The savings-seizing shenanigans in Cyprus just reinforced the importance of having gold and gold stocks in your portfolio. An indeed, with gold at extreme lows, now's a great time to buy more. Frank Holmes explains.
Until recently, an entire class of investors that control a huge pool of money - more than $27 trillion worldwide - have almost entirely ignored gold.
But lately, this group has begun to show more interest in the yellow metal, a trend that ultimately will exert massive upward pressure on gold prices.
We're talking about pension funds, which typically have had little interest in gold.
But with more traditional investments like bonds at historic lows, many pension funds aren't getting the returns they need to fund future obligations.
And with central banks debasing most major currencies and risking higher inflation, pension fund managers almost have no choice but to consider adding gold.
It's already started in Japan, which has about $3.4 trillion in pension funds - second only to the U.S., which has about $20 trillion.
In response to Prime Minister Shinzo Abe's pledge to spur inflation by printing more yen, Japanese hedge fund managers plan to double their gold holdings from about $500 million to $1.1 billion over the next two years, primarily by investing in gold exchange-traded funds (ETFs).
Itsuo Toshima, who represented the Tokyo office of World Gold Council for 23 years through 2011 and now advises Japanese pension fund managers, sees gold becoming a standard asset as inflation becomes more of a threat - with major consequences for gold prices.
"Pension money invested in bullion is "peanuts' at the moment," Toshima told Bloomberg News. "If 1% of their total assets shift to the metal, the gold market would explode."
As we've explained before, manipulation of gold and silver prices is happening right here in the United States.
Our Global Resources Specialist Peter Krauth interviewed silver market analyst Ted Butler last year, who explained how big financial institutions were using high-frequency trading to depress silver prices.
After more than a decade of merger mania, gold miners are now looking to spin off some of their acquisitions.
By doing so, the gold miners hope for better results after abysmal performance recently, as gold prices have fallen. And, as always, gold miners' profits rise and fall much faster than the yellow metal's price.
The underperformance of the Market Vectors Gold Miners ETF (NYSE: GDX) compared with that of the SPDR Gold Trust (NYSE: GLD) bears this out. GDX is down 20.5% since the end of last year, while GLD is down 4.8%.
Investors are starting to get really impatient with the gold miners - so much so that billionaire hedge fund manager John Paulson is arguing some of the world's biggest gold mining companies, including AngloGold Ashanti Limited (NYSE: AU), spin off some of the mines that they have acquired through M&A over the past 10 years.
Paulson, the largest shareholder of GLD and AU, thinks the sum of the parts is greater than the value of the whole mining company. Paulson certainly can't be pleased with AU's 23.5% decline so far in 2013.
The most actively traded gold contract, for April delivery, rose $2.70, or 0.1%, to settle at $1,590.70 a troy ounce on the Comex division of the New York Mercantile Exchange.
"The gold market is getting propped up by a break in the dollar index," Ira Epstein, director of the Ira Epstein division at the Linn Group, told The Wall Street Journal. "The problem is, people are not buying into the rally, they're buying it on the dips."
If gold prices cross the psychologically important $1,600-an-ounce level, confidence in investing in gold could strengthen.
Until then, it looks like investors will stay busy trying to profit from the record-high Dow.
They almost HAVE to. Fact is, gold mining companies' stocks specifically have lagged the performance of the precious metal for six years. Here's why investors can expect a reversal in the next nine months.
Gold prices have been languishing in recent weeks, as investors have been drawn into riskier assets, like equities. Investors are not looking for a "save haven" right now. But not everyone is shunning gold - and you shouldn't either. Take a look.
Gold and silver prices both marched toward their largest gains in more than a week Tuesday joining the uplifting mood on Wall Street. As the Dow Jones Industrial Average reveled in a historic rally that took the benchmark to a record high, commodities also soared.
Gold prices settled Tuesday's trading session up $2.50, or 0.2%, at $1,574.90 an ounce, supported by stimulus chatter and a weaker dollar. The safe haven metal had reached as high as $1,585.80 an ounce intraday, on course for its biggest leap since Feb. 26.
Year-to-date, gold has dipped 5.7%. The commodity logged its fifth consecutive month of declines in February, marking its longest stretch of declines since 1997.
Silver prices rose 1.7% to $28.97 in early trading, their biggest gain in more than a week. The white metal ended the day at $28.81.
While silver's slip since January has been more modest than gold's, it's well below the $34.89 it traded at during the same period a year ago.
But loose monetary policies worldwide, geopolitical uncertainties, rising oil prices and renewed fears of inflation should support, if not boost, both gold and silver prices in the months ahead.
