Gold Prices Going Up Regardless of Jackson Hole Outcome

Investors want to know if this week's Jackson Hole, WY meeting of central bankers will result in further stimulus measures and a rally in gold prices – but they don't have to wait to know gold is headed higher in 2012.

Gold fought back from its Tuesday morning low of $1,659.10 an ounce after a read on consumer confidence showed sentiment dropped in August to its lowest level in nine months. Americans have become increasingly worried about their employment scenarios and the overall outlook on the sluggish U.S. economy.

"Bad news is good news for gold again," Charles Nedoss of Kingsview Financial told CNBC.

Gold for December deliverylost $5.90, or 0.4%, to end at $1,669.70 an ounce on the Comex division of the New York Mercantile Exchange – but the slip won't last.

"Before you know it, gold is going to push for the next level, somewhere above $1,700 an ounce," Michael K. Smith, president of T & K Futures in Florida, told MarketWatch.

Gold glistened last week on news of possible additional monetary intervention from the U.S. Federal Reserve.

Following the release of the Federal Reserve's minutes last Wednesday, gold prices climbed to a 16-week high on hopes the central bank may engage in a fresh round of monetary stimulus to give life to the besieged U.S. economy.

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to the Federal Open Market Committee (FOMC) meeting minutes from July 31 – Aug 1.

Gold futures for December delivery hit $1,655.90 an ounce Wednesday after the 2 p.m. announcement, marking a then four-month high.

Gold prices continued the rally Thursday, gaining some $32.70 as the metal relished in renewed safe-haven buying. The precious metal was buoyed by an uninspiring manufacturing report from China revealing production fell to a nine-month low in August. The data suggested more action may be needed to boost the Asian nation's lackluster economy.

Now analysts see even more upside potential as the gold-price trend slopes upward. Deutsche Bank AG (NYSE: DB) expects U.S. and Chinese policy measures to support gold's growth over the next quarter or so.

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Ignore the Doom-and-Gloom Crowd When They Talk About $40 Oil

I just returned from a week down South with a few of my energy clients. It's good to get my hands dirty and remind myself firsthand what is going on at the project level of some of the country's top energy companies.

But when I returned home this weekend, I made the mistake of flicking on the television and opening the newspaper.
I can't believe that the pundits are now predicting that oil will fall to $40 a barrel. They also are projecting that the entire natural gas sector is going to collapse.

Here we go again.

Yes, we are wrestling with an energy sector that remains gun shy on elements from market volatility to geopolitical tensions.
And sure, $40 a barrel is possible, but only in an improbable situation where global demand for oil completely collapses, along with the world economy.

But we are in a new reality. And such doom and gloom predictions are highly oversimplified and potentially dangerous to you as an investor.

Here's why.

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Oil Prices Promise to Head Higher As Mexican Production Dwindles

In addition to Iranian threats and growing demand, dwindling production of crude in Mexico promises to push oil prices higher as well.

Mexico is the third biggest exporter of oil to the United States. That's bad news for the U.S. economy which always gets hit when oil prices rise.

From 2004 to 2008, the U.S. Department of Energy reports such jolts, along with OPEC price manipulation, cost roughly $1.9 trillion. Plus, a recession followed each major blow.

According to the U.S. Energy Information Administration (EIA), Mexican oil production reached a peak of 3.2 million barrels a day in 2008. And by 2011, it wasn't even producing 3 million barrels a day.

Since then oil production has slipped to 2.5 million barrels a day.

Worse still, Mexico could actually become a net importer of oil within a decade if it cannot find fresh discoveries to make up for the 25% production drop since 2004 and fails to change its current policies.

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Oil Prices are Higher, But It Won't Be Much Help for Alternative Energy

Normally, when gas and oil prices accelerate on both sides of the Atlantic, alternative energy sources come into focus and become a big part of that "energy independence" discussion.

Well, not this time.

During the run up to mid-$4 gas and $147 a barrel oil in 2008, many assumed these costs would continue to advance. That made alternative sources – especially renewables such as solar, wind, biofuels, and geothermal – more attractive to investors, politicians, and energy enthusiasts.

