change has come to the gold market and things are not what they were.
Author: Julian D.W. Phillips
Posted: Friday , 26 Aug 2011

JOHANNESBURG -

The rise in the gold price has continued and shown a break up above the trend line. This has always been a sign that the gold, silver prices have ‘spiked'. This has always been a signal to be ready to take profits and be ready to go back in lower down.

This was a correct approach and we do not argue with the logic; however, a change is happening in precious metal markets. Over the last few weeks gold has run ahead but it has seen brief and shallow corrections until this last week when traders and speculators caused a ‘spike' to $1.910, before an equally dramatic fall back to $1,716. This is not the sort of correction we are discussing here. The speed and extent of the correction did not reflect the market fundamentals.

So we must ask, "Are the current buyers also potential sellers?" In developed markets, the concept that an investor will not take a profit once his target price is reached seems ridiculous because it is believed that all buyers will be sellers when they have a good profit. But in the changed gold market of today buyers are not often sellers, as we know it.

Does the Developed World Still Dominate Gold Prices?

The ongoing uncertainty in the developed world, the lack of political leadership over financial matters -Angela Merkel telling all that governments should not be told what to do by markets, still-and overwhelming debt in the face of further economic downturns, points to demand for gold coming from the developed world; however, gold demand is lackluster there, at best.

Developed world investors are asking themselves...

• Will the developed world debt and distress factors pushing gold higher be put right?
• Are these the factors that are pushing gold higher?
• Are the gold and silver price rises just about the developed world and its problems?
• Has gold seen its top?

By past measures the gold price looks as though it should have a deep correction. The same was said when gold hit $500 after rising from $300 too.

Table - Gold demand by region - (Jewelry, coin & bar demand only)

Region/Country	Percent
India	32%
Greater China	20%
Europe and Russia	13%
Middle East and Turkey	12%
North America	8%
Others	15%

There has never been a more important time to understand both the gold and silver markets. The table above is the most definitive piece of evidence describing what is happening in the global gold markets.

Gold Goes Global

Gold went really global around five years ago. In 2009 central banks came in as buyers. These two factors have changed the gold market entirely; they have distorted the factors bearing on technical analysis and changed the way prices move now. In fact, the very nature of investors in gold has changed, and for good!

Of course the market looks as though it needs a major correction, if you look at it through the eyes of six years ago. If you believe the picture painted by the old criteria, you should sell gold and stay out until it drops back, but to where?

If you understand the new investors and how they think, then your conclusions should be different. Look at what has happened since June and note that while the risks in the gold market have risen, current buyers are not price chasers either. This fact alone should make you ask,

Are they likely to be sellers because of a swift rise?

What we have seen is a failure to follow prices up, but to wait until they pull back and for physical gold to be on offer. The new investor wants physical gold itself and is not so concerned with price. If they are right, sooner or later the price will rise to well above what they have paid. The lifespan of their investment is generations long, not days, weeks, or years long.

The conditions that have lifted gold from $275 to $1,900 continue to persist. The gold price is not about gold; it is about the bear market in currencies, the deteriorating confidence in the value of currencies, as well as developed world's government's ability to restore that confidence.

As these factors point to more of the same -expect a continuation in the fall of currencies against gold and silver to levels deemed incredible by the developed markets of the world.

Do you expect the value of currencies to rise? Do you expect a resurgence of economic health in the developed world? Do you expect strong government with the force and conviction to produce a reformed strong monetary system across a financially united world?

Asian View of Money

Asia has always had an inherent trust in precious metals; a trust, which has now been validated again and again over the last decade.

Asian investors have never believed that paper money is a solid measure of value. When they see currencies weaken it is in line with the nature of governments. Is there a government whose money has lasted throughout its entire lifetime? When there has been, its money was gold and silver, and such money has lasted throughout most governments in history. Now, has there been a paper money based on a government's obligations that has lasted beyond the life of the government?

It is this perspective of money that is critical to understanding today's gold and silver markets.

There is a point where confidence in paper money has sunk so low that a collapse is triggered. Governments will fight tooth-and-nail to prevent that from happening. When it does happen, it happens as fast as rebels entering Tripoli.

Central bank's investment in gold is an insurance policy against such a collapse. People who have never been lulled into the developed world's sophisticated monetary systems are not likely to be so, now that it looks so wobbly. The rise of gold and silver prices is about the fall of paper money.

