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  • Gold Prices

  • Gold Prices: How to Climb the "Golden Staircase' When U.K. subscriber John M. wrote in this week, he got right to the point.

    Asked John: "What's happening to gold prices? Why are they dropping?"

    For an answer, I speed-dialed Real Asset Returns Editor Peter Krauth - our resident expert on mining and precious metals.

    Peter is based in Canada, which keeps him close to the natural-resource companies that proliferate north of the border. He gave me a detailed and insightful answer to John M.'s question.

    And he recommended three ways to profit - including an ETF he says is perfect for first-time gold investors.

    To explain what's happened with the "yellow metal" - and to project where gold prices will go next - Peter invented a pricing theory that he christened the "Golden Staircase."

    "The bottom line, Bill, is that the price of gold has simply entered a consolidation phase - much like it has done numerous times since it entered this secular bull market back in 2001," he told me.

    Gold futures were at $1,662.40 an ounce yesterday - well off the yellow metal's high. Here's why.

    "If you think back, when gold hit its all-time high of $1,900 last August, we were in the midst of wild speculation that the U.S. government wouldn't resolve its debt-ceiling crisis," Peter explained. "A deal in Congress was reached in time, but Standard & Poor's went on to downgrade the nation's credit rating for the first time in history. Since then, there's been considerable apathy towards gold by the general investing public, pushing its price down about 13%. What's more, government-calculated inflation looks benign, taking away from gold's luster."

    And here's where it gets interesting.

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  • Gold Prices Headed for $2,000 an Ounce Gold prices this week picked up again but are still far from last year's record $1,920.30 an ounce, reached in September.

    The most-active June contract settled on the Comex Friday at $1,660.20 an ounce, for a gain of 1.8%, or $30.10, since the April 5 market close.

    Given the economic volatility in 2011, last year was a banner year for gold prices. Fears of global market turmoil helped push the yellow metal to record highs.

    While the long-term bullish outlook for gold remains, short-term pressures have halted its steady climb.

    "Gold has found more support recently, but it doesn't have all of the catalysts in place to be driven substantially higher yet," Suki Cooper, an analyst at Barclays Capital, told Reuters.

    Here's why this dip isn't the start of a bearish gold year, but a chance to stock up before gold prices thrive and head to $2,000 an ounce.

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  • Why Gold Prices Should Thrive
    Last week was a challenging one for gold investors. Gold prices have been on the downside.

    Although the yellow metal has been on a spectacular 11-year bull run, recent strength in the economy has some thinking gold's heyday is over.

    As I often say, investing, like life, is about managing expectations-even throughout gold's decade-long rise, price action over the short term can go both ways.

    It helps to look at what happens after short-term drops.

    For example, looking at the past decade of one-day 5% declines in gold, you can see that this event is pretty rare.

    In 2006, gold dropped more than 5% in a day only two times. In 2008, there were three such events.

    Another one occurred at the end of this February. Take a look:
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  • The Bernanke Effect on Gold Prices, Silver Prices Means Time to Buy Metals Gold prices hit a two-month low Wednesday after the Federal Reserve indicated no new stimulus measures would be issued, and silver prices slumped to a seven-week low.

    The metals fell after the Fed, led by Chairman Ben Bernanke, announced a positive outlook on the U.S. economy. The Fed reaffirmed it would hold interest rates near zero through 2014, and failed to mention any more means of stimulus.

    Without more Fed steps to stimulate growth, and with more positive U.S. economic data, investors expect the dollar to strengthen which puts downward pressure on gold and silver prices.

    But the long-term outlook for gold and silver is the same, and investors should instead take the Bernanke Effect as a key time to buy metals.

    "This should be treated as an opportunity to buy, or if you already own but feel you don't own enough, to accumulate," said Money Morning commodities and mining expert Peter Krauth. "These two precious metals remain in a secular bull market and are integral to every investor's portfolio."

    The Bernanke Effect on Gold Prices, Silver Prices

    After Tuesday's Fed announcement, gold for April delivery fell $51.30, or 3%, to finish at $1,642.90 an ounce. May silver slumped $1.40, or 4.2%, to $32.18 an ounce.

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  • Buy, Sell or Hold: Buy the Dips in Gold (NYSE: GLD) SPDR Gold Trust (NYSE: GLD) experienced a major pullback on Leap Day this week, dropping almost exactly 100 points on the day.

    This happened while the European Central Bank (ECB) offered its second tranche of three-year Long Term Recapitalization Operations (LTRO).

    The sell-off in gold on Wednesday is a related sign that liquidity is currently in demand.

    But you only have to look at gold's big move up since the start of 2012 to know this stage of the move was unsustainable short-term.

    It's why investors shouldn't be surprised by the pullback, and should use this latest move down to increase their long-term exposure to gold.

