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Showing posts with label Finance. Show all posts
Showing posts with label Finance. Show all posts

December 15, 2019

The World’s Wealthy Are Hoarding #Gold - Physical not #ETF‘s

At least that's what Goldman Sachs says...
The Wealthy Are Hoarding Physical Gold
The world's rich are hoarding gold – this according to data buried in a recent Goldman Sachs note to clients.
In the note published over the weekend, Goldman recommended diversifying long-term bond holdings with gold, citing "fear-driven demand" for the yellow metal.


The Goldman note cited political uncertainty and recession fears as the catalyst for the move toward gold. It also mentioned worries about a wealth tax, increasing interest in Modern Monetary Theory (essentially money-printing) and the current loose central bank monetary policy.
Data buried in the note also revealed that owning physical gold appears to be the preferred method to "hedge against tail events" by the rich.
"Since the end of 2016 the implied build in non-transparent gold investment has been much larger than the build in visible gold ETFs."

July 27, 2019

How Awesome was Anil #Agarwal’s @AngloAmerican Adventure


The FT's DD breaks down the trade:
In our article, we explain that Agarwal has made about $500m in gross profits on the trade. BUT, that is before the substantial costs required to service the instruments involved in making the stake happen. Coupon costs alone will have totalled about $300m since he first put on the two legs of the trade.
And we've learned that Agarwal is likely to reveal that he is up about $100m from the overall project. We assume that means a hefty chunk of the remaining $100m will be headed to the folks at JPMorgan.
Agarwal's trade strongly resembles an equity collar, which DD's Rob Smith and Arash Massoudi explained last year has become a hot money spinner for Wall Street banks looking to make money from deep pocketed clients. In short: collars do not come cheap.
In short:
  • Agarwal just spent an insane amount of time and energy to correctly pick a stock that soared 80 per cent in two years, but due to the use of an exotic structure may have only made profits equal to his bank fees . . . yikes!
Read the whole story here: https://www.ft.com/content/53b77de8-af35-11e9-8030-530adfa879c2

July 25, 2013

What diverging #monetary policies signal- Xie

#Gold prices will top $3,000/oz in 5 years

Gold is likely to perform well in the second half of 2013

The growth outlook for Europe and Japan remains fragile. Their quantitative easing is likely to remain intact through 2013.

A limited crisis in emerging markets is still possible. As hot money is leaving them

What diverging monetary policies signal: Andy Xie

Commentary: Gold prices will top $3,000 per ounce in five years

By Andy Xie
BEIJING (Caixin Online) — The monetary policies of major economies are diverging for the first time since 2008. The euro zone, Britain and Japan are sustaining quantitative easing, while the United States, China and other major emerging economies are on a tightening path.
The divergence is creating trends in some markets, volatility and confusion in others.
The U.S. dollar DXY 0.00%  is on a strong trend, as the expectation of the Fed’s tightening is driving deleveraging of dollar-financed carry trades. On the other side of the strong dollar are a weak pound GBPUSD +0.01% , euro EURUSD -0.04%  and yen USDJPY +0.09% .
The decline of commodity currencies is the clearest trend. The Australian dollar AUDUSD -0.22% , Canadian dollar USDCAD +0.01%  and the currencies of several commodity-export-dependent emerging economies have declined sharply. The trend is likely to continue throughout the year.
Stocks will remain volatile on conflicting news regarding liquidity and growth. Fueled by asset inflation, the United States’ growth rate is picking up, and dollar liquidity is receding in anticipation of higher interest rates ahead.
The growth outlook for Europe and Japan remains fragile. Their quantitative easing is likely to remain intact through 2013. Most big companies are global in their sales and earnings. Hence, their stocks will fluctuate with mixed news on growth and liquidity.
A limited crisis in emerging markets is still possible. As hot money is leaving them, they are facing difficulties in adjusting to the tighter liquidity environment. The recent political disturbances in Brazil, Egypt and Turkey amplify the uncertainties.
Gold is likely to perform well in the second half of 2013. While the rising U.S. dollar keeps downward pressure on the price of gold, rising global uncertainties support its role as a safe haven. Further, gold pricing is shifting to the East from the West.
The Shanghai market is likely to overshadow London or New York within five years. Hence, the price of gold will increasingly track China’s monetary policy rather than that of the United States.

