Gold Prices

India's Demand for Gold to Boost Prices Before Festival Season

With the U.S. markets taking a break thanks to Hurricane Sandy along with the upcoming U.S. presidential election, it's been a quiet gold marketplace.

On Wednesday, markets returned to action and December gold prices rose to a week high on the Comex of $1,720.40.

But even without activity in the States, gold prices have a major catalyst from another part of the world: India.

This year, India's demand for gold has been off as authorities blame the metal for the country's economic problems, higher gold import fees and a lower Indian rupee.

But Indians don't stay away from gold for long - especially ahead of festival season.

Festival season in India, which includes Diwali and Dhanteras, starts in November. Weddings will also take place during this period with gold jewelry included in dowries.

With a "pent-up' demand for gold in India, it has the potential next year to hit new highs -- past $2,000 an ounce, reported Emirates 24/7.

On Tuesday, trading in the December gold contract on the Multi Commodity Exchange (MCX) closed 0.01% higher to 31,097 rupees per 10 grams, after seeing a 30,968 rupee low--a level not seen since August, reported Reuters.

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Gold Prices in 2013: Where We'll Be in Six Months

Gold investors have enjoyed a bull market for more than 10 years.

In fact, the metal's string of annual gains is its longest winning streak in at least nine decades.

So it is hardly surprising that some investors are questioning whether the strong performance will continue for gold prices in 2013. Recent market activity shows a short-term pullback is on its way.

As Money Morning's Chief Investment Strategist Keith Fitz-Gerald explained today, "Many hedge funds and institutions are using gold to collateralize their marginable assets right now so one of the first things they're going to sell to raise cash when faced with a margin call is gold. They're also sitting on large profits that they'll immediately begin to take off the table in a sell-off. This will end up catching a lot of investors by surprise because they expect gold to take off when the stuff hits the fan."

But that doesn't mean the long-term 2013 gold price outlook is doomed.

Fitz-Gerald said gold will take off - "but only after it takes an initial hit."

In fact, Money Morning Global Resources Specialist Peter Krauth said gold could hit $2,200 by April or May.

Looking beyond the sell-off, here are three key drivers of gold prices in 2013.

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How to Play Q4 Defense: Hedge Your Bets, Up Your Stops and Sell Your Gold

So far fourth quarter earnings have made a mockery of things.

Of the 20 S&P 500 companies that have provided Q4 guidance so far, 18 of them have guided lower, "slashing" their forecasts, according to Goldman Sachs and CNBC (as of Monday afternoon).

What's more, roughly one quarter of the reported earnings have come in flat to middling. According to Capital IQ, overall revenues are up only slightly at 0.34%.

Yet, for some reason the S&P 500 is only 3.89% off of its highs and is up 12.01% year-to-date through Wednesday afternoon.

Under the circumstances this suggests two things to me:

  • There's a lot of volatility waiting in the wings; and,
  • The near-term risk is to the downside.
First, let's tackle the volatility that's still in store; then we'll move on to what you can do to prepare for it.

The Q4 Earnings Story

So far this earnings season, roughly one quarter of the S&P 500 has already reported. That leaves the market with nearly 375 companies that have yet to spit out their numbers, roughly 150 alone this week.

Assuming the balance follows the pattern set so far, companies like Caterpillar Inc. (NYSE: CAT), Philip Morris International (NYSE: PM), and 3M Co. (NYSE: MMM) are going to show "respectable" (under the circumstances) numbers while talking about the "challenges" they see ahead.

Meanwhile, a few others, like DuPont (NYSE: DD) and United Technologies (NYSE: UTX), are going to reflect weakening earnings and revenue pressures leading to further cost-cutting as a means of protecting profits. These will include job cuts.

I also expect the bulk of the remaining companies will take the opportunity to lower their expectations -- especially when you consider that 61% of the companies as of Monday afternoon missed revenue expectations.

The irony here is that 61% of the companies that have reported over the same period have also exceeded analysts' expectations.

Naturally the markets will punish those who missed even when what they should recognize is that the analysts were wrong yet again. But that's another story for another time.

