Long Gold - page 2
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Was reading that Deutsche Bank's Macro Strategy Group recommended emerging-market assets, high-yield bonds and gold as likely to benefit from a "global sweet spot" of economic recovery and central-bank liquidity, which it called "the perfect mix for a range of risky assets." The group sees gold going to $1,100 an ounce.
Gold continues to rally, hitting a spot record high of $1,043.80, probably less as a hedge against inflation and more as a store of a wealth and protection from the weakening dollar. Gold probably will have trouble breaking $1,050, but once it does, we should see it going to $1,100.
Jim Rodgers says gold may go to $2,000 an ounce in the next decade. Assuming it will take 10 year for this to happen and using $1,000 as the current base price – that would generate a compound return of about 7% annually. Bill Gross is estimating that stocks will generate 5% over the long run. An allocation to gold is a good investment at this time
Dollar strength and the recent rally in gold may be causing some investors to sell gold, but with the ease at which it is going through these psychological round barriers, I’m still buying on every dip. Hedge funds increased their net long positions in the week ended Oct 6 according to USCFTC data.
Gold hit a record high of $1,068.40 an ounce in early trading, settling at $1,064.20, up $7.50. Hedge against inflation, hedge against volatility, hedge against weak dollar, momentum trading, best store of value, ETF fund accumulation – whatever the reasons the media wants to put on it – I’m continuing to buy gold. Now Taiwan is jumping on the train, announcing that it may consider buying gold, according to central bank Governor Perng Fai-nan
in fact generally the usd and commodities have negative correlations
News reports show that pension funds will begin to purchase gold as financial insurance, which will lead to further price increases. Already the Teacher Retirement System of Texas has announced that they will be purchasers.
Good article:
Gold at $2,000 Becomes Inflation-Adjusted Bullseye for ‘80 High
Oct. 19 (Bloomberg) -- Gold’s rally to a record means prices are still 53 percent below the 1980 inflation-adjusted peak.
While gold rose 19 percent this year to $1,072 an ounce on Oct. 14, consumer prices almost tripled in the past three decades, eroding the metal’s value. Bullion hasn’t kept pace with the cost of bread, fuel or medical care. In 1980, gold hit a then-record $873 an ounce. In today’s dollars, that would be $2,287, according to the U.S. Labor Department’s inflation calculat
Record government debt and interest rates close to zero percent are pushing gold higher for a ninth straight year, and options show investors expect the rally to continue. When prices reached all-time highs, the contract with the most open interest was the December call to buy the metal at $1,200. The contract to purchase at $1,500 an ounce was the third biggest.
“Gold is not at any peak,” said Martin Murenbeeld, the chief economist at Toronto-based DundeeWealth Inc., which manages $58.5 billion in mutual funds and brokerage accounts. “The world’s money supply has increased and gold hasn’t kept pace,” he said. “We’re now in a period where gold is catch
The U.S. Dollar Index, which measures the currency against those of six major trading partners, fell on Oct. 15 to the lowest level in 14 months, and has dropped about 7 percent this year. President Barack Obama has increased the nation’s marketable debt 22 percent to $7.01 trillion to revive growth.
Preserving Value
Gold bulls say today’s record borrowing and low interest rates mean the government will have to accept faster inflation as the economy recovers. Investors buy bullion to preserve value during times of turmoil and economic stress.
Financial institutions worldwide have reported credit losses and writedowns of about $1.62 trillion since the start of 2007, when the credit crisis began. Group of 20 governments have pledged about $11.9 trillion to ease credit and revive economic growth, according to the International Monetary Fund.
“Gold is the hedge against currency devaluation,” John Brynjolfsson, of hedge fund Armored Wolf LLC, said in a Bloomberg Television interview from Aliso Viejo, California, on Oct. 7. He predicted bullion will top $2,000
Banks have raised their gold estimates. On Oct. 9, JPMorgan Chase & Co. said the metal will average $1,006 an ounce next year, compared with an earlier projection of $950. Deutsche Bank AG forecast an average of $1,150, up 32 percent from its estimate in July. Barclays Capital said Oct. 12 that “prospects for a run at $1,500 should not be underestimated” next year
Understated CPI
Gold would need to rise more than sixfold to top the 1980 record, using a more accurate inflation-adjustment, said John Williams, an economist and the editor of Berkeley, California- based Shadowstats.com. He said the government has understated the cost of living over the past two decades with adjustments in the way it measures the basket of goods and services monitored by the U.S. consumer price index, or CPI.
Gold futures for December delivery closed Oct. 16 at $1,051.50 an ounce on the New York Mercantile Exchange’s Comex division, gaining for a third straight week.
“If the methodologies of measuring inflation in 1980 had been kept intact, gold would have to hit $7,150 to be the equivalent of the 1980 record,” Williams said
The cost of living in the U.S. rose 0.2 percent last month, the Labor Department said on Oct. 16. Compared with a year earlier, consumer prices fell 1.3 percent. The CPI will drop 0.5 percent this year, before rising 1.9 percent in 2010, reflected by the median estimates of 61 economists in a Bloomberg survey. Annual increases averaged 2.8 percent a year in the past decade.