The dollar’s long shadow

A rising dollar is the most important trend in financial markets. Its importance is in the role of dollar liquidity in carry trades since 2008. Since 2008, the Fed has communicated its intentions clearly to the financial market. It decreased the risk to using the dollar to fund speculation.
Based on the surge in the forex reserves of emerging economies, it appears that trillions of dollars of hot money have flowed into emerging economies. A strong dollar is triggering a reversal. The full consequences are yet to be felt.
The U.S. economy is recovering. Without fiscal consolidation, it could be growing at 4% to 5% now. I believe asset inflation is driving the U.S. economy. Its current net household wealth has surged 45% to $70 trillion from the low of $48 trillion in 2009, and significantly above the pre-crisis peak of $63 trillion.
The Fed’s tightening is primarily to prevent a full-blown asset bubble. Its burst could bring another financial crisis.
As the global tide of hot money recedes, the chances are that the United States’ asset markets will be resilient. Much of the hot money will just vanish due to deleveraging. Some money will be reallocated to the U.S. market from others. Hence, the United States’ asset prices are better supported than others.
In the medium term, the U.S. dollar’s outlook hinges on the continuing rise of the U.S. stock market. It is a self-fulfilling expectation.
If most investors believe in the U.S. economy, the money will flow into the country’s stock market. Its rise creates enough wealth effect to sustain the economy. The strong economy justifies the optimism. The money keeps coming.
In the longer term, if the fundamentals improve sufficiently, the bubble element in the economy could be digested through flattening out asset prices while letting the economy grow. Energy and agriculture are bright spots for the U.S. economy.
They aren’t sufficient to carry the economy. The key to the U.S. dollar’s future, in my view, is in improving the quality of the U.S. labor force. Without major progress there, the dollar will collapse again.

Changing places

The United States’ virtuous cycle depends on lack of competition for money. The main alternative is China. Since China joined the World Trade Organization, global money flow has favored it. This was a major factor triggering the weak dollar between 2002 and 2012. After 2008, the flow to China at the expense of the United States accelerated.
When international money flows to an economy and is used to enhance its competitiveness, the optimism is validated, and the money inflow will receive its appropriate reward by sharing in the growth.
However, the money could be used to finance an asset bubble. It creates paper gains for the capital inflow in the short term. The optimism is validated too, which encourages more inflow. But, this is an unsustainable dynamic. When the bubble peaks, everyone realizes that the optimism is misplaced. Capital flight follows, and with it the bubble bursts.
China’s economy was mismanaged after 2008. Instead of learning from the bubble disaster of the United States and embarking on structural reforms to improve competitiveness, China merely used fiscal and monetary stimulus to amplify an existing bubble, creating a feeding frenzy of getting rich overnight. As the U.S. economy improves and attracts more money, China’s bubble bursts.
To reverse the situation, China must embark on structural reforms to improve competitiveness. It has a major advantage over the United States. With per capita income of $6,000, its growth potential is far greater. If the reforms can convince the market that China’s potential can be realized, the money will return.
The competition between China and the United States for money is a key global dynamic. The yo-yo dynamic between the two will dominate the global economy for decades. It amplifies the up-and-down cycle in either.
As the composition of growth is quite different between the two, other economies will float up or down depending on their relationships with either.

Commodity currencies

The yo-yo dynamic now is in favor of the United States. Hence, the economies that have benefited from China’s boom are suffering. Commodity exporters are the most exposed. Their currencies are adjusting to reflect the new reality.
The Australian dollar has declined nearly one-fifth from its peak. There is much more to come. The most vulnerable commodities to China’s down cycle are industrial minerals.
Since China joined the World Trade Organization, the price of iron ore rose nearly ten times. Australia has benefited enormously from the trend. It suffers most on the way down too. The Australian dollar’s adjustment is not half done, in my view.
I thought that oil would be resilient compared to industrial minerals because it cannot be recycled. It has performed even better than I expected.
China’s electricity production has slowed two-thirds. The price of oil should have halved. But Brent crude remains above $100 per barrel, down less than 20% from the last year’s peak. Its strength is probably due to Saudi Arabia managing supply and the turmoil in the Middle East.
The uniqueness of the energy story suggests that the currencies of energy exporters like Canada and Russia perform better than that of mineral exporters like Australia and Brazil.
Emerging economies as a whole are facing difficulties. They suffer declining export prices and hot money leaving. To stop a vicious spiral of currency depreciation and inflation, they have to tighten monetary policy in an economic downturn.
If they try to protect growth by easing monetary policy, the vicious spiral could lead to another emerging market crisis like in 1998.