What's important to understand is that top-tier company management is using this earnings season to accomplish three things.



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Why the Price of Gold is Headed to $2,000 an Ounce

Over the past decade, the price of gold has steadily moved upward, peaking in September 2011 at roughly $1,900 an ounce, marking a near 500% increase.

Meanwhile, over the last eight years, silver soared 790% before profit taking took some of the sheen out of the white metal. It is difficult or nearly impossible to find other investments that can boast those kinds of gains.

Despite the recent pullbacks and sideways trading in the metals' markets since mid-September, gold and silver are heading higher.

CIBC World Markets agrees and just turned more bullish on both commodities. The firm says both gold and silver are due for a seasonal bounce and investors should plunge into the sector now.

"We are about to head into the strongest month for gold performance, and indeed in looking at the next four months, investors could capture 56% of the annual gold gains and a whopping 66% of the annual silver gains by holding the metals over the period November to February," CIBC analysts Barry Cooper and Alec Kodatsky wrote in a note to clients.

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Dip in Gold Prices Nothing to Fear; Long-Term Outlook Bullish

A drop in gold prices earlier this week made some investors nervous, but the long-term factors pushing the yellow metal higher haven't changed.

Following a 5% increase and a rise in exchange-traded funds holdings in the third quarter, gold prices fell back to earth Monday, falling 1%.

It was gold's greatest one-day fall since July.

Most of the news that hurt gold prices was fleeting.

Positive U.S. retail sales data raised concerns the Fed would abbreviate its purchases of mortgage-backed securities. Investors were also worried early in the week about the possibility of weak Chinese economic data, although that didn't materialize - China posted growth of 7.4% on Thursday, as expected.

Finally, as Mitt Romney rises in the polls there's concern that as president he would implement bigger cuts to U.S. government spending, which would be bad for gold prices.

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What South Africa's Mining Turmoil Means for Investing in Gold

Gold prices recently have risen due to global central bank stimulus measures, but the true movement in the market stems from much more than QE3.

Precious metals investors no doubt have seen the recent headlines coming out of South Africa. Violent strikes (resulting in dozens of deaths) and work stoppages have plagued the platinum industry there in the past few months.

The causes of the labor unrest include poor wages and unsafe working conditions. There has also been a tussle for power between two warring labor unions - the Nation Union of Mineworkers and the far more militant Association of Mineworkers and Construction Union.

The result of all this turmoil is quite obvious for the global platinum market. The majority of the world's platinum, roughly 80%, comes from South Africa. Not to mention that 90% of that production comes from a limited area, the Western Bushveld region of the country.

But here's where it gets interesting, especially for those investing in gold.

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How Helicopter Ben Helps Jobs and, Inadvertently, Gold Prices

The world's central bank leaders continue to spike the monetary punch bowl, with investors imbibing on gold once again.

This flurry of gold buying prompts many curious investors and doubting media to ask me two questions: 1) How can demand for gold and gold stocks continue; and 2) How high can gold prices go?

To answer these questions, we need to look at the intentions behind the economic and political decision-making across several developed countries, analyze the causes, the effects, and the possible ramifications.

For example, one of the most debated topics today is America's ongoing unemployment situation.

Job loss has affected the lives and pocketbooks of millions of Americans and our friends and families, culminating to a center-stage position in the election this year. All eyes turn to President Barack Obama and Mitt Romney to explain how each intends to create jobs.

During the two years following the Great Recession, Americans lost jobs at a similar rate to the employment losses during the Great Depression and in Finland after 1991. But two years after the crisis, U.S. employment losses stopped and reversed direction.

Compare this to the situations in Norway, Spain, Finland and Sweden, each of which had prolonged unemployment.

After Norway's financial crisis in 1987, it took 8.5 years to return to the country's employment peak. It took 13 years for Spain's employment to return to its 1997 peak. For Finland and Sweden, it took more than 17 years following their 1991 peaks.

Although the job losses in the U.S. don't seem as dismal, "Helicopter" Ben Bernanke wants to avoid Europe's and Japan's catastrophic situations.