    This dip is a buying event and nothing more.

    The pullback in the price of gold also hit equities along with bonds and some other commodities.

    Even so, it appears that the ECB has provided enough liquidity to fight off the near-term fears.

    Once these funds begin to work their way through the system, I believe they will be bullish for commodity prices.

    Over time, banks will eventually put that capital to work, with an eye toward generating a positive rate of return on it. One of those avenues will undoubtedly be gold.

    Here's why, along with a bit of background.

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  • John Paulson Says Now's the Time to Buy Gold Billionaire hedge-fund manager John Paulson wrote a letter to investors saying now is the time to buy gold, as prices are going to soar this year.

    Paulson said government spending will trigger inflation, and investors should stock up on gold as protection.

    "By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position in gold," Paulson wrote in a letter at the end of 2011 obtained by Bloomberg News.

    Hedge funds and money managers have increased their bets this year on higher gold prices.
    Paulson's hedge fund, Paulson & Co., is the biggest investor in the SPDR Gold Trust ETF (NYSE: GLD) with a $2.9 billion stake. The fund is up 24% in the past year and more than 10% this year alone.

    Paulson: It's Time to Buy Gold

    With the U.S. Federal Reserve leaving interest rates near zero until 2014, more investors will buy gold as an inflation hedge.

    "The appalling state of fiscal finances of most industrial nations does lead to concerns about the possibility of inflation," Mark O'Byrne, executive director of brokerage GoldCore Ltd., told Bloomberg. "Gold is a crucial diversification given the various risks out there."

    The European debt crisis and its uncertain effects on the markets have also pushed investors into gold. China this week pledged to help the region resolve its fiscal issues by investing in Europe's bailout funds. To continue reading, please click here... Read More...
  • How This Indian Wedding Tradition Drives Global Gold Demand An Indian wedding tradition dating back thousands of years is more than a simple cultural practice - it has become one of the biggest drivers of global gold demand.

    In a Feb. 12 CBS News' "60 Minutes" report, correspondent Bryon Pitts took a look at how the Indian wedding tradition of draping the bride in gold jewels has propelled India to be the biggest source of global gold demand. India is now No. 1 in gold consumption of jewelry as well as physical bars and coins.

    India accounts for about 32% of the global gold market with half of the gold Indians buy spent on jewelry for the 10 million weddings held there each year.

    As a result, gold prices typically rise ahead of wedding season as families prepare.

    "The demand for gold out of India is fundamental for the health of the industry," Ajay Mitra of the World Gold Council told Pitts. "If India sneezes, the gold industry will catch a cold."

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  • Gold Prices 2012 Forecast: How to Make Double the Gold Profits in the New Year Despite a pullback from its all-time high of $1,923 an ounce a few months ago, gold is still trading in the $1,700 range. In fact, the glittering metal has gained 22% in the past 12 months.

    What's more, I believe gold prices will eclipse $2,200 an ounce in the next year, and shoot beyond even $5,000 an ounce after that.
    With the economy still in turmoil - and the U.S. dollar sinking even lower in 2012 (Take a look right here to learn how far the dollar will sink in our new report) - gold prices will continue to rise.

    So there's obviously still time to get in on this once-in-a-lifetime bull-run, if you haven't already.

    Of course, every investor should at least have shares of a gold-based exchange-traded fund, but if you really want to profit from the price surge, you ought to look at gold mining companies.

    Let me explain.

  • Don't Be Fooled by Gold's Recent Dip – We'll Still See $2,000 an Ounce in 2012 If you're concerned about where gold prices are headed after yesterday's (Wednesday's) bear-market buzz, don't be. This is just a brief pit-stop in what continues to be an epic bull-run for the yellow metal.

    Gold prices fell below $1,600 an ounce Wednesday for the first time since October, settling down nearly 5% at $1,586.90 an ounce Comex division of the New York Mercantile Exchange (NYMEX). That's below the closely-watched 200-day moving average for the first time since January.

    There are a few reasons for this slump: Panic over the Eurozone and its weakening currency, banks' need for cash, and year-end profit-taking have all taken their toll on gold this week.

    Still, while gold prices may be stumbling right now, they are not headed for a long-term bear market - not even close. In fact, it's something our own gold and global resources specialist predicted months ago.

    Money Morning Global Resources Specialist Peter Krauth said as far back as August that gold prices were due for a pull-back, so this minor blip isn't surprising - and it definitely isn't permanent.

    "This is something I saw coming," said Krauth. "Back in late August, as gold was pushing $1,900, I told my subscribers it was due to pull back, and likely to trade in a range between $1,600 and $1,800, and that's exactly what we've seen so far. We could see a bit more weakness, but I think we're much closer to a bottom at this point."

    Here's why.