Gold moves East

There is a negative correlation between the U.S. dollar and gold in recent history. In light of the strong dollar, huge amounts of short positions have been built up in gold and gold stocks. I suspect that the correlation won’t work in the second half, and such short trades will turn out badly.
At the beginning of the year, I expected that a strong U.S. dollar would pressure the price of gold in the first half. But it would perform better in the second half as the U.S. stock market slows, diverging less money away from gold.
A new factor strengthens the case for gold. The physical demand has been extraordinarily strong in response to the slide in the price of gold. This could be a turning point in gold history. The pricing of gold may move permanently to the East from the West.
China and India account for roughly two-thirds of global demand for gold. Other emerging economies account for most of the rest. But, the price of gold is fixed in London or New York and driven by U.S. monetary policy. This is obviously wrong. But inertia is a powerful force. Financial markets continue with what has worked in the past.
The tension between where gold is priced and where demand is located is manifesting itself in two ways: first, gold shops in Asia have no physical gold to meet demand; and second, the price of gold set in Shanghai is consistently higher than in London or New York.
Physical gold is likely to flow from the West to the East due to the pricing gap. It is only a matter of time before the warehouses of London and New York are emptied.
When the stock is all shifted to the East, the price fixed in Shanghai will become the real price. The gold exchanges in the West will wither.
China lost gold to the West from the mid-19th century onwards. Domestic uncertainties drove waves of immigration financed by gold. The trend has reversed over the past decade. And the trend is likely to accelerate in the coming decades.
India has the most gold in the world. The Fed has the most gold reserves among all central banks. China is likely to surpass both in the coming decade.
Gold is a substitute for money. Gold production is about 3,500 tons per year and is worth $154 billion or 951 billion yuan ($154.9 billion) USDCNY +0.01% . China’s M2 is likely to rise by 14 trillion yuan or 16 times the gold supply.
Within five years, China’s M2 could rise by 2 trillion yuan per month, while the supply of gold will remain the same. Gold should trade with China’s money supply, not with that of the United States.
In addition to China, India will remain the second largest source of demand. Even if its economy grows at 5% per year, proportionally, its gold demand will increase by 28% in five years.
As the Bank of Japan targets 2% inflation, the Japanese have become a force in gold demand too. Looking beyond the shadow of the strong U.S. dollar, gold has a very bright future. I believe that the price of gold will top $3,000 per ounce in five years.


What diverging monetary policies signal: Andy Xie - Caixin Online - MarketWatch


July 9, 2013

Analysis of the day:Rogoff: collapse of #gold has not changed investment case- policymakers: be cautious interpreting it as vote of confidence

collapse of has not changed investment case- policymakers: be cautious interpreting it as vote of confidence



Twitter / MasterMetals: collapse of #gold has not changed ...

The MasterMetals Blog

#Paulson #gold #fund plunges 65% through June

With roughly $300 million in assets, the gold fund is the smallest portfolio in his New York-based firm's lineup with less than 2 percent of its assets and it invests mostly Paulson's personal money
The fund's assets have fallen from roughly $700 million at the end of the first quarter

John Paulson's gold fund has lost 65% of its value so far this year after it declined 23% last month, says people familiar with the matter.



Paulson gold fund plunges 65% through June


Author: Svea Herbst-Bayliss & Katya Wachtel (Reuters)
Posted: Tuesday , 09 Jul 2013