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If You're Investing in Gold, Singapore Just Became More Important to You

Singapore recently made a huge step forward in establishing itself as one of the biggest players in the global market for investing in gold.

The Asian city's government repealed a 7% tax on gold and silver effective Oct.1. Now investors can store their gold in Singapore without costly value-added taxes.

Singapore hopes the move will help the region morph into a precious metals trading market like London and Zurich.

"It seems a little unfair to put a sales tax on what is essentially money. The removal of the GST on gold will allow Singapore to better compete with Hong Kong and other bullion trading centers in the region," Nick Trevethan, a senior commodity strategist at ANZ in Singapore told Reuters.

Singapore currently controls roughly 2% of global gold demand and aims to grow that share to some 10% to 15% over the next five to 10 years.

The market expansion is expected to increase global demand for gold and silver bars and coins in the fourth quarter of 2012. An influx of precious metal traders to Singapore is also expected, with more commodity offices and bullion storage facilities to follow.

Anticipating the opportunity, JPMorgan Chase & Co. (NYSE: JPM) opened a precious metals vault in the city in 2010.

"I think this is really going to change the landscape in Singapore," a gold dealer told Asia One Business. "A lot of companies will find the incentive to start operations in Singapore. This news is going to draw attention to Singapore as a safer place to park funds."

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Bill Gross, the Ring of Fire, and Gold Prices

Thank Bill Gross for adding some muscle this week to the already strong rally for gold prices.

That's because Gross, the Pacific Investment Management Co. (PIMCO) founder and co-chief investment officer, released his October 2012 investment outlook Tuesday that came with a warning for the U.S. and investors.

Gross said that U.S. fiscal problems have put the country in a "Ring of Fire" that'll burn investors if they aren't protected by gold and real assets.

Gross warned that recent studies have concluded that "[T]he U.S. balance sheet, its deficit and its "fiscal gap' is in flames and that its fire department is apparently asleep at the station house."

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Gold Prices Will Soar Past $2,500 As Central Banks Buy it Up

With governments all over the planet buying up gold over the past five years, it's no wonder gold prices have risen 142% since 2008.

Central banks bought 254.2 tons in the first half of 2012 and may add close to 500 tons for all of 2012, the World Gold Council said last month.

According to the International Monetary Fund (IMF), Russia added 18.6 metric tons of gold in July. South Korea bought 16 tons -- a 30% increase. Kazakhstan increased their bullion reserves for a 12th consecutive month.

Turkey, Ukraine and the Kyrgyz Republic also joined the party.

And the buying continued in August, albeit at a more moderate pace, the IMF confirmed.

"Gold prices continue to be underpinned by growing demand from central banks...we believe this trend is likely to ramp up once liquidity increases in global markets," Justin Harper, markets strategist at IG Markets, told MarketWatch.

That means the cheap money policies by many of these same central banks, such as the Federal Reserve's recently announced QE3 program, will also help fuel the rise in gold prices.

Combine that with skyrocketing demand from the private sector, and government hoarding could easily push the price of bullion as high as $2,500 in 2013.

In fact, the rally could be similar to gold's big breakout move in 2007, when gold prices surged 60%, according to Citi FX Pro analyst Tom Fitzpatrick.

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Gold Prices: Here's Why All the Hype Goes Beyond QE3

It was another bumpy week for gold prices that included two-week lows and a surge to seven-month highs.

On Thursday, December gold futures increased $26.90 (1.5%) and settled at $1,780.50 an ounce on the COMEX.

This represented gold's highest close since the end of the February.

As the week comes to an end and traders waited for more news from Spain, December gold was down on Friday morning to $4.10 to $1,776.40 an ounce.

Gold's price moves came from a number of factors this week including bargain hunters and weak U.S. macroeconomic data.

The bottom line is that the QE3 rally might have fizzled, but the long-term gold outlook still shines brightly.

Here's why.

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Investing in Gold: Why the "Golden Cross" is a Big Deal

Investing in gold and silver already offered staggering profit potential, and the opportunities just got even brighter.