Purchasing-Power Adjustment
In March 1980, inflation surged to a 14.8 percent annual rate, two months after gold capped a four-year rally. Adjusted for the decline in the dollar’s purchasing power since then, gold’s Oct. 14 record of $1,072 represents the equivalent of $409 in 1980 dollars, the Labor Department calculator shows
Since January 1980, the average price of a pound of white bread has risen almost threefold, from about 50 cents to $1.38 in August, and medical care has surged more than fivefold, Labor Department figures show. Gasoline and electricity prices have more than doubled.
Today, the gap between gold’s spot price and its CPI- adjusted equivalent is the widest ever.
Gold hasn’t been as effective a hedge against inflation as oil since the 1980s, said Matt Zeman, of LaSalle Futures Group LLC in Chicago.
Oil Beats Gold
Crude passed its 1981 inflation-adjusted record two years ago. The cost of imported oil averaged $39 a barrel in February 1981, after Iran cut exports, according to the Energy Department. That’s $89 in 2007 dollars, the Labor Department calculator shows. Oil reached a record $147.27 on July 11, 2008, and closed at $78.53 on Oct. 16 in New York trading.
“If you bought gold in the 1980s, you’re still losing money today,” said Zeman, a metals trader. Gold prices in New York languished for two decades after declining from the 1980 record, dropping to a 20-year low of $253.20 on July 20, 199
While bulls say gold is cheap, the inflation-adjusted price is 15 percent above its 30-year average, Bloomberg data show.
The Federal Reserve may limit gains by raising interest rates before inflation balloons, analysts said. Fed Chairman Ben S. Bernanke said on Oct. 8 that policy makers will need to raise interest rates “at some point” to control inflation
‘Prepared to Tighten
“When the economic outlook has improved sufficiently, we will be prepared to tighten,” Bernanke said in remarks prepared for an Oct. 8 conference in Washington
Fed moves to cool inflation and the government’s revenue needs will stop gold, according to Jon Nadler, a senior analyst for Montreal metals dealer and refiner Kitco Inc.
“These wild calls for several-thousand-dollar gold are typical of times when gold goes into uncharted territory,” Nadler said. “The Fed will pull the interest-rate trigger and the Obama administration will, in addition, pull the tax-hike trigger before we get into any serious inflation. Once the man on the street gets in, the gold rally is likely ove
Gold held in exchange-traded funds climbed to records this month at Zuercher Kantonalbank and ETF Securities Ltd. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, are up 42 percent this year. Hedge funds and other large speculators hold their most-bullish position ever in gold futures. So-called net-long positions, or bets prices will rise, increased by 6 percent to 253,955 contracts in the week ended Oct. 13, according to the Commodity Futures Trading Commission.
Gold Producers
The Philadelphia Stock Exchange Gold & Silver Index jumped 43 percent this year, as Phoenix-based Freeport-McMoRan Copper & Gold Inc. tripled. Toronto-based Barrick Gold Corp., the world’s largest producer, fell 10 percent. Barrick said Sept. 8 it will record $5.6 billion in third-quarter costs to eliminate fixed- price contracts as the company bets gold’s value will climb
At Jersey, Channel Islands-based GoldMoney.com, which held $759 million of gold and silver for investors as of Sept. 30, founder James Turk said bullion can climb eightfold based on the historical relationship between the metal and the Dow Jones Industrial Average. The Dow is up 10-fold since January 1980.
Gold and the Dow, which has gained 14 percent this year to 9,995.91, were at about the same level during the Great Depression and the early 1980s, he said. On Jan. 21, 1980, as gold futures surged to $873, the Dow slipped to 946.25.
“The dollar is constantly being debased and inflated,” Turk said. “By 2013, gold is going to be at $8,000 and the Dow will be at 8,00
Gold-Dollar Link
Deutsche Bank said early this month that the dollar will fall to $1.60 per euro next year, a drop of 7.3 percent from last week, because of “rising fiscal deficits and loose monetary policy.
Gold has moved in the opposite direction of the dollar over most of the past decade. The metal’s correlation coefficient to the U.S. Dollar Index is minus 0.8539, Bloomberg data show. A correlation of minus 1 indicates two assets move inversely to each other, while a 1 would show they move in tandem. A reading of zero shows no correlation.
Philip Gotthelf, the president of Equidex Brokerage Group Inc. in Closter, New Jersey, says he expects gold to trade at $1,250 by year-end.
“Gold has been pushing higher because it’s no longer just a hedge against commodity inflation, it’s also a hedge against a change in world-monetary standard
There’s anxiety that gold can maintain a price above the $1,000 level and the number of buyers out there right now is diminished according to metals traders. I think investors are worried about a rally in the dollar, especially after the strength shown by the dollar the last few days. Gold continues to fall, heading for the longest decline since August, which provides a nice re-entry point after having reached 1064.
Seeing strong correlation between the dollar and gold right now as the dollar continues to rally for the fifth straight day and gold continues to decline. At this point it appears that buyers expect more selling and are waiting on the sidelines until this correction exhausts itself. Institutional investors decreased their long exposure the week of Oct 20 by 2% and we will probably see additional declines this week.