BOSTON (Reuters) - 

Hedge fund manager John Paulson's gold fund has lost 65 percent of its worth so far this year after the portfolio declined 23 percent last month, two people familiar with the fund said on Monday.
Gold had been one of the billionaire investor's winning bets a few years ago, but not this year. His investments in gold and gold miners have suffered double digit losses for the past three months.
In June, gold tumbled 12 percent in the wake of fears the Federal Reserve might taper its economic stimulus by cutting monthly bond purchases. It is unclear how a 12 percent drop in the price of the precious metal translated into a 23 percent fall in the fund in June, and whether it is the result of the bet having been leveraged up through borrowing and the use of derivatives
A spokesman for Paulson declined to comment.
With roughly $300 million in assets, the gold fund is the smallest portfolio in his New York-based firm's lineup with less than 2 percent of its assets and it invests mostly Paulson's personal money, the people familiar with the fund said.
The fund's assets have fallen from roughly $700 million at the end of the first quarter, according to those people.
They did not want to be identified because the information is private.
The gold fund, which at one point managed almost $1 billion, rose 35 percent in 2010 and contributed to Paulson's estimated $5 billion payday that year.
As the heavy losses made for outsized headlines in recent months, Paulson decided a few weeks ago to report the gold data only to the gold fund investors, not investors in his bigger and better performing funds. In April, Paulson garnered unwanted attention when the gold fund lost 27 percent as the price of the metal plunged 17 per cent over two weeks.
"Paulson's impact on the gold market is dramatic. In particular his size alone, on the way in or way out," said John Brynjolfsson, managing director of global macro hedge fund Armored Wolf LLC. "But one needs to look beyond his size alone because his positions are relatively widely publicized, and representative of how others are thinking, so thereby their impact gets magnified."
The gold fund is one of a handful of funds that make up Paulson's New York-based hedge fund, which at its peak in 2011 managed about $38 billion. The firm now oversees about $19 billion in investor money.
Most of Paulson's bigger funds are in the black this year, but the gold investments have weighed down returns of the Advantage Funds, which lost 3.06 percent last month, shrinking the year's gains to 1.17 percent.
Paulson & Co's largest holding by market value at the end of the first quarter was the SPDR Gold ETF, with 21.8 million shares, according to a regulatory filing. The firm also had large stakes in gold mining companies through March, those filings showed.
Paulson launched his gold fund in 2010, requiring outside investors to commit $10 million each. He hired gold industry experts Victor Flores, HSBC's former senior gold mining analyst, and John Reade, a former senior metals strategist at UBS. The fund is now called the PFR Gold Fund, in a nod to their last names.
Paulson's investments in gold are one reason he rose to prominence on Wall Street.
After earning billions betting against the housing market before the financial crisis, Paulson made roughly $5 billion in 2010 thanks to prescient bets on the economic recovery and gold.
Paulson is not the only brand-name manager hit by the gold rout. David Einhorn's Greenlight Capital Management's offshore gold fund fell 11.8 percent in June, bringing year-to-date losses in the fund to 20 percent, Reuters has reported.


Paulson gold fund plunges 65% through June - GOLD NEWS - Mineweb.com Mineweb

The MasterMetals Blog

July 8, 2013

#Gold presents investors with a quandary

#Gold presents investors with a quandary


By Lucy Warwick-Ching

FT




©Bloomberg

Gold has lost some of its attraction as a haven for investors following a 25 per cent price drop since the start of the year, taking it to its lowest level in three years.

"Its fall has been a remarkable and painful drop for investors seeking financial protection," says Adrian Ash, head of research at BullionVault.com. "In the past 45 years we have only had three occasions when gold prices fell harder – in summer 1974, spring 1980 and early 1981."









www.ft.com/intl/cms/s/0/adda4ed8-e3f1-11e2-b35b-00144feabdc0.html#axzz2YRlNLiQ7

June 28, 2013

BofA: '#GOLD BEARS BEWARE'

"The downtrend remains for 1212/1200, but this decline is in its final stages. Bulls need a move above 1270 to indicate a base and turn.”

BofA: 'GOLD BEARS BEWARE'

Business Insider Australia

If you’ve been betting on gold this year, watching it fall day after day – including a few spectacular crashes, like the one we’ve seen over the past few trading sessions – has probably not been fun.

goldClick to enlarge.
As the daily candlestick chart at right shows, the shiny yellow metal hasn’t spent many days in the green.
Today, the price of an ounce of gold dropped below $1200 for the first time since August 2010, hitting a low of $1196.10 this afternoon before bouncing back to current levels just above $1200.
BofA Merrill Lynch technical strategist MacNeil Curry argues today in a note to clients that “further gold downside [is] limited.”
“While Gold has been on a relentless downtrend, the weekly ADX (a measure of trend strength, not direction – see chart 1 for additional info) says further weakness is limited. Indeed, previous ADX readings of 50 have resulted in reversals of between 35% and 36% of the flat price,” writes Curry. “GOLD BEARS BEWARE. For now, the downtrend remains for 1212/1200, but this decline is in its final stages. Bulls need a move above 1270 to indicate a base and turn.”
The chart below shows the ADX, or “Average Directional Index,” that Curry references.
Gold and ADX
The second chart shows the potential support levels flagged by Curry.
gold support 
 
BofA: 'GOLD BEARS BEWARE' | Business Insider Australia

The MasterMetals Blog

June 27, 2013

Who “murdered” the #gold price? Ian Gordon - Mineweb


The old highs of $1,900/oz will be surpassed by a long shot over the medium to long term.