Gold this week reached a "golden cross" and silver is perched to traverse one in a matter a days, following successive weeks of bullish trends in both precious metals' markets.

A golden cross occurs when the current price of a commodity (or an equity) and the shorter term moving averages "cross" or rise above the longer term 200-day moving average.

After 18 months of tepid and sometimes lower price movement, gold and silver have formed a large foundational base while enjoying two of the longest and strongest bull markets in history, according to research from Business Insider.

Now the golden cross has delivered technical support for higher moves for both metals.

"We're going to see new highs in both gold and silver in the first half of the New Year," said Money Morning Global Resources Specialist Peter Krauth. "I don't see anything that will keep this from happening."



Here's why Krauth is so bullish on gold and silver.

All Signs Now Point to Gold

With another syringe of quantitative easing being injected into the U.S. economy's bloodstream, Ben Bernanke is giving the markets their liquidity fix.

The Federal Reserve's action reaffirmed the stance I've reiterated on several occasions that the governments across developed markets have no fiscal discipline, opting for ultra-easy monetary policies to stimulate growth instead.
The government's liquidity shot promptly boosted gold prices and gold stocks, as investors sought the protection of the precious metal as a real store of value.

In fact, since the beginning of 1984, as money supply has risen, so has the price of gold.

The dollar declined due to the Fed's easing, which isn't surprising, given the fact that gold and the greenback are often inversely correlated, and increasing money supply generally causes the currency to fall in value.

What's interesting is that currency decline was what Richard Nixon sought to avoid when he ended the gold standard in 1971 and announced that the country would no longer redeem its currency in gold.

During his televised speech to the American public, Nixon translated in simple terms the "bugaboo" of devaluation, saying, "if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today."

As you can see below, more than 40 years later, a dollar is worth only 17 cents.

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Investing in Gold After QE3

It's been just four trading days since QE3 ended and gold prices are already up about $40 an ounce.

Prior to the announcement, gold was trading at six-month highs, but dipped slightly before Thursday's anticipated news. Upon hearing the Fed's decision, gold prices shot up 2% that day.

Here we are on Tuesday and gold prices have slightly dipped with Comex December futures declining $4.50 to $1,766.10 an ounce. Many investors have hit the sidelines to watch whether or not the Eurozone will dodge increasing doubts about its bailout agreements.

But we're still a long way from the long-term price target for gold. Can this QE-fueled rise match ones for QE1 and QE2? History does have a way of repeating itself...

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Investing in Gold ETFs: Don't Miss this Bull Market

The gold bull market is alive and well, meaning now's the time for investing in gold exchange-traded funds (ETFs).

Gold kicked off the week with December futures rising $6.80 (0.4%) to $1,738.60 an ounce Monday. This came on the heels of Friday's disappointing U.S. jobs report and the anticipation of a newsworthy week for the precious metal thanks to some possible central bank action.

Gold futures again edged higher today (Tuesday) with December futures at $1,736 an ounce. The gold price rise continues thanks to an increasing euro and the anticipation of a German court ruling Wednesday on the Eurozone bailout fund's legality.

Adding to the bullish sentiment on gold is the anticipation of this week's two-day Federal Open Market Committee (FOMC) meeting: Will they or won't they announce another round of additional easing on Thursday?

While these events help price outlook for gold, they're also drawing investors to gold ETFs.

On Monday, gold ETFs rose to a record high of 72.49 million ounces, reported Reuters.

In 2012, total holdings have increased by almost 3.5 million ounces; in the last month 2.7 million ounces flowed into gold ETFs.

The interest in investing in gold ETFs is another bullish signal for the yellow metal, erasing some worries over the sustainability of gold's price rise.

"With a good portion of gold's recent strength accounted for by the sharp increase in spec positioning, this certainly raises concerns on the longevity of the [gold price] move, especially with fundamental buying virtually out of the picture," Edel Tully, a strategist at UBS, said to Reuters. "But the fact that the (ETF) camp - a relatively less-fickle group of buyers - has also been giving gold its vote of confidence offsets some of those worries."

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