Alternative sources are more expensive than conventional oil, gas, or coal. They are, however, more environmentally friendly. Paying those higher costs was regarded as a tradeoff for cleaner energy sources and a reduction in emissions.

Today, that view has changed.

U.S. Oil and Gas Squeezes Alternative Energy Prospects

It's part of the reason why I've recently avoided alternative energy companies like First Solar (Nasdaq: FSLR), Canadian Solar (Nasdaq: CSIQ) or SunPower Corporation (Nasdaq: SPWR) in my Energy Advantage portfolio.

The economic downturn has made reliance on more expensive energy sources a difficult proposition to accept. Renewables are hardly a convincing argument anymore, especially during a sluggish economic recovery.

Yes, increasing oil and gas prices should reduce the spread between conventional and renewable, thereby providing stronger arguments for change. And proponents argue that alternatives provide an enhanced advantage given that they can also be domestically produced.

Just don't bet on these arguments holding up this time. Here's why.

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Why a Strategic Petroleum Reserve Release Won't Help Oil Prices or President Obama

With oil prices showing no signs of retreat during the final months of the U.S. presidential campaign, beltway insiders are turning to one misguided solution to combat rising oil prices.

Releasing oil from the Strategic Petroleum Reserve (SPR).

Trial balloons floated all over Washington during the past few days. The only reason politicians didn't move on this sooner (say a few months ago) was the price level.

Until the last month or so, both oil and gasoline prices were heading in the other direction. Near-month futures contracts for West Texas Intermediate (WTI), the crude oil benchmark traded on the NYMEX, were below $78 a barrel in intraday trade toward the end of June, while the same futures for RBOB (the NYMEX traded gasoline contract) were at $2.55 a gallon.

At the time, all the sage pundits predicted that oil would fall below $60 a barrel; some even suggested that prices could approach $40. On the gasoline side, these same wise guys were proclaiming we may see prices at the pump breach $3.

Everything has changed quickly.

Yesterday morning the markets opened with WTI 23% higher than late June and RBOB up by more than 20%. Oil stands at more than $96 a barrel in New York, while Brent has exceeded $116 a barrel in London. And retail gas prices are once again approaching $4 a gallon.

Recently, I discussed why oil prices are moving up. But for some politicians, including the fellow running for reelection at 1600 Pennsylvania Avenue, those prices are becoming a job liability.

So it's back to hitting the SPR.

But there are four reasons why tapping the SPR won't make oil prices any cheaper in the end.

Maybe you should let your Congressman know about them…

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Invest in Gold Mining Stocks While They're Still a Bargain

With gold prices high and likely to go higher, this might be the best time to invest in gold mining stocks.

Gold prices eked out a small gain Friday to close at $1,616.30 an ounce.

Comments from German Chancellor Angela Merkel Thursday supporting European Central Bank President Mario Draghi's crisis strategy to do "whatever it takes" to save the euro helped push gold prices higher.

More disappointing U.S. economic news in manufacturing and housing starts could also boost the yellow metal. The more the U.S. economy struggles, the more likely the U.S. Federal Reserve will launch another stimulus program that would favor higher gold prices.

For some investors, this adds to their dilemma of whether to invest in physical gold or gold equities.

History is on the side of physical gold. Citigroup Inc. (NYSE: C) has found that in the last five years, physical gold has outperformed global gold stocks by 120%.

But because gold stocks – and gold mining stocks in particular – have lagged gold prices, they have a lot of upside potential.

What's more, gold mining stocks offer something in return – dividends – in addition to benefiting from a continued rise in gold prices. Many commodities experts think gold prices could reach $2,000 an ounce or more within the next six months.

While not quite in bull mode, gold mining stocks have begun to stir of late. Here are three gold mining stocks worth a look for gold equity investors.

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Why Investors Are Hoarding Silver

With the U.S. Federal Reserve failing to take monetary action a few weeks ago, silver prices saw an opportunity to deflate, but instead have held steady around $27 an ounce.