    A Weak Euro and the Scramble for Cash

    One of the biggest factors contributing to lower gold prices is the Eurozone and its increasingly weak currency. The euro fell Wednesday to $1.2998 against the dollar, its lowest level since January. That forced many traders into the dollar.

    "As investors flee the euro, the "risk off' trade means they're falling back on the U.S. dollar," said Krauth. "A higher U.S. dollar, in turn, means lower gold because gold is priced in U.S. dollars."

    Krauth said Europe's economic turmoil has forced the region's banks to hunt for more cash, which has led to more gold leasing transactions, further pressuring the precious metal's price.

    "European commercial banks are desperate for cash," said Krauth. "They could well be "borrowing' central bank or other sourced gold to lend out simply to raise cash temporarily. Interestingly, gold lease rates just spiked back up on Dec. 7, the very same day we started that recent bout of gold price weakness."

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  • Gold Price Outlook 2012: Miners Will Shine as Prices Soar Despite a pullback from its all-time high of about $1,920 an ounce set in September, gold is still trading in the $1,750 range. In fact, the glittering metal has gained 22% in the past 12 months.

    What's more is that I believe gold prices will eclipse $2,200 an ounce next year, and shoot beyond even $5,000 an ounce after that.

    So there's obviously still time to get in on this once-in-a-lifetime bull-run, if you haven't already.

    Of course, every investor should at least have shares of a gold-based exchange-traded fund, but if you really want to profit from the price surge, you ought to look at gold mining companies.

    Let me explain.

    A Golden Opportunity

    While gold prices have surged 22% over the past year, gold mining stocks have lagged curiously behind over that period.

    The Amex Gold Bugs Index, a weighted benchmark made up of 16 of the world's largest gold and silver mining companies, began the year at 540, and after numerous troughs and peaks, we're back near those same levels.

    Normally, gold stocks will leverage gold on a 2-for-1 basis, but in this case, we've seen miners move sideways as gold has advanced.

    Yet with gold's price powering skyward, the gold miners have seen their margins expand, making them very profitable at current levels. That makes them absolute steals at these prices.

    You don't have to take my word for it, either. Just look at what industry insiders are saying.

    "A substantial disconnect has developed between the price of gold and the mining companies," said David Einhorn of Greenlight Capital. "With gold at today's price, the mining companies have the potential to generate double-digit free cash flow returns and offer attractive risk-adjusted returns even if gold does not advance further. Since we believe gold will continue to rise, we expect gold stocks to do even better."

    Portfolio managers Michael Bowman and Allan Meyer of Wickham Investment Counsel Inc. concur.

    "We are now finding a large number of gold stocks are hitting our value screens, something that has been unheard of in the past," said Meyer.

    What else are experts noticing?

    Well, as gold prices have risen and stayed high, the price/earnings (P/E) ratios of gold miners have been cut in half. That means the sector as a whole is at as compelling a value as it's been in three years. And with the price of gold set to rise still higher on the back of incessant money printing in the United States and Europe, these miners are only going to get more profitable.

    How high is gold likely to go?

    My own research tells me we should expect gold to easily reach $2,200 in 2012.

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  • Gold Prices Back on Track for $2,500 an Ounce Having overcome a slight pullback heading into the fall gold prices now appear to have resumed their upward trajectory and will likely hit $2,500 an ounce next year - if not sooner.

    Gold prices surged to their highest level in more than a month yesterday (Wednesday), capping off a four-day bull run that's taken the yellow metal to more than $1,700 an ounce.

    In fact, gold for December delivery yesterday rose $19.40 an ounce to settle at $1,719. Meanwhile, December silver surged to $33.39 an ounce.

    Gold prices plunged 20% in September, leading many investors to bail on the gold bull.

    Of course, if...
  • Gold Prices Hit Another Record – But Silver is the Play to Make Gold prices had another record-breaking day yesterday (Monday), with gold for December delivery climbing 2.1% to close at another all-time high of $1,891.90 an ounce on the Comex.

    But as impressive as gold's run has been, silver may be the better bet.

    Silver prices rose 2.5% yesterday to settle at $43.47 an ounce.

    Make no mistake: Gold prices are headed higher, but silver, since it took a spill earlier this year, actually has more upside at the moment.

    This is no secret to "insiders."

    The latest CFTC data for the week ended Aug. 16 revealed tactical investors increased their exposure to every precious metal with the exception of gold. Net fund length in Comex Gold fell by 3,500 lots. Speculative length in Comex Silver, on the other hand rose.

    The fear is that gold prices, which have been on an absolute tear through the month of August, have gotten ahead of themselves. Gold is up 16% this month, which means its set for its best monthly gain since 1999.

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  • Gold Prices Skyrocket To New Highs: The No. 1 Stock To Deliver Premium Gold Profits Right Now Gold has risen steadily since the start of 2009, when it was trading at a bit less than $900 an ounce.