Julian Phillips is a well-respected gold and silver analyst based in South Africa and principal writer for www.goldforecaster.com and www.silverforecaster.com

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UBS Weighs Fee on Franc Deposits - WSJ.com

UBS Weighs Fee on Franc Deposits

By KATHARINA BART And DEBORAH BALL

• MARKETS
• AUGUST 27, 2011

ZURICH—In a sign of mounting tension caused by the strong Swiss franc, UBS AG said it may begin levying a temporary charge on Swiss franc deposits as a way of encouraging other banks to limit the cash they keep in the surging currency.

On Friday, UBS notified other lenders that bank with the Swiss group that, in light of strong inflows of cash deposits held in Swiss francs, it "might have to take corrective action, within the next few days, by means of a temporary excess balance fee." UBS declined to comment further on the notice.

Reuters

UBS's move echoes a recent move by Bank of New York Mellon, which said it would charge large corporate and investor clients for deposits.

The potential move comes as Swiss National Bank has been battling to rein in the franc, which has surged against the dollar and the euro in recent weeks. Earlier this month, it trimmed its key three-month London interbank offered rate target to close to zero in an effort to stem investor demand for the franc. It has also increased banks' most readily available deposits—a type of overdraft available to retail banks that want it—to 200 billion francs in recent weeks from 80 billion francs.

The resulting swelling of liquidity has effectively sent short-term interest rates into negative territory in the interbank market. For banks, this means holding Swiss franc cash deposits for other banks isn't worth their while.

UBS has in turn been flooded with Swiss-franc deposits from other banks that yield close to zero. When the cost of managing these accounts is taken into consideration, these deposits could be loss-making for UBS.

"It means that they are also quite nervous about these negative rates," said Ursina Kubli, foreign exchange strategist with Bank Sarasin.

Credit Suisse Group and Julius Baer Group declined to comment as to whether they would follow UBS's warning. However, a person familiar with the situation says Swiss banks have been warning their clients that they are reluctant to take on additional large Swiss franc deposits. Swiss banks, including UBS and Credit Suisse, have said that rock-bottom interest rates have weighed heavily on their profits in recent quarters.

UBS's move echoes a recent move by Bank of New York Mellon Corp., which said it would charge large corporate and investor clients for deposits. Turmoil in the financial markets has driven investors and corporations to hoard cash with banks that have custodial operations, rather than investing the money in even relatively safe securities. As a result, BNY Mellon was flooded with cash that it was struggling to reinvest, particularly in an environment of ultra-low interest rates. Moreover, institutions such as BNY Mellon pay fees to regulators to insure their deposits.

However, while BNY Mellon's decision reflected broader strains in the U.S. economy, UBS's warning is a side effect of investors' view of Switzerland and the Swiss franc as a haven in a time of turmoil.

In the 1970s, the SNB required Swiss banks to charge a penalty on franc deposits by nonresidents, in an effort to control a similar surge in the Swiss currency. Those penalties were held in place for much of the decade, but did little to stem the rise of the currency by the time the bank abandoned it.

On Friday, the SNB said that it hasn't asked UBS or Credit Suisse to impose fees on deposits. While some traders have been looking for the SNB to intervene in the currency market to weaken the franc, few expect it to repeat the 1970s experience of ordering Swiss banks to charge foreigners for franc deposits.

The SNB's actions have helped in part to rein in the franc in recent weeks. In early August, the euro hit a record low against the franc, nearly reaching parity with the Swiss currency. In late trading Friday in Europe, one euro bought 1.17 francs.

Meanwhile, the dollar has risen 14% against the franc since it hit a record low on Aug. 9, surging nearly 2% on Friday afternoon on the back of comments by Federal Reserve Chairman Ben Bernanke, which seemingly ruled out another round of stimulus.

Write to Katharina Bart at katharina.bart@dowjones.com and Deborah Ball at deborah.ball@wsj.com

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

UBS Weighs Fee on Franc Deposits - WSJ.com

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WSJ articles on #Gold: $2500 gold price!

UPDATE: JP Morgan Joins Goldman Sachs In Upping Gold Forecasts

   By Andrea Hotter 

   Of DOW JONES NEWSWIRES 

LONDON (Dow Jones)--JP Morgan (JPM) has become the latest bank to up its forecast for spot gold prices, hiking its estimates by a whopping 39% and predicting the precious metal to reach at least $2,500 a troy ounce by the end of the year.