Aggressive Global Stimulus Here to Stay
Driving gold and silver prices higher Tuesday were comments from Federal Reserve Vice Chairman Janet Yellen.
At the National Association for Business Economics conference Monday, the Federal Open Market Committee's (FOMC) Yellen defended the bank's $85 billion a month of bond purchases.
"At this stage, I do not see any (risks) that would cause me to advocate a curtailment of our purchase program," Yellen said.
Yellen's sentiments mirror that of Fed Chief Ben Bernanke, who thinks continued stimulus will be good for the U.S. economy. Acknowledging there are risks from the Fed's aggressive efforts to stoke the anemic U.S. economy, Yellen added there are also risks from not being aggressive enough.
This news from overseas is also bullish for gold and silver prices...
If you’ve ever suspected gold prices are being manipulated, you’re right, they are.
Against the backdrop of fiscal mismanagement, political incompetence, and failed austerity measures, the world's biggest traders have all bet heavily on gold. Lately, they've been pulling out all the stops to get what they want (while laughing all the way to bigger bonuses).
Today, I want to talk about who "they" are and share a few tricks you can use to capitalize on their actions without being taken to the poorhouse.
Here's how to play the game to win.
In recent years, global gold production has been at or near record levels. The plentiful supplies have led gold bears to argue that the yellow metal's decade-long bull run will end.
But gold bears are dead wrong.
In fact, the 'glory days' of gold production may be ending soon.
That's because some industry experts are beginning to point to a gold "production cliff' that is looming not far in the future.
And this coming decline in production can mean only one thing: higher gold prices.
It's dipped to a six-month low, and investors are nervous. But as long as gold is attractive to both the fear trade and the love trade, hold on tight to your share of the yellow metal. Frank Holmes explains.
There are a lot of moving parts to the gold story so let's start with the biggest takeaway: Gold prices are facing only a temporary setback.
Longer-term, as the U.S. Federal Reserve and other central banks begin to wind down quantitative easing and, more importantly, begin to ease interest rates back up to more "normal" levels, inflation should begin to kick in and drive gold up to new highs, making the yellow metal a great long-term investment.
First, though, let's tease apart the various factors that currently are driving the price of gold lower.
Now we know what Russia has been doing all these years with all its oil mega-profits: investing in gold.
A Bloomberg News article Monday reported that Russia's central bank added 570 metric tons of gold in the past decade, making the country the world's biggest gold buyer. That amount is a quarter more than the world's second-biggest buyer, China.
The amount of gold Russia added to its stockpile is almost triple the weight of the Statue of Liberty, according to Bloomberg.
It certainly makes sense for Russia to add to its official gold reserves. Gold prices have gained about 400% over the past decade.
"The more gold a country has, the more sovereignty it will have if there's a cataclysm with the dollar, the euro, the pound or any other reserve currency," Evgeny Fedorov, a lawmaker for Putin's United Russia party in the lower house of parliament, told Bloomberg in a telephone interview in Moscow.
Legendary investor Jim Rogers sees now as a great time to load up on gold and silver coins - and he's not alone.
A record 7.5 million ounces of silver coins were sold in January as investors hunted for a safe haven investment.
"You can't get [silver coins]. They sell out," Rogers, who owns a rare 2013 silver coin, said on Yahoo! Finance's "The Daily Ticker." "Several mints have run out of coins because everybody's worried about the future of the world."
And 150,000 ounces of American Eagle gold coins were sold in January, the highest monthly total since July 2010.
"Gold has been up 12 years in a row which is extremely unusual for anything," added Rogers. "A lot of speculators are rushing into gold right now. I'm not rushing into gold, but I'm certainly not selling it. If it goes down, I'm buying more."
You see, currently China's gold investors have few opportunities to play rising gold prices, which they want to do increasingly to hedge against risk and inflation. Most buy gold bars and notes to bet on higher gold prices.
But they will soon have more options.
The China Securities Regulatory Commission on Jan. 25 announced the country's rising gold demand required diversified investment instruments. It announced provisional guidelines for gold exchange-traded funds (ETFs), which have been prepared for launch over the past few years and will be made available soon.
The CSRC said that the gold ETFs would be invested in the spot contract traded on the Shanghai Gold Exchange and up to 10% on other products.
In the future, the funds could be opened up to futures contracts.
"Later on, we will further open up the market and quicken the steps to integrate into the international market," Xie Duo of People's Bank of China said. "We should actively create conditions for the gold market to become integrated with the international gold market."
Here's how this news is bullish for gold prices.