Who “murdered” the gold price? Ian Gordon

INDEPENDENT VIEWPOINT

Ian Gordon, chairman and founder of the Longwave Group, speculates on what happened to the gold price on April 15, the biggest one-day loss ever for the yellow metal.
Author: Brian Sylvester
Posted: Thursday , 27 Jun 2013 
The Gold Report  - 
The gold price may have taken a tumble, but Ian Gordon, chairman and founder of the Longwave Group in British Columbia, is watching for a recovery. As bullishness in gold reaches some of its lowest levels, Gordon, in this interview with The Gold Report says he believes that is indicative of a turn.
The Gold ReportOn April 15, the gold price plunged about 9%—the biggest one-day loss ever for the yellow metal. Many gold investors got "murdered" that day. Has your personal investigation revealed any suspects? 
Ian Gordon: I suspect it was akin to what happened in 1999. The then-governor of the Bank of England, Edward George, supposedly said that "any further rise in the gold price would take down one or more trading houses." He said the rising price of gold was curtailed through the work of the Federal Reserve and the Bank of England. It appears that a bullion bank was caught offside on the short side and they had to take the price of gold down quite dramatically to allow it to cover. 
I think something similar happened in April. I think it was manipulated to the downside. Goldman, Sachs & Co. encouraged its clients to short sell gold two days before this occurred.
TGR: Could it have just been an error?
IG: I always suspect the worst. There's so much manipulation in all the markets as I see it.
TGR: That one-day drop caught even long-time gold investors off guard and shook their confidence. Is being a precious metals investor at this point simply about having the resolve to stay the course, or should even the ardent investors make adjustments to their gold portfolios? 
IG: I'm extremely bullish on gold. Bullishness in gold, according to the website Market Vane, is at 40%, the lowest it has been since 2001. Bullishness in the stock market is at 70%, which is almost the highest it has been since Market Vane began tracking it. I see a reversal occurring here, for the gold price to the upside and the stock market to the downside.
TGR: There's no way to sugar coat the disappointing performance of gold and silver in 2013. But has the current global economic backdrop provided some new and compelling reasons to own gold and precious metal equities? 
IG: There are compelling reasons to be bullish on gold particularly, simply because there is a real worldwide crisis in fiat money. The unfolding crisis is similar to the 1930s, when the whole monetary system collapsed. We're envisioning something quite similar to that collapse is now occurring. 
We can see that there's this huge move to gold, not only by countries like China and Russia and even the small "-stan" countries, but major investors are also taking up the physical metal because they can see this crisis unfolding.
TGR: Most of what I'm reading says that there just aren't a lot of bids in the market right now for precious metals. Investment demand has waned, with gold falling consistently lower since its high in 2011.
IG: Investment demand is huge. The output of American Eagle gold bullion coins by the U.S. Mint is at record highs. Demand by the small investors for gold and silver is at unprecedented levels. The amount of gold that's being imported through Hong Kong into China is at a record level. 
TGR: Yet, at the same time, India, which is the world's biggest gold consumer, increased the royalty from 6% to 8% on gold imports.
IG: It has, but India is notorious for gold smuggling. Most people are going to look for a way to go around those taxes. I suspect that there will be the same amount of gold imported into India through Dubai, but most of it won't be declared.
TGR: You say you're seeing strong demand for the physical metal, but investors have been getting out of exchange-traded funds (ETFs) and equities in mass numbers.
IG: With regards to the gold ETFs, I suspect that many investors are cashing in their paper claims to take possession of the physical. Yes, gold stocks, particularly the juniors, have been slaughtered, but once bullishness returns to gold, bullishness will return to gold equities. When you get this overly bearishness in markets, it's usually indicative of a turn. I'm confident that we're going to see a turn to the upside. I also believe that the turn in the stock market to the downside is about to begin.
TGR: I get the sense that there's a prevailing sentiment that we haven't hit a bottom yet in the mining equity space and that there's another leg down before we see a move to the upside. Do you see that as well?
IG: That is always a possibility and it can't be ruled out, but the precious metals' fundamentals are as compelling today as they have ever been.
TGR: Could it be seasonality due to the summer? 
IG: I don't think so and anyway I am a long-term investor and I am essentially not concerned by short-term price machinations. As I have said, the most compelling reason to own gold is the crippling debt crisis, which has brought about the probability of a catastrophic end to fiat currencies. 
TGR: Sean Boyd recently told Bloomberg that gold could reach about $1,800/ounce ($1,800/oz) within a year. What's your medium-term outlook for gold and silver? 
IG: The market is going to have to go through a consolidation that could last for weeks. However, I'm much more bullish on gold than I am on silver because gold has traditionally been recognized as money sine qua non. Industrial demand is going to drop quite precipitously as the world goes into the depression stage of the cycle. Nevertheless, it is likely that silver will take on the role of poor man's gold.
My belief is we're going to see a decoupling between the paper markets and the physical markets. The demand for physical is going to grow dramatically. It's going to make the paper markets irrelevant.
I'm not sure if it's going to be a year as Sean says, but it's going to be extremely strong and the move will be very dramatic once it starts. The old highs of $1,900/oz will be surpassed by a long shot over the medium to long term.
TGR: Do you think silver will fall below the $20/oz level in the next six months to a year?
IG: We're as oversold as we were in 2008, although the price isn't as low as it was then. I see a consolidation in the price, but I don't forecast much lower prices occurring in either of the precious metals. Once this consolidation is over, I see a resumption of the bull market.
TGR: Is there any good news among the juniors? 
IG: In the junior sphere, you can buy some companies for nearly $10/oz of gold in the ground.
TGR: How do you determine cheap? 
IG: Relative to where it was formerly priced and the value I place on the company's assets. I started to buy gold and silver stocks in 2000 because they were cheap and no one wanted them. We are in the same position in the market today. We know the bullish consensus numbers for gold are at the same levels that they were in 2001. You can buy these things really cheap. 
The only reason anybody wouldn't be buying them is because they don't believe that the price of gold is going to rise. I believe that the price is going to rise substantially because the chaos in the financial markets is going to be horrendous.
TGR: Thanks, Ian.
A globally renowned economic forecaster, author and speaker, Ian Gordon is founder and chairman of the Longwave Group, which comprises two companies—Longwave Analytics and Longwave Strategies. The former specializes in Gordon's ongoing study and analysis of the Longwave Principle originally expounded by Nikolai Kondratiev. With Longwave Strategies, Gordon assists select precious metal companies in financings. Educated in England, Gordon graduated from the Royal Military Academy, Sandhurst. After a few years serving as a platoon commander in a Scottish regiment, he moved to Canada in 1967 and entered the University of Manitoba's History Department. Taking that step has had a profound impact because, during this period, he began to study the historical trends that ultimately provided the foundation for his Longwave theory. Gordon has been publishing his Longwave Analyst website since 1998. Eric Sprott, chairman, CEO and portfolio manager at Sprott Asset Management, describes Gordon as "a rare breed in the investment-adviser arena." He notes that Gordon's forecasts "have taken on a life force of their own and if you care to listen, Gordon will tell you how it will all end." 
This article is an edited version of the original and is republished here courtesy of The Gold Report 