This is almost $800/oz higher than current levels, which represent an all-time high.

The U.S. bank had previously expected spot gold to be at $1,800/oz by year-end.

The move will come amid very high volatility, the bank's Colin Fenton said, and is being driven by "rising probability of a reflaring of financial crisis."

Earlier Monday, Goldman Sachs (GS) raised its forecast for gold, saying its economists now place a one-in-three chance of a U.S. recession that would most likely occur within the next six months. But its prices are significantly lower than JP Morgan's, with Goldman predicting a spot prices of $1,645/oz in three months and $1,730/oz by six months.

Gold soared higher overnight and has become an investor favorite amid deteriorating economic conditions in the euro zone and the U.S.

Friday's downgrade of the U.S. credit rating from AAA to AA-plus by ratings agency S&P triggered the most recent strength in gold, which leapt over $70 from Friday's low to peak at $1,715.29/oz earlier Monday.

Morgan Stanley, ANZ, UBS, MF Global and Barclays Capital last week all upgraded their gold price forecasts, while producers like Barrick Gold (ABX), AngloGold Ashanti (AU) and Randgold Resources (GOLD) have been making bullish statement in support of further rises in recent days.

But JP Morgan said it isn't just gold that will benefit from the financial malaise. Commodities geared toward Asia, investment, and inflation will outperform commodities anchored more to the growth prospects and local supply chains of the U.S.

"The bullish basket includes Brent crude oil, gasoil, gold, raw sugar, copper, corn, and wheat," said JP Morgan's Fenton. "The bearish basket includes WTI crude oil, RBOB gasoline, aluminum, zinc, and North American natural gas."

He singled out sugar, noting that dollar weakness and rising inflation expectations open the upside for raw sugar prices to surge far higher than would otherwise be likely, perhaps doubling or more in a spike. But he cautioned that "sugar rallies tend to be brief, violent, and difficult to time."

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@dowjones.com

 

Gold Again Hits Platinum's Level

• By RHIANNON HOYLE And TATYANA SHUMSKY

The price of gold stood at parity with sister metal platinum for the first time since the end of 2008, as the yellow metal's value soared.

Gold set a new record as it hit $1,700 a troy ounce as the U.S.'s downgrade set markets into turmoil. MarketWatch's Laura Mandaro outlines the case for as well as against gold. (Photo: Getty Images.)

"We saw platinum and gold trading at the same price during the early stages of the global economic crisis, and we are close to the same situation" now, said Mitsui precious-metals analyst David Jollie. "Gold's status as a near-monetary asset is giving it considerable strength while platinum's greater exposure to economic growth is currently a weaker driver for price appreciation."

Ratios between the precious metals are watched by investors, who often examine moves to help them decide which metal may be the better investment. Platinum and gold are both used by the jewelry industry; however, platinum's extensive role in automotive applications makes the white metal sensitive to economic downturns unlike gold.

Late afternoon in New York, spot or "cash market" gold traded at $1,719.50 a troy ounce, up $56.10, or 3.4%, and it continued rising in early Asia trading on Tuesday.

Spot platinum fell $2 or 0.1%, to $1,714.

The moves in the spot market were echoed in the futures market. The gold contract for August delivery gained $61.40, or 3.7%, to settle at a nominal record of $1,710.20 on the Comex division of the New York Mercantile Exchange. It was the largest one-day dollar and percentage gain since March 19, 2009. Platinum for October delivery rose $4.50 or 0.3% to settle at $1,723.60 an ounce.

Gold prices are up more than 20% this year as concerns about U.S. economic growth and Europe's sovereign-debt problems keep investors away from riskier assets like equities. Prices got another push Monday as stock prices slid.

"The stock market is…causing a lack of confidence," said Tom Pawlicki, a precious-metals analyst with brokerage MF Global. "There's a fear that there's no leadership in either Washington or the Federal Reserve and no way to bolster the economy."

S&P's move is expected to raise the cost of borrowing for the U.S. Treasury and have wide reverberations throughout the economy as the cost of everything from car loans to credit cards increases. "While this step is not entirely surprising, it is a clear signal to market players that also government bonds do not offer complete security," said analysts at Commerzbank.

The ride higher is unlikely to end soon, as two leading investment banks, J.P. Morgan Chase & Co. and Goldman Sachs Group, raised their gold-price forecasts Monday. J.P. Morgan now sees gold prices at $2,500 a troy ounce by year-end, while Goldman expects gold at $1,730 in six months.