    And gold's advance has accelerated of late. The price of gold increased 21% in the year's first half.

    Many investors and investment pundits are claiming this gold-plated party is destined to end: When the Eurozone gets its house in order and our elected leaders in Washington finally reach a federal budget accord, these gloom-and-doomers say, the price of gold will plummet.

    But I say they're wrong.

  • Gold Prices Hit Record High After S&P Downgrade – Are Poised to Double Gold prices hit a record high of $1,718 an ounce in intraday trading yesterday (Monday) in response to Standard & Poor's downgrade of the U.S. credit rating, and the continuing drumbeat of dreary global economic news will keep pushing the yellow metal higher.

    In fact, Money Morning Contributing Editor Peter Krauth reiterated his belief that gold prices will more than double from current levels.

    "I expect gold to reach $5,000 before this bull market peaks," Krauth said. "I'm very open to the possibility that gold could correct from here, but I'd expect that to be nothing more than a short-term pullback."

    Following through on a months-long threat, S&P cut the U.S credit rating to AA+ from AAA late Friday, sending global stock markets tumbling and a flood of investors to one of the few safe havens available - gold.

    "The S&P downgrade adds to concerns that investors have in the safety of U.S.- issued debt," Krauth said, pointing out that Treasuries are "considered to be the safest in the world because of their previously unblemished AAA rating and their liquidity. When doubt is cast on such an important and ubiquitous investment instrument, it's no surprise that gold, a traditional safe haven dating back millennia, is going to be a beneficiary."

    Although it had already risen 15% for the year as of Friday, the appeal of gold remains high among investors worried about sovereign debt problems in the United States and Europe, as well as a U.S. recovery that looks like it may tip into a double-dip recession.

    "The surge in gold is a knee-jerk reaction to the downgrade and could prompt profit-taking, but concerns of slowing economic activity in the U.S. and the lack of concise action to tame its debt levels will likely see more diversification from U.S. assets, boosting demand for the ultimate safe haven," FastMarkets analyst James Moore told the Wall Street Journal.

    Gold on the Comex division of the New York Mercantile Exchange soared $66.40, a 4% pop, in overnight electronic trading Sunday night to a record $1,718.20 an ounce. After slipping below $1,700 in the morning, S&P's follow-up announcement that it had also downgraded the credit ratings of mortgage giants Fannie Mae and Freddie Mac drove gold to $1,715.50 by 4 p.m.

    Yet gold remains well below its inflation-adjusted peak set in 1980, when it sold for $850 an ounce - the equivalent of about $2,400 an ounce today.

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  • Short-Term Drop in Gold Prices Overrun by Profit Potential Money Morning Contributing Editor Peter Krauth yesterday (Monday) warned readers that a debt-ceiling deal could spark a short-term drop in gold prices, creating a key chance to stock up on the yellow metal.

    As you may have noticed, he was dead on - but what he didn't foresee was that gold prices would bounce back as quickly as they did.

    Krauth expected a rebound, no doubt. But when investors delved into the details of the feeble agreement conjured up by President Barack Obama and Congressional leaders, gold resumed its upward trajectory at a rate that eclipsed what even Krauth, a noted gold bull, had anticipated.

    Gold futures slipped as much as 1.5% yesterday morning as news broke that a deal to raise the debt ceiling by up to $2.4 trillion was taking shape. But gold for December delivery bounced back enough to close the day down just 0.55% at $1,622.30 an ounce.

    Gold prices climbed over the past few weeks as investors turned to the metal as a safer investment than stocks and U.S. Treasuries. Gold is up 14% this year, far outpacing the 2.33% gain in the Standard & Poor's 500 Index. The yellow metal hit an all-time high of $1,637.50 on Friday.

    The drop in gold prices was short-lived because investors' concerns about the global economy outweigh the limited progress Congress has made reining in U.S. debt. While the weekend's debt compromise may prevent a U.S. debt default, it likely won't be enough to preserve the United States' top-tier AAA credit rating.

    "Washington raising the debt ceiling is leading to still more borrowing and spending, and an ever-expanding money supply," said Krauth. "Over the long haul - as we've told you again and again here in Money Morning - this ever-growing debt load will be highly bullish for gold prices."

    The growing federal debt will also continue to erode the U.S. dollar's value, pushing investors away from paper currency and into hard assets.

    "On Aug. 1, the U.S. dollar officially lost its place as the world's safe currency as a store of value," Tom Winnifrith, a fund manager at t1ps Investment Management, told The Wall Street Journal. "In the absence of an alternative, the only currency whose value is not being systematically destroyed by politicians remains gold, and if you think recent increases in the gold price were startling, you ain't seen nothing yet."

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