Who “murdered” the gold price? Ian Gordon - INDEPENDENT VIEWPOINT - Mineweb.com Mineweb


June 26, 2013

Registered #Gold at the #Comex LT Chart on Jesse's Café Américain



Does this mean JPM has been accumulating all the ounces that have been sold out by the GLD ETF held by HSBC?


Jesse's Café Américain: Registered Gold at the Comex Long Term Chart: Someone asked me about this, and while I do not keep a history of it, I found a decent historical chart of the registered gold inventory a...
For your reference the number of registered ounces in the COMEX warehouses yesterday (June 24, 2013) was approximately 1,360,000.



June 18, 2013

#Gartman: #Gold Is A Broken Commodity


"People forget that the high in gold is now almost two years behind us,” says Gartman. “We’ve broken all trend lines. We’ve broken all support. Gold, in dollar terms, is a broken commodity.”

#Gartman: #Gold Is A Broken Commodity
Dennis Gartman, Founder and Publisher of the Gartman Letter, has some thoughts on gold and gold bulls.
Dennis Gartman, Founder and Publisher of the Gartman Letter, thinks gold is going down.
“People forget that the high in gold is now almost two years behind us,” says Gartman. “We’ve broken all trend lines. We’ve broken all support. Gold, in dollar terms, is a broken commodity.”
To those cheering on the yellow metal, Gartman has bad news. “It’s probably going to head lower, not higher, despite all of the news that the monetary authorities are expanding the supply of reserves to the system,” he says. “Every gold bull knows that. Every gold bug reiterates that. Every gold bug continues to buy gold. And, they continue to lose a lot of money.”
Gartman has particular levels he’s watching. “The first signs of support may well be $1,200. If it starts to break under $1,200, I’m sorry but there’s not much support until you do get to $1,000,” he says. “The trend seems to be downward and those who are buyers find themselves in a very uncomfortable position.”
“Like an aging athlete, [gold] just keeps faltering. It cannot just quite get across the line to catch that pass any longer than it used to be able to do very readily,” says Gartman. “Even with all of the news that is supposedly as bullish of gold as you can get – a weakening dollar at times, continued monetary expansion by every central bank in the world – gold can’t rally.”
What’s a gold bull to do? Gartman has an idea.
“The oldest rule in commodity trading is, when something can’t rally when the news is bullish, it’s a bear market.”
-----
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Gartman: Gold Is A Broken Commodity | Talking Numbers - Yahoo! Finance