Write to Rhiannon Hoyle at

SPDR Gold Trust registered its biggest one-day gain in more than a year @mastermetals

Holdings of SPDR Gold Trust registered its biggest one-day gain in more than a year, rising 1.8 percent on Monday as investors flocked to seek refuge in bullion amid economic concerns triggered by a debt downgrade of the United States.

The world's largest gold-backed exchange-traded fund said its holdings rose to 1309.93 tonnes at the end of Monday's trading session, from 1286.30 tonnes on Friday. SPDR's holdings are now closer to its record 1,320.436 tonnes on June 29, 2010.

MasterMetals (@mastermetals) 8/9/11 9:37 AM SPDR Gold Trust holdings see largest one-day gain in more than a year http://goo.gl/fb/wqFHW #MasterMetals

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Gold Rises to Record as Rating Cut Spurs Buying

Gold Rises to Record as Rating Cut Spurs Buying - Bloomberg

Gold climbed to a record after Standard & Poor's cut the U.S. credit rating, fueling a slump in equities and commodities amid concern that the global economy is slowing.

The S&P 500 Index lost as much as 5.7 percent, while the Thomson Reuters/Jefferies CRB Index of 19 raw materials touched 317.6, the lowest since Dec. 17, after S&P cut the long-term U.S. rating one level to AA+ from AAA on Aug. 5. The agency described the outlook as "negative" and criticized the nation's political system for failing to adequately address deficit reduction.

"There is heavy buying in gold because of the uncertainty surrounding the U.S. economy," Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. "For gold, the sky is the limit."

Gold futures for December delivery rose $61.40, or 3.7 percent, to settle at $1,713.20 an ounce at 1:45 p.m. on the Comex in New York, the biggest gain since March 19, 2009. Earlier, the metal surged to $1,721.90, the highest ever. In after-hours trading, it touched $1,723.40.

Prices may jump to $2,000 in the next few weeks, Zeman said.

Read the rest of te story here: http://www.bloomberg.com/news/2011-08-08/gold-advances-to-record-as-u-s-credit-rating-cut-boosts-demand-for-haven.html

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Commodities other than gold to fall on U.S. ratings downgrade - Analysts - POLITICAL ECONOMY | Mineweb

Commodities other than gold to fall on U.S. ratings downgrade - Analysts

Analysts expect commodities, with the exception of gold, to fall on Asian markets early in the week, but don't think this will be panic selling as Chinese demand seen as staying strong.
Author: Manolo Serapio Jr
Posted: Sunday , 07 Aug 2011