Investors' silver holdings are approaching record highs as speculators exit the precious metal and exchange-traded products with silver add to positions. In the last three months, these products' holdings have grown to a $16.2 billion value, reported Bloomberg News.

But they're poised to get even higher.

Analysts have forecast that silver will average $33.02 an ounce in the fourth quarter-an 18% rise from current prices.

Since last week silver has been increasing and closed up 0.35% to $28.00 on Friday.

So why are investors bullish on silver? There are a few reasons.

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Gold Prices Rise as All Signs Point to More Stimulus

Gold prices were on the rise again today (Wednesday) as the market digests the recent spate of global economic data that could warrant more stimulus measures – and send metals prices soaring.

China reported last Friday that its July consumer price index (CPI) rose to 1.8% from the previous year, representing its lowest jump since January 2010. Industrial production declined to 9.2% from June's 9.5% thanks to slowing growth in heavy industrial production. Retail sales fell to 13.1% from June's 13.7%.

There's more: July exports increased 1% from the previous year, while imports rose 4.7%, exemplifying a weak external demand, but also a slowdown in Chinese investment.

As if this wasn't enough news to fuel a little action in the gold markets, Japan continued the trend on Monday with news that its economic growth in the second quarter had slowed down more than anticipated.

Also triggering stimulus speculation was news out of Europe that the Eurozone's economies contracted in the second quarter. The European Union's statistics office said yesterday (Tuesday) that six countries were in recessions.

"It looks like the gold market will continue to be held up by the sentiment of expected central-bank stimulation," Marex Spectron Group said in a report Tuesday. "The downside risk is limited."

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The Dumb Money Hates Silver, it’s Time to Go Long

Speculators hate silver…

For the past year, the positive silver headlines have been few and far between.

Ever since the poor man's gold peaked near $50 in April of last year, it's become a despised metal.

Admittedly, it's been languishing near $27 since early May not far from where it was for the first time – in this bull market – back in late 2010.

But as I'll show you, right now a number of technical, seasonal, and sentiment indicators are pointing upwards for this volatile metal.

This could well be the critical turning point silver investors have been waiting for. One of these indicators is the resilient price of gold.

Let me explain.

The Silver/Gold Ratio

Silver has always pretty much been gold's lapdog and on a relatively short leash at that.

As a rule, silver prices usually follow the direction of gold. But as long time silver investors recognize, the moves are amplified both on the downside and the upside. Silver prices are simply more volatile than gold prices.

As for gold, since it peaked about a year ago, it seems to be drifting aimlessly in zombie land. For the better part of the year it's been consolidating about 16% below its previous peak of $1,900.

Today, at $1,600, gold is back to levels its first saw a whole year ago. What investors need to pay attention to is the gold to silver ratio.

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Winning the Race for Resources

The world watched in awe as American swimmer Michael Phelps became the most decorated Olympian of all time.

I've read he's been training in the pool for an average of 6 hours a day, 6 days per week, which equates to about 30,000 hours since age 13 and about 10,000 calories burned during a training day. It's inspiring to see the incredible results of his tremendous sacrifice and commitment.

Investing in global markets requires the same sort of stamina, especially at times like this week, when the month's reading on the manufacturing industry was not encouraging. The J.P. Morgan Global Manufacturing PMI of 48.4 for July was the lowest since June 2009.

However, I believe there are encouraging pockets of strength to energize and inspire investors.

For example, we're coming up on the anniversary of the first stimulus move that kicked off the global easing cycle.

On August 31, 2011, Brazil unexpectedly cut rates by 50 basis points, and since then, ISI says 228 stimulative monetary and fiscal policy moves have been initiated across several countries, including the Philippines, China, France, and Colombia.

In June and July alone, there were nearly 70 moves-the most since the world began this massive easing.

Generally, by the time central banks make a fiscal or monetary easing move, economic deterioration has already occurred.

Even with these moves, it still takes several months for the stimulative measures to take effect and work their way through.

China Makes Its Move

But while the world wades in the shallow end of the pool waiting for the economy to warm up, Asia has taken a deep dive into the energy space as they've recently announced acquisitions of Canadian resources companies.

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