The MasterMetals Blog

June 7, 2013

Daily #chart: #Commodities Prices since 1950

The price of commodities "in the ground" have boomed while resources that can be grown have trended downwards

Daily chart

Vital ingredients


IN HIS 1968 book “The Population Bomb”, Paul Ehrlich, a biologist, argued that rising populations would inevitably exhaust natural resources, sending prices soaring and condemning people to hunger. In a new paper David Jacks, an economist at Simon Fraser University, assembles figures on inflation-adjusted prices for 30 commodities over 160 years. It turns out Mr Ehrlich was not entirely off the mark. Over the very long run commodity prices display a marked upward trend, having risen by 192% since 1950, and by 252% since 1900. But that upward trend has clearly not translated into global famine, and not all commodities are alike. Long-run rises have been most pronounced for commodities that are “in the ground”, like minerals and natural gas. Energy commodities especially have boomed, soaring by roughly 300% since 1950. In contrast, prices for resources that can be grown have fallen. The inflation-adjusted prices of rice, corn and wheat are lower now than they were in 1950. Although the global population is 2.8 times above its 1950 level, world grain production is 3.6 times higher. See full article.



Daily chart: Vital ingredients | The Economist


May 31, 2013

Peter #Degraaf The Long Wait is almost over for #Gold

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The Long Wait (nearly 21 months) is Almost Over

May 29, 2013

DOUG #KASS: The Case to Buy #Gold

   • There is a time, place and price for every asset class.



   • Gold gets dug out    of the ground in Africa, or someplace. Then we melt it down, dig another hole,    bury it again and pay people to stand around guarding it. It has no utility.    Anyone watching from Mars would be scratching their head.

   • The problem with    commodities is that you are betting on what someone else would pay for them in    six months. The commodity itself isn't going to do anything for you.... [I]t    is an entirely different game to buy a lump of something and hope that    somebody else pays you more for that lump two years from now than it is to buy    something that you expect to produce income for you over    time.

   • Gold is a way of    going long on fear, and it has been a pretty good way of going long on fear    from time to time. But you really have to hope people become more afraid in a    year or two years than they are now. And if they become more afraid, you make    money; if they become less afraid, you lose money -- but the gold itself    doesn't produce anything.

   • I will say this    about gold. If you took all the gold in the world, it would roughly make a    cube 67 feet on a side.... Now for that same cube of gold, it would be worth    at today's market prices about $7 trillion dollars -- that's probably about a    third of the value of all the stocks in the United States.... For $7 trillion    dollars ... you could have all the farmland in the United States, you could    have about seven ExxonMobils, and you could have a trillion dollars of    walking-around money.... And if you offered me the choice of looking at some    67-foot cube of gold and looking at it all day, and, you know me, touching it    and fondling it occasionally.... Call me crazy, but I'll take the farmland and    the ExxonMobils.

   • The major asset in    this category is gold, currently a huge favorite of investors who fear almost    all other assets, especially paper money (of whose value, as noted, they are    right to be fearful). Gold, however, has two significant shortcomings, being    neither of much use nor procreative. True, gold has some industrial and    decorative utility, but the demand for these purposes is both limited and    incapable of soaking up new production. Meanwhile, if you own one ounce of    gold for an eternity, you will still own one ounce at its    end.

   • What motivates most    gold purchasers is their belief that the ranks of the fearful will grow.    During the past decade, that belief has proved correct. Beyond that, the    rising price has on its own generated additional buying enthusiasm, attracting    purchasers who see the rise as validating an investment thesis. As "bandwagon"    investors join any party, they create their own truth -- for a    while.

   • I have no views as    to where it will be, but the one thing I can tell you is it won't do anything    between now and then except look at you. Whereas, you know, Coca-Cola will be    making money, and I think Wells Fargo will be making a lot of money and there    will be a lot -- and it's a lot -- it's a lot better to have a goose that    keeps laying eggs than a goose that just sits there and eats insurance and    storage and a few things like that.

 

-- All  of the above quotes are from Warren Buffett

In many  ways, I have shared Warren Buffett's skepticism on gold, as expressed in his  seven quotes above.

Also,  in support of Warren's ursine view of the precious metal, is Oaktree Capital  Management's Howard Marks, who has written that gold is a lot  like religion. In religion, you either believe in God or you don't. In the gold  market, you either believe in gold or you don't. 