SINGAPORE (REUTERS) -
Commodities, except gold, may fall when Asian markets open on Monday as investors fret over S&P's downgrade of the United States' AAA rating, but losses should be capped by hopes growth in big commodity consumer China will stay robust.
Bullion should benefit from the renewed uncertainty although expected declines in oil, base metals and grains may be short-lived with investors seen on alert for any opportunity to buy at weakened prices.
Strong economic growth in China -- the world's top copper consumer, No. 2 oil user and major buyer of grains -- as well as tight global supplies for some raw materials including coal and iron ore, will also support commodity prices.
Standard & Poor's cut the long-term U.S. credit rating to AA-plus on Friday, saying the country's efforts to put its fiscal house in order fell short of what would be necessary to stabilise the government's medium-term debt dynamics.
The unprecedented blow to the world's largest economy, a move that over time could ripple through markets by pushing up borrowing costs and making it more difficult to secure a lasting recovery, prompted global policymakers to hold an emergency conference call on Sunday to discuss the debt crises in the United States and Europe.
"I don't think commodities will take the downgrade very well. The market's certainly in a bearish mood and this just does nothing to improve that," said Citigroup analyst David Thurtell.
"But it should be an orderly decline, nothing to panic about. The important thing now is that confidence doesn't slip too far," he said, adding investors were likely to buy on dips.
The U.S. dollar may weaken and Treasury yields rise on Monday after S&P's move, though any selling is likely to be tempered by the escalating crisis in the euro zone.
The Reuters-Jefferies CRB index , the 19-commodity benchmark, fell nearly 4.5 percent last week, its steepest drop since a rout in early May fuelled by concerns about a stalling global economic recovery.
U.S. oil CLc1 and Brent crude LCOc1 may drop after rebounding from steep intraday losses on Friday, when data showing a forecast-beating 117,000 rise in U.S. non-farm payrolls last month helped tame fears the U.S. economy may be courting another recession.
London copper should lead base metals lower and grains may also retreat, while gold could retest new peaks. Gold hit an all-time high of $1,681.67 an ounce on Thursday, its 10th record in 18 sessions.
"The initial reaction will be a high degree of uncertainty and thus volatility since investors will not know where to turn for safety," said Mark Mobius, executive chairman of Templeton Emerging Markets group which oversees $50 billion in emerging market assets.
"During the sub-prime crisis safety was in U.S. dollars and U.S. Treasuries. Now that anchor to the global community is deteriorating," he said in an email to Reuters.
CHINA STRENGTH
But when the initial shock is over, analysts said other commodities should regain ground as investors bet on China's growth.
With China's economy, the world's second largest, continuing to expand strongly, "commodities could be a bit of a haven on a China play," said Thurtell.
"China is still growing strongly and increasingly its growth is becoming less dependent on the U.S. and the rest of the world.
"China has not excessively borrowed, they've got a pretty good fiscal position, they've got very high foreign exchange reserves, so China's got the ability to keep growing and that's the bottom line in commodity markets," he said.
Despite Beijing's monetary tightening, the country's copper imports jumped 19.7 percent in June from a 30-month low in May, and analysts see copper prices heading to record near $11,000 a tonne before year-end on the strength of Chinese demand.
A steep fall in Shanghai-traded commodities on Friday could also keep Monday's losses in check with buyers ready to scour the market for bargains.
Shanghai commodity futures, from base metals to rubber and rebar steel fell between 2-6 percent on Friday, with aluminium and zinc hitting their downside limit, following an exodus in U.S. and London markets the day before on mounting global economic concerns. (Editing by Sambit Mohanty)


Mineweb.com - The world's premier mining and mining investment website Commodities other than gold to fall on U.S. ratings downgrade - Analysts - POLITICAL ECONOMY | Mineweb

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Ecuador`s President wants $100m-$200m in mining royalties in advance - POLITICAL ECONOMY | Mineweb

Ecuador's President wants $100m-$200m in mining royalties in advance

Ecuador's President Correa, an economist by training, hopes to place his nation at the forefront globally by securing mining royalties for copper and gold projects in advance
Author: Dorothy Kosich
Posted: Monday , 08 Aug 2011


RENO, NV -
Ecuador President Rafael Correa said Saturday that his government is demanding that mining companies pay from $100 million to $200 million in mining royalties before "starting to extract the mineral."
During his weekly address to the country, the former economist said the first beneficiaries of the mining royalties will be the residents of the cities, parishes and communities near mining projects.
Correa urged residents of the province of Zamora Chinchipe, particularly those living in the towns of El Yantzaza and El Pangui to prepare for responsible mining growth. While Correa commented that there is much manipulation and bad faith surrounding the issue of mining, he asked people not to be fooled, but to realize that mining projects will bring numerous benefits including more employment.
The Correa Administration is now in contract negotiations with Kinross for the Fruta del Norte gold project, Corriente Resources for the Mirador copper project, and International Minerals for the Rio Blanco gold and silver project.
In his weekly address, the President noted the mining projects will generate a wide diversity of jobs including more than 3,000 jobs in El Pangui and about 5,000 in El Yantzaza. "
The Province of Zamora is very fortunate for these riches," Correa said. Mining companies hope to invest US$3.2 billion over three years, using the best available technology for exploration and project development. The President said he had no doubt that mining royalties will not only change the lives of people in El Pangui and El Yantzaza, but also throughout the province.
He stressed that he will seek mining operations that are environmentally friendly and socially responsible. Correa also wants guarantees that mines will not harm Ecuadorians.
In a news release from the President's Office, Wilson Pastor, minister of non-renewable natural resources for Ecuador, said the contract negotiations have been lengthy, but will put Ecuador at "the forefront in the distribution of mining royalties globally, in copper and gold."
Pastor said US$1.7 billion will be invested in the Mirador copper project in Zamora over three years. Mirador is expected to mine 235 million pounds of copper annually and generate 3,100 direct jobs and 20,000 indirect jobs.
Meanwhile, Ecuador's government is hoping to negotiate at least $100 million in advance royalties from the Fruta del Norte project, Pastor added.
President Correa recently stated he wants mining companies to sign exploitation contracts that will pay 8% in mining royalties.
While Pastor was hoping the contracts will be signed this month, Correa said in his weekly address that contract negotiations will conclude in September with the contracts signed in October.