In the  past, I have agreedon the subject of gold with both The Oracle of Omaha  and The Oracle of Oaktree. In fact, I recently debatedwith Peter Schiff about gold, providing the bear case  for the asset class (albeit, at much higher prices).

In  essence, the gold market is a state of mind -- the subject of gold is an  emotional one. It neither represents a corporate franchise that increases over  time as profits are earned and retained such as, say, Procter & Gamble ( PG), with a protected  moat -- nor is it a productive asset. As such it is hard to ascertain what the  intrinsic value of the commodity is.

On the  latter point, gold doesn't produce profits or cash flow and, as such, fails to  provide a stream of income. Its future price is simply dependent upon someone  willing to pay more for the asset class compared to its  price today.

While  it might take time for the price of gold to build a real bottom, there is a  time, place and price for every asset class.

Why  Now?

This  morning, I paid $133.30 for SPDR Gold Trust ( GLD) in premarket  trading.

Below I  will discuss my reasons for building a position in gold over the next few weeks  and months.

Expectations  for the price of gold are now low and diminished . Gold  experienced a speculative blow-off top 18 months ago as the European debt crisis  peaked, the threat of a U.S. default ceiling rose and coincident with the debt  rating of U.S. being lowered.

A most  unpopular asset class provides a contrarian's appeal . Weak  price action since September 2011 has created an improved reward vs. risk. Hereis  the price of gold since 1833. And below is a chart that follows the price of  gold since 1970.

As you  can see, the price of gold is more than $500 an ounce below the fall 2011  peak.

Last  month's gold selloff looks like a selling price and volume  climax . That  first day of the mid-April collapse was a near 5 standard deviation move lower  (or every 4,700 years) on huge notional volume of $20 billion. On the following  Monday, gold took an even greater beating. Over the two-day period, there was a  8 standard deviation event, which occurs statistically about every billion  years.

Negative  sentiment extreme . The  sharp price drop in gold has brought on a growing short  position.

With it  lies the seeds for a potential short squeeze or perhaps some latent demand from  short sellers.

The  growing consensus view of an acceleration in the rate of global economic growth  may be too optimistic . As  such, not only might the recent rise in real interest rates be nearly over (as  it holds the seeds for detracting from growth) but it raises the prospects for  more QE, lasting much longer than many market participants  expect.

The  U.S. dollar's recent strength might peter out . A higher U.S. dollar  is typically seen as a gold negative. But the recent strength, reflecting a  growing consensus of Fed tapering, might be  short circuited if global growth moderates.

More  currency debasing lies ahead . The  currencies of all the major countries, including ours, are under severe pressure  because of massive government deficits. The more money that is pumped into these  economies (the printing of money, basically), the less valuable the  currencies become and more valuable gold is.

Inflation  is gold's friend . The  world's debt load cannot be paid back in constant dollars. Reflating (and  inflation) seem inevitable (though inflation may lie out into the distant  future) and is the natural outgrowth of monetary policy.

Tail  risks remain . I  don't subscribe to the notion that all economic tail risks have been eliminated  nor that the shoulders of growth will be borne by monetary policy. Rather I view  an upcoming "aha moment," in which it becomes recognized that easing is losing  its impact as the Fed is pushing on a string. Again, QE might be with us for a  lot longer than many anticipate.

Demand  for physical gold is rising . It is  interesting to note that when the price of gold had its two-day crash in  mid-April, the price for physical delivery (gold coins, etc.) held better (the  premium increased) than future prices. (View about 33 minutes, 50 seconds into this  presentationby Grant Williams.)

Previously  bullish brokerages have given up on gold . Credit Suisse , JPMorgan and Goldman  Sachs have recently slashed their gold price projections. I view  this surrender as consistent with a possible contrarian  signal.

Summary

Recognizing  that the intrinsic value of gold is difficult to evaluate, now seems a  propitious time to consider diversifying some portion of one's portfolio into  gold.

There  is probably no better time to consider diversifying one's portfolio into a  depressed asset class (e.g., gold) than when the crowd is optimistic about a  vigorous and self-sustaining global economic recovery and when the world's stock  markets are at record high prices.

Gold,  which had a speculative blow-off to the upside back in 2011 (18 months ago), now  appears to have had a selling climax last month.

Investor  sentiment toward gold probably can't get much worse, and the growing optimism  regarding the trajectory of global economic recovery may not get much better in  the weeks and months ahead.

Position: Long  GLD

 

Douglas  A. Kass

Seabreeze Partners Management Inc.

 

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