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China's gold output exceeds 164T in first half, Gold sky-rockets to all-time high in India

Some mining news

China's gold output exceeds 164 tonnes in first half of year

MCOT - August 6, 2011 - PERMALINK

China's gold output grew by 5.18 tonnes, or 3.25 percent year-on-year to 164.42 tonnes during the first half of the year, the Ministry of Industry and Information Technology (MIIT) said Friday. In June alone, the country

Gold sky-rockets to all-time high in India as traders gear up for spectacular jewellery festival

Frik Els - August 6, 2011 - PERMALINK

The price of gold zoomed to an all-time high of Rs24,770 per 10 grams by adding Rs420 in New Delhi, India on Saturday on frantic buying by stockists and investors. India is the world's number one consumer of gold and official figures released on Friday show the country's revenue from the importation of gold almost doubled in 2010-11 compared to the previous year. The news follows the announcement by the World Gold Council that it is teaming up with jewellers to sell discounted gold to price-conscious Indians during the all-important Shraavan Aavani month that culminates in a festival next Friday.

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Is Gold A Bubble? 14 Charts, The Facts And The Data Suggest Not

Is Gold A Bubble? 14 Charts, The Facts And The Data Suggest Not

For more than 3 years - since gold rose above its nominal high of $850/oz in February 2008 - there has been much talk about gold being a bubble. Nouriel Roubini, professor of economics at New York University's Stern School of Business, is one of the more prominent financial and economic experts who said gold was a bubble and many other experts internationally echoed his sentiments. On December 10th, 2009, with gold at $1,100 per ounce, Roubini, said, "all the gold bugs who say gold is going to go to $1,500, $2,000, they're just speaking nonsense". Roubini went on to say ,"I don't believe in gold." Gold has now risen 50% since then and Roubini has been silent on the gold price. We believe that he was wrong regarding gold as he, like many in the western world, is simply not aware of the facts and the fundamentals driving the gold market. He also is not aware of gold's diversification benefits. The fundamental drivers of the gold market are not appreciated by most and rapidly get forgotten by many due to the daily barrage of noise and fear emanating from the markets. The facts and charts below strongly suggest gold is not a bubble. However, even if it were a bubble, those calling gold a bubble should acknowledge the diversification benefits of owning gold and urge diversification rather than vainly trying to predict the future and the future movement of asset prices.

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Is the Debt Ceiling Raise Bullish for Gold?

Is the Debt Ceiling Raise Bullish for Gold? - Yahoo! Finance

--- The short answer is Yes, as this simply legalizes their continued spending...

It was quite the day for markets as a debt ceiling deal played with emotions.  The Dow , which initially jumped over 100 points at the open, finished the day down 10 points. The U.S. Dollar received a boost as markets are somehow feeling reassured about the government's ability to borrow more money.   Gold and silver also closed the day lower.

Although precious metals were down, there is a strong upward channel in gold.  The chart below shows the rise in gold prices over the past couple years.  Even though critics of gold will quickly call an end to gold's run on a decline, investors should keep the big picture in mind.  Gold continues to receive buying support as it nears the bottom of this channel. Even if gold declines to $1550, the longer-term technical trend looks strong.

As our Gold and Silver Premium Newsletter readers know, despite the temporary pullback in gold and silver, the debt deal is actually bullish for precious metals.  The debt deal allows the government to continue its massive spending and debt cycle, which will cause investors to seek out protection from the U.S. Dollar.  Furthermore, someone has to purchase government bonds, and the Federal Reserve is the most likely candidate.  The past two quantitate easing programs from the Fed paved the way for all time record gold prices, just imagine where QE 3 will put gold at in the near future.

Investors looking to hold metal miners in their portfolio may want to consider gold plays such as AngloGold , Newmont Mining , or Market Vectors Jr Gold Miners ETF .  Silver miners include First Majestic Silver , Endeavour Silver , and Global X Silver Miners ETF .

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

Disclosure: Long AGQ.

http://finance.yahoo.com/news/Is-Debt-Ceiling-Raise-Bullish-wscheats-3672415141.html?x=0&.v=1

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Bank of Korea buys 25 tonnes of gold

In what is its first gold purchase in more than a decade the Bank of Korea says it spent more than $1bn over the past two months in order to diversify its holdings away from reserve currencies like the dollar and the euro

Author: Yoo Choonsik and Kim Yeonhee (Reuters)
Posted:  Tuesday , 02 Aug 2011

SEOUL (Reuters) - 

South Korea spent more than a billion dollars in its first gold purchase in more than a decade, as uncertainty about global growth and sovereign debt push central banks around the world to diversify foreign reserves.

A brittle global economic recovery and precarious debt conditions in the United States and Europe have boosted the safe-haven appeal of gold, lifting bullion to a record high on Friday.

The Bank of Korea said in a statement on Tuesday it bought 25 tonnes of gold over the past two months, raising its gold holding to 39.4 tonnes, news that helped lift spot gold by around $6 from late Monday.

Reserve currencies, like the dollar and euro, "have been losing their clout since the recent global financial crisis partly due to abnormal monetary policy adopted in many countries and fiscal deficit problems," said an official at the central bank who declined to be named because he was not authorised to speak to the media.

Data on 27 major economies from the Bank for International Settlements shows the dollar's inflation-adjusted real effective value has dropped by 10 percent in the past two years and the euro has lost 6 percent, reflecting the sharp increase in the amount of each currency in circulation.

South Korea's gold holdings remain far smaller than that of other Asian central banks, with China, which ranks sixth globally, the biggest with 1,054.1 tonnes by the end of May, according to World Gold Council data.

Japan, No. 9 globally, has 765.2 tonnes of gold, or 3.3 percent of its total reserves, and 11th-ranked India has 557.7 tonnes, or 8.7 percent.

"South Korea's central bank seems a little late to the party, but gold investors should continue to expect price support as central bankers around the world are underinvested in the yellow stuff," said Sean McGillivray, head of asset allocation at Great Pacific Wealth Management.

"Investors and central bankers are looking to protect purchasing power, diversifying into the currency of last resort, gold."

With prices hovering near historic highs, the central bank of Asia's fourth-largest economy said gold looked less lucrative as an investment, but it was the right time to buy the precious metal because its foreign reserves had risen above $300 billion.

The news helped boost gold prices, with spot up 0.4 percent at $1,623.94 an ounce by 0528 GMT. Gold hit a record high of $1,632.30 on Friday.

"Any news about central banks buying gold reassures consumers and other major players who are already looking at gold as an investment," said Jeffrey Pritchard, analyst at California-based commodities futures and options brokerage Altavest Worldwide Trading.

CONDITIONS RIPE FOR GOLD PURCHASE

The Bank of Korea said its latest gold purchase was valued at $1.24 billion. It did not say whether it had bought gold bullion or funds, or whether it plans to buy more gold.

The purchase comes weeks before the central bank is due to face an annual parliamentary audit, expected in September, and after several South Korean lawmakers from both the ruling and opposition parties have repeatedly called for it to boost holdings of gold to diversify reserves.

At 25 tonnes of gold, equivalent to 803,769 ounces, the average price paid comes to around $1,543 an ounce, based on Reuters calculations.

A BoK official said it was the bank's first gold purchase since at least the 1997-1998 Asian financial crisis when patriotic Koreans collected the precious metal as part of a campaign to boost the country's foreign reserves, when it was on the verge of a sovereign default.

"The country had too small an amount of foreign reserves to diversify into gold before 2004 and was not able to buy gold between 2005 and 2007 due to concerns about the central bank's annual losses," the Bank of Korea said.

"Now that our total reserves topped $300 billion and foreign exchange markets stabilised, we judged that conditions were ripe for us to increase gold holding."

The increased gold holding would put South Korea in 45th position in the World Gold Council's list of central banks holding gold, up from 56th previously, the Bank of Korea said.

The United States has the biggest gold holding in its reserves, at 8,133.5 tonnes, or 74.7 percent of total reserves, according to the WGC's July report. Germany is a distant second with 3,401 tonnes, or 71.7 percent of its total reserves.

The Bank of Korea declined to disclose the purchase price but said it had entrusted all of its gold holding to the Bank of England for possible use in gold lending and other related transactions.

Including the gold, South Korea's foreign reserves rose by $6.55 billion in July to $311.03 billion, equivalent to about 30 percent of the country's annual gross domestic product of just more than $1 trillion in 2010.

South Korea's foreign reserves ranked seventh in the world as of the end of June, the central